Elections and Referendums: Spending Rules
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Lord Rennard
To ask Her Majesty’s Government what assessment they have made of the case for reviewing legislation concerning spending rules in elections and referendums.
Lord Young of Cookham (Con)
My Lords, we are considering carefully the conclusions and recommendations of a number of relevant reports on election and referendum spending, including the Electoral Commission’s reports on elections held in 2015 and 2016, and on the EU referendum. While investigations by the police and the Electoral Commission are ongoing, it would not be appropriate for the Government to come to any conclusions.
Lord Rennard (LD)
My Lords, reports by the investigative journalist Michael Crick and by the Daily Mirror and others suggest that it was possible at the last general election for political parties to spend several hundred thousand pounds within individual constituencies in order to change the outcome of the election within those seats and avoid previously enforced legislation which prevented the purchasing of particular seats. The defence against this charge is that the law is ambiguous about what is local and what is national spending. If so, should not the law be changed to prevent abuse of the democratic process in this way?
Lord Young of Cookham
I am grateful to the noble Lord for the way he put that question. He will understand that I cannot respond to the particular instances that have now been referred to the police and prosecution authorities. The legislation—the Political Parties, Elections and Referendums Act—sought to make a distinction between national spending on the one hand and constituency spending on the other. As I said a few moments ago, I think it makes sense to wait until the investigations by the Electoral Commission and the police are completed. Then, of course, we should stand back and look at the legislation to see whether we need greater clarity for all political parties in interpreting how that distinction should be made.
Lord Hayward (Con)
I welcome what my noble friend just said on this particular convoluted collection of legislation. The process of conducting elections has moved on dramatically over the last 20 years. In reality, the law in all its guises has been in need of reform throughout that period. May I also make a quick reference to the third Question on the Order Paper, and say that that may include treating?
Lord Young of Cookham
I am grateful to my noble friend. He is right to say that there are a number of reports—the report from Sir Eric Pickles on fraud in local elections, the report from my noble friend Lord Hodgson on third-party campaigning, and the interim report of the Law Commission—which have an impact on the legislation on elections. As I said a few moments ago, it makes sense to stand back, look at all the recommendations and, in consultation with the Electoral Commission and all the political parties, see how best to take this forward in order to restore public confidence in the democratic system.
Lord Kennedy of Southwark (Lab)
Recently, during the consideration of the Bill of the noble Lord, Lord Tyler, the Minister told the House about the willingness of the Government to look at areas where agreement can be reached and incremental changes agreed. Can the Minister update us further in this regard, and will he look at involving those Members of the House who can bring valuable experience to those discussions?
Lord Young of Cookham
Again, I am grateful to the noble Lord, who took part in that debate on 10 March on the Private Member’s Bill of the noble Lord, Lord Tyler. At the end of that debate, I indicated that the Government were anxious to see if there was a consensus on some of the measures that might be brought forward. I indicated that the Minister for the Constitution, Chris Skidmore, was anxious to meet noble Lords who took part in that debate to see whether we can take incremental reforms forward on a cross-party basis.
Lord Tyler (LD)
My Lords, again I thank the Minister for taking this initiative to make sure that these discussions do take place and then fulfil, of course, the promise in the 2015 Conservative manifesto. I remind him that during that debate on 10 March I made specific reference to some of the discrepancies in referendum election expenses, to which he referred just now, because of course those are not subject to the difficulties that might occur with those matters that are possibly going to go before the courts. He will have seen the report from the Electoral Commission yesterday, which has some very good recommendations for looking at some of these issues. Will he confirm that that could be part of the discussion that is due to take place shortly?
Lord Young of Cookham
The noble Lord is quite right to refer to the recent report on the referendum by the Electoral Commission, which recommended that some of the provisions made for the recent referendum should be incorporated into PPERA—the Political Parties, Elections and Referendums Act—and would cover all referendums. The report came out only yesterday. He will understand that consideration is at an early stage. But it is perfectly possible to take those recommendations forward on a separate track.
Lord Tebbit (Con)
Will it be possible at some time in one or other of all these inquiries to look at the scale of the spending of public money by the BBC and the gross bias which has been evident to anybody who has listened to its programmes?
Lord Young of Cookham
I take this opportunity to wish my noble friend many happy returns of the day. The issue he raised falls outwith my remit. I think we are debating the BBC later today and it may be that with this advance notice, my noble friend Lord Ashton may be able to provide more details on the specific question that has been raised.
Lord Lexden (Con)
Does my noble friend feel that enough is being done in schools to familiarise our young people with the full range of electoral issues, particularly in the light of the Institute for Digital Democracy’s recent recommendation that political education might become compulsory?
Lord Young of Cookham
It is important that those of us in public life, whether Members of this House or the other House, take the initiative in visiting schools, colleges and universities in order to encourage people to take an interest in public life and joining our democratic system, and explaining some of the parameters. I know that down the other end Mr Speaker has taken a number of initiatives to bring more schoolchildren in to the Palace of Westminster to expose them to the political process. I think everyone in this and the other House has a role to play in encouraging the next generation to take part in the democratic process.
The Earl of Sandwich (CB)
My Lords, while we are on referendums, does the Minister agree that a large number of the public were surprised that a decision of such constitutional importance was taken by a simple majority? Is there no precedent in Parliament for it to be altered through legislation?
Lord Young of Cookham
The noble Earl may remember that during the passage of the relevant legislation amendments were tabled to secure certain thresholds in turnout and majorities, and I think those amendments were defeated after a debate.
Electoral Fraud
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Baroness Pinnock (LD)
My Lords, on behalf of my noble friend Lord Greaves, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.
Lord Young of Cookham (Con)
My Lords, the Government will continue to provide support to returning officers, who have responsibility for ensuring the integrity of 2017 polls, with a view to preventing electoral fraud. This support has previously included providing funding to the 17 authorities most at risk of fraud allegations to develop best practice that can be applied at subsequent elections. We will work closely with our partners to support the successful conduct of 2017 polls, to ensure a secure democracy.
Baroness Pinnock
I thank the Minister for his response. Would he agree that postal-vote harvesting and fraud are the most serious threats to the integrity of the ballot? What steps are the Government intending to take to ensure that postal votes are completed by the individual in whose name they are acquired and not organised and collected by families and political activists?
Lord Young of Cookham
I am grateful to the noble Baroness for her question. On her final point, there is already guidance stating that postal votes should not be harvested by campaigners or activists. We are considering whether we should introduce a ban on handling of postal votes by specified people or groups, which would tackle the inappropriate conduct that she referred to.
The Pickles review considered postal voting and came up with a number of recommendations, one of which is that the offence prescribed for when people vote in person—namely, that it should be in secret and there should be no undue influence—should also be applied to people who vote by post, which it does not at the moment. We are considering how that might best be done. There were other recommendations about postal voting, one of which was that it should not last for ever: it should be renewed every three years. We understand the concern and a number of measures are in train to address it.
Lord Kennedy of Southwark (Lab)
My Lords, what discussions have taken place between the parties, the Electoral Commission and the police in the 18 areas identified by the review carried out by Sir Eric Pickles with regard to the measures that should be in place for the local elections where those specified areas have local elections this May, prior to the ID pilot scheme coming into force in May 2018?
Lord Young of Cookham
I am grateful to the noble Lord for that question. The Electoral Commission is concentrating resources on those local authorities where there is seen to be an undue risk of fraud. It is in touch with the single point of contact, which is a police contact in that area, to ensure that it has all the necessary information and, where appropriate, it holds additional training courses. Resources are being applied to the 18 areas identified as at risk by the Electoral Commission to minimise the risk of fraud.
Baroness Chisholm of Owlpen (Con)
My Lords, when I was standing where my noble friend is now standing—he is doing such a fantastic job—I remember talking about pilot schemes that we planned, which I feel would help us decide the way to go. Can he reassure me that they will still take place?
Lord Young of Cookham
My noble friend is much missed at the Dispatch Box when questions are asked about electoral matters. We plan to go ahead in 2018 with a number of pilots to test voter identification. This is a recommendation made several times by the Electoral Commission: that when you vote, there should be some evidence that you are you say you are. We plan to pilot that next year and hope that some of the local authorities which have been identified as being at risk will apply to be part of that pilot.
Baroness Lane-Fox of Soho (CB)
My Lords, is the Minister aware of the work that Estonia has done with the two-step verification process, which it has used with electronic and online voting, dramatically reducing fraud? Someone has to show that they have voted but can also check that the vote is their vote—it is an unusual system. With a population of just 3 million, it seems to me that this would be an effective pilot system, similar to use in a local election?
Lord Young of Cookham
I am grateful to the noble Baroness. I am not familiar with the electoral system in Estonia. When we pilot a number of projects next year, we will be looking at various means by which the voter can identify themselves at the polling station. This might be a bus pass, a bank card or an NUS card, but in order not to exclude those who do not have those forms of identification, we are also looking at non-photographic identification. I will see that the helpful information that the noble Baroness has given us about proceedings in Estonia is fed into the options.
Lord Blunkett (Lab)
I wonder whether the excellent Minister will reflect on a practice which involves freepost by a political party, encouraging those who have signed a postal vote to send it back to the party’s local headquarters. Does he feel that that is totally inappropriate, as I believe it was in the 2015 general election, practised on behalf of the former Deputy Prime Minister?
Lord Young of Cookham
Without getting involved in Sheffield politics, it is certainly inappropriate for postal votes to be handled in that way. As I said in response to an earlier question, that practice is already discouraged in guidance from the Electoral Commission. There have been recommendations that it should be banned for precisely the reason that the noble Lord explained, and the Government are deciding how best to take that forward when legislative opportunities present themselves.
Lord Wallace of Saltaire (LD)
My Lords, could the Government ensure that the police take sufficiently seriously examples of electoral malpractice during elections, both local and the 2015 general election? In Bradford, there were a number of allegations during the last campaign across the parties about gatherings of young men outside polling stations and about party workers going into polling stations. The police did not follow these up as fully as perhaps they should have done. Can the Government make sure that the police are aware, for local as well as general elections, that these are serious offences?
Lord Young of Cookham
The noble Lord is quite right. This was one of the problems identified by Sir Eric Pickles in his review; he recommended that there should be a sort of cordon sanitaire around polling stations to prevent the intimidation to which the noble Lord refers. My understanding is that the Electoral Commission has taken that recommendation forward in guidance to stop intimidation in polling stations for the reason that the noble Lord has given.
Lord Pearson of Rannoch
My Lords, does the Minister agree that our first past the post system in local and national elections ensures that their results are democratically fraudulent?
Lord Young of Cookham
We do not have first past the post in many local elections. If the noble Lord is familiar with the election of the Mayor of London, for example, he will recognise that there are alternative systems—and likewise for some of the other elections. As for moving away from first past the post, it has been discussed several times, certainly down the other end. Indeed, I think that we had a referendum on the matter, and the country decided that it wanted to remain with first past the post.
Social Security (Personal Independence Payment) (Amendment) Regulations 2017
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Lord Young of Cookham (Con)
I think that the House would like to hear from the noble Baroness, Lady Campbell.
Baroness Campbell of Surbiton (CB)
My Lords, I support the Motion in the name of the noble Baroness, Lady Bakewell, to annul the Social Security (Personal Independence Payment) (Amendment) Regulations 2017. I understand that such a Motion should be used only in exceptional circumstances. I will explain why I think that this is an exceptional circumstance.
People in my position, with a highly visible, severe impairment, tend to find it a lot easier to demonstrate and receive the support we need to get from A to B than those experiencing mental health challenges. To be honest, I probably find it a lot easier to get around than many in your Lordships’ House today. I think that you will all have witnessed those on the mobile Bench whizzing around the Palace estate with ease and speed.
But let us be in no doubt: the impact of panic attacks and anxiety, not to mention schizophrenia, dementia and autism, on being able to,
“plan and follow a journey”,
are equally fraught, if not more so, with profound obstacles than the effects of visual or physical impairments. As Jenna reminded me recently,
“Suddenly, for no reason at all, as I step out of my front door, the prickles in my chest get sharper and my head gets foggier. My heart pounds faster as it tries to defend itself from impending danger. My breathing becomes shallow as I desperately try to get air into my body and brain ... I try to grasp on to something, anything, to keep me tethered and whole”.
“Anxiety” may sound manageable to many, but unexpectedly and unpredictably collapsing in agony in public places can overwhelmingly restrict people’s mobility.
Speaking to a young woman with ADHD and Tourette’s syndrome who lives down my street, I heard about her terrible journey on a train where she suffered a severe anxiety attack. The train had to be stopped and the emergency services called. This expensive scenario could have been avoided if her PIP had not been reduced from the high to standard rate award a couple of months ago, allowing her to continue paying for a travel companion or use taxis. Her life has now been severely restricted.
