Syria-Jordan Border: Rukban Camp

Lord Bates Excerpts

Tuesday 16th October 2018 Lords Chamber

[Lord Hylton (CB)]

My Lords, I beg leave to ask a Question of which I have given private notice.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the conflict in Syria has resulted in the worst humanitarian catastrophe of this century so far. We remain immensely concerned by the ongoing situation at the Rukban camp in southern Syria. It is just another example of the Assad regime’s systematic and blatant disregard for international humanitarian and human rights law and for the well-being of its people.

The UK has been a leading voice among donors on this issue and we continue to raise it with the UN on a regular basis. In particular, we continue to lobby all parties for full humanitarian access to the camp to enable regular aid deliveries to take place. As a result of this lobbying, we understand that a humanitarian convoy from Damascus to Rukban later this month has now been approved. We call on all parties to ensure that this takes place to provide the assistance that these people so desperately need.

[Lord Hylton]

My Lords, I thank the Minister for his reply. Can he confirm that most of the people in this camp have come from Raqqa and can he say whether there is a possibility that they could begin to return home safely? However, in the present crisis of virtual siege, will the Government co-ordinate with Jordan and the United States forces so that people can have access to food and perhaps water to prevent further deaths immediately and not in two or three weeks’ time?

[Lord Bates]

The situation is extremely serious. The information that I have is that we have not been able to identify the cities of origin of the people who are trapped there. However, we know from reports that almost 80% of them are women and children, which heightens the concern about their safety and safeguarding. We believe that our focus for attention in this area should be the Assad regime and Russia to ensure that access is made available. The fact that there is now a commitment that there will be an entry point on 24 October is progress in the right direction, but we believe that this offer of access should have come much earlier.

As to the situation of the United States, it stated as early as April this year that it would not block access. The situation in Jordan is more complex and we continue to make representations to both Amman and Damascus for access to these people, who the noble Lord rightly identifies as being in acute and urgent need.

[Lord Collins of Highbury (Lab)]

As the Minister rightly says, access is the critical issue, with 60,000 people, many of them children, dying as a consequence of this situation. UNICEF issued a statement calling upon both the Syrian regime and Jordan to give access. Can the Minister tell us a little more about how we are approaching the Jordanians to ensure that we can get humanitarian access and aid workers can get in to offer proper support?

[Lord Bates]

Those representations are ongoing through diplomatic channels and through the Syria support group process in Geneva. It has met and, in many ways, the response to and the access of the aid convoy were driven through that process. We are supporting the activities of a key actor in this area, the UN special envoy, Staffan de Mistura. I understand that he is due to give a report on potential solutions to the UN Security Council tomorrow. That has not been confirmed but I understand it to be the case.

[Lord Naseby (Con)]

Can my noble friend clarify what the role of the ICRC is in this situation? In the difficulties over the war in Sri Lanka, when the UN withdrew at a certain point from supplying food and medicines and so on, the ICRC continued to provide supplies of food and medicines which, in the end, proved to be adequate. Can he tell me whether or not the ICRC is deeply involved in this case?

[Lord Bates]

The ICRC is always involved—it has a particular place in international humanitarian law and a responsibility to deliver assistance, so it is there. However, the problems and the challenges are not so much at the level of UNICEF or the ICRC but are more related to a political will to honour the humanitarian commitments which were given in UN Security Council Resolution 2393.

[Baroness Northover (LD)]

It is reported that the Syrians and Russians are blocking aid from getting into this camp. What assessment have the Government made of the apparent plans of the Syrians and the Russians to transfer these IDPs from this camp? What inherent risks do they see?

[Lord Bates]

The plan has been put forward and we are familiar with it. It contains some challenges and we are still working through the detail. The UN has expressed some concerns about it. The briefing and support for the leadership of Staffan de Mistura and his reporting back to the UN Secretary-General and the Security Council within the next day or two will be crucial in determining what shape the response to that proposal takes.

[Lord West of Spithead (Lab)]

My Lords, I am sure the Minister believes that Assad will, within the next 12 months, effectively gain control of Syria, with the help of the Russians. He might be a loathsome man—indeed, he is a loathsome man when one looks at what has happened—but the only way to help the poor, benighted people in that country is, surely, for us to have proper links with him and work to the future to look after them? Certainly the end of the civil war is one of the best things possible for the people of Syria because while it continues there will be more deaths and more refugees, and so it goes on.

[Lord Bates]

We are certainly supportive of the fact that the only real solution is for there to be a lasting political discussion. That is why we are putting so much energy into the Syria support group process in Geneva and at the UN. I accept that. There is a particular challenge faced by the effects of Daesh and it was right that the UK played its role as part of the international coalition seeking to drive it out of its bases in Syria.

[Lord Cormack (Con)]

My Lords, will my noble friend not reflect on what the noble Lord, Lord West, just said? Time and again in this House, some of us have urged on Ministers the need for a diplomatic presence in Syria. It is completely wrong for us not to have that. We decided not to interfere in the civil war at the beginning but nevertheless derecognise the regime, thus reducing any influence that we might have had. Can we now try to regain some of that influence?

[Lord Bates]

I am afraid that I do not have what my noble friend would regard as a satisfactory answer on the latest situation in these matters. For some time now, diplomatic representations have been based in Beirut rather than Damascus, the status of which is of course dependent on future negotiations through the UN Security Council and discussions with our colleagues in government.

[Viscount Waverley (CB)]

My Lords, the Minister rightly said that Syria’s humanitarian situation is the disaster of the century. Why on earth do fair-minded states—one thinks of those in the West in particular—not do more to prevent such catastrophes occurring in the first place, whether in Yemen, Burundi, DRC or countless other places?

[Lord Bates]

I agree with the noble Viscount. The international community has done something extremely good in building a first-class A&E department where we provide humanitarian access to patch up the wounded and the sick from conflicts around the world. At some point, we need to start devoting more energy, effort and cash to preventive work to stop conflicts breaking out in the first place. Once they break out, of course, it is incredibly difficult to do anything to meet the humanitarian needs of the people.

[Lord Dobbs (Con)]

Following up on the points made by my noble friend Lord Cormack and the noble Lord, Lord West, we can be proud in this country of the humanitarian effort that we put into the Middle East. However, is it not a fact that we got the fundamentals of the policies we pursued in Syria—indeed, ever since Iraq, in Afghanistan and Libya too—wrong? To avoid these catastrophes in future, is it not time to go back, reflect on where we got things wrong in our foreign policy over the past 20 years and see if there is a better way of pursuing things?

[Lord Bates]

That would be a worthy topic for a short debate, or even a long one, in your Lordships’ House. These are major issues. The ultimate urgency at present is to stop the fighting and conflict and have a pause, a ceasefire, to allow humanitarian access and a breathing space so that the nascent process beginning in Geneva can take root in Syria and work towards a lasting political solution.

UN: Global Goals for Sustainable Development

Lord Bates Excerpts

Tuesday 9th October 2018 Lords Chamber

[Lord McConnell of Glenscorrodale]

To ask Her Majesty’s Government when they will publish their plans for the United Kingdom Voluntary National Review on the United Nations Global Goals for Sustainable Development, due to be presented to the United Nations in September 2019.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the UK will present its voluntary national review of progress towards the global goals at the UN in July 2019. Preparations are under way. The Government are committed to an inclusive process, to produce a strong voluntary national review. Yesterday, the Government launched a website, www.gov.uk/sustainabledevelopmentgoals, setting out our plans and asking for input from people and organisations across the UK.

[Lord McConnell of Glenscorrodale (Lab)]

I thank the Minister for that Answer and look forward to contributing to that consultation. One key element of the sustainable development goals, which was missing from the millennium development goals, is the commitment to take more action on disaster resilience. In the last two weeks we have seen the impact that a natural disaster, such as an extreme weather event, can have on development in Indonesia, with the recent tsunami and earthquake. Will the Government ensure that, while it is important that we send aid to Indonesia, we are also acting internationally on disaster resilience to ensure that countries such as Indonesia, which face these extreme weather events regularly, are better able to prepare for, and therefore pre-empt, some of the impacts?

[Lord Bates]

I can certainly do that and I pay tribute to the work the noble Lord has done over many years in this area, as co-chair of the All-Party Parliamentary Group for Sustainable Development Goals. He is right that we have responded generously, as is usual with the UK, via the Disasters Emergency Committee appeal, to the situation in Indonesia. The resilience element is something we have been very much aware of, not least because of the effect of the hurricanes in the Caribbean last year. Those led us to work very much on resilience and building back better in that area. I will certainly ensure that that remains a very strong part of our response in terms of the sustainable development goals.

[Baroness Sheehan (LD)]

Of the countries that have already published their voluntary national reviews, there are some that stand out. Japan has established a new cabinet body, the SDGs Promotion Headquarters, headed by the Prime Minister and composed of all Ministers. In Germany, the Federal Chancellery is the lead agency for the national sustainable development strategy. Will the Minister confirm that delivery of the universal SDGs in the UK will have a similar high-level, cross-cutting commitment?

[Lord Bates]

I will, of course. David Cameron, when Prime Minister, was a member of the high-level panel that set up the sustainable development goals. The report will be presented to a high-level panel in July by the Secretary of State for International Development. Indeed, further to that, the Prime Minister will take part next September in the first stocktake of sustainable development goals at the UN General Assembly. That shows that commitment to the SDGs comes from right at the top of this Government and will continue to do so.

[Lord Naseby (Con)]

My noble friend referred to Hurricane Irma and our response, which was not quite up to scratch. In light of the review that was undertaken, I ask him to look again at the request that I and others, particularly in the Caribbean, have made that that review’s findings, even with people’s names removed, should now be published.

[Lord Bates]

I take issue a little with my noble friend. As he knows, we do not quite see the response that way. I think the response of the UK to those unprecedented two category 5 hurricanes in the Caribbean last year was incredibly effective, with the delivery of support, advice and resilience building. We have done a lot in that area and continue to keep it under review. My noble friend Lord Ahmad and I, and the Ministry of Defence, have put in a substantial amount of work to prepare for this year’s hurricane season, which I think will ensure that that resilience continues.

[Lord Collins of Highbury (Lab)]

My Lords, the universal nature of the SDGs is obviously vital. It is about co-ordination in this country to ensure that we respond positively to them. I have a specific question about the consultation. The Government need to be more proactive about the involvement of civil society. The last time DfID undertook a review, there was no mention of trade unions, although they are critical for sustainability and keeping pressure on Governments. Will the Minister undertake that there will not just be a website inviting participation but that the Government will go out and actively seek involvement in the process?

