Conduct of Debate in Public Life

Lord Young of Cookham Excerpts

Thursday 9th May 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I have wound up many debates in my time but I find this the most difficult of all, not least because we have had some great speeches which it will be very difficult to match but also because some of the issues that we have been discussing—what sort of country we are, how our institutions are letting the country down and how our political parties are not working properly—have no easy answers. But noble Lords have been good enough to identify some ways forward, so let us have a go.

The noble Lord, Lord Harris, was quite right to raise this serious issue, and I commend the speech that he made in introducing the debate. He made some very moving references to Jo Cox, also referred to by the right reverend Prelate the Bishop of Leeds and others. The noble Lord cares passionately about our democracy. He articulated the threats that he sees, including the loss of confidence in democratic institutions, and identified some potential solutions. One theme that has run through the debate is the need for strong political leadership—a point he mentioned with which I agree. That was picked up by others, including the noble Lord, Lord Liddle. He also mentioned the need for political parties to put their own house in order, and again I endorse what he said.

I am grateful to all noble Lords who participated in the debate with some very thoughtful and thought-provoking interventions. They discussed how best to restore confidence in the institutions of our country, asking how we can promote good conduct and healthy political debate, alongside respect for those with a different view—the tolerance that the noble Lord, Lord Wallace, mentioned—and what both government and those of us in active politics can do as individuals to heal the divisions. A theme developed by the noble Lord, Lord Harris, the noble Baroness, Lady Prashar, and others was that it is not just up to the Government. The noble Lord, Lord Parekh, mentioned the importance of the language that we use, and the right reverend Prelate the Bishop of Leeds was, rightly, concerned about the normalisation of violence in our language.

The noble Lord, Lord Harris, referred to my noble friend Lord Bates—an unerringly friendly, courteous and popular Minister, who took stock of the vitriol, anger and intolerance in British politics and resigned, calling for reflection and change. He has decided to make his contribution by talking to people on his journey from Belfast to Brussels, to get a deeper insight into the current malaise and how we might restore national unity. We hope to hear from him on his return.

Picking up a theme from the noble Baroness, Lady Morris, the noble Lord, Lord Wallace, and others, next week I am going to do something which many noble Lords have done. I shall be addressing a masterclass for year 12 at a secondary school, where those representing different career options will be making their pitch to school leavers. Listening to the debate this afternoon has brought home to me the challenge of persuading teenagers to opt for elective office when there are so many other careers that offer greater job security, less media intrusion, less risk of personal harm, and better pay, and which enjoy higher prestige in the public eye—and there is not even an estate agent coming with whom I could compete on equal terms.

I also remember recently addressing a roomful of university students on the Upper Committee Corridor. They were in their last year of a politics course. At the end, I asked how many would consider becoming an MP. Not one hand went up—a point made by the noble Baroness, Lady Prashar, who talked about the difficulty of engaging. Yet I was struck by a point that the noble Baroness, Lady Morris, made: never have young people had more reason to become engaged in public life and shape their future. We saw last month how strongly young people feel about climate change.

In fact, we have a good story to tell about politics and democracy. In many ways, becoming an MP is more attractive now than when I started 45 years ago. MPs have better working conditions in Portcullis House, more generous pay and realistic allowances, proper staff, civilised working hours and, through technology, an increased facility to communicate with their constituents.

My noble friend Lady Bottomley put in a broader context the violence in society and asked what was different this time. I shall certainly read the speech of the noble and learned Lord, Lord Judge, as she recommended, and I will come on to the theme of social media, which she touched on, in a moment.

As part of the response to the issues that have been raised, I will explain what the Government have tried to do to remove some of the barriers to public life, to mitigate online abuse—one of our themes today—to tackle hate crime and hate speech, to prevent parliamentary intimidation and to promote democratic engagement, and I shall answer some of the questions raised.

This is a timely debate because, over the weekend, the Government announced plans to safeguard our democracy, addressing the mounting need to protect public debate and the integrity of our elections. In recent years, we have witnessed rising levels of violence and abuse directed towards those taking part in that debate. This increased prevalence of intimidation in public life risks stopping talented people from standing for public service and putting voters off politics.

The noble Baroness, Lady Hussein-Ece, mentioned the independent Committee on Standards in Public Life. It was asked by the Prime Minister to look at this very issue of the intimidation of parliamentary candidates, MPs and other public officeholders following the 2017 general election. It looked at the nature of intimidatory behaviour and considered what measures might protect the integrity of public service effectively, especially given the rise of social media. As I said, we published a response last weekend, entitled Protecting the Debate: Intimidation, Influence, and Information. Additionally, the Minister for the Constitution announced that the Government will legislate for a new electoral offence of intimidatory behaviour—a matter raised by the noble Baroness, Lady Hussein-Ece. Those found guilty of intimidating a candidate or campaigner during the run-up to an election will be stripped of their right to run for elected office for five years.

Passions run high in politics and political debate, and it is right that we should care about how we govern or are governed. However, there is absolutely no excuse for anyone, no matter who they are, to threaten or abuse a candidate or campaigner whose views they do not agree with. Neither do individuals have the right to impose their views on others. I deplore, as others have done, the comments made about Jess Phillips by a UKIP candidate; that candidate’s feet would not have touched the floor had he been standing for any party represented in our debate today.

The right reverend Prelate the Bishop of Rochester raised the need for a conversation about national identity, asking questions about who we are, to try to fill the vacuum—the “dark place” referred to by the noble Baroness, Lady Morris. He referred to the hostile emotions that have filled that vacuum and then sketched out how it might be done. This theme was developed by my noble friend Lord Patten, who suggested the possibility of a forum which might do some lateral thinking to work out the agenda for a way ahead. The noble Lord, Lord Hunt, suggested a new role for the Government in reassuring minority groups—I would like to reflect on that—as well as the idea of a parliamentary committee looking at how outside bodies deal with the sort of conflicts that we have been wrestling with this afternoon.

Brexit was one of the themes that ran through our debate; a large number of noble Lords mentioned it. A referendum has the potential to set people against Parliament when the people vote for a proposition with which the majority of parliamentarians disagree, and are then frustrated—as the noble Lord, Lord Liddle, mentioned—when three years later the result they voted for has not been delivered. We have seen a sort of polarisation of leave versus remain, which is beginning to replace the traditional right/left divisions that we have seen in our politics. The noble Lord, Lord Parekh, referred to the polarisation of a metropolitan elite on the one side and the rest of the country on the other.

I have reservations about referendums. I think it is legitimate to have a referendum to see whether Scotland or Northern Ireland wants to remain part of the UK, but I have reservations otherwise. I happen to believe that democracy is a conversation between people and Parliament, rather than a one-off instruction from one to the other. But, whatever one’s views, nothing can excuse the hatred and violence that we have recently witnessed.

The right reverend Prelate the Bishop of Leeds developed the themes by referring to the language of betrayal that has been used by some of those currently campaigning. I deplore the language that has been used—in some cases by my party—to talk about politicians. But the whole House welcomed the two memorable thoughts for the day offered by the two right reverend Prelates.

To the noble Lords, Lord Liddle and Lord Wallace, I say that we have had a look at electoral reform; we tried it but the public did not buy it, and I am not sure that it will happen in the near future. I was moved, as I am sure we all were, by the speech of the noble Lord, Lord Puttnam, who spoke of the risk of the slippery slope—the drift—if we do not confront extremists. He reminded us how nationalism can get out of control. Yes, we will stand up for the values he described.

While we have been talking about the toxicity in public life, it struck me that the increasing levels of violence that we have mentioned extend beyond the walls of Westminster to the lives of councillors—as the noble Lord, Lord Liddle, mentioned—and to hard-working teachers, nurses, doctors, judges and police and prison officers, who have also been targets and victims of toxicity and, in some cases, the intimidation and violence referred to in our debate today.

I was concerned to read in today’s Times, as I am sure were other noble Lords, that a number of MPs no longer feel secure walking across Westminster Bridge and are increasingly taking taxis. Noble Lords will have seen at times the aggressive behaviour of protesters during the recent Brexit debates. I looked out of the window of the Chief Whip’s Office this morning and saw a large placard saying, “Self-serving liars are destroying our nation”. Security arrangements at the Palace of Westminster are under constant review, and there is an ongoing police operation on the Parliamentary Estate as the debate on Brexit continues. The Metropolitan Police will do its best to balance the legitimate right to peaceful protest, but its members will deal robustly with incidents of harassment and intervene wherever they see or hear breaches of the law.

A number of noble Lords mentioned social media and the online harms White Paper, and talked about the abuse that takes place online and the damage it can do to people’s lives, careers and health. That is why we are taking action through the joint DCMS and Home Office online harms White Paper, which was welcomed by a number of noble Lords. We will establish a new statutory duty of care, as referred to by my noble friend Lady Bottomley, to make companies take more responsibility for the safety of their users and tackle harm caused by content or activity on their services. Compliance with that duty of care will be overseen and enforced by an independent regulator. As we debate these measures, there will be opportunities for noble Lords to add their own thoughts about how the legislation might be improved.

Accountability was a theme mentioned by the noble Baroness, Lady Prashar. Companies will be held to account for tackling a comprehensive set of online harms, including behaviours that may not be illegal but are none the less highly damaging to individuals or threaten our way of life in the United Kingdom. We expect that to include hate crime. We would also expect the regulator to include in a code of practice guidance to companies to outline what activity and material constitutes hateful content, content that may directly or indirectly cause harm to users—for example, in some cases of bullying or offensive material—and expectations around clear and accessible guidance to users on what constitutes hate crime and how to report it. We are consulting on the most appropriate powers for the regulator.

