Wednesday 13 January 2010
[Christopher Fraser in the Chair]
Motion made and Question proposed, That the sitting be now adjourned.—[Helen Jones.]
Somewhere in my scrapbook is a photo of my hon. Friend the Member for Mid-Norfolk (Mr. Simpson), who is responding to this debate on behalf of the Official Opposition, me and a number of other members of the great and good, including Andrew Neil, outside NATO headquarters in the early 1970s on a student study tour. My hair was somewhat longer and my hon. Friend’s moustache was somewhat fuller, but otherwise we are fully recognisable. That demonstrates that we, and indeed all hon. Members in this Chamber, grew up in a world of two superpowers—the United States and the Soviet Union—although throughout the cold war the United States economy was far more advanced than and twice as large as that of the Soviet Union.
The collapse of the Soviet Union in 1991 greatly enhanced the pre-eminent position of the United States and, by implication, the west. Terms such as unipolarity and phrases like “the end of history” sought to describe what appeared to be a unique situation. Those of us living in the United Kingdom and Europe, whose nation states had been the pre-eminent powers from the start of the industrial revolution until the mid-20th century, accepted as a given the west’s ability to shape global history. Well, all of us are now going to have to adapt to a new reality, as are our children and succeeding generations. We are witnessing a significant change, which, although it is still in its early days, will transform the world: the rise of China.
Global Insight, a US economics consultancy, expects China to overtake the United States as the world’s largest manufacturer by 2020. An article demonstrating that in the Financial Times in May 2007 was entitled, “US to lose role as world’s top manufacturer by 2020.” Goldman Sachs estimates that by 2025 the United States and China will have similar-sized economies, but by 2050 China will be the largest economy, followed some way behind by America and India. Incidentally, only two European countries are predicted to be in the top 10 by 2050: this country and Germany, in ninth and 10th positions respectively.
China is a country where gross domestic product grew 30 per cent. from 2004 to 2006, investment since 2000 has tripled and exports have quadrupled. China has getting on for a quarter of the world’s population. Last week it was announced that China has overtaken the US to become the biggest car market in the world—more than 13.5 million vehicles were sold in China last year—and, interestingly, for four out of every five Chinese customers that car is the first they have driven.
My hon. Friend is painting a full picture of what China is today. Of course, it was not always so. At times China was clearly a closed society, and British businesses did not trade there as they do now. Will he pay tribute to the British businessmen who, with entrepreneurial wit and wisdom—some in the 48 Group and those known as the icebreakers—went into China and started trading with it in the early days when it was not fashionable to do so?
Those in the 48 Group are much to be commended, as are those in the China-Britain Business Council, who continue to work hard to promote trade between the UK and China.
This week it was announced that China is now the world’s largest exporter, with an economy on track to grow by 9.5 per cent. in 2010. If our economy were likely to grow anything like that we would all collectively be singing the hallelujah chorus. But China’s growth is in large part a testament to the fusing of foreign capital and Chinese hard work in that country.
During the next four decades the world will become a different place. The future will be different from the past and anything other than a policy of fully engaging and seeking the best possible mutual understanding with China is simply not an option. A part of the challenge for all of us in the UK will involve visualising a world that will look different in 10, 20 or 30 years, particularly our relationship with China. Western dependency on Chinese products will grow, especially as we need to keep interest rates down.
An element of the challenge of our relationship with China is that, as a country, China is somewhat sui generis, as one of our colleagues, George Walden, observed in his book, “China: A Wolf in the World?” I quote from certain books, Mr. Fraser, because I do not want to give the impression that the only person in the Conservative party who reads books is my hon. Friend the Member for Mid-Norfolk. I want it to be understood that some of the rest of us read books as well. [Interruption.] I should say to the Minister that that is an in-joke.
In his excellent book, “China: A Wolf in the World?”, George Walden, who was a young diplomat in Beijing for many years, wrote:
“Which other country with a billion plus population—a five thousand year old civilisation who from its own perspective has always seen itself as the centre of the world—which has been catapulted from extreme left-wing totalitarianism to a headlong rush to consumerism and the outward signs of capitalism in just three decades—whilst at the same time maintaining a Communist political structure”.
That quote demonstrates that China is a unique country. Understanding China will be one of the great challenges of the 21st century.
China sees itself as a civilisation state of understandable antiquity. We all see ourselves from our own perspective. Emperor Qianlong’s comments to George III’s petition are probably almost as relevant today:
“I have perused your memorial. The earnest terms in which it is couched reveal a respectful humility on your part, which is highly praiseworthy…My capital is the hub and centre about which all quarters of the globe revolve…I do not forget the lonely remoteness of your island, cut off from the world by intervening wastes of sea…Our dynasty, swaying the myriad races of the globe, extends the same benevolence towards all.”
I suspect that quite a number in Beijing, in slightly different terms, still perceive us slightly in that way today.
As Martin Jacques observes in his recent book, “When China Rules the World”, China
“still has almost the same borders that it acquired at the maximum extent of the Qing empire in the late eighteenth century. The state remains as pivotal in society and as sacrosanct as it was in imperial times. Confucius, its great architect, is in the process of experiencing a revival and his precepts still, in important measure, inform the way China thinks and behaves.”
He went on to say, perhaps more contentiously:
“The legitimacy of the Chinese state, profound and deeply rooted, does not depend on an electoral mandate; indeed, even if universal suffrage was to be introduced, the taproots of the state’s legitimacy would still lie in the country’s millennial foundations. The Chinese state remains a highly competent institution, probably superior to any other state-tradition in the world and likely to exercise a powerful influence on the rest of the world in the future.”
My concern, and the reason why I sought this debate, is that during the end of last year and the start of this year three things happened, which, in different ways, show that China and this country need to make much greater efforts to understand each other. None of us wants a situation in which we kowtow to China’s increasing economic influence, and China will not listen if we give the impression of hectoring. Engagement must be on the basis of mutual respect, and we should endeavour to understand each other.
In the case of the Copenhagen conference on climate change, the bottom line was that China did not want a bottom line. As one Danish official observed, “China doesn’t do numbers”. China was not even willing for developed countries to set out their own CO2 reduction targets. One can understand that China—the largest CO2 emitter in the world—still sees itself as a developing nation, and would be wary of any target that might be set. However, one is inclined to ask: where were the sherpas? Why had China not communicated its misgivings much earlier, and how was it that others, such as ourselves and our colleagues in the United States, had not picked up on those concerns? Why was it left until the last two days of the conference?