[Lord Bates]

The noble Lord has raised this before. He is absolutely right that if the SDGs are to be met, they will not be met by Governments alone; they have to be met by civil society. That means business getting involved, as well as church groups, trade unions and charities. It is impossible to assess our progress towards the SDGs by looking simply at government entities in this country. Therefore, the trade unions will be a very important element in that. Individual departments will be reaching out to trade unions to ensure that their voices are heard. Proactively, however, there is also the opportunity through the website launched yesterday for trade unions and other parts of civil society to make sure that their contribution to meeting those goals is recognised in our voluntary national review.

[The Earl of Sandwich (CB)]

My Lords, in view of all the bad news about climate change that we have been reading, are the Government making more effort and looking harder at sustainable development goal 13, which is about climate change? What action will they take?

[Lord Bates]

We have taken a number of pieces of action. Some of the action required of us is under the Climate Change Act, which was introduced in 2008 under the previous Labour Government. Of course, a major step forward was the Paris agreement. There will be a follow-up to that agreement. We have introduced international climate finance as a way of scaling up the amount of investment available for that very important area. The IPCC made those announcements in Seoul, South Korea, just a couple of days ago, which grabbed the headlines. They will be followed up at a special meeting in Katowice in Poland in December and we will play a full and leading part in that.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I am sure the Minister knows that yesterday’s UN report said that we would have to be carbon-neutral by 2040 to survive a lot of catastrophes, and something like $2.4 trillion would have to be spent on future-proofing ourselves. Do the Government really think that their plans are ambitious enough?

[Lord Bates]

The point with all the sustainable development goals is that they are absolutely essential but they are long-term strategic goals. That is why the Government have a 25-year environmental plan. They also require huge amounts of capital. The noble Baroness mentioned $2.4 trillion. The global aid packages which go around the world amount to $150 billion—and we are looking for $2.4 trillion. These are huge amounts. We cannot do that without scaling up investment from the private sector; individual Governments need to step up as well. We will continue to urge that course of action.

Overseas Development Aid

Lord Bates Excerpts

Tuesday 9th October 2018 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, with the leave of the House I will repeat the Answer to an Urgent Question given by my right honourable the Secretary of State for International Development in the other place earlier today.

“The combined global aid spend totals $150 billion dollars, leaving a funding gap of $2.5 trillion to deliver the global goals. We are adrift on the global goals— 80 years off nutrition, 100 years off education, 200 years off poverty. We must ask ourselves: do we want to deliver the global goals? If we want to, we have to let others help, including the private sector.

We have had good returns from investing in developing countries. CDC’s average annual investment return is 7%. The City of London manages over £8 trillion in assets, but little is invested in the poorest countries. Even a small increase could have a huge impact on these economies. For example, if we could redirect just 1% of the total assets to investment opportunities in Africa, that would generate an additional investment of around $110 billion. By contrast, global aid flows to Africa in 2016 were worth just $50 billion. I believe the public would be interested in their savings and pension funds being used to deliver the global goals. Why can British people not go to banks and invest their savings in pensions and products that will invest in the global goals, or open up an app on their phone and select which global goals they would most like to invest in?

We have lots of tools to do this. As we outlined today, the World Benchmarking Alliance, which I unveiled at the UN General Assembly will rank companies on their contributions to the global goals, so people can decide which companies they want to buy from, invest in or work for. We have the expertise to do this: the City of London in the financial services sector, in DFID and elsewhere in development and impact investment. Today I have announced that I want to start a national conversation with financial institutions, but also with savers, pensioners and the wider public. We will announce the findings of that conversation at the UK Africa investment conference next year. We will work with the Organisation for Economic Co-operation and Development to make sure that the aid rules incentivise private sector investment where it is needed. This is the only way we will collectively deliver the financing necessary to meet the global goals. In future years, as the amount of funding coming back into our own development financial instruments increases, we should be open to using these profits to count towards 0.7%. I am exploring the scope to reinvest those funds with DAC—the Development Assistance Committee—to maximise the value of our investments.”

[Lord Collins of Highbury (Lab)]

I thank the Minister for repeating the response to the Urgent Question. It is a pity this is an Urgent Question and not a Statement from the Government, because if it had been a Statement we could have had a little more time to probe exactly what the Secretary of State meant this morning when she spoke at the CDC. The Minister knows that I have repeatedly asked questions about the Government’s intention with the DAC definition of ODA, since immediately after the election and of course in November. The clear intentions were never really apparent, but in the debate we had on the CDC Bill in this House it was made perfectly clear that we supported it because we wanted the CDC to leverage more investment. Everyone knows we will not achieve the SDGs simply on ODA alone. For the Secretary of State to preach to the Opposition about how that can be achieved is nonsense. The fact is that we need greater additionality. There should never be a case where we are using CDC investment, getting a return and then counting the return as ODA-accountable. It is double counting. It is wrong. What we want to do is use the CDC to leverage more.

I want to ask the Minister a very specific question on how the Government intend to move forward. Will he give an assurance that we will not take unilateral action to change the definition of ODA, and that we will continue to work with our partners in the DAC and maintain a consensus? This country has led the way, and it would be a shame if we broke that consensus.

[Lord Bates]

The noble Lord is right to say that the development assistance community works by consensus. That is how it arrives at its conclusions. Regarding this debate, I feel that a few issues are being conflated. One is the SDGs, to which we are all committed and which we discussed earlier today. The second is the realisation—I readily accept that the noble Lord has regularly made a point of it—that that cannot be achieved by public flows alone. It has to be catalytic to leverage in private sector investment. Then there was the question about impact investing, and whether something else could be done in the future so that more private citizens could leverage in capital.

The final issue comes to the heart of the noble Lord’s question, about CDC funding. This is where we have had a lot of debate. If, for example, your £1 billion is put into CDC and over time the investments make a profit which is then returned into the fund—it is 100% UK-owned, so it is public sector in that sense—and then that profit is reinvested, should that reinvestment score? It is a debate that has to be had. We believe there is a case for doing that, but we have to do it by working with our partners and discussing it with them. This is one of a range of points on this issue. I hope that that has been helpful.

[Baroness Sheehan (LD)]

My Lords, I confess to being a little confused. In her speech to the CDC today, the Secretary of State says we should be open to using profits from UK development finance instruments,

“to count towards the 0.7%”,

and as we have heard, the current ODA rules do not allow this. However, earlier in her speech, the Secretary of State outlined why it was important to get private investment into developing countries, given that $150 billion of annual aid will never measure up to the $2.5 trillion needed to achieve the SDGs. Like the noble Lord, Lord Collins, I agree wholeheartedly with that. However, the fact is that unless profits from DFIs and any other development funds that may in future be raised in the City of London are powered back into developing countries we will lose the advantage of any leverage gained, as well as the opportunity to power back profits to help developing countries, and in the process compromise efforts to achieve the SDGs.

In my view, the Secretary of State is being disingenuous. This is an attempt to undermine the 0.7%, breaking the Conservative manifesto commitment. Does the Minister agree?

[Lord Bates]

The noble Baroness will not be surprised to hear that I do not agree, and neither do I agree with the suggestion that the Secretary of State is being disingenuous. Far from it—I think she was very clear, although how those remarks have been interpreted is clearly another matter. So this is a good opportunity for us to make it absolutely clear that we are committed to the SDGs and to 0.7%. The DAC element counts only public sector investment, so it cannot count private sector investment towards the 0.7% target to which we are committed. But, as the noble Baroness and the noble Lord said, we are at one in recognising that you will not provide the 18 million jobs that Africa needs every year between now and 2050 without the private sector engaging with this. You will not bridge the $2.5 trillion gap in meeting the SDGs without getting the private sector involved. That is why the Secretary of State was absolutely right to say that we need to do more to leverage and catalyse that investment which the UK has an expertise in.

[Lord Campbell-Savours (Lab)]

My Lords, DfID projects have historically been subject to post-project evaluations for economy, efficiency and effectiveness—in other words, to make sure that we are not wasting public money. In the event that private investment were to be levered in, in the way that is being suggested—as I understand it, it would be within the 0.7%—what post-project evaluations would take place, not because it is public sector project money but to ensure that that investment meets overseas development criteria, and that it is not simply being attributed to overseas development criteria as a way of spending the money?

[Lord Bates]

An example is impact funds, many of which already exist within the City of London; many civil society groups and organisations such as the UN Global Compact scrutinise how that is accounted for in accounts. With the CDC it is a different process. We were quite specific when we discussed the raising of the threshold—the capitalisation of the CDC—as the legislation went through this House, that no investments could be made under that without a business case being prepared, which then has to be signed off and reviewed at the end of it to ensure that the outputs it was envisaged would be delivered were achieved, and if not, why not? These are therefore all important elements in the exploration of these issues. More can be done, but again, it needs to be done transparently.

[The Earl of Sandwich (CB)]

My Lords, I concur very much with what the noble Lord, Lord Collins, was saying, and I well remember the CDC Bill and the criticisms that we made then. One can raise a slightly different issue about the CDC. Does the Minister recall the comments of ICAI—the Independent Commission for Aid Impact— about the impact of aid? You can put in the rubric that poverty alleviation is a purpose, but what about the measurement of that purpose, and where is the evidence of impact? We still have to wait for this to come from the CDC.

[Lord Bates]

The impact comes in three levels that we specifically target. One is the amount of money which catalyses money to come in from the private sector: if we invest £1, does it bring in £10 of private investment? We look at it in terms of the taxation it generates for revenue in the country where the investment is taking place, and we look at the number of jobs that are created by that. In alignment with the SDG requirement on this for aid, this is for decent work, so I accept all that. That is how we do it. The point which the noble Earl was right to highlight was addressed substantially by the change in the new investment strategy, which the CDC was required to have alongside the new investment. That has a much greater focus on the most fragile and most affected states, because we do not want it—not that it has ever done this in its illustrious, 70-year history—to cherry pick the investments. We want it to go where no private sector capital is going so that it can make the greatest impact. That impact and that change in the investment strategy will see results in the years to come.

Poverty Premium

Lord Bates Excerpts

Monday 10th September 2018 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I, too, thank the noble Lord, Lord Hodgson, who started this debate by setting out very clearly the paradox with which we are faced. On the one hand, he said that there are 2.7 million people who are entirely dependent on cash, and then he used a series of excellent examples, drawn from his own experience, that show the great benefit to be achieved by those who can make payment in other forms—in his examples, direct debit mandates.

