Inflation

Lord Lea of Crondall Excerpts

Monday 1st July 2019 Lords Chamber

[Lord Lea of Crondall (Lab)]

My Lords, I begin by referring to a remark made by the noble Lord, Lord Macpherson, about the confidence that people must have in statistics. I was on the Retail Prices Index Advisory Committee for many years when I was at the TUC. I draw attention to the fact that a very strange omission in the report, which the noble Lord, Lord Forsyth, did not mention, is that what most people associate with the RPI is not gilts or housing costs but wage negotiations. The bedrock of all wage negotiations is the RPI. No one anywhere would think that the yardstick in wage negotiations could ignore the RPI.

Before we scrap the RPI—some people want to do that, so let us make no bones about it—we have to relate that to the dictum about confidence. If anybody in this country ever starts to think that somebody has a vested interest in tinkering around with the RPI, that will be a very bad day indeed. For that reason and others, I am glad that the committee has come down on the side of reforming the RPI but not abandoning it.

That being the case, I would like to put a question to the Minister. Is he aware that, in recent months, there has been a concerted campaign from somewhere in the newspapers, where any reference by economic correspondents to the RPI is preceded by the adjective “discredited”? If you pick up any dozen references in the last six months to the RPI or any consideration of it in the newspapers, you will find the word “discredited”. Where is this adjective coming from? It must be coming, I suspect, from the Treasury or the Bank of England. I would like to hear any other suggestions about where it is coming from, but these organisations have regular confidential conversations with economic correspondents —I do not think that the ONS does in quite the same way.

For the first time, we are in danger of making this issue into a bit of a political football. It has never been a political football, and I hope that it never will be. I do not even think that Boris Johnson would have it in mind to remove Brussels sprouts from the index. There has never been any political interference with it. The advisory committee has always tried to reach an agreed conclusion, although I think that some years ago there was a vote about something to do with housing costs.

That leads to my second point, which is that there is no perfect solution. I thought that the noble Lord, Lord Darling, let his rhetoric run away with him in implying that somehow a clear overall message was coming out of this and that something ought to be done about it. It is a very delicate balance indeed.

On housing costs, I think that the report says almost in these terms, “Well, we don’t much like housing costs being in the index, but on balance we can’t have an index without them in it”. If that was not in this committee’s report, it was in that of another weighty committee not so long ago. Housing costs are inherently very difficult because, unlike Brussels sprouts, they are ultimately a question of the valuation of land. We all know that economics textbooks refer to the factors of production being land, labour and capital, but in practice, of course, land is not a factor of production—as somebody once quipped, “They don’t make much of that any more”. The house price question has been a main driver of the change in economic activity in many parts of the country—exacerbated, I would say, by the component of RPI that we cannot take away—and there is obviously a difference between the received estate agent index affecting London and that affecting Aberdeen or Aberystwyth. So there are a number of delicate dilemmas.

I recognise that the committee does not conclude with a broad rhetorical flourish; it concludes with some careful recommendations—not throwing javelins at random in the direction of somebody at fault who has not been paying attention. That is why Mr Boris Johnson’s namesake himself adjusted his position to look at this thing in the round. Broadly speaking, I think that this is a good report, but there are arguments on both sides of many of the questions under scrutiny.

Yes, it is true that the RPI is generally a bit above the CPI, but that is factored into much of industrial life. Saying that there should be just one index is a dangerous road to go down when all the academic literature at least pays lip service to the notion that, if you are looking at macro policy or international monetary policy, you probably need something constructed along the lines of the CPI. But given that historically, ever since the Ernest Bevin era when it was created as a cost of living index, the retail prices index has had confidence, we should stay with it. On getting a solution to the clothing dilemma, I do not totally understand it, but clearly it is correct to have that recommendation.

The people at the receiving end of statistics such as the RPI might expect the House of Lords’ Economic Affairs Committee to include some people who have been a bit more involved in wage negotiation; there are no such people in sight on the committee and this is relevant to the point we were debating half an hour ago. This is a matter for the man and woman on the street; it has become a bit of a debate between the economic academics, the Treasury and the Bank of England.