I was not at Copenhagen—I do not think that any hon. Members present were—but Mark Lynas, a writer for The Guardian, was attached to one of the delegations. In an article written immediately after the events, when matters were fresh in his mind, he observed:
“The truth is this: China wrecked the talks, intentionally humiliated Barack Obama, and insisted on an awful ‘deal’ so western leaders would walk away carrying the blame. How do I know this? Because I was in the room and saw it happen. China’s strategy was simple: block the open negotiations for two weeks, and then ensure that the closed-door deal made it look as if the west had failed the world’s poor once again. And sure enough, the aid agencies, civil society movements and environmental groups all took the bait… All very predictable, but the complete opposite of the truth...China gutted the deal behind the scenes, and then left its proxies to savage it in public…it was China’s representative who insisted that industrialised country targets, previously agreed as an 80 per cent. cut by 2050, be taken out of the deal.”
The suggestion is that the whole Copenhagen conference and the accord were effectively undermined and sabotaged by Chinese mendacity—that is how Lynas puts it.
I believe that it is unlikely that China deliberately intended to ruin the Copenhagen conference, or that it wanted to be accused of systematically wrecking the accord. It is interesting that almost immediately after the conference, a senior member of the Chinese negotiating team at Copenhagen was shifted. The media have been speculating that that was punishment for the debacle of the climate change talks. He Yafei, who was at the forefront of the negotiations, was removed as Vice-Foreign Minister, and it is suggested that he was removed for failing to ensure smooth relations between China, the US and Europe.
In advance of what was clearly a major world conference, why did China and the rest of the world not have better established negotiating positions and work out where the red lines were going to be? There was the bizarre situation of Barack Obama having to burst into the room on practically the last day of the conference, find a seat, and help to guide the negotiations to the Copenhagen accord. I hope that the UK, those in the embassy in Beijing and representatives of the European Union mission, are talking to their counterparts in Beijing to seek to better understand whether China meant to wreck the talks, or whether there was a tragic failure of understanding. If China did mean to wreck the talks, that is a serious matter. China takes on the rotating presidency of the UN Security Council this month, and it cannot afford misunderstandings any more than we can.
I attended the Copenhagen conference for one of the days, although I was not privy to that particular meeting. Like my hon. Friend, I would be amazed if China had gone wilfully to try to sabotage the talks. Does my hon. Friend agree that in the past, Hu Jintao has said supportive things about wanting to tackle climate change, and that we must work closely with other countries to ensure that China has nothing to fear from coming to an agreement about what action needs to be taken? Vast tracts of China are developing but are impoverished. China must have no fear of working with the west, so that we can reach an agreement that will not prevent the developing parts of China from progressing into the 21st century.
My hon. Friend uses an extremely good phrase—we must convince China that it has nothing to fear. It must have nothing to fear from being part of the international community, from moving towards more democratic processes or from opening up society. Today, we have the bizarre situation that Google is threatening to pull out of China altogether. However, it is difficult to see how the world’s largest exporter, and a country whose economy is growing exponentially, will manage if internet providers start shutting down services. There could be a collision between the concerns of the Chinese Communist party and Government, who on the one hand want to maintain party control, but on the other hand want economic expansion. We must help China to recognise that it has nothing to fear.
Something else that happened while the House was in recess was the conviction of Liu Xiaobo for supposedly subverting state power. His trial lasted just two hours, and resulted in an 11-year sentence of imprisonment for doing no more than seeking to promote democracy. He simply said that China should have a more democratic system—something that many people have said.
Zhao Ziyang was the general secretary of the Chinese Communist party at the time of the Tiananmen square massacre. As hon. Members will recall, he intervened with the students and tried to get the demonstration called off. For his pains, he was sacked as general secretary, and spent the rest of his life under house arrest. He managed to record his memoirs on a children’s tape recorder, and after he died, what was in effect his autobiography was discovered and published.
Zhao Ziyang quotes his predecessor, Hu Yaobang, general secretary until 1987, who stated:
“In the history of mankind, in the struggle of the newly emerged bourgeoisie and the working class against feudal dictatorship, the formation of the ideas of democracy, freedom, equality, and fraternity greatly liberated the human spirit. The most important lessons learned during the development of socialism were: first, neglecting development of the economy, and second, failing to build real democratic politics.”
Therefore, two successive general secretaries of the Chinese Communist party recognised that it will be difficult to build China without having some regard to enhancing democracy. It is tragic that someone who did no more than promote Charter 08, which calls for a constitution guaranteeing human rights, should be serving 11 years of imprisonment.
That is not an isolated case. Last July, the Chinese Government suddenly detained the famous lawyer Dr. Xu Zhiyong, who is an activist renowned for his work on behalf of China’s most disadvantaged, and for his commitment to advancing the rule of law in China. He is not an extremist; he is a mainstream lawyer. He had a clear record of support for incremental reform in his litigation, which was aimed at the enforcement of guarantees already enumerated in the Chinese constitution, and he had won a seat on his local people’s congress in a district of Beijing. However, he was detained on what clearly, as I think everyone recognised, were somewhat trumped-up charges in respect of “suspicion of evading taxes”.
Last year’s Amnesty International report on China makes dismal reading. It states:
“Individuals who peacefully exercised their rights to freedom of expression, assembly and association remained at high risk of harassment, house arrest, arbitrary detention, and torture and other ill-treatment. Family members of human rights activists, including children, were increasingly targeted by the authorities, including being subjected to long-term house arrest and harassment by security forces. Lawyers who took on sensitive cases were also at risk; several had their licences suspended, and others lost their jobs. Some lawyers were specifically warned by the authorities not to take on sensitive cases”.
The reality is that the conviction and extremely harsh sentencing of Liu Xiaobo mark a further severe restriction on the scope of freedom of expression in China. It is a system that still massively restricts freedom of opinion and is very suspicious of anyone who organises, but just as we must seek to understand China and the Chinese position, so too must they understand that, for us, human rights are universal. That is the whole point about the universal declaration of human rights. If we as individuals and parliamentarians in this country regularly raise issues about human rights, it is not because we wish to be antagonistic or hostile or to appear hectoring, but because we believe that we have an innate duty as world citizens to seek to defend human rights irrespective of borders.
Lastly, there was the case of Akmal Shaikh, which resulted in the Prime Minister saying that he was “appalled” and a spokesperson for the Chinese Government retorting:
“We urge the British side to mend its errors and avoid damaging China-British relations.”
I cannot recall when the Prime Minister and Ministers were exhorted by an official spokesperson of the Chinese Government to “mend their errors”. That is going back almost to the days of the cultural revolution.
Clearly, the case of Akmal Shaikh was very sad. It is difficult to know whether Akmal Shaikh was so mentally ill as to be unfit to plead, but it was very sad that the Chinese authorities did not feel able to spend sufficient time making those inquiries. It is fair to say that the House is now collectively opposed to the death penalty anywhere in the world.