The noble Lord, Lord Empey, drew on his experience from the excellent work of the Financial Exclusion Committee in your Lordships’ House, and talked about the need to secure access to banking services. The noble Baroness, Lady Bottomley, drew on her experience from her time with the Child Poverty Action Group, and made the hopeful point about the significant reduction there has been in the number of workless households in this country. The noble Lord, Lord Bird, gave positive examples from Lloyds Bank about the cost of credit, but talked about the impact of that on health and the need for people to have order and structure in their lives. I thought of his memorable maiden speech in this House, when he said, if I am correct, that the reason he was able to do so much to help the poor in this country, which he undoubtedly has, was because he did not have a sentimental bone in his body about poverty. That is not a contradiction. Indeed, it is important that we look correctly at those people we are seeking to help. The noble Lord, Lord Sharkey, talked about another level of exclusion, particularly digital exclusion, and the 4 million people who have never used the internet. The noble Lord, Lord Davies, talked about how uncertainty of income flow can exacerbate the disadvantage that people feel.

I will set out briefly what the Government are doing in these important areas and then come to some of the questions that have been raised. When it comes to tackling poverty in general, a key element was acknowledged by the noble Lord, Lord Davies. I assure the House that the Government are focused on lifting people out of poverty. Indeed, the proportion of people in absolute poverty both before and after taking into account housing costs is now at a record low. Additionally, real disposable household income per person is above its pre-crisis peak and is 3.4% higher than at the start of 2010. We know that over 3 million more people are in work, and that there have been improvements in the national living wage, and of course we have seen a rise in the tax thresholds.

That said, I appreciate the concerns which have been expressed around the isolation felt by people who are unfamiliar with the digital payment services that are becoming ever more prevalent. We know that 8.4% of adults have never used the internet—instead of a percentage, we were given an absolute number by the noble Lord, Lord Sharkey—while many more people are missing out on the opportunities that the digital world offers, from online banking to easier access to direct debit payments. We want to make sure that everyone can access all the benefits of digital banking. To that end, the Government are actively committed to tackling the root causes of digital and financial exclusion. The digital strategy, which was published last year, committed the Government to enabling people in every part of society and irrespective of age, gender, ethnicity or socioeconomic status to access the opportunities of the internet. That point was brought out by my noble friend Lady Bottomley when she used the illustration of students searching the internet for travel fares. Many apps can provide those services, but if you are digitally excluded, clearly you are not going to be able to take advantage of those deals.

The Government have now established the Digital Skills Partnership, which will bring together stakeholders from the private, public and charitable sectors in a joint effort to help people increase their digital skill levels. This will build on the free digital skills training opportunities that our corporate partners have pledged as part of the digital strategy. Some 4 million training opportunities were pledged, with 2 million having already been delivered.

Similarly, reducing financial exclusion is a key government priority. After the noble Lord, Lord Empey, and his committee had done their work we created the Financial Inclusion Policy Forum, which was referred to by my noble friend Lady Bottomley. It met for the first time in March and is due to meet again soon. This is driving better co-ordination across the sector. Government Ministers, regulators, industry and consumer groups are working together through the forum to ensure that people, regardless of their background or income, have access to useful and affordable financial products and services. For example, the forum recognised that a key challenge is tackling the issue of a lack of access to affordable credit. A sub-group of forum members has been established to look at how that work can be taken forward.

The noble Lord, Lord Bird, referred to his Creditworthiness Assessment Bill. I often pay tribute to him because in the course of the Bill, without the legislation actually making it on to the statute book, he managed to get £2 million out of the Treasury for the rent recognition challenge, which has been launched as a way of coming up with innovative solutions to precisely the challenges that his Bill identifies.

The Government recognise that people are increasingly moving away from cash and towards digital payments, as my noble friend Lord Hodgson set out. While the Government support these developments, we also recognise the continuing importance of cash, especially to the more vulnerable members of society. For those people who depend on cash today and in the future, we will need to ensure that that access is continued. An individual reliant on cash will be penalised if they can access cash only at an ATM which charges for cash withdrawal. That is why the point made about the LINK system is so important and I shall come back to it when I respond to the questions. The UK has today one of the most extensive free-to-use ATM networks in the world. Around 80% of the ATM network is free to use and 97% of all ATM transactions are conducted through free-to-use ATMs. The Government continue to work with industry and the regulators to ensure that widespread free access to cash is maintained.

I turn now to some of the important questions raised in the debate. My noble friend Lady Bottomley asked specifically about the LINK programme and its availability. In January 2018, LINK announced that it would enhance its financial inclusion programme to include all ATMs that are a kilometre or further from the next free-to-use ATM. The Government have been engaging and will continue to engage with regulators and industry, including LINK, to ensure that widespread free access to cash is maintained. The noble Lord, Lord Bird, talked about people paying for high-cost credit. The Government welcome the FCA’s update and its proposal to cap the cost of the rent-to-own programmes that have been introduced. It is important that these measures are effective and the Government will continue to work with the FCA to ensure that all customers are treated fairly.

The noble Lord, Lord Empey, talked about the closure of bank branches. While of course that is a commercial decision, I know that the Economic Secretary to the Treasury, John Glen, recently visited several small and remote communities in Scotland to experience at first hand what they were going through as the result of a lack of access to banking services. That is why the Government support the industry’s access to banking standard, which sets out the steps that banks must follow when they decide to close a branch, including giving at least 12 weeks’ notice and providing information on how customers can make alternative arrangements. Moreover, we have the post office banking framework agreement set up with 28 high-street banks. This enables 99% of personal banking and 95% of small business customers to carry out their everyday banking at one of the Post Office’s 11,500-plus branches.

The noble Lord, Lord Sharkey, talked about improving the incomes of the poorest. The statistics he used on real household incomes are those on which we should focus, and are the reason that we supported the national living wage. The lowest-paid, those in the fifth percentile, saw their wages grow by almost 7% above inflation between April 2015 and April 2017. Over 1 million people, the lowest earners, have been taken out of income tax altogether since 2015.

The noble Baroness, Lady Bottomley, asked about access to credit and gave the example of Wonga. The Government are committed to facilitating sustainable financial services to give consumers greater choice in accessing credit. This includes support for the credit union sector, which provides an accessible alternative to high-cost credit. In the Autumn Budget, the Government announced their intention to help the sector expand by increasing the number of potential members of credit unions from 2 million to 3 million. The call for evidence has been issued and is now closed. The helpful note on this I received from colleagues simply says that a formal response will be made “in due course”, which I know is not going to add a great deal to the sum of human knowledge, but it recognises that we have taken this subject seriously, we are calling on the evidence and are reviewing it as we speak.

The noble Lord, Lord Sharkey, also asked about maintaining access to LINK ATMs. I have given that answer in response to the question from the noble Baroness, Lady Bottomley, on the same point.

The noble Lord, Lord Davies, talked about the use of food banks. We recognise this and are constantly reviewing research carried out by organisations including the Trussell Trust to add to our understanding of food-bank use, and will consider requirements to add further to the evidence base. Food banks are not unique to the United Kingdom but are an international phenomenon and an important element of our society. They are a civil-society response to people in need and we ought to recognise that, but also redouble our efforts to ensure that people do not have to access their services as far as possible.

The Government recognise the profound impact that the rapid rise in digital payments is having on our country, with which the noble Lord, Lord Hodgson, began our debate. As technology plays an ever-greater role in our lives, we recognise that the Government must support innovation and make the most of new technology, while ensuring that no one is left behind. That is the importance of cash. As I hope I have made clear to noble Lords today, the Government are working with industry and regulators to ensure that all members of our society benefit from the potential of digitalisation and that cash continues to be accessible to all who rely on it, and in that sense this continues to be a country that works for everyone.

Debt Advice Services

Lord Bates Excerpts

Thursday 6th September 2018 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government what assessment they have made of demand for debt advice services; and what steps they are taking to reduce the level of household debt.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government recognise that demand for debt advice is currently higher than supply. That is why we are increasing the funding for publicly funded debt advice. Although the level of household debt in relation to income is significantly down since the financial crisis, we realise that some people struggle with debt, which is why we are creating a breathing-space scheme to help people to get out of problem debt.

[Lord Haskel (Lab)]

Recently, there have been many reports of the rise in the number of people seeking debt advice and seeking loans to pay basic household bills. Many of these people are in work. National Debtline, the IPPR, McKinsey, and now the National Audit Office tell us that the cause is exploitative and precarious terms of employment, which enables low-value jobs, instead of encouraging productivity and investment in skills and trades. There was a time when we spoke of work being a way out of poverty, but under this Government it seems that the opposite is true. How will the Government make employment the answer and not the cause of this rise in household debt?

[Lord Bates]

I am sorry but I do not accept that; the evidence does not point to it. Over 3 million more people are in work in this country. We have seen one of the largest increases for the lowest-paid in this country through the introduction of the national living wage. As a result of basic tax thresholds being raised, the typical taxpayer in full-time work is £1,000 better off. That is not to diminish in any sense the fact that there is a serious problem with personal debt in this country. It is about 16.5% less than its pre-crisis levels when inflation is taken into account. That is why we are taking the steps that we are.

[The Lord Bishop of Southwark]

My Lords, with the demise of Wonga, which I hope the Minister will want to join me in welcoming, does he wish to take this opportunity to endorse the work of the many credit unions which are a channel for such sound advice?

[Lord Bates]

We have provided significant additional funding to the credit unions. Wonga, which is in administration at present, is not a matter directly for government. The Financial Conduct Authority has issued advice that those who have loans with Wonga should continue to service those debts to avoid getting into further potential debt in the future.

[Lord Forsyth of Drumlean (Con)]

Perhaps I should declare an interest as chairman of a bank. Is my noble friend surprised that debt problems are growing when our daytime television is filled with ads for gambling and loans at exorbitant APRs?

[Lord Bates]

Certainly these are causes for concern. That is why we had a gambling review and followed the recommendation to introduce a £2 limit on fixed-odds betting terminals. That is why we put a cap on payday loans, abolished surcharges on credit and debit cards, and why we are currently undertaking a review through the FCA into high-cost credit. All those things are necessary for the reasons suggested by my noble friend.

[Baroness Smith of Newnham (LD)]

My Lords, I think I heard the Minister say that demand for advice has gone up since the end of the crisis, yet household debt is falling. In light of the comments this morning by the noble Lord, Lord Skidelsky—he said that the next crisis is a case of not “if” but “when”—what are the Government doing to create resilience so that we have provisions in place to ensure that if another crisis comes, household debt will not rise further, and that such advice will be in place ahead of time?