I finish with the theme on which I began, which is that it is a pity that there should be this relentless and democratically not very sensible campaign on the part of certain bodies—I suspect that it can only be the Treasury and the Bank of England—who keep putting the word “discredited” before “RPI”. Given the state of Britain now, that is not a very sensible thing to do. Although the RPI is not perfect—and no index is—many of the criticisms made of it reflect a misunderstanding of its purpose and are implicitly based on the erroneous assumption that it should follow in full the economic principles suitable for indices such as the CPI and CPIH.

I am sorry for making a rather long statement, but one cannot say that people should accept in their wage packets a difference of minus £350 a year by shifting from the RPI to the CPI. That is a street level understanding of the question, not a highly academic one.

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[Lord Turnbull (CB)]

My Lords, earlier today, the House confirmed my P45 from membership of the Economic Affairs Committee. I greatly enjoyed working under the chairmanship first of the noble Lord, Lord Hollick, and latterly that of the noble Lord, Lord Forsyth. It was also an exquisite pleasure to note the conversion of the noble Lord, Lord Forsyth, to the cause of social housing and—as we will hear—ultimately to more generosity in the provision of long-term care.

I want to take this opportunity to pay tribute to the work of the late Lord Jenkin of Roding, who had an enduring interest in the quality and integrity of national statistics. He was instrumental in passing the Statistics and Registration Service Act 2007, which brought about important changes to the governance framework. We have already seen some important interventions from the statistics authority where it has identified abuses or distortions; for example, the notorious £350 million claim in the Brexit campaign and its decision to alter the presentation of student loans in the national accounts to give a more accurate picture of the incidence over time of write-offs of debt.

Nevertheless, some significant controversies remain unresolved, some of which, as the House has heard, are of the statistics authority’s own making. Three steps brought them to a head. First, the then Government decided to specify the MPC’s inflation target using the CPI to bring us into line with the rest of Europe. They also explained that the CPI was running about 0.5% a year slower than the RPI. The switch allowed the Chancellor of the Exchequer to claim that he was targeting lower inflation without the Bank having to do much tightening. It also allowed him to tell Tony Blair, who was like the impatient boy in the back of the car and was disappointed that the five tests did not support entry into the euro, that we were getting nearer.

At that stage, the change was confined to the realm of monetary policy. The next event was around 2010, when the ONS made the now notorious change to the way in which clothing prices were collected, which had the immediate impact of widening the gap by another 0.3%. The ONS reviewed that outcome but surprisingly decided to do nothing about it. However, the statistics authority—I emphasise that it was the statistics authority; the noble Lord, Lord Lea, tried to claim that it was the Treasury or the Bank—then declared that the RPI was a very poor measure of inflation that did not have the potential to be developed into a good one. It would therefore go on publishing the RPI but no longer designate it as a “National Statistic”.

[Lord Lea of Crondall]

My Lords, although I attributed possible motive to the Bank and the Treasury, I said that my main concern was the lack of authority to put this adjective in front of it to say that it was discredited. On what basis can officials brief the press that the RPI is discredited?

[Lord Turnbull]

The basis on which that was done was that the statistics authority said it was flawed; that, I thought, was sufficient. Anyway, it said it would go on publishing the RPI and no longer designate it as a “national statistic” but rather, treat it as a legacy measure, with no further work to develop it. The chief statistician said there were many flaws with the RPI. For example, if it is used in the Carli index, which is a very simple test, if something goes up by 25% and then down by 25%, it does not end up where it started—the so-called time reversibility test. It said that it was not worth changing the treatment of clothing if it was not going to look at all the other issues.

This policy of spartan neglect proved controversial, provoking the inquiry by the EAC. Our conclusion was that RPI was deeply embedded in many aspects of economic life—on this we agreed with the noble Lord, Lord Lea—and it was wrong of the statistics authority and the ONS to just walk away from it. Indeed, it was argued that the statistics authority had a statutory duty—

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[Lord Young of Cookham (Con)]

My Lords, I thank my noble friend Lord Forsyth for introducing this and all noble Lords who have taken part in an exceptionally well-informed debate on a rather specialised, but none the less important, topic which impacts directly on all of us—as the noble Lord, Lord Darling, and my noble friends Lord Tugendhat and Lady Browning, explained. I also thank noble Lords for their detailed report, for which the Government are grateful; I thank, too, the departing members of the committee for their work.