There seems to have been a breakdown of communication between us and the Chinese Government. There must have been, because the fact that the Prime Minister used a word such as “appalled” about the action of the Chinese Government and that the Chinese Government responded with a phrase such as “mend our errors” suggests that there had clearly been an expectation on the part of our embassy in Beijing and the Government and the Foreign Office that pleas of mitigation on behalf of Akmal Shaikh would succeed. On the part of the Chinese Government, there was clearly frustration that they were being misunderstood and it looked as though we were trying to interfere publicly in their administration of justice. The point I am making is that we both need to make far better attempts to understand each other and what we are really saying to each other, so that we do not end up with a public spat of that kind. It was hardly a good way to end one decade of Anglo-Chinese relationships and start another.
Of course, there is an enormous amount for us to celebrate with China. As my hon. Friend the Member for Ribble Valley (Mr. Evans) said, we increasingly see trade expanding between the UK and China, which is very good news. This year, we shall have the Shanghai expo. I understand that the UK national day at the Shanghai expo is 8 September 2010—that is 8.9.10, which must be extremely good feng shui. We are about to start the year of the tiger. We are delighted to see ever increasing numbers of Chinese students coming to the United Kingdom, which is testament to China’s belief in education and the belief that students will receive a good education in the United Kingdom. That is also to be celebrated. Considerable numbers of Chinese tourists come to the UK. Indeed, the largest single destination for Chinese tourists in the UK is Bicester Village in my constituency—I exhort any officials in the Foreign Office who have not yet been to Bicester Village to ensure that the Minister visits it.
I met a group of young people from China who came to the House when visiting the United Kingdom. They met representatives of the British Youth Council, of which I am an honorary president. Does my hon. Friend believe that the bonds can be cemented most effectively by young people from China visiting the United Kingdom and vice versa? When the young people I referred to were talking together in the Jubilee Room, not far from this Chamber, one could tell that the interests of the young people from both countries were very much in common.
Of course. That is absolutely right. My daughter was fortunate enough to learn Mandarin at school and spent a large part of her gap year in Beijing, which substantially enhanced her insight into China and the younger generation of Chinese citizens. Young people from the two countries communicate at a perfectly good level, and that is all good strengthening stuff.
We must all accept that in the 21st century we live in a world where China is becoming an increasingly powerful nation. It is a civilisation state. It is increasingly powerful economically and in terms of global politics. It therefore behoves both the Chinese and ourselves to understand much better what the other is saying. It is not for us to tell China what form of democracy—what form of government—it should have. I hope that China would see that it is in its own interest to have the greatest possible access to information and that censorship is eventually self-defeating. I hope that China will come to realise sooner rather than later that bearing down on individuals’ human rights is also self-defeating because ultimately, as we have seen in the Soviet bloc and elsewhere, the human spirit will eventually overcome such restrictions.
However, it behoves us to make every effort better to understand China’s position and it behoves China to seek to understand our position. That is also important in ensuring that the Foreign Office and the Treasury recognise that the Foreign Office must have the resources necessary to ensure that the embassy in Beijing and consulates elsewhere can have the resource to communicate with their opposite numbers, and that we have information and decent informed discussion with the Chinese. Otherwise, we shall have future tragedies of failed international conferences such as Copenhagen, and the world—the future of civilisation—simply cannot afford other failed Copenhagens.
I congratulate the hon. Member for Banbury (Tony Baldry) on introducing what is yet another debate about China. It always grieves me that these debates have to be in Westminster Hall. Yesterday we had a debate about the Goldstone report—a really critical debate about Palestine. Where was it? It was in Westminster Hall. There were so many hon. Members here that not everyone could be called to speak. I ask that the Government sometimes rethink their priorities on foreign affairs.
Let me make a couple of points in response to the hon. Gentleman’s speech, much of which I agree with. He did not say much about the World Bank or the International Monetary Fund, but we need to move faster on China’s membership of both bodies. After all, Belgium and Luxembourg have more votes than China on both, and we know their GDP is much bigger than China’s—[Laughter.] If we do not move faster, the time will come when America and the rest of the world want the dollars that are in Beijing and Shanghai, but China will say, “Do you know what? We don’t like your banking systems. We don’t like your IMF and World Bank. We’ll set up our own system.” We should not think that they will not do that.
One of the big issues that we misunderstand is that the Chinese—much like Israel—do not need the western world as much as the western world thinks that it needs them. If the Foreign Office misunderstands that, the consequences will be very serious. One way in which we could be more proactive is by saying that although it might have been right in 1945 for the World Bank, the IMF and the United Nations to be in Washington and New York, it is not right today. One thing that we could do is move one of those organisations to China. If China is to be the world’s leading economic power by 2020, it is incumbent on us to help it with its political understanding of the world, and moving an international organisation there will move Chinese diplomacy on light years.
I make that point in the light of discussions about Google last night and this morning. When Google went into China, it agreed to censorship rules that went against America’s first amendment, which is a completely back-to-front philosophy for Google’s owners to adopt, given where they come from, their background and the fact that the company’s chief executive is a Republican. In any case, Baidu, the Chinese search engine, is much bigger in China than Google, so perhaps this is not about the number of attacks on Google. After all, Google is the greatest technology company in the world and should be able to handle such attacks, which happen to every company. I think that there are between 5,000 and 10,000 a day—I would love to see the figures—but that, in a sense, is an aside.
On Akmal Shaikh, the real issue was that the trial lasted for just half a day. In relation to China’s human rights and the style of its legal system, we are asking the Chinese whether such trials, which create tension between countries, could be open not only to the Chinese public, but to non-Chinese, so that we can see that justice is done. That is the crux of the issue in such cases.
I turn now to my own thoughts about China. I place on record my thanks to the Industry and Parliament Trust, which took me to Shanghai in 2008. In September last year, I also went on an amazing visit to Beijing with the all-party group on China. We made the 25-hour train journey to Tibet, where I learned a good deal more about Tibet. Those who have not understood what is going on in China should consider the fact that Russia and Canada, where the temperature can be minus 20° C, have had trains for considerably longer than China has. However, although the temperature on the railway that we used is sometimes minus 35° C—it goes up to 15,000 feet—the service has not missed a single day, while the services in Canada and Russia both have. In other words, the technology in China is the finest in the world, and we misunderstand how fast things are progressing.
To give another example, more university papers were published in China in the past year than in the whole British university system. If we use such figures for university research to judge universities, China is already ahead of us. The pace of change is substantial, but that change is not just economic; it is fundamental and it is taking place at every level.
In addition to those two visits, I have been to Hong Kong, where I was brought up as a child. Although I am not writing my autobiography, I am working on a major work called “The Foreign Office: A Disaster Abroad in the Twentieth Century”. Everywhere I have looked, the Foreign Office has been pretty disastrous. We got the middle east, Africa and India wrong, and if we are not careful we will get China wrong, too. That is partly because the Foreign Office is independent inside Whitehall. If we are to change in the 21st century and hang on to the title of “Great Britain”, the Foreign Office will have to grow up and come into the system that exists in this country.