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[Lord Bates]

We are taking some steps on that. The Financial Guidance and Claims Act, which my noble friend Lord Young took through this House, introduced the single financial guidance body. We stress that we are increasing the funding that goes into making financial advice available to people to prevent them getting into debt. We have taken action against illegal money lending by imposing a levy on the consumer credit industry; it must fund the illegal lending teams that clamp down on loan sharks. A lot needs to be done, but we need constant vigilance in this area because of the problems that we have seen arise in the past.

[Lord Anderson of Swansea (Lab)]

The Minister spoke of the increased support from public funds for debt counselling agencies. Is he satisfied with the contribution from those companies that press individuals and vulnerable households to take out more debt?

[Lord Bates]

They are of course regulated through the Financial Conduct Authority, which is one reason why a review into high-cost credit is currently under way, looking particularly at the rent-to-buy model, which I know is of particular concern to many people. It recognises that that is an important element of it, and we are taking action on that.

[Lord Mackenzie of Framwellgate (Non-Afl)]

My Lords, does the noble Lord agree with me that more could be done to resolve problems between debtors and creditors by staged payments, for example, and not immediately bringing in bailiffs, which creates enormous trauma and more expense?

[Lord Bates]

One provision on precisely that point in the Act that I referred to concerns breathing space. It puts on a statutory footing a structured way in which creditors can be paid the debt but which reflects affordability and the lender’s ability to service that payment. That will come forward for consultation very shortly.

Prudential Regulation Authority: Equity Release Sector

Lord Bates Excerpts

Wednesday 5th September 2018 Lords Chamber

[Lord Sharkey]

To ask Her Majesty's Government what assessment they have made of the report by the Adam Smith Institute, Asleep at the Wheel: The Prudential Regulation Authority and the Equity Release Sector, published on 7 August.

[The Minister of State, Department for International Development (Lord Bates)]

My Lords, the Government take the issues raised in this report very seriously. Equity release offers an effective way for home owners to enhance their standard of living in later life, but must not threaten their financial stability or place consumers at risk. The Prudential Regulation Authority is alert to the issue. It is acting to set a clear and more precise prudential expectation for insurance companies’ risk management of equity release mortgages.

[Lord Sharkey (LD)]

The equity release mortgage market has trebled over the last five years and continues to grow strongly. Many of these mortgages have no negative equity guarantees—in other words, the loan value is capped at the price of the house when sold. The Adam Smith report says that insurance companies selling these mortgages have so misjudged the risk that another and bigger Equitable Life scandal is in prospect. Will the Minister say what action is being taken to prevent that?

[Lord Bates]

The responsibility for that lies directly with the PRA, the responsible regulator. It is in regular contact with the industry on setting new guidelines. That was already done in 2016. Just before the report, to which the noble Lord referred, was published, a new consultation was published by the PRA on this issue—the effective value test, which was used to calculate an appropriate amount that must be held in capital on the balance sheet to reflect the risks being entered into. That consultation is open until 30 September. There are some proposals, which, if they find support, will be implemented by the end of the year.

[Baroness Kramer (LD)]

Is the Minister sure that the PRA is genuinely on top of this issue? We would all agree that it is essential that sufficient capital is held to deal with the risk inherent in equity release guarantees. When evidence was given to the Treasury Select Committee, in the same Session, in February 2017, Sam Woods, speaking for the Bank of England said that the capital required to be held was in the range of £126 billion. David Belsham, speaking for the then PRC gave the figure as only £80 billion. They were presumably part of virtually the same organisation. Does this suggest that there is some coherent thinking within the regulator and that it fully understands the risks it is facing?

[Lord Bates]

What it reflects better is an issue of pricing, which is a fair debate. The no negative equity guarantee, which is very important to lots of consumers, because they do not want to leave their families with the potential liability, is a key part of the offer. The pricing of that, depending on which measure you take, says either that we assume there will be house price growth over the next 15 to 25 years, or that there will be no growth at all, or that interest rates will accrue at 5% to 6% or at 1% to 2%. The variance that the noble Baroness has identified lies in whether you apply the effective value test at a different point between those two extremes to come up with a different number. The purpose of the consultation paper is to get clarity so that all interests are protected.

[Lord Davies of Oldham (Lab)]

My Lords, the rate of increase in the market has been exceptional over the past five years, and there are clear indications that this will carry on at a rate not dissimilar for the immediate future, so I do not know the extent to which the regulators are being effective in this respect. It is obvious that home owners will be eager to borrow in circumstances where incomes can scarcely keep up with inflation, but we have to guard against things going badly wrong. What if house prices shudder to a halt or even fall? There are reasons to think that such issues could arise in the economy and we would be back to Equitable Life, which caused such tremendous damage to people 20 years ago.

[Lord Bates]

That is of course why within the industry itself—and indeed with the regulator—the normal level at which borrowing is taken from the home is between 30% and 40%, to allow for that cushion. We have to recognise also that this has two benefits: to individuals as, for most people, their home is their largest asset and being able to release some capital to enhance their quality of life in later life is good; and to the annuity holders on the other side of the balance sheet from the equity release, who have been suffering badly as a result of gilt yields being around 1.5%. The ability of life insurance companies to match these two needs and to offer a better deal to both is something to welcome. The noble Lord is absolutely spot on when he says that we need to watch it; we need to watch it very carefully and what I have outlined is what the regulator is doing already and the rules that it has applied, and also the consultation that is open at this moment to see whether more needs to be done.

[Baroness Altmann (Con)]

My Lords, I support wholeheartedly what my noble friend has said about the importance of the equity release market for certain families. Does he also agree with me that, as the Equity Release Council figures show, most equity release loans are only about 30% of loan to value—some may be around 50%? Even if house prices were to decline by 30% or more, the problems in the conventional mortgage market would be far greater than those in the equity release market. I was rather surprised to see such scary headlines on this particular segment of the market.

[Lord Bates]

My noble friend has great expertise in this area, which she brings to our consideration. Of course, the amount of capital at risk in the non-asset linked security on balance sheets amounts to some 3% of the total. It is, therefore, a relatively small amount but it is growing fast. We want to make sure that two things happen: first, that balance sheets correctly reflect the risks that are inherent in them and, secondly, that consumers get independent advice, take the right decisions and are aware of the risks that they face. Both are responsibilities that have to be shared between the PRA and the Financial Conduct Authority. We are watching this very carefully; we are not complacent and we want to make sure that that happens.

United Nations Relief and Works Agency

Lord Bates Excerpts

Tuesday 4th September 2018 Lords Chamber

[Baroness Northover (LD)]

My Lords, I beg leave to ask a Question of which I have given private notice.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

The United States has consistently been UNRWA’s single largest donor. When the US announced its intention to withhold a planned disbursement to UNRWA in January, we were sympathetic to the need for a broader donor base for UNRWA, but made clear our concerns about the impact on UNRWA’s activities that any unexpected reductions or delays in predicted donor disbursements might have. That remains our position.

[Baroness Northover]

My Lords, UNRWA supports Palestinians, as the Minister will know, in Syria, Lebanon and Jordan, as well as the Occupied Palestinian Territories and Gaza. Does he worry about the effect of this decision on these fragile states which already have a huge burden of refugees? Will the Government reassert the importance of UNRWA’s role, emphasising that refugee rights must be recognised and cannot simply be set aside by outside powers?

[Lord Bates]

I am very happy to do that, and I am very happy to give this Government’s strong and unequivocal support to the work of UNRWA, which provides vital education, healthcare and other services to the refugees in that area. What is more, we have underscored that by the fact that when this crisis first arose, an emergency meeting took place, which the Minister, Alistair Burt, attended, and we brought forward £28.5 million in support planned for this year. Then in June, we announced a further £10 million for that cause. There is our government commitment, and at the same time, we have encouraged other countries to step up to the plate to ensure that this vital work continues.

[Lord Collins of Highbury (Lab)]

Of course, the noble Lord is absolutely right. The United Kingdom’s response cannot be the only solution because the gap would be so huge. This is a brutal attack on the Palestinian people—brutal in terms of the basic services that are provided. Can the Minister give more detail on what we are doing with our EU partners to ensure that there is no diminution of the basic services, and that they are able to continue with the sort of action Germany has taken?

[Lord Bates]

There are a number of things we can do. Certainly there has been ministerial contact with the US. There have been official-level contacts with our EU partners. The European Commission’s ECHO fund is the second largest donor, and of course we contribute significantly through that. There is a meeting next week in Brussels, and I am sure this will be on the agenda. It is a constant area of engagement and concern that other people should do more.

[Lord Hannay of Chiswick (CB)]

Perhaps the Minister noticed that during the Recess, the Foreign Secretary made a speech in Washington in which he was reported to say that we agree with the United States on 95% of foreign policy issues. Will he say on which side of 95 or five this particular decision falls?

[Lord Bates]

Perhaps I can answer that with another illustration from the Recess, when Alistair Burt visited the Middle East, which he does frequently. He does an incredible job, and in the process of visiting Gaza, he announced that we would double the funding for economic development in Gaza and the West Bank. That underscores where our beliefs and principles lie.

[Lord Campbell of Pittenweem (LD)]

My Lords, does not the Minister understand that this decision is both mean-spirited and tactically inept? It is mean-spirited because of the nature of the work done by UNRWA, and tactically inept because nothing is more likely to stiffen the resolve of the Palestinian people than such decisions.

[Lord Bates]

It is worth putting it on the record that the US has distributed $60 million so far this year, which makes it the fifth largest donor this year and shows that the US currently pays 30% of the budget. Clearly, to be sustainable, there needs to be a much broader base. The USA contributes $364 million; the EU, through ECHO, $142 million; Germany $76 million; the UK $67 million; and Sweden $61 million, but there is a long tail of very small donors who I hope will be reflecting on their contributions to see what more can be done to ensure that this vital work continues.

[Lord Pickles (Con)]

My Lords, does this not emphasise the need to look at a final agreement between Palestinians and Israel? Would not the best thing be to use this as a way to get unconditional talks to occur between Israel and the Palestinian authorities?

--- Later in debate ---

[Lord Bates]

My noble friend is absolutely right: that dialogue is critical and at the heart of this. One of the elements within the economic development package announced by Alistair Burt was a strong emphasis that progress on economic development and trade is in both their interests and has to be part of a wider peace agreement. We encourage and support those calls.

[Lord Judd (Lab)]

Does the Minister not agree that, while it may be essential that we try to keep the dialogue going, this ill-advised action by the United States makes that very much more difficult because it plays directly into the hands of the extremists? Is it not therefore essential to ensure, for political and security reasons, that the services of UNRWA—particularly the education of the young—continue without interruption? Should this House take the opportunity to put on record our admiration for the work of UNRWA in the most difficult circumstances?