I thought the noble Baroness, Lady Prashar, made a good point, on the other side of the scales, in accentuating the positive benefits that can come from the intelligent use of information technology.

On fake news and state actors, the noble Lord, Lord Harris, asked why we did not have a toolkit such as the one that they have in Europe to deal with misinformation. In fact, the RESIST toolkit was launched last month to help communicators to spot and respond to disinformation. There is also a rapid response unit in the Cabinet Office to try to address disinformation.

The noble Baroness, Lady Morris, asked what we are doing to educate schoolchildren. We are looking at critical thinking skills in schools and launched a secondary schools resource last year to raise awareness of democracy. However, focusing just on children is not enough; we must do more now, which is why we launched the RESIST toolkit, as well as an awareness campaign targeted at 18 to 24 year-olds to give them the tools that they need. However, all the evidence is that people still look to the news agencies and news websites and give greater credibility to them than news on social media.

I am conscious that I am not going to get through all the issues that have been raised, but I will say a word about hate crime, an issue raised by the noble Baroness, Lady Hussein-Ece. We are clear that hate crime and hate speech are completely unacceptable, that victims should be supported, and that those who commit these hateful attacks should feel the full force of the law. We are committed to upholding free speech, and legislation is in place to protect fundamental rights. However, this freedom cannot be an excuse to harm or to spread hatred. Current UK legislation values free speech and enables people who wish to engage in debate so to do, regardless of whether others agree with the views being expressed. Importantly, the law ensures that people are protected against criminal activity, including threatening, menacing or obscene behaviour, online and offline. In this way, we believe the law strikes the right balance between protecting citizens and protecting their right to expression.

I will say a word about Prime Minister’s Questions, an issue raised by the noble Lord, Lord Winston—this will be a personal view. For many people, the weekly session of PMQs, which now lasts nearly twice as long as Standing Orders provide for, shapes their perception of politics. It is like Marmite. Some people love it—it is good box office, with at times some good one-liners worked up by spads and brisk exchanges on the issues of the day. For others, it is a poor advertisement for our democracy and our elected representatives, which switches many people off a career in public life and downgrades their faith in the democratic process. No one understands more than I do the passions that exist in the other place and the function of Prime Minister’s Questions as a sort of safety valve, but it could be a better advertisement for the political process if the context was less rowdy. I admire the way the Prime Minister handles this bear-pit with dignity, and I suspect it is not how she would prefer to conduct political discourse. I hope at some point it might be reset, retaining it as the forum of political debate but without the concomitant uproar.

Of course, the other place should never be like your Lordships’ House, where herbivores like me prefer our debates without the large decibel count, personal animosity or a binary approach to issues. We need to embody civility—a word raised by many during our debate. I agreed with what the noble Lord, Lord Winston, and the right reverend Prelate the Bishop of Rochester said: this might be a better forum for addressing the issues we have been discussing than the other place. I cannot remember who complained about it, but there are fewer people in the upper House who read out prepared scripts from the Whips’ Office.

I thank all those who have taken part in the debate. We must all work together to protect, respect, and promote our democracy. I will share with ministerial colleagues the helpful suggestions that have been made, and I hope that, working together, we will create a better environment in which our democracy can thrive and in which we can all deliver on our collective responsibilities.

Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019

Lord Young of Cookham Excerpts

Tuesday 7th May 2019 Lords Chamber

Moved by

[Lord Young of Cookham]

That the draft Regulations laid before the House on 3 April be approved.

[Lord Young of Cookham (Con)]

My Lords, the Treasury has been undertaking a programme of legislation, through SIs introduced under the EU withdrawal Act, to ensure that, if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK.

The SIs made before 29 March covered all the essential legislative changes that needed to be in law by exit to ensure a safe and operable regime at the point of exit. While the deficiency fixes covered in this SI are important, it was not essential for them to be in law at exit, as long as they could be made shortly after. This SI will help ensure that the UK regulatory regime continues to be prepared for withdrawal from the EU. The approach taken in this SI aligns with that of previous SIs laid under the EU (Withdrawal) Act, providing continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that it works effectively in a no-deal context.

This SI has four components. First, an important aspect of our no-deal preparations is the “temporary permissions regime”, which enables EEA firms operating in the UK via a financial services passport to continue their activities in the UK for a limited period after exit day, allowing them to obtain UK authorisation and complete any necessary restructuring. We also introduced a run-off mechanism via the Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019, made on 28 February, for EEA firms that do not enter the temporary permissions regime or that leave the regime without full UK authorisation.

This SI does not amend the design of these regimes but introduces an additional safeguard for UK customers of firms that will enter run-off. Specifically, it adds an obligation on firms that enter the contractual run-off regime—part of the run-off mechanism established by the Financial Services Contracts Regulations—to inform their UK customers of their status as an exempt firm and of any changes to consumer protection. This ensures that EEA providers must inform their UK customers if, for example, there are changes to consumer protection legislation in the firm’s home state or in the EEA that affect UK customers. Part 3 of this SI introduces similar obligations for electronic money and payment services firms in the contractual run-off.

The second component of this instrument concerns the post-exit approach to supervision of financial conglomerates. An EU exit instrument fixing deficiencies in the UK’s implementation of the financial conglomerates directive was made on 14 November last year. As part of the EU exit instrument made on 22 March this year, which makes amendments to the Financial Services and Markets Act, Parliament approved a temporary transitional power giving UK regulators the flexibility to phase in regulatory changes introduced by EU exit legislation. As part of work to apply this power, the regulators proposed that, in certain circumstances, changes to the supervision of financial conglomerates should be delayed in order to give affected firms time to reach compliance in an orderly way. To achieve this, a transitional arrangement needs to be introduced to the FiCOD regulations in respect of the obligations on the regulators to supervise financial conglomerates.

The Treasury and the regulators engaged with industry on the temporary regimes and on the approach to phasing in onshoring regulatory changes in order to minimise disruption for firms. TheCityUK, with representation from a number of different trade associations and law firms, expressed support for the approach to transitional arrangements, describing them as “prudent and pragmatic”.

Thirdly, this SI makes a clarificatory amendment to the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018. Here, the drafting approach resulted in the FCA having only the implicit power to cancel the temporary deemed registration or authorisation of an EEA-authorised payment institution or EEA-registered account information service provider that is providing account information services, which lacked the insurance cover currently applicable to EEA passporting firms conducting this activity. This instrument makes this cancellation criterion explicit.

Finally, this instrument makes corrections to earlier EU exit SIs. All the legislation laid under the EU (Withdrawal) Act has gone through the normal rigorous checking procedures. However, as with any legislation, errors are made from time to time and it is important that they are corrected.

Certain provisions in the Financial Services Contracts Regulations 2019 relating to the run-off regimes incorrectly referred to “EEA fund managers”. These references are now removed, as EEA fund managers will not be able to make use of these regimes. In the Long-term Investment Funds (Amendment) (EU Exit) Regulations 2019, made on 20 February, references to “European long-term investment funds” were not fully replaced with the term that will be used for UK-only funds. In the Capital Requirements (Amendment) (EU Exit) Regulations 2018, made on 19 December last year, a redundant paragraph on EU member state flexibility in the liquidity coverage delegated regulation was not deleted as it should have been. This SI corrects these drafting errors.

As I explained in my opening remarks, it was not essential for the additional measures and corrections covered by this instrument to be in law by the original exit day of 29 March, and that is why this instrument has not been considered by your Lordships earlier. Now that the Article 50 process has been extended for six months, we can ensure that these provisions are in place and that the UK’s regulatory regime will continue to be prepared for withdrawal from the EU in all scenarios. I hope that noble Lords will join me in supporting these regulations. I beg to move.

[Baroness Kramer (LD)]

My Lords, I am so glad I did not have to write the content of this SI; it was hard enough trying to work one’s way through it when simply reading it. It is obviously the result of a combination of “Oops!” and communication with customers. I see absolutely no reason to oppose it. If anything, this underscores the complexity of trying to make arrangements for dealing with a no-deal scenario. I hope we never have to use it, because we would run into more “Oops!” if we ever found ourselves in that situation. I hope the Treasury is going ahead with a mapping exercise to try to link this all together, because how anybody who functions in the industry can ever work their way through all this is completely beyond me. Frankly, if you ever needed an argument for remaining, it seems that this alone provides it.

[Lord Tunnicliffe (Lab)]

My Lords, this is one of many no-deal SIs on which I have been forced to represent Her Majesty’s Opposition from the Front Bench—a pretty unattractive pastime. The principal reason for this is the fact that most of these SIs amend an SI that amends an SI that amends an Act that is many years old, which makes it fundamentally difficult to understand them. When one has put all the intellectual effort into understanding the so-called no-deal SI, one then discovers that the actual substance of the SI is frequently merely technical or consequential.

I found that this SI, and particularly its Explanatory Memorandum, really won the prize for being the most difficult to understand yet. In my frustration, I thought I would find out to what standard an Explanatory Memorandum should be created. I had the inspiration to go along to the Secondary Legislation Scrutiny Committee offices to seek guidance. I was once on that committee when it had a much grander title, the Merits Committee, and the staff there were always helpful and competent. I asked, “What is the guidance on the creation of SIs?” They said there were two pieces of guidance: that given by the committee itself and the Government’s guidance, which—for reasons I do not understand—is actually issued by the National Archives. The guidance from the committee itself is some 17 pages long. The latest version is from July 2016. Its objectives are caught in one particular paragraph:

“The purpose of the EM is to provide members of Parliament and the public with a plain English, free-standing, explanation of the effect of the instrument and why it is necessary. It is not meant for lawyers, but to help people who may know nothing about the subject quickly to gain an understanding of the SI’s intent and purpose. Legal explanations of the changes are already given in the Explanatory Note which form part of the actual instrument”.