It is a fundamental tenet of the Equality Act that there shall be no hierarchy of disability: we define a disabled person as someone with a “mental or physical impairment”. We in this House have welcomed the Prime Minister’s commitment to parity of esteem between mental and physical health. The amended regulations, sadly, completely depart from these vital principles. They state, in effect, that disabled people may be equal but, just like in Orwell’s Animal Farm, some disabled people have become more equal than others.
Lord Young of Cookham
My Lords, I think the House would like to hear from the right reverend Prelate.
The Lord Bishop of Winchester
My Lords, I have been asked to speak on behalf of the right reverend Prelate the Bishop of Durham and a number of other Lords spiritual who are unable to be in their places today. Like them, I have serious concerns about the impact of the proposed changes to the personal independence payment on people with mental health problems. A number of the Lords spiritual wrote to the Secretary of State on 8 March seeking clarification on the rationale for the new legislation. I am not aware that they have received a reply. I wish to use this debate to reiterate these concerns and urge the Government to reconsider their position.
Our understanding is that the introduction of PIP was intended to create parity of treatment for people with mental and physical health problems by basing the assessment on a person’s ability to carry out certain tasks, irrespective of the nature of their disability. This is a fundamental principle that we strongly support, which has helped counter a long-standing bias within the benefits system against people who suffer from severe mental health problems, such as schizophrenia, anxiety disorders and autism. Explicitly limiting access to the enhanced rate of the mobility component for those who experience psychological distress undermines this fundamental aim by reintroducing an unhelpful distinction between people with physical and mental health conditions.
Crucially for this debate, this change appears to be inconsistent with the primary legislation, which makes it clear, as the Explanatory Notes underline, that people should be entitled to the higher rate of mobility component if,
“a person’s ability is severely limited by their physical or mental condition”.
Furthermore, it appears to be inconsistent with Ministers’ public statements at the time. People who find it difficult to leave the house because of anxiety, panic attacks and other mental health problems can be as restricted in their independence as people with physical mobility problems. They face the same additional barriers and costs as other disabled people, and should be scored accordingly against the same criteria. The amended regulations, however, would mean that people with these conditions would be assessed against only two of the six criteria for “planning and following journeys”, even though they may be unable to make familiar or unfamiliar journeys without the support of another person.
I am aware of the issues through the work of local mental health charities in my own diocese of Winchester. I understand from Jane Harvey, the head of home support at Solent Mind, which supports people with mental health problems in Southampton and across Hampshire, that she is in no doubt about the social isolation of many of her clients. Getting out of the house can be an extremely stressful experience for someone who suffers from paranoia, lacks confidence in social situations or feels unsafe in noisy, crowded environments, such as public transport. But these daily interactions are also vital to their mental and physical well-being, preventing them becoming even more isolated and enabling them to eat properly, pay their bills and attend important appointments. That is why it is so important that we seek to remove as many barriers to their mobility as possible through financial and other forms of support, and that we do not differentiate in a way that seems to be against people with mental health problems, whose condition can be just as debilitating as a physical disability.
I realise that, in practice, many people with mental health problems have until recently missed out on the mobility component of PIP. But we believe that the clarification provided by the Upper Tribunal ruling is more in keeping with the original intent of the legislation than the amendment tabled by the Government, opening up additional support to around 160,000 people with severe mental health problems.
From these Benches we would not want to be seen to be resisting the aims of the original legislation, but we need persuading that the amendments to PIP are not undermining the intended aims of the benefit. I shall be supporting the noble Baroness, Lady Sherlock.
Non-Domestic Rating (Rates Retention) and (Levy and Safety Net) (Amendment) Regulations 2017
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Lord Young of Cookham
That the draft Regulations laid before the House on 20 February be approved.
Lord Young of Cookham (Con)
My Lords, the business rates retention scheme, which was introduced in 2013-14, allows local government in England as a whole to retain 50% of the business rates it collects locally. These regulations change the regulatory framework governing the day-to-day operation of the business rates retention scheme. The changes, which are highly technical, are necessary, first, to ensure that the scheme adapts to the impact of the 2017 business rates revaluation and, secondly, to reflect the fact that from 1 April 2017 a number of authorities will be piloting 100% business rates retention.
Starting with the changes that need to be made because of the revaluation, the business rates retention scheme currently provides that some of the 50% of business rates that authorities retain is redistributed between them to ensure that no area is disadvantaged by having a small business rates base. This redistribution is achieved through what are known as “tariffs” and “top-ups”. Tariffs take money from authorities which are relatively rich in business rates when compared to their spending needs, and this is then redistributed through top-up payments to authorities which are relatively poor.
Tariffs and top-ups were set in 2013-14 based on the difference between the business rates that authorities were expected to collect in that year and their relative need, as established in that year’s local government finance settlement. Thereafter, they were uprated annually by inflation. Any growth, or decline, in local business rates after 2013-14 has not been taken into account in future years’ tariffs and top-ups—hence, authorities have an incentive to grow their business rates bases, as, by doing so, they keep 50% of the benefits of growth.
However, as a result of the business rates revaluation that will take effect on 1 April 2017, the amounts of business rates that authorities will actually collect in 2017-18 will be very different from what they collected in 2016-17. If, for 2017-18, we were simply to uprate the existing tariffs and top-ups by inflation, as we have done in the past, authorities could find their income from business rates substantially changed for reasons quite unconnected to their efforts to secure growth but due to revaluation.
Therefore, when we set up the scheme in 2013, we announced that we would adjust tariffs and top-ups to strip out the impact of revaluations. During the summer we consulted on the methodology for doing that, and new tariffs and top-ups for each authority were approved by Parliament as part of the most recent local government finance report.
Because business rates can decline as well as grow, the business rates retention scheme, under which local government keeps 50% of locally collected business rates, also provides for safety net payments to authorities that see their business rates income fall significantly. These are paid for by charging a levy on authorities whose business rates income grows. Tariffs and top-ups are used as part of the calculation of levy and safety net payments. The detailed calculations are set out in secondary legislation, which currently sets out the “old” tariffs and top-ups due to and from authorities. Therefore, these regulations amend the regulatory framework to ensure that the new tariffs and top-ups are used in these calculations.
The regulations also give effect to the 100% rates retention pilots, which the Government have set up to take effect from 1 April 2017. These were announced in the summer as a way of testing elements of the new 100% business rates retention scheme that will be rolled out more widely in 2019-20. Local authorities in Cornwall, Greater Manchester, the Liverpool City Region, the West Midlands and the west of England will be piloting the new arrangements in 2017-18 and, as a result, will keep all the local business rates they collect, subject to the normal arrangements in the system which redistribute some of their business rates income through tariffs and top-ups. In return, they will forgo some revenue grants from central government—most notably, revenue support grant—and their tariffs and top-ups will be further adjusted to ensure that the pilots are effectively cost-neutral.
The GLA will also keep a higher share of the business rates that will be collected by London boroughs in 2017-18. In return, it will give up its revenue support grant and take on responsibility for funding nearly £1 billion of grant to Transport for London. The regulations will make the necessary changes to the administration of the business rates retention system to ensure that the sums paid and received by the pilot authorities over the course of the year reflect the new pilot arrangements.
To sum up, the regulations make technical changes to the administration of the business rates retention system to reflect the impact of the revaluation and to allow the 100% rates retention pilots to operate from 1 April 2017. Without the changes, authorities would not receive the income from the business rates retention scheme that they are expecting and for which they have budgeted. I commend the regulations to the House and beg to move.
Lord Beecham (Lab)
My Lords, I must first apologise to the Minister for missing the first minute of his speech; I hope it was not full of fresh information that I ought to be aware of. As far as I am concerned, and I think the same goes for my noble friend, there is no particular objection to these regulations. It is interesting, however, to hear about the proposed pilot schemes—I suspect that the good citizens of Surrey will be waiting with bated breath to see whether they will be included in the pilot scheme. Although the Minister cannot indicate the outcome of ongoing discussions with other authorities, perhaps he can tell us when a decision will be made.
Part of the problem faced by authorities, and by the Government themselves, is the delay in this revaluation—I think it should have occurred in 2015. Will the Minister tell us whether it will be possible to decide on and then stick to a regular period for revaluation? The longer the gap, the greater the impact appears to be, and that is certainly part of the current reaction.
There is also a real problem, not dealt with in these regulations, about the appeals process. The Local Government Association—I remind the House, such as it is, of my local government interests—points out that there have been more than a million appeals from business rate properties since 2010, and 200,000 of those appeals are still waiting to be decided. This has led councils to hold back £2.5 billion in reserves in case they have to meet their 50% share in respect of refunds; 50% is payable by councils and 50% is payable by the Government. The system is clearly creaking around what it is capable of resolving in relation to the appeals system. I wonder whether the Government will look at that system and at the funding that is required to be put in place when there are appeals.
Finally, one of the reactions to the announcement was to point out the strange apparent outcome that very large operations such as Amazon and Sports Direct, with their massive out-of-town sheds, get a very low business rate, whereas the shop on the corner and the pub in the middle of town pay a disproportionately high amount relative to those very large concerns. Are the Government looking at that anomaly and, if so, when will it be resolved? It certainly concerns anybody living in a city area, where business rates income will now be crucial to the services that the authorities can provide, and yet these large institutions, mainly outside urban areas, will both compete with those in our towns and cities and themselves have very little to pay by way of business rates. That anomaly should surely be addressed.
Lord Young of Cookham
I am grateful to all noble Lords who have taken part in what has been on the whole a consensual debate and I shall try to answer the questions that have been raised. If I cannot, I will write. I did not think that we would get through this debate without Surrey being mentioned. The position is that Surrey County Council informed the Government that it wanted to become a 100% business rates retention pilot area, but was told that that would not be possible for 2017-18. We said that, subject to due process and meeting the necessary criteria, it could participate in the 2018-19 pilot scheme. We explained that other councils had also had discussions with the department about becoming 100% pilots. We went on to announce that all councils will be free to apply to participate in a 2018-19 pilot programme and that the Department for Communities and Local Government would publish more information shortly.
I agree entirely with what the noble Lord, Lord Beecham, said about the need for regular revaluations, both to minimise the turbulence each time you do it and to make sure that we have an up-to-date tax base for local government. We have already said that we are looking at the revaluation cycle with a view to reducing the time between revaluations.
A number of noble Lords mentioned appeals. We are looking at changing the way in which appeals are dealt with under 100% rates retention so that individual authorities do not have to bear the risk of appeal losses. We are currently discussing the mechanics of doing this with the LGA and the sector with a view to removing some of the risks to their income from these appeals. Perhaps I can write on the backlog when I have the most up-to-date figures.
The noble Baroness, Lady Pinnock, asked what would happen if a local authority lost a substantial business rate payer in its area. When I introduced these regulations I mentioned that there was a safety net. There will continue to be one under 100% rates retention. We are discussing the detail of a new safety net with the LGA and the sector and will announce detailed proposals later in the year. The noble Baroness also made the valid point that not all local authorities will gain from 100% business rates retention. That is indeed the case. Redistribution and the timing between resets—in other words, how frequently we assess or reassess the needs of an authority—will be critical. Again, we are discussing the timing of this with the LGA, but we have indicated that we might reset the needs more frequently than under the 50% schemes. I hope that is of some reassurance to the noble Baroness.
We then heard about the anomalies in business rates between large rural businesses and small urban businesses. As noble Lords know, business rates reflect the rental value of the properties that businesses occupying them take. Businesses take decisions on location reflecting those differences. In recent years we have taken a number of steps to reduce the bills of small businesses, including some measures in the Budget and the permanent doubling of small business rate relief. Perhaps I could write about the question raised on the staff of the VOA who are needed to deal with appeals and the resources behind them.
The noble Lord, Lord Shipley, made the point that corporation tax has been going down whereas business rates have been going up. He drew attention to the imbalance. The only point I would make on that is that the rate of corporation tax is important to ensuring that this country remains competitive in an international world. The rate of corporation tax is a barometer of competitiveness in a way that business rates are not.
There was a valid point on Amazon. All businesses pay rates on the property they occupy, including Amazon. It is true that businesses that do not use high-value property or have a high internet profile will reduce their business rates bill, but of course business rates are not the only tax on those businesses. They will pay national insurance contributions on their employees and if they are making a profit they will pay corporation tax.
An issue was raised that is raised in every debate about local government about the Government putting more responsibility on local authorities without giving them the resources to discharge them. I remember making those points back in the 1960s when I was a local councillor. As part of the move towards 100% business rates retention we will give authorities some £12.5 billion of additional resources from which to fund the new responsibilities that they assume. To meet the perfectly valid point raised by a number of noble Lords, we are discussing the functions that will be devolved to local authorities with the LGA and with the local government sector. The new scheme will take account of imbalances through redistribution via tariffs and top-ups, and of the frequency with which, as I said a moment ago, we reassess the needs and reset the tariffs and the top-ups, in response to a point made by the noble Lord, Lord Kennedy.