I say that because I have spent a huge part of my life abroad and visited many places. I was a member of the African National Congress. I care enormously about how Britain is perceived abroad. In that respect, I have spoken to our new ambassador in Beijing. As I said in Shanghai, the quality of our people under ambassadorship in China—I will not say that I am deeply distressed about it, because that is the wrong word—needs a fundamental rethink. How can it be right that we have fewer people in the largest country in the world than we do in America? We need to reshape our thinking; we need more consulates in China than in Europe and America. We have said that many times before in this place, but nothing actually changes.
In that respect, the issue of Copenhagen is interesting. The hon. Member for Banbury asked why we had not picked up the feelers and realised how China felt about Copenhagen. Why did we not do that? Is our regime in Beijing big enough? Is it intelligent enough? Did we not meet the Americans and other Europeans in Beijing to discuss China? Did we never have a discussion in Beijing, with our opposition, about Copenhagen? Where were we? Why was the issue allowed to fester? What has changed? We have not had that debate here. We have not asked how China went to Copenhagen without our having used all the soft diplomacy skills that we are supposed to have. Perhaps the Minister can enlighten us on what happened.
On Tibet, I have written to the Speaker, and I have not yet had an answer, although my letter was sent in October. We fundamentally changed our policy on Tibet, as a result not of a debate or a vote in the House, but of a statement. That is not how a democratic Government go about changing policy: if we want to change policy, we have a debate so that those who do not feel comfortable have a chance to put their feelings on the record. In future, I hope that we will not change policy on any part of foreign affairs as a result of just a statement. I say that irrespective of which party forms the next Government.
We have talked about the economic power that China will enjoy by 2020. I have also said that we are pretty under-represented in our foreign embassies and consulates in China. Now, however, I want to come to the issue that is really gnawing at me following my trip to Tibet. On her first official visit after she was nominated, Hillary Clinton said that she and America were downgrading—she did not quite put it like that, but the meaning was clear—America’s resolve on human rights in China. That approach is wrong, but it has washed over the rest of the western world. People are thinking, “Okay. If that’s America’s attitude because they need the trade, maybe we’ll follow suit.” That is a very dangerous way to go. As the hon. Gentleman said, we are talking about universal rights, and we should stand up for them. He mentioned Russia, but I could also point out how Poland changed because of one person. These things happen, and we need think only of Solzhenitsyn and his books in Russia. The individual matters, and universal rights are just that—universal.
The issue that concerns me most, however, is Tibet. Lords Steel and Alton have put forward some rather clever ideas about how to cope with Lhasa and the Dalai Lama. If the Dalai Lama dies before the issues of Lhasa and Tibet are resolved, he will die a hero, which will cause even more problems for the Chinese. Italy reached a solution on a similar issue when the Catholic Church was given independence within the state. Lord Alton has proposed that the small part of Lhasa where the two main temples are situated should be the equivalent of the Vatican for the Buddhist faith. I ask the Government to start making representations about resolving the issue, which will fester if we do not resolve it.
We had discussions in Beijing, and I should mention the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Bury, South (Mr. Lewis), who he is not here today, although he is absent for good reason. In the Northern Ireland context the Americans always talked to both sides; in the Sri Lankan Tamil context Archbishop Tutu was talking in Dubai; in the Palestinian and Israeli context the Norwegians were talking for nine months, without anyone knowing. There are ways of coming to resolutions. I ask the Minister to ponder whether President Clinton and former Prime Minister Blair could not be asked to go to Beijing to talk through the matter, given the middle east and Northern Ireland peace talks in which they were involved. When I raised that in Beijing, the official view of the Chinese Communist party officials was that it would be a sign of weakness to involve a third party in their problem. I said that it was a sign of maturity in a growing power if it asked an outsider for help. After all, those meetings are held in deep confidence. I said it would be seen as a strength. I think that we are between two positions: China says Tibet is theirs, and we say it is theirs, but that it belongs to the rest of the world too.
The hon. Member for Banbury mentioned Expo 2010. In some ways, hard diplomacy failed in the last part of the 20th century. We need only look at Iraq and Afghanistan to see that. Even if we were to win in Afghanistan, which seems highly unlikely, what have we left, and how much damage has been done in the region? In the same way, America went into Vietnam. Macmillan’s advice was by all means to go in, but to remember that we had the same situation in the Sudan; it cost us £1 million a week and in 1920 we gave it back. He saw that that was exactly what would happen in Vietnam. What will happen in Afghanistan? Exactly the same. We will have spent millions of pounds protecting something that, in the end, will go back to what it was. That is the history of Afghanistan.
My point is that in the 21st century hard diplomacy should be secondary to soft diplomacy. What we have not understood about Joseph Nye’s work—and I am pleased that the British Council has invited him here next Wednesday for a major lecture; after all, he wrote “Soft Power” in 1994—is that we have astonishingly good soft power people working for us. They are perhaps the best in the world: BBC radio and television overseas, the British Council and the Open university. The British Museum is advising museum staff in Beijing. It is in Shanghai and has a major exhibition there and a major part of our Expo exhibition. The British Council is everywhere. However, we ask both those bodies to do more and more for less and less. We have not produced—but I should love the Foreign Office to publish it—a strategy for soft power in the world. We should build on the three British bodies that I have mentioned, which are outstanding in the world—and we have many others—to create the best diplomacy, which is soft diplomacy.
I want to conclude with a few words about the Chinese Ambassador Madam Fu Ying, who is leaving shortly. I have got to know her incredibly well. She is by some way the best ambassador that China has had in the 12 years I have been in Parliament. I have even taken her to Twickenham; show me a Chinese woman who will say “Yes, I’ll come to Twickenham”—but then she went to watch rugby union in Australia, too, when she was there. She understands not just hard power but soft power, and has been outstanding, even if we have had our differences on Tibet and human rights. We shall miss her, and we wish her well. Other hon. Members want to speak, but I want to give the message to the Foreign Office to rethink its overall strategy on China.
It behoves me too to thank the hon. Member for Banbury (Tony Baldry) for securing the debate, which comes at a crucial time. I am humbled to follow my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt), who always speaks with such authority and wisdom. He showed us the point we have reached—when we need to think and to re-examine our relationship with China. It is imperative that we recognise that China has made a strategic shift in the world, and that we must make that shift too.
The hon. Member for Banbury said several times that the Chinese must understand that they have nothing to fear. I would say it is we who must understand and it is we who have things to fear, if we do not recognise the shift in relationships across the world because of the new China, and its position in and view of the world. It is time for us to stop talking to China from the point of view of a parent-child relationship, and to move to an adult to adult relationship, in which rather than telling the Chinese things, we listen actively. I have all too often seen us go into meetings with the Chinese saying we are there to converse, when really we are there to tell.