Normally, I look forward to debates on my noble friend’s reports, but on this occasion it cast a small cloud over my weekend, as I realised that what I have to say may leave my noble friend and his committee less than satisfied. However, I hope to persuade him that there are good reasons for that. In fact, much of the debate focused not exclusively on the Government but on the role of the UKSA—particularly the speeches from the noble Lords, Lord Burns and Lord Turnbull. I am sure that they will read with interest what we have said today.

As a former Treasury Minister, albeit some 25 years ago, I took a deep personal interest in the Government’s response, possibly straying from my advertised role as a spokesman for the Treasury. I have read the report, which raises a number of complex and wide-ranging issues on the RPI, the Government’s use of inflation statistics, and the future of measuring inflation.

Before I continue, may I first pay tribute to John Pullinger, who recently retired as National Statistician? He had a distinguished term in that post. To mention but a few of his achievements in the role, he led the ONS strategy entitled Better Statistics, Better Decisions, headed the newly created analysis function, and worked alongside the UKSA to, in his own words, make it,

“unacceptable for people to either not use evidence, or to misuse it”,

a sentiment with which I am sure this House concurs—and relevant in view of the exchange earlier today in the Oral Question from the noble Lord, Lord Foulkes.

I should like to address the concerns of my noble friend Lord Forsyth, and the other noble Lords who sit on the Economic Affairs Committee, on the lack of a government response to their report, which was published in January—an issue raised by many noble Lords, including the noble Lord, Lord Sharkey.

The Government appreciate the amount of work and the level of scrutiny that go into all the committee’s inquiries; we understand its frustration. I regret that there is yet to be a government response and understand the difficulties in debating a Select Committee report without one being available. This delay is not driven by inaction. The issues that the report raises are complex and wide-ranging. Measures of inflation are embedded across the economy and affect the lives of almost everyone in the country. They include rental agreements, mobile phone contracts, financial instruments, government debt, pensions and rail fares, to name but a few.

[Lord Lea of Crondall]

Will the Minister take this opportunity to include wage and salary increases in that list? It seems quite extraordinary that the main quantitative use of the RPI does not get a mention, even now.

[Lord Young of Cookham]

I said, “to name but a few”, but I will gladly add the issue raised by the noble Lord to the list. Some, but not all, wage increases are linked to RPI.

Some uses of the measures are interlinked; for example, for pension schemes whose members, many of whom are in private sector defined benefit schemes, have pension payments that increase by RPI. This means that, in turn, those schemes seek RPI-linked assets to hedge those liabilities. As a result, a large share of the Government’s outstanding RPI-linked debt is held by those pension schemes. The Pension Protection Fund estimates that almost 90% of outstanding index-linked gilts are held by UK defined benefit pension schemes and UK insurance companies.

The breadth, complexity, and importance of these issues mean that the committee’s report requires further careful consideration. Given the complexities of the issue, it is sensible that the Government and the UKSA produce a well-considered response—while respecting the UKSA’s independence, of course.

Devolved Administrations

Lord Lea of Crondall Excerpts

Monday 25th March 2019 Lords Chamber

[Lord Young of Cookham]

Devolution is England is not stuck. I spend many hours in the Moses Room dealing with statutory instruments, either setting up combined authorities, where local authorities wish to combine, or local mayors, who will shortly be elected, so we are making good progress in devolving power from Westminster to the local authorities.

[Lord Lea of Crondall (Lab)]

My Lords, is the notion that Northern Ireland is a special case somehow inevitable as there is no devolved Administration in operation? Is that the rationale that the Minister is pointing to?

[Lord Young of Cookham]

A priority for the UK Government is to restore the devolved institutions in Stormont. In the absence of Executive Ministers, there is a limit to the decisions which the civil servants in Northern Ireland can take. That is why last November the Secretary of State issued guidance on decision-making for Northern Ireland during the period for Northern Ireland Executive formation. In the meantime, we are taking such steps as we can to develop a common framework, but there does come a point where you cannot make much more progress without prejudicing the freedom of Northern Ireland to do what it wants.

House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL]

Lord Lea of Crondall Excerpts

Report stage (Hansard): House of Lords
Friday 15th March 2019 Lords Chamber

[Lord Colgrain (Con)]

My Lords, I support this amendment and Amendment 23, having said before in your Lordships’ House that I endorse the whole House voting on hereditaries while the Burns report is being implemented and comprehensive reform is being put in place.