We have stressed the importance we place on the fair funding review. We have been discussing the methodology of assessing needs with the LGA and with the sector. Again, we hope to publish further details in due course.
The noble Baroness, Lady Pinnock, raised the central list, which brings in about £2 billion per year. Perhaps I could write to her on the details of exactly where that money goes. The noble Lord, Lord Kennedy, raised a number of issues. As always happens when he winds up, I do not always have time to assess the in-flight information in time to respond to him, but he made valid points about hospitals, schools and a number of other issues. Perhaps I could write to him when I have assembled an up-to-date and authoritative response.
These regulations provide for changes to the day-to-day administration of the business rates retention system. The changes reflect decisions already made by Parliament in the Local Government Finance Report for 2017-18 about the percentage share of business rates that local authorities are to keep and the tariffs and top-ups that they are to pay or receive during the course of 2017-18. They deliver on the Government’s commitment to ensure that authorities are not financially disadvantaged as a result of the business rates revaluation that comes into force on 1 April. They also provide for the 100% business rates retention pilots in Greater Manchester, Liverpool City Region, Cornwall, the West Midlands and in the West of England, and, to a more limited extent, in London. They ensure that the agreements reached with those authorities can be implemented and that the Government can learn lessons from those pilots before 100% business rates retention is rolled out more generally in 2019-20. I commend them to the House.
Barnsley, Doncaster, Rotherham and Sheffield Combined Authority (Election of Mayor) (Amendment) Order 2017
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Lord Young of Cookham
That the draft Order laid before the House on 6 February be approved.
Relevant document: 26th Report from the Secondary Legislation Scrutiny Committee
Lord Young of Cookham (Con)
My Lords, I understand that this Motion may have a centrifugal impact on your Lordships’ House so let us have a small pause. The draft order that we are considering today, if approved and made, will postpone the mayoral election for the Sheffield City Region, meaning that the mayor will first take office in May 2018, not May 2017; and will set the first mayoral term for a duration of four years, with the next election in May 2022.
In bringing this order before Parliament, we are responding to a request from the Sheffield City Region’s local leaders. On 11 January this year these leaders met as the combined authority and concluded that it was no longer possible to achieve a mayoral election in the Sheffield City Region in May 2017. They agreed and announced that they would now be working towards a mayoral election in May 2018. In their announcement, the local leaders explained that they had reached these decisions due to the need for the combined authority to undertake further consultation before it would be possible for an order to be made conferring the powers on to the mayor and city region, as envisaged in the devolution deal which was agreed between the Government and the city region in October 2015.
Regarding the background to the need for additional consultation, Derbyshire County Council brought a judicial review against the Sheffield City Region Combined Authority, seeking that the public consultation which that authority had undertaken should be quashed on the grounds that it was misleading. On 9 and 10 November 2016, the case was considered by the court, and in December judgment was given that the consultation did not achieve its lawful purpose. While the court did not quash the consultation, as Derbyshire County Council requested, there was a need for further consultation before the statutory requirement on this was satisfied. The city region’s local leaders have decided to prepare and carry out that necessary additional consultation, with a view to starting it after the May 2017 local elections—hence the need to defer the mayoral election until May 2018, by which time all necessary consultation can be expected to have been completed and the devolved powers envisaged in the devolution deal conferred on the combined authority and mayor.
Before turning to the specific provisions in the order before us, it may be helpful if I briefly recall how devolution is to be put in place in the Sheffield City Region. On 2 October 2015, the Government and the Sheffield City Region agreed a devolution deal giving brand new powers over transport, planning and other key policy areas, along with budgets, to the combined authority. The deal also included a commitment to adopt a directly elected mayor covering the whole of the combined authority area. On 21 July 2016, the Barnsley, Doncaster, Rotherham and Sheffield Combined Authority (Election of Mayor) Order 2016 was made after having been approved by Parliament, which established the office of mayor for the Sheffield City Region. That order provided that the first elections for this mayor would take place on 4 May 2017 and that the second election would take place on 7 May 2020. Thereafter, there would be mayoral elections every four years.
The next step in implementing the devolution deal was for a further order to be made conferring the powers agreed in the deal on to the combined authority and mayor. Before such an order could be made, the city region combined authority had to undertake a public consultation on the proposed conferral of powers. The Secretary of State is required by statute to be satisfied that no further consultation is necessary before he can proceed with an order conferring the powers. The city region also wished that any order conferring the devolved powers would, in addition, expand the area of the city region to include—with their agreement—the areas of Chesterfield borough and the district of Bassetlaw. The consultation that the city region undertook therefore covered proposals for devolving powers and for this expansion of the city region area.
The consultation started on 1 July last year but before it could be completed Derbyshire County Council, in which the borough council of Chesterfield sits, brought a judicial review against the combined authority. The case brought by Derbyshire questioned the legality of the consultation in two areas: whether it could be considered a public consultation in connection with the proposals in the scheme, and the fairness of the consultation. On 21 December 2016, the court ruled that the consultation did not achieve its lawful purpose as it did not include a question specifically seeking consultees’ views on Chesterfield becoming part of the combined authority.
Accordingly, what is now required before the devolution deal can be fully implemented is for the city region to undertake a further consultation and submit a summary of the consultation responses to the Secretary of State. It is then for the Secretary of State to decide, having regard to those responses, what provision to include in any further order which, subject to Parliament’s approval, would confer functions on the combined authority and mayor. It might also, if the Secretary of State considered it appropriate, provide for any expansion of the city region area which the city region leaders are seeking. Once such an order has been made it would be appropriate for there to be the first mayoral election, which is now envisaged for May 2018.
As to the detail, the draft order changes the date of the mayoral election from 4 May 2017 to 3 May 2018 and also sets the first mayoral term for a duration of four years, with the next election in May 2022.
In conclusion, this order postpones the mayoral election until May 2018. This is in the expectation that by that date, powers and budgets envisaged in the agreed devolution deal can, if Parliament approves, be devolved to the city region, which will have a mayor who can deliver for local people and help the area to fulfil its long-term ambitions. I commend this draft order to the House.
Lord Kennedy of Southwark (Lab)
My Lords, I first draw the attention of the House to my entry in the register of Members’ interests and declare that I am an elected councillor and a vice-president of the Local Government Association.
This is one of a number of statutory instruments that we have been considering over the past few weeks in your Lordships’ House. I should first say that I welcome further devolution, although I have concerns with all these deals about the level of funding provided. This order puts the election for the mayor back by one year. There is also an issue about the patchwork nature of the deals and, as many other noble Lords have said today, about the lack of any coherent framework for devolution in England. That is something that we should all be concerned about. In some areas, the devolution deal seems to have progressed well and important powers and functions have been devolved to the combined authority. In other areas, this has not been the case. In county areas in particular, a directly elected mayor perhaps does not feel right. My noble friend Lady Hollis referred to this as a particular concern. There is certainly a question over how these mayors fit in to the vision of future devolution in England. The Government have still been unable to explain their obsession with directly elected mayors—perhaps the noble Lord, Lord Young of Cookham, will do so now.
I lived and worked in the east Midlands for many years, I know Lincolnshire very well and I entirely agree with the comments of the noble Lord, Lord Cormack. It is a rural county and I just do not see how a mayor would work there at all. The Government should recognise that each area is different.
We need a coherent framework for devolution. The Government should set out what they mean by it so that there can be a proper debate and discussion in England about what it will be. Years ago we used to have things called Green Papers, which would come along and set out the Government’s thinking on where they would like to go and invite that sort of dialogue to get local government and people engaged. That is certainly something that the Government should do. I am also aware that there have been a few changes in the department in recent days. I do not know whether that will have any effect on what will happen, but certainly the Government need to think long and hard about the whole question of mayors and why we have to have mayors in an area if that area does not want one.
As I said, huge changes have taken place in recent years. We have police and crime commissioners, which were referred to, who can now take over the fire service. We have the combined authority models, with or without directly elected mayors. This is not very joined up or coherent. In my view, it is not the best way to move forward.
There is a problem here. A contradiction arises with the drawing of quite artificial boundaries in the spirit of trying to put together a combined authority when they do not necessarily mirror community identities. There has of course been the legal action from Derbyshire referred to by a number of noble Lords. Councillor Anne Western is someone I know very well. I regard her as a friend. She is a very competent leader of the county council. I have known her and worked with her for many years. There is no question that she is pro devolution and believes in the devolution of powers from Westminster to communities. Equally, I agree that the consultation was not organised very well. I agree with the comments of my noble friend Lord Blunkett. I do not particularly agree with the comments of the noble Lord, Lord Scriven; I think that some of them were designed for the front page of the Sheffield Star. We need to look carefully at where we are going with these devolution deals.
We need a proper framework. The Government need to come forward with one now. This is not the only place where we have problems. Other parts of the country have problems with these deals. The Government need to set out what they see for the future and how they are going to get there. That would certainly help the situation we have here today.
Lord Young of Cookham
My Lords, I am grateful to all those who taken part in this debate—some of which went slightly broader than the date of the election of the mayor. I was at this Dispatch Box yesterday having a rather uncomfortable time in connection with a manifesto commitment. Now my noble friend Lord Cormack invites me to break another one. The manifesto commitment is that we will devolve a wide range of powers and budgets to major cities that choose to have an elected mayor. That is the link. I am invited by a number of noble Lords to break that link. I hope that they understand that I am unable so to do. It is entirely a matter for the local area to decide whether it wants to go down this road. This is a choice that it did not have before. It can have a devolution deal and if it wants to it can put a proposal to the Government and then we can make progress. The Government have been absolutely clear that there must be an elected mayor to ensure that there is sufficient accountability, which we believe only an elected mayor can deliver.
Lord Kennedy of Southwark
I am sorry to interrupt the noble Lord but I think that is a little unfair. At one point he said that it is up to people in a local area to decide, but then that if they want one thing they have to have another. It is not the case that they can decide. Look at bus powers, for example. The Government are not just leaving it to the local people or a council to decide at all; they are setting conditions.
Lord Young of Cookham
With great respect, I disagree with the noble Lord. They have a choice, which they did not have before. They can either stay put, which is what used to happen, or they can have a devolution deal as offered by the Government, but with an elected mayor. That is a real choice. If they do not want to have an elected mayor, for all the reasons that we have heard, they can stay where they are—but at least they have a choice, which they did not have before.
Lord Cormack
I am deeply grateful to my noble friend—he is a friend in every sense—but does he really think that one man or woman can adequately know and relate to the sort of area to which the noble Baroness, Lady Hollis, referred, or to Lincolnshire, or for that matter to this extraordinary collection of towns and cities? How can one person—an elected Gauleiter—really relate?
Lord Young of Cookham
I would put a different question to my noble friend. Given that we are going to have combined authorities—and I think that there is agreement that that is a good idea—is it better to have one elected mayor as the accountable person or what we used to have with the old metropolitan areas, where there was much less accountability than you would have with an elected mayor? As we have seen in London, an elected mayor increases accountability over and above the other alternatives that you could have in those areas.
I turn to the other specific questions that have been raised, as we are obviously not going to get agreement on that one. The noble Lord, Lord Scriven, will understand that, although I do not want to get involved in a dispute between two local authorities—it is always regrettable when there is such a dispute, as it costs taxpayers money—I hope that what we have seen in this case is a one-off, and we do not have similar problems in future. In its judgment, the court did not quash the consultation, and what is needed now is an additional consultation on Bassetlaw and Chesterfield becoming part of the area of the Sheffield City Region Combined Authority. The noble Lord asked a number of questions. It is really for local people to come to a judgment on who has let their electorate down and who has not, rather than for Ministers to pontificate from the Dispatch Box. Local leaders are accountable to local people through the ballot box and, ultimately, it will be for their electorate to judge them.
The question raised by the noble Lord, Lord Blunkett, and other noble Lords—and I am grateful for what he said—was whether Sheffield City Region will still get its funding up front despite this hiccup in the process. The answer is yes. The combined authority is already in existence, and gain share funding, which is the name I understand has now been given to this pot of money, of £30 million a year can be paid to the combined authority once the consultation has been undertaken and it is clear that the councils are committed to the deal and an assurance framework agreed with government is in place. That can take place before the postponed elections of the mayor.
I think that the noble Baroness, Lady Pinnock, was suggesting that Derbyshire County Council should have a veto on whether Chesterfield should join. I am glad that she shakes her head, because I do not think that it would be right for a county council to prevent a constituent district from joining a combined authority if that is what was wanted.
Then we had the point which was reinforced by my noble friend Lord Cormack about whether a mayor could represent such a diverse area. I was around when the Greater London Council was started, which included bits of Middlesex and Surrey. London is very diverse, yet we have a Mayor of London. So I am not sure that I would buy the argument that it is impossible for a mayor to represent an area that has a diversity in it.