The latest government guidance from the National Archives, the fifth edition on statutory instruments, dated 27 November, states at paragraph 2.9.2:

“The purpose of an EM is to provide the public with an easy-to-understand explanation of the legislation’s intent and purpose—why the legislation is necessary. Avoid repeating content you have included in the Explanatory Note. Your explanation should be concise but comprehensive, and should not generally exceed four to six pages. Use plain English and avoid … jargon”.


I put it to noble Lords that this document fails.

I then turned to the EM itself, which at paragraph 15.2 states:

“Katie Fisher, Deputy Director for Financial Services EU Exit Domestic Preparation at HM Treasury, can confirm that this Explanatory Memorandum meets the required standard”.


She is wrong. It does not.

However, in my frustration, I rang the number given at paragraph 15.1 to try to understand a little more and my conversation resulted in an email from Richard Lowe-Lauri. At long last, after much toil, I feel that I do largely understand the Explanatory Memorandum, as prompted and helped by that useful email. What did I find? I found at the end of this exciting process that the issues tackled in this SI are technical, consequential or merely corrective. Therefore, I have nothing to object to, except for one very minor question about paragraph 2.4, the last sentence, which happens to be about five lines long. It states:

“It also inserts provisions into other temporary regimes, allowing EEA financial services firms to continue to service existing contracts with their UK customers post-exit, and mitigating risks faced by UK firms using services provided by non-UK central counterparties and trade repositories”.


I could not find anywhere how and what the risks were that we were mitigating and how they were being mitigated. Otherwise, I have no objection to the SI.

[Lord Young of Cookham]

My Lords, I am grateful to both noble Lords who have taken part in this debate. I agree with the noble Baroness, Lady Kramer. I do not want a no-deal scenario any more than she does. The Explanatory Memorandum at paragraph 7.2 explains all that we are doing to move away from no deal by seeking a,

“deep and special future partnership with the EU … greater in scope and ambition than any such agreement before and”,

that encompasses “financial services”.

[Lord Tunnicliffe]

On that point, the Minister should realise that that paragraph has been repeated 65 times, so we all know it well.

[Lord Young of Cookham]

That is why I knew exactly where to find it. I am sure that the noble Lord had no difficulty with that particular paragraph as he has had an opportunity to reflect on it many times. But I am grateful to the noble Baroness, Lady Kramer, for her broad support for the SI before us.

I note from the noble Lord, Lord Tunnicliffe, that we have tested his patience. He made that abundantly clear and he has awarded the wooden spoon to this particular Explanatory Memorandum. If he ever wants a different job, perhaps he could be recruited to draft Explanatory Memorandums for the Government. He clearly has high standards, and he is capable of turning the documents in front of him into something which he understands, which is a valuable skill.

I shall deal with the specific point he raised about paragraph 2.4 of the Explanatory Memorandum. The Financial Service Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 inserted provisions into the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 and the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018; I hope the noble Lord is still with me. These amendments established a run-off regime for central counterparties, allowing UK firms time to wind down relevant contracts and business with non-UK CCPs in an orderly manner. They also established a run-off regime for trade repositories giving UK firms time to make alternative arrangements with another registered or recognised TR to satisfy the reporting obligations set out in the European Market Infrastructure Regulation—EMIR. In a nutshell, without these run-off provisions, UK firms would face cliff-edge risks, and that is the risk that we seek to mitigate, including disruption to services from non-UK CCPs and TRs introducing operational, legal and stability risks. I hope I have dealt with that point.

On the noble Lord’s valid final point—that an Explanatory Memorandum should be a stand-alone document which is readily understood—the Treasury has endeavoured to ensure that all its Explanatory Memoranda provide a full and clear explanation of how and why each exit instrument laid under the Act is intended to operate, so that we can scrutinise the legislation as effectively as possible. However, in the light of his comments, we will have another look at this Explanatory Memorandum and consider whether the document should be revised and relaid to ensure that its explanations are as clear as possible.

Motion agreed.

National Security Council Leak

Lord Young of Cookham Excerpts

Thursday 2nd May 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, with the leave of the House I shall repeat an Answer to an Urgent Question asked in the other place earlier today by my right honourable friend David Lidington, Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office. The Answer is as follows:

“Mr Speaker, the National Security Council takes critical decisions about keeping this country safe. It was established in 2010, in part following lessons learned from the Iraq war, to ensure proper co-ordinated decision-making across the whole of government. It operates with the full breadth of expertise in the room, with Ministers from the relevant departments, advisers and officials, including the Chief of the Defence Staff, the chairman of the Joint Intelligence Committee, the heads of the intelligence services, and others.

The decisions which it makes are of critical importance to the safety of British citizens and of British interests, both in this country and around the world. For example, it is inconceivable today that the Cabinet could take a decision to commit combat troops without a full and challenging prior discussion in the NSC on the basis of full papers, including written legal advice, prepared and stress-tested by all relevant departments, and with decisions formally minuted.

I am sure the whole House will recognise how important it is that those decisions are taken in an environment in which members of the council and those who advise them feel free to speak their mind, with absolute certainty that the advice which they provide and the conclusions which they reach will remain confidential.

The leak investigation into the disclosure of information about 5G was constituted in order to ensure that the integrity of the NSC in general is upheld and that, vitally, participants in NSC meetings can continue to hold full confidence in its operation and the confidentiality of its proceedings. The Prime Minister has set out her response to evidence from the leak investigation last night and has thanked all members of the National Security Council for their full co-operation and candour during the investigation.

The unauthorised disclosure of any information from government is serious, and especially so from the National Security Council. The Prime Minister has said that she now considers that this matter has been closed, and the Cabinet Secretary does not consider it necessary to refer it to the police, but we would of course co-operate fully should the police themselves consider that an investigation were necessary. The House will recognise that it is the policy of successive Governments of different political parties not to comment on the detail of leak investigations and I will not comment on specific circumstances or personnel decisions”.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I thank the Minister for repeating the Answer on such a serious matter. There are two issues here. One is the potential provider of 5G, where Ministers can argue their corner in Cabinet, in the NSC or with the Prime Minister; if they still do not like the decision, they can resign and make their case from outside the Government. However, what is not acceptable is to leak from the National Security Council to further one’s argument. This is a breach of trust and, probably, of the Official Secrets Act, as well as damaging to our relationship with close allies. Can the Minister reassure the House that our Five Eyes allies will not withdraw any support as a result of the leak? Can he explain on what basis the decision was taken not to refer this to the police, given that the Prime Minister believes there is compelling evidence that the Secretary of State for Defence was responsible for the leak and that we have heard this morning that the Met Police would not investigate this without such a referral?

[Lord Young of Cookham]

I am grateful to the noble Baroness. On the first issue that she raised, the 5G decision will be made public in due course and will of course be subject to the usual scrutiny. On the question that she raised about the confidence of our allies, the action that the Prime Minister has taken shows how seriously she takes the leak from the NSC. We are now in touch with our allies to reassure them about the steps we have taken to remain confident in the security of NSC discussions, so that they can continue to have confidence in us.

On the second question, I said a moment ago that the Prime Minister considers the matter closed and the Cabinet Secretary has judged it not necessary to refer the matter to the police. However, Ministers and officials would co-operate should the police want to investigate. The Secretary of State for Defence was dismissed for a breach of the Ministerial Code. I believe that the Prime Minister is entitled to have in her Cabinet colleagues in whose judgment she has confidence and whom she can trust. In this case, that confidence and trust have clearly gone.

[Lord Campbell of Pittenweem (LD)]

My Lords, I too thank the Minister for repeating the Answer to the Urgent Question in the other place. I also fully accept his analysis of the role and responsibilities of the National Security Council but he may be over-optimistic in thinking that this matter is closed, not least because of the continuing vehemence of Mr Williamson’s denial and the continuing public expressions of anxiety from our partners in the Five Eyes. The truth is that whoever is responsible for this leak, it is an illustration of the continuing and corrosive effect of the breakdown in Cabinet responsibility in this Government. There are those who now claim that the decision of the Prime Minister is to be regarded as a vindication of her authority. I cannot resist making the observation that it would be rather better for us all if she had exercised that authority more frequently in the last three years.

[Lord Young of Cookham]

I have great respect for the noble Lord, but I did not detect a question in what he said, just some comments. Personally, I deplore all leaks, NSC and Cabinet. Colleagues should be free to express their views frankly around the Cabinet table and, once they leave the Cabinet table, should keep quiet. I hope that what happened will re-establish more discipline and collective responsibility for decisions, and that people will respect the confidentiality of what happens in Cabinet.

[Lord Robathan (Con)]

I entirely agree with my noble friend and deprecate all leaks. This was absolutely a sacking offence, whoever did it, and it appears that it was Mr Williamson. However, does the Minister also agree that, notwithstanding the outrage of others, this is not a threat to national security? A conversation was leaked that should not have been, but there is no threat to national security. To bring the Official Secrets Act into it is a complete confection.

[Lord Young of Cookham]

What is serious is the forum from which the leak emanated. The contributions of individual members of the NSC were also leaked, and both of those are very serious offences.