I am disappointed to see that the noble Baroness, Lady Hayter, is not in her place. I much enjoyed her comment about looking down the rabbit hole as wee Alice. My election by the whole House as a hereditary Peer was greeted by a broadsheet with reference to a Blackadder election. The producer of Blackadder is responsible for another programme—“The Museum of Curiosity”—the title of which I was hoping another broadsheet would have entertained us with, with reference to hereditaries.

It may interest your Lordships to know that yesterday I was on the roof outside the stained glass windows up there, looking at the work that had been done on the stained glass and all the leading, and as I looked in, I felt there was a certain parallel. I looked into the Chamber and could see absolutely nothing at all; we look out from this Chamber and can see daylight and lovely colour, and think that the work we do here is fully understood by the public at large. In fact, they are on the outside, looking in, and can see very little. They do not understand what it is we do, and in particular what hereditaries do.

Hereditaries are not apparatchiks of any particular political hue, whether Fabian Society or Bow Group. We are what the poet Matthew Arnold praised as being “formed men, not crammed men”, formed by the independence of our own thoughts and experience, random, without any party tribalism or essence of our own political importance. When I look at fellow hereditaries across all the Benches, I see Olympic gold medallists, journalists, film and documentary makers, doctors, dentists, the self-employed, owners and managers of SMEs, pilots, specialists in insurance, banking, shipping and property, linguists of all descriptions, married to different nationalities—

[Lord Lea of Crondall (Lab)]

Is the noble Lord’s logic not that all hereditaries should be Cross-Benchers?

[Lord Colgrain]

If the noble Lord, Lord Grocott, is successful in his Bill and the hereditary election process is terminated, so is this independence of thought, action and experience, to be replaced by an even greater proportion of life Peers who are ex-MPs, ex-MEPs and representatives of regional assemblies and county councils. The general public have had their fill of the body politic from the other House at the moment—some would say where lunatics are running the asylum—and would relish the chance to have a more catholic representation in your Lordships’ House.

Brexit has not endeared politics to Everyman. We should be mindful of the consequence of decreasing the number of unorthodox Peers who have a less political careerist disposition, and recall the adage, “Be careful what you wish for”.

Employee Shareholding and Participation in Corporate Governance

Lord Lea of Crondall Excerpts

Thursday 11th October 2018 Lords Chamber

[Lord Lea of Crondall (Lab)]

My Lords, this is a subject on which the Prime Minister is beating a quick retreat since she referred to it rather positively a couple of years ago. The slew of reports recently proved that it is becoming part of a new consensus, but I think it is still not quite part of the consensus in the golf club bar. This is typical of this country’s problems, in some respects. It is summed up, as I understand it, although I am not a lawyer, in the surprising but true doctrine that the company is the shareholders. That is what a company is. Is that not extraordinary?

The stakeholder model of capitalism is rather different from the British model. I will elucidate one or two consequences of this. My noble friend Lord Monks, in his interesting anecdote about Rotterdam, prompts me to give the House my favourite anecdote. A friend of mine went over to Gothenburg. His company wanted to take over a Swedish company. At lunch, round a canteen table, they had the worker representatives from both the main supervisory board, I suppose you would call it, and the works council. If your Lordships will forgive my Swedish accent, although I am rather proud of it myself, when it came to questions, the chairman of the works council said, “Mr Struthers, if you take over our company, how will that improve our world market share?”. When Malcolm got home, he said, “Do you know what happened to me in Gothenburg? I asked these people if there were any questions, and this man asked”—I will not repeat my Swedish accent, your Lordships will be relieved to hear—“about world market share. I have never heard anybody ask any question remotely like that in this country”. Am I not right? This is the division. I will not refer to this not being popular among those of my former colleagues who believe in the class struggle as an end in itself, but it is part of the consensus of the trade union movement now, in a very broad sense.

The slew of reports proves that more than 40 years since Bullock, the analysis of the nature of British inequality has moved on to become a consensus. These reports are hugely significant, not only in what they all say in similar terms but in the range of who has written them. We will not specify but it is a fact that although the Bullock committee report was greeted with ridicule 40 years ago in most establishment quarters, all I can say in the presence of the right reverend Prelate the Bishop of St Albans is that although our reward is only in heaven, in this case I hope the reward will come within 50 years. I strongly endorse the idea, which had not occurred to me, from the noble Lord, Lord Greaves, that we should all indicate in unison to the noble Lord, Lord McFall, that this would make an excellent subject for a special inquiry.