Lord Alton of Liverpool (CB)
Just before the Minister leaves that point, I think that the noble Baroness, Lady Pinnock, was making the point that as we go forward it will be important to keep under review how the provision actually works out in practice. I fully support the order being laid before your Lordships’ House, and the next one, which deals with Liverpool and the Merseyside area, where there is agreement that we should have a combined mayor. But will the Minister have a dialogue in future with local councils about replication, whereby you can end up as Liverpool will with a mayor for the greater region, an elected mayor in the city and a lord mayor as well? That will cause confusion.
Lord Young of Cookham
There may be confusion, but this is what local people will have decided through their local councils. That is the system of running the area that they have chosen to have.
The noble Baroness, Lady Pinnock, asked about turnout. If one looks at the turnout for directly elected mayors, one can see that it has been roughly in line with local elections so far. I hope that she takes some encouragement from that.
Finally, the noble Lord, Lord Kennedy, said that there was a patchwork. I explained at the beginning that this is basically a bottom-up approach—the Government responding to areas that want to go down this particular road. It is inevitable from that approach that there will be a patchwork. The alternative, which I am sure the noble Lord would not advocate, is for the Government to insist on this regime for the whole country. We do not want to go down that route at all—but that is why there is a patchwork.
In conclusion, this is an important order, which will allow us to progress the devolution for the Sheffield City Region, and once again I commend it to the House.
Liverpool City Region Combined Authority (Functions and Amendment) Order 2017
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Lord Young of Cookham
That the draft Orders laid before the House on 6 February be approved.
Relevant document: 26th Report from the Secondary Legislation Scrutiny Committee
Lord Young of Cookham (Con)
Well, let us see if we have less trouble over this one.
The draft orders, if approved and made, will confer important new powers on the mayors and the combined authorities for the Liverpool City Region and the Tees Valley. The Government have of course already made significant progress in delivering their manifesto commitment to devolve far-reaching powers and budgets to large cities in England which choose to have directly elected mayors. In this House, we have now debated and approved a number of orders devolving powers to places including Greater Manchester, the West of England and more recently Cambridgeshire and Peterborough. We have also considered and approved an order enabling the Tees Valley mayor to take steps necessary to establish a mayoral development corporation; that is to be complemented by the order we are considering on Tees Valley today. We are grateful to the House for the attention it has given to these matters. Following our last debates, my colleague the noble Lord, Lord Bourne, has written to noble Lords, as he undertook to do. I hope that we are now drawing to the end of this first devolution journey, with possibly just a few more orders after those we are considering today.
The draft Liverpool City Region Combined Authority (Functions and Amendment) Order 2017 brings to life the devolution deal which the Government agreed with the Liverpool City Region constituent councils in November 2015. We are taking that deal forward with the combined authority and its six constituent councils: Halton, Knowsley, Liverpool, St Helens, Sefton and Wirral. The deal agreed between the Government and the Liverpool City Region means that the area will receive: a devolved transport budget and transport powers to help provide a more modern, better-connected network; new planning and housing powers to manage planning across the region; and control over an investment fund of £30 million a year for 30 years.
Noble Lords will want to know that the basis of the draft order is the governance review and scheme prepared by the combined authority and the six constituent councils of the Liverpool City Region in accordance with the requirement in the Local Democracy, Economic Development and Construction Act 2009. The combined authority and the six constituent councils published that scheme in June 2016 and, as provided for by the 2009 Act, consulted on the proposals in the scheme. That was a public consultation entirely undertaken by the authorities concerned. They decided the approach, which was a matter for them. The consultation ran for six weeks and was undertaken through a variety of methods and media, including engagement with regional and local media, web content, social media, workshops with elected members, targeted letters to key stakeholders, as well as material available in libraries and local council town halls. As statute requires, the combined authority provided the Secretary of State with a summary of the responses to the consultation. Before laying the draft order before Parliament, the Secretary of State considered the statutory requirements in the 2009 Act, and considers that they have been met in relation to proposals to confer functions on the Liverpool City Region Combined Authority.
In short, having regard to the summary of consultation responses, which had been submitted to him, the Secretary of State concluded that no further consultation was needed. He considered that conferring the functions on the Liverpool City Region Combined Authority would be likely to lead to an improvement in the exercise of the statutory functions across the Liverpool City Region. In this consideration, he has had regard to the impact on local government and communities. Most significantly, the combined authority and six constituent councils have consented to the making of the order—that is, the democratically elected representatives of the area have agreed to the making of the order, if Parliament approves.
As required by the 2016 Act, we have in parallel with the draft order laid a report before Parliament which sets out the details of the public authority functions that we are conferring on the Liverpool City Region through the order. Noble Lords may recall that the requirement for this report was one of the additions that this House made to the 2016 Act during its passage. If approved by Parliament, the draft order will come into effect the day after it is made, except for the functions which are to be exercised by the mayor. The mayoral provisions will take effect on 8 May this year when the first mayor takes office.
The draft order gives effect to many of the proposals in the combined authority’s June 2016 scheme, which reflects the agreed devolution deal. If approved and made, it will confer the following powers and functions on the combined authority to be exercised by the mayor: a duty to prepare a Liverpool City Region Combined Authority spatial development strategy, enabling an integrated approach to spatial planning; powers on land acquisition, disposal and housing, including a compulsory purchase power—the same powers as the Homes and Communities Agency and councils; power to call in planning applications of potential strategic importance; power to designate mayoral development areas, leading to the creation of mayoral development corporations; powers to work with the combined authority to draw up a local transport plan, leading to a joined-up approach to transport across the area, recognising that efficient transport is fundamental to securing economic, social and environmental objectives; and powers to enter into agreements with constituent authorities, to establish and manage a key route network of strategic roads in the combined authority’s area. In addition to their existing transport and economic development powers, the combined authority will exercise powers and functions of: having the final say on the mayor’s spatial development strategy and local transport plan; promoting road safety; and regulation of traffic.
These new powers will enable the Liverpool City Region to take a strategic approach to driving development and regeneration and stimulating economic growth, supporting effective use of the £900 million devolved budget. The draft order also provides for the necessary constitutional and funding arrangements to support the mayor and the combined authority.
I now turn to the draft Tees Valley Combined Authority (Functions and Amendment) Order 2017. This draft order will be another important step to bring to life the devolution deal that the Government agreed with the Tees Valley in October 2015. The deal agreed means that the area will receive: a devolved transport budget and transport powers to help provide a more modern, better-connected network; control over an investment fund of £15 million a year for 30 years; and new housing and regeneration powers for growth across the region. Noble Lords will recall that the implementation of the Tees Valley devolution deal agreed between local leaders and the Government has already seen three orders made in relation to the Tees Valley. The most recent of these was about devolving powers for a mayoral development corporation. We brought this last order forward in advance of today’s order, as the area is eager to establish a mayoral development corporation in South Tees on which an 11-week consultation had already been undertaken.
This draft order has been prepared on the same basis as I have described for the Liverpool City Region order. If approved and made, the order will come into effect on 8 May when the first Tees Valley mayor takes office, with the exception of the provision relating to the establishment of an independent remuneration panel, which will come into force on the day after the order is made to enable the combined authority to make any necessary arrangements.
Let me turn briefly to the detail. The draft order will confer the following powers, to be exercised by the mayor, on the combined authority: powers to pay grants to the five constituent councils of the Tees Valley Combined Authority, with the condition that the mayor has regard to the desirability of ensuring that the councils have sufficient funds effectively to discharge their highways functions; and powers to produce a local transport plan for the area. The draft order also provides that the functional power of competence, already exercisable by the combined authority, is also exercisable by the mayor. Finally, the draft order confers various powers on the combined authority: powers to provide local passenger transport services—these powers were already delegated to the combined authority by the Tees Valley Combined Authority Order 2016; the duty to review housing need in the area; and funding and constitutional provisions to support the powers and functions conferred, including the establishment of an independent remuneration panel to recommend the allowances of the mayor.
In conclusion, the two draft orders devolve new, far-ranging powers to the Liverpool City Region Combined Authority and to the Tees Valley Combined Authority, giving effect to the bespoke devolution deal of each area, putting decision-making into the hands of local people, and helping the two areas fulfil their long-term economic and social ambitions. The draft orders are significant milestones contributing to greater prosperity in the Liverpool City Region and the Tees Valley and paving the way for a more balanced and successful economy and improving housing supply across the country. I commend the two draft orders to the House.
Lord Alton of Liverpool (CB)
My Lords, I shall be brief. I enthusiastically support the remarks that the noble Lord, Lord Young, has just made, notwithstanding the minor caveat that I entered the Chamber as he was replying to the previous order and note the unnecessary duplication and replication which can cause confusion. I encourage him, and the Government generally, to stay in touch with the local authorities that will be affected by the implementation of these orders to see in what ways they impact on them and whether there can be further streamlining and clarification.
It is 45 years since, while I was a student in Liverpool, I was elected to represent an inner-city neighbourhood—a slum clearance area—in the Low Hill ward in the heart of Liverpool. I served that ward on both the city council and on the Merseyside County Council that was created by the then Government, and then abolished by the following Government. During those years, I saw more changes than I cared to see in many respects. I served as deputy leader of the city council and as its housing chairman and had to deal with compulsory purchase orders, which were often imposed centrally with very little say locally on what their impact would be on the neighbourhoods they affected. Therefore, I particularly welcome what the noble Lord said about the devolution of compulsory powers to the city region and the opportunities for development corporations. The great success story on Merseyside, following the riots in Toxteth in 1981, was the creation of the Merseyside Development Corporation. The noble Lord, Lord Heseltine, has recently received some criticism in your Lordships’ House but he deserves great tribute for the work that he did during that period and the achievements that were made. The extraordinary regeneration and renewal of the city of Liverpool had its seeds in the work that he did. In my view the orders that have been laid before your Lordships’ House today with the agreement of the local authorities on Merseyside pave the way for the continued renewal and success story that Liverpool now is. Therefore, I very much welcome what the noble Lord said and commend the orders to your Lordships’ House.
Lord Kennedy of Southwark (Lab)
My Lords, turning first to the Liverpool order, I certainly support the arrangements before the House today. Like the noble Baroness, Lady Pinnock, I obviously wish the Liverpool and the Tees Valley combined authorities every success in the future. But I want to put on record that this is no giveaway for Merseyside local authorities from the Government—nothing could be further from the truth. As we have seen, local councils have suffered huge public sector spending cuts in recent years and Merseyside has not escaped that. Cuts to police and fire services, primary and secondary schools, Sure Start and so on far overshadow the comparatively small investment that the Government are making today. That investment will not deliver the Government’s vision for the northern powerhouse, although we seem to hear that phrase less and less from the Government. The foundations for devolution are being cut away by the Government every year, which is not helpful. It just makes the challenges faced by local government that bit harder. Having said that, I welcome the arrangements before us for devolution.
As I said in a previous debate, however, I am concerned about the whole question of patchwork. I accept that there can be difference, but I still think the Government should set out a framework. We have a messy patchwork, which does not bring the best things forward. We should set out what we want from devolution for England and how we see the country going forward. I certainly recall that in a debate last week on Cambridgeshire, the noble Lord, Lord Tebbit, referred to four tiers of local government in that part of the country. It is all a bit of a mess. We are not clear where the Government are coming from. I think the noble Lord, Lord Lansley, mentioned that in the debate as well. This is all a mess and we need some clarity from the Government about where they want to go in terms of devolution.
There has been a distinct lack of public engagement in the order for the combined authority for Tees Valley. It is important to engage the public in devolution discussions particularly where we propose to have mayoral elections. We want to get the agreement of the public because we will ask them to go out and vote for these people at some point in the future. It would be nice if the public engaged with that and agreed that they wanted this form of government. I think about 2,000 people responded to the local authority’s consultation but only 11 members of the public responded to the Government’s consultation, which from a population of 670,000 seems a derisory figure—0.001%, which is poor by any stretch of the imagination. Of those 11, seven had a negative view of the Government’s proposals. The Government should take account of consultation but also ensure that the consultation is done in a way that engages people and enables them to give their views to us.
As I said, it is necessary for the Government to set out clearly where they are going in England with devolution, and they are just not doing that. That is why we have these problems in understanding what is going on with devolution. However, I certainly wish Liverpool and Tees Valley every success in the future.
Lord Young of Cookham
My Lords, I am grateful to all those who have taken part in this debate and I shall try to respond to the issues that have been raised. In response to the noble Lord, Lord Alton, we will keep this issue under review. Under the devolution deals, the Government of course stay in touch, and an evaluation of progress is made every five years. As this is a relatively new innovation, we will be particularly interested in seeing how it pans out. The noble Lord reminded me of my time as a junior Minister with Michael Heseltine in the 1980s after the White Paper into the riots, and he is right to point to the transformation that was undertaken in partnership with the local council and local MPs. As a result, substantial investment was made in the city. I am grateful for what he said about that.
