Tuesday 10 March 2009
[Mr. Greg Pope in the Chair]
GB Football Team (Olympics)
Motion made, and Question proposed, That the sitting be now adjourned.—(Steve McCabe.)
I welcome you to the Chair, Mr. Pope, for this short debate, which I hope you will find interesting. I want to take you back to 27 May 1972. It may not have been a special day for you, but it was important and significant to the young Master Wishart. It was the day of my Hampden baptism. I remember going along with my dad and some boyhood friends to watch Scotland play England in the old home internationals. That day filled my young boyhood senses. About 100,000 people were crammed into that tight space in Mount Florida, and the Hampden roar reverberated right around the south side of Glasgow. It was a fantastic day—a day that I would want for any of my countrymen and women. It was only slightly marred by the fact that Alan Ball came from absolutely nowhere and scored the only goal and winner for England, but that is what it is like to be a Scotland fan. One is on an incredible emotional rollercoaster, but I would not surrender my ticket for that rollercoaster for anything whatsoever.
I mention all that because the Scotland football team unites our community in a way that nothing else does. We are totally passionate about it. It is a great ambassador for our nation. When we started to re-emerge as a nation in the past 10 or 20 years, it was our international football team that, practically alone, gave us an international profile. What would international football be without the tartan army, those tartan-clad, Jimmy-wigged ambassadors and troubadours who invade foreign soil and turf with such good humour and good nature?
I mention all that because I feel privileged to stand here today to do and say something to try to defend and protect our national football team. That should be the job of all of us as legislators. If we were to take a decision, even inadvertently, that threatened the continuation of our national football team—even if there is only a one in 100 or even one in 1,000 chance—we should be dismissed out of hand. Our position should not be considered; we should be shredded, told to go away.
We should do absolutely nothing that would ever threaten our independent footballing status. We should never give a hint of a precedent that might be used against us in the future. We should give no reason or excuse to those who would question our independent footballing status, and no succour to those who would seek to end the very generous arrangements that we have in the United Kingdom. Our job is to protect our status, and that is what we should be doing.
The Government’s proposals for a Team GB put that all aside. They are establishing the precedent, and giving a reason and excuses to those who would question our separate arrangements. I appeal to them to stop and not do anymore.
First, the proposals are not Government proposals. Secondly, does the hon. Gentleman think that football should be an Olympic sport?
I shall come to that in the course of my speech. The short answer is that I have no problem at all with football being an Olympic sport, but it will not be one of the most glamorous parts of the Olympics. Call me old-fashioned, but I believe that the best way to settle international football is through the traditional method: the World cup. That is where we should be determining international football champions, but I have no issue at all with football being a feature of the Olympics.
I congratulate the hon. Gentleman on securing this debate and giving us an opportunity to discuss sport, football and politics all together. He makes a strong point about the identity of the home nations, but Olympic sports are international championships—that applies to every sport. I do not know of an athlete in Wales who would not be proud to run for Wales in the Commonwealth games, and to wear the UK vest and run for Great Britain and, hopefully, win gold.
I am grateful to the hon. Gentleman for that intervention. There is not much in it with which I disagree. Yes, have a Team GB for the Olympics, if that is what he wants, but the key issue is whether it is worth it to question the future standing of international football teams, because that is what could happen. I can imagine a future FIFA board saying, “For the 2012 Olympics, Scotland, Northern Ireland, Wales and England were able to set aside their national football sides. Why can they not therefore do it for the World cup and the European championship?” Is it worth it? I say to him, not at all.
I congratulate my hon. Friend on securing this debate. Following on from the last intervention, would he agree that the main problem is that we would have the one Olympic team? In an ideal situation, we would have separate Olympic teams, and this would not be an issue. It is the anachronism of a united Olympic team that is causing the knock-on effect.
My hon. Friend makes a powerful point and is absolutely right. There is an elegant solution: if the Government are determined to have football in the Olympics, why not have all the international home teams compete in the Olympics? I see nothing wrong with that. I shall come to that important point later in my contribution, but I am grateful to him for raising it.
If what has been suggested is not a Government proposal, it certainly is a Government-supported proposal. I am sure that the Minister will speak about that later.
It might indeed be a Government-supported proposal, but it certainly does not seem to be supported by Scottish Labour MPs, whose absence this morning is glaring.
I just noticed that, and am grateful to my hon. Friend for pointing it out. There do not seem to be any other Scottish Members here, which is staggering. I am sure that Hansard will want to ensure that that is noted. They show a lack of interest by not even bothering to get out of bed to come here and discuss the thing that we in Scotland are most passionate about: our international football team. I shall leave that aside, but, looking at the threadbare Labour Benches—again, I shall not bother to comment.
For the first time in 50 years, we are setting aside all our home nations to come together for a team GB. Is it worth it? We talk about participating in the Olympics. I have heard all the figures, and I agree that it would be a great opportunity for all those under-23 young men to have an Olympic experience, but it is not how we settle international football competitions.
Let us look at how the massive sporting events are arranged. Every four years, there is the Olympics, and every four years there is the World cup. There are always two years between them, because they are the two biggest sporting occasions in the world. If we are having football in the Olympics, and the World cup, why do we not have international athletics as a warm-up to the World cup? If we are to go down this road, should we consider that?
The best way to settle the football world championship is the old-fashioned, tried and tested method of the World cup. That is where it is done. We are threatening and questioning our independent status as a footballing nation for a non-event in the Olympics, contested by an under-23 side. It will not even be a best side; the top stars will not be there. It will be a meaningless competition, and I say to the Minister that it will not be worth while.
Perhaps I could suggest a more sinister reason why the proposals have emerged in the past couple of years. I do not think that they are as much about football as about a particular agenda that our Prime Minister has: his Britishness agenda. He has form on the issue. My hon. Friends will remember clearly that when he was asked what his favourite sporting moment was, to try to ingratiate himself with English football fans and promote his Britishness agenda, he said that it was the day that Gazza scored against Scotland in the 1996 European championship. That goal broke Scottish football supporters’ hearts, but it was our Prime Minister’s favourite sporting moment.
We should not sacrifice our independent football team to make our Prime Minister feel that little bit more British. I would prefer that he continue to stick his Union Jacks in his Kirkcaldy home rather than threaten and get involved with the national football team. That may be the real reason behind the proposals, but we will give him no succour.
Let us look at the two teams. What a formidable squad the “no to Team GB” line-up is. It is pitted against the “for Team GB” squad. The “no to Team GB” squad has a strong 4-3-3 formation, led by the Football Associations of Scotland, Wales and Northern Ireland. It has a formidable midfield, comprising the tartan army, all the pundits and commentators in Scotland and former Scotland managers and players. And, let us not forget its defence: the overwhelming majority of Scotland fans. Who is in the “for team GB” squad in Scotland? It has a pretty threadbare 2-1-1 formation, and already many of its members have been red-carded. It is led by the Prime Minister, but we all know that he is much more likely to score an own goal than a goal in the opposition’s net. The midfield consists of the Secretary of State for Scotland, running around like a headless chicken—not the midfield dynamo that you would expect, Mr. Pope. And, in defence—well, there is nobody in defence. I thought that they would at least have been present to say something about the issue, but the defence has gone home. If you were a football fan, Mr. Pope, and passionate about the game in Scotland, whose side would you be on? Would you be on the side of the Prime Minister, or of everybody else, who oppose the proposition? The answer is pretty straightforward, Mr. Pope. I see you laughing, so I think that you know the answer, too.
What do the proponents of this Team GB think about the opposition? Almost arrogantly, they dismiss it; they could not care less. Every single football association other than the English Football Association has rejected the proposal, but still the proponents pursue, support and propose it. Sebastian Coe allegedly used some very colourful language to tell us where we should all go—language that if I were to repeat in this House, Mr. Pope, you would have the Doorkeeper frogmarch me from the estate, and quite rightly. Sebastian Coe ever so politely told all the opposition where they might go. Well, I have a message for him from the fans of Scotland, Wales and Northern Ireland: “We would like to reciprocate your kind offer, and go away and do absolutely nothing that threatens our independent status.”
In fully supporting the hon. Gentleman’s contentions throughout, I must say that I cannot understand the reasoning behind the call for a GB team. All the home nations’ teams are strong sides that can hold their own in international competition, and that is the way it should be. Indeed, I am sure that he will join me in congratulating the Wales rugby sevens side on becoming world champions last weekend.
Absolutely. May I offer those congratulations wholeheartedly to the hon. Gentleman and to the Welsh national side? It was an incredible achievement and, of course, I share his bewilderment at the proposal’s pursuit. It is not just pursued, however; it is arrogantly pursued.
Was it a mistake, then, to have a GB football team at the Paralympics in Beijing last year?
The Paralympics team does not threaten the home nations’ independent status. FIFA and UEFA are not looking at that; they are looking carefully at the decisions that we make about this Team GB today. I have no problem with the Paralympics team; I have a problem with any proposition that will not allow my son or my grandchildren to turn up to Scotland football games. Even if there is just a one in 100, or a one in 1,000 chance of it happening, even inadvertently, we should get rid of the proposal—take it away, not discuss it, just close it down. I wish the Minister would join me in that view. I know that he is a football fan who likes his game and his international football. His football team probably is not threatened by the proposal, but ours is, so I hope that he will take very seriously the fact that everybody in Scotland is against him on this proposal.
My hon. Friend makes the point that the Minister’s football team is not threatened by the proposal, but, if a European Union football team were suggested, the reaction from the English FA and, perhaps, from the Minister would be far different.
My hon. Friend is right: there would be no support for that proposal whatever. We acknowledge that the United Kingdom has generous historical arrangements: all the home nations are members of the FIFA board. In the past five to 10 years, however, a number of new nations have emerged, and many of them look enviously at what we have. Devolved Parliaments throughout the world would like a shot at competing in international competitions, as Scotland, Wales and Northern Ireland do, but we should give them nothing—no reason and no excuse to bring up the issue and discuss it.
At the heart of the matter when it comes to such proposals are the assurances that Ministers, Sebastian Coe and others secure and receive when they raise the issue with FIFA. FIFA tells everybody that the proposal will not affect the independent status of the home nation teams—assurances that are not worth the paper that they are not even written on. They are totally and utterly meaningless, and we have the pathetic sight of the Secretary of State for Scotland, wandering back from yet another meeting with FIFA declaring, “Peace in our time,” because we have had yet another assurance, such is his negotiating skill and the clever and complicated way in which he puts his argument. He got the same answer as everybody else: “Yes, of course it won’t affect the international standing of your home nations.” But, even if we accept that that is the FIFA board’s view, and there are big questions about that after Sepp Blatter’s interesting remarks last week, the view is not binding for future FIFA boards; they could quite easily rip it up and have nothing whatever to do with it. So, let us not hear anything about those assurances.
The FIFA board’s view was interesting, too. Last Saturday, Sepp Blatter most certainly let the cat out of the sports bag when he revealed his real reasoning. David Peat, recalling what Sepp Blatter told him in a private meeting, said:
“Mr Blatter told us at an informal function that, if we agreed to be part of Team GB, our position would be in jeopardy. My immediate reaction was one of surprise. I glanced over at the English table and their two guys, Lord Triesman and Sir David Richards, just looked at each other.”
I bet they did, with their hands at their heads, because that is the real position of the FIFA president. At an informal function, when speaking his mind on the issue, he is quite happy to tell us his real view on the matter. Please, I ask the Government, do not insult our intelligence with these meaningless assurances. They are not worth anything. I am sure that, when the Minister responds, he will bear that in mind. The board could not care less.
I see that the Minister has a paper in his hand, and I have a paper in my hand, too. It is a very interesting one, from David Will, the honorary vice-president of FIFA, who should know a little bit about international football and politics. He says:
“People seem to have forgotten that at almost all the FIFA Congresses throughout the 1980s, delegates, mostly from Africa supported by the Caribbean, raised objections to the existence of the four associations.”
There is an ongoing discussion in FIFA and in UEFA, so their assurances are totally and utterly meaningless.
A few people have talked about Members getting politically involved in FIFA issues, and I take very seriously the Scottish Football Association’s concerns about that. I leave it to the SFA, however, to raise those issues with FIFA. Our job, as Members, is to raise the issues with Ministers who strongly support the proposal. As long as they propose it, my job, as a Member who represents thousands of passionate Scotland fans, will be to oppose the Government and their support for this national football team. That is what we are here to do, and I make absolutely no excuse for doing so.
There are solutions, as my hon. Friends have said, however. If we want football teams to participate in the Olympics, what is wrong with all the home teams participating? Absolutely nothing. That is what happened when the Olympics last came to London, in 1908. All four home international sides competed, so, surely, that is how we should proceed. If being a part of the Olympics is such a great experience for young men, we should multiply it fourfold and give that wonderful chance to even more of our young people. The Minister should consider that solution. For goodness’ sake, we are hosting the Olympics; it is not as if we are without influence when it comes to making such decisions. Surely, he could put it to the powers that be.
We could kill this proposal today. We could end it today. All is needed is for the Minister to say, “We no longer support this. We take on board the clear opposition. We will not arrogantly try to pursue it against the wishes of all the other football associations.” He could easily do that today. If all Scottish Members of Parliament came together on an early-day motion, that would also kill the proposal. We could unite on that. I would even be prepared to sign an early-day motion put together by Government Members who are not in the Chamber, as long as it was trying to achieve that objective. That is something that we could do.
Everybody is against this proposal. There is no support for it in Scotland, Wales and Northern Ireland. If there is support for it, perhaps the Minister would say who is for it other than the Prime Minister, the Secretary of State for Scotland and a few Labour MPs. Even Labour in Scotland is beginning to crack. There are Members of the Scottish Parliament who get it, understand the issues, see the threat and are now against it. Support for this proposal lies only in this House. It exists nowhere else. There is no serious, credible pundit, commentator or former official in Scotland, Wales and Northern Ireland who believes that this proposal is a good thing.
Our job is to ensure that ordinary football fans are given a voice in the House. I do not know how many of my constituents I have spoken to about this issue who are concerned about all this. We have to give no precedent whatever, no reason and no excuse. Our job is to defend our national football side. I make no excuse for trying to do that today.
As I said, it is a great pleasure to congratulate the hon. Member for Perth and North Perthshire (Pete Wishart) on securing this debate, which gives us the opportunity to talk about football and the Olympics—two things that dominated my life when I was young, and still do.
The hon. Gentleman says that nobody in Wales supports the proposal that we are debating, but I suggest that he join me on a Saturday afternoon watching my local team and talk to the parents of young players and young children. I accept that when I raise the matter it divides opinion, but the hon. Gentleman does not have a monopoly to speak for the football-loving people of Wales on this issue. I accept that there are establishments—the football associations—that strongly oppose the proposal, and I share some of their fears, but it is utterly wrong to suggest that nobody else in the footballing world of Wales supports it.
The hon. Gentleman proclaims that he knows about all the support for this in Wales. I confess that I have not come across anybody who seriously suggests that it is a good idea.
I will develop my argument, but I repeat what I have said. I have been speaking to people in the stands of my local football team while watching games and talking to parents and I think that they would believe that what I have said is so, with certain caveats and assurances, which we must have in every sport—football is no different. Other teams have certain concerns about the identity of their national sport when asked to have an Olympic team. I am sure that the Minister will highlight that in his winding-up speech.
Like the hon. Member for Perth and North Perthshire, I have a passion for football. I remember, as a young man in the 1970s, watching Wales play Northern Ireland at Goodison Park, my favourite football team’s stadium. I recall going to Hampden and watching Wales lose, draw and win against Scotland on occasions. As a football supporter from north-west Wales, even to go to a home game—having to travel to Cardiff—was a journey in itself. I have also supported the Welsh national football team across the world. I have been to international games in many countries and supported that team and will continue to do so.
I also support grass-roots football and the game at premier level—the Welsh premier league and the Football Association premier league—so I do not see any divisions based on boundaries. I enjoy football per se. That is why I will support the idea, with the assurances that I have mentioned, that a United Kingdom team give the opportunity for Welsh young people to look at Welsh participation in an Olympic team.
The hon. Gentleman says that he does not support any boundaries in football, but I have been listening to his account of his support for the Welsh football team over the years and I wonder whether any Portuguese Members of Parliament are looking for unification with Spain for an Iberian team. I would not think so. He talks about the idea of football without boundaries and says that is why he would support a United Kingdom team, but, extending his argument logically, would he support a European Union football team? I certainly would not, but the logic of his argument indicates that he would.
I am certainly not going to allow the hon. Gentleman to put words in my mouth. I was saying that I believe in football first—football as a game—to inspire young people to come into sport. That is my first and foremost viewpoint.
I remember, as a young man, watching the Olympic games every four years and seeing Olympians from the four home nations winning gold medals. My earliest memory is of Lynn Davies winning the long jump for Wales and Great Britain in Tokyo. I remember David Hemery, the great hurdler in the Mexico Olympics, winning for England and the United Kingdom and Great Britain. I also remember Mary Peters, the great Northern Ireland athlete, winning in Munich in 1972 for Northern Ireland and for Britain. Of course, I remember Alan Wells, in the Moscow Olympics, winning for Scotland and the United Kingdom, Great Britain and Northern Ireland.
The hon. Gentleman places great stress on the fact that people can represent both the UK or GB and the home nation, but was it not the case that in Beijing a choice had to be made, because the Chinese authorities would not allow Scottish and Welsh flags to be displayed, owing to the Tibetan problems, and that people have to choose whether they want to be in GB/UK or in Scotland/Wales?
The hon. Gentleman is confusing the emotive issue of flags with what I am talking about. I do not think that Chris Hoy, the great Scottish Olympian, worried about wearing a Great Britain vest. That is my point: he and many athletes in Wales, Scotland, Northern Ireland and England are proud to be Scottish, Welsh, English, Northern Irish and British. That argument needs to be brought to this debate and that is what I intend to do.
Although the 2008 Olympics brought great gold tallies to the United Kingdom, my favourite moment was when the Welsh cyclist, Nicole Cooke, whose enthusiasm inspired so many athletes across the United Kingdom crossed the line, saying, “Yes, yes, yes!” and won the first medal for Britain. She did it for British sport. She will inspire people to get on their bikes and ride for Britain and for Wales. That is how sport can inspire people.
The hon. Gentleman perhaps makes the point. I did not realise that that young lady was Welsh. I just thought that she was from somewhere else in the UK. The Welsh identity was lost at that moment.
I will develop this argument, but I repeat that many athletes and many people in Wales can be proud to be both Welsh and British—and that principle applies in Scotland, Northern Ireland and England. That is no boundary for them. Artificial boundaries are put in place by many people, including the Scottish National party.
A European Union football team?
Yes, European. People are proud to represent the British Lions and Ireland by putting on those shirts: it does not make them any less Irish, and the proposal we are talking about does not make people any less Welsh, English or Scottish. That is my point. The ethos of sport and competing is more important than narrow nationalistic views.
The hon. Gentleman may or may not be right, but does he not share my concern and fears about his national football side if we were to come together as team GB? That is what this debate is about. Has he any fears about the future existence of his beloved Welsh side if we come together as Team GB?
I am trying to be generous in giving way to broaden this debate from the idea of being Scottish or British and from losing identity to one of greater participation in sport by people from the home nations.
There is an opportunity to bring my love of football and the Olympics together in the United Kingdom by having a United Kingdom team. That is important. That does not go against my strong support for a Welsh football or rugby team or any Welsh team. When Wales plays England, I have a passion for seeing Wales beating England equal to that of the hon. Member for Perth and North Perthshire; equally, however, when I see a Welsh athlete in a British shirt representing Great Britain, I want them to succeed. I want people watching them to be inspired and to come into sport. That does happen and it will happen in the next Olympics.
If one of the amazing young crop of Welsh football stars thought that putting on a British vest in a British football team would endanger the future of a Welsh national football side and, therefore, their chance to compete for Wales in the World cup in the future, what does the hon. Gentleman think they would do?
I do not think they should be put in that position, and I shall come to that. [Interruption.] There is no exactly, and no blueprint, I am sorry to say. I am equally keen on rugby, and when a Welsh athlete plays for the British Lions, they are not put in that position because they have assurances from their national and international bodies. That is the point that I shall come to. I shall make a counter-argument against some of the issues that the hon. Member for Perth and North Perthshire raised.