One clear example of the change that has taken place is China’s influence in Africa, which we ignore at our peril. Its influence in countries where it has invested a lot of money, and where it is trading and taking many of the raw resources that it needs to help its economy grow, will clearly have effects in the world in the short and long terms.
The hon. Gentleman is right. There has been a further arrogance in our thinking. We have assumed that we could allow China to move into Africa and that we could watch and almost tolerate its frequent pillaging of natural resources there, particularly its destruction of rain forests and removal of trees, but that China would eventually begin to see the error of its ways and would think and operate according to the tenets of the west. That is not going to happen. It is time we recognised that and saw the need to form a new relationship and dialogue with China.
There was an excellent article in The Guardian yesterday by Simon Tisdall, and I urge hon. Members who have not read it to do so, because he sets out how relationships with China are turning chilly. There is a huge risk that we shall expect China to work on the same basis of compromise and consensus on which the west has for so long operated, and that we shall fail to see that China does not recognise the need to work on that basis. My hon. Friend the Member for Sittingbourne and Sheppey talked about Madam Fu Ying, and I endorse every word he said about how she epitomises China’s use of soft power. It is virtually impossible to pick a fight with her. She has charm and is calm, amusing and witty, but has a core of absolute strength and an unbiddable determination to have her own way. The velvet glove masks a solid, hard power. The fact is that she will listen, nod and smile, but she will not move. That is what we need to understand. We need to develop a new relationship with China.
There is a saying that “You never want a serious crisis to go to waste”. We have had a crisis with Copenhagen; and we have had a crisis with the cancellation of the UK-China human rights dialogue. Let us use those crises, recognising that it is time for us to make a strategic shift from the global dominance of the west. We must find new ways of accommodating the world that is emerging.
Societies are inherently linked to their past, and China is no different. Imperial China depended upon a vastly powerful and infallible centre, as communist China still does. In neither system have human rights, constitutional checks and balances or any form of democracy figured prominently.
China sees the execution of Akmal Shaikh as part of its way of operating. It does not see the need to move into a world of negotiation on human rights matters. There are times when we have to talk differently with China about the place it wants in the world. Part of the problem is that we in Europe are used to consensus. To become a member state of the European Union, there is a set of rules that have to be complied with; those standards have to be met to be a member of the EU. To become a leading power in the United Nations, however, countries do not have to fit in with any rules. They can become leading members, powerful members, of the UN and still ignore human rights. They can ignore consensus. They can go their own way.
We are moving into a new world, which has a new level of sophistication in dialogue. I believe that the Foreign Office can deal with that, but it is time to step up and time to grow. China is understandably very confident about its recent success, but we need to understand how China works. Its leaders are effective technocrats; they are managers, they are pragmatic. They are deliberately uncharismatic compared to some of their predecessors. China has grown fast, and its leaders have been thrust on to the world stage.
Foreign policy did not previously register high on the Chinese Government’s agenda, which was to move its economic development forward. Its global mission was to improve its economic position in the world. It has succeeded, and can now afford to grow its internal markets and put less emphasis on its world markets. China therefore has less need to consider how it is viewed by the west. Economically, it is extremely powerful. It holds the world’s financial system in its hands. We need to engage with that new China.
I have found a keenness to improve bilateral understanding between the two countries. The UK-China leadership forum of which I have been privileged to be part for the past few years, held its third meeting at Ditchley park in September last year. The forum brings together political figures and policy makers from both sides to explore an understanding of our respective positions on the key issues of the day. That form of dialogue is immensely valuable, and I hope it will continue and flourish. I hope that those from the top of both Governments will find a new way of talking and communicating to increase understanding on both sides. It is no longer a case of explaining the west to China. China has to take the proactive step of explaining its views to the west and how it sees the relationship with the west.
China is realistic about Copenhagen. It has the greatest problem in the world on climate change. The pace of desertification in China has doubled over the past 20 years; 25 per cent. of the land area is already desert, and air pollution is prematurely killing 400,000 people a year. The country is not unaware of the dangers and risks of climate change.
I said that China’s foreign policy is driven by its need for economic development. It is also driven by an appetite for oil. We need to work with China and talk with China about a path for greater resource efficiency and a low-carbon future. We need to support that with shared science and technology, finding new ways of solving the problem together.
Questions have been asked about why we did not understand what China’s position would be at Copenhagen. I suggest that it was the usual problem—that we were telling China. We were not listening; we were not being responsive or aware of what it was saying. The balance in the world has changed. It has moved from the G8 to the G20. We need to be aware that China has an increasing level of support in the G20, and that the balance is moving.
China has joined the World Trade Organisation and is a judicious member of the United Nations Security Council, but we need to be aware too of the Shanghai co-operation agreement and its impact on China’s relationships with many other countries. That relationship is one in which countries do not interfere in each other’s affairs, do not set standards for behaviour and do not demand human rights. However, they offer mutual support, defence and trade. I do not suggest that it is a route that we in the west should follow, but we need to understand the implications for relationships around the world, especially for countries that have joined the Shanghai co-operation agreement.
It has been said that we need to consider our future in Afghanistan. It is something on which we have the opportunity for a new dialogue with China. Instability in China is seen as a high risk, and Afghanistan and Pakistan could create huge problems for it. So far, China has on the whole sat back and ignored that risk. It is time to engage with China, telling it that it has responsibilities and listening to the response in order to try a new kind of dialogue.
China is softening its borders with the spread of its own people—to Russia and Mongolia, and to central Asia, Burma and Laos. I believe that its mantra of non-intervention will gradually soften, but we need to be in dialogue with China to ensure that it happens. We must consult China on international issues, especially in relation to Iran, Darfur, Kosovo, Burma, the middle east and Africa. Let us have a new dialogue.
As the hon. Member for Banbury said, many Chinese students come to this country every year and there is a huge opportunity to develop a mutual understanding. It is a way of forming a new relationship. Let us move forward into that new relationship and take the opportunities to forge closer links with China on a new transnational agenda, which covers issues such as energy, the environment, climate change and overseas investment, in a way that respects Chinese interests. Let us find a new, safer world in which we have nothing to fear because we have found a way of talking and understanding.
I congratulate the hon. Member for Banbury (Tony Baldry) on securing the debate. Three months ago, we had a debate in this Chamber on the implications for UK policy of relations between China and the west, which was called by the hon. Member for Cities of London and Westminster (Mr. Field). During the debate, we touched on economic and trade issues, security, human rights and Tibet. Rather than going back over those issues, I will try to focus on developments since then. As China is a rising superpower, it is important that we return to the subject of China with some regularity because much has happened over the past three months.