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[Baroness Vere of Norbiton (Con)]

My Lords, I thank the noble Lord, Lord Haskel, for securing this important and timely debate. Giving employees a stake and a voice in the organisation that they work for is important. As the noble Lord very powerfully noted in his opening remarks, it can lead to better outcomes for all stakeholders—employees, shareholders, customers, suppliers and, indeed, the Exchequer—through better-quality boardroom decision-making, stronger worker commitment to the business, higher productivity and greater influence of workers over the strategic decisions that will affect them. This has been noted by many people, not just in the Chamber today but outside. This debate is indeed very timely. The IPPR report has recently come out. It was mentioned by the right reverend Prelate and the noble Lord, Lord Stevenson.

We can all agree that employees are the lifeblood of all successful organisations and that their participation is crucial. Where I suspect we will disagree is on how government should encourage—some would prefer “force”—listed and non-listed privately owned companies to increase employee participation. Some in today’s debate—I note the comments of the noble Lord, Lord Stevenson—have criticised the speed at which the Government are acting. I cannot agree.

I will turn first to worker participation in corporate governance. As the noble Lord, Lord Stevenson, noted, the recent comments by Andy Haldane, the chief economist of the Bank of England, are welcome and timely. I am sure that noble Lords were very pleased to see his appointment as chair of the Industrial Strategy Council announced a few days ago. That council will meet for the first time in a couple of weeks’ time.

In 2016, we consulted on the Corporate Governance Reform Green Paper which, among many other things, sought views on how best to strengthen the worker voice in the boardroom. It was an extensive consultation. There were 375 thoughtful responses from businesses, trade unions and wider society. One thing was particularly striking from the responses: that no single way is the best way to strengthen the employee voice and influence at board level. Some companies favour the direct appointment of employees to company boards. Others favour dedicated and diverse workers’ councils which can reach into all aspects of the organisation. There is a huge range of approaches, each suiting the specific needs of the company, its structure and the sector in which it operates. So it became clear to us over the course of the consultation that one method would not suit all and that it would be wrong, and possibly quite damaging, for the Government to dictate a single method of worker participation.

[Lord Lea of Crondall]

Does the doctrine of diversity not mean that the Government are ruling out, almost for all time, any legislation?

[Baroness Vere of Norbiton]

Not at all—but at this moment legislation is not needed. If I am allowed to make a bit of progress I will explain how this is being put into practice.

Our reforms achieve change not by forcing companies into a one-size-fits-all approach but by providing options, supported by a clear and transparent accountability system. There are two main elements to our approach. First, we have put new reporting requirements on the statute book. They require all large companies—those with more than 250 UK employees—to explain in their directors’ reports how they have had regard to the interests of employees, including how they have engaged with them and, crucially, the effect of that engagement on decisions taken by the board during the year.

Secondly, at the Government’s request the Financial Reporting Council has revised the UK Corporate Governance Code to require boards to have in place at least one of three worker voice mechanisms: a director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director. If a board has not chosen one of those methods, it will have to explain to its shareholders what alternative arrangements are in place and why they are effective.

The noble Lord, Lord Haskel, questioned the statutory underpinning of the code. It is mandatory for all listed companies. Noble Lords will be aware that Sir John Kingman is reviewing the FRC and all its activities, and we look forward to receiving his report in due course.

The Government expect these reforms to drive real change, with our large companies having effective mechanisms in place to engage with employees at boardroom level.

Many noble Lords on the Labour Benches have spoken in today’s debate and talked about Labour Party policy in this area. What do we see? We see exactly what the consultation showed us would not work. Labour is proposing a one-size-fits-all approach which we know will not suit many companies. Labour would force all large companies to do exactly the same thing, irrespective of their type, size, ownership and sector. For the reasons I have set out, we believe this would be wrong. Indeed, the personal experiences shared in the Chamber today by the noble Lord, Lord Monks, Lord Cotter, Lord Lea and Lord Davies, further support our view that one size simply does not fit all.