I am suggesting that passion for sport comes first, and I dispute the suggestion that no one in Wales or Scotland likes the idea. The establishment, the Scottish media, the pundits and others are taking the “no” lead, but football in 2012 will be hosted in the greatest stadium in the United Kingdom—the Millennium stadium. Imagine the irony if young people from all over Wales, the United Kingdom and the world were watching football at that great stadium with not a single Welsh player representing a United Kingdom team. That would be a missed opportunity for football, but it would happen if a UK team had only English players. Imagine the irony of the Welsh passion in that stadium supporting an English team against a Portuguese or Brazilian team if young Welsh stars were denied the opportunity to play on that great occasion. The Olympic games is the greatest sporting occasion in the world.
On the point about football and the Olympic games, does my hon. Friend think it was clever of the three associations to write to the British Olympic Association saying that they did not think football should be an Olympic sport?
I do not think that was clever. I have travelled with the Football Association of Wales to away games when there were not many supporters. In fact, there were more people wearing blazers—officials of the association—than supporters. I declare an interest, and I think there is some protectionism.
I accept what the hon. Member for Carmarthen, East and Dinefwr (Adam Price) says. Of course, I do not want Welsh players to risk losing their Welsh status, but I want them to have the opportunity in 2012 to represent the United Kingdom. I do not use the phrase “Team GB” because it will be a UK team from Great Britain and Northern Ireland. I want to see a UK team, not a GB team, represented.
The name is wrong.
Order. This is a good-natured debate, and the hon. Member for Ynys Môn (Albert Owen) has been generous with his time, but there are too many sedentary interventions. If hon. Members want to intervene, they should make proper interventions, but we cannot have heckling.
My hon. Friend the Member for Thurrock (Andrew Mackinlay) will be able to make his points if he catches your eye, Mr. Pope.
I understand how the Scottish Football Association, the Football Association of Wales and the Irish Football Association feel when there is such a strong negative campaign, and when private meetings have been held but assurances and private conversations have been leaked to the press. I understand that FIFA’s executive met in Tokyo and gave assurances that national identities would not be eroded. There may be debates outside that, but FIFA said that this one-off opportunity for the United Kingdom football team at the 2012 Olympics would not harm the status of the four individual nations. That is important. [Interruption.] I will not give way again, because I have done so several times and other hon. Members want to speak.
Those assurances should be accepted. The hon. Member for Perth and North Perthshire said that only the under-23s would be affected. Only young people? Many young players go on beyond that, but many are at their prime at 21 and they will have the opportunity to excel on the national stage at the showcase that is the Olympics and at stadiums such as the millennium stadium in Cardiff and Wembley stadium. The millennium stadium attracted great passion last year when Cardiff City played in the FA cup. Many Welsh people were happy to support Cardiff City and its international players, including Aaron Ramsey; I am sure that the hon. Member for Carmarthen, East and Dinefwr will agree that he is a likely contender for the first team of any UK team. The Arsenal player, who is a talented young man and would play a great role, will be 22 in 2012, so he could be an under-23 player. He would inspire many girls and boys in Wales and the United Kingdom. That is why football would be the winner if there were a UK team.
Many nationalist politicians in Wales go further and instead of making a pro-football or a pro-sport argument, they use this as an anti-Britain agenda. I have heard Welsh politicians who want to do away with the British Lions. Imagine a British Lions team without the likes of Gareth Edwards and Barry John if we followed the logic of allowing them to play only for Wales. The British Lions tour to South Africa in the summer will be more than just peppered with Welsh talent as they represent Great Britain and Ireland on the international rugby stage. That would not harm Wales if they subsequently went for another grand slam.
There is an agenda—the hon. Member for Perth and North Perthshire is right—and it is narrow and nationalist. [Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr. MacNeil) says that I can do better. I could go on, but I am trying to speak about the subject of the debate. I believe that the British Lions are richer for having Welsh participation, and a GB football team would be richer for having Welsh, Scottish and Northern Irish representatives. One can be proud to be Welsh, proud to be Scottish, proud to be English, proud to be Northern Irish and proud to be British. Putting on a GB football shirt in 2012 would enhance sport in Britain and the home countries. In Beijing, British people from all the home countries came home to celebrations in their individual capital cities.
I want British football to be seen from the terraces of the millennium stadium with Welsh representatives playing alongside people from other countries. I would like the team to be fully Welsh if it was selected on merit, but British sport has a role to play at national level. The assurances that have been given must be taken seriously. The football associations may have their own way and there may be just an English team with no participation from other players, and FIFA might still argue that national teams should merge. That debate will not go away, and it is wrong to use it nationalistically, as supporters of nationalist parties and nationalist politicians have done.
The beautiful game, merged with the Olympics, will enhance sport and football. I support a 2012 UK team with the assurances that that will not be detrimental to national identity.
I congratulate the hon. Member for Perth and North Perthshire (Pete Wishart) on securing this important debate, which he introduced in his usual idiosyncratic style. I am aware that despite this debate being broadly good-natured, I may be intruding on private grief between his party and the Labour party north and west of the English border. I confess that I have considerable sympathy with elements of his political argument, although I would have couched them more tactfully.
The Prime Minister’s risible Britishness agenda disguises the fact that his Government’s ill thought through devolution a decade ago has destroyed British people’s—English, Scottish and Welsh—understanding of Britain as it has existed since 1707. We are at an interim stage. There is no going back from a Scottish Parliament. We have an asymmetrical feeling of devolution throughout the UK, which means equal powers. Heaven only knows how that will be worked through. It is a mess at the moment, and to go on about Britishness risibly attempts to disguise the fact that Mr. Brown is a Scot. He represents or is from a country of 4.5 million people out of 60 million. That will be very evident as time goes on. I would not have wished to make that argument before 1997, but his Government have brought it on themselves. It will resonate loudly during the next general election campaign—very regrettably, in my view.
I have a lot of sympathy with what the hon. Member for Perth and North Perthshire has to say—I suspect that I will be at odds with those on my Front Bench on this matter—because I think that the essence of spectator sport is competition and rivalry. Sport also, as the hon. Gentleman rightly said, brings people together. I confess that I scribbled my notes for the debate at the beginning of the weekend and I referred to sport as “war by other means”. The terrible events of the past 72 hours in one part of the United Kingdom, Northern Ireland—I am sure that the hon. Member for Thurrock (Andrew Mackinlay) would point out that it is part of the United Kingdom, rather than part of Great Britain—put those comments in context.
However, spectacles such as the World cup and the Olympic games have a global appeal. The first ever international soccer match took place 137 years ago, between Scotland and England in Glasgow. It was a goalless draw, which I suspect reflected not a lack of endeavour, but a determination on both sides to avoid defeat. It is the oldest international in the football fixture list. The notion of a GB team runs counter to the rich history of that rivalry, but it would also set some potentially worrying and unintended precedents, on which I shall focus.
Let us say that there was a GB team for the Olympics. Almost inevitably, despite what the hon. Member for Ynys Môn (Albert Owen) had to say, demand would grow for a GB team for all competitions. It might lead to the end of the Scottish league. There has been a great deal of talk for some years now that the two Glasgow teams—Celtic and Rangers—might join the premiership, although I suspect that the ease of passage for them into the champions league means that it is more attractive to play north of the border than to venture south.
We have seen—the Minister will be well aware of this—the joint hosting of football championships. That started at the 2002 World cup, hosted by Japan and South Korea. In 2008, the European championships were hosted by Austria and Switzerland. There was talk until recently of a joint bid for the 2016 European championships by Scotland and Wales. That idea has been dropped, ostensibly for economic reasons. We have seen the great rise of the African footballing powers.
My understanding is that the joint bid for the European championships was supported by many Members of the Scottish Parliament and the Welsh Assembly. They felt that the Celtic nations could indeed host the championships. Would that pose the same threats to the national identities of those teams?
I accept that that may have been the thought in the Scottish Parliament. I think that there would have been a risk.
Let me move on to a more general point. We are talking now of a World cup of 32 nations, whereas 20 or so years ago there were only 16 nations in the World cup finals. The European championships will involve 24 nations next time, partly for the reasons that have been pointed out. We have seen the emergence of eight or nine sovereign nations from the former Yugoslavia and we have seen something similar with the former USSR, with a number of those states playing their part. There are now 195 nations in the UN, and football is ever more important as the global game.
I think that a GB team would set a precedent. There would at some point be more and more pressure for either a GB or a United Kingdom team to represent all our nations in world and European championships. The danger—this goes back to the concern about the passion that people have for sport—is this: who would support such an entity—a Great Britain football team—and how would it be run? We can all envisage the appalling problems that there would be in trying to be politically correct and ensuring that there were two Northern Ireland players and two Welsh players as an absolute minimum. Particularly if a match was being played at the Millennium stadium, would the best 11 players necessarily be playing? All sorts of politics would play a part.
In the Beijing Olympics, there was a Team GB—a Paralympic team—for a number of different sports, including football. That team was run by the English FA with the support of the other home nations. It can be done.
I can accept that. The Minister has made a valid point about the Paralympics. We are in the early stages of the Paralympics as a sporting movement and I pay tribute to the Government, who have played a very important role in the past decade in ensuring that sport for the disabled has such a high profile. However, I suspect that in 20 or 30 years’ time there will be much more demand, not only in the footballing world but in other areas, for a breaking down of the team into national teams and that the competition and rivalry that is seen in able-bodied sport will also play its part in sport for the disabled.
I appreciate that other hon. Members want to say a few words. I shall end with a slightly more parochial point.
The hon. Gentleman has clearly stated that he does not support the concept of Team GB, but he has not outlined his alternative.
I shall leave it to the Front Benchers to go into that in detail. It may well be thought that only one nation’s team—perhaps an English, a Scottish or a Welsh team—will emerge from this. I suspect that in an ideal world we would like all the nations to have an opportunity to put teams up.
As I said, I shall end with a slightly more parochial thought, because I am a keen football fan and have been all my life. I remember that there was great revulsion in my home town of Reading at the suggestion in 1983 that that team—Reading were then in the fourth tier of professional football—should merge with Oxford United to form the Thames Valley Royals under the late and not much lamented Robert Maxwell, who owned that club at the time. It is interesting how the two clubs developed over the 20 years after that. Oxford United were promoted into the top flight of football. I remember watching them quite avidly when I was an undergraduate. Then they went into a downward spiral. They had a spanking new out-of-town stadium, which has been a financial millstone around their neck, and they also lost their league status in 2006 and are not likely to regain it any time soon.
By contrast, Reading went from strength to strength. They made it into the premiership in 2006. They now routinely have crowds of 20,000. I remember being one of 3,000 or 4,000 at the rather ramshackle old Elm Park ground. No one would have envisaged that 25 years ago, not least because of the rivalry and competition among the fans in that area. What I am trying to say is that there would be many unintended consequences from any mergers that might take place. We need to think through those complications at the outset, rather than giving wholehearted support to something that might lead us down a path that we would all find undesirable.
Order. Two hon. Members still wish to speak. I hope to start the winding-up speeches at about 10.30, so I appeal for the co-operation of hon. Members. I call Adam Price.
I thank the hon. Member for Cities of London and Westminster (Mr. Field) for the unexpected but nevertheless welcome support for our position from Cities of London and Westminster. I also thank and pay tribute to my hon. Friend the Member for Perth and North Perthshire (Pete Wishart) for his impassioned defence of the independence of Scottish and Welsh football. In answer to the point made by the hon. Member for Ynys Môn (Albert Owen), it was not our parties that decided to make football a political football. It was the Prime Minister who did so in advancing, as the hon. Member for Cities of London and Westminster said, his Britishness agenda.
The hon. Gentleman is wrong. This argument goes back four or five years before our Prime Minister came to that office. It is something that the British Olympic Association brought forward as an idea, so that host nations would not have to qualify. That is the origin of the argument, so I am sorry but the hon. Gentleman is wrong when he says that the Prime Minister, with his enthusiasm for a Great Britain team, was the start of the debate; he was not.
The British Olympic Association may have been there at the kick-off, but the Prime Minister ran with the ball. There is a bigger political question here, because in this United Kingdom we have one very large nation and three smaller nations and sensitivity needs to be shown to the interests of the three small nations. When the football associations and the majority of football supporters in those countries say, “Hang on a minute. There’s something very important here that we hold dear and that we feel could be imperilled by this decision,” the Government should listen. The hon. Gentleman is a Unionist; he believes in the United Kingdom. The only way in which this United Kingdom can work is if the interests of the small countries are listened to by the large country. That is all we are asking for.
I am slightly concerned to hear that the Prime Minister is running with the ball when we are talking about football rather than rugby. However, I put it to the hon. Gentleman and the Minister that whatever our views on Team GB—we have different ones here—we should address the absurdity of the Team GB football team singing “God Save the Queen”, which is, wrongly, still the English football national anthem. When will we address that and stop having this identity confusion? When England compete as England, they should have an English national anthem so that when a British team plays, we do not ask its Scottish and Welsh members to stand and sing what they perceive as an English anthem, which is absurd.
The hon. Gentleman makes a strong point, and I certainly support it.
My hon. Friend the Member for Perth and North Perthshire likened being a Scottish football supporter to being on a rollercoaster, but Welsh supporters have also had their fair share of highs and lows. In the 1958 World cup quarter-final, a young Brazilian by the name of Pele came on and scored his first goal in international football to put us out. In the quarter-finals of the 1976 European championships, we lost to the former Yugoslavia. I also have to mention a certain handball in 1978, which introduced an element of disagreement between Scotland and Wales. Scotland also put us out in 1986, but I will pass over that.
Wales now has a crop of young players. The hon. Member for Ynys Môn mentioned Aaron Ramsey, and we also have Joe Ledley, David Edwards and Jack Collison, whose combined ages would be about 80. This crop of young players has a real prospect of getting Wales into a major championship again, and we do not want to put that at risk. I am sure that the hon. Gentleman understands that in his heart of hearts.
The position in FIFA has changed, and there have already been two votes on the membership issue. FIFA vice-president Jack Warner from Trinidad and Tobago is a leading opponent of independence for the four home nations. He has recently said that he has an open mind about the effects of Team GB on our membership of FIFA, and the issue will come back on the agenda if we take up the proposals.
In several cases recently, FIFA has taken a much more conservative line than it has in the past. It has more members than the United Nations because its criteria for membership were much broader in the past, but that has changed. Greenland made an application for membership in 2005, but it was turned down. Catalonia has also made an application. Similarly, UEFA has tightened up its rules, and new members must be members of the United Nations to qualify as members. Things are therefore changing, and if we move down the proposed path, there is a real danger that we will lose our independent membership.
Such a development will have a knock-on effect on Welsh clubs. At the moment, teams from the Welsh premiership can compete in the champions league and the UEFA cup. A few years ago, Barry Town beat Porto, which went on to win the champions league a few years later. Such games are important opportunities for young Welsh players, and we need to defend their ability to play in them.
The hon. Gentleman talked about artificial boundaries. In a sense, identity is artificial because it is a cultural construct—it is something we believe in. We believe passionately in our Welsh identity, partly for reasons of history, but it is real to us. There is a distinction to be made. Originally, the Olympic movement was about not national sides, but individual athletes competing against each other—the national element came in only later. I understand what the hon. Gentleman is saying: in a sense, the Olympian movement is about individuals, and its motto is “Citius, Altius, Fortius”. However, the national dimension of team sport is absolutely central—it is part of the passion of the game to see two national sides pitting the best talent that they have against each other. Surely we would not want to lose that.
I want political independence for my country and I make no apology for that. The hon. Gentleman has every right to disagree with me, but it is a laudable ambition to want one’s country to have self-determination. Historically, the arrangement in these islands has been that we respect the fact that four different nations make up our state and that we allow expressions of national identity within that, and sporting identity is an important element of that.
The Football Association of Wales is the third oldest football association in the world. We were a founding member of UEFA. Along with the other home nations, we are also on the FIFA board, which decides the rules and which has only eight members.
The hon. Gentleman has made several references to Welshness and identity, but someone who supports Welsh independence is no more Welsh than Welsh patriots who want to be part of the United Kingdom. That is the important point: there is a difference between nationalism and patriotism. However, he also talked about the Olympic ethos, and is not being part of a team also part of that? When Team GB came back from Beijing, members from the individual home countries did not feel any less Scottish or Welsh for being part of it.
I say to the hon. Gentleman in all honesty and sincerity that identity is personal and subjective. I accept that he has a British identity alongside a Welsh one, but that British identity is not one that I share. That is my personal, subjective view. I am prepared to allow him his identity if he will allow me mine. An important part of my identity is the continuation of an independent Welsh national side. I have no problem with the current arrangement, under which we have a UK Olympics team, and we have to accept that the Olympics authorities perhaps take a different view from FIFA or UEFA, although that is a matter of some dispute. If the hon. Gentleman wants his identity, that is fine, but will he please allow me to have mine and to express it in sporting terms by continuing to support a Welsh national football side?
I will wind up now, however, because I am very interested to hear what the hon. Member for Thurrock (Andrew Mackinlay) has to say.
One reason why I am interested in this issue is that I am a member of the Celtic diaspora who was born in Wembley. My earliest memories include being let out of St. Joseph’s school in Wembley early to see an international on a Wednesday afternoon—there were no floodlights for soccer matches at Wembley in those days. I also remember kith and kin coming down from Scotland on the overnight coach to see Scotland beat England. The issue is very interesting. I am a soccer enthusiast and I certainly like the international game.
It is laudable for Ministers to say that it would perhaps be nice to have a United Kingdom team. Indeed, let me say for the record—in case what we say is distorted elsewhere—that I support that objective as a soccer enthusiast. However, my point, which I think is new, is that the Government should back off. There is a point at which these things are no longer Government business, but a matter for the four football associations, and it is dangerous for the Government to try to push the issue.
I note that the Minister intervened to pray in aid the Paralympics. He said that the English FA organised the football team with the support of the other football associations, but that is precisely the point: the initiative had the support of the other associations. However, that support does not exist now. Then, there was acquiescence, full knowledge and full consent, which is fine. It was a grave matter, and the associations decided that they would support the UK Paralympics team. However, they have now decided—they are entitled to do so—that they will not support such a team in the 2012 Olympics. The Government should bear that in mind.
I am desperately angry about the obsession with calling the team Team GB. That shows how stupid—I deliberately use that word—the people who run the Olympics in this country are. This is the United Kingdom, and that is the official short term—that is what is in front of the United Nations. Everyone understands that. The team should be Team UK. That is not a small point or a meaningless difference, because this country is the United Kingdom of Great Britain and Northern Ireland. Even at this late stage, the name should be corrected. Ministers should be particularly sensitive about that, because they are the custodians of the political identity of the United Kingdom. They should correct such things at every stage.
All this comes down to modalities and the statutes of FIFA and the Olympic movement. One reason why the Government should not trespass there is that it would draw the Olympic movement into United Kingdom domestic politics. As I understand the statutes, the team must be a member of FIFA. There is not a United Kingdom football association affiliated to FIFA. It does not exist. If there were acquiescence from the other three associations things would be fine, but there is not, and the matter should be dead in the water. To take up a point that the hon. Member for Cities of London and Westminster (Mr. Field) made, where would it end if England’s FA were to claim to be the United Kingdom team, and the Government were to buttress that claim and support it? It would trespass into a political dimension. It is another increment that threatens the Union—the very Union that the Government say they want to maintain. We should not go there. It would put FIFA and the Olympic movement in a difficult position.
I urge the Minister to reflect on the fact that there is a line over which the Government should not trespass. There would be debates about and frustration over the method of selection, anyway. My hon. Friend the Member for Ynys Môn (Albert Owen) seemed to assume, because he is a patriot, that there would be a Welsh player. I would hope that there would be Welsh players, but one cannot be sure, because the essence of the Olympic movement is that a person would be selected on merit. Therefore, in conclusion, I counsel the Government to back off and be much more sensible than they have been about the soccer competition. Secondly, because it is a directly related matter, they should start to get their political terms correct, and insist that the team from the United Kingdom should be called Team UK.
It gives me great pleasure to participate in this colourful, heartfelt and passionate debate. I congratulate the hon. Member for Perth and North Perthshire (Pete Wishart) on securing it. All that was missing was the Mel Gibson-style face paint I expected the hon. Gentleman to arrive with this morning. He has built from the foundations, brick by brick, and laying the mortar on very thick, ably supported by his colleagues’ urgent and pleading interventions, a huge Aunt Sally to demolish. He did it quite successfully, and for good measure he threw in a conspiracy theory involving the Prime Minister. I understand his reasons for choosing to do that, but with the limited time available to us he might have considered as an alternative a debate on the Olympic legacy in relation to Scotland, Wales and Northern Ireland. There are significant issues to consider in that context, whether on matters of infrastructure or access to contracts for businesses. That would have been an interesting debate.