[Lord Anderson of Swansea (Lab)]

My Lords, this was a breach of the Ministerial Code, but it also appears to have been a breach of the Official Secrets Act. Would not civil servants who have been dismissed or prosecuted for breaching the Official Secrets Act now feel aggrieved?

[Lord Young of Cookham]

The issue of whether the Official Secrets Act has been breached is a matter for the police and, ultimately, the courts. As I repeated in the Statement, the view of the Cabinet Secretary is that it is not necessary to refer the matter to the police. However, if the police want to investigate, we will co-operate fully.

[Lord Cormack (Con)]

My Lords—

--- Later in debate ---

[Lord Cormack]

I am most grateful, my Lords, and I associate myself entirely with everything that my noble friend has said about leaks and the severity of leaks from the National Security Council. I am probably the only Member of your Lordships’ House who knows Gavin Williamson very well, as my successor as Member of Parliament for South Staffordshire. Does my noble friend accept there is a human dimension to this? As we speak, his wife is in her home with the press camped around. Does the Minister accept it would be sensible, in view of the continued protestations of Mr Williamson, to reconsider referring this matter to the police? Mr Williamson has indicated he would welcome that and I think it would be to the satisfaction of all if it were done.

[Lord Young of Cookham]

I can also say that I know Gavin Williamson well, having served in Parliament with him for five years and having been Chief Whip in that time. This is a difficult time for Gavin Williamson, his wife and his children, and I hope the media will give them the time and space they need to come to terms with what has happened. On the further steps my noble friend suggested, as I say, the Cabinet Secretary has judged it not necessary to refer the matter to the police, and the Cabinet Secretary will of course read the comments of my noble friend.

[Lord Reid of Cardowan (Lab)]

My Lords, how is this matter to be definitively resolved? The Government say the former Defence Secretary is guilty as charged. He is the third Defence Secretary to retire under a cloud, and he completely denies that he is guilty as charged. This is not just a question of the National Security Council; the Secretary of State for Defence is in receipt and a custodian of the most sensitive and secretive areas of British foreign policy and defence, even outside the National Security Council, so it has to be resolved one way or another. I do not know whether there is any guilt attached to the former Defence Secretary, but it is in the interests of this country to clarify this by a deeper investigation. If that means a criminal investigation, so be it.

[Lord Young of Cookham]

The noble Lord uses phrases such as “guilty as charged”. The Secretary of State for Defence was dismissed because he was in breach of the Ministerial Code, which says:

“Ministers only remain in office for so long as they retain the confidence of the Prime Minister. She is the ultimate judge of the standards of behaviour expected of a Minister and the appropriate consequences of a breach of those standards”.


That is why the Secretary of State for Defence lost his job.

[Lord Marlesford]

My Lords, does my noble friend agree that a serious side-effect of such incidents is the constant, increasing rotation of Ministers at every level, which militates strongly against effective government?

[Lord Young of Cookham]

That raises a broader issue, but I hope that my noble friend is not suggesting that Ministers who have broken the code should remain in office simply to avoid the rotation to which he referred. If confidence has been lost, the Minister should go.

[Lord West of Spithead (Lab)]

My Lords, 34 years ago today, I dropped some classified papers when I was rescuing a dog from a river. I was court-martialled for that and punished for it. There is a danger of double standards here, where there is no clarity as to exactly what the offence is. Are senior people in Cabinet being treated differently from all those below them in their organisations?

[Lord Young of Cookham]

Any Minister who accepts office knows that he or she goes when the Prime Minister so decides—I speak as someone who has left the Government four times. I am glad that the noble Lord has recovered from the incident and that his career appears to have been unimpeded.

Elections: Online Interference

Lord Young of Cookham Excerpts

Wednesday 1st May 2019 Lords Chamber

[Baroness O’Neill of Bengarve]

To ask Her Majesty’s Government what measures they intend to take to prevent or mitigate online interference with any future elections or referenda.

[Lord Young of Cookham (Con)]

My Lords, the Government are committed to ensuring the security and integrity of our democratic processes and defending them from all forms of interference. To date, we have not seen evidence of successful interference in UK democratic processes. UK voting mechanisms do not lend themselves to direct electronic manipulation as voting and the counting of ballots are highly manual processes conducted under the watchful eye of observers.

[Baroness O’Neill of Bengarve (CB)]

My Lords, I wish I could share the noble Lord’s optimism. The ways that exist for interfering in elections are not confined to direct interference at the polls. We are talking about interference in campaigning, and there is ample evidence of that. There is no evidence of how successful interference has been in particular cases; the nature of the problem means that such evidence cannot exist. This is an urgent matter. I believe that the country would be ill served by further democratic processes, whether elections or referenda, where people could not tell whether they had been fairly conducted.

[Lord Young of Cookham]

I say to the noble Baroness, Lady O’Neill, that we take these issues seriously. We are now actively considering the recent report and recommendations of the Electoral Commission, the recent report of the Information Commissioner on digital campaigning and the role of Cambridge Analytica, and the recent report of DCMS on fake news. The Secretary of State will give evidence to the Select Committee next week. We hope shortly to have the Intelligence and Security Committee’s report on Russian interference in the referendum and the 2017 election. We will then take steps to ensure that we have a robust framework for our election process, which is resistant to corruption and enhances public confidence in our democratic institutions.

[Baroness Hayter of Kentish Town (Lab)]

Perhaps the Minister would like to congratulate the Observer and Carole Cadwalladr on her Scoop of the Year award from the London Press Club for exposing the Cambridge Analytica scandal. It is worth seeing her TED talk on this, if noble Lords have not. It was investigative journalism, not our regulator, that identified these problems. Given that we are likely to have the European elections soon and that, because of their international implications, there is even more temptation for interference from outside, will the Minister agree to meet people in this House with particular expertise in campaigning and digital matters to look at the evidence he referred to and see whether we can get some assurance on this issue?

[Lord Young of Cookham]

I am grateful to the noble Baroness. I recently attended one such all-party meeting to discuss these issues and I have no hesitation in accepting her suggestion that there should be another. I have said before from this Dispatch Box that we have an analogue legislative framework seeking to operate in a digital age. We are determined to update that framework to make it fit for purpose and I welcome the suggestion of all-party talks.

[Lord Garel-Jones (Con)]

Can my noble friend advise the House on whether there has been any progress on the consultation aimed at extending to online electoral propaganda the same imprint that now applies to printed materials?

[Lord Young of Cookham]

My noble friend will know that last July we consulted on extending the requirement for an imprint, which already exists for printed material, to digital campaigning material. The Government have now concluded their considerations and an announcement will be made very soon.

[Lord Foulkes of Cumnock (Lab Co-op)]

We should acknowledge that the Minister is taking this matter very seriously, as we heard from his Answer. That is very encouraging. As well as the various bodies that he referred to, could he ensure that the Electoral Commission and the appropriate departments of government meet and discuss the arrangements for elections and referenda with the Venice Commission of the Council of Europe, which has revised its guidelines for both referenda and elections?

[Lord Young of Cookham]

I am grateful to the noble Lord for that suggestion. As he will know, the Electoral Commission is independent of government, but I see no reason why it should not respond positively to the suggestion he made.

[Lord Wallace of Saltaire (LD)]

My Lords, the Electoral Commission is independent of government but depends on government for its resources. Given the extent to which confidence in our electoral system and campaigning has been hit by various allegations, stories and uncertainties over where financial contributions have come from, is the Minister confident that the Electoral Commission has the resources to restore the necessary confidence in our electoral campaigns and elections at present?

--- Later in debate ---

[Lord Young of Cookham]

For once, most uncharacteristically, the noble Lord is incorrect. The Electoral Commission is not dependent on the Government for its resources; it is dependent on the Speaker’s Committee on the Electoral Commission in another place. I am grateful for his gracious nod in response. The budget is set by the Speaker’s Committee, but I can say that in the last year for which we have figures the Electoral Commission underspent by £1.1 million.

[Lord Hayward (Con)]

My Lords, does my noble friend agree that any form of interference in elections is important and should be dealt with? Therefore, I encourage the Government to adopt Labour Party policy on voter ID and require people to produce some form of ID at all elections, as the Labour Party does when selecting candidates.

[Lord Young of Cookham]

Of course, I have no idea how the Labour Party selects its candidates—

[Lord Foulkes of Cumnock]

Neither have we.

[Lord Young of Cookham]

However, I say to my noble friend that voter ID is part of our policy to restore confidence in the integrity of the democratic process. He will know that last year we had pilots for the local elections and the Electoral Commission’s evaluations showed that they were a success. The overwhelming majority of people cast their vote without a problem. Tomorrow there will be another round of voter ID pilots in local government. We have consulted a wide range of civil society groups to ensure that voter ID will work for everyone.

[Lord Cormack (Con)]

If voter ID is so important, why do the Government take such an obdurate line on identity cards?

[Lord Young of Cookham]

I can do no better than to refer my noble friend to the very capable Answer given from this Dispatch Box only yesterday by my noble friend Lady Williams.

Making Tax Digital for VAT (Economic Affairs Committee Report)

Lord Young of Cookham Excerpts

Monday 29th April 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I thank my noble friend Lord Forsyth for introducing this debate, and for agreeing to reschedule it from its previous slot, which would have been at a less civilised hour. I also thank the Economic Affairs Committee, for its two detailed reports, and all noble Lords who have taken part in this exceptionally well-informed debate.