I turn to employee shareholding and ownership. Many businesses choose employee share ownership to involve and motivate their employees. But, crucially, employee share ownership must remain a free choice for businesses to make. However, the Government have a role to play. We can remove the barriers to employee shareholding and to employee ownership to make these easier for business. The Nuttall review in 2012, commissioned by the previous Government, identified three barriers to growth: a lack of awareness of the concept, a lack of resources to support implementation, and actual or perceived legal, tax or other regulatory barriers. The review made 28 recommendations, and these have been addressed by the Government in awareness-raising initiatives and by simplifying the relevant regulations through changes in the Finance Act 2014. So we have tackled the barriers; it is now up to the private sector to set this up and help employees to participate.

This Government back businesses, whichever ownership model they have. It is in that context that we keep under review our approach to employee share ownership schemes. I noted the comments by the noble Baroness, Lady Bowles of Berkhamsted. I have read her very good report, and one thing that struck me was that she said:

“That is not to say employee ownership is the ‘ideal’ business model, or that its impact is automatically and universally transformative”.


She is right, and that point was made also by the noble Lord, Lord Liddle. We have to be aware of people investing not only their job in a company but also perhaps their life savings.

However, we would like to see more employee-owned companies, and we have noted the recommendations. The Government keep all areas of the tax system under review and, I am sure, are looking at the proposal that the noble Baroness mentioned that was sent recently to HMT. We already offer four tax-advantaged employee share schemes that allow 4 million employees to invest in the future performance of their companies. This is alongside employee ownership trusts, which the Government have promoted since in 2014 and which offer generous tax reliefs both for employees and for business owners who sell to a trust.

Perhaps it is worth taking a moment to look at Labour Party policy in this area, which was cited by a number of noble Lords today. It is certainly radical. It would involve an immediate and significant diminution to the pension assets of all pension holders, and indeed anyone with any shares in a larger listed company. It would be an astonishing confiscation of private wealth. There would be no actual employee share ownership, merely ownership by proxy, and a cap on any upside for the employee. I wonder whether noble Lords on the opposition Benches have any estimate of quite how much extra tax the Exchequer would get as a result of this cap. Some say that it would be around £6 billion— that is, £6 billion of extra corporation tax targeted only at companies with a high dividend yield. The policy is extraordinary, and not in a good way. It would have a devastating impact on UK business and the UK as an attractive place to invest.

Noble Lords touched briefly on Section 172 of the Companies Act 2006, which is the cornerstone of the company law framework. Directors have a duty to promote the success of a company for the benefit of their shareholders. However, in doing so they must have regard to a range of stakeholders. This is the enlightened shareholder value model and we are not minded to review it at this time.

The UK has an international reputation for the strength of its corporate governance framework, which we have kept up to date with reviews and carefully considered improvements. As the noble Lord, Lord Monks, suggested, we will look at best practice in other countries, but a one-size-fits-all approach will not work.

House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL]

Lord Lea of Crondall Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Friday 7th September 2018 Lords Chamber

[The Earl of Erroll (CB)]

My Lords, I support this regret Motion and I will support the Motion of the noble Lord, Lord Adonis, as well because it is about democracy. If the other place is reduced by 50 people, I would point out that the proportion of Ministers who are heads of the Executive’s departments will increase in proportion to the number of Back-Bench MPs. The challenge comes because Parliament is here to control the Executive. The danger in the Commons is that if there are too many Ministers who see themselves as more powerful, yet are circumscribed in what they can join in on as Ministers, that weakens parliamentary scrutiny of the Executive. Therefore, the Bill is extremely dangerous because it will reduce the poison pill—us, the hereditaries—but not incentivise further democratic reform, which I have always supported. Both regret Motions are valid. It cannot be piecemeal because once we go, there will not be further reform. The noble Lord, Lord Adonis, is therefore absolutely right, apart from his point about moving Parliaments backwards and forwards, which does not work very well with Strasbourg. Apart from that, the democratic effect is vital. If your Lordships really think that there will be further reform if you allow this Bill through, I think that is charmingly naive.

[Lord Lea of Crondall (Lab)]

My Lords, I have heard some convoluted arguments in my life but we are getting into near-nonsense territory. I ask the House to consider whether the noble Lord, Lord Wakeham, for whom the whole House has the greatest respect, can really sustain the argument—I hope he will correct me if I quote him incorrectly—that his fundamental opposition is to a principle not being sustained by this House if we wish to act by legislation, when this House has always said that it would act by self-regulation. That sounds fine but I ask the House to consider how this could be done by self-regulation. I happened to be here just in time for the 1999 Bill. At that time, it was clear that that reform had to be done by legislation. Am I right or am I wrong?