Of course, this has been a wonderful opportunity for us all to reminisce about our football experiences. I can reminisce about a match I attended in 1976, I think, between Leeds and Bayern Munich. We were living in France, and the match was in Paris. I am afraid that the Leeds fans tore the stadium apart and fought battles in the streets with the French police. I can reminisce too about a surreal football match that I attended when I went on a school trip to Russia. I think it was Odessa versus Kiev, in 1975. The match was played in complete silence. The only thing we could hear in the crowd was the crunching of sunflower seeds, because that is what the spectators ate during the game. When we left the stadium the aisles were littered inches deep with sunflower seed husks.
That is enough reminiscing. We have little time for the debate, so I will focus on the meat of the matter. The British Olympic Association has decided that the UK—both men’s and women’s teams—will take up the free ticket to the football games. It understands, as I think does everyone in the Chamber, the concerns expressed by the hon. Member for Perth and North Perthshire and others about the potential for that to affect the home nation teams. However, the hon. Gentleman did not respond to the point that the potential would exist irrespective of whether we hosted the Olympics in 2012. There is always the potential for FIFA to examine at some point the arrangements for nations, and to come up with a decision that he, others and I would be unhappy with, for example in relation to the World cup.
In support of his arguments, the hon. Gentleman deployed some quotations from Sepp Blatter, although I understand that we have received assurances that they were taken out of context; I considered writing to him but I understand that he has had so many letters on the issue that he would be unhappy to receive a further one from me.
I wish that the hon. Gentleman had listened more to his hon. Friend the Member for Leeds, North-West (Greg Mulholland), who was on steadier ground. Is he speaking for the Scottish Liberals in this matter? Do they support Team GB? Are they in opposition to all other opinion in Scotland in this matter?
I thank the hon. Gentleman for that intervention. I confirm that I spoke to my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) who speaks on Scottish issues. I am also happy to confirm that, as the hon. Gentleman will no doubt be aware, Ross Finnie MSP is on record supporting the need for assurances from FIFA. That is exactly the point that I am making and that other hon. Members have made. We need assurances from FIFA. If the Minister goes away from the debate with one thing, it will be the knowledge that we are collectively asking him to secure a much more solid assurance than we have so far received. Rather than writing to Sepp Blatter individually, the right way forward would be for us all collectively, with the Minister, to sign a letter seeking those assurances.
I regret one thing about the debate, which is that the hon. Member for Perth and North Perthshire and other hon. Members did not focus enough on the potential for increasing participation in women’s football and Paralympic football. I agree with the hon. Member for Thurrock (Andrew Mackinlay) that if we have a Team UK, that should be its name, not Team GB. Such a team, with players who could be Welsh, Scottish—for all we know it could be a completely Scottish team—or English or from Northern Ireland, and from men’s, women’s and Paralympic football, would kick-start those sports and give players from all those nations an opportunity to play at the highest level. That must be good for sport. I regret that the hon. Member for Perth and North Perthshire did not pick up that point, because it leaves an impression, as the hon. Member for Ynys Môn (Albert Owen) was saying, that the argument is a nationalist one. It should in fact be about how to maximise participation in sport and get the most for our men’s, women’s and Paralympic teams.
The debate has been challenging. The Minister has been given clear guidance by all the hon. Members who have spoken about what he needs to do. Perhaps he can get assurances from FIFA that what happens at the Olympics in 2012 will not create any risk to future World cups.
Will the hon. Gentleman give way?
I am afraid not; I am concluding.
If assurances could be obtained I should be comfortable about supporting a Team UK. I am sure that my Scottish and Welsh colleagues here and in the Scottish Parliament and the National Assembly for Wales would also be happy to support it.
As is customary, I too start by congratulating the hon. Member for Perth and North Perthshire (Pete Wishart) on securing the debate on the GB football team at the London 2012 Olympics. I hope that he will not mind my saying, however, that despite the evident good humour with which he spoke, as a sports fan I have not approached the debate with great enthusiasm. I do not think that it reflects particularly well on the management of the issue thus far that the selection of sportsmen and women, both able-bodied and Paralympic, to represent their country at a home Olympics, has become a matter of such entrenched political debate. It would have been much better if we could all have resisted temptation and left the issue to be resolved by sport, not politics.
When considering such matters, it is often instructive to look to history for a precedent. I am not sure that it is relevant in this case, but for the record—no one has yet mentioned this—Great Britain has won three gold medals at football. The first was in 1900; the hon. Member for Thurrock (Andrew Mackinlay) will be delighted to know that Upton Park football club represented this country and won. In 1908 the English national amateur team won, and the last medal was won in 1912.
GB went on to compete, perfectly happily, in 1920, 1936, 1948—the London games—1952, 1956 and, for the last time, in Rome in 1960. GB participated in the qualifying rounds in 1972, but failed to qualify. I have been unable to verify whether we lost on penalties to Germany. However, the removal of the distinction between professional and amateur teams by the Football Association in 1974 meant the end of our participation in the Olympics.
As the Minister said, we fielded two teams at the Paralympic games in Beijing—a seven-a-side cerebral palsy team and a five-a-side blind football team. Inevitably, in view of this morning’s debate, the cerebral palsy team contained footballers from Scotland, but the FA managed the team without controversy on behalf of GB. That rather backs up my view that these issues are controversial only when politicians become involved.
As far as the specifics of this morning’s debate are concerned, I wish to make three points. First—this is a personal view, and I doubt whether it will be popular with the Minister—I sometimes wonder whether football is a natural fit with the rest of the Olympic games. I fully realise that it is a decision solely for the International Olympic Committee, and not one for national Governments; indeed, I endorsed London’s bid for the 2012 games even though football was always a key part of our offer. None the less, I believe that the Olympics should contain only those sports in which it is the peak of an athlete’s career to win a gold medal.
For many male footballers—indeed, perhaps the majority—winning the premier league, the Scottish league, la Liga, the Serie A, the Bundesliga, the European cup, the World cup or the European championships will always be more prestigious than winning an Olympic gold medal. I realise that football brings a new audience to the Olympics, with its associated broadcasting and revenue opportunities, but as a traditionalist I believe that anyone winning an Olympic gold medal should feel that they had reached the absolute pinnacle of their sport. I am not convinced that is the case for many male footballers.
Is the hon. Gentleman drawing a distinction between men’s football, women’s football and Paralympic football?
I thank the hon. Gentleman for that intervention. I shall continue.
The situation is different for the women’s game. Being part of the Olympics opens up unprecedented coverage to the UK’s fastest growing participation sport, and it would be the pinnacle of any female footballer’s career. After the failed attempt to field a women’s team in Beijing, women’s football would receive a huge boost if it was able to participate before home crowds in 2012. However, despite my personal misgivings about the male game, football will be a key part of London 2012 in some way, shape or form. The challenge is to make it work as well as possible.
That brings me to my second point. I entirely agree with the hon. Member for Thurrock that it is a great shame that the issue has become so politically contentious. The whole question of having a football team at London 2012 has become part of a wider debate about devolution and independence. I am sorry to have to tell the Minister that both the main protagonists are at fault in that regard. The Prime Minister and the Secretary of State have used the issue to make wider points about the Union and, unsurprisingly, the Scottish National party has reacted.
The clear voices that have been raised against Team UK or Team GB have not been heard. It falls into the realm of politics if the authoritative voices that should be listened to are not being heard. I would say that is the result of arrogance.
In a way, the hon. Gentleman is making the same point as me; it would have been better if we had managed to hold off and stop the issue becoming a political point.
The hon. Gentleman was keen to mention the Prime Minister. Does he think that Lord Coe, his colleague, has had a role in making the matter political?
No, I do not. As chairman of the organising committee, Lord Coe has to take his lead from the Government. The Government are responsible for the overall strategic direction of the 2012 Olympics, and the Prime Minister gave a lead. Lord Coe had to follow. He did not have the option.
My third and final point is that given that we are where we are, the key thing is what to do next. The British Olympic Association, which is responsible for selecting Team GB, has assured me absolutely that FIFA’s executive committee confirmed in December 2008 that participation in the London 2012 tournament will not affect the status of the home nations. However—I say this before everybody jumps to their feet—FIFA also recognises the concern within the Scottish, Welsh and Northern Irish football associations that that may not be the case. I am happy to make public the fact that FIFA has received letters from all three associations stating that they will not support, or enter discussions about entering, a GB football team in 2012. Sport is a devolved issue. It is therefore ultimately for the individual home country football associations to decide what course to take.
It would be wrong—perhaps, like the hon. Member for Thurrock, my Celtic influences are coming into play—for the Government, the FA or London 2012 to do anything that would impinge on the independence of those football associations. Ultimately, I see no option but to leave them to make their own decision.
Does the hon. Gentleman agree that the individual associations should confirm that they have considered the question of women’s and Paralympic football, and the potential to increase participation, before deciding whether to engage in discussions on the subject?
I thank the hon. Gentleman. That is two out of two. I shall continue.
On a personal basis, I absolutely respect the decision, but I regret that things have come to this. As a result, both able-bodied and Paralympic athletes will miss out. A fantastic opportunity to showcase the women’s and Paralympic games, with all the benefits for increased participation, will be lost. Broadcasting exposure and commercial revenue will be forfeited. All those things will happen because politics has got in the way.
Unless a solution can be found, through a pre-qualification tournament or some other form of compromise, the BOA will enter a GB team, but it will contain only English players. I presume that Irish, Scottish and Welsh players will be invited to put their names forward, but that they will face possible sanctions from their home country associations if they play.
As an aside, and in case anyone else was thinking of doing so, I mention that the last two high-profile athletes to defy the Government over an Olympics political issue—Sebastian Coe and Colin Moynihan—are now chairman of the London organising committee and chairman of the national Olympic committee respectively.
I do not understand why, but the hon. Gentleman said that the British Olympic Association will probably submit a team. My point is about modalities; it is technical. A team cannot be submitted without an association, and we do not have a United Kingdom association. Many people are being foolish and fudging the issue. The BOA cannot do it. There has to be an association, but it does not exist.
I asked the British Olympic Association that question yesterday, and I think that the hon. Gentleman may not necessarily be correct. In Beijing, a home nation committee took over in many sports; it then morphed into a UK body—or a Team GB body. In this case, I guess that the BOA will invite the home nations to put forward players but that the Scottish, Northern Irish and Welsh will refuse because they believe that it will compromise their independence. As a result, the team will go forward under a Team GB banner, but will contain only English players.
As I said at the beginning, I very much regret that this has become such a contentious public matter, and the way that it has been handled by the Governments in London and Edinburgh has made a difficult situation worse. However, whatever my personal feelings, I acknowledge that the Northern Irish, Scottish and Welsh FAs are entirely within their rights to refuse to release their players, with the result that as of today the GB team selected by the BOA will contain only English players—the point made by the hon. Member for Thurrock. We are still more than three years from London 2012, so there is ample time for a compromise to be reached, if the will exists to find one. However, after this morning’s debate I suspect that is probably a vain hope.
The really sad part of all of this is that as things stand the athletes affected will be denied a once-in-a-lifetime opportunity to compete in front of their home crowd at the world’s largest sporting event. Whatever one’s view, that is a great shame.
I welcome you to the Chair, Mr. Pope. This has been an interesting debate in terms of the emotions engendered by the argument. I congratulate the hon. Member for Perth and North Perthshire (Pete Wishart) on raising the issue, even though I may disagree with everything that he said. However, it gives us an opportunity to air some important issues.
I agree with the hon. Member for Faversham and Mid-Kent (Hugh Robertson) as I, too, am sad that we have reached this position, because at the end of the day it is the athletes who will suffer, which as sports Minister I regret. The whole ethos of sport is to bring people together and to ensure that we all value sport and our passion for it, whether for individual athletes or teams. Sport can and should gel us all together. We saw that in Beijing and with the merging of Olympians and Paralympians during the successful parade through London, when the whole UK celebrated their success. I do not want to lose the passion of those athletes.
It is not arrogant for the Government to say, “This is what’s going to happen.” As the hon. Member for Faversham and Mid-Kent said, the situation has arisen because we are hosting the Olympic games in 2012. A fantastic event—the world’s leading sporting event—will be in London in 2012, and we want the whole UK to benefit, in the same way that we want it to benefit from the Commonwealth games in Glasgow in 2014. Furthermore, during the coming decade of sport, we want to ensure that international events are held all over the UK, so that we can inspire future generations, and teach them the value of sport and what it can mean to individuals.
Those considerations, and not some narrow, nationalistic worry about the potential for the home nations to lose their identities, should be the driving force behind our decisions. I have not heard anything in this debate to suggest that the home nations will lose their identity. In fact, we have heard to the contrary, as the hon. Member for Carshalton and Wallington (Tom Brake) said. We have received written assurances and minutes of meetings from FIFA stating that a Great Britain football team will not affect the individuality of the three home nations.
I know that the Minister is coming on to those assurances—we will hear them all once again—but why does he think that the Scottish, Northern Irish and Welsh football associations, as well as pundits, commentators and former executives of FIFA and UEFA are all against the proposal? It is not a nationalist agenda, but a footballing agenda. In Scotland, Wales and Northern Ireland, people believe that thoroughly. Why are they wrong, and the Minister right?
I am not saying that they are all wrong. They are seeking assurances that the individuality of the home nations will not be affected, which I understand and respect. It is their right to respond to the situation. However, I am concerned—that is why I intervened earlier—because there has always been, and will continue to be, a threat to that individuality, given the way that FIFA is evolving, with new nations coming in. That threat will always be there.
Surely the responsibility of a UK Government Minister should be to support the wishes—in this case—of three in four of the football associations, not to try to railroad them in a particular direction.
I disagree with the hon. Gentleman; in this instance, the role of the sports Minister is to ensure that the UK Olympic games are the most successful ever and to get the mass participation in sport of everybody in the UK. I assume that we all agree on the power of sport.
The argument boils down to this: the British Olympic Association, not the Government, proposed a Team GB, as was its right. We are the host nations and we can have a Great Britain football team in the men’s and women’s games and in the Paralympic games. That is our right as the host nation. As my hon. Friend the Member for Ynys Môn (Albert Owen) said, it will be the biggest football occasion in this country since 1966 when we hosted the World cup. More than 2 million people attended the Beijing games. The 2012 football games will be played throughout the UK, and it would be a farce for qualification games to be played in Wales and Scotland without British participation.
Will the Minister use his great office of state to increase participation by encouraging and advocating the possibility for four teams, instead of one team, rather than railroading football associations? That would result in greater participation.
That could have been the argument had it been proposed earlier, but the situation has moved on. The International Olympic Committee, which runs the games, has awarded them to London—we now have an organising committee—and has given us an opportunity that we should not turn down, for the reasons we have given.
The hon. Member for Perth and North Perthshire said that he feels that football in the Olympics is devalued and not taken seriously. That is not true, judging from participation at Beijing, where leading players from Argentina and Brazil played. They believed that football had value, as do I. The Olympics are the greatest sporting event on earth, which is why a number of sports are applying to join.
The kernel of the argument is that we want assurances from FIFA, the IOC and other bodies to ensure that we do not do anything to damage the current situation. I accept that, and that is what we are trying to do. We have held meetings with Sepp Blatter and FIFA, and have correspondence stating that the proposal will not affect the individuality of the home nations. However, the home nations have not helped themselves by writing to the BOA stating that they do not think that football should be part of the Olympic games. That in itself will threaten the individuality of the home nations.
I urge caution in resolving the issues with the IOC, the BOA and FIFA. FIFA considers its sport an integral part of the Olympic games and their legacy. As the hon. Member for Carshalton and Wallington said, we will do everything possible to ensure that the assurances we have received are worth while.
Returning to the original point, we do not want the athletes to suffer, which is what will happen if we continue on our current course.
Will the Minister clear up a narrow, technical point? This country is committed to a GB football team in 2012. As I understand it, the BOA will invite all home nations to put forward players for that team. If any home nation feels that its independence is under threat—whether that is right or wrong—and decides, therefore, not to put forward players, will we field a GB football team in 2012 containing players only from home nation associations happy to put forward players? In other words, might the GB team consist only of English players?
That is correct; sadly, that will happen unless we can resolve the issue.
Further to the question from the hon. Member for Faversham and Mid-Kent (Hugh Robertson), would it help if the letters that the Minister has received from FIFA were made public so that we can see a written submission from FIFA with cast-iron guarantees that a one-off tournament will not threaten the identity of the national football associations? Can my hon. Friend envisage a compromise if the Welsh, Scottish and Northern Ireland associations do not proceed? For example, what if no sanctions were to be taken against individual players?
That is an excellent point. We attempted just such a compromise. We said, “We understand the position of the home nations, but do not take sanctions against players who want to play,” but we could not get that assurance. We need to find a way through that intransigence. As the hon. Member for Faversham and Mid-Kent said, the reality is that there will be a team—the BOA, not the Government, has said that—and we want it to be as representative of the UK as possible. We will work with home associations, whose right it is to respond independently and as they want.
My hon. Friend the Member for Ynys Môn was quite right about protection. The Football Association has tried to modernise our approach. I do not want to lay blame or attack individual associations, but we should consider the point raised by the hon. Member for Carshalton and Wallington about the impact on the women’s game and disabled people, and on greater inclusion.
In criticising the national associations and calling them intransigent, is the Minister not infringing on their autonomy? What is FIFA’s attitude to such political intervention?
I said that it is the right of those bodies to do the things that they are doing; I just happen to think that they are wrong. As UK sports Minister, I regularly meet Wales, Scotland and Northern Ireland sports Ministers. It is important that we do not allow sport to become a political football and that we listen. However, we must deal with the facts as they are, and the fact is that there will be a team in 2012. I hope that we can have a team that represents the whole UK. That would be the best way forward, but if it cannot be achieved—
Order. We now move on to the next debate.
Financial Services Compensation Scheme
May I mention that I have ditched half of my speech to accommodate those who wish to participate in the debate? On 13 January, I tabled early-day motion 426 entitled “Financial Services Compensation Scheme Levy on Building Societies”. It now has 158 signatures, which is why I requested a long Adjournment debate this morning.
Let me give some background to the debate. The Financial Services Compensation Scheme is a safety net for customers of financial institutions in the UK and it steps in when institutions fail. In the recent economic turmoil, a number of banks have failed, including Bradford & Bingley, Kaupthing Singer & Friedlander, Icesave, Heritable and London Scottish Bank. However, not one private individual with a UK deposit in a failed bank has lost any money. In cases in which the amount insured by the FSCS has been exceeded, the FSCS covers the first £50,000 of an individual’s deposit, and £100,000 in the case of a couple. At the time of the Bradford & Bingley failure, the equivalent figures were £35,000 and £70,000. The Government—or the taxpayer—have paid the remainder. That is to be welcomed and has helped UK depositors feel confident that their money is safe. However, the impact on building societies is unfair, which is why I requested this debate.
The compensation payments have been made in the first instance by the UK Government. Part of such payments have been in the form of a loan to the FSCS, which currently amounts to £18.7 billion. The principal of the loans will not become due until September 2011 by which time it is hoped that there will have been substantial recoveries from the assets of the failed banks. However, it is likely that a significant proportion of the £18.7 billion will still be outstanding. Although there may be some rescheduling of the loans, the principal will still need to be repaid and will need to be met by the FSCS levies on the industry.
In the meantime, building societies and banks are being required by the FSCS to service the interest on the loans made by the Government to the FSCS. Those interest payments are capped at £1 billion a year, of which the Building Societies Association estimates that building societies will be required to pay a fifth—up to £200 million a year—in each of the next three years. Building societies consider that a disproportionately high share of the compensation costs associated with failed banks. Societies are annoyed that although, by and large, they behaved prudently during the housing market upswing they are now being forced to pay for organisations that acted much less prudently. As mutual member-owned organisations, any additional costs such as those ultimately work to the detriment of society members—both savers and borrowers.
The cost to societies of up to £200 million per annum in each of the next three years would be equivalent to about 15 per cent. of the sector’s annual pre-tax profit—based on the 2007-08 financial year. With the recent reductions in interest rates, the latest estimates are that the £1 billion per annum cap will not be reached this year. The Financial Services Authority’s forecast is that the FSCS levy for 2009-10 will be £645 million, of which the BSA estimates that building societies will be required to pay £130 million. The impact on building societies contrasts starkly with the banking sector, in which the levy for FSCS management expenses is typically between 3 and 5 per cent. of pre-tax profits over a similar accounting period. It is particularly galling that in the few cases in which societies have got into difficulty, mergers have been arranged with stronger building societies, without recourse to the public funds. Such funds have been needed to bail out depositors at Bradford & Bingley and the other banks.