I have read both the reports and the Government’s response with particular interest, as a former Financial Secretary to the Treasury with responsibility for HMRC 25 years ago—some 15 years after the noble Lord, Lord Lawson, who was referred to in our debate. Although we have debated these two reports together, they are very different. The one on powers is wide ranging, hard hitting and contains some radical proposals—particularly those which we have just heard from the noble and learned Lord, Lord Judge. The one on making tax digital is more narrowly focused, more consensual and concerned with the pace of travel—as mentioned by my noble friend, Lord Tugendhat—rather than its direction. The current Financial Secretary carefully considered both documents and gave a detailed written response. Although he did not agree with all the recommendations, he was happy to accept the majority of them, in whole or in part. We are still reflecting on the report.

I take very seriously the comments made by my right honourable friend, and the comments made by my noble friends Lady Noakes and Lord Forsyth, the noble Lord, Lord Kerr, and others, about his reluctance—his refusal—to give evidence before the committee. My understanding is that the sub-committee’s inquiry was focused on the Finance Bill, which is properly the preserve of the other place, and as such, no Treasury Minister has given evidence to the sub-committee in the nearly 20 years of its existence. However, I take on board the comments and undertake to convey them to my right honourable friend, to see whether, were a further invitation to be extended to him by the committee, he might reflect again on his decision not to appear.

Before addressing the issues raised in the debate, I join others, particularly the noble Lord, Lord Davies, in paying tribute to my colleague and noble friend Lord Bates, who earlier this month stood down from his position as a DfID Minister and Treasury spokesman. No one regrets his resignation more than I do, as part of his ministerial burden falls on my shoulders. He was an exceptional, dedicated and popular Minister, covering government business on a wide range of topics, from overseas aid to the Trade Bill, from financial services onshoring to the performance of our economy —to name but a few. For each, he brought intellectual clarity and a strong defence of the Government’s record, but also a listening ear. We all wish him well as he walks from Belfast to Brussels raising funds for a cause he is passionate about.

I apologise—58 years too late—for running into the noble Lord, Lord Kerr, on my bicycle in Oxford. Had I known that in 2019 he would make a trenchant attack on a government policy I was obliged to defend, I would have navigated with much more diligence. I thought I was in enough trouble when he sat down—but then the noble and learned Lord, Lord Judge, got up.

I turn to the question of HMRC’s powers, which dominated our debate. I am conscious that I will not answer all the questions raised but I will write to rectify that omission. The British people expect HMRC to take decisive action to tackle tax avoidance and evasion, and Parliament has voted to grant the department a variety of powers which allow it to carry out this essential function. It is of course also essential that there are safeguards in place for taxpayers, but the purpose of the powers is to allow HMRC to collect the tax that we need to fund vital public services, a point made by the noble and learned Lord, Lord Judge.

I note what the report says in paragraph 58 about scrutiny of the loan charge but, as someone who has taken a Finance Bill through the other place and sat in Committee on the Finance Bill in opposition, it is my experience that Members in the other place are extremely wary about giving HMRC new powers over their constituents. This legislation was taken through the parliamentary process, with scrutiny in the House of Commons, following a public consultation on the policy and on the draft legislation. As my noble friend knows, we have also set out in a report published last month the rationale for, and impact of, the charge on disguised remuneration loans.

[Lord Forsyth of Drumlean]

On the subject of the scrutiny in Committee on the Finance Bill in the other place, I think I am right in saying that there was a speech from a Minister, a speech from the Opposition and two other speeches. None of the issues about retrospection et cetera was raised. I think there has also been an Early Day Motion signed by many Members and several debates, including one in Westminster Hall, none of which has altered the Government’s response in any way.

[Lord Young of Cookham]

I am sure that if my noble friend and I had been on the Finance Bill at the time, we might have raised some of the issues that he has now raised. I make the point again that the legislation went through all its stages in the other place after its publication in draft.

I was grateful for what my noble friend Lord Tugendhat said about HMRC in some generous words, which I know will be well received by the hard-working public servants in that department. I believe all Governments, and both Houses, are committed to striking the right balance between helping the compliant majority to fulfil their obligations, and providing appropriate support to customers who need extra assistance to get things right, while taking robust action against those who seek to avoid paying their fair share of taxes. For this reason, the Government welcomed the committee’s detailed contribution to this important debate.

I say to my noble friend and to others who have taken part in this debate that my comments will reflect the Government’s response to the reports, including the updated response which we published in March. I will share with the Chancellor and other Ministers in the Treasury the tone of the debate and the deep concern expressed by Members on all sides about some of the actions that have been taken. Again, without any commitment, I will see whether within the confines, which I hope the House understands, there is any flexibility available to reflect the anxieties that so many Lords referred to.

Several noble Lords spoke more specifically about the charge on disguised remuneration loans. My noble friend Lady Noakes made this the focal point of her speech. As acknowledged by the report:

“Disguised remuneration schemes are an example of unacceptable tax avoidance that HMRC is right to pursue. All individuals using these schemes must accept some degree of culpability for placing an unfair burden on other taxpayers”.


It is the Government’s view, supported by a unanimous Supreme Court ruling, that these schemes are not and have never been effective, and that tax was always due. It is unfair to the vast majority of ordinary taxpayers who pay all their taxes to let anyone benefit from contrived tax avoidance of this sort. I am sorry to disappoint the noble Lord, Lord Kerr—

[Baroness Kramer]

The Minister is doing his best and because he referred to the Supreme Court, he will be aware that that ruling focused on the culpability of employers. There was no expectation in any of those Supreme Court discussions that action would be taken against the ordinary user. That has been a source of a great deal of the fury around this issue.

[Lord Young of Cookham]

With respect to the noble Baroness, the unanimous decision of the Supreme Court was that the tax was due and is payable by the employee and not the employer. I will come on to the employer in a moment. I was about to disappoint the noble Lord, Lord Kerr, on one of the questions he put to me. But if it was always the case that the tax was due, as I have just said, the loan charge is not retrospective, as he implied. I am not sure that he meant to imply this, but it does not have to be paid in the current tax year. It becomes liable, but I hope that people will engage with HMRC and agree terms that may cover a longer period.

[Lord Forsyth of Drumlean]

I apologise for interrupting my noble friend again, but there are two points here. The court proceeding he referred to was the Rangers case, which said that liability was with the employer. The point that my noble friend Lord Kerr was making was that this is treated as an emolument in one year, which means that the incidence of tax is higher because goes over the top rate. That is the point.

[Lord Young of Cookham]

My understanding is that the tax now due accrued over a period of time, and was payable in the year in which it was accrued. That has been consolidated and crystallised into the loan charge. If I am wrong, I will write to my noble friend.

The Government are committed to tackling the promotion of tax avoidance and that is why HMRC has been investigating more than 100 promoters and others involved in marketing tax avoidance, including many who sold disguised remuneration arrangements. HMRC recently won a legal case, mentioned by the noble Baroness, Lady Kramer, over a contractor loan avoidance scheme promoter, Hyrax Resourcing Ltd. This will help collect over £40 million in unpaid taxes.

The charge on disguised remuneration loans has been criticised by those who say that it ought to be the employer who has to pay the tax that is outstanding. I agree, so let me be clear that HMRC will seek to collect the loan charge from employers in the first instance, and will pursue individuals for the tax due only where it cannot reasonably do so from the employer; for example, if the employer is no longer in existence or is offshore. In those cases, HMRC seeks to collect the tax liability from the individual who benefited from the tax avoidance.

[Baroness Kramer]

Since most of the employers in these cases were local government, they would pay any bill that HMRC thought was appropriate. Central government departments would also pay. Collecting from HMRC itself ought to be quite simple, and there are various public bodies, such as the BBC. Is the Minister now giving a reassurance to all those who have received a loan charge demand but were working for those public entities that they, at least, will not be pursued, because their employer will be paying?

[Lord Young of Cookham]

The safest thing I can do is repeat what I just said: HMRC will seek to collect the loan charge from employers in the first instance, and will pursue individuals for the tax due only where it cannot reasonably do so from the employer; for example, if the employer is no longer in existence or is offshore. The BBC is still there and is not offshore, as are the other employers mentioned by the noble Baroness, so HMRC will indeed seek reimbursement from them first, before it seeks to collect the liability from the individual. By the end of 2018, about 85% of the yield in advance of the charge was from settlements with employers. Since the 2016 Budget announcement, around 6,000 have agreed settlement, raising £1 billion for the Exchequer. These numbers will continue to increase as more settlements are agreed.

The Government recognise the impact of this legislation on the individuals affected and the importance of them receiving appropriate support. Some individuals are facing large tax bills, often as a result of using these schemes over a number of years or receiving large sums through the schemes. That is why the best thing for anyone concerned about paying what they owe is to get in touch with HMRC, which is expanding its specialist service for customers with additional needs to help them meet their obligations. HMRC has a good track record of supporting customers to pay their tax debts and has made it clear that it will not force anyone to sell their main home to pay their disguised remuneration debts. It does not want to make anyone bankrupt; insolvency is considered only as a last resort and few cases ever reach that stage. HMRC is determined to work with individuals to reach manageable, sustainable payment plans wherever possible.

My noble friend Lord Forsyth spoke about suicides and my noble friend Lady Noakes about the Samaritans. HMRC has been informed that a customer who had used DR schemes has taken their own life. Out of respect, and given HMRC’s duty of taxpayer confidentiality, the Government are not in position to comment further, but we continue to improve support to vulnerable customers and will extend HMRC’s valued needs enhanced support service to customers undergoing compliance checks. HMRC works alongside the voluntary and community sector to improve its support and to ensure that vulnerable customers receive adequate support beyond getting their tax affairs right.

[Baroness Kramer]

I do not want to keep stressing the issue of suicides, but in the one case that I am personally aware of is the Minister aware that HMRC is now pursuing the heirs for the loan charge?