[Lord Rennard (LD)]

My Lords, the Bill of the noble Lord, Lord Grocott, has full support from these Benches. The principle is entirely right. It is very important that we improve the reputation of this House by ending what is considered to be a farcical process of continuing to conduct hereditary by-elections. The Burns report has been referred to several times already. The Bill would actually assist the process of bringing forward Burns, which will face some problems if we do not bring an end to the hereditary by-elections because of the issue that has been raised about having a higher proportion of hereditary Peers in the House, unless we do something to stop them.

There is nothing with which I disagree in the regret Motion of the noble Lord, Lord Trefgarne. I recall that in 2010 the then Labour Government, in their Constitutional Reform and Governance Bill, brought forward the abolition of hereditary by-elections and received majority support in the House of Commons. One reason why the Bill of the noble Lord, Lord Grocott, should be approved is to allow the Commons to vote on the issue; if we do not approve it, the Commons will not have that say. That being said, in my view the regret Motion of the noble Lord, Lord Trefgarne, adds nothing to the debate. There is nothing with which I disagree but it takes up precious time and encourages the perception that there is a filibuster trying to prevent the Bill being approved. The filibuster itself brings the House into disrepute. That is enough said; I urge Members of the House to say no more than necessary in order to move on with the business, approve the Bill and discard what I consider to be irrelevant regret Motions.

Referendums: Parliamentary Democracy

Lord Lea of Crondall Excerpts

Thursday 19th July 2018 Lords Chamber

[Lord Wallace of Saltaire (LD)]

My Lords, in discussing referendums we have very much to put our discussions in the context of declining popular support, in this country and elsewhere, for parliamentary democracy. It is a real problem we all face, and we see it as it stretches across the rest of the democratic world. In Britain, we have a situation in which the people—and newspapers—who campaigned very hard for the restoration of British parliamentary sovereignty have, for the past two years, insisted that the “will of the people” as expressed in one referendum must override parliamentary scrutiny and further debate. We have disillusion with elites and with the establishment—with representatives, as such—and the rise of “authentic” charismatic figures who are seen to represent the people, even though they usually do not come from the people. We see that not just in Britain but elsewhere. When I see the Daily Mail giving large coverage to Jacob Rees-Mogg attacking the establishment as a man of the people, I feel that we are almost in a surreal world. But that is where we are, and the public school-educated journalists of the Daily Mail and the Daily Telegraph busily attack the metropolitan elite, even though they are all members if it; meaning, of course, that what they are attacking is those who think that evidence, debate and discussion are important to democratic politics and not simply emotion and gut feelings. That is the problem that faces us and into which context we have to put the future of referendums.

Membership of political parties has declined. In 1970, 5% of our voters belonged to political parties, the largest of which was the Conservative Party. In 2010, it was 1%. It has recovered a little since then, although in some unpublished figures, the Conservative Party is now the fourth largest political party in Britain after the Liberal Democrats and the SNP. It certainly ought to worry us that the governing party has become a central political machine funded by large donors without the roots it used to have among the population.

[Lord Lea of Crondall (Lab)]

What about the Labour Party?

[Lord Wallace of Saltaire]

That is a matter for the noble Lord.

We have a broken two-party system. In many other countries, the old parties have begun to break up and new parties are emerging, but ours are held in place by a voting system and by their privileged access to funding. We have a situation in which political education in this country is extremely poor—almost absent. The noble Lord, Lord Higgins, said that we believe in parliamentary democracy. However, my experience of the referendum campaign is that many people expressed deep confusion about the quality of democracy and the issues at stake because we have not tackled the question of how to educate our masters, as Disraeli said we needed to do, so many years ago. One reason I have been converted to the idea of the voting age being 16 is that it would encourage schools to get into political education in a much more active way. We all know how delicate and difficult that is, but we need enormously to prioritise citizenship, an understanding of the rights and obligations of citizenship, what we mean by the rule of law and what we mean by representative democracy.