The fact that building societies are not profit-maximising organisations is fundamental to their mutual ethos. However, their modest profits, which contribute to their reserves and increase their financial strength, are being hit hard by the FSCS levies. Several building societies have recently announced their financial results for 2008, and all show the significant impact of FSCS levies caused by the bank failures of late 2008. Based on the 10 building societies that have reported annual results for 2008 so far, FSCS provisions have reduced reported pre-tax profit by a staggering 75 per cent. Without the FSCS levy, pre-tax profits for the 10 would have been £135 million. After providing for the levy—not all societies have provided for the levy in the same way—pre-tax profits were reduced to £34 million.
Building societies are a model whose time has come and should be encouraged. However, the FSCS-driven onslaught on building societies comes at a particularly bad time when one looks at the bigger picture. There is a backlash against the reckless, bonus-driven excesses that have characterised some sections of the banking industry over the past 20 years, which ultimately led to the near collapse of the system. A consensus is emerging that there is a need for a return to the old and possibly boring values of risk-averse banking.
There are 55 building societies in the UK, with total assets of £395 billion. They hold about 20 per cent. of the total outstanding mortgages in the UK, with about 2.9 million borrowing members, 20 per cent. of retail savings in the UK and more than 23 million investing members. Building societies employ more than 51,500 full and part-time staff and operate through more than 2,000 branches. On 22 February, the Prime Minister, in The Observer, said:
“We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent, careful terms.”
Building societies fit that bill. They are, in many ways, an antidote to the banking excesses of the recent past—a small corner of sanity. It thus makes no sense to be kicking them via the FSCS levy. Instead, they need to be nurtured and encouraged.
There are some possible solutions. Having demonstrated that the building societies and their 23 million investing and 2.9 million borrowing members are being treated unfairly under the arrangements for allocating FSCS levies, and that that is not a good idea given the valuable role performed by the societies, what now needs to be done to give building societies a better deal? Building societies are very supportive of the need for a deposit protection scheme. Although it is unlikely—though not impossible—that they will ever need to call upon it, they are happy to pay an appropriate share of the costs of the scheme. The point at issue is what that share should be. Societies consider there to be a strong case in equity for the allocation of the FSCS levies to be modified to reflect better the relative risk profiles of building societies and banks.
There are several ways in which that could be done. For example, the contribution groups for deposit takers could be recast to include sub-pools so that the banks meet in full the first slice of any FSCS levy resulting from a bank failure. By that I mean before building societies and other deposit takers are required to contribute. Similarly, in the event of a building society-generated call on the FSCS, building societies would meet in full the first slice of any FSCS levy, before the banks and credit unions were required to contribute. Secondly, FSCS levies could be capped at a proportion of a deposit taker’s pre-tax profits—for example, at 5 per cent. of the rolling average of the most recent three-year pre-tax profits. Thirdly, we could base the FSCS levies wholly on balance sheet quantities, but take account of the size of the total balance sheet rather than simply the retail balance sheet. Any of those things is likely to produce an outcome that is, over time, more fairly reflective of the relative riskiness of bank and building society businesses models.
How might the FSA and FSCS respond? I was encouraged to read the report of the Treasury Committee’s questioning of the chairmen and chief executives of the FSA and FSCS on 25 February. They confirmed that in the light of the building societies’ concerns, they would be embarking on a review of the FSCS. Loretta Minghella, the FSCS chief executive, told the Committee:
“I think we are all very conscious of the fact that the compensation scheme has to be funded by the live industry and that does mean that good firms pay for bad firms that have gone, so there is always an element of unfairness about any of the bills that we produce for people…I do think it is time to look again at the way the scheme is funded. One of the things that has come out over the past few months is that of course we have had the money that we have needed to pay the claims as they have fallen due, but the bills are coming at a difficult time and this does raise the question again of whether or not there should be an element of pre-funding for the scheme which I think will now come back onto the agenda.”
After hard questioning by my hon. Friend the Member for Leeds, East (Mr. Mudie) on the unfairness of the FSCS levies on building societies, Lord Turner of Ecchinswell assured the Committee that the issue would be looked into. The Committee also had considerable sympathy for the plight of building societies. The Chairman, my right hon. Friend the Member for West Dunbartonshire (John McFall), said:
“We have had unsung witnesses here who came after the press, namely the Building Societies Association, who did not get themselves into trouble and that has made quite an impression on us.”
Finally, I was puzzled that there was absolutely no mention of a review in two letters that I received subsequently from Mr. Jon Pain of the FSA. I shall pursue that with the FSA, but it would be helpful if my hon. Friend the Minister said what he knows of the review that was promised by the FSA and FSCS to the Treasury Committee, and when it is likely to happen.
I congratulate my hon. Friend the Member for Keighley (Mrs. Cryer) on her excellent early-day motion and on securing this important debate.
I have the good fortune of having the headquarters of two mutual building societies in Leek in my constituency—Britannia and Leek United. They differ in size, but they are trusted institutions and very much part of the local community in Moorlands. In the late 1990s, they were subject to the challenges of the carpetbaggers, but they resisted because of the loyalty, good sense and commitment of their members, who would not be bribed by cash handouts in return for demutualisation. How right they were. The 10 building societies that went down that route no longer exist as separate entities: they have been swallowed up by larger banking groups such as Barclays and Lloyds.
Leek United and Britannia offer something special to their customers: a safe haven for cash, trustworthy advice, sympathetic handling of mortgage arrears and membership benefits. They also make a huge contribution to the local community through charitable giving, volunteering and financial education. No wonder that, as trust in banks slid in the past year, 1 million new building society accounts were opened. That shows that building societies are perceived by their customers as outperforming banks in every aspect of customer service. That is not surprising, because, as mutuals, building societies do not have shareholders to please and are accountable only to their members. Some 74 per cent. of building society borrowers are extremely satisfied or very satisfied compared with 63 per cent. of borrowers from other institutions; 67 per cent. of building society customers think that their provider offers value for money, compared with only 48 per cent. of bank customers; and 68 per cent. of building society customers agree that their institution treats customers fairly compared with 55 per cent. of bank customers.
Building society business models are based on old-fashioned values that are relevant today in our financial crisis. The money deposited by building society customers is used as a basis for lending to other customers. Unlike the banks, which borrow in the wholesale markets to lend to customers, building societies are legally required to obtain a minimum of 50 per cent. of their funding from retail savings. Therefore, their exposure to the wholesale money markets is significantly less than that of banks. Building societies operate far less risky business models and take a prudent approach to lending. That is borne out by their low level of arrears and repossessions, which are in stark contrast to the latest figures published by the banks.
Building societies support the aims of the FSCS. In the current climate, it is important that savers in the UK feel confident about investing in the UK. The FSCS is an insurance policy, and it is right that building societies pay a fair premium. However, I cannot believe that the Treasury intended the FSCS to discriminate against prudent organisations such as Britannia and Leek United. By calculating the levy based on the share of the savings market and excluding, for example, current account balances, the burden is falling disproportionately on building societies and, more particularly, on their members, for it is they who will pay. For 2009-10, the FSCS bill will be around £130 million to the building societies, which is about 9 per cent. of the sector’s pre-tax profits for the 2007-08 financial year. The societies’ share of the levy for the years beyond 2011 is totally uncertain, but it could well cost as much as £200 million per annum.
That contrasts starkly with the banking sector, in which the FSCS levy for management expenses is typically less than 3 per cent. of pre-tax profits over a similar accounting period, or one third of building societies’ exposure. There are two reasons for that. First, the current allocation of FSCS levies relates to the size of each contributor’s retail deposit balances. Building societies, which have always raised the great majority of their funds from their traditional retail savings customers, will pay, relative to their total balance sheet, much more than the banks. Secondly, building societies aim to provide the best rates to both borrowers and savers, rather than maximise their profits and pay dividends to external shareholders. That is why so many building societies are at the top of the best-buy tables. Building societies’ stated profits, even in good times, are much lower.
Having said that, Britannia has produced some excellent results for the past year—it must be congratulated on its ability to sustain itself in this period of financial turmoil. Leek United is by far the smallest of the two building societies in my constituency. The charge against its 2008 accounts will be a whopping 20 per cent. of its pre-tax profits. It will also be faced with significant charges in future years and a great deal of uncertainty about the size of the levy beyond 2011.
Proportionately, the cost to Britannia is not as great, but the cost to its members will be huge, as it is the members who will bear it. I should declare an interest: I am a proud member of Britannia building society. The 2008 charge to Britannia was £19.8 million. In 2009, it expects the figure to be about £12 million. That money would otherwise have been returned to Britannia’s 3 million members, either through better rates or directly through its annual profit sharing scheme, which gives money to members based on the building society’s performance in the previous year.
Surely it is grossly unfair that building societies should pay for the failure of dysfunctional banks. No building society has ever called on the FSCS or its predecessor schemes. That is not to say that it will never happen, but it never has, and that should be recognised. The Financial Services Authority should overhaul the UK’s deposit protection scheme to ensure that building societies do not bear a disproportionately large share of the £1 billion annual bill. Should not building societies’ and banks’ payments into the compensation scheme be risk-related, as my hon. Friend said? Methods exist to do that, and they must now be considered urgently. It is not fair that building societies, which have operated such a prudent financial system, should be so penalised.
It would be ironic and devastating if, having seen off the rapacious carpetbaggers of 1999, Leek United should find its position compromised by the FSA’s bid to bail out the very building societies that went down the risky, high-profit route of becoming banks. Leek United, helped in the battle by Britannia building society, rightly rejected that route because it decided that that was the best option for its members, and those members overwhelmingly supported it. Let us ensure that building societies are given the confidence to go forward rather than being penalised for being prudent and risk-averse.
I congratulate the hon. Member for Keighley (Mrs. Cryer) on securing the debate and thereby doing a great service to building societies in the UK, which are angry—furious—that they are being penalised for other people’s mistakes. I have signed her excellent early-day motion. I declare an interest of which she just reminded me— I am grateful to her for triggering my memory—in that I am a member of Dunfermline building society in my constituency. Unfortunately, I will have to leave early, if you will excuse me, Mr. Pope. I have another engagement, but I will read closely the Minister’s response in Hansard to ensure that all points have been dealt with.
In the heart of my constituency sits a modest but important building, the Dunfermline building society headquarters. Dunfermline building society has been a strong constant in west Fife and Scottish society for almost 150 years. While others have boomed and many have gone bust, it has stayed steady and strong. It is now the largest Scottish building society, with assets topping £3.3 billion and a network of 34 branches and 37 agencies. It is playing a crucial role in the expanding social housing sector in Scotland and recently announced an additional £30 million in funding for 500 affordable homes across Scotland during the next three years. In its strong support for social housing, Dunfermline building society has made a huge contribution to something important not just to the Government, but to all politicians in the House during these difficult times for the construction industry. I hope that the Government recognise that building societies contribute hugely to such important Government objectives and help the Government to achieve their aims.
Other institutions have chosen to travel a riskier route over the past decade or so. They have made substantial profits during that time, but those have profits have proven unsustainable. Meanwhile, societies such as the Dunfermline building society have steered a much steadier course involving lower profits and have turned out to be much stronger institutions in the long term as a result.
My mother and father are in their 70s. They are safe drivers who have hardly had an accident during their whole time as drivers and who, in recent years, have had no accidents at all. They secured a special deal through their insurance company that involves lower premiums. They are not required to pay as much as Jimmy Smith who lives next door, drives at breakneck speed at every opportunity and crashes regularly. They are rewarded for safe and responsible driving. That policy is not available only to my parents, by the way—it is not a special deal that I secured for them—but is available to lots of people throughout the country who are responsible drivers. Driving discounts arise through no-claims bonuses, but some are due also to age. Organisations such as Saga offer cheaper insurance for older drivers, who are regarded as safer.
The Government and the state seem to offer a different scheme. Those who are irresponsible—those who have the car crashes of the financial sector—have others to pick up the tab for them. That is fundamentally unfair and does not reflect fair and decent regulation. We require urgent change so that people are not penalised for responsible behaviour. We have encouraged people to save, and now they are being penalised for doing so. That is extremely unfair.
When the Financial Services Compensation Scheme was at a lower level, the building societies accepted the fee that they were required to pay. They might have felt that it was disproportionate and unfair, but still they accepted it, perhaps because they could afford it. However, now that the fee has increased dramatically, those anomalies are being magnified—they have mushroomed tenfold. That must be addressed. Even though the arrangement might have been accepted in the past, that does not mean that it is acceptable now that the fee is much higher.
As a proportion of their profits, building societies are required to pay almost three times as much as the riskier banks. I am genuinely puzzled why that is the case. Why have we not got a better balance between value and risk? Surely we have learned something over the past year to 18 months. What is important is not just value and profits, but the associated risk. We should be encouraging the behaviour that encourages fine saving and safe saving, so that we do not end up having to pick up the tab for those who behave inappropriately. Does the Minister believe that we require an urgent change? Will there be a review to ensure that those who have chosen safer and more secure routes are not penalised for it?
Dunfermline building society is part of my community. It is well respected throughout west Fife and Scotland and it is a safe institution. There is an important point to be made in the wider perspective. When even the safe bodies that have not chosen the rocky road of high profits are under threat, the whole fabric of society begins to unravel and people have even less confidence in Government institutions and the advice provided by Government, Ministers and politicians. We must take an extra step to ensure that institutions such as the Dunfermline building society are rewarded, not penalised, for being trusted.
I am here to support my friend and constituency next-door neighbour the Member for Keighley (Mrs. Cryer), who tabled the early-day motion that has attracted huge support from colleagues across the House. There is a problem, as everyone who has spoken has identified, and we are all looking to the Minister to give us a solution this morning.
The Marsden building society is located in the heart of my constituency, just as the Dunfermline building society is in the heart of the Dunfermline constituency, but the Marsden’s reach extends across Lancashire. It has been a highly regarded and profitable building society for about 150 years; it was established in 1860 and has about 40,000 members. It does not pay dividends to shareholders, any profits are ploughed back into the organisation and it offers good rates to borrowers and depositors alike. It is a good, highly regarded organisation that supports the community and has a strong regional identity. Earlier this morning I visited its website, which tells its 40,000 members:
“As a member of Marsden Building Society you can rest assured that your savings are in safe hands. The Society’s business model is well placed to protect the interests of members.”
That is true—and what a contrast to the banks, which have let everyone down.
I do not know the last time that someone was knighted for their services to building societies, but we have the grotesque example of Sir Fred Goodwin, who still has his knighthood for services to banking. I am not going to be diverted down that road, Mr. Pope—I see you looking at me in that admonishing way of yours. As long as we have knighthoods and damehoods, I should like to see one go to someone who promotes the mutuals and building societies that play fair.
Does the hon. Gentleman have it in mind to put forward the hon. Member for Keighley (Mrs. Cryer) for a damehood for services to building societies?
I would be delighted to do that, but I am against any name-changing titles, whether they are knighthoods, damehoods or anything else, but let me move off that point, interesting though it is.
I had a word with Neil Shoesmith, the chief executive of the Marsden building society, to tell him that my friend from Keighley had secured the debate, and the first thing that he said was that the Marsden accepts, without question, its responsibilities under the Financial Services Compensation Scheme. I would expect him to say that, because all the building societies realise that the burden should be shared fairly; however, it is not being shared fairly. As other Members have said, the liability for the levy favours organisations that are funded by the wholesale markets rather than by retail deposits. The Marsden, like most building societies, is almost 100 per cent. funded by retail deposits and the levy is equivalent to about 15 per cent. of its pre-tax profits, whereas a bank with high wholesale funding pays about 5 per cent., as we have heard. That is wholly disproportionate.
Despite those additional burdens, the Marsden has come through the crisis profitably, with strong capital and low-risk residential mortgage books, but that is not to say that building societies do not fail sometimes. The Skipton and Scarborough building societies recently merged; that is how building societies respond when they get into difficulties. They have not gone cap in hand to the public purse, expecting a bail-out as the banks have. We are now in a grotesque situation in which risk-averse building societies are funding, through the perverse levy, the losses of banks and other organisations that have failed because of their imprudent lending. That is the reality. The levy erodes building societies’ ability to offer the best rates to savers and borrowers.
In a nutshell, prudent, profitable organisations such as the Marsden, with low-risk assets, are having to pay disproportionately for the excesses of those with high-risk assets and low capital. I do not know what we need to do get out of that situation. We have heard that the Treasury Committee is to conduct a review, and that Lord Turner is to look into the issue. Whatever happens, we need an early review of the scheme because of the corrosive impact that it is having on the Marsden and other building societies across the country.
I, too, congratulate my hon. Friend the Member for Keighley (Mrs. Cryer) on securing the debate, which is of equal interest to me because the headquarters of the Nationwide building society is in my constituency. I know that she has also been assiduous in taking this matter up in private meetings at the very highest levels of Government, and I congratulate her on that. Although I do not sign early-day motions, because I am a parliamentary private secretary, I support hers completely. [Interruption.] The hon. Member for Taunton (Mr. Browne) needs to speak to the Chief Whip, who reaffirmed last week, in a private meeting, that that is absolutely so.
The Nationwide employs many people from my constituency and the surrounding constituencies, many of whom have written to me about the levy because they are concerned about the effect it will have on the Nationwide in Swindon and the great part that it plays in the community and the knock-on effect on that community. It is one of those businesses that makes a major contribution to our local and national economy, being the largest building society, and the initiatives that it takes on locally and nationally are ones that the Government would support, because it helps Swindon residents and the wider society. We are asking the Government to support it and all the other building societies that hon. Members have discussed today.
I was seven years old when I opened my first building society account. My parents took me to the Halifax because they banked there and they felt that it was a safe place to put their money. It was once the biggest mutual and was the watchword for safety, but then it demutualised. I kept my account into my adulthood, as I am sure many other hon. Members did. I voted against demutualisation, and I think that those who thought demutualisation the wrong thing to do have been proved right. Both my right hon. Friend the Member for Birkenhead (Mr. Field) and I knew that something was wrong with the Halifax in 2006, when the Christmas hamper firm Farepak collapsed and HBOS grabbed £30 million of savers’ money to add to its £4.8 billion profit. We said then that something fundamental had changed in that institution that would lead to its downfall. Even so, we called on the bankers, in early-day motion 117 of the 2006-07 Session, to repay that £30 million, and we warned that the collapse of Farepak would be a greater portent of what was happening to that demutualised society.
Although many financial institutions, such as HBOS, have not been prudent in recent years, the Nationwide has been. It has remained mutual and it has protected savers. I have a lot of time for the Co-operative party’s campaign to remutualise Northern Rock and Bradford & Bingley, as mutual ownership has long been shown to be a good solution for ensuring a stable, long-term future for Nationwide and other building societies. However, instead of being rewarded for that, they are being punished, as my hon. Friends have said.
As the Building Societies Association argues, it is particularly galling that, in the few cases where building societies have got into difficulties, mergers have been arranged by stronger building societies without recourse to public funds—a phrase my hon. Friend the Member for Keighley used and one that we should repeat. I therefore congratulate the Nationwide on taking on board two smaller societies—the Derbyshire and the Cheshire—to safeguard those building societies and the whole sector.
Conversations with the chief executive of Nationwide, Graham Beale, who would be an admirable candidate for a knighthood, have shown that both he and the board felt strongly that it was their duty to take on the societies that had been exposed to some toxic debts and that they should do so at no expense to the taxpayer. However, as a mutual, all the Nationwide’s profits are ploughed back into the organisation and any losses have to be absorbed by the organisation. The Nationwide has no shareholders to cream off the dividends so it keeps a much smaller amount in reserve, most of which is in its retail balances. Even in good times, building societies’ stated profits will always be lower, so they will still suffer from the system that the Financial Services Compensation Scheme has created.
The Nationwide is being forced to pick up the bill for the failure of banks, and rather than being supported at a time of stress, it is being leant on. That gives the building society sector less room for manoeuvre and leaves it with less money to lend to its customers at a time when the Government are asking them to lend more. Nationwide favours a pre-funded scheme based on risk. I would like the Minister to consider such a scheme and give us his opinion on it. Last year, the Treasury Committee said that it favoured such a scheme, which would provide greater consumer confidence and encourage institutions to act prudently. Last June, the Governor of the Bank of England also said:
“A degree of pre-funding is one of those ideas that is bound to be unpopular before the fund is called upon, but seems decidedly wise after the event as it lessens the burden on the banking system in a time of stress”.