[Lord Young of Cookham]

I was not aware. Of course, I understand the sensitivities of the issue and will raise the matter with HMRC.

HMRC has introduced simplified payment arrangements for those who approached it to settle by 5 April this year so that individuals will not have to pay the loan charge. Regardless of whether the individual decided to settle their taxes or whether the loan charge applies, for those who need more time to pay there is no maximum period for payment.

Resources for HMRC were raised during the debate. The Government have always provided HMRC with the resources that it needs. At the 2015 spending review, they invested £1.3 billion to transform HMRC to make it quicker and easier to deal with. In addition, since 2010, the Government have invested £2 billion in HMRC to tackle avoidance and evasion.

My noble friend Lord Forsyth raised the right of appeal on accelerated payment notices and follower notices. As my noble friend knows, the rules do not affect a taxpayer’s right to appeal against an HMRC decision or assessment concerning their tax liability. If the taxpayer successfully appeals the actual liability, the follower notice penalties will no longer be due. Again, Parliament granted HMRC these powers to discourage tax avoidance.

My noble friend also asked about retrospection. I think that I have dealt with that, if not wholly to his satisfaction. It is a new charge on DR loan balances outstanding on 5 April. It does not change the tax position of any previous year or the outcome of any open compliance checks.

My noble friend asked what the position was on the powers review. We agree that HMRC has to balance tax collection with important taxpayer safeguards. The powers review was a major project coming alongside the merger of HMRC and Customs and Excise. There has not been a similar fundamental change to justify another such review, but I say in response to my noble friend that we keep the tax system under review and will consider options for reviewing and updating the tax administration framework to ensure that it is effective in modern tax administration.

A number of noble Lords spoke about low-paid employees and social workers being affected by the loan charge. HMRC’s analysis shows that around 3% of those individuals who used a disguised remuneration loan scheme worked in medical services and teaching.

My noble friend Lord Tugendhat raised the issue of naming. Again, Parliament has legislated to allow taxpayers to be named in limited circumstances. These are prescribed explicitly in legislation. HMRC places importance on taxpayer confidentiality, and no one can be named simply for disagreeing with it. I hope that HMRC never engages in what my noble friend called “innuendo”.

In view of the number of interventions, I may claim a bit of injury time on the question about HMRC inaction on loan charges. The Government’s view, as I think I have already said, is that these schemes never worked. Compliance activity has been taken ever since the schemes were first used, including the use of thousands of inquiries into scheme users, successful litigation and agreement of settlements. The loan charge was introduced to draw a line under all outstanding DR loans, but HMRC has always warned against the use of DR schemes, with the first spotlight being published in 2009. Many scheme users did not disclose details of their scheme use, or disclosed partial information which did not enable compliance—this is in response to an issue raised by the noble and learned Lord, Lord Judge. Where DOTAS numbers were provided, HMRC routinely opened inquiries, and it will look carefully at cases where individuals provided evidence that they fully and properly disclosed their use of a DOTAS at the time and where HMRC closed an inquiry with that evidence. However, it does not believe that there are many cases where that has happened.

I am conscious that I have not said anything about Making Tax Digital, so I will say a few final words about that report. We want every individual and business to develop the skills and confidence to seize the opportunities of digital technology. In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system keeps pace. Making Tax Digital gives UK businesses more control over their finances and allows them to manage their tax more easily so that they can focus on what they do best—innovating, expanding and creating jobs. The Enterprise Research Centre found in 2018 that web-based accounting software delivered productivity increases for micro-businesses of 11.8%. One should set that against the costs mentioned by my noble friend Lord Forsyth and the noble Baroness, Lady Burt.

I was asked what the position was on small businesses unable to go digital because of the absence of broadband. Businesses that are unable to go digital will not be forced so to do. If it is not reasonably practical for a business to join MTD for reasons of age, disability or remoteness of location—which can affect broadband connection—it may qualify for an exemption.

I am deeply conscious that I have not done justice to the many serious questions that have been raised, and I am already over my time. In conclusion, I thank noble Lords for their contributions to this stimulating debate—

[Lord Kerr of Kinlochard]

I am quite sure that the House will be very willing to extend considerable injury time to the Minister if he would be prepared to tell us not just what the boilerplate says but what he actually thinks.

--- Later in debate ---

[Lord Young of Cookham]

At the risk of getting myself into further trouble, I said fairly early on in my remarks that I took very seriously the tone of the debate and the criticism of the implementation of the loan charge scheme. I said that within the constraints—I hope noble Lords understand that there is now legislation in place—I would see whether there is any flexibility which might address the very real concerns raised by noble Lords. That goes way beyond my negotiating position; it is without commitment to what anyone in the Treasury may do. I take this debate seriously; the points that have been made and the cases that have been raised were moving. The report has made some very strong points, and I propose to raise with the Chancellor and ministerial colleagues the nature and tone of this debate, and see—within the constraints that I am sure all noble Lords understand—whether we can go some way to meeting the issues that have been raised. I hope I have reassured your Lordships that we will continue to give careful consideration to these very important matters.

European Parliament Elections

Lord Young of Cookham Excerpts

Wednesday 24th April 2019 Lords Chamber

[Lord Robathan]

To ask Her Majesty’s Government whether the United Kingdom will participate in the European parliamentary elections next month; and what preparations are being made.

[Lord Young of Cookham (Con)]

My Lords, it remains the Government’s intention to leave the EU with a deal before 23 May so that we do not need to participate in European parliamentary elections. However, we have taken the necessary steps required by law should we have to participate, and we have provided the necessary legislation for returning officers to hold potential European parliamentary elections on 23 May.

[Lord Robathan (Con)]

I hope that my noble friend’s optimism is not misplaced. I think that referendums are, frankly, a very bad idea in a parliamentary representative democracy, and I suspect that many Peers would agree. However, three years ago we had one. Whatever position people took in the referendum and have taken since, surely the people of this country will at the very least be astonished if we fight these elections. Our friends in Europe and elsewhere are already pretty bemused. Should it come to pass that we fight these elections, the trust in Parliament and politicians that is already pretty shaky will be further harmed, so will my noble friend consider what action the Government can take to bolster that trust before it completely disappears?

--- Later in debate ---

[Lord Young of Cookham]

I hear my noble friend’s concern about the breach of public trust that would occur were that eventuality to take place. I was in my place on 27 March when he spoke on this very subject. He said:

“I have no idea what will happen and I shall not predict. It is very unwise if one does”.—[Official Report, 27/3/19; col. 1854.]


I think that he was right. However, on a more constructive note to my noble friend, I am as anxious as he is to avoid holding the European elections. With that objective in mind, I believe that he might have more leverage with the European Research Group than I have. Perhaps he could persuade those who have so far declined to do so to back the deal so that we have a better chance to call off the election.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I wonder whether the Minister can help me. If these elections take place, will the Conservative Party be supporting Conservative Party candidates? Various enunciations made by his colleagues in the other place seem to suggest that they will not actually be supporting the Conservative Party. Can he help us here?

[Lord Young of Cookham]

Well, I shall certainly be supporting Conservative candidates in the European elections. I am sure that the noble Lord, led by the Opposition Chief Whip, will be heading a task force to the south-west to support the noble Lord, Lord Adonis, even if the price of success means that we no longer have his contributions to our debates on statutory instruments.

[Baroness Ludford (LD)]

My Lords, does the Minister agree that it would be deplorable if all the effort and money being put in by the Electoral Commission and local electoral returning officers were wasted due to Tory infighting and fear of the European elections? It is rather rich that Brexiters do not like the democracy that the European elections incorporate, having always claimed that the EU is undemocratic.

[Lord Young of Cookham]

The noble Baroness will be as familiar as I am with the reasons why we might have to go ahead with these elections. After the decision on 29 March not to vote for the withdrawal agreement, it became inevitable that there would be a risk of holding these elections. The Prime Minister has done all that she possibly could to avoid this scenario, and I commend her patience and determination. There is still time to avoid those elections if enough people in another place change their minds and decide to back the deal.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, it is quite clear that we will be fighting these elections, because the Government have not managed to get a deal to which the Commons agrees. In that case, will the Cabinet Office agree to do two things? First, will it alert EU citizens living in this country that they will be able to vote on that day if they are registered by 8 May? Will the Government, for example, remind those on the settled status list of that? Secondly, will the Government ensure that the other 27 Governments alert British citizens resident in their countries that they will be able to vote in those countries on their election dates?

--- Later in debate ---

[Lord Young of Cookham]

I agree entirely with the noble Baroness. It is important that EU citizens in this country and UK citizens in European countries are fully enfranchised and can take part in the European elections—if they take place. I would like to pursue with the Electoral Commission some of her ideas about raising the profile of these elections, because in some European countries people may have assumed that they will not take place. I will certainly see whether further action can be taken to raise the profile of these elections. Information is of course available on the European Parliament website for those who want further details on how to vote.

[The Lord Bishop of Leeds]

My Lords, whether the election goes ahead or not, is it not clear that the Government need to have some vision that goes beyond the EU for the future of Europe, of which the UK remains a part in a post-Brexit world? If so, is this vision being developed so that it can be articulated?

[Lord Young of Cookham]

I agree entirely. To some extent, that goes beyond the withdrawal agreement to the political agreement which is set out. I very much hope that we will continue to have a good and close relationship with our neighbours in Europe, and that any deal minimises turbulence for the economy and for employment. I agree that, once we have overcome the hurdle of the withdrawal agreement, we should raise our sights and work towards a harmonious future with our European friends and neighbours.