It does not help that local democracy has been undermined and its funding cut back, and that we now have fewer elected representatives in England than in any other democratic country. We have seen the professionalisation of political campaigning, the rise of what the Russians call political technology, and the very slick way in which the anti-AV campaign and the Brexit campaign—both led by Matthew Elliott—used the peripheral, almost irrelevant, question of funding for the National Health Service to discredit other matters. That was very well done and very clever, given that it was not central to the issues. The influence of big funders—often offshore and occasionally foreign funders, and occasionally also dark money—is clearly something that we need to look at.

Where does that take us? Like the noble Lord, Lord Higgins, I have read the various reports. I was very impressed by the Independent Commission on Referendums and I strongly agree with many of its recommendations, including that referendums are best to ratify a decision which government has taken rather than to start a debate about what we might do if the population expressed a preference for X rather than Y. The last thing one should do, of course, is have a referendum to avoid the governing party having to take a decision first. That is what happened two years ago and is, after all, what happened in 1975.

I also agree with the commitment that referendums need to be embedded in a longer process of debate and negotiation, as far as they can be. Citizens’ assemblies and other things are mentioned, and in Britain we face the problem that we have a more highly educated electorate but they are less interested in politics. They want to listen to us on the radio or television only for 30 seconds at a time, rather than the two to three minutes we used to get 20 or 30 years ago. There is a real problem in getting complex politics across. I also agree that referendums need to be restricted to major constitutional questions. I further agree that referendums need to be tightly regulated. The report says rather optimistically that they need to be fair, but what we have seen in the context of the last two referendums—most recently in 2016—is that regulation needs to be not only clear but quickly imposed. Here we are, two years after the referendum, and the questions of where some of the money came from and whether the limits were exceeded still hang in the air.

Where are we as a result of all this? Referendums have become a part of the British constitution—we cannot take them away again—but they should be used rarely. Our democratic system is much shakier than it used to be, and politicians across all parties need to co-operate to repair and strengthen it. To paraphrase Winston Churchill: parliamentary democracy is the worst of all systems of government, except for all the others. And I am not at all sure that plebiscitary democracy is any better than parliamentary government.

Carillion

Lord Lea of Crondall Excerpts

Monday 15th January 2018 Lords Chamber

[Lord Young of Cookham]

My Lords, I am grateful to the noble Baroness. It is worth making the point that of the seven contracts that were let post July, six were joint ventures; in other words, there was joint and several liability to undertake the work if one of them collapsed. In the case of HS2, which was the largest at £1.4 billion in total, Kier has already announced this morning that it has put in place contingency plans to ensure continuity of service. The two MoD contracts were joint ventures, as were the two HS2 ones, and so was the Network Rail contract to Carillion Powerlines. Only one relevant contract was not a joint venture where Network Rail is now transferring the work to another framework contractor.

However, the noble Baroness has made a good point. When one assesses who has won a tender, one has to do it against a number of set and published criteria. If you do not, you are up for judicial review. One of those criteria is financial stability. Clearly, whatever the test was back in July, it was passed. It relates to a point made by my noble friend Lord Lawson, which is whether one should take this opportunity just to stand back and look at whether the criteria used for assessing financial stability are correct and robust enough or whether they need firming up.

[Lord Lea of Crondall (Lab)]

My Lords, is not a picture emerging of some prima facie creative accounting going on? The noble Lord, Lord Lawson, makes a fair point when he suggests that not every contract should come directly from the Government. The picture now is that in almost everything done by Wimpey, Costain and so on, they are called subcontractors, and that applies to the workforce as well. Does the inquiry not need to cast a beady eye over how far the culture of subcontracting everything—much more so than was true previously in the construction industry—is part of the background to this problem because no one can take an overall view of what is happening on the balance sheet?

[Lord Young of Cookham]

That is quite a complicated question. One can make a good argument for having subcontractors—namely, people who specialise in a particular discipline and compete against each other for contracts, rather than one company trying to cover the whole spectrum of services. Many very successful industries are built on a structure of contracts and subcontracts. Noble Lords need look only to the airline industry to see a whole range of contracts: companies lease the aeroplanes and subcontract baggage handling and catering and so on, and, on the whole, it is a satisfactorily run industry. I would not want to get drawn into conclusions about what structure is the right one for a particular industry. On the question of accounting, I should have said that the FCA and the FRC are both conducting their respective inquiries—one, I think, into audit, and the other into statements that were made or not made about the company’s prospects. These particular aspects are being looked at by the relevant authorities.