A risk-based levy could be introduced whereby banks meet the first slice of any FSCS levy resulting from a bank collapse, with building societies contributing only after the banks have paid their dues.
Will the hon. Lady give way?
The hon. Lady has plenty of time in which to take interventions. Does she think that the same principle should apply to credit unions and that they should bear their losses first? At the moment, when a credit union collapses, the cost of compensation or of meeting customer balances is spread between banks, building societies and credit unions. Does she think that credit unions should stand alone too?
Credit unions in this country do a fantastic job, particularly for the small savers in my constituency who suffered from the collapse of Farepak. We should consider all those points, but I will not go as far as saying yes to the hon. Gentleman’s question because I know that some credit unions are small organisations and that they are not nearly as large as the building societies that we are discussing. We need to look at credit unions as a separate case.
Finally, I ask the Government to consider increasing the compensation limit to £100,000. That is something that the building societies have also asked for. Doing so would help them to compete with European and American banks and would protect 99 per cent. of building society deposit balances. As hon. Members have said, no building society has ever made a call on the FSCS levy, and Nationwide and all the building societies that we have heard about today are paying for institutions that have behaved far less prudently than they have. I hope that the Minister will listen to our pleas and will stop this iniquitous levy on our local building societies, which are local and national heroes.
Thank you, Mr. Pope, for giving me the opportunity to speak in the first of the winding-up speeches on this extremely important subject. I congratulate the hon. Member for Keighley (Mrs. Cryer) on securing the debate. She has not yet been recognised for her services to the building society sector by Her Majesty the Queen, but no doubt that time will arrive in due course. The hon. Lady has given us a welcome opportunity to discuss a vital topic, and it has been taken up by a number of hon. Members who have direct constituency experience of the benefits that building societies bring to their communities and, indeed, in most cases specifically to them as individual depositors and savers.
My party supports an insurance scheme because it is an extremely sensible safety net. The initial scare led to depositors queuing in an orderly British fashion outside Northern Rock to withdraw their deposits. One feels that in many countries people would have been breaking down the doors, but in this country people stood for hours and hours in queues. However, so far no one has actually lost their money in the banking crisis or storm that has hit our financial sector. That is very important because if the view took hold among the population that if banks or building societies were going down, people would lose their deposits and, in some cases, their life savings, panic would set in. People would want to withdraw their money and keep it under their mattress or put it into what they regarded as a safe harbour. That would obviously have profound implications for the banking and financial sectors, and indeed for the economy as a whole.
It is not just in the interest of the individual depositor or even the individual institution to have some sort of safety net to protect people, although obviously the primary beneficiaries, at least in the immediate term, are depositors who have confidence in the British financial sector. Of course, if we did not have a scheme of this type, people would still expect to be bailed out if their bank or building society failed, so in a way the insurer of last resort would be the state. That is increasingly what is happening, but the banks and building societies themselves have a responsibility to insure as far as possible against risk in their sector, and they should not assume that the state will always be there to pick up the pieces. If the state needs to do that on behalf of all of us, using the money we all give to the state as taxpayers, it should be the last resort rather than the norm. My party shares the wide consensus that an insurance scheme broadly of that type is a desirable and sensible way to proceed.
Engaging in the key point of the debate, I also agree that the share the mutualised building societies are being asked to contribute is unreasonable. The relevant calculation—a point made by my hon. Friend the Member for Dunfermline and West Fife (Willie Rennie) and others—is surely not the overall share of the market for mutualised building societies compared with that for banks. Surely, the relevant consideration is the risk to funds of depositors in the building society sector compared with the risk to those in the banking sector. One does not need to calculate that risk in a particularly sophisticated way—although no doubt there is benefit in doing so—because the evidence is there for us all to see.
Many of the Members who have contributed to the debate have already made the point that so far no mutualised building society has had to draw on that insurance-based scheme. To use the example mentioned by my hon. Friend, the situation is like that of the extremely cautious driver who makes sure that their car is insured. Of course, they are legally obliged to do so, but their low premium reflects the low likelihood that they will ever have to draw on the insurance. That is surely the relevant and sensible model for us to follow. Its logical conclusion is that because building societies are much lower risk, they should pay a much smaller proportion to cover against risk than higher-risk institutions. It would be an extraordinary irony if building societies were threatened because of the size of the levy on them to cover the risks taken by the banks that got us into these difficulties in the first place.
While we have the opportunity, and because it is relevant to our deliberations, I want to widen the debate slightly and consider how we got into a situation where building societies feel that they are being put under unreasonable pressure and banks are much more likely to draw on the insurance-based scheme. I agreed with many of the comments that the hon. Member for Staffordshire, Moorlands (Charlotte Atkins) made, but I do not necessarily take the view she seemed to imply that shareholder institutions inevitably deliver a lower level of customer service than organisations that do not have shareholders. I believe that shareholding capitalism has an important, dynamic part to play in our economy, and it would be wrong for us to conclude that shareholder capitalism per se has failed.
Clearly, many capitalist organisations with shareholders—in this case, banks and financial institutions—have failed. In part, that was caused by a failure of regulation and of leadership at the highest levels of the banks, and by pure greed. People put short-term profitability before the long-term interests of their institution.
I remember the unseemly clamour when many of the building societies demutualised. When the people who had previously been running the mutualised building societies went into work after demutualisation to do what, on the face of it, appeared to be exactly the same job as they had done before, they thought it only right that they should be paid an amount that was three or four times more because they were now running a swashbuckling financial institution—yet they were sitting in the same office doing what appeared to be much the same job.
That was also the case when many of the utilities were nationalised. Civil servants who appeared to be perfectly competently running utilities suddenly thought that they were right at the cutting edge of modern capitalism and paid themselves far greater salaries to do what appeared to be much the same job as they had done before.
Is the hon. Gentleman aware that at the time of the demutualisation of Bradford & Bingley and the Halifax, which are both adjacent to my constituency, I and many of my colleagues wrote to the two organisations and begged them not to demutualise? Now we feel like saying, “We told you so.”
I am sure that the hon. Lady did that. One of the things that I thought was interesting about the phenomenon was that when members got the letters through their door, many seemed to take the view that it was an opportunity to get a free cheque for £200, £300 or £400, with no downside at all. I do not think that the members who voted for demutualisation can completely absolve themselves of blame; there was a vote, and they chose to exercise it. The situation was presented to people—at least they chose to see it that way—as though the question was, “Do you want to be given several hundred pounds with no downside?” It is not surprising that many members of the building society, when the choice was presented to them in those terms, thought, “Why not take the money?” They would still have a mortgage with the same organisation, which would have the same name, and they would go into the same office to talk to the same people in the same uniforms, but they would have enough money to pay for a holiday in southern Europe, or whatever.
[Mr. David Amess in the Chair]
It seems that only now the chickens are coming home to roost, and people have realised what they let themselves in for, but at the time it appeared to many people who were less forward-thinking than the hon. Lady that demutualisation was all upside. At the time, there was no obvious downside.
However, it is fair to say—I shall inject a note of politics into this discussion—[Interruption.] No, it is important, because it is almost exactly a quarter of a century since the big bang, and the financial deregulation mood took hold in this country and there was a sea change in the way that we viewed and approached financial services. During that quarter of a century, the Conservatives and Labour have governed for almost precisely the same proportion of time. They were both in power for about 12 or 13 of the past 25 years and, in that sense, have presided equally over the process.
Anyone viewing the financial catastrophe that has engulfed the whole financial services sector could reasonably ask what the motivation was that led to both the Conservative party initially and then the Labour party being so remiss when it came to trying to prevent it. Why were they asleep at the wheel? Was it simply incompetence, or were other motivations and forces at work?
It was the Conservative party, of course, that sowed the seeds of many of the problems that we face today. There was a belief in high-risk, high-return capitalism. I am trying to look at the situation as dispassionately as possible and I think that was the main motivation for many Conservatives in the “loadsamoney” 1980s—you will remember, Mr. Amess, that the 1980s were satirised as being about loads of money and, as there often is, there was truth in the characterisation. It was a me-first decade, and a time to make money as quickly as possible.
As I try to understand why that mood gripped the Conservative party at the time, and is probably still very much a characteristic of its outlook, I suppose that it was a reaction to the cloying corporatism of the 1970s. The sense took hold that dynamic, entrepreneurial people were being held back and needed to be liberated, and that we needed a higher-risk, lower regulation economy. That was a world away from the benefits of prudent mutualisation that we are discussing this morning and, of course, the chickens have come home to roost.
I have not informed the right hon. Gentleman that I would mention him because he has only just come into my mind, but Members such as the right hon. Member for Wokingham (Mr. Redwood) were making such a case until a few months ago. This is not a history lesson. The Conservative party is still very much wedded to the approach that led to the failures of institutions in the financial services sector that are now becoming apparent even to them.
What is harder to understand is why in the second half of that quarter century the Labour party, which one traditionally thinks of as the party of the left, of trade unions and even of socialism in the United Kingdom, presided over disaster in the financial services sector. Again, I am trying to look at the situation as dispassionately as possible and trying to understand. I have heard several Labour Members make extremely reasonable, sensible speeches, but one would think from listening to them that Labour had not been in Government for the past 12 years, and that a Labour Government had not set up the regulatory system that allowed the failure to happen.
As I try to understand how the Labour party came to preside over the collapse in Britain’s banking system, I conclude that the motivation was probably a desire to rebrand as Labour after Tony Blair became leader of the party in 1994.
In a moment. There was a desire to come up with a wholly new entity—new Labour—and it was important that it was branded as something separate from the Labour party that had gone before, which had lost the previous four general elections, as you, Mr. Amess, will remember more than anyone.
On a point of order, Mr. Amess. That is straying way beyond the terms of the debate. We have been listening for the past 10 minutes to something that has no direct bearing on the subject before us.
I have to advise Mr. Browne that a valid point has been made. I ask him to stick much more closely to the terms of the debate.
I seek your advice, Mr. Amess. Am I able to give way on a subject that you have ruled to be inappropriate for discussion?
The intervention must be specifically about the Financial Services Compensation Scheme and the levy on building societies.
Mr. Amess, you took the words out of my mouth. The FSCS is, of course, a body that was set up by the Labour Government in 2001—traditional values in a modern setting—and part of the regulatory regime and one of many measures introduced by the Government. The first Standing Committee I ever sat on was about regulating credit cards. I am delighted with the regulation that we introduced. However, we face a global economic crisis that neither this nor any other Government predicted.
Interventions from Parliamentary Private Secretaries remind me of speak-your-weight machines. One puts in the necessary information, and it comes out the other end.
For many years, there have been warnings from my hon. Friend the Member for Twickenham (Dr. Cable) and many others, so I observe only that the Labour Government are the Government now and have been for 12 years. One burden of being in government—an opportunity that, sadly, I have yet to experience—is that one has to take responsibility when things go wrong as well as taking the credit when they go right. That is the misfortune that Labour must face, having presided over a collapse not only in the number of mutual building societies but, more importantly to some people, in the viability of many financial institutions.
My party opposed demutualisation—as did the hon. Member for Keighley and others. We need a mixed sector, comprising a banking segment and complementary mutual building societies. There should not be one dominant model; it is not desirable for all mutuals to turn themselves into banks, because mutuals offer different and complementary services. We also need to move to a different banking model altogether, separating the high street banks and their depositors—the people we meet in our constituencies who put their savings and money into banks and borrow small amounts from them under the protective umbrella of insurance schemes and, ultimately, if need be, the state—from the high-risk investment banks.
The hon. Member for Pendle (Mr. Prentice) touched on my next point. When I look at the very highly paid chief executives and senior managers of banks, I am always reminded of the expression about criminals: “If you do the crime, you have to be man enough to do the time.” If bankers are willing to take the big pay when times are good, they have to be big enough to take the losses when times are bad. It is no good people saying, “We want the state out of our lives—all those people trying to regulate and frustrate our entrepreneurial spirit,” as they make lots of money and award themselves huge bonuses, when as soon as things do not go so well for them, they suddenly want to be propped up and looked after.
I am coming to my final point and want to leave time for the other speeches, but I shall give way once more.
Will the hon. Gentleman’s party give back the dodgy £2 million from its dodgy donor?
I am not entirely sure about that question, so I shall defer to you, Mr. Amess.
I ask the hon. Gentleman to resist responding to it, because I cannot quite see its relevance to the debate.
I cannot either. It may be displacement theory—a cry for help from the party that presided over disaster.
In conclusion, my party strongly supports the point that early-day motion 426 makes. It is extremely regrettable that we are in this deep financial crisis, which has affected our whole economy and continues to do so. There are big lessons that we can learn about how our financial institutions are regulated and the merits of a mutual sector that works much more prudently and modestly on behalf of its members than banks have on behalf of their account holders. I hope that the Minister will look kindly upon the case that the hon. Member for Keighley and others make, because the hon. Lady makes an eminently reasonable point about the balance between risk and reward. At the moment, the building societies are being very unfairly treated.
I congratulate the hon. Member for Keighley (Mrs. Cryer) on securing this interesting and thoughtful debate. It raises a host of issues, some of which are relevant, and others, including many remarks that the hon. Member for Taunton (Mr. Browne) made in his 14-minute speech, which seem wholly irrelevant, given the title of the debate.
I shall probe the issues that have been raised and, in doing so, comment directly or indirectly on the speeches made by the hon. Members for Staffordshire, Moorlands (Charlotte Atkins), for Dunfermline and West Fife (Willie Rennie), for Pendle (Mr. Prentice) and for South Swindon (Anne Snelgrove). I intervened on the hon. Member for South Swindon regarding credit unions, because, importantly, the Financial Services Compensation Scheme shares the risk of failure between sectors, and if one part of the deposit-taking pool wanted to go it alone, there would be an issue about how it affected other parts of the pool.
Having had time to reflect on the hon. Gentleman’s point, my response is that credit unions are so small and deal with so few people that they will not call on the FSCS as much as he makes out. I take his point, but any measure must be part of an overhaul of the whole system.
The hon. Lady makes an important point. We must think about what risk we are trying to assess, because although the absolute amount that credit unions may call upon from the FSCS may be small, credit unions collapse more frequently than banks or building societies, so the assessment of risk is much more complex than the debate has so far addressed. The hon. Lady and the hon. Member for Pendle pointed out that building societies have swallowed their own smoke in this financial crisis and, indeed, problems with building societies have led to mergers.
The hon. Lady mentioned Nationwide acquiring the Derbyshire and Cheshire building societies. It is worth pointing out that they were the two societies that sold their offshore deposit-taking activities—Derbyshire in the Isle of Man to Kaupthing Singer & Friedlander, and Cheshire in Guernsey to Landsbanki—and created a raft of problems for savers inside and outside the United Kingdom. Building societies must remember that rescuing smaller institutions involves a cost to them and to their members. No merger is cost-free, even if only the cost of the transaction is involved. Indeed, building society members pick up costs from two sources: first, the levy from the FSCS and, secondly, the cost of the merger with their stronger counterparts.
Everyone on both sides of the House—or around the hemicycle, whichever way one refers to Westminster Hall—agrees about the importance of the financial mutual sector and wants it to survive and to continue to strengthen, because its ethos gives a distinctive character to its organisations and how they deal with their members and customers. There have been legislative changes to strengthen the sector. The hon. Member for Staffordshire, Moorlands referred to Britannia building society, which is merging with Co-operative Financial Services and taking advantage of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007, which my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) promoted during its passage through the House. That legislation is being used to help to strengthen the mutual sector.
The hon. Member for Keighley made a cogent argument about the building society levy’s disproportionate effect on building societies, and I noticed yesterday, when Newcastle building society published its results, that the levy amounted to about £6 million. Unfortunately, the other major factor affecting that institution’s results was its exposure to Icelandic banks, so it has been caught twice by the financial crisis.
The FSCS is an important tool that protects consumers in the event of a default and an important part of the architecture of this country’s financial regulation. Although the scheme came into effect in 2001, there were predecessors, including a stand-alone building society scheme that has now merged with the overall scheme for deposit takers. The FSCS exists to instil confidence in consumers, and it is important that the institutions that benefit from being able to offer their customers such protection recognise the costs that must be paid when there is a default.
One point that has come out a couple of times during the debate is that no one, either when the FSCS scheme was set up in 2001 or when its funding was reviewed in late 2004 or early 2005, envisaged the current financial crisis. I do not think that we would have had this debate had it not been for the fact that the FSCS has been used as a conduit for funding the transfer balances from Bradford & Bingley to Banco Santander and some of the balances from the Icelandic banks to ING and to make payments out to some people who have banked with the Icelandic banks and London Scottish. There is a cost attached to that. No one in this debate has argued that the industry should not bear that cost, because if it did not do so the taxpayer would.
The taxpayer is making a significant contribution to the funding of the bank rescues, but it is right that the cost of bailing out individual institutions is borne by the industry. The question then becomes how that burden can be shared. Clearly, the existing funding mechanism that has been reviewed and supported relatively recently comes under particular strain at a time such as the present. Building societies are not the only ones who are concerned: independent financial advisers are also worried about some of the costs that they are having to bear in respect of the collapse of Pacific Continental Securities, for example, which is a boiler room that has gone bust owing a huge amount to its customers, leaving IFAs to pick up some of the tab. It is not just building societies that are facing this situation. Even if we accept the inequity of how the cost of financing has been borne by building societies and others, the question is, how can we design a more equitable scheme? Obviously, the responsibility for that rests with the FSA, which designed the scheme rules, and it will need to think about that.
A number of suggestions have been floated in this debate, including one to cap the contribution under percentage of profits. That is fine when all businesses are profitable, but I am not sure how such a scheme would work in practice at the moment, given the losses that have been incurred by the large banking institutions, such as HBOS, Lloyds and RBS. Of course, the scheme needs to cover all its costs, but a cap on contributions may mean that an element of the cost of the scheme will not be met from that levy. So what would happen then? Who would pay the excess over the amount that would be generated if the levy was restricted to 5 per cent. of profits? It is not clear to me how such a scheme would work in practice and who would pick up any shortfall.
There has been some discussion about risk. The hon. Member for Dunfermline and West Fife talked about that in the context of a no claims bonus-type scheme, as used for motor insurance, but that presupposes a level of pre-funding. There has been a lot of debate about whether there should be a pre-funded compensation scheme. The Minister and I discussed that topic at some length during the Commons’ consideration of the Banking Bill. Pre-funding had its attractions, but some difficulties attach to a pre-funded scheme. When the Banking Bill Committee took evidence from various interested parties at the start of its proceedings, Adrian Coles, the chief executive of the Building Societies Association, was quizzed on a pre-funded scheme and he said that such a scheme, assuming that building societies had to hold the same capital, could lead either to savers being paid a lower rate of interest or to borrowers paying a higher rate of interest. So even a pre-funded scheme is not cost-free from a building society’s perspective in relation to how it supports its members. There are some complexities that would need to be worked through in respect of a pre-funded scheme.
I understand the hon. Gentleman’s point about the complexities, which need to be considered carefully. We are just asking the FSCS to look again at various approaches. The building societies are not asking to be let off scot-free: they are asking for a more level playing field, because at 3 per cent. of profits for the banks and 15 per cent. on average for the building societies, the levy is iniquitous.
I agree. There is a lot of sympathy out there for building societies, but the solution is not necessarily straightforward. That is why I reflected on the comments made by Adrian Coles of the BSA. A risk-based pre-funded scheme would have an impact upon a building society’s ability to serve its customers: it might have to either pay a lower rate to savers or charge borrowers a higher rate. Any review of the scheme needs to be carefully thought through, because there is no easy solution. The solutions proposed so far have their failings and will create a set of winners and losers. It is not necessarily about one sector winning and another losing. Some people in the building societies sector may lose out as a consequence, depending on how risk is assessed and quantified.
I am also concerned about the idea, which has been suggested, of moving away from the larger pools for deposit protection to smaller pools, with building societies perhaps picking up the first tranche of a series of losses. Would the building societies be in a position to bear the first loss? How big would that pool be? At what point would the risk be shared with banks and other deposit takers and then, at the next level up, with other financial services institutions? There has been a big debate already about how big the various pools should be and whether they should be tightly defined in relation to particular types of institution or whether they should be broader and what the transfer risk between them is. There is no easy solution to this problem; I wish there were, but I do not believe that there is. I do not think that there is a quick solution, either, as any solution will involve significant change and needs to be properly thought through.