My noble friend Lord Deben made a thoughtful comment in which he suggested, I think, that central government should seek to mirror centrally the sort of structure that is being developed locally. I have some sympathy with that. Against that, however, one of the signals we have been getting in central government is a plea for stability and certainty rather than further reform. One has to try to balance a move towards the sort of approach my noble friend has advocated with the plea for stability against a background of several planning Bills which have gone through the House. I say to my noble friend that the White Paper on housing is quite clear that neighbouring authorities should work together constructively. We are also going to look at the NPPF so that authorities must prepare a statement of common ground to work together. I will certainly feed in what he has said as we do that work on the NPPF.
In response to the noble Baroness, Lady Pinnock, and to some extent the noble Lord, Lord Kennedy, I should point out that there is some tension between the reported views of local residents, which both noble Lords referred to, and the views of the locally elected councillors. Of course, that reaches us only if the locally elected councillors have decided that this is the way they want to go. The Government’s view is that it is legitimate to look to the locally elected representatives to come to a strategic view of where the authority wants to go rather than to a whole series of local opinion polls. I do not know whether the noble Baroness is a vice-president of the LGA—most people who speak in these debates seem to be. A long time ago, back in the 1980s, I was a vice-president of the AMA, but I think I was expelled when I abolished the Greater London Council. However, I think that the view of the LGA would be that it is perfectly legitimate to look to locally elected councils to reflect views.
I turn to the issue of having lots of mayors in one place. In London we have a Lord Mayor of London and a mayor, Sadiq Khan, and some boroughs have locally elected mayors. I think that people understand what is going on and while we could try to find a new name for mayors—the chain gang, or whatever you call them—if this is the way local authorities want to go, it would be a very brave central government that forbade them to do so, even though in some areas this does result in parish, district, county and combined authorities.
These draft orders confer further new functions on to the Liverpool City Region Combined Authority and the Tees Valley Combined Authority, some of which are to be exercised by their respective mayors. The first ones are to be elected in May this year. I commend this order to the House.
Class 4 National Insurance Contributions
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Lord Young of Cookham (Con)
My Lords, with the leave of the House, I shall now repeat a Statement made in the other place by the Chancellor of the Exchequer, the right honourable Philip Hammond. The Statement is as follows:
“With permission Mr Speaker, I wish to make a statement on national insurance contributions paid by the self-employed. As I set out in the Budget last Wednesday, the gap between benefits available to the self-employed and those in employment has closed significantly over the last few years. Most notably, the introduction of the new state pension in April 2016 is worth an additional £1,800 to a self-employed person for each year of retirement. It remains our judgment, as I said last week, that the current differences in benefit entitlement no longer justify the scale of difference in the level of total national insurance contributions paid in respect of employees and the self-employed.
Honourable and right honourable Members will also be aware that there has been a sharp increase in self-employment over the last few years. Our analysis suggests that a significant part of that increase is driven by differences in tax treatment. HMRC estimates that the cost to the public finances of this trend is around £5 billion this year alone and the OBR estimates that the parallel increase in incorporation will cost more than £9 billion a year by the end of the Parliament. This represents a significant risk to the tax base and thus to the funding of our vital public services.
The measures that I announced in the Budget sought to reflect more fairly the differences in entitlement in the contributions made by the self-employed. The Government continue to believe that addressing this unfairness is the right approach. However, since the Budget, parliamentary colleagues and others have questioned whether the proposed increase in class 4 contributions is compatible with the tax lock commitments made in our 2015 manifesto. Ahead of the Autumn Statement last year, the Prime Minister and I decided that however difficult the fiscal challenges we face, the tax lock and ring-fenced spending commitments we have made for this Parliament should be honoured in full.
I made that clear in my Autumn Statement to this House. As far as national insurance contributions are concerned, the locks were legislated for in the National Insurance Contributions (Rates Ceilings) Act 2015. When the Bill was introduced, it was made clear by Ministers that the lock would apply only to class 1 contributions. The measures I set out in the Budget fall within the constraints set out by the tax lock legislation and the spending ring-fences. However, it is clear from discussions with colleagues over the last few days that this legislative test of the manifesto commitment does not meet a wider understanding of the spirit of that commitment.
It is very important both to me and to my right honourable friend the Prime Minister that we comply not just with the letter but also with the spirit of the commitments that were made. Therefore, as I said in my letter this morning to the chairman of the Select Committee, my right honourable friend the Member for Chichester, I have decided not to proceed with the class 4 NICs measures set out in the Budget. There will be no increases in national insurance contribution rates in this Parliament.
For the avoidance of doubt, as I set out in the Budget, we will go ahead with the abolition of class 2 national insurance contributions from April 2018. Class 2 is an outdated and regressive tax and it remains right that it should go. I will set out in the Autumn Budget further measures to fund in full today’s decision.
I undertook in the Budget speech to consult over the summer on options to address the principal outstanding area of difference in benefit entitlement between employed and self-employed, which is in parental benefits. We will go ahead with that review. We now intend to widen this exercise to look at the other areas of difference in treatment alongside the Government’s consideration of the forthcoming report by Matthew Taylor, chief executive of the Royal Society of Arts, on the implications of different ways of working in a rapidly changing economy for employment rights. Once we have completed these pieces of work, the Government will set out how they intend to take forward and fund reforms in this area.
Reducing the unfairness of the difference in the tax treatment of those who are employed and those who are self-employed remains the right thing to do. But this Government set great store in the faith and trust of the British people, especially as we embark on the process of negotiating our exit from the European Union. By making this change today, we are listening to our colleagues and demonstrating our determination to fulfil both the letter and the spirit of our manifesto tax commitment. I commend this Statement to the House”.
Baroness Kramer (LD)
My Lords, what a climbdown. And what a spat between No. 10 and No. 11. The Chancellor has always had a tin ear, but did the Prime Minister not recognise that the NICs change was, in effect, a tax increase on the plumber, white van man, the entrepreneur and women working from home because of children—people who are typically “just about managing” and whose income fluctuates, is low and is often unreliable?
Yesterday, in the Budget debate, the noble Lord, Lord Willetts, spoke of the now discarded NICs change as a way to combat companies that, to benefit from tax arbitrage, push people out of employment into less certain self-employment. I suggest, as I did then, that if the NICs changes had been focused on those companies seeking that tax arbitrage, rather than on the self-employed—manifesto pledge or no manifesto pledge—the response would have been very different. Were the Tory Government following their usual pattern of protecting big companies and big business and hitting the little people?
It is crucial, as I think everyone in this House would agree, that the increase of £2 billion for social care remains, inadequate though it is, being spread over three years. How will the Government fill the gap in the public finances when the Chancellor is so constrained by expected blows from hard Brexit? Can the Minister give us today a guarantee that it will not be filled by more severe spending cuts parts of the public sector already under extraordinary pressure? Do the Government agree that the whole Victorian structure of business and employment taxes needs re-examining? The former BIS Secretary, Sir Vince Cable, is chairing such a review for the Liberal Democrats. Will this Government, among their many reviews, take on frankly a review of similar scope, because it is vital?
When spreadsheet Phil decides to shoot from the hip, we surely have a Government puffed up in hubris. I am afraid that this exactly reflects the arrogance that led the Government to hard Brexit. If they have a tin ear over their own self-employed, how bad is the tin ear that they will take into EU negotiations?
Lord Young of Cookham
My Lords, I say to the noble Lord, Lord Davies, that we are reluctant to take advice from the Labour Party on promoting harmony between No. 10 and next door. He will recall that Budget measures introduced by the Labour Government subsequently had to be revised. For the Liberal Democrats, the noble Baroness was cautious enough not to mention manifesto commitments—there are certain issues from her party that would be brought to mind.
We have made it absolutely clear that we will make good the fiscal impact of this decision in the Autumn Statement. We are not minded to borrow more, which has sometimes been suggested. However, in response to the serious issue raised by both the noble Lord and the noble Baroness, I can give a firm assurance that all the spending commitments made in the Budget will be honoured—on skills, on adult social care and on accident and emergency. We stand by those commitments.
The noble Lord asked about universal credit. There will be no change to the entitlement to universal credit by the self-employed. On the broader issues about the Taylor review, there is an issue here—and the Labour Party has recognised it as an issue; it has a commission looking at the issue. I do not think that it would be right to do what the noble Lord suggested, which is to ditch the Taylor review. It is important that we go ahead with it, but we have ruled out certain responses in how we take it forward. But there is an issue here—a threat to the tax base that we need to address.
The Autumn Budget will make good the deficit, in the normal way, so the hole will be filled, and the Chancellor remains committed to sound finance, reducing the deficit and investing in infrastructure and key public services. Those commitments remain as before.
Lord Higgins (Con)
My Lords, my noble friend will know that the Chancellor’s original proposal was widely welcomed by, for example, a leader in the Financial Times and the Institute for Fiscal Studies. Would he agree that the way in which the doctrine of the manifesto has developed over almost the last century needs further review now? We find ourselves in a situation where a manifesto appears at short notice, is subject to absolutely no consultation with anyone and is not subject to amendment. In those circumstances, it is not surprising that it sometimes contains rather unfortunate proposals. None the less, one must obviously abide by it in general terms—but one must surely take into account changes in circumstances. The result of the referendum means that the Chancellor will be faced with immense problems in this Parliament. Is it not a mistake to continue to tie his hands, and should we at least give him the possibility of not sticking to the manifesto commitment as it was conceived at the time of the election because of these changed circumstances? He ought not to be bound by the triple lock, which is after all a major aspect of fiscal policy, when we are trying to deal with all the problems that a hard or even a soft Brexit may produce.
Lord Young of Cookham
My noble friend gives some wise advice on the number of commitments in the manifesto. I think that we had 600 in our last manifesto, and I am sure that there are lessons to be learned. But I cannot agree with him that we should ditch our manifesto commitments. Confidence in the political system is not that high and if any party, once elected, were to break its manifesto commitments along the lines that my noble friend has suggested, it would not enhance confidence in the political system at all. So we have to stick within the commitments that we made and find other ways in which to reduce the deficit.
Lord Bilimoria (CB)
Although I welcome the fact that the Government have backed down on this, the reason given very clearly is on the spirit of a manifesto commitment not being broken. Well, the biggest manifesto commitment that has been broken is remaining in the single market. Are the Government now going to back-track on that? We shall wait and see.
The main reason why people—and when I say people I mean Members across the parties in another place and here—objected to this increase in national insurance contributions for self-employed people affecting more than 2.5 million people is because the perception that it sends out is that the Government are going after and hitting the very people who take the risk to be self-employed and going against encouraging entrepreneurship. Would the Minister agree that the main role of government in this area is to encourage entrepreneurship, which means encouraging job creation, tax takes and growth, which will help to get rid of the deficit—not by hurting the very people who will create that growth?
Lord Young of Cookham
The noble Lord will know that we have taken a number of measures to promote enterprise. We have reduced corporation tax and we are investing in infrastructure and broadband. I do not want to reopen a discussion that we have had for the last two or three weeks about the single market and Brexit, but what has happened is that there was an announcement last week and there were then discussions with parliamentary colleagues and others. Against the background of those discussions, the Government have decided not to proceed. This is not an unparalleled development in the political system. It is a measured and proportionate response to some very real reactions that we got from colleagues down the other end.
Lord Rooker (Lab)
Can I give the Minister two messages for the Chancellor? First, the greatest unfairness in national insurance—as I look around the House, this will not go down very well—is the cut-off point at age 65. Whether people are on salaries or pensions, national insurance is general taxation and it should cover everybody who has a relevant income. I cannot see how that could be covered by this lock. My second message is more widespread. It comes from the mid-1990s, when some of us on the Front Bench were sent to Templeton College, Oxford, on the basis that one day we might be Ministers. The abiding lesson that I took away from that seminar was a simple one: it is never too late to avoid making a bad decision.
Lord Young of Cookham
I am working out the exact impact of that—if you have made a bad decision, how do you get out of it?
Lord Young of Cookham
If the noble Lord is saying that if you make a bad decision it is never too late to undo it, I understand that. On his other point, there is an argument for harmonising tax and national insurance; this debate has been going on for some time. It is not without its consequences. National insurance is a contributory benefit—you contribute to your state retirement pension. If you have retired and drawn your pension, what is the argument for continuing to make national insurance contributions if your pension is not going to go up as well? Harmonising is a complex issue, which we will of course continue to look at. But I have to say, it is not something that the Labour Government did while they were in office.