[Lord Bates]

I am happy to do as the noble Lord requests. UNRWA currently has a deficit of $270 million, which is unsustainable and needs to be sorted out. It relies too heavily on the United States and has too narrow a base of donors; the finances are not there. We understand that it has sufficient funding to keep the 711 schools open this month, but thereafter we are not sure. These are very serious times; as a result the Government are looking urgently at what more we can do in this area. Because of the vagaries of parliamentary timing between the House of Commons and here, I am not sure whether Minister Burt has yet made his announcement about what we might do, so I am slightly restricted in what I can say. However, we will today be announcing yet another increase in funding to meet the shortfall and ensure that people get the support and help that they need.

[Lord Leigh of Hurley (Con)]

My Lords, it is estimated that the number of Palestinian refugees who are alive today who were displaced in 1948 is around 30,000. However, unique to any refugee situation in the world, the United Nations now defines their descendants as refugees, so the total is over 5 million. Does the Minister agree that a solution to this issue is made almost impossible when refugee status can be inherited in perpetuity? We should bring pressure on UNRWA to rehabilitate, rather than perpetuate.

[Lord Bates]

That comes back to the point, raised by my noble friend Lord Pickles, about the importance of peace dialogue and reconciliation. The plight of Palestinian refugees has been experienced at first hand by many noble Lords, including me, and cannot be denied. In Syria they are doubly blighted by the situation there. This is a group of people in urgent need; this country has never walked by on the other side and will not do so in this case.

[Baroness Symons of Vernham Dean (Lab)]

My Lords, the Minister said that Minister Burt—who I agree is an excellent Minister for the Middle East—is going to make a Statement on this issue later today. Will the Minister undertake to come back to this House, tomorrow or the day after, and repeat that Statement so that we can hear exactly what Minister Burt has said and have the opportunity to comment on it?

[Lord Bates]

The noble Baroness draws me a little further. I will try to short-circuit that in terms of the procedures of the House. In Foreign Office Oral Questions, which are taking place at this moment in the other place, an announcement will be made of a sum of money additional to the £10 million announced in June and the £28.5 million which was brought forward. I have been asked to restrain myself from announcing the precise amount of this additional money until Minister Burt has done so. I am happy to find another mechanism for ensuring that this House is correctly informed of it.

Taxation (Cross-border Trade) Bill

Lord Bates Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 4th September 2018 Lords Chamber

Moved by

[Lord Bates]

That the Bill be now read a second time.

Relevant Documents: 11th and 32nd Reports from the Delegated Powers Committee

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government have been clear that, following the UK’s exit from the European Union and its customs union, we intend to secure a deep and special partnership with our nearest trading partner. As we seek to pursue a bold, new and independent international trade policy, the need to avoid friction in trade with the EU will continue to be of the utmost importance. This is one of the underlying principles behind the Government’s proposals set out in the White Paper published on 12 July—to create a UK-EU free trade area that establishes a common rulebook for industrial goods and agricultural products. This will maintain high standards in those areas, but the Government will also ensure that no new changes in the future take place without the approval of Parliament.

As part of our future economic partnership with the EU, the UK will also propose a new customs model with the freedom to strike new trade deals around the world—a facilitated customs arrangement. Under that model, the UK would apply its own tariffs and trade policy for goods intended for the UK, but apply the EU’s tariffs and trade policy for goods intended for the EU. As a result, the need for customs checks and controls between the UK and the EU would be avoided, removing a friction which would otherwise cost UK businesses billions of pounds a year, and avoiding a hard border on the island of Ireland.

The details of the future economic partnership—and, within that, our future customs arrangements—are of course a matter for negotiations with the EU. I turn to those negotiations. We have already published, in the lead-up to the June European Council, a joint statement with the European Commission. It sets out the progress we have made thus far in finalising the text of the withdrawal agreement on the majority of remaining separation issues. We are having constructive discussions and our negotiating teams continue to work at pace to ensure that those are finalised by the autumn.

Of course, it is vital that the UK is prepared for a range of outcomes from the negotiations, and the Government have already taken a great many steps to ensure that this is the case. Indeed, the Bill represents a significant part of those preparations. As set out in the customs Bill White Paper, which noble Lords had the opportunity to debate on 5 December 2017, it allows the UK to establish a new, stand-alone customs regime, and will ensure that VAT and excise legislation operates as required on EU exit. Since the referendum—both before and after the publication of the future partnership paper on 15 August 2017—the Government have met over 300 businesses and other organisations involved in international trade throughout the UK to discuss customs, VAT and excise, and a further 1,700 to discuss wider EU exit issues. This engagement has been taken into careful consideration when drafting the Bill.

The Bill contains a number of provisions that are absolutely essential for any future customs regime to function effectively, regardless of the outcome of the negotiations. These include: enabling the UK to charge import duty on goods, including those imported from the EU, in Clause 1; enabling HMRC to set out how, and in what form, customs declarations should be made, in Schedule 1; giving the UK the freedom to vary the rates of import duty as necessary, and setting out the factors that the Government must have regard to when doing so, in Clause 8; allowing the UK to continue to offer zero or low-tariff access to its markets for less developed countries following EU exit, under its own unilateral preferences scheme, as set out in Schedule 3; together with the Trade Bill, establishing an independent trade remedies regime, set out in Schedules 4 and 5; and providing the power for the UK to maintain existing customs union arrangements with the Channel Islands and the Isle of Man—which we will most certainly seek to do—which is set out in Clause 31.

Moreover, the Bill contains a number of provisions enabling subsequent changes to the VAT and excise regimes, which may later be required but cannot be predicted as this stage, which are set out in Parts 3 and 4. Finally, in Parts 5 and 6 there are a series of necessary and appropriate powers to support the transition from the current customs, VAT and excise regimes and to ensure that the UK is able to respond effectively to the outcome of the negotiations.

Throughout the passage of the Bill through the other place, the Government heard representations from a range of stakeholders, from both within and outside Parliament. In light of these representations, we made a number of amendments to the Bill as it went through the other place. For example, amendments were made following feedback from parliamentarians, including the work of the Delegated Powers and Regulatory Reform Committee, which wanted to ensure that the scrutiny and scope of the Bill’s powers are appropriately balanced, including by “sunsetting” and by applying the affirmative procedure in certain cases. There is also explicit confirmation that the Treasury will have regard to the interests of UK producers when setting any future import duty rates, and changes were made to provide more clarity in the Bill on the operation of the UK’s future trade remedies regime.

The Taxation (Cross-border Trade) Bill is of course not the only piece of EU exit legislation that the House will consider. The European Union (Withdrawal) Act, which completed its passage through Parliament in June, will perform a critical role in ensuring a functioning statute book on the day we leave the European Union. Furthermore, it confirms that it is for this Parliament—and in some cases the devolved legislatures—to make any future changes. The Act will maximise certainty for individuals and businesses as we leave the EU. It is in no one’s interests for there to be a cliff edge, so the laws and rules that we have now will, so far as possible, continue to apply.

Looking forward, the Trade Bill, which will receive its Second Reading before your Lordships’ House next Tuesday, will provide important continuity for UK businesses, workers and consumers, and for our international trading partners. This key legislation serves the purpose of enabling the preservation of the UK’s current trade and investment relationships, while creating necessary legal powers to ensure we are ready to operate independently when we leave the European Union.

Finally—although not exhaustively—the EU withdrawal agreement Bill will be brought forward once the negotiations have been concluded and Parliament has approved a final deal agreed with the EU. The Bill will be an essential part of the UK’s preparations for a smooth and orderly exit from the EU. The Government have already, on 24 July, published a White Paper in advance—Command Paper 9674—entitled Legislating for the Withdrawal Agreement between the United Kingdom and the European Union. It sets out a number of provisions, covering citizens’ rights, the implementation period, the negotiated financial settlement, procedures for the approval and implementation of the withdrawal agreement and a framework for our future relationship. The White Paper gives Parliament time to begin considering the content of the Bill ahead of its introduction, including by providing detail on the substantial areas of agreement that have already been reached with the EU, in particular our deal on citizens’ rights, the financial settlement and the time-limited implementation period.

The Bill before us today takes significant steps to make certain that the UK is ready for EU withdrawal, by allowing the UK to establish a stand-alone customs regime and by ensuring that our VAT and excise legislation operates as required on exit day. As we begin our discussions with the EU on the end state, of which the customs union is a key part, the Government will continue to be guided by the drivers underpinning the proposed model, as set out in the White Paper of 12 July. For this reason, we confidently anticipate a future in which the UK will be able to pursue trade deals with partners across the world and, at the same time, one in which our trade with the EU will remain as frictionless as possible and in which we avoid a hard land border between Northern Ireland and Ireland.

These are also the principles informing the Government’s approach to the Bill, which I commend to the House today. I beg to move.

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[Lord Bates]

My Lords, this has been a good debate. I now have the challenge of trying to respond to, by my calculation, 33 specific questions in the time allotted; if I am to abide by the Companion I should not exceed 20 minutes for winding up.

Before I address the key themes raised, I will say that a lot of the debate centred on the constitutional nature of what we seek to achieve through the procedure by which we are considering the Bill. I want to set out the context. The proposition made was, effectively, that this piece of legislation was being railroaded through both Houses and on to the statute book without sufficient scrutiny. To that challenge, I point out that it was on 9 October last year that the customs Bill White Paper and the trade White Paper were published; that it was on 20 November last year that the Taxation (Cross-border Trade) Bill was introduced to the House of Commons in a Ways and Means debate; that it was on 5 December last year that both the trade and the customs elements were the subject of take-note debates in your Lordships’ House; that it was on 8 January this year that the Second Reading of the Bill was debated in the other place; that, during debate on the EU withdrawal Act in your Lordships’ House, customs and trade implementation issues were readily and frequently the subject of amendments and of debate; that on 12 July the Government published their White Paper on the future economic partnership, which set out in detail the proposal for a facilitated customs arrangement; and that on 16 July the Bill completed its Commons Report stage and therefore now comes to your Lordships’ House.

[Lord Purvis of Tweed]

The Minister is making the point that the Bill started so long ago that we have had sufficient time to consider it—but some fundamental changes were made a week before the House of Commons rose for its recess. There has been no other parliamentary time to scrutinise the amendments made by the ERG, which could fundamentally change the Government’s whole proposal for a facilitated customs arrangement. There has been zero opportunity to have that consideration, and there will now be zero opportunity for it in this House as well.