Economy: Productivity Measurement

Lord Young of Cookham Excerpts

Thursday 28th March 2019 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government what steps they are taking to modernise the way productivity is measured in the economy.

[Lord Young of Cookham (Con)]

My Lords, the independent Office for National Statistics measures productivity and has increased the volume and timeliness of productivity data, which can now be accessed by region, with detailed breakdowns of region by industry. We are the only country in the world to produce quarterly, rather than annual, multifactor productivity reports, which take account of capital. We now also have the UK’s first official estimates of aggregate infrastructure and intangible assets, such as research and development.

[Lord Haskel (Lab)]

I thank the Minister for that reply. However, it is not the quantum of data that we need but up-to-date data. The Government’s industrial strategy—if noble Lords remember that—is directed towards raising our productivity by developing the so-called intangible economy and the digital economy. Yet the way we measure productivity is still biased towards traditional industry. It is the same with GDP. As they say, what gets measured gets done. Will the Government show some urgency and speed up, encourage, publicise and conclude the work of modernising these measurements so that we may get a better understanding of exactly what is going on in our economy today?

[Lord Young of Cookham]

The noble Lord has a long-standing interest in productivity data, perhaps inspired by the book Capitalism Without Capital by Professor Jonathan Haskel, with whom he has a relationship that is statistically significant. The noble Lord is quite right that intangible assets such as software, research and development and intellectual capital are now just as important as tangible assets. In fact, the annual investment in each is about the same. The ONS regularly engages with leading academics and government departments to ensure that its work meets their needs; there is an annual productivity user forum. Over the next two years, the ONS is investing in improving information, particularly on public service productivity, and I will ensure that it takes the noble Lord’s injunctions on board tomorrow morning.

[Lord Cormack (Con)]

My Lords, would it be a good idea if the good Professor Haskel turned his attention to productivity in your Lordships’ House, and compared it with productivity in what is fast becoming the House of Chaos at the other end of the Corridor?

[Lord Young of Cookham]

It is certainly the case that cost per Member is much lower in your Lordships’ House than in another place, although of course there are reasons for this. So far as productivity in your Lordships’ House is concerned, one possible measure would be the number of questions we get through in 30 minutes adjusted for quality.

[Lord Fox (LD)]

My Lords, without bringing the analysis down, it is a fraction; it comes down to that in the end. The denominator is something that the Government like to talk about a lot. Employment levels are high and that is a good thing. However, the numerator is GDP. Last year, we saw GDP grow at only 1.4%—the worst performance since 2009—and the ONS predicts that the figure this year will be 1.2%. Clearly, the chaos we are seeing is driving down GDP growth. How can we ever have the productivity levels that the Government aspire to when the chaos around us prevents investment and confidence in business?

[Lord Young of Cookham]

The noble Lord goes back to an issue raised by the noble Lord, Lord Haskel, which is the industrial strategy. Its main thrusts were driving up productivity, backing businesses with high-quality and well-paid jobs, and investing in skills, growth industries and infrastructure. Investment in infrastructure is up 3%. Private sector investment totalled over £358 billion in 2018, combined with public sector investment. We also have long-term partnerships in 10 key sectors, so we are making progress. One reason that productivity has not been as good as it might have been is that, after the downturn, industry tended to keep people on, but at the same time, investment fell. Of course, that had an impact on productivity.

[Lord Stevenson of Balmacara (Lab)]

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

[Lord Young of Cookham]

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

[Lord Tyrie (Non-Afl)]

My Lords, I declare a statistically very significant interest as chairman of the Competition and Markets Authority. If productivity and competition levels in the British economy are in decline—and there is a good deal of evidence to support that—it probably follows that competition policy is not robust enough at the moment and needs a shot in the arm, so does the Minister support the proposals designed to achieve that which I sent to Ministers last month?

[Lord Young of Cookham]

The noble Lord, whom I have known for 35 years, brings to your Lordships’ House his ability to propose and then drive through major economic reform. The proposals he refers to are indeed detailed, trenchant and robust, and they will inform the competition policy that the Government are working on. Not only can it benefit consumers by promoting better-quality goods and services at lower prices but it can help the economy by promoting innovation and productivity. The Government welcome his report and will be consulting on the competition review shortly, including his proposals.

Honours System

Lord Young of Cookham Excerpts

Tuesday 26th March 2019 Lords Chamber

[Baroness Berridge]

To ask Her Majesty’s Government what plans they have, if any, to review the honours system.

[Lord Young of Cookham (Con)]

My Lords, the honours system is independent of the Government. In recent years, significant progress has been made to ensure that the system is more open and representative, but there is always more that can be done. A number of changes have been made over the past year to review the operation of the system. That work is continuing.

[Baroness Berridge (Con)]

I thank my noble friend the Minister for his Answer, but in 1917 the introduction of a system to recognise service to your country that included the word “Empire” was appropriate—it is not so today. For this reason, many people, often from within the black and minority ethnic community, refuse to accept—or even to apply on behalf of others for—an honour. Can my noble friend the Minister please outline whether consideration could be given to the introduction of an additional honour to the existing system that does not include the word “Empire”, so that all parties can be satisfied that those who have a conscientious objection for good reason can accept an honour that might be the Order of British Excellence—keeping the same letters—but so that the existing system could be respected as well?

[Lord Young of Cookham]

I agree with my noble friend that we should do more to ensure that those from ethnic minority communities who have made a significant contribution to society should see their achievements get public recognition, and we should remove any obstacles in that path. In 2016, 6% of the New Year Honours went to those from black and ethnic minority communities. In the New Year Honours this year it was 12%, and we are averaging around 10%, but none the less more can be done. There are relatively few refusals of honours; the latest figure I have seen is around 2%. The reasons for refusal are not given, but I understand that it is very rare for a refusal to be on the grounds that my noble friend suggested. On her final point, that would require a new order of chivalry. The structure of the honours system is a matter for the monarch; this is well above my pay grade and, indeed, my rank.

[Lord Wallace of Saltaire (LD)]

My Lords, given that there are good grounds for renaming the Order of the British Empire now that we no longer have a British Empire, does the Minister accept that the range of acceptable titles is presumably rather large, since two of our most distinguished orders of chivalry are named after the garter and the bath?

[Lord Young of Cookham]

I understand that the order cannot be renamed. The statute makes it quite clear that it must be known by that name and no other, so we would have to close it and start another. In response to the general issue that has been raised, it is noteworthy that 10 Commonwealth countries, many of them in the Caribbean, continue to nominate people for Orders of the British Empire and other ranks, so I am not sure that the reservations expressed by my noble friend are necessarily widely shared.

[Lord Dubs (Lab)]

My Lords, while accepting the point about not using the term “Empire”, I put a further comment to the Minister. Does he accept that one of the criticisms is that there is a hierarchy of honours and that the top honours go to senior people in this country who get them because of their jobs, whereas at the bottom of the scale are the most worthy people who do voluntary work for fellow members of their community? Is it not those people, who work for nothing for their community, who ought to be given pride of place in our honours system?

[Lord Young of Cookham]

I agree: no one should get an honour simply for carrying out the job they are paid to do. As I said right at the beginning, the operation of the honours system is independent of government; there is a Main Honours Committee and nine or 10 sub-committees below it, with civil servants and Members of your Lordships’ House on them. I am sure they will take on board the comments made by the noble Lord that there should be a fairer distribution of the ranks of Orders of the British Empire between those who at the moment are the main beneficiaries and others who perhaps get some of the lower orders.

[Viscount Waverley (CB)]

My Lords, does the Minister accept that our now Commonwealth allies are part of our proud heritage and shared great hardship on our behalf? Decisions of this sort should not be taken in isolation as, more than ever, we need to stand shoulder to shoulder.

[Lord Young of Cookham]

I agree with the noble Viscount. As I said a few moments ago, the order remains in use in other countries: Antigua, the Bahamas, Belize, Grenada and many other countries continue to nominate. Any change would have implications for those Commonwealth countries.

[Lord Lexden (Con)]

Why are so many places left unfilled in the Order of the Companions of Honour, which is particularly well suited to recognising conspicuous service in the worlds of arts and culture?

[Lord Young of Cookham]

As a beneficiary of the Order of the Companions of Honour myself, I understand the reservations. If my noble friend looks at the some 60 recipients of the Companionship of Honour, he will find that there is a fairly broad representation. We had a photograph taken a year ago to commemorate the 100th anniversary of the installation of the Companions of Honour. I found myself standing next to one of the smallest actresses I have ever come across, and it looks very odd in the picture.

[The Lord Bishop of Salisbury]

My Lords, I am not sure that the Minister’s Answer to the original Question from the noble Baroness was entirely convincing. There is careful screening to check whether somebody might be willing to consider accepting an honour before an application is ever made. That is done by talking to their family, their friends and others involved with them. Therefore, the figure of 2% refusals is entirely unconvincing, and there needs to be a much more careful analysis of what is going on behind the Question in order to deal with the real issue, as is recognised by the questions asked by the House.

[Lord Young of Cookham]

I take seriously the point made by the right reverend Prelate. People do give reasons for turning down honours; those reasons are not made public. In the letter which my right honourable friend the Prime Minister wrote to my noble friend last year, when this issue was raised, she said that it was “rare” for an honour to be turned down for this reason. But we will try to dig further, in the light of the comments of the right reverend Prelate, and see to what extent this is a real disincentive.