Lord Scriven (LD)
My Lords, I draw the House’s attention to my interests as listed in the register, particularly as a member of Sheffield City Council. As the national insurance contribution changes were widely briefed by the Government to pay for extra social care funding and business rates support, will the Minister now give an absolute guarantee that local government budgets will not be raided to pay for the gap that has now been made by this U-turn?
Lord Young of Cookham
I think I have already given that commitment: the support that we announced for local government in the Budget will go ahead and will not be affected by the announcement today.
Lord Northbrook (Con)
My Lords, I congratulate the Chancellor on his change of heart. I am sure that he is encouraged by yesterday’s debate here on the Budget and the contributions of my noble friends Lord Flight and Lady Altmann and the noble Lord, Lord Bilimoria, and others. I welcome this measure for self-employed business, but can the Minister make representations to the Chancellor on the subject of dividend tax changes, which will hit small incorporated businesses particularly hard, and also on the new proposed probate tax, which has not come in yet but which will affect current and potential Conservative voters in London in particular?
Lord Young of Cookham
I am grateful to my noble friend for drawing attention to the very good debate that we had yesterday on the Budget Statement. I will ensure that the Chancellor is aware of the views that were expressed by him and others, not just on the national insurance issue but also on probate and the changes to the dividend tax allowance. Whether it was my noble friend’s speech last night that caused the Chancellor to change his mind this morning, I am not quite so sure, but I am grateful for his support this evening.
Lord Elystan-Morgan (CB)
My Lords, does the Minister accept that the Statement is a brilliant piece of euphemistic improvisation? It may well be that the man in the street will remind himself of a line of Victorian poetry, “Someone had blundered”. However, does he accept that it is entirely appropriate for the Government to proceed with extreme caution on this fateful day, the Ides of March?
Lord Young of Cookham
I am grateful to the noble Lord. He said “improvisation”, but I think he does an injustice to the minds of the civil servants, politicians and spads who had to put together the Statement that the Chancellor made a few moments ago.
Lord Howarth of Newport (Lab)
My Lords, further to the excellent exchange between the noble Lord, Lord Higgins, and the Minister, is not the moral of this episode—indeed, one that should be taken by all parties—that manifestos that read like mail order catalogues are a bad idea and that manifestos would be better confined to one side of A4?
Lord Young of Cookham
I have some sympathy with that as a person who has had to defend manifestos over 10 general elections. It is important that the public have some idea of the direction in which a political party will take the country if it is successful in a general election, and that manifestos give some idea about the big issues such as public ownership, tax, defence, the police and law and order. However, 600 commitments, which I think is what we made, may be on the high side. By the time we hit 2020, I am sure everybody will learn that there is something to be said for brevity.
The Lord Bishop of Chester
My Lords, I think I can paraphrase the remarks of the noble Lord, Lord Rooker, by saying:
“To improve is to change; to be perfect is to change often”,
as Churchill said. It is a strength that the Government can change their mind so openly and directly, and I wish that politicians would more often simply and openly accept that they have changed their mind in the light of the evidence. So, in that sense, I welcome this announcement. My concern is about the further measures. One of the problems with the triple lock and the guarantee on tax rates and so on is that tax increases tend to be stealth taxes of one form or another. In a healthy democracy, the more open, direct and progressive taxation is, the better. I wonder whether the Minister is willing to make some comment, from his heart, on that suggestion.
Lord Young of Cookham
The right reverend Prelate invites the sinner to repent; I think that was the gist of his remarks. I am sure the Chancellor, as he reflects on how to make good the deficit that we now have in the Budget, will take on board the suggestion that the right reverend Prelate made about openness and avoiding stealth taxes. However, I hope he is not implying that the Government should not make good the deficit and continue with their policy of getting it down.
Lord Dobbs (Con)
My Lords, I congratulate the Chancellor on his brave and sensitive decision to change his mind. I see our Labour colleagues smiling, but the Chancellor changed his mind after seven days. They have not changed their minds after 18 months of having the wrong leader. At least our Chancellor got the message—
Lord Dobbs
I bow to the noble Lord’s greater intimacy with those decisions.
I pick up on the many points made about the value of manifesto commitments. It seems to me inevitable that other manifesto commitments will have to be considered: the triple lock is just one clear example. Can we learn from this lesson and make sure that the debate is had before those decisions are made, rather than waiting until the SAS comes through the window?
Lord Young of Cookham
I am grateful to my noble friend. I think there is something for all the political parties to learn in terms of setting up policy reviews well in advance of the 2020 general election and involving party members and other people, as appropriate, as they develop their policies, rather than leaving things to the last moment. I therefore take heart from what he says. I am sure that we will all learn from what has happened today.
Lord Harris of Haringey (Lab)
My Lords, many of those who are self-employed are also registered for value added tax. I declare an interest as such a person. However, the Government, with effect from 1 April, will introduce a flat rate for limited-cost businesses under the VAT flat rate scheme. This will have an immediate effect for many people in that position of increasing the money they pay to HMRC by a margin of 2% or 3%—in some cases more—of their turnover. Is that consistent with the spirit of the Conservative manifesto?
Lord Young of Cookham
I assume those measures have already been approved by both Houses of Parliament, if they are going to come into effect next month.
Baroness Altmann (Con)
My Lords, I too add my congratulations to the Chancellor on his very sensible and timely decision. The idea that self-employed and employed people have opportunities for arbitrage, and that that needs to be corrected, is absolutely right. However, the Chancellor should be applauded for concluding that we should wait until the Matthew Taylor review and a more thorough analysis can be carried out, and then come back in the autumn with perhaps different proposals that will achieve the desired impact without breaking manifesto commitments and recognise the huge importance to our economy of encouraging self-employment, risk-taking and the establishment of new businesses.
Lord Young of Cookham
I am grateful to my noble friend for what she has just said and for her contribution to yesterday’s debate on the Budget. I am sure she is right in what she says about the Taylor review and about finding the right way through the dilemma of continuing to encourage enterprise and self-employment where it is legitimate while, on the other hand, removing the opportunity for arbitrage and abuse, which in some cases is taking place at the moment. I am grateful for her support.
Lord Cunningham of Felling (Lab)
My Lords, a very famous operator in the field of social security and taxation once said, “When the evidence and the facts change, I change my mind”. That is very wise advice for the Government. What concerns me in all this is that the Government have locked themselves for the whole of the Parliament into what I would regard as a rash, ill-judged manifesto commitment. A black hole—not the first one—now appears in our public finances and will have to be remedied over time, as the Minister has already acknowledged. The question for us now is: as people on benefits, housing benefit and low incomes have been hurt, who will be hurt by whatever measures emerge to fill this black hole?
Lord Young of Cookham
I understand the noble Lord’s concern but, as I said when I repeated the Statement, in his Autumn Budget the Chancellor will outline the measures that he will take to make good the revenue lost by this decision. Therefore, the noble Lord will have to wait until the Autumn Statement for the answer to his question, but I know that the Chancellor will take on board his concern for the lower paid and the less well off as he addresses those issues.
Lord Marlesford (Con)
My Lords, I congratulate the Chancellor on his rapid reverse but might it be worth reminding the Labour Party what a long time it took for it to drop the absurd selective employment tax, invented by Professor Kaldor? It hung round Labour’s neck for a very long while. As for filling the gap, did my noble friend notice the suggestion that I made yesterday that one of the easiest things to do is to reverse the freeze on road fuel duty, which would do less than make up for inflation? An increase of 10p a litre would produce £4.6 billion of revenue this year, next year and every year.
Lord Young of Cookham
I am grateful to my noble friend for reminding us about the selective employment tax, which I had totally forgotten about until he reminded me a few moments ago. I am also grateful to him for making a suggestion as to how the gap might be filled —something that we have not had from many other contributors. I know that as the Chancellor approaches his Autumn Budget he will take on board my noble friend’s suggestion, but I give no guarantee at all that he will implement it.
Lord Snape (Lab)
Without wishing to sound a sour note, does the Minister accept that, in the view of many of us, no congratulations to the Chancellor are necessary on what is in fact a humiliating U-turn? As former Whips in the other place, the Minister and I both know that the reason the Chancellor has backed down is that he does not have a majority for this measure on his own Back Benches. That is the simple explanation. As far as the welcome advice that the Chancellor is now going to take from Mr Matthew Taylor, I recollect—and I hope that the Minister does too—that Mr Taylor was a distinguished adviser to Mr Tony Blair during his time as Prime Minister. If his involvement indicates that we are about to return to that golden era, it will be long past time.
Lord Young of Cookham
I am sure that Matthew Taylor will be able to build a consensus between the various parties that he has served over a period of time. As the noble Lord knows, Whips do not speculate about how they go about their trade. The reasons for the decision were as I set out in the Statement some 20 minutes ago.
Baroness Pinnock (LD)
I thank the Minister for his very clear statement about the continuing commitment to social care additional funding, but will he give us an equally clear and unequivocal statement to satisfy lots of worried people in local government that he will not be raiding existing funding for local government in order to offset the social care funding that has been provided?
Lord Young of Cookham
The settlement for the current year has been made and the additional funding that was announced in the Budget will stand, so all the commitments that have been made in the Budget will remain.
Lord McKenzie of Luton (Lab)
My Lords, there is an air of inevitability about this decision today. We have seen it built on the folly of those manifesto commitments referred to by the noble Lord, Lord Higgins. There is another issue that has run through lots of Budgets, which is the internal process of government and the checks and balances that are applied to Budgets, which are much weaker than one would see in most legislation. Anyone producing a Bill in government has to go round every department getting input into it, and there is challenge. That process irons out some of the problems that we have seen emerge not only in this Budget but, to be fair, in previous Budgets and announcements as well. On the specific commitment today about no changes to class 4 contributions, does that apply to the basis of calculation of thresholds as well as the rates?
Lord Young of Cookham
That is a good question. The manifesto commitment was actually about the rates. So far as the thresholds are concerned, our policy has been to uprate them each year in line with CPI, I think. We have no plans to change that.
Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2017
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That the draft regulations and order laid before the House on 16 January and 6 February be approved.
Considered in Grand Committee on 9 March.
Higher Education and Research Bill
Lord Young of Cookham ExcerptsMonday 13th March 2017
(7 years, 2 months ago)
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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.
Lord Willetts (Con)
I shall very briefly comment, as I have had my arguments referred to by the noble Lord opposite. The graduate repayment scheme is neither conventional public spending, nor is it a commercial loan. All three parties, when faced with the question of how you finance higher education, have concluded that the best way forward is through such an arrangement. If it is public spending, it will be a low priority, and the funding of universities will suffer. If it is a commercial loan, which now appears to be what the Labour Opposition are calling for, and if we really were to have it regulated under the terms of the convention on private loans, one of the first requirements would be the requirement to know your customer—to make an assessment of an individual recipient to see whether they have the capacity to repay a student loan. The agencies would have to decide whether to lend to any one individual or not, and disadvantaged students would certainly lose out from such an assessment. That is why this scheme is a midway house between two unpalatable alternatives, and why all three parties have backed it.
As part of that arrangement, it seems legitimate that Governments should be able to decide—I have always thought every five years, in an explicit public review—the balance between repayments by graduates and the remaining burden being borne by the generality of taxpayers, as the loans are paid off. That seems a sensible arrangement, bringing necessary flexibility into the system, and it is why it has always been made clear to students that Governments have the right to change the repayment terms as they wish. That seems a sensible feature—and if we go down the route of treating it like a private contract and repayment, it will have consequences which all of us in this House, particularly the party opposite, will come to regret.
Lord Young of Cookham
My Lords, I share the concern of the noble Lord, Lord Watson, that students should be entitled to protection when they take out student loans. Protections are already available in law and take account of the particular nature of these loans. Student loans are not like the commercial loans of the sort regulated under the Consumer Credit Act; they are not for profit and are universally accessible. Repayments depend on the borrower’s income, not on the amount borrowed, and the interest rate is limited by legislation. I am grateful to my noble friend Lord Willetts for summarising the excellent speech that he made on this subject in Committee, and putting forward powerful reasons for not treating these as commercial loans.
I turn first to the issue of the threshold freeze. To put higher education funding on to a more sustainable footing, we had to ask those who benefit from university to meet more of the costs of their studies. This enabled us to remove the cap on student numbers, enabling more people to get the benefit of a university education. When the current system was first introduced, the threshold of £21,000 would have been around 75% of the projected average earnings in 2016. Since then, updated calculations, based on ONS figures for earnings, show that figure is now 83%, reflecting weaker than expected earnings growth since 2012. Uprating the repayment threshold in line with average earnings would cost around £5 billion in total by April 2021 compared with the current system. The total cost of uprating by CPI would be around £4 billion over the same period. The proportion of borrowers liable to repay when the £21,000 threshold took effect in April is therefore significantly lower than could have been envisaged when the policy was originally introduced. The threshold would now be set at around £19,000 if it were to reflect the same ratio of average earnings. The current £21,000 threshold remains higher than the £17,495 threshold that applies to loans taken out under the system left behind by Labour in 2010. Low earners remain protected. Borrowers who earn less than £21,000 a year repay nothing, while borrowers earning more than this repay 9% of their earnings above the threshold, irrespective of how much they borrowed. Any outstanding balance on the loans is written off after 30 years with no detriment to the borrower and no effect on their credit rating. This Bill makes no changes to any of these arrangements.