I welcome the FSA’s consideration of the matter. It has already embarked on a review of the Financial Services Compensation Scheme to consider how it can introduce seven-day pay-outs or a single customer view and some other important issues. I hope that it looks at this matter carefully, because if there is to be change it is important that we get the right answer—one that is equitable and does not have any unforeseen consequences. We have seen in this crisis that a scheme that was supported by a range of institutions not that long ago is coming under pressure because of a specific set of circumstances. New circumstances may arise in future. Perhaps because of the consolidation of the building society sector, building societies will not be able to swallow their own smoke as they have done in the past. What would be the consequences of that if we moved to smaller pools or a pre-funded scheme, or one based on risk?
This is a complex topic. There is a great deal of sympathy with the views of building societies, but I do not think there is a clear solution—a clear way to tackle the problems—at the moment.
I congratulate my hon. Friend the Member for Keighley (Mrs. Cryer) on securing this Adjournment debate. Through the early-day motion and extensive lobbying, she has shown a great interest in the impact of FSCS levies on building societies, and we have previously discussed the matter. I hope to use this opportunity to go into greater detail on the current position.
It is important to set the matter in context. I do not think that I need to say that we are living through extremely uncertain times and that the banking crisis has made the past 18 months challenging for the industry, the Government and the general public. Now is not the time to debate the causes of the crisis or to decide who is to blame. Suffice it to say that the Government took action when they needed to in relation to Northern Rock, Bradford & Bingley and the Icelandic banks. As my hon. Friend noted, no retail depositor in British banks has lost out in the wake of the global financial crisis. I emphasise that the Government remain committed to doing whatever it takes to stabilise the banking system to protect depositors and taxpayers and to support the wider economy.
As hon. Members will be aware, we brought into force the Banking (Special Provisions) Act 2008 to give us the right mix of emergency powers to deal with deposit takers in difficulty. That Act’s successor, the Banking Act 2009, reformed those powers and put them on permanent footing. It made some changes to the legal framework for the FSCS and introduced a new bank insolvency procedure, which aims to allow speedier payouts to eligible depositors. We hope never to have to use those powers, but we are now in a position to deal swiftly and precisely, if necessary, with financial institutions that pose a threat to financial stability in the UK.
We have used the powers under the 2008 Act to protect the financial system by, as the hon. Member for Fareham (Mr. Hoban) noted, transferring deposits from Bradford & Bingley, Heritable and Kaupthing Singer and Friedlander. We have also ensured that retail depositors in UK branches of Landsbanki and London Scottish have been fully compensated. All that costs money. The Government contributed by paying for the transfer of deposits or compensation when depositors stood to lose more than £50,000. We expect the Icelandic Government to support deposits in branches of Icelandic banks.
That leaves a cost, which falls on the UK FSCS. As my hon. Friend the Member for Keighley clearly outlined, the principle behind the scheme is that the industry mutually meets the costs of compensating retail customers for losses caused by the failure of their peers, be they deposit takers, insurers, or other firms. I did not hear any hon. Member who spoke today argue with the general principle that the industry should meet its own costs of failure.
Under normal rules, a large part of the cost of compensating depositors could have fallen immediately on FSCS levy-paying firms. That would have left deposit takers facing a £1.8 billion bill and other firms a £2.2 billion bill. The Government recognised that that would be a serious burden for many firms and that the FSCS would still need large loans to meet costs over the first £4 billion. Accordingly, we arranged for the Bank of England to make loans. The loans are being refinanced by the Treasury, but they will have to be paid for. The interest costs on the borrowing will be met by deposit-taking firms, and the loans will be repaid over time by FSCS levy-payers after recoveries have been made from the assets of those banks that were the subjects of pay-outs.
As my hon. Friend explained, the deposit-taker category of firms includes banks, building societies and credit unions, which brings us to the nub of today's debate—that building societies believe that it is unfair that they must contribute to the cost of failed banks. I understand that, and I have every sympathy with societies who find themselves in that position.
I think the building societies object not to contributing to reimbursement in relation to failed banks, but to the proportion that they are paying compared with the banks.
I agree with my hon. Friend, and I will say more about that if I can. We face a zero-sum game: if one person pays less, someone else must pay more. My hon. Friend suggests that it is a matter of balance and that building societies are being unfairly discriminated against. She and my hon. Friends the Members for Staffordshire, Moorlands (Charlotte Atkins), for Pendle (Mr. Prentice) and for South Swindon (Anne Snelgrove) spoke eloquently about building societies in their constituencies—Britannia, Leek United, Marsden and Nationwide—and rightly made the point about the share of the FSCS levy that building societies are expected to pay. The hon. Member for Dunfermline and West Fife (Willie Rennie) said that the Dunfermline building society is a strong constant in his constituency and made the point that my hon. Friends made about the value of mutual societies. We all recognise that that is important.
Let me be clear about the current position and responsibilities. The detailed rules on levies for the FSCS are a matter for the Financial Services Authority, which was set up as an independent regulator under the Financial Services and Markets Act 2000. The Government have always been clear that the costs of the scheme should be met by the financial services industry, and one of the main reasons for the scheme is to protect consumers’ confidence in the industry. All parts of the industry benefit from it.
A question for the FSA to consider is how to divide the costs among levy payers. It is entirely rational and sensible that in the first instance each sector should consume its own smoke. Building societies are deposit-taking firms, and it would be extremely unfair if parts of the industry that are more remote from deposit-taking firms should pick up the tab before they do. If a building society encountered difficulties, depositors would be protected by the FSCS as much as if they had put their money in a bank. However, the problem remains, as my hon. Friend the Member for Keighley said, of whether it is appropriate to split off a separate sub-class of FSCS levies for building societies. As the hon. Member for Fareham said, that raises some serious and complicated questions. It could result in building societies not contributing in the first instance to the cost of bank defaults, but banks could not then be expected to contribute in the first instance to protection for building societies.
Under the legislation, that is a matter for the FSA, which is an independent body, and it considered it during the last major review of FSCS funding, in 2007. At that time, the FSA came out in favour of a single class covering all deposit-taking firms. When the review ended, the FSA published a policy statement which says:
“We discussed the revised proposal to keep a single deposits class with the British Bankers' Association…and the Building Societies Association…Neither trade association expressed opposition to the proposal.”
Will the Minister give way?
I have only a few minutes left, but I will give way in a moment if I can.
Other options have been considered, such as pre-funding, which is a system in which levies are used to build up contingency funds to meet future compensation costs. I want to make it clear again that the Government do not believe that it would be appropriate to introduce pre-funding in the near future and we do not intend to do so, but if a contingency fund had been built up, it could have been used to meet part of the costs that the FSCS has incurred. That would have reduced the burden on levy payers today, but levies would have had to be collected in the past to build up the fund, and banks and building societies have consistently opposed pre-funding.
How the levy is apportioned between firms and societies is a matter for the FSA, which is consulting on a new basis for apportionment between individual firms that reflects the deposits that are protected by the FSCS. We will monitor that with interest, but I am not entirely convinced that it will provide the sort of remedy that my hon. Friend the Member for Keighley seeks, because the review is quite narrow. The FSA has given a commitment to undertake a review of the funding model in 2010-11, and obviously the situation has become important because of what has happened in recent months. I shall ensure that this debate and my hon. Friend’s suggestions for solutions are brought to the attention of the FSA.
Inevitably, when there is a bill to pay, there will be a debate about who pays and how much. We all agree with the logic of a compensation scheme financed by the industry. Levies will be paid by firms that did not default, so most of them will pay for the failure of others. That is not ideal, and it is important that the FSA continues to consider alternatives, and that the Government and the industry continue to engage and to ensure that UK retail deposit takers continue to have the best possible protection.
I am happy to meet my hon. Friend and to discuss the subject further. She is aware that the FSA leads as an independent regulator, but the matter is clearly of great public interest and I have no doubt that we shall have further debates.
“In the cinema, you dream with your eyes open.” Those words were spoken by Bernardo Bertolucci at the Edinburgh international film festival some years ago, and for me they sum up why we are having this debate. The film industry in the UK is important for a wide variety of reasons. It is important culturally, creatively, economically, technically and for many other reasons. At one end of the spectrum, going to the cinema is an enjoyable night out; at the other, this is a vital multi-million pound industry.
In Parliament it is our duty to ensure that we react quickly to changes in technology and in the criminal world to ensure that this important industry receives the protection and support that it deserves from its law-makers. We must ensure that, when required, we introduce the legislative changes needed to tackle copyright theft in all its forms. Today we are considering the impact of copyright theft on the film industry, but it is worth mentioning that it spreads into many walks of life in a wide variety of industries, from pharmaceuticals, where fake products can be a matter of life and death, to fake components for cars, which can have the same disastrous result.
In the creative industries, while we see those at the top of the trade on the red carpets and on television, there are many others who struggle to get by. They, too, should have their original work protected by law, so that they can be paid for what they have created; otherwise they will have no financial incentive to carry on.
In recent weeks and months we have seen the banking industry go into meltdown. Whatever the reasons, the results for many have been dramatic, with job losses and much more. My constituency has the global headquarters of the Royal Bank of Scotland and many employees from all the major banks. RBS has announced 2,300 job losses in the UK, with the chief executive confirming that in the longer term the number might be as high as 20,000. Although manufacturing industry has declined dramatically in this country since the war and other jobs have gone abroad, one shining light in the UK economy is the creative industries, and within that group the UK film industry plays a major part.
If anyone doubts the range of jobs involved, they have only to stay behind and look at the credits at the end of any film to see the endless list of creative and technical jobs and expertise that have gone into the production. Britain is recognised worldwide as the home of some of the best talent in the world today. The recent British Academy of Film and Television Arts and Oscar awards testify to that. I am thinking of “Slumdog Millionaire”, “The Duchess”, “Man on Wire”, Kate Winslet’s best actress performance and much more.
My own first visits to the cinema were for Saturday afternoon matinées in the Astoria cinema in the suburbs of Edinburgh, which sadly is now long gone. I have supported the Edinburgh international film festival for more years than I can remember. I would like to put it on the record that that is the longest continually running film festival in the world. I was introduced to the industry at college and then gained practical experience on documentaries, television work and much more.
It is estimated that the UK’s creative industries generate 2 million jobs, many of which are directly and indirectly involved in the film industry. Each year, the British audio-visual industry loses about £0.5 billion through copyright theft and the wider economy loses more than £1 billion. I congratulate the Minister on the fact that the Government have made some positive moves to tackle the problem. I shall refrain from listing those in my speech, as I have no doubt that he will do that when he replies to the debate.
The scale of the problem is clear. I was given a briefing paper by NBC Universal, which pointed out the magnitude of the problem. It said that the cost of piracy was an estimated £500 million. It also says that
“for every one legitimately downloaded film”
from the internet,
“600 are downloaded from illegal sites.”
“A report…by Europe Economics in December 2008 estimated that 800,000 jobs in the creative industries are at risk as a result of…file-sharing.”
The briefing went on to detail the role of internet service providers. I have no time to go into that today, but I will say to the Minister that although he has taken action and the Government are considering the matter, it is still a worrying issue for many in the industry.
People can be prosecuted under the Fraud Act 2006, but that provision is simply not doing the job. I am not aware of any examples—perhaps the Minister is—of people who have been found guilty of camcording in a cinema. I was given one example in which an individual had been caught with a camcorder on a bracket on a seat in a cinema. He had gone into the cinema with four individuals, who were to his left and right and back and front so that what was being done would not be spotted. At his home there was video-editing equipment. However, the Crown Prosecution Service did not take the matter further because it reckoned that there was not enough evidence to prosecute. I would say, in my non-legal terms, that he was bang to rights and should have been prosecuted; the full weight of the law should have come down on him. We need today legislation whereby taking a camcorder into a cinema to record a film is a criminal offence. That would make it much simpler for the police and the authorities to prosecute.
Trying to take the matter forward through the Fraud Act involves proving that people will go on to produce fake DVDs and commit a fraud. The whole system is too complicated. As I said, to my knowledge no prosecutions have yet been brought to court, even when people have been caught redhanded. Can the Minister confirm that the Government not only are aware of the problem, but are willing to take the action required to ensure that enforcement measures are in place and that resources are allocated to tackle the problem?
A report produced by Oxford Economics to be launched later today, entitled “Economic impact of legislative reform to reduce audio-visual piracy”, goes into the issue in much greater depth. The Minister will be at the launch this afternoon at the stock exchange. I wish him well at the launch and I hope that he will make statements that help to convince the film industry that he and the Government are moving in the right direction.
One of the basic steps that I would like to be taken in the near future would be the introduction of legislation to make camcording in cinemas illegal. I argue that anyone who takes a camcorder into the cinema is not about to make a family film or something for their enjoyment at home. They are there for one purpose, which is to record the movie to produce a fake DVD or for some other dubious purpose. That was not a problem many years ago, when any reasonably high-quality camera was much more bulky than cameras are today, but now that high-quality digital cameras can be easily concealed, it has become a real issue. Camcording in cinemas is not a criminal offence, but it is the source of 90 per cent. of first-release fake DVDs seized and illicit film files on the internet.
It is amazing how quickly fake films can find their way on to the streets, with popular films now available within 48 hours of being premiered and sometimes even more quickly. People should be in no doubt that if they are offered a DVD of a film that has just been released in the cinema, it is a fake. Current films such as “Slumdog Millionaire” and last year’s “Mamma Mia!” are all too easily available. Films are particularly vulnerable when they are premiered in the UK. We in the UK are now the No. 1 source of illegal recordings of films in Europe. Sad to say, we have overtaken Russia. That is one title that we should try to lose as quickly as possible.
There is no reason to take a camcorder into a cinema. Those who do have made their intentions clear and should expect the full force of the law to come down on them. They should also expect the immediate loss of their equipment, which should be retained as evidence in any prosecution. I ask the Minister to give some indication today of whether he will join me and others calling for the change that I have described. He will not be on his own. He will know that when “Respect for Film” was launched as a pilot project in 2007 by the then Minister responsible for the creative industries, the right hon. Member for Barking (Margaret Hodge), the steering group included the Federation Against Copyright Theft, the British Video Association, the Motion Picture Association, Paramount Pictures, Sony Pictures, Twentieth Century Fox, Walt Disney Studios, Warner Brothers and many more. There is no doubt that the major players in the industry are on board. Will the Government deliver what they need to deliver?
Camcording in cinemas is illegal in a number of other European countries, including France, Italy and Spain. I would be delighted to offer my support today and that of my hon. Friends if the Minister decided to make progress on this issue. I also plan to table an early-day motion today if he needs to be convinced that hon. Members on both sides of the House believe that what I have set out would be a change for the better.
Reducing copyright theft is about not only protecting those who are creative and those in the film industry, but protecting the public from inferior-quality goods, preventing people from being ripped off and reducing the money that goes into organised crime. Of course, many who buy illegally reproduced goods know exactly what they are buying. In that respect, I was surprised to find that 25 per cent. of the British population were involved in some form of unauthorised activity in 2007—from buying knock-off DVDs to illegally downloading music. However, many people who buy an illegal product think that they are buying the real thing, although what they get is a poor-quality film, with terrible sound, part of the screen missing and sometimes even the silhouette of someone who is heading off to the loo walking across the picture. That is not only a poor product, but it prevents people from experiencing the excellent, high-quality original products on the market. The prices of such products will always be higher, but people get what they pay for.
I mentioned money going into organised crime, importing drugs and worse. The exact sums involved are difficult to confirm, and the Minister may have more accurate figures than I do, but income generated from criminal activities is often used to fund other criminal acts. While some might feel that it is relatively harmless to purchase a dodgy DVD for the children, the money could end up funding the importation of drugs that end up on our streets and available to those same children. Late last night, I watched a programme on the state of the television industry, and copyright theft was mentioned. Even the makers of “Teletubbies” announced that 300,000 fake DVDs of the programme had been produced and sold. Those might seem like fairly harmless, family-friendly products, albeit not of the best quality, but the money from selling them can go into the pockets of criminals who use it for much more serious and harmful crimes.
Education is also at the heart of the fight against copyright theft, and I congratulate all those who have pushed for a wider awareness of the issue among the general public. That includes Members of this place, many of whom have raised such issues the past. Indeed, the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke), who is present, has a long-standing record of supporting the British film industry, and I congratulate him on that. In addition, few people will not have seen adverts by FACT in their local cinemas, and I also congratulate it on its tireless work on the issue.
However, much more needs to be done. Today, time has allowed me to cover only some of the key issues. One issue that I have not been able to spend much time on is the advance of technology and the role of internet service providers, which will clearly increase in importance as we move towards a digital age. Illegal peer-to-peer file sharing is expected to increase by 80 per cent. in the next two to three years. For the next generation, which will have instant access to broadband, such activities will become a daily event. Another problem, as I mentioned, is that many people who are stealing copyright material have no idea that they are doing so and do not really think about it. None the less, their actions have a major impact on the industry, jobs and creative talent in the UK.
I hope that the Minister will take this debate as it was meant—as part of a positive attempt to raise an important issue. I accept that the Government have made moves in the right direction, but more still needs to be done to ensure that copyright theft in the UK is reduced and that the British film industry continues to go from strength to strength.
I thank the hon. Member for Edinburgh, West (John Barrett) for raising the important subject of film copyright. I absolutely agree that this is an important debate to have in the House, and the issue should be at the forefront of the minds of the many people across the country who enjoy film and cinema. In the past few weeks, such people will have taken great pleasure from Kate Winslet’s success in this country and at the Oscars in America, as well as from the success of Danny Boyle’s film “Slumdog Millionaire” and the rise of Dev Patel. Such developments say something about the talent that we have in this country.
I also applaud the hon. Gentleman for his continued advocacy of the Scottish film industry and his close involvement with the Edinburgh international film festival. Like the cinema industry in the rest of the UK, the Scottish film industry has prospered. In the past few years, it has produced huge triumphs, from “Gregory’s Girl” to “Trainspotting” to, most recently, “The Last King of Scotland”. There are also many lesser known but still significant successes.
As has been said, the film industry continues to contribute to much of the Scottish economy and the British economy as a whole. In 2006—the last year for which we have figures—the British film industry turned over £7 billion. I therefore fully share the hon. Gentleman’s appreciation of the importance of safeguarding the film industry’s contribution to this country’s well-being, both financially and in terms of the many thousands of jobs that it supports, particularly in these difficult times. That is why the problem of film piracy should concern us all.
The economic loss that piracy causes the film industry can be calculated in a number of different ways. The UK Film Council, which has produced a briefing note for the debate, adopts a maximalist approach. It has looked closely at the impact on cinema ticket sales and arrived at a cost of just over £500 million. It also says that 15 million people in this country have at least one pirated film.
I do not want to question those figures today, but one thing on which we can all agree is that this is a significant problem. That was brought home to me when I attended a raid in north-west London in November with police, representatives of FACT, trading standards officers and others. During that raid, more than 60,000 counterfeit DVDs with a value of £185,000 were seized, including pre-released titles that were not yet in the cinemas. All those titles were in a terraced street typical of others in London and, indeed, the country.
What I saw also brought home to me the complex nature of this crime. Among the DVDs in that household were some very obscene illegal DVDs. That links to the organised criminal activity of those who produce such things. Many of those titles would not have been granted certification in Britain. Of course, such things are at the extreme end of the spectrum. It is true to say, however, that people can be encouraged or seduced into camcording a film in a cinema and that their activities can then relate to, and extend to, the huge organised trafficking of films that are sold not just in this country but around the world, and that can happen overnight.
The UK Film Council report also highlights key areas in which it wants legislative reforms. I thought it would be helpful if I spoke to the main ones. I know that some in the film council are keen to introduce specific criminal legislation on camcording. The hon. Gentleman mentioned that in his speech. As the council’s report acknowledges, the Government are seeking a test case to take forward under the Fraud Act 2006. I remind the House that section 6 of the Act provides that a person should not be in possession of articles
“for use in the course of or in connection with any fraud.”
Clearly, a camcorder in a cinema is probably not there to record the happy experience of attending the cinema with pals. It is right to consider closely the possibility that the device is there to be used in fraud or in connection with fraud.
Does the Minister accept that a problem in using section 6 is that the Act is relatively recent and has not been shown to be effective? Something much simpler is needed so that more effective prosecutions can be brought, because until that happens there will be no deterrent and the business will carry on.