[Lord Bates]

The noble Lord says that, but I am not suggesting what he has just accused me of suggesting for one minute. I am placing this in context. There has been substantial scrutiny and time for debate on the issues. The Trade Bill will follow; it has its Second Reading on 11 September, as referred to by the noble Lord, Lord Stevenson. We hope that an agreement with our European friends will take place this autumn, and there will then be a meaningful vote. Following that, there will be an agreement and implementation Bill. Following that, a piece of legislation on the future economic framework will have to come before your Lordships’ House. Placed in that context, this Bill represents the fact that at the moment our customs, trade and tariff policies are hardwired into the European Union, so there is a legislative necessity for us to have a standalone trade and customs arrangement, legislatively underpinned, so that we can prepare for any eventualities that the negotiations throw up. We have been clear throughout that it is in the best interests of this country and of the European Union that we conclude in an orderly way, with an agreement, and that we move to frictionless trade as far as possible.

The debate has focused essentially on the following issues; I will summarise them as a way of trying to work through and answer as many questions as I can in the time available.

[Lord Hannay of Chiswick]

Since the noble Lord is moving on from the point about timing, could he answer the question as to whether the powers in the Bill have any practical applicability in the context of an agreement with the European Union which provides for a 20-month transition period, during which we will not be able to exercise any of these powers because we will still be following the decisions of the customs union and the single market? I accept that, if there is no deal, these powers will have applicability. Am I correct in thinking that the only circumstance in which they will have applicability before 1 January 2021 is if there is no deal?

[Lord Bates]

That is correct. Obviously I defer to the noble Lord, who has immense experience in this area—I believe that he was one of the team of negotiators who negotiated our entry into the European Economic Community—and knows it substantially. In his question, he gave the reason why the Bill is necessary: because we are not guaranteed a deal. However, we are guaranteed that business will need to trade, because we are a trading nation. Therefore, we need to be prepared for every possible outcome or eventuality.

The headings under which this debate has taken place are: the economic impact of Brexit, raised by the noble Baroness, Lady Kramer, and the noble Lord, Lord Fox; trade remedies, which the noble Lords, Lord Kerr, Lord Stevenson and Lord Davies, referred to; the Northern Ireland border and the Bill’s relation to ports more generally, raised by the noble Lords, Lord Hain and Lord Adonis; the progress of the negotiations, mentioned by the noble Lord, Lord Tunnicliffe—and following this debate, my noble friend Lord Callanan will repeat a Statement to update the House on that; the impact on supply chains, mentioned by my noble friend Lady Altmann; and the impact on free trade, mentioned by my noble friend—I underscore the friend element—Lord Trenchard, although the noble Lord, Lord Stevenson, also placed his remarks in the context of the Trade Bill. I have tried to address the constitutional concerns raised by the noble Baroness, Lady Kramer, and the noble Lords, Lord Kerr and Lord Browne. There were also points on rules of origin, which the noble Lord, Lord Whitty, raised, as he did in the take-note debate last December. The noble Lords, Lord Purvis, Lord Whitty and Lord Hannay, referred to the application of duties and the methodology of the tariffs; the noble Baroness, Lady Kramer, raised the important issue of VAT and the way it will continue; and the noble Lord, Lord Hannay, referred to WTO status. I put that on the record just to give those who read these concluding remarks some sort of structure in terms of how I will try to work my way through the debate.

First, on the amendments to Clause 31 and the charge that they have restricted the Government’s options, we have been clear that as we leave the EU, we will also leave the EU customs union. Therefore, the Government have no objection to an enhanced level of scrutiny related to the use of Clause 31. The Chequers agreement does not envisage a customs union with the EU as part of a future economic partnership. Therefore, the amendment is consistent with the White Paper.

The noble Lord, Lord Tunnicliffe, asked whether HMRC has the necessary resources. There was a full response from the chief executive of HMRC, Jon Thompson, to Meg Hillier, chair of the Public Accounts Committee, which did a very detailed report on this subject earlier in the year. He responded as to where they were, including in terms of independent reports by the National Audit Office on the infrastructure project assessments that had taken place.

We have committed an extra £260 million to ensure the UK’s new tax and customs arrangements with the EU, including compliance and customer services staff to resolve the design of the new IT requirement. Also on that note, it was pointed out—a number of noble Lords referenced the fact—that there will potentially be a requirement for the number of customs declarations generated electronically to rise to some 250 million. There are currently 55 million. The capacity of the system that has been designed is for up to 300 million.

The noble Baroness, Lady Kramer, asked about the business impacts of the facilitated customs arrangement. There will be no new routine checks or controls for UK businesses trading with the EU under the FCA model. There will be a range of facilitations to help UK businesses which export to the rest of the world. For UK businesses importing from the rest of the world, they will benefit from the UK’s own tariffs. We estimate that up to 96% of UK goods trade will pay the right or no tariff on the UK border. I note the point made by the noble Lord, Lord Purvis of Tweed, and I will come to it later. The remaining 4% of UK goods trade is most likely to pay the UK’s tariff through the repayment mechanism, which we will make as simple as possible by introducing a range of facilitations.

The noble Lord, Lord Kerr, asked about the Trade Remedies Authority, on which there are provisions in the Bill, but which gets its structure and overarching powers from the Trade Bill to come. The Trade Bill establishes the TRA as a non-departmental public body. It will have an independent chairman. There will be recruitment processes for people to form a shadow Trade Remedies Authority ahead of its being ready for our exit from the European Union. The upcoming Trade Bill provides an opportunity to explore those issues further.

The noble Baroness, Lady Kramer, asked about the impact on supply. The Bill establishes a stand-alone customs regime in relation to taxation. For this reason, it was introduced in the other place on a ways and means resolution. Bills introduced through such resolutions are Bills of aids and supply which, in accordance with established practice, are not amended by this House. There is nothing in this Bill that could not have been in a Finance Bill.

A number of noble Lords, including the noble Lords, Lord Browne and Lord Kerr, referred to Clause 54, saying that, as amended, it prevents the Government implementing the facilitated customs arrangement. The Government have been clear in their White Paper that, under the FCA, the UK would seek to agree a mechanism for the remittance of relevant tariff revenue. The UK has proposed a tariff revenue formula taking account of goods destined for the UK entering via the EU and goods destined for the EU entering via the UK. Clause 54 is therefore consistent with the White Paper.

The noble Lord, Lord Hain, claimed that this contradicts the UK’s commitment to the backstop, and therefore a hard border would be inevitable. This point was also made by the noble Lord, Lord Adonis, who invited me to give a one-word response. I am still working on that, but, if I may, I will give him the lengthy answer first. Clause 55 seeks to avoid a fiscal customs border between Northern Ireland and Great Britain by preventing Northern Ireland forming part of a customs territory separate from GB. That was the backstop arrangement negotiated in December. Since then, both the European Commission and the UK have made their positions clear. The concept of a hard border between the Republic of Ireland and Northern Ireland is simply not acceptable to the Government.

This clause is therefore a straightforward statement of government policy. The Government have always been clear that there will be no hard border between Northern Ireland and the Republic of Ireland and have committed to protect the constitutional integrity of the UK in the joint report in December.

The noble Lord, Lord Hain, among others, asked what that means for the Northern Ireland protocol. Our proposal delivers all our commitments to Northern Ireland and Ireland. It means that goods and agri-food would flow freely across the border, with no need for any physical border, infrastructure or related checks or controls, so the backstop would not need to be used. We have said clearly that we are committed to agreeing a legally operative backstop in the withdrawal agreement, and we will continue to negotiate on this as we intensify negotiations over the coming weeks.

There has been some criticism in terms of how the White Paper has been received, but there have been a number of positive remarks. Chancellor Merkel has said that we have made progress and that it is a good thing that we have proposals on the table. The Taoiseach said:

“The Chequers statement is welcome. I believe it can input into the talks on the future relationship”.


Kristian Jensen, the Danish Finance Minister, said just a couple of weeks ago that Chequers is a,

“realistic proposal for good negotiations”.

He said that we need to go into a lot of detail but that it is a very “positive step forward”.

The Government understand that the impact and cash-flow implications of the different rates of VAT, whether it is import VAT or acquisition VAT, are a very important concern for VAT-registered businesses. It was announced in the Autumn Budget that the Government will look at options to mitigate any cash-flow impacts for businesses. The White Paper on the future economic partnership, published on 17 July, makes it clear that the Government’s aim is to,

“ensure that new declarations and border checks between the UK and the EU do not need to be introduced for VAT and Excise purposes”.

They therefore propose,

“the application of common cross-border processes and procedures”.

I was asked what happens in the event of a no-deal scenario. The Government are confident that the UK can agree a deep and special partnership with the EU. However, a responsible Government should prepare for all potential outcomes, including the unlikely scenario in which no mutually satisfactory agreement can be reached. The VAT for Businesses if there’s No Brexit Deal technical notice confirms that, if the UK leaves the EU without an agreement, the Government will,

“introduce postponed accounting for import VAT on goods brought into the UK”.

I believe that that will be welcomed by businesses and it was as a result of listening to business that we brought that proposal forward. The noble Lord, Lord Browne, asked about delivery timescales. The UK and the EU will work together on the phased introduction of a new facilitated customs arrangement. The precise timeline will be agreed through negotiations with the EU.

The noble Lord, Lord Fox, kindly referred to my north-east antecedents and interest in that wonderful part of the country, which I share with my noble friend Lord Callanan. He talked about the impact on the economy of the north-east of England. We are currently enjoying the fact that unemployment in the north-east is at record low levels—down to 4.3%. That is the lowest level for 40 years and it compares to 8.3% in the eurozone. Therefore, I think that the north-east has the ingenuity, talent, ability and propensity for hard work to be able to look after itself whatever the outcome, and that goes for the rest of the UK.

I turn to the important matter of Scotch whisky. The Scotch whisky industry is a truly great British success story, and the EU accounted for around a third of the valuable Scotch whisky exports in 2016. The Bill provides the ability to adopt the EMCS after our withdrawal from the EU in order to manage suspended UK internal excise duties. The Government want to minimise burdens on firms while still having the tools to tackle the illicit trade which undermines all legitimate producers and retailers.

I think that I have covered the point about unreasonable powers in the Bill, but I particularly want to cover the issue of the no-deal version that the Government presented last week as being “incompatible” with the Good Friday agreement, to quote the noble Lord, Lord Adonis. That is a very serious charge, and we obviously recognise that successive Governments have placed that at the heart of their policies. The UK Government remain steadfast in their commitment to the Good Friday agreement, in both letter and spirit, alongside maintaining the common travel area and associated rights and avoiding a customs border in the Irish Sea. This will meet all the commitments which have been made to the people of Northern Ireland.