It is important that, subject to parliamentary scrutiny, the Government retain the power to adjust the terms and conditions of student loans. As I said a moment ago, I fully share the noble Lord’s desire to ensure that students are protected and that is why the loan terms are set out in legislation.
Lord Watson of Invergowrie
If the situation had been reversed, and earnings had risen by more than had been anticipated, would the Government’s ability to vary the loans have been carried out in a manner which benefited students, rather than as has happened on this occasion?
Lord Young of Cookham
Perversely, the noble Lord’s amendment would prevent the Government making any changes to the loan agreement that would favour the borrower. In other words, one of the effects of the amendment would be that we would not be able to alter the terms to the advantage of the borrower if the situation changed.
Lord Watson of Invergowrie
As I said earlier, that is what the amendment is designed to do. The point is, when you reach an agreement you stick by it; you do not vary it either way. I am certainly not advocating that it should be varied the other way. My question was whether the noble Lord and his Government would be prepared to vary it the other way, had earnings risen by more than had been anticipated.
Lord Young of Cookham
My response was that we would not be allowed to under the terms of the amendment. We have flexibility, which the noble Lord would deny us. The amendment would mean that future cohorts of students and taxpayers would have to bear the risks of the scheme, because it would insulate current students from any change. Perhaps that is why the Labour Party did not legislate to prohibit changes to the terms and conditions of existing loans when they introduced the system of income-contingent loans in the late 1990s. As I said, his amendment would prevent the Government making any change to the loan agreement that would favour the borrower, were this ever to be necessary.
It is also important that the Government should continue to be able to make necessary administrative amendments to the terms and conditions to ensure that the loans can continue to be collected efficiently. An example of this was the repayment regulations having to be amended in 2012 to accommodate HMRC moving to an electronic system to collect PAYE income tax through employers. Not being able to make this type of technical change to the regulations would eventually affect our ability to collect repayments through the tax system.
Having reflected on the question that the noble Lord asked me twice, the best answer is that I am reluctant to comment on a hypothetical question.
I turn to the regulation of student loans. The current student loan system is heavily subsidised by the taxpayer, and is universally accessible to all eligible students regardless of their financial circumstances. As my noble friend has just reminded us, taking out a student loan is in no way the same as taking out a commercial loan, and it should not be regulated as if it was. This fact was recognised by Labour when it legislated to confirm this exemption in 2008.
The key terms and conditions are set out in legislation and are subject to the scrutiny and oversight of Parliament. Extending a system of regulation designed to regulate a competitive market in personal finance to a system of subsidised loans whose terms are set by Parliament would be impractical, expensive and fundamentally ill conceived. The additional costs of the regulation would need to borne by borrowers and taxpayers and would not be in their interests.
I return to the point that this is a heavily subsidised government loan scheme, and it remains right that Parliament should continue to have the final say on the loan terms and conditions, as it is best placed to balance the interests of taxpayers, borrowers and students. We are committed to a sustainable and fair student funding system. Our system allows the Government, through these subsidised loans, to make a conscious investment in the skills of our citizens. We are seeing more young people going to university than ever before, and record numbers of 18 year-olds from disadvantaged backgrounds. Our funding system has enabled us to lift the cap on student numbers and, with it, the cap on aspiration.
I hope that this addresses the concerns raised by the noble Lord, and I therefore ask him to withdraw Amendment 145.
Lord Watson of Invergowrie
My Lords, I thank the Minister for that reply. Some of his comments about the Government’s commitment to student loans would have carried more weight had they extended as far as sharia-compliant loans; we know from the previous debate that that is not the case. Although I take on board the points made by the noble Lord, Lord Willetts, he did not address the major point of this amendment: challenging the fact that the Government have changed the rules of the game after the game has begun, leaving a huge number of students worse off financially as a result of their actions. That is not acceptable. I have heard nothing from the Minister that suggests that the Government regret the move that they have made. In fact, they have said quite clearly that it was done for financial reasons. Those financial reasons are impacting on students. We believe that is unacceptable, and I wish to test the opinion of the House.
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.
Lord Dubs
My Lords, I hope I have not gone over the top in my sense of optimism. It is not something I normally do in relation to this Government, and I have had experience to the contrary on other, related issues. However, I take a little bit of comfort from what the Minister said. I took more comfort in my earlier meeting today, but that is not on the record for our debate now. However, the Government speak with one voice, both privately and publicly, and I am hopeful that they will be able to deal before too long with what is an acknowledged anomaly.
It is unfair that if people who have missed out on education and had enormous difficulties in their life want to make some sense of their life, they have to wait three years to access higher education. It is an appallingly long time. What are they supposed to do in those three years—sit at home and watch television? It is a real indictment when these people want to move forward. I accept that other groups are also penalised in this way—they should be looked at in the same way—but if people are going to make a positive contribution to this country, it is right that we should not withhold higher education from them. That way, they can make a much bigger and more positive contribution to this country. I beg leave to withdraw the amendment—but on the understanding that, at intervals, the Government will let us know how they are getting on with looking at this.
Lord Watson of Invergowrie
My Lords, I support the amendment in the name of the noble Lord, Lord Storey, and I spoke in support of the same amendment in Committee. This is a problem of some seriousness and I think it is understated. We heard in the previous debate that the QAA was not taking it particularly seriously and had no legal or regulatory powers to take action against an individual student who was found to have cheated in whatever way. The noble Lord, Lord Storey, told us at that time that it was rather offhand about the fact that only 17,000 students had been caught cheating. The fact that that was the tip of the iceberg seemed not to be a major issue.
It is a major issue if there is such an amount of this going on that Professor Newton—to whom the noble Lord, Lord Storey, has referred in the past—has carried out a survey by interviewing students and those providing such services, which came up with a whole list of how long it took for an essay, a dissertation or whatever. If it is even worthy of academic study, it has to be a problem of some substance. The noble Lord quoted Professor Newton and said that he had been advised that if the word “intent” had been taken out of the amendment it would have strengthened it. I am not quite clear about how it would have strengthened it. I think the noble Lord said it would have given it more power, but that has not been done. Will the noble Lord explain why the amendment has been submitted in the same form?
The noble Baroness, Lady Goldie, is in her place. She was the Minister who responded to this debate in January. As we were together in the Scottish Parliament many years ago, I hoped that she might respond to this debate, but I see that—forgive me—silence is Goldie and the noble Lord, Lord Young, will respond. Will he pick up the point that the noble Baroness, Lady Goldie, made in her response in January that the Government were on the point of announcing a new initiative on this? The noble Baroness, Lady Goldie, said it would be with us,
“Within the next few weeks”.—[Official Report, 25/1/17; col. 765.]
Seven weeks have ticked by since we last discussed this, so we must be very close to it now. Perhaps the Minister will tell us whether he has a date for the publication of this new initiative, which I think was to involve the QAA, the NUS, HEFCE and UUK—a whole lot of acronyms. It would helpful and would perhaps deal with this issue, at least in the interim, as I accept that we are short of a position where legislation is required.
Lord Young of Cookham
My Lords, I am grateful to the noble Lord, Lord Storey, for his extensive work on this issue. I am grateful for his contribution to the round-table discussions with the QAA and his continued engagement on this matter. He touched on the problem of foreign students. The evidence presented in the QAA’s report on plagiarism indicates that cheating may be more prevalent among international students. However, we recognise that plagiarism is a wider issue, so our approach is to look at the sector as a whole. We will be working with the QAA and other sector bodies to develop a co-ordinated response across all students and providers.
As my noble friend Lady Goldie said in Committee, plagiarism in any form, including the use of custom essay-writing services, or essay mills, is not acceptable and the Government take this issue very seriously. Having said that, I am afraid that I am going to plagiarise much of the speech which my noble friend made in Committee when she dealt with this amendment. My noble friend announced that the Minister, my honourable friend Jo Johnson, would be launching a co-ordinated sector-led initiative to tackle this issue, working with the QAA, UUK, NUS and HEFCE. In response to the question just posed by the noble Lord, Lord Watson, this initiative has now been launched.
The Minister has asked sector bodies to develop guidance with tough new penalties as well as information for students to help combat the use of these websites as well as other forms of plagiarism. This new guidance for providers should ensure that a robust approach with tough penalties can be embedded across the sector. In developing the guidance, the Minister has asked sector bodies to bear in mind that, for any enforcement to be effective, the penalties imposed must relate to both the gravity of the offence and the likelihood of an offence being discovered. The new sector guidance and student information is expected to be in place for the beginning of the 2017-18 academic year.
As part of this initiative, the QAA has also been tasked with taking action against the online advertising of these services and to work with international agencies to deal with the problem. The QAA has already started to progress these actions, including making a formal complaint to the Advertising Standards Authority, asking it to investigate the essay mills sector on a project basis.
We believe this sector-led, non-legislative initiative is the best approach to tackling this issue in the first instance. We will, of course, monitor the effectiveness of this approach and we remain open to legislation in the future should the steps we are taking prove insufficient. If legislation does become necessary, it would be crucial that we get the wording of the offence right. In the amendment tabled, it is unclear who would be responsible for prosecuting and how they would demonstrate intent to give an unfair advantage. As currently written, there is also a risk that the offence could capture legitimate services, such as study guides, under the same umbrella as cheating services.
The effectiveness of a legislative offence operating as a deterrent will depend on our ability to execute successful prosecutions and we would need to take care to get it right. This was acknowledged by the noble Lord, Lord Storey, in Committee, who said that,
“this should not be rushed and we should get it spot on”.—[Official Report, 25/1/17; col. 766.]
We do not believe that legislative action is the best response at this time, and I have outlined the steps that are being taken. Against that background, I hope that the amendment will be withdrawn.
Lord Storey
My Lords, I am grateful for the Minister’s reply and for the opportunity to talk over the issues with the Minister for Universities. The Minister is right to say that this should not be rushed. It is interesting that this issue started from a very small complaint and has become such an important matter that we now want to deal with. It shows that when we collectively share our thoughts and ideas we can get a result—I hope.
I was quite shocked to see in the QAA’s briefing that a 3,000-word dissertation in law can be done for just £6,750. I am delighted that the Government take this seriously. There is a need for a co-ordinated response. The penalties will be important. It is important that students know what is happening, and I suppose that if students do not wish to have penalties levied against them, the companies will wither on the vine. I look forward to seeing how this develops over the next few years. I was pleased to hear the Minister say that if this joint co-ordinated initiative does not prove effective, the Government will be open to legislation. I beg leave to withdraw the amendment.
Baroness Lister of Burtersett
My Lords, I am pleased to support the amendment and to follow the noble Baroness, Lady Hamwee, who, as she noted in Committee, joined the Joint Committee on Human Rights just as I left it. In Committee, I reminded noble Lords of the concerns raised across the House during the Counter-Terrorism and Security Bill about the application of the Prevent duty to higher education institutions. As we have heard, the present amendment does no more than call for an independent, authoritative review of how the duty now operates in those HE institutions. This would respond to concerns raised more recently by a range of organisations, including, as my noble friend Lord Dubs said, the Home Affairs Select Committee. These concerns include: possibly discriminatory impact; the question of the adequacy or otherwise of the training given to academics; and the human rights implications, echoing earlier concerns of the JCHR.
In Committee, the noble Baroness, Lady Goldie, said that,
“we welcome discussion about how to implement Prevent effectively and proportionately, but … we consider blanket opposition to the duty unhelpful”.—[Official Report, 25/1/17; col.762.]
As we have heard, the amendment no longer proposes blanket opposition. Surely, in order to have a well-informed discussion, as called for by the noble Baroness, it makes sense to have an independent review of how the policy is operating, as called for in the amendment, to inform that very discussion. I can understand why the Minister opposed the original amendment, even though I disagreed with her, but I can see no justification for opposing this much more modest, and I hope helpful, amendment as a basis for the discussion that she said the Government would like to see.
Lord Young of Cookham
My Lords, I am grateful to all noble Lords who have spoken to this amendment and for the measured way in which they have put forward the case. I hope we will all agree we cannot ignore the increasing threat to the UK from terrorism. This is currently assessed as severe, meaning an attack is highly likely. We cannot simply wait for attacks to happen. We cannot stand by and do nothing while vulnerable individuals are targeted for radicalisation and drawn into terrorism, so we must have a strong and robust strategy to prevent this.