I understand what the hon. Gentleman says, but the Act was passed in 2006 and we are now at the beginning of 2009, and he will understand that the judicial process takes some time. There has been a relatively short period in which to come to the conclusion that he has reached. He talked about not being aware of any other cases in the system. I am advised that there was a case in the system, which was dropped, largely because of the age of the perpetrator. It is important to see where the test case gets us.
I accept that it has been three years since the Act was passed, but there have been no prosecutions in that time. I know that the youngsters who were not prosecuted were about 14, but if we have got to the stage at which 90 per cent. of first-release DVDs originate from camcorder recording, and there have been no prosecutions in three years, the evidence is fairly clear that something is not working.
I have heard what the hon. Gentleman has said, and I think that a relatively short period has passed. It is important to consider carefully how the Act bears down on the issue. I remind him that, were we simply to make taking a camcorder into a cinema a criminal offence, that would be a strict liability offence. That is serious under the criminal law, because it would not be necessary to establish criminal intent.
The area is an important one that we should examine closely. That is why we are working in partnership with the Federation Against Copyright Theft, the police, trading standards and of course the Intellectual Property Office. I know there is some frustration about the lack of visible progress by the Government on issuing a consultation to assess the need for legislation to cover occasional sales and markets. One is aware that throughout the country, in all sorts of Sunday markets, such DVDs are on sale. It is a complex area and we need to ensure, particularly in more difficult economic times, that we strike a balance between tackling the sale of counterfeited and pirated goods and making sure that we do not deter market organisers and others, including schools and charities that run fêtes, from engaging in legitimate activities in some of our most deprived areas.
There have been calls for us to strengthen our damages legislation. That is being looked at as part of a broader review of the law on damages. We need to make sure that any system of civil damages is not only robust but workable. The Ministry of Justice has said that it hopes to publish a response to the consultation in the near future.
The hon. Gentleman raised the important issue of online and physical copyright infringement, which raises strong feelings in the industry. Here again, it is important to take concrete but proportionate action. The Government will shortly be publishing the response to the consultation held last year on matching penalties for online and physical copyright infringement and will be seeking to raise the maximum fine to £50,000 for all intellectual property offences. Clearly I do not want to prejudge the outcome of consultations on “Digital Britain” and associated legislation, but we will be making announcements in the coming days.
Good law is good, of course, but proportionate, enforced laws are better. In the case of online infringement, we are not introducing the jail terms that some in the industry have called for, but I think that the measures we propose will offer an effective deterrent to fraud that stops short of putting even more pressure on overcrowded prisons. The balance that we must strike is between better deterrence—a better way to get the internet service providers and the film industry to work together—and recognising that access is part of the zeitgeist, and that young people want immediate access to film, in the way they want. How should we work with industry to get monetised solutions but create an environment in which the vast majority of the relevant activity is within the law and we are not condemning young people to unnecessary enforcement or sentencing?
That is the balance we need, which we shall be striving for post-“Digital Britain” and the associated legislation that will come out of it. It is also the reason I am setting up an interministerial group on enforcement, so that I and colleagues in other Departments, such as the Ministry of Justice and the Home Office, can continue with the discussion across Government. The issue affects other Departments.
I know that the hon. Gentleman will appreciate that the fact that something is a priority for me as Minister with responsibility for intellectual property does not mean that it is the No. 1 priority for Ministers who have other criminal activity to deal with. Let us have the discussion in the correct forum, and find the means to take the matter forward. I hope to make progress with what is an important issue, which greatly affects the British economy, as well as the way we all enjoy film.
As the hon. Gentleman said, my next engagement will be the “Respect for Film” event, to which I look forward. I am grateful that he has brought this important issue to the House this morning.
Coventry City Council
I thank Mr. Speaker for granting me this debate. I believe this is the first time, Mr. Amess, that I have spoken in a debate chaired by you, although we know each other quite well.
I start by considering the national situation. I wonder whether Opposition proposals are already being used locally in Coventry. There has been talk, should there be a change of Government, of a 1 per cent. cut in public service budgets. I hope that the Minister will answer that point, as such a policy would certainly have ramifications for Coventry.
Equally, if we are to believe what is being said—again, it will have ramifications for the public sector in Coventry—there has been talk about public sector pensions. I shall not debate that subject today, but employees have paid into pension schemes and at the end of the day they will get out of their pension schemes only what has been put into them.
The third thing that I would like the Minister to deal with relates to the interpretation of the Gershon review. I have had one or two meetings with the trade unions in Coventry, and it seems that the local authority may be suggesting that it cannot keep such savings. My understanding of the Gershon review is that local authorities and Departments can keep savings that they have made. I hope that the Minister will clarify the matter, so that we have it on record and know where we are going.
The other complaint made by the trade unions about the local authority in Coventry is its lack of consultation. We can always ask how long consultation should continue—it has always been a debatable matter—but when people in the trade unions in Coventry tell us about lack of consultation and lack of involvement in what is being planned by Coventry city council, we must take it seriously. Good employers should always try to take the trade unions with them. Again, I want to make the Minister aware of the problem. There are, of course, other concerns that he cannot answer, such as those about concessionary travel should there be a change of Government.
I shall dwell on the situation in Coventry. First, given the economic climate, I find it strange that the Government wish to make cuts in the voluntary sector. I am told by the trade unions and some in the voluntary sector that they will experience cuts of as much as 2 or 3 per cent. That could have a major impact, given the extension of services needed by the people of Coventry. I am told that such cuts would be across the board. There has been no proper consultation. However, the trade unions tell me that the council is blaming its officers; when the trade unions spoke to the council, it said that officers were telling the council to make the cuts.
I have been in local government and I know that there are always a number of options. One should not accept whatever officers say—it should be challenged. That is why we have local democracy. The problem alarms many people in Coventry.
Another matter that I hope the Minister will clarify is the question of housing associations. It was recently put to me that proposals were being made by one or two housing associations in Coventry to introduce hefty rent increases; they said that it was the Government’s fault. I hope the Minister will investigate that, as blaming the Government for something that the associations themselves are doing is serious.
In Coventry, cuts of £6.7 million from the council’s budget would mean that up to 154 jobs could go. That would include cuts to the neighbourhood warden service. It is well known that every city centre needs a neighbourhood warden service, particularly because of incidents at the weekend. The cuts would mean five wardens in the city centre losing their jobs, and nine throughout the whole area. That could put neighbourhood safety at risk, and it would also put an additional burden on the police. It certainly does not reassure the public, particularly pensioners, given the level of petty crime. The Government have launched effective campaigns over the years, not only against major and serious crime, but against petty crime.
The monetary effect is the need to borrow in excess of £9 million. That leads to questions. There will be hefty cuts, yet the council will have to borrow £9 million. In addition, there will be a cut of between £5 million and £6 million in the council’s revenue-generating activities, so council income may be lost. That suggests that the council is not well managed, either economically or financially.
There has also been a larger-than-average increase in council tax. Again, that will hit poorer families in Coventry, particularly pensioners.
I understand my hon. Friend’s logic, but how can it be that cuts are being made when, wherever it can, the council is making increases? It is receiving £4.1 million more than expected, yet borrowing is still on the increase and it is now making further cuts to reduce those borrowings. It seems that there is an imbalance in—or entire mismanagement of—the income and expenditure accounts.
There is a suggestion that the council has used considerable sums from its reserves for traffic schemes and renewing roads. I must be honest with my hon. Friend and say that I have not been able to work it out. I have heard about numerous sums coming out of reserves, but I shall try to bottom that out after the debate.
As well as increases in the half-price charge for services to pensioners, we are trying to help them with winter fuel allowances and that sort of thing, but the pensioners are faced with service increases and charges. It is worth pointing out that although Conservative Governments used to cut support, this Government have increased it, as my hon. Friend said, by £4.1 million above expectations. People did not think that the council would get such resources, yet front-line services are being cut.
That is having an effect on youth services. We are trying to get the youth off the streets, to become skilled and to be good citizens, yet we see planned cuts of £660,000 to youth services. That could cause the closure of 14 after-school clubs, and a loss of jobs. Again, I cannot bottom that out. Another problem is the fact that 23 summer play schemes will be cut. That will place a hefty burden on the public, yet at the same time we are trying to keep people in employment, get kids off the streets, be fair to pensioners so that they can pay their bills and so on, and we are also trying to help young families.
As I said earlier, some of those schemes are crucial to young couples. For example, during the summer, someone will be available to look after the kids so that they are fully occupied while the father and mother go to work. The cuts will affect as many as 6,000 children in Coventry. That is quite an impact.
We cannot get away from the fact that should we have a Conservative Government—I do not think we will—a cut of 1 per cent. will have quite an impact when added to some of the problems that already exist in Coventry. No real explanation has been given by the Opposition. I return to the question whether Coventry has been used as a trial run for a future Tory Government. There has been no explanation of where cuts will be made.
I hope that the Minister will respond to some of the points that I have made. I am seriously worried about how the council is being run, and about its finances, and I know that he will pick up on other things that I have not mentioned.
I join my hon. Friend the Member for Coventry, South (Mr. Cunningham) in saying what a pleasure it is, Mr. Amess, to serve under your chairmanship for the first time. I am sure that you will be good enough to extend our thanks to Mr. Speaker for granting the debate.
I thought that my hon. Friend’s exposition of the situation in Coventry was devastating, but it left many questions hanging. It was detailed and correct, and the subject was well researched and well spoken to, but I do not understand how we can have such a combination of factors in a council’s running of its affairs. It is cutting front-line services, the one thing we do not want to cut; instead, we try to cut costs through administration, natural wastage, retirement, retraining and so on. Nevertheless, front-line services are being cut by £6.7 million, yet through Government grants the council will receive £4.1 million more than it was expecting. Furthermore, it has imposed a larger-than-average council tax, which will bring in more money, while managing to increase borrowing by £9 million.
I do not know how one would set about trying to reconcile those conflicting policy effects in a local council managed by highly professional people. They may be trying to pay off borrowings, but that is not clear from the accounts. It would seem, as my hon. Friend said, that the council has borrowed heavily from the reserves for a major road improvement policy in the city. However, that has been very badly handled. Take Tile Hill library, in my constituency, for example. The pavement around it was a disgrace and the road a real hazard. The council put in a good crossing and rebuilt the library superbly under schemes that might have been around for a while, and it all looks very good. However, the pavement was not touched. What is the sense of a road-building programme that puts in place a good level crossing for elderly citizens, many of whom live in the area, and young children using the library, while leaving the pavement untouched and very dangerous? There are potholes everywhere. I have raised that matter several times.
That point goes back to the competence of the council. I do not know whether it is in the Minister’s power to authorise an inquiry into any of those matters. I have asked for an inquiry into Coventry’s business improvement district programme. The Government launched the BID programme, of which there are many good examples, and when Labour was in power the local authority left in place a very good scheme. However, it has been so mismanaged that 250—at last count, I think—small local companies have gone to court over promises made, and contractual commitments entered into, in the five-year plan. In the end, they did not refuse to pay; they were just making the point that, especially in respect of CCTV security coverage and broadband, which we all want to promote, the big companies simply have not delivered. I am sure that the Minister will tell me that is not directly the council’s responsibility, but it cannot collect a tax, as is its duty, knowing full well that it will not be used for the purposes for which it was raised. Again, we do not know where that money has gone or what it is doing.
Does the Minister not think that there is something a bit wrong with Coventry council? I do not understand how we have reached a position in which small BID companies, which allegedly voted for the schemes—although the fact that they went ahead on the basis of such a small majority is scandalous—are close to open revolt. I am pleased to say that I have been invited to a meeting with the BID chairman and an acting chief executive to see whether we can get a rebate or, preferably, a re-ballot. Would the Minister be good enough to look into that? The re-ballot might be more difficult, but what about a rebate? Those small companies pay 1.5 per cent. on the business rate—even at this time, in the depths of a recession—for services that they are not getting. I cannot understand how the council can be in such financial schtuck, given that we have increased our contribution. Nor can I understand how it has got itself involved in the BID programme, which is nothing but a disaster. It would be good if my hon. Friend responded to both those points.
It is a pleasure to serve under your chairmanship, Mr. Amess, as I have done quite a few times now. I congratulate my hon. Friend the Member for Coventry, South (Mr. Cunningham) on securing this important debate. I greatly enjoyed his robust, focused analysis of the problem. I also enjoyed the contribution from my hon. Friend the Member for Coventry, North-West (Mr. Robinson), who repeated and extended that argument.
The Government have a very good track record of investment in local services. In our first 10 years in office, we increased total Government grant by 39 per cent. in real terms, which provided a full decade of above-inflation increases in Government grant for authorities overall. That contrasts markedly with what my hon. Friend the Member for Coventry, South said about possible proposals from a future Conservative Administration of a real-terms 1 per cent. cut in local public services, which would have a devastating impact on the delivery of services on the ground for good, decent, hard-working citizens, such as those in my constituency and in Coventry.
This year, the settlement received by local government as a whole has been a good one. Not only have we continued to increase funding to a level that allows local authorities to deliver effective services at an affordable cost, but we announced last year the first ever three-year settlement for local government in England, precisely to give authorities the ability to plan for the longer term to ensure that they have schemes and strategies in place. That, ultimately, will result in cost savings.
As my hon. Friends know, the House approved the second year of the three-year settlement for local government on 4 February 2009. This Government have worked closely with local authorities in the context of the comprehensive spending review—I am looking at my hon. Friend the Member for Coventry, North-West, who is a distinguished former Treasury Minister—to examine all pressures on councils up to 2010-11 and how to manage them. Over the three-year settlement of the CSR period, we are providing an additional £8.9 billion to local authorities—an average 4.2 per cent. cash increase per year in funding. Again, I contrast that with the proposed 1 per cent. slash in local public services advocated by Conservative Front Benchers.
We expect those increases to be reciprocated by local authority efficiency gains, and we have made clear our intention to realise a further 3 per cent. a year through this route. Delivery of £4.9 billion net cash releasing savings by 2010-11 is key to enabling local authorities to meet those pressures. To help, the Government will provide an additional £185 million funding to support local authorities to achieve that value-for-money ambition.
Will the local authority be allowed to keep any Gershon savings?
As part of the co-ordination package, local authorities will be allowed to reallocate net cashing savings into front-line services. There should be no impact on the delivery of services provided to the citizens of Coventry and elsewhere. I hope that that clarifies matters.
It is good that the Minister can clarify that point so precisely, but why, therefore, is Coventry cutting front-line services so severely?
As a result of my hon. Friends’ excellent contributions, I shall certainly look into the matter.
The theme of my Department’s policy is to ensure that local authorities have the powers and priorities in place to respond to local needs. It is also up to them to ensure that they are accountable to the electorate. I am particularly keen to move away from time-limited funding streams for certain things. More grants should be mainstreamed, so that councils can take local circumstances into account. We have done an awful lot on that: for example, we have mainstreamed some £5.7 billion of grants over the CSR period and removed ring-fencing and other controls.
We have also delivered a reduced number of performance indicators, as promised in the local government White Paper. To be frank, we are setting local government free to ensure that it can do what it needs to do locally to deliver first-class services to its citizens at an affordable cost. I thank my hon. Friends for holding local government to account and for challenging it as much as possible in Coventry.
We have also said that there is no excuse for excessive council tax increases. The Government have made it clear that we will not hesitate to use our capping powers to deal with excessive council tax increases in future years, and we will require authorities to re-bill if necessary.
Coventry city council received an increase of £5.376 million in its formula grant in 2008-09, a 3.8 per cent. increase on the previous year. As my hon. Friends have said, in 2009-10 it will receive an increase of £4.134 million, an increase of a further 2.84 per cent. The provisional figure for 2010-11 is an increase of £3.614 million, or 2.4 per cent. Therefore, over the three years to 2010-11, we are providing the council with an additional £13.124 million. The 3 per cent. of cashable efficiency savings that we expect local authorities to deliver in 2009-10 will make an additional contribution of up to £11 million. By comparison, the city council anticipates a £4.2 million increase in its budget requirement for 2009-10.
In the real world, it is fair to say that local authorities face some challenging pressures from declining revenue streams—for example, there is a marked reduction in planning and building control income. They also face an increase in housing benefit and social care case load and an increase in energy costs. Coventry city council is no different from other local authorities in those respects. As a result, it has identified £9.3 million of efficiency savings in its 2009-10 budget, which has resulted in the loss of 190 jobs. However, the local authority has informed my Department that some of those posts are vacant.
Every council is required to make tough decisions. Coventry, like other local authorities, has to balance staffing levels against other savings to deliver the best possible services in the current economic circumstances. I say to my hon. Friends—they may want to challenge their local authority on this matter—that the latest Local Government Association survey is very interesting, particularly on the impact of the recession. It shows that 84 per cent. of councils do not plan to cut jobs as a result of the downturn, and some 77 per cent. are actively recruiting. I am fully aligned with my hon. Friends here when I say that efficiency savings should not and do not entail service cuts. Between 2004 and 2008, councils made £3.45 billion of efficiency savings. That is the equivalent of £193 off the average band D council tax bill. Councils were free to use the savings either to cut council tax or to reinvest in local services.
Up and down the country, local authorities are innovating to save money and help us through the recession. We know that some local authorities are making considerable progress in reducing the additional pressures that they face: for example, more than 50 per cent. are making efforts to reduce petrol consumption, and more than 60 per cent. are succeeding in reducing electricity consumption, helping to save not only the planet but money for hard-working council tax payers. Compare that with the mere 16 per cent that say they expect to make service cuts. Again, I say to my hon. Friends that they should take those figures back to Coventry city council.
If I have the figures right—I am sure that the Minister will correct me if I am wrong—84 per cent. of councils are making no cuts because of the recession and some 77 per cent. are recruiting. We will go back to the council on that. On his third point, when he again said that we could go back, what we were trying to say was that as MPs, our job is very much here. He has a whole Department and his own leadership to use in getting to the root of the problem. We will do our bit, but I hope that he does his, too.
I believe that my hon. Friend has done his bit in bringing the matter to our attention in this Chamber. He has done an excellent job in making Coventry city council’s politicians accountable for their whole strategy and their financial delivery programme. He has tried to ensure that they can make efficiency savings, while providing the best possible services for local people.
To my mind, energy costs illustrate the fact that cost pressures are not all one way. The latest Audit Commission report identifies that fuel costs dropped by almost 12 per cent. in July to October 2008, to below April 2008 levels. Since then, petrol prices have dropped even further, by almost 30 per cent. from their peak in July last year. Such price falls are already being fed into the cost of other goods and should impact on energy bills in due course. I hope that local authorities will take advantage of that.
The level of inflation expected in 2009-10 also means that the Government grant will go further than it would otherwise have done. Although I accept that there may now be additional pressures on local government as a result of rising costs and falling revenue streams—Coventry is no different from any other local authority in that respect—I have to say in the strongest possible terms that those authorities that demonstrate good leadership and financial management are finding innovative ways of dealing with such pressures.
In recent years, the city council has been fortunate in the expertise on which it has been able to call. The previous chief executive was instrumental in developing a strong local strategic partnership and agreeing a robust local area agreement. I understand that she has now moved on. I know that my hon. Friends would not want to attach any criticism to officers, who are merely carrying out the instructions of their political masters and mistresses. We need to challenge the political direction of the authority to ensure that it delivers efficiency savings—the theme of today’s debate—provides good value for money in a time of recession and maintains first-class services.
I have touched on flexibility. The watchword of Government policy is flexibilities for local authorities. I would like to see Coventry capitalise on the flexibilities that we have given councils. For example, I know that it has agreed to revisit its local enterprise growth initiative package to respond to an increasing number of small-scale redundancies with smaller employers. I was disturbed to hear what my hon. Friend the Member for Coventry, North said about the council imposing a 1.5 per cent. increase in rates while providing no services. I promise that I will take that point away and respond to my hon. Friends in due course.
I also know that council officers are working closely with the new Homes and Communities Agency to find innovative ways of maintaining regeneration, delivering affordable housing and minimising the impact on mortgages. The council will also need to make effective use of the value for money strategic partnership that it has developed with PricewaterhouseCoopers in response to the Government’s transformation agenda. If properly managed, that should realise up to £5 million of sustainable savings per annum by 2010 without any cuts to front-line services.