There is still a lot of negotiating to be done, but there are some things that we cannot compromise on because they are at the heart of what people voted for—for example, an end to the vast annual contributions to the EU, an end to the jurisdiction of the ECJ and an end to free movement. Inevitably, there are some who are unhappy with our proposals—people who want to reverse the referendum decision—and some who, rather than compromise, would prefer the most distant relationship possible with the EU. However, the country did not vote for either of those things. It is time that we came together and agreed a pragmatic Brexit that most people can support and get on with, and which is good for us, good for business and good for our European friends. I believe that this Bill represents an important part of the preparations for that aspiration. I commend it to the House.

Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018

Lord Bates Excerpts

Wednesday 18th July 2018 Grand Committee

Moved by

[Lord Bates]

That the Grand Committee do consider the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, in just under five months, the ring-fencing regime will be fully in force. It requires structural separation of core retail banking from investment banking for UK banks with retail deposits of more than £25 billion.

Ring-fencing is one of the key parts of the post-financial crisis reforms and will be important in preserving financial stability in the United Kingdom. It was the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, which the Government accepted and legislated for via the Financial Services (Banking Reform) Act 2013. It will support financial stability by insulating retail ring-fenced banks’ core activities, whose continuous provision is essential to the economy—that is, retail and small business deposits and payments services. It will protect them from shocks originating elsewhere in the global financial system.

The continuous provision of core services—namely, retail and small business deposits and payments services—is essential to the economy. Ring-fencing means that banks that provide those essential services become simpler and more resolvable, so core services can keep running even if a ring-fenced bank or its group fails. Details of the regime are set out in secondary legislation passed in 2014. As part of restructuring to comply with the ring-fencing regime, banking groups may be required to move some accounts from one legal entity to another. For example, they may need to move a retail depositor’s account into a new ring-fenced bank. However, some of the holders of those bank accounts are subject to financial sanctions, which prohibit the movement of any funds that the said account holders own, hold or control.

There is a clear conflict between the two regimes. This means that, at present, some banking groups are unable to move accounts held under sanction, which in turn means that they are not compliant with the ring-fencing legislation. The order resolves the otherwise conflicting requirements between the ring-fencing regime and financial sanctions regime by amending the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014. The order amends the definition of “core deposit” so that accounts whose account holders are or have been subject to financial sanctions—as defined in Section 143(4) of the Policing and Crime Act 2017—at any time in the last six months are no longer included in the definition. This means that banking groups will not be required to move retail accounts whose holders are subject to financial sanctions into ring-fenced banks. They will be outside the scope of the ring-fencing regime. Banking groups will have six months from the removal of sanctions to move retail accounts of those account holders previously subject to sanctions inside the ring-fence. This ensures that the regime remains consistent once the sanctions have been lifted.

The order will ensure that banking groups that cannot otherwise comply fully with the ring-fencing regime due to sanctions legislation are not deemed non-compliant under the ring-fencing legislation. The amendment does not alter the location and height of the ring-fence or the timetable for ring-fencing: banks in scope must be ring-fenced by 1 January 2019 and, together with the Prudential Regulation Authority and the Financial Conduct Authority, we are monitoring their progress closely. I commend the order to the Committee.

[Baroness Kramer (LD)]

My Lords, as a member of the Parliamentary Commission on Banking Standards, I am a very strong advocate of ring-fencing. I am pleased that the process is now well under way. Obviously, I remain vigilant for any opportunity for any person to try to find a way either under or over the ring-fence. Therefore, I would look very carefully at any change or exemption. In this case, the order seems entirely logical and a suitable way in which to deal with the conflict between two good pieces of legislation, finding the simplest path to reconciling them.

I have two simple questions for the Minister. Can he give us some sense of the scale that we are talking about? To be honest, I have little idea of how many accounts are sanctioned at any typical time. I do not know if we are talking about six accounts or 6,000. The reason why I ask is that it makes a difference in monitoring—that is, whether it is a relatively small number or a challenging number. I just have no idea. I do not know if the Minister will be able to throw light on that.

There has also always been a concern, in particular from the sanctions perspective, that people who do bad things—and, typically, if you are going to be sanctioned, you will have been doing something that we think is a bad thing—will look at the opportunity to use aliases, false names and so on to front their various accounts. There is always the possibility that, if those accounts are not recognised as being linked to the individual who is to be sanctioned, they can end up being moved over into the ring-fenced bank. With accounts in two locations, it may become much harder to recognise that they are the accounts of the same individual and ought to be treated in the same way. I am fairly sure that those who are sanctioned will look for any mechanism possible to escape it, but I have no idea if there is a mechanism within all this that provides us with some comfort that we are alert to the use of this particular change as a mechanism that might make life a little easier for those who wish to avoid the sanction that they are due.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for introducing this order and the noble Baroness, Lady Kramer, for asking at least one of the questions that I had in mind, particularly on scale. I do not have quite the exalted background of the noble Baroness as being a member of the banking commission but, because I failed to duck, I have been involved with this legislation since 2010. I saw it through and feel a certain loyalty to it. When this conflict arises, like the noble Baroness, I want to see that conflict resolved. However, I did think, “Why are they going to spoil this beautiful banking legislation, which I have sought to understand over the past several years? Why can we not change the sanctions legislation?” I decided to try to understand the sanctions legislation to see if there was a way in which it could provide the flexibility rather than the banking legislation. I dived into Section 143(4) of the Policing and Crime Act 2017, but I have to say that, at that point, I hit a brick wall. For the life of me, I could not understand from that how the sanctions regime functions. I hope that the Minister can shed light on how the regime works—or perhaps he will write to me at some point.

To what extent has the alternative way of solving the problem been considered—creating flexibility in the sanctions regime to allow movements across the ring-fence that are required for other legal purposes and hence keep the accounts hosted on the right side of the ring-fence?

[Lord Bates]

My Lords, I thank noble Lords for their broad welcome for the order, and I recognise the expertise which they bring to this matter. I shall seek to address the points they have raised.

On the numbers and scale, which the noble Baroness, Lady Kramer, asked about, there is on the website a list of persons who are subject to financial sanctions. It has a long URL address, but it is helpfully set out on page 2 in the Explanatory Memorandum that accompanies the order. It does not list the numbers, but it does show where that information can be found. We are currently trying to get some numbers, because it is a perfectly reasonable question to ask.

The noble Baroness, Lady Kramer, also asked about the mechanism potentially to escape the sanctions. Clearly, we need to be very vigilant. The accounts are not moving; they are staying outside the ring-fence. As such, we believe that the opportunity for the kind of nefarious activity that has been suggested is minimised, but not totally removed.

The noble Lord, Lord Tunnicliffe, asked for beautiful banking legislation to be referenced in the Official Report, perhaps for the first time. He asked whether we could amend the sanctions legislation rather than banking legislation. We assessed whether there was a licensing option under existing sanctions legislation to resolve the issue, but concluded that there was not. Further financial sanctions legislation includes directly applicable EU regulations, which the UK does not have the power to amend unilaterally. In addition, it was important that this change was made to come into effect before 1 January 2019 so that banks will not be in technical breach of the ring-fencing regime once the legislation comes into effect.

On the need for specific legislation itself, as referred to by the noble Lord, Lord Tunnicliffe, we are committed to implementing a robust and successful regime. That means that we will act if we spot problems with the regime that cause conflicts in existing legislation. The Treasury and the Prudential Regulation Authority will continue to monitor closely the relevant banks’ implementation plans to ensure that they are robust. I think that those were the principal two points that were raised. I apologise for not having the information referred to by the noble Baroness, Lady Kramer, at my fingertips, but I hope that it can be found from another source.

[Lord Tunnicliffe]

Is there a possibility of the Minister sending us a letter on either of our points to develop his answer a little more?

[Lord Bates]

I can certainly do so. Noble Lords are very kind and courteous. It would be a courtesy to do it the old-fashioned way and send an email with summary statistics, rather than pointing to a URL address. That goes for any other points that have not been covered, of course.

Motion agreed.

Overseas Aid: Charities and Faith-based Organisations

Lord Bates Excerpts

Thursday 12th July 2018 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I join other noble Lords in paying tribute to my noble friend Lady Stroud for securing this debate on this important and timely topic. She began by drawing on her own experience of the work that she had seen, such as the work of Hand in Hand for Syria, in Aleppo, and the assistance it had given. She told us about small charities and faith-based organisations, particularly those which work on the Ebola outbreak in Sierra Leone to stop the spread of that disease. She pointed to the area of conflict, where people are often in search of those they can trust, and how they frequently turn to people from faith-based and local community-based charities.

We will of course long remember this debate for the maiden speech of the noble Lord, Lord McNicol. He brings passion and expertise to this House, and we welcome him. I have to tell him that it is not every Back-Bencher who gets the Leader of the Opposition responding to a debate in which they have made their maiden speech. He clearly has a bright future ahead of him. Although he is from West Kilbride—I am treading dangerously here; I tried to pick up a signal on my smartphone so that I could check the facts—in the great town of East Kilbride is the headquarters of the administration of all British overseas aid. We have over 800 people there. I think it is a new town. I am not sure of the distance between the two but the name Kilbride certainly connects them. The noble Lord talked about the importance of trade unions. Internationally, we are working increasingly with trade unions and the International Labour Organization in the area of human trafficking, because often they are the first ports of call and essential partners in combating that evil trade.

My noble friend Lady Hodgson talked about a number of examples from Liberia to Mali, as well as about peacebuilding in Iraq. I was glad that she mentioned the work of Afghan Connection. It is an inspirational organisation whose chief executive is Sarah Fane. It is incredible to see the impact that a very small charity focused simply on building schools in remote rural parts of Afghanistan is having. I must not get too carried away with enthusiasm about the charity because I think it might be applying for a grant from DfID. Officials are saying, “You have to be careful and even-handed”. I am sure that there are other organisations doing similar work, but I was particularly impressed by that one.

The right reverend Prelate the Bishop of Rochester gave a practical example of a partnership between his diocese, Tearfund and the local community in Tanzania. I particularly enjoyed that example because sometimes aid is perceived by people in need as having a patronising element to it. Therefore, helping people to deploy the skills they already have in providing for their own future and building their own schools is very much where we are heading.