As was mentioned by the hon. Member for Sittingbourne and Sheppey (Derek Wyatt), we have had the positive news that Google will no longer be censoring its search results in China. Indeed, the lack of media freedom was an issue that we discussed during that last debate. The news from Google is very welcome to those of us who have been incredibly uncomfortable with Google’s capitulation to China’s demand for restriction of the media and control of what can be viewed on the internet. Such behaviour is in total opposition to the freedom of information that we have come to associate with the internet and, in some ways, to the very principles and mantras that a company such as Google stands for, particularly with its slogan, “Don’t be evil”. It will be interesting to see how China responds to Google’s move, whether Google will be able to continue to operate in China and how the Chinese public, who are used to using Google, will react. We will follow developments on that front very carefully.
However, it has not all been such good news. The three issues on which I should like to focus are the tragic execution of Akmal Shaikh, the Copenhagen conference and the deterioration of the situation in Sudan.
Tragically, on 29 December, Akmal Shaikh was executed. The death penalty itself is abhorrent, as we discussed in a recent debate in this Chamber. The lack of due process and the mental health problems of Akmal Shaikh made his a particularly difficult case.
The secrecy of the Chinese judicial system was also very evident. The Foreign and Commonwealth Office was not told that the death penalty had been handed down until months after the sentence was passed. Clive Stafford Smith from Reprieve said:
“Despite having flown to China to be with him, Shaikh’s family were not told of his death until he was already apparently buried in the frozen soil of Urumqi. Nobody told the family how or where he would be killed. No family member or independent observer was allowed to witness his death, view his body or verify his burial. We have only the word of a press release that he was even killed.”
We can only imagine what it is like to be in the shoes of the family in such a situation. As I said, the death penalty in itself is abhorrent enough quite apart from the lack of the proper process and dignity that should go alongside any judicial decision. I understand that Akmal’s family have written to the Foreign Secretary to ask for an inquest into his death to be held in the UK, which could provide much needed closure to the grieving family, and I hope that the Government will honour the request.
I understand that both the Prime Minister and the Foreign Secretary made representations to the Chinese calling for clemency. My hon. Friend the Member for Orkney and Shetland (Mr. Carmichael), who followed the case closely, exchanged correspondence with the Government on it and concluded that the Government did everything they could for Akmal Shaikh. Given that they were not successful, will the Minister tell us whether he thinks that a different strategy could have yielded a different outcome so that we can avoid further tragedies?
Turning to Copenhagen, I, like other hon. Members, read the article by Mark Lynas and was shocked by the representations that were given. The image of our Prime Minister, President Obama and Ban Ki-moon sitting in a room while a second-ranking Chinese official ran in and out with the political negotiation equivalent of, “Computer says no” just seems a ridiculous way to conduct negotiations on one of the biggest threats that the world faces.
Two years ago, the Environmental Audit Committee visited China as part of an investigation into the international response to climate change. I was impressed on that visit by how seriously the Chinese were taking the issue, particularly with regard to carbon intensity reduction—if not absolute carbon reduction itself. Their technological advances seemed to be far ahead of the game; the hon. Member for Sittingbourne and Sheppey called them impressive. Therefore, the Chinese recognise the severe threat posed by climate change, and with a huge number of their population still living in poverty, reliant on melt water from the Himalayas and facing the risk of desertification and other such challenges, one would have expected a different response from them in the international negotiations. Will the Minister tell us what strategy the Government will adopt to bring China back on track? Obviously, securing a transition to a low-carbon world is one of the FCO’s key priorities.
Presumably, an investigation is under way into how the problems at Copenhagen could have been averted. Other hon. Members have already asked how it was that we did not recognise the extent of the difficulties that China would pose. I appreciate that such an investigation is not just for the UK, because many other countries around the world had a huge stake in ensuring success as well. None the less, we have to ask the questions and find the answers if we are to move forward and reach a meaningful global deal.
On 5 January, the Climate Change Secretary told the House:
“The conference was held up by disagreements over procedure…Those disputes about process meant that it was not until 3 am on Friday, the last day of a two-week conference, that substantive negotiations began on what became the Copenhagen accord.”—[Official Report, 5 January 2010; Vol. 503, c. 43.]
I wonder whether the procedural issues should have been resolved in the weeks before the conference. However, it is not clear whether there were actually procedural issues, or whether countries that did not want an agreement put forward the procedural issues as a blocking move. If there truly were procedural issues, they should have been resolved before the conference began.
My hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes) has said that just as the UN Security Council sits in permanent session, so, too, should a UN climate council. The Climate Change Secretary has said that such an option should be considered, so I am interested to know whether the FCO will take that suggestion to the UN. It would be interesting to know what strategy the FCO is adopting, given that we are hoping for a global climate deal from the Bonn conference in June.
I know from conversations with FCO officials in posts in various countries that climate change is not just a departmental priority written on a piece of paper, but something to which individuals have a great deal of personal commitment. That is a huge asset that we must use. Moreover, we must assess where our policy is not working, particularly in respect of the Copenhagen conference.
Let me briefly touch on Sudan, particularly in relation to the report that was released last week, “Rescuing the Peace in Southern Sudan”, by a coalition of non-governmental organisations. The report described the continuing violence in southern Sudan, with 2,500 people killed in 2009 and 350,000 fleeing their homes. National elections are to be held in April and a referendum in 2011.
I am coming to the point that is relevant to this debate but I thank you, Mr. Fraser, for that advice.
Basically, I wanted to ask the Minister for his assessment of the attention the Chinese Government are paying to the situation in southern Sudan, given that China has such important trade relations with that area and that China’s involvement is crucial to finding a global resolution to what is going on there, which could end up becoming a very dangerous situation.
I appreciate the opportunity created by the hon. Member for Banbury in securing this debate, which has allowed us to raise a set of issues relating to China, and I look forward to hearing the Minister’s response.
It is a pleasure, Mr. Fraser, to be under your chairmanship today. I too congratulate my hon. Friend the Member for Banbury (Tony Baldry) on introducing this very timely debate.
As was said by the hon. Member for East Dunbartonshire (Jo Swinson), who speaks for the Liberal Democrats, we were debating a similar subject in Westminster Hall on 13 October 2009—the implications for UK policy of relations between China and the west. That debate had a somewhat broader remit and it was, of course, introduced by my hon. Friend the Member for Cities of London and Westminster (Mr. Field). In passing, I want to say to the hon. Member for Sittingbourne and Sheppey (Derek Wyatt), who I do not think was able to attend the debate in October, that quite a bit of it was about the economic and business aspects of the relationship between China and the west.
I do not intend to reprise what I said or to comment on things that were said by others during that debate. As far as this debate is concerned, the crucial point relates to the three specific issues that my hon. Friend the Member for Banbury flagged up and which were important at the end of 2009 and the start of 2010. The first issue was why the Copenhagen climate change discussions failed and who was to blame, if I can put it crudely. The second issue was the conviction and persecution of a number of dissidents in China; that is a continuing issue, but it appears that there have been two or three high-profile cases recently. The third issue, which a number of hon. Members have already commented on, was the execution of Akmal Shaikh.