My hon. Friends suggest that the city council is struggling to deliver an appropriate level of service to its citizens within the agreed budget. I agree that challenge and accountability are necessary to ensure that political priorities are considered. We in central Government have set in place sufficient financial support and flexibilities to enable Coventry city council to maintain services. The fact that other councils are doing just that is testament to what I have been saying. We will continue to support local government through these difficult times, but we look to local authorities such as Coventry to take the right political and financial decisions and to demonstrate the best possible leadership to minimise the impact on services that has been the subject of this excellent debate.
This is the first time that I have had the honour to serve under your chairmanship, Mr. Amess, and I am delighted to do so. The Minister is attending back-to-back debates, which is the latest sport. Perhaps we could have a whole week of debates with the Minister simply staying where he is.
Much of what the Minister said in the previous debate is pertinent to this one. However, I am grateful to be discussing the Audit Commission, and I would like to offer a brief history lesson. In 1846—the Minister may remember it well—the first sewing machine was developed in America, the Irish potato famine began and, believe it or not, official audits were introduced in English local government. We should have come a long way in the intervening 162 years, but progress does not always follow an upward path—certainly not when it comes to auditing local councils.
In 1983, the Conservative Government established the independent Audit Commission. It seemed like a good idea at the time, but unfortunately the work load has snowballed. The commission was given more councils, authorities and trusts to keep a watchful eye on, and today it is responsible for checking the books of 11,000 complex public bodies that spend £200 billion of our money, including everything from town halls to health trusts, fire authorities and the police, which is a pig of a lot of paperwork to handle in anyone’s book.
However, delightfully, the commission is not exactly overstaffed. It employs 2,500 people, which is slim government. I have no problem with that, but it works out at one harassed human being for every four public authorities. In other words, the work is a superhuman challenge. I have not come here to decry what the commission tries to do—I have absolutely no doubt that those people give it their best shot given their resources—but I am seriously worried about some of its operations.
I shall go into detail about the local authority that I have the terrible misfortune to know best: Somerset county council. We are all painfully familiar with the tales of mismanagement and greed from the world of banking and it is widely acknowledged even by senior Cabinet Ministers that light-touch regulation was a dangerous error. There are growing calls for the Financial Services Authority to be beefed up or got rid of so that we can tackle tomorrow’s Fred the Shreds. I am concerned that the bad practice that almost wrecked the reputation of British banking is now creeping into the public sector.
The Minister will be delighted that we have our own Fred the Shred in Somerset. His name is Alan Jones, the chief executive of the county council. He was taken on in 2003 for £90,000 a year, which makes MPs look cheap, and now takes home £160,000, which is more than the Prime Minister. That scale of inflation is enough to make any grown man groan. Actually, Jones the Groan is in charge of a so-called four-star authority. Listening to him, one could be mistaken for thinking that every element under the county’s control is pure heaven, but that is highly deceptive, to say the least.
The star awards are a denigrated currency. So many councils have collected them that the commission is scrapping the prizes. Like green shield stamps, the awards have become tacky and worthless. Star ratings do not even register at my favourite Somerset local, “The Dog and Duck”. People care only about the quality of service and how much it costs, not about stars. Unfortunately, the commission’s stars have also bred a greedy race for high salaries. Today, we see the ludicrous spectacle of many chief executives earning far more than the Prime Minister. That cannot be right.
The executives behave like premier league football managers, shifting from council to council on still richer packages, simply because they are on some silly star rating system. Research by the commission recently found that council chief executives’ pay has risen by more than a third in the past four years. We are envious of that. It is a shameful legacy of the commission that it has created a market for local government fat cats and bloated egos, few of whom have larger egos than Jones the Groan.
Jones the Groan had a big, expensive business idea. Like all great schemes, it was destined to be paid for by the likes of us. I was deeply suspicious from the word go and brought it to the Government’s attention. Last year, I secured a debate in the Chamber about the formation of a new joint venture company, which is now called Southwest One. A joint venture implies partnership, but that partnership is far from equal. Three public bodies, which are all meant to be answerable to the commission, are involved: Somerset county council, Taunton Deane borough council, and the Avon and Somerset police. They did a deal with IBM, a multi-billion pound company, and took over hundreds of staff, mostly in information technology. Together, they intended to trade throughout Britain as Southwest One.
Before the company even started, it was heralded as a great success story that was guaranteed to save £200 million for the hard-pressed taxpayers of Somerset. The Government will not be surprised that so far it has not saved a brass farthing. Unfortunately, IBM continues to own 75 per cent. of the company, which means that every time it provides a service to its joint venture clients, three quarters of the returns go into IBM’s pockets. IBM did not get where it is today through charity. Last year, it turned over $98 billion and made $10 billion profit.
The Somerset deal means that IBM always gets its rake-off and other partners cannot be encouraged to join. Jones the Groan and his team have not persuaded any other council to get involved. Through the commission, Devon and Cornwall looked at the arrangements. Because they did not join, Jones the Groan called them “institutional chauvinists”—it seems we do not do charm in Somerset. The initial contract was signed in September 2007 with the commission’s knowledge and amended in March last year when Avon and Somerset police joined. The contract, which runs to 3,000 pages, is still secret. I asked the commission to look at it, but that is not in its remit. Councillors are allowed to inspect the paperwork only if they sign a gagging order to prevent them from revealing anything about any aspect of the deal. That is bizarre and, I suspect, highly undemocratic. The odour of rotting fish is quite normal in county hall these days.
I shall go through some of the history. Unfortunately, the commission knew all about it. Alan Jones, the chief executive, hired a special brain to take the project through—a lady called Sue Barnes. She got the job and a lucrative contract with no interview. Sue Barnes uses her maiden name. Her married name is Mrs. Port, and she is the wife of the chief constable of Avon and Somerset police. That may be a coincidence, but Mr. Port’s force is now a member of Southwest One, and he has put himself on the company’s board. Board directors of Southwest One have a direct responsibility to protect not only the commercial interests of the company, but Somerset’s taxpayers. Inevitably, that produces conflict with his role as head of the Avon and Somerset police.
Did anyone in the Home Office, the Association of Chief Police Officers or the commission raise a murmur about that? No, they did not. Silence is golden. Anyone who did anything about it, including the BBC, got a letter from Carter-Ruck, with whom many of us will be familiar. It cost us £90,000 to defend Mr. Port. Again, the commission did nothing. What is the matter with the commission? On every occasion that I have asked about the arrangements, I have been told that they are outside the commission’s remit and that it cannot look at them. The commission was set up to uphold the best principles, and should be working to do so, but in practice its powers are at best severely limited and in some cases negligible.
Last year, I received an anonymous brown envelope containing a load of documents—no doubt I will be arrested for that after the debate—including the transcript of an interview with a very senior officer at the county council, the corporate director of resources, Mr. Roger Kershaw. It showed how Mr. Kershaw’s original evidence to the Standards Board had been altered. Large sections were deleted, probably by Mr. Kershaw himself or Jones the Groan, his boss. The bits that went missing implicated Sue Barnes, the chief constable’s wife, for holding a secret meeting with IBM at a crucial stage in the bidding process. It even described how Sue Barnes had been, in effect, dismissed straight afterwards, but mysteriously was still around when the contract for Southwest One was signed. At the time, that looked like a deliberate attempt to suppress evidence concerning a contract that involved £400 million of taxpayers’ money.
Last year, in the House, I called that corruption. I hope the Minister understands that I do not use the word lightly. I was advised in writing by the Secretary of State for Communities and Local Government to take my concerns to the district auditor, and I did so. The district auditor even came to see me, but I was not encouraged by his response, which was that such things were outside his remit. I wrote to him and got the same reply, so I ask the Minister: whose remit is it? When such evidence comes to light, we want to know, in a democratic nation, where it has come from.
The district auditor was equally dismissive when I told him about Roger Kershaw’s professional conflict of interest. Mr. Kershaw just happens to be Somerset county council’s line manager for Southwest One. He is also the section 151 officer, whose duty is to ensure that everything is done by the book. He runs with the fox and the hounds, but guess what? According to the district auditor, that is not within his remit either.
Do not get me wrong. I do not think that this is the Audit Commission’s fault; it is the system’s. We—I say that collectively—have failed to provide enough legal muscle, people and money to do the job. We may, unfortunately, trust too much in the process of democratic accountability. We ought to give far greater support and training to local councillors who must scrutinise complex—in this case, bad—deals such as Southwest One. In Somerset, the public are forced to rely on a “Dad’s Army” Captain Mainwaring-style figure of fun, a one-time small-town banker—there is an old cockney rhyme for that—called Mr. Crabb. That individual, God help us, is Somerset’s equivalent of the Chancellor of the Exchequer, without the eyebrows. He is a part-time councillor who runs a French property business and spends most of his time in Edinburgh. He has been shown to be at best incompetent and at worst stupid. His political opposite number is a well-meaning councillor who sells golf balls.
Those councillors are well-meaning people who want to do the best that they can, but they are totally out of their depth. There are two other potential defenders of the public interest on the board of Southwest One, but they too are woefully inexperienced elected members. To put it crudely, IBM can afford the best financial and legal brains on the market. We cannot compete, either as councillors or as Members. The councillors are forced to take advice from a small group of highly paid officers whose careers are entwined in the matter. They are treated like mushrooms—I am sure that the Minister can guess what is coming; they are kept in the dark, and every now and again the door opens and in comes the manure.
The crude fact is that there is no effective accountability. That should change. I believe strongly—as I know the Minister does, because of where he comes from—that electors deserve councillors who are properly taught to do their job and know where to get impartial advice. I hope that he will side with me. That is the only way for tyrannical chief executives to be challenged before they do lasting harm to this country’s democratic process. I am totally with the Government in seeking more openness and honesty in council chiefs. I applaud the Minister’s pledge to force chief executives to come clean about their salaries, bonuses and pension perks. We have to do that, so why should they not do it too? They get a lot more than we do. I do not want my county run by unelected fat cats, and I do not want Jones the Groan rewarded for his obvious and utter failures.
The current politicians are not exercising control, and nor is the Audit Commission. The commission lacks the time, people and power to get to the bottom of any problem. I note that it is trying to recruit a new principal auditor for the south-west. The pay scale is £33,000 a year. By contrast, Roger Kershaw, the equivalent in Somerset county council, takes home £110,000, not counting all the other bits. Money talks. How can the commission hire the best staff if it cannot compete on pay?
When the auditors turn up to inspect a local authority, how do they work? They are not like a murder squad. They cannot turn over a council, searching every nook and cranny. A finance man from a big county described the Audit Commission’s task to me:
“They listen to what councils say. They look at internal audit work and things they raised last year. They do some sampling to see if there is anything that challenges what they have been told. They listen to objections raised by interested parties. But unless they are pointed in the right direction, it is sometimes like looking for a needle in a haystack. And their first priority is to reassure themselves that the accounts present the transactions in the year in a fair and transparent way.”
Imagine taking in a car for an MOT and being cross-examined, “Is it running well? How are the tyres? Any other problems? Oh well, we’ll sign you off, great.”
Auditors who lean so heavily on client input can hardly be described as independent, let alone thorough, and there are not enough of them. Last year, there was so much adverse publicity about the formation of Southwest One that the Audit Commission finally took a look at the matter. I suspect that ministerial push was behind it. That particular exercise cost £8,900. The district auditor charged £345 an hour. He skimmed through one of the most detailed and complex contracts in recent history, which was probably three and half days’ work. It was not a proper audit; it was a snapshot. It was light-touch regulation all over again.
A complete council audit is far from cheap. A lot of councils have complained about Audit Commission charges. Somerset had to cough up £257,300 last year. That raises another important issue of doubt. How can the independent Audit Commission’s word be trusted when the client pays all the bills? Will the Minister consider reducing grants to local government by the amount required to create a central audit fund? That way auditors could be fully independent and free from the accusation that whoever pays the piper calls the tune.
Have the Government considered a merger between the National Audit Office, the Audit Commission, the government consultants 4ps and the Office of Government Commerce? On large, risky ventures such as Southwest One, local government auditors should be able to call on additional resources to ensure that the highest standards are applied in the public interest. On another point, key milestones called gateway reviews are mandatory in large national projects. Why are they not also mandatory for large local government projects such as ISiS and Southwest One? I ask in a spirit of constructive debate, because I do not know the answer.
I consulted many experts before this debate—I have been going on about the issue for two years—and have reached the sorry conclusion that the Audit Commission is no longer fit for task. This year, to everyone’s derision, Somerset county council received from the auditors the highest value for money rating possible. They might as well have given an Oscar to a tub of lard for all the good that has done. Somerset borrowed £35 million to buy an unproven computer system from IBM that is already drastically late. That is not value for money. The council also ignored all professional advice and invested £25 million in Icelandic banks. That is not value for money either, but what would the Audit Commission know? Some £10 million of its reserves also went to Iceland. We have all been caught up.
We pay for such costly mistakes. We deserve better: better audits, better scrutiny, and a much tighter rein on the likes of Jones the Groan and all the useless people around him. If we do not get that, we will all end up paying in the long run.
I congratulate the hon. Member for Bridgwater (Mr. Liddell- Grainger) on securing this debate. He knows where I come from. In a former life, I was an auditor with responsibility for auditing local authorities and other organisations on risk management, corporate governance and internal performance. When I was a councillor on Hartlepool borough council, I was also the portfolio holder for performance management, so the subject is dear to my heart.
I congratulate the hon. Gentleman on the manner in which he has raised the subject. It is serious, but he has discussed it in an entertaining manner. I have an awful lot to cover in the time available. If I do not cover all the matters involving audits, corporate governance and corporate performance, I will be more than happy not only to write to him but to meet him to discuss them further.
The hon. Gentleman is a distinguished member of the Select Committee on Public Administration. Last night I was reading the transcripts of the Committee’s current inquiry into good government. He raised many of the same issues there. I am also aware that part of the inquiry involves consideration of mechanisms for assessing and improving Government performance. That is an important role.
As the hon. Gentleman has said, the Audit Commission celebrated its 25th anniversary last year. From the very beginning, it has had a responsibility to assess, evaluate and promote economy, efficiency and effectiveness in the delivery of public services. That is what I want to cover in my response to him, the major theme of which, notwithstanding my invitation to meet him, is that this is not an abstract exercise, or something that can be put into the journals of some public sector magazine. This issue directly affects millions of people every day, and involves billions of pounds of taxpayers’ money.
I have been reading Duncan Campbell-Smith’s excellent book “Follow the money—the Audit Commission, public money and the management of public services, 1983-2008”, and I was struck by an extract from Andrew Marr’s foreword that encapsulates what the hon. Gentleman and I both want from performance management. Andrew Marr states:
“How do you actually make a council, or a health authority improve in the hundred small ways which, to the rest of us, may make the difference between a successful minor operation and a life-threatening infection, or living in a clean housing estate as opposed to a dangerous, damp-infested modern slum? After the crisp-sounding headlines and the rousing political prose, where are the levers, inducements, measurements and encouragement that translate aspiration into achievement, in offices, streets, police stations and so on? In short, after you’ve spoken, how do you do?”
I agree with the hon. Gentleman. The assessment of those questions, in a nutshell, is the role of the Audit Commission in local government. One of the commission’s strengths, over its quarter-century, has been the way it has evolved to take changing circumstances into account in assessing how councils are doing. The debate is extremely timely, because the Audit Commission is on the verge of moving from one performance evaluation system to another. I would like to talk about those two systems.
Comprehensive performance assessment was introduced in 2002 to provide a rounded and simplified picture of local council performance. For the first time, local residents, councils, the Government and the media could easily gauge a council’s service delivery and compare it with those of its peers. The corporate assessment asked questions about councils’ capacity for improvement, looking at ambition as well as current and past performance. I strongly believe that the CPA regime has been an important driver for improving services for local people, and has helped poorly performing councils to put in place building blocks for improvement.
A strength of the CPA regime has been the simplification of its assessment, so that explicit comparisons can be made between the performances of whole authorities, and not just between individual services. The fact that an authority could be classed as excellent and given four stars was an easy message and rating system to convey. Councils that received no stars, or one star, were often shocked and shamed into improving. Performance has certainly improved during the CPA’s seven years. Excellence has increased, with 42 per cent. of councils in the highest category of performance by 2008—an increase from 15 per cent. in the CPA’s first year. Conversely, weak performance became rare: in 2008, no council received no stars, and only four councils received one star, compared with 34 councils having been rated as weak or poor in 2002. Those rating improvements understate the improvement in real performance within local government following the introduction of the harder test for CPA in 2005.
The hon. Gentleman has made the telling point that despite improvements in corporate performance, public satisfaction with councils has fallen at the same time. Across England, the overall proportion of people who were satisfied with their council fell from 64 per cent. in 2000-01 to 55 per cent. in 2003-04, and fell still further to 53 per cent. in 2006-07. That is of concern, because there is an obvious divergence between objective assessments of councils’ performance and the public’s satisfaction with local authorities. That hints that the CPA regime had probably run its course, and that a new challenge, which asks challenging questions about performance from the point of view of the individual citizen or community, is required.
The hon. Gentleman lives in the real, modern world, so he knows that local authorities do not provide all services on their own. Indeed, he has discussed IBM in that regard. Local authorities form partnerships with a wide range of agencies and companies. The police form partnerships to tackle criminal and antisocial behaviour, the primary care trusts form partnerships to tackle health inequalities, and other bodies such as Jobcentre Plus and colleges form partnerships to raise skills levels and employment. In addition, the voluntary sector has increased massively in recent years. The local area agreements that we provided a few years ago demonstrate a more mature and less abrasive relationship between central Government and local government, ensuring that local targets, based on genuine local priorities are in place. Increasingly, local authorities should be seen as strong local leaders that co-ordinate the efforts of the public, private and voluntary sectors. That strong, local leadership role is more pressing than ever in this time of global recession.
As a result of that changing landscape, comprehensive area assessments will replace CPA next month. So that the commission can provide rounded judgments about the challenges, performance and prospects for particular areas, the arrangements have been strengthened for information sharing at both national and local level. There is now a network of 41 CAA leads, who are covering local area agreement, or LAA, areas to help to co-ordinate the assessments and teams on the ground. The Audit Commission will play the leading role within the seven inspectorates that will jointly carry out CAAs, which include the Commission for Social Care Inspection, the Healthcare Commission, Her Majesty’s inspectorate of prisons and Ofsted. They will work together to implement the commitments in the local government White Paper “Strong and Prosperous Communities”.
That sounds all well and good, but, as I have said, I am very conscious of the diverging trends between performance and public satisfaction. The experience of the citizen in accessing council services should be central to assessing authorities’ performance. The services that councils provide should be based on what local people want and need. The Government believe that everyone is entitled to quality public services and that local people deserve to know how well their council is serving them and providing those services. I fully agree with the hon. Gentleman that accountability for local services and strategies is important, and local authorities and their partners should be accountable not only to the Government, but to each other and to local people.
CAA will be a robust assessment that is based around the risks to outcomes and the management of those risks. Risk management has been in the news an awful lot in the past 12 months, because of what has happened in the financial sector, and I absolutely agree with the hon. Gentleman that it should play a leading role in setting targets and assessing and monitoring performance at local authority level. CAA will focus not on structures, nor on abstract theories that mean nothing to people’s day-to-day experiences of local public services, but more on outcomes, citizens’ experiences and perspectives, and areas rather than just individual institutions.
CAA will put local residents first and focus on results that will make a real difference to people’s lives. It will also relate people’s experience of living in an area to how local partners work together and how local public services can be improved. For example, normal people are unconcerned that the police should have formal and legal responsibility for tackling crime and that local authorities should have a statutory responsibility for tackling antisocial behaviour. Normal people simply want their area to be safe, and want the police, councils and others to work strongly together to achieve that. CAA will therefore take more account of the priorities and perspectives of local people, and will report in a way that makes sense to them. It should provide local people with better, more focused information to help to hold local bodies to account.
The inspectorates have made it clear that the views and experiences of local people will be key sources of evidence for CAA. They will draw on the findings of the new biennial place survey, as well as the national survey of third-sector organisations and the annual business survey. They will also take account of the area’s own evidence through users’ views of local services. Local partners will engage with residents to find out their views about the priorities for their area, and whether those priorities are then delivered. The level and quality of public engagement and empowerment will then be evaluated as part of the CAA process, including how well vulnerable and marginalised groups have been involved.
In conclusion, this topic is incredibly important, as it concerns the accountability, corporate performance and audit of £200 billion of taxpayers’ money. It is right and proper that appropriate risk management and corporate governance policies are in place and that they are evaluated in an independent manner. I think that the Audit Commission does that, but I am happy to talk to the hon. Gentleman, at length, about how we can improve that process.
Question put and agreed to.