The noble Lord, Lord Sheikh, talked about the generosity of Muslim charities. I attended the wonderful event in the River Room. In one of those amazing juxtapositions, in the space of one week I went from announcing an aid match for the Lent appeal for Christian Aid to doing to the same for CAFOD. I then went to the launch of Islamic Relief, involving zakat. We were UK aid-matching them all. The first time I heard that £100 million had been given in one month by the Muslim community of Britain, I had to double-check it. I thought, “Surely there’s an extra nought on the end”, but the figure is absolutely correct. I do not know why we do not hear more in the media about our British Muslim community. It is the most generous of the faith communities in the United Kingdom and we are incredibly proud of the contribution that it makes to this great country.

The noble Baroness, Lady Barker, said that while of course we want faith-based charities to be a channel for aid, providing help to those in need, it is important that they do not become a barrier. That was an important point to make, particularly in reference to sexual and productive health. This country has been at the forefront in advancing that on the international agenda, often against some opposition from different quarters. We held a very successful conference on that very subject just last year to highlight our ongoing commitment to ensuring that people get the sexual and reproductive health treatments and help that they have the right to receive.

The noble Baroness, Lady Smith, reminded us that there is almost a “triple word score” benefit from getting volunteers to do fundraising and to help. Not only do they provide practical support for the charity’s aims but they build a sense of society within our own community, and they also highlight the cause that underlies it. She said it was very important that we remain focused. She will know from her time in ministerial office that it is tempting, when we hear wonderful stories of charities, to focus on their inspirational founders and leaders, but she was right to remind us that our hard focus must be on the outcomes that they deliver for the people in need.

The noble Baroness also underscored the importance of safeguarding. Protecting the safety of those we are seeking to help must be our Hippocratic oath: “first do no harm”. I do not know whether it is correct for me to acknowledge it but, in that context, our distinguished colleague my noble friend Lady Stowell is chair of the Charity Commission, and I am sure she will find this debate very helpful in her work.

As DfID’s Minister for Civil Society, I know that small charities and faith-based organisations do extraordinary good around the world. My department is committed to working with them to deliver the sustainable development goals and to eradicate extreme poverty from the world by 2030. I would like to focus first on small charities and then on faith communities.

Small charities are a vital part of the civil society ecosystem and do remarkable work, as all noble Lords have recognised. They are able to innovate and specialise, and often can better engage with the British public than their larger counterparts. In 2016, DfID’s civil society partnership review found that despite the added value that they bring, small charities often felt excluded from DfID funding, as the noble Baroness, Lady Smith, and my noble friend Lady Hodgson both referred to. This presented an issue for my department, which we have worked hard to resolve.

At the heart of this effort is DfID’s Small Charities Challenge Fund, which was launched last summer to provide funding opportunities for very small, UK-based charities. The noble Baroness, Lady Smith, and the noble Lord, Lord McNicol, asked what more could be done to draw attention to this fund. One thing we are seeking to do is engage parliamentarians, both in this House and in the other place. Parliamentarians have constituency-based connections and, in this House, many noble Lords are representatives, trustees and patrons of particular charities. They can help signpost this fund’s existence. The first round of the fund closed in September last year and I am pleased to announce the commencement of the first four projects, with more to follow over the summer. One of these projects will establish a community recycling centre in the Gambia, creating local employment and reducing pollution; another will provide access to safe water and sanitation in rural Malawi; yet another will focus on quality healthcare and rehabilitation; and the final project will improve access to affordable and clean energy, which is a key issue in sub-Saharan Africa. This is just the start of DfID’s exciting new collaboration, and I look forward to further developments and announcements over the coming months.

I should say that the funding window for the next round is open right now. For those tuning in—people with insomnia might tune in to the Parliament channel in the early hours—if you are involved in a charity, go to a search engine and punch in the words “Small Charities Challenge Fund” and “DfID”, and you will find out how to apply. The window will be open until the end of September.

In the process of doing that, we said that it was very important to ensure that we got feedback from small charities as the pilot progressed. Like my noble friend Lady Hodgson, the small charities told us that our application process was too long. We therefore designed a one-stage application form on a bespoke online platform. They also told us that our due diligence process was too onerous. I should put in a caveat here: we are dealing with taxpayers’ money and with some of the most vulnerable people in the world and it is right that our due diligence be demanding, but not too onerous. Therefore, we have implemented a more proportionate, streamlined process.

My noble friend Lady Hodgson asked about the difficulties of cash flow, which is a critical issue for many small organisations trying to make payments and meet commitments. Therefore, we created a tailored payment-in-advance approach to ensure that grant holders do not have to dip into their own reserves to deliver the project effectively.

My noble Friend Lady Hodgson asked us to think about multi-agreements. We looked carefully at that but we are concerned that we do not create a dependence upon aid. Often these small charities are lean, effective and mobile, as the noble Baroness, Lady Stroud, reminded us, and that is their great advantage. There is a place for the small as well as for the large in the system and we do not want to conscript them into a dependency on future grants of government aid; we want them to continue doing their good work.

These changes are working and the fund is reaching a smaller, more diverse set of organisations. In the second round of the fund, 90% of applicants had not received DfID funding before, and 62% of shortlisted applicants are based outside London and the south- east, an important development of which I know the noble Lord, Lord McNicol, will approve. Sometimes the larger organisations are centred in the capital for obvious reasons but there are brilliant charities across the entire country. However, we will not stop there. As a pilot programme, the Small Charities Challenge Fund is being used to gather evidence on how we can work even more effectively with organisations in the future. To this end, we are increasing our engagement with the sector and are constantly gathering feedback. I will shortly be hosting round tables with both successful and unsuccessful applicants and the information gathered will be used to ensure that we can improve the system for the next rounds.

Our work with small charities is not just limited to funding projects: we are also working to develop their capabilities. To achieve this, we have worked to deliver a bespoke programme of capacity-building initiatives. This includes learning events, webinars and regional roadshows. We are also working to better understand the value of small organisations based overseas. I will come back later to the specific questions I was asked about this. By helping organisations based here and overseas develop their capacity, we can achieve a sustainable legacy that will enable civil society to flourish around the world.

Moving on to faith-based organisations. I am again pleased to confirm a real shift in DfID’s approach in recent years. The noble Baroness, Lady Stroud, drew on evidence which showed the tremendous number of faith-based charities registered in England and Wales—there are 50,000 with a faith-based ethos. DfID clearly and publically recognises that religion is crucial to development. Most people in developing countries believe that faith is important to them, with the Afrobarometer study in Africa showing that 80% of surveyed people felt that religion was a very important factor in their lives.

Faith is also a huge motivator for giving, with statistics showing that, on average, those with faith give nearly twice as much to charity. Faith-based organisations make a significant and distinctive contribution to poverty reduction. They can inspire confidence and trust and are often seen as more embedded in, and committed to, the local communities they serve. They are often uniquely placed to deliver services to marginalised peoples and communities. For example, in sub-Saharan Africa, these organisations provide at least 40% of health services, as the noble Baroness, Lady Barker, rightly remarked. They are also vital in providing humanitarian assistance in crises with their extensive networks and roots in local communities. They stay for the long haul. After the Nepal earthquake, faith-based groups were the first in and the last out.

Faith-based organisations can empower poor people to ensure that their voices are heard, and can subject Governments to essential scrutiny. Civil society has a crucial role to play. It contributes to the building of peaceful states and societies, reducing certain types of conflict and retaining a presence when government can no longer function.

Working effectively with these groups is essential in meeting our objectives. In 2010, DfID established the Faith Working Group and in 2011 it published the Faith Partnership Principles. Since then we have seen a dramatic change in the way that DfID looks at faith and faith-based organisations. The department has invested in a wealth of faith-focused research and has participated in a joint learning initiative with other organisations. It is part of the International Partnership on Religion and Sustainable Development, a major network that brings together bilateral donors. We are also working closely with our colleagues in the Foreign and Commonwealth Office to protect freedom of religion and belief. This work recently culminated in the appointment of my noble friend Lord Ahmad of Wimbledon as the UK’s special envoy on freedom of religion and belief. I should like to make one other point. In my work in this area I often meet with representatives from Humanists UK because it is important to recognise that some of the most persecuted groups around the world are those with no belief at all. Atheism is regarded as blasphemous and people often face imprisonment and punishment for their beliefs. I am pleased to announce that we will be launching the Faith in Development Forum, which will encourage a more active dialogue between the department and faith groups.

In the time available to me, perhaps I may address some of the questions which were asked. My noble friend Lady Stroud asked what steps we are taking to engage with small charities. I mentioned the Faith in Development Forum, and in addition officials and Ministers are undertaking regional visits around the UK to draw attention to the Small Charities Challenge Fund. The noble Lord, Lord McNicol, asked what advice and support was available to charities. Guidance is available on the website, and I have referred to webinars. We are also looking at other ideas on how we can extend awareness of this project.

My noble friend Lady Hodgson asked whether there are plans to expand the fund. Officials are cautious because we are in the middle of a spending review, but I have to say that the first impressions are outstanding in terms of the quality of the bids received, and I am sure that we will want to see this go further forward. My noble friend also asked what we are doing to support NGOs overseas. The recently announced Jo Cox memorial grants—a £10 million fund in memory of Jo Cox—are for both UK and overseas-based charities looking at women’s empowerment and conflict prevention.

The noble Baroness, Lady Barker, asked whether we will collaborate in the distribution of aid, given that the USA has changed the way that it is distributing aid. DfID’s policy on sexual and reproductive health services is clear and has not changed. We will be working with others to make sure that the shortfall caused by the implications of the Mexico City policy is met and that the important work continues. I have to say that it is very important that other countries should step up to the plate as well on this. The UK is doing a lot and other countries should be doing a lot more.

The noble Baroness, Lady Smith, asked me to say a little more about the range of smaller charities. The average income of SCCF-shortlisted applicants is £90,000 a year, which is well below the £250,000 ceiling. That shows that we are breaking new ground. I think that I have covered the key points, but I shall look again at the debate and if there is anything that I have missed, I will write. For now, I do not want to fall foul of the Standing Orders and exceed my 20 minutes in front of the Leader of the Opposition.

Let me therefore conclude by saying that here in the UK, as well as overseas, the picture is made all the more compelling by the wonderful work done by both small charities and faith-based organisations. We at DfID want that to continue and we want to work in increasing partnership with them, as UN sustainable development goal 17 points to. We want to do that because we want to alleviate suffering. We want to bring hope of a better world in future for the vulnerable, the sick, the refugees and those who are most marginalised in our society—and in that I am sure we are absolutely united.