The crucial point is whether those issues represent a blip in our relations with China. The Foreign Office called in Ambassador Fu Ying for an interview without mao-tai to express our displeasure at what had happened to Akmal Shaikh. There was then an incredibly critical verbal reply from the Chinese. Is that a blip or is there a longer trend?
Having listened to the comments of a number of hon. Members, my personal view is that we have ended up having a rather simplistic debate. The idea that China has never been interested in foreign policy was mentioned. Foreign policy has always been subsumed into domestic policy, but the Chinese have an incredible interest in foreign policy, which has grown not only because of their need to protect their strategic homeland but because of their ability to have access to economic resources.
There was also the idea that, somehow or other, the Chinese have only just become involved in Africa. As most hon. Members know, the Chinese were becoming involved in Africa from the late 1950s and early 1960s.
It seems to me that the key issue in how the UK relates to China is the fact that China has a world view, which is based, as senior Chinese officials keep saying in all the conversations that I have had with them, upon achieving harmony; that is harmony from a Chinese point of view. Consequently, as far as China is concerned there is a raft of issues, most of which relate to Chinese internal affairs, that are not to be discussed. They are certainly not to be discussed in public, and the fact is that individuals or countries that raise them in public, even if they are raised in a moderate way, are likely to produce the grave displeasure of the Chinese Government.
Furthermore, China has gained access to resources in the world, which they believe is perfectly legitimate. The Chinese would turn to us and say, “Well, after all”—I am using shorthand—“you westerners pillaged the resources of the world from about the 16th century onwards. All we are doing is offering good trade relations with many developing countries, but we do not attach any form of moral politics to that. We are not interested in relating that to human rights in one form or another”.
I want to turn the debate around. It is not just a question of the United Kingdom being—quite rightly—sensitive to Chinese culture and history, and of our trade and business relationships with China. The hon. Member for Sittingbourne and Sheppey is absolutely right; the balance of power has changed in the world. Once again, I do not think there is anybody who does not accept that. The balance of power in the world has changed not only because of the growth and power of China but because of the growth and power of many other countries, including India and Brazil. That complicates matters not just for us but for the Chinese, who I believe are driven by fears of instability. Those fears drive China more than anything else.
As I was saying, it is not just a question of our being sensitive. The Chinese will have to recognise that they must take into account the policies and opinions of many other countries. It will be increasingly difficult for them to operate in a world at a very narrow economic level without realising that if they are to achieve membership of the World Bank and participate in many other things—they are already finding it difficult enough in the United Nations—they will have to take a position on certain things. They will have to be involved in the give and take of politics.
What are we to do about that? First, we should continue to say, very politely, to China that there are certain issues that we regard as important, not only as parliamentarians but as a British Government and Opposition, and that we will continue to raise those issues with the Chinese, not confrontationally but in a way that reflects our values and is not an insult to China.
Secondly, we must recognise that there are actually many areas where China and the United Kingdom have mutual interests. We are an entrepreneurial nation, keen on developing technology and education. Those links are very strong indeed. There are even areas in terms of security where China is co-operating with Britain and the west. Recently, the Chinese navy has been co-operating on anti-piracy patrols in the Indian ocean. That is all to be welcomed.
However, when we talk about the relations between the UK and China, we should not constantly place the emphasis on always trying to consider things from the Chinese perspective. It is equally important that we are very clear what UK national interests are and we should spell those interests out, forcefully but not rudely, to the Chinese.
Actually, I think the Chinese Government realise that. Their formidable ambassador, Madam Fu Ying, also realises it. I emphasise all the things that have been said about her; she has gone out of her way to improve British-Chinese relations, although I would put in a caveat—however good an ambassador is, they have riding instructions from their Foreign Office and we should recognise that. Ambassadors are not independent actors.
I welcome the debate. As I said, the real question is whether the issues raised by my hon. Friend the Member for Banbury are a blip or represent a trend. What is the perspective of Foreign Office officials and of the Minister? Although, like many colleagues, I have in the past been critical of the Foreign Office and its officials at times, I do not think those officials are as inadequate, or that the Foreign Office is as poor, as the hon. Member for Sittingbourne and Sheppey may have been suggesting in some of his comments.
I take that last comment by the hon. Member for Mid-Norfolk (Mr. Simpson) as a ringing endorsement, not of me personally, obviously, but of the Foreign Office.
It is a delight to serve under your chairmanship, Mr. Fraser. Whenever the general election is, it is a shame that you will not still be gracing these corridors afterwards.
This debate is very timely and I congratulate the hon. Member for Banbury (Tony Baldry) on securing it. He gave us a tantalising mental image of himself and the hon. Member for Mid-Norfolk in the 1970s with longer hair. However, I just wonder what their foreign policy was at that time, for example on Pinochet’s Chile and particularly on South Africa and apartheid. However, that is obviously not a matter for today’s debate.
It has been an entirely sensible one all my life.
The hon. Member for Banbury said that he too reads books. I see that some additional books have been brought in for him during the debate. That is a great delight, as I thought that I might have to recite to him some words from Pope—
“A little learning is a dangerous thing;
Drink deep, or taste not the Pierian spring:
There shallow draughts intoxicate the brain”—
but obviously he has plenty to keep him reading.
On serious matters, I will say three general things before I come to Members’ specific questions. One statistic that exemplifies the issue for all of us is that in 2005, the UK’s GDP and China’s were roughly equal, at $2.24 trillion for China and $2.25 trillion for the UK. It is almost certain that the final figure for China in 2009 will be double the UK’s. With regard to economic might, we must be absolutely clear-sighted about the issue before us. It is compounded by the fact that China, unlike Japan, is a permanent member of the Security Council, so its role in international affairs is significant.
One thing that has struck me forcibly in this debate is that many people have referred to China’s growing power and the possibility of a bipolar world in which the United States of America and China are the two world powers. To me, that points clearly not just to the role of the G20 and so on but to our role within the European Union. One frustration for the Chinese is that they end up doing different deals with 27 countries within the EU and that Europe cannot manage to get its act together effectively in its relations with China. We can be much more effective on many issues by having a shared foreign policy within the European Union in relation to China.
The hon. Member for Mid-Norfolk said that it is sometimes difficult to say things in public because it offends Chinese sensibilities. I am sure that he was not suggesting that we therefore should not say them.
I understand that. However, it is often easier for us to say things jointly, as the whole European Union. That has far more effect without affecting bilateral relations directly. In relation to some of the issues that we have discussed today, the fact that the EU has been able to engage concretely as a whole, making representations on our behalf as well as on that of other member states, has mitigated some potential problems with bilateral relationships.