Prevent was discussed in Committee, and I am particularly grateful for the input at that stage from the noble Baroness, Lady Deech, who recognised the importance of Prevent in higher education. The Prevent programme is designed to safeguard vulnerable individuals from all forms of radicalisation in a variety of institutions. It is an important safeguard for our domestic students but also for the thousands of international students who choose to study here each year. Setting off to university can be a big transition in the lives of many people, and it is vital that universities safeguard their students during what can sometimes be a very challenging time for vulnerable individuals. The coalition Government introduced a clear legal duty to ensure universities recognise and act on this responsibility.
Preventing people being drawn into terrorism is difficult and challenging work, but Prevent is working and making a positive difference. In 2015, more than 1,000 referrals of vulnerable individuals were made to Channel, which enabled them to access support to try to divert them away from radicalisation. The vast majority of the individuals who choose to participate in Channel leave with no further concerns about their vulnerability to being drawn into terrorism—so as I say, Prevent is working.
Of course, this amendment is aimed at reviewing the operation of Prevent in the higher education sector, but this is already happening. Following consultation with the sector, HEFCE, which I believe to be independent of government, launched its monitoring framework last year and has had 100% engagement. In its report published in January, HEFCE found that the vast majority of institutions are implementing the Prevent duty effectively.
HEFCE has seen higher education providers increasingly improve their awareness of the risks to vulnerable students, and there have been some highly encouraging examples across the sector of how they mitigate these risks in a sensible way. The HEFCE report highlights numerous cases of good practice in the sector, and the steps being taken by institutions, from our oldest institutions through to newer providers. To give just one example, HEFCE found that the University of the West of England hosted a joint consultation with its students’ union on the implementation of the Prevent duty. This included open debate between students and Prevent partners with an opportunity for all students to view and comment on draft policies and procedures. This demonstrated a real understanding of the importance of engaging and collaborating with the student body to effectively implement the duty.
Finally, I know that noble Lords are concerned about the interplay between Prevent and freedom of speech, something the higher education sector rightly holds dear, and which we touched on in an earlier debate. Prevent does not stop lawful debate. In higher education, providers that are subject to the freedom of speech duty are required to have particular regard to this duty when carrying out their Prevent duty. This was explicitly written into the Prevent legislation to underline its importance as a central value of both our higher education system and indeed of our society. HEFCE’s monitoring shows that higher education providers are balancing the need to protect their students and their obligations under Prevent while ensuring that freedom of speech on campus is not undermined.
I say to the noble Lord, Lord Dubs, and those who have taken part in this short debate that the Government are grateful for the opportunity to discuss this vital duty that stops vulnerable individuals being drawn into terrorism. Prevent is being implemented effectively and pragmatically in the higher education sector and we want to maintain this momentum. We know it is both effective and pragmatic from the monitoring that HEFCE does. Against that background, I hope the noble Lord might feel able to withdraw Amendment 154.
Lord Dubs
I am grateful to the Minister for his response and to those noble Lords who have spoken in this short debate. I am not quite sure that the HEFCE review the Minister spoke about goes as wide as I would have wished—certainly the amendment would have gone much beyond that—nor am I sufficiently aware of the details of the results to see whether they would meet the concerns that many people have expressed to me. Given that we got something, though, I think we will return to this before too long. I think in the end, the Government will have to do a full and totally independent review of the Prevent strategy in higher education; there is too much at stake, it is too contentious, it is not as easy a situation as the Minister suggested and the concerns are much more widespread. On that basis, I beg leave to withdraw the amendment.
Lord Young of Cookham
“23A (1) Section 78 (financial years of higher education corporations) is amended as follows.(2) In the heading, at the end insert “: Wales”.(3) In subsection (1), after “higher education corporations” insert “in Wales”.(4) After subsection (2) insert—“(3) In this section “higher education corporation in Wales” means a higher education corporation established to conduct an institution whose activities are carried on, or principally carried on, in Wales.””
Political Parties (Funding and Expenditure) Bill [HL]
Lord Young of Cookham ExcerptsFriday 10th March 2017
(7 years, 2 months ago)
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Lord Young of Cookham (Con)
My Lords, I am grateful to the noble Lord, Lord Tyler, for the opportunity to debate this important issue, and to all noble Lords who have spoken in the debate. I congratulate the noble Lord, with whom I have been debating in a variety of institutions for 57 years—he said 55 but I make it 57—on producing a substantial piece of legislation: a much richer diet than we are normally used to on a Friday. As he said, this is based on work by MPs of all three parties, supported by some professional input. I am grateful for his kind words about me and I reciprocate by complimenting him on his consistent campaign on matters of constitutional reform over a number of decades.
As the noble Lord indicated, he has been here long enough to know that a Bill that gets its Second Reading in the first of two Houses on the last sitting Friday has a short life expectancy. However, this is an important subject that deserves an airing. I was struck by what the noble Lord, Lord Wallace of Saltaire, said when he opened a short debate on a similar subject on 3 November last year. He said that,
“party funding reform is rather like Lords reform: we come back to it every other year, or at least once every Parliament; we … get round to setting up a working group; the parties fail to agree; we go away and significant change is rarely made”.—[Official Report, 3/11/16; col. 867.]
I think that parallel is actually instructive, and I will return to it later.
The current regime to regulate political parties and party funding was established in the PPER Act 2000, on which I and, I think, the noble Lord, Lord Tyler, were our respective parties’ spokesmen as it went through the other place. Since then there have been a number of proposals to reform the system. Indeed, the proposals of both the Committee on Standards in Public Life in 2011 and those of Sir Hayden Phillips in 2007 are drawn on in this Bill. However, despite a decade of talks, there has been no cross-party agreement on changes to party funding. Wide-ranging talks were held in 2012 and 2013, with representatives meeting seven times. Many of the issues raised by noble Lords today were covered during those talks.
Unfortunately, as on previous occasions, the parties did not reach agreement during those talks. No consensus has emerged since then and, understandably, the Government are reluctant to make changes without that consent. In a debate on 9 March last year the noble Lord, Lord Tyler, quoted Winston Churchill counselling in 1948 against one party imposing its will on another on matters affecting the interests of rival parties. Several noble Lords have called for cross-party talks on this subject to be resumed. For those to be worthwhile, there would need to be some agreement about the basis of the talks so that we do not simply repeat the fruitless exercises of the past. I will return to this point at the end of my remarks.
The Bill uses the proposals of the CSPL from 2011, in particular, as its foundation. We must remember that that report did not receive cross-party support. Indeed, there were dissenting opinions within the report itself. Both Labour and Conservative members of the committee disagreed with its conclusions, as the noble Lord, Lord Bew, reminded us.
The Bill suggests reallocating and increasing state funding for political parties in Clauses 10 to 14— a subject touched on by the noble Lord, Lord Whitty. The Government do not believe that there is any public appetite for more taxpayer funding of politicians and political parties at this time. Noble Lords will be familiar with the advice of Nick Clegg in another place that,
“the case cannot be made for greater state funding of political parties at a time when budgets are being squeezed and economic recovery remains the highest priority”.—[Official Report, Commons, 23/11/11; col. 25WS.]
That advice seems as relevant today as it was then. Indeed, as substantial demands are likely to be made on the public purse to restore the building in which politicians work, it might test the patience of the public if at the same time we were to ask for significantly greater support for the trade we carry on within it.
Instead, we want to reduce the cost of politics, and we are taking steps towards this by reducing the size of the House of Commons—which I hope noble Lords will support when the relevant SI comes before us—freezing ministerial pay and stopping unanticipated hikes in the cost of Short money.
Lord Young of Cookham
We tried to reduce the number of Peers in the previous Parliament, as I know to my cost, but it did not have the consensus that we needed.
Often, the starting point of our discussions is that the spending of political parties should be reduced and that, in the absence of stricter rules, an arms race is taking place between the parties. Research published by the CSPL in August 2016 showed that this is not the case. There has been no arms race in party funding in recent years. My party spent less in the 2015 general election than in 2010—and that was a lower figure than in 2005. The less we spend, the better we seem to do. Taking into account inflation, the CSPL research showed a steep fall in central party spending since 1997. Neither of the two main political parties in the 2015 general election came close to its spending limit.
Like other recent attempts at reform, the Bill suggests complex and, at times, controversial structural changes to the party funding system. Talks that have focused on these ideas have so far always failed. Perhaps real progress could be made if the focus was instead on smaller reforms that might gain cross-party support.
Here, I return to the parallel drawn by the noble Lord, Lord Wallace of Saltaire, with Lords reform. As I know to my cost, heroic attempts to reform your Lordships’ House failed because there was basically no consensus between the two Houses and within the two main parties. Subsequently, there has been useful incremental reform, with two Private Members’ Bills reaching the statute book and the possibility of further incremental reform coming from the Lord Speaker’s Committee.
Indeed, I wonder whether the noble Lord, Lord Burns, who has tackled difficult subjects such as hunting with dogs, the Trade Union Act and Lords reform, might thereafter apply his resourcefulness and ingenuity to this subject. As with incremental reform of our House, I think we should adopt the same approach to party funding: moving ahead with smaller reforms that may command broad support, rather than trying and failing to achieve an all-or-nothing solution, as this Bill does.
I was interested in what the noble Lord, Lord Bew, said, in the debate on 9 March. Commenting on my party’s evidence to the noble Lord, Lord Burns, which suggested smaller reforms rather than an all-or-nothing, big-bang solution, he said:
“That is an interesting observation. We could address certain aspects of what is a very difficult problem in its totality, in the event that we do not within this Parliament achieve the big-bang solution. These smaller reforms could include finding practical ways to encourage more and smaller donations from wider audiences”.—[Official Report, 9/3/16; col. 1377.]
He repeated that suggestion this afternoon.
These smaller reforms could include finding practical ways to encourage more and smaller donations from wider audiences. As the Minister for the Constitution said when he appeared before the Constitution Committee earlier this week, the Government are open to constructive debate and dialogue on small-scale measures that could command broad support, if there was a positive reaction to such a potential step from the main political parties. I think that today’s debate has shown that there is such an appetite, and I shall return to that in a moment, when I have addressed some of the issues raised in the debate.
The noble Lords, Lord Bew and Lord Rennard, raised the issue about the lack of transparency in donations in Northern Ireland. On 5 January, the Secretary of State for Northern Ireland announced that he would write to Northern Ireland political parties seeking their views on ending the current arrangements on donations and loans to political parties. He asked whether now was the right time to move to full transparency, and he remains keen to make progress on the issue of donations to political parties now that the election has concluded.
The noble Lord also asked about the review of third-party campaigning by my noble friend Lord Hodgson. The Government welcomed that review of campaigning in the 2015 general election, and welcomed the noble Lord’s conclusion:
“Restrictions on third party expenditure at elections are necessary”.
He recommended a balanced package of measures; some would tighten the rules and some would relax them. We are considering his recommendations carefully, along with the Electoral Commission’s response to them.
My noble friend Lord True raised two important issues. Firstly, on impermissible donations, he rightly said that all three parties had been affected but focused his comments on the Michael Brown case and asked whether the Electoral Commission should be able to secure the return of donations which are later found to be the proceeds of crime. The Electoral Commission has recommended that the rules on company donations should be reviewed following its investigation of donations made by 5th Avenue Partners Limited to the Liberal Democrats in 2005. We are considering that issue alongside a number of other issues related to donation matters.
My noble friend also raised the matter of reports about a £250,000 donation being offered to the Green Party before the Richmond by-election. This was denied by the Green Party, and the Electoral Commission records for the relevant period do not show any such donation being made. Laws around such donations relate largely to ensuring that they come from a permissible source and that they are properly declared to the Electoral Commission to comply with transparency requirements. If the donation in this case had complied with those requirements, it is unlikely to have broken any laws. But my noble friend raised an interesting question as to whether the law applied to parties as well as to individuals. That is an issue that we need to reflect on further.
The noble Lord, Lord Wrigglesworth, made a valid point about social media and the changing landscape of political campaigning. I agree that it would be better if all parties were less reliant on large donations and we had a broader base of membership donations on which to rely.
The Bill proposes a number of reforms to political party funding, including caps on donations and new schemes for public funding. These are complex structural reforms which could be taken forward only on the basis of a cross-party consensus. No such consensus exists at this time, so the Government believe that it is premature to consider a Bill at this time.
However, anticipating that there would be an appetite in today’s debate to make progress and try to break the logjam that we now have, I spoke to the Minister for the Constitution earlier this morning. He would be happy to have a meeting with the noble Lord, Lord Tyler, and other noble Lords who have spoken in this debate, to see whether we can find a way forward along the lines that I have suggested of incremental reforms that achieve cross-party support.
That may not be the giant step forward that the noble Lord hoped for in his opening remarks, but I hope that he accepts it as a constructive response to the debate and a helpful way forward, even though we cannot take his Bill very much further forward today.