[Lord Faulkner of Worcester (Lab)]

My Lords, the New Year Honours List of 1969 contained a life peerage for Sir Learie Constantine, who took his seat in this House 50 years ago today. On the House of Lords website, there is a very fetching photograph of the bust of Lord Constantine, with the Lord Speaker and the noble Baroness, Lady Benjamin. Lord Constantine’s bust, borrowed from the National Portrait Gallery, is in the Royal Gallery from today. Will the Minister encourage all Members of your Lordships’ House to attend the event on 1 May, when this iconic figure will be celebrated in a seminar and lecture in the Robing Room? There, Members can pay their own tribute to the first Afro-Caribbean Member of your Lordships’ House.

[Lord Young of Cookham]

I entirely endorse what the noble Lord has said. As he was speaking, I could see noble Lords writing in their diaries the date he referred to.

Devolved Administrations

Lord Young of Cookham Excerpts

Monday 25th March 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, the UK Government and devolved Administrations are working together to develop common frameworks in policy areas where powers returning from the EU intersect with devolved competence and where we need to continue working together following EU exit. We are also carrying out a joint review of intergovernmental relations with the devolved Administrations, considering both the principles and machinery that underpin relations and how they can facilitate the best relationships possible for the future.

[Lord Bruce of Bennachie (LD)]

I hope that that will have a positive outcome, but will the Minister take note of a publication today by the Institute for Government entitled Ministers Reflect on Devolution? If so, he will note the frustration expressed by Ministers of all parties about the relationship between devolved and UK Ministers. Given that the UK is now in effect a quasi-federal state, is it not time for a more fundamental review of how the devolved Administrations can genuinely be part of UK decision-making, even considering a royal commission and the possible role of qualified majority voting?

[Lord Young of Cookham]

I understand the frustration to which the noble Lord refers: that was reflected in our debate earlier this year initiated by the noble Lord, Lord Lisvane. After that, I undertook to communicate with the Chancellor of the Duchy of Lancaster, who wrote back to try to allay those concerns, and a copy has been placed in the Library. The review to which I referred is a joint review and can make progress only if it is agreed by all four parties. The noble Lord suggested the heavy guns of a royal commission; I think some nimble light artillery might be better focused to address the issue.

[Lord Morris of Aberavon (Lab)]

My Lords, when did UK Ministers last meet Welsh Assembly Ministers, and when do the Government intend to reply to the severe criticism made by our Delegated Powers Committee last October of the Agriculture Bill now before Parliament, which sought to bypass the devolved legislatures—or are the Government blind to the fact that the devolved Administrations are now part of our constitution?

[Lord Young of Cookham]

A top priority for the Government is the constitutional integrity of the UK, and that is secured by a good working relationship between all four Governments. I accept that the intergovernmental architecture underpinning that relationship needs buttressing, and that is why we are undertaking the review that I mentioned. As for meetings, as the noble and learned Lord will know, there is a plenary JMC, a European one, a EU negotiations one and a ministerial forum. They are meeting regularly. The ministerial forum last met in February. The JMC on EU negotiations also met in February. Perhaps I could write to him on the specific issue that he raised about the DPRRC.

[Lord Wigley (PC)]

My Lords, does the Minister appreciate that in the context of the current European negotiations, there was considerable dismay in Cardiff—and, I think, in Edinburgh as well—when there were reports that Northern Ireland may be given a special seat at the table when discussions are going on? Will he assure us that all the devolved Governments will be treated on an even-handed basis in such matters?

[Lord Young of Cookham]

The Prime Minister has made it clear that she wants all the devolved Administrations to have an enhanced role in the next stage of the negotiations with the EU as we move forward, I hope, after exit. I know of no plans to give preferential treatment to one devolved Administration over another.

[Baroness McIntosh of Pickering (Con)]

My Lords, can my noble friend confirm that the devolved Administrations are consulted on both rolled-over and new trade agreements before they are initialled?

[Lord Young of Cookham]

I refer my noble friend to the answer I gave when she asked me about future trade agreements. The Prime Minister has promised an enhanced role. Official discussions are taking place to bring some definition to that, but I shall certainly take on board my noble friend’s request that they should be involved in trade negotiations, which of course include many of their vital interests—particularly, say, fisheries in Scotland.

[Baroness Bryan of Partick (Lab)]

My Lords, the Minister mentioned a case for intergovernmental negotiations, but does he see a case for inter-parliamentary negotiations so that parliaments and assemblies get a role, and to find a way of feeding the regions of England into this?

[Lord Young of Cookham]

The noble Baroness raises a good point. The review I referred to is about intergovernmental relationships, not inter-parliamentary ones. If the parliaments want to take action independently of government to build up closer relationships, I see no reason why they should not.

[Lord Trefgarne (Con)]

My Lords, will my noble friend and Her Majesty’s Government take particular care in drafting the necessary secondary legislation for the Brexit process, while having particular regard to the Welsh Assembly, which made some complaints on this?

[Lord Young of Cookham]

I recognise the particular role my noble friend has when it comes to statutory instruments, and I can give him that assurance.

[Lord Wallace of Saltaire (LD)]

My Lords, the Minister has already been asked about what has happened to the English regions. Now that we have a rather privileged relationship for the three national assemblies, is devolution to the English regions stuck? In Yorkshire we have made very detailed proposals for a One Yorkshire scheme. The Minister for the Northern Powerhouse suggested that we had to accept four city regions for Yorkshire or nothing, in spite of the fact that there is no city in one of those four proposed regions.

[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.

Interserve

Lord Young of Cookham Excerpts

Wednesday 20th March 2019 Lords Chamber

[Lord Wallace of Saltaire]

To ask Her Majesty’s Government what changes they are considering to the outsourcing of public services as a result of Interserve entering into administration.

[Lord Young of Cookham (Con)]

My Lords, nothing in Interserve’s refinancing will affect the delivery of public services. No staff have lost jobs and no pensions have been affected. The company has executed a contingency plan it had prudently developed in case the shareholders rejected the proposed refinancing deal. However, we have already announced changes to how we outsource; these are captured in the Outsourcing Playbook, which outlines a range of measures designed to ensure that outsourcing projects succeed.

[Lord Wallace of Saltaire (LD)]

I am glad the Government are investing in playbooks—I am not sure what sort of play is intended. It seems to be time for an overall review. Can the Minister confirm that of the 29 strategic suppliers the Government list for outsourcing, five have now run into severe financial difficulties, and that in several cases, as with Interserve, US hedge funds shorting the shares have contributed to that, putting British public services in peril? Can he confirm also that Interserve was a general supplier of probation services, the updating of sewers, waste management, bus station refurbishment, hospital cleaning and security, motorway repairs and the like, and that the record therefore—as with probation services, of which it was the largest supplier—suggests that its expertise is relatively limited?

[Lord Young of Cookham]

On the first point raised by the noble Lord, it is important to understand that what happened to Interserve was totally different from what happened to Carillion, for example. Carillion went bust. Pensioners took a hit. Creditors took a hit. People lost their jobs and there was discontinuity in services. None of that happened with Interserve. It was done with the approval of the pension trustees and the lenders, who wrote off the debt and put £100 million in. There was no discontinuity in services and nobody lost their job. That is important to understand.

The noble Lord asked whether we would have a general review. I announced that we have learned from past lessons; the document to which I just referred has 11 key policy areas in which we can come to better decisions and create a healthier outsourcing market.

The noble Lord is right that Interserve has a general portfolio—it protects the pandas in Edinburgh Zoo. The issue of probation services goes far wider than Interserve, as the noble Lord will know; the MoJ has announced a review of community rehabilitation services, with a view to improving outcomes and better integrating public sector, private sector and third sector providers.

[Lord Browne of Ladyton (Lab)]

My Lords, the annual revenues of Interserve were £2.9 billion, two-thirds of which it got from the public sector. The debt holders got this business for approximately £600 million, and will undoubtedly sell off its profitable parts for more than they were owed. However, the unsecured creditors have been left fighting over £600,000. Were the Government part of that deal? How much was owed to these creditors? Why do the Government think that that amount of money is safe? These people will lose lots of money and many of them are small or medium-sized businesses.

[Lord Young of Cookham]

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

[Lord Stevenson of Balmacara (Lab)]

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

[Lord Young of Cookham]

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

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

[Lord Fox (LD)]

My Lords, the Minister shows great calm, as usual, on these issues. In fact, this squabble was played out across the City pages for weeks. The players in that squabble were the banks, the bondholders and the hedge funds. The Government had no part in that. The fact that Interserve lives to continue is nothing to do with the Government, it is the fortune of what happened out there—it was luck.

The Minister talks about a playbook. How does that playbook affect retrospectively all the services that the companies currently carry out? It is all very well looking forward to future services, but it is services today that were let many years ago that are still threatened by this kind of problem.

[Lord Young of Cookham]

The Government keep all the contracts under review. We have developed arrangements with all the major contractors. We have continuity arrangements known as living wills should there be, by any chance, any corporate failure. As I announced, looking forward, there will be a number of policy changes to ensure that better decisions are taken in future. We believe it is important to have a robust outsourcing market. The fact that Interserve has survived means that we still have a larger number of suppliers in this market than would have been the case had it gone out of business.

[Lord Grade of Yarmouth (Con)]

Would my noble friend the Minister agree that perhaps there is a lesson in procurement here? Taking the lowest bid in a tender process is not necessarily the best long-term value for money.

[Lord Young of Cookham]

I entirely agree. The Government want to get the right mix of quality and effectiveness at the lowest possible price over the lifetime of the contract. There is certainly flexibility in our current rules to ensure that a higher-quality bid is successful even though it may cost more than other bids.