The creation of a much more rationalised External Action Service within the European Union and its presence in China will be vital to UK interests in the years to come. We must ensure that good British diplomats are deployed in the External Action Service in China, and we must ensure that the EAS is effective. Given how Cathy Ashton presented her case to the European Parliament on Monday, I am sure that she is focused on that.
We need to address crucial international affairs issues, such as Iran’s growing nuclear ambitions, and China will be key to that. Several hon. Members referred to trade issues. One area in which we need to move forward significantly is achieving market economy status within the European Union for China. That can happen only when China is prepared to make effective concessions on some of its anti-competitive practices.
The hon. Member for Banbury started by referring to Copenhagen. Several hon. Members, including my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt), suggested that there might have been a complete failure on the British part and that we somehow did not know what the Chinese were thinking. We certainly did. On many occasions last year, Ministers here expressed our profound concern about the direction in which China was moving in relation to climate change. Many of us tried to put the argument to China that the threat to it from climate change is significant in terms of internal migration and migration from low-lying areas around the world, and that it is in China’s interest to get it right.
The hon. Member for Mid-Norfolk said that ambassadors sometimes do not have much wriggle room; that is also true of Chinese delegations. Perhaps if there had been more wriggle room in Copenhagen, we would have got closer to a better and stronger set of agreements. I know that many more vulnerable nations were upset that the equity argument about climate change—namely, that the poorest people in the world will be most dramatically affected by it, whether in Bangladesh or on islands in the Pacific that are likely to disappear under the ocean—did not carry as much weight with China as it perhaps should have done, especially in light of the argument that China wants a harmonious world according to its own understanding.
We look forward to Mexico and hope that we will be able to secure a better agreement. I am convinced that the Chinese position will move; I am sure that the equity argument will carry more weight. It was good that China moved substantially last year from the position that it held at the beginning of the year to the position that it adopted in Copenhagen. It was a significant change. China now accepts the need for measurement and verification.
Several hon. Members asked whether we have the right architecture for such discussions. That is almost certainly not the case; the difficulty is whether we should first address the architecture arguments or the substance. That is one complication of all United Nations bodies. We need to find an architecture that better embraces the changing power blocs that several hon. Members have mentioned, not least Brazil, India and Mexico.
The hon. Member for Mid-Norfolk discussed the execution of Akmal Shaikh, and the hon. Member for East Dunbartonshire (Jo Swinson) referred to her hon. Friend the Member. for Orkney and Shetland (Mr. Carmichael), who has done a great deal of work on the issue of the death penalty around the world. We debated the issue before Christmas—I answered for the Government. He has said, I think, that we did everything that we thought possible. The Prime Minister, the Foreign Secretary and I, as well as the embassy in Beijing, did everything that we could to ensure that our concerns about the nature of the trial, the secrecy that surrounded it and the issues relating to mental health were understood. It is worth saying that mental health is viewed very differently in China and that the amount of drugs involved was 80 times the amount that would normally lead to an execution there.
We wholeheartedly deprecate the use of the death penalty in any country. The fact that China, and Chinese public opinion, has a completely different attitude towards such matters is undoubtedly a problem for us. We understand the family’s need for a proper sense of closure, and we will respond in a way that I hope can provide it; I am not yet sure precisely how we will go about it.
The hon. Member for Banbury mentioned the number of Chinese students who come to the UK. My hon. Friend the Member for Sittingbourne and Sheppey—incidentally, I should say that it is also a great sadness that he will not be here after the general election either, as he will not be standing; I have had the great pleasure of rowing and agreeing with him over the years—mentioned soft diplomacy. The number of Chinese students who come to the UK is an important part of that, which is why I would not change the student visa regime in the way suggested by the Conservative party. The more Chinese students who come to the UK, the better. In relation to soft diplomacy, the BBC World Service, the British Council and the Chevening scholarships are all important elements of how we do business around the world.
Several hon. Members raised the issue of dissidents being treated aggressively by the Chinese courts recently. We wholeheartedly deprecate and are concerned by the verdict and sentence pronounced against the prominent human rights defender Liu Xiaobo. It is the most substantial sentence given for many years—
I am grateful for the opportunity to address the Chamber on this important issue, Mr. Fraser.
Although this debate is on the regulation of the insurance industry, my aim is not to discuss the subject in its broadest terms, but to focus on a specific issue as it affects one of my constituents. Paul McGaw’s health insurer refused to provide a payout under a critical illness scheme for a medical condition covered by the policy. I hope that bringing this issue to the Government’s attention will encourage them to reconsider the system of regulation of the insurance industry.
Mr. McGaw was an employee of Sopra Newell and Budge, an IT company based in Edinburgh. In June 2003, the company instituted a group critical illness scheme with AEGON UK, which was open to all employees. Mr. McGaw applied to join the scheme in June 2005 and his cover commenced on 1 July 2005. At the time of application, no comprehensive details of exclusions were made available to Mr. McGaw, nor was there a key facts summary. Applicants to the scheme were required only to complete a fairly basic tick-list questionnaire, which Mr. McGaw duly did.
Nearly two years after his policy cover started and following a number of medical tests, Mr. McGaw was diagnosed with multiple sclerosis by his general practitioner. That condition was covered by his policy. Understandably, he made a claim under the terms of the policy through his employer. The claim was examined by AEGON UK, which requested his previous medical records so that they could be looked at by its appointed medical adviser.
On 27 September 2007, Mr. McGaw was informed that his claim had been rejected on the grounds of paragraph 10.2 of the policy conditions:
“No benefit will be payable for any Critical Illness condition occurring within two years of the Member’s cover starting which, in the opinion of the medical advisor nominated by us, has resulted directly or indirectly from any condition that the member was known to be suffering from at, or prior to, the start of Cover.”
AEGON UK wholly accepted that Mr. McGaw was suffering from MS, but based on his medical records, claimed that he was known to be suffering from a pre-existing condition prior to the commencement of the policy. That related to the diagnosis of an eye condition three years earlier.
In 2004, Mr. McGaw had experienced a number of problems with his vision. He had been examined by his GP and a consultant ophthalmologist. The consultant wrote to the GP confirming a diagnosis of retrobulbar neuritis and stating that Mr. McGaw’s vision had returned to normal. It is important to make it clear that at no time was Mr. McGaw advised that the diagnosis suggested other more serious neurological problems. Even in his medical notes, there was no suggestion of possible or suspected MS at that time.
The insurance provider took issue with Mr. McGaw’s diagnosis of retrobulbar neuritis, saying it was a possible indicator of MS. I should point out that it is not a cause of MS. Mr. McGaw’s consultant has confirmed that more than half of those diagnosed with the eye condition do not go on to develop MS. Given that Mr. McGaw was not referred for any further tests in November 2004, it is difficult to argue that he was known to be suffering from a relevant condition when he joined the critical illness scheme, or that any of his medical advisers suspected that he was suffering from MS. Nevertheless, AEGON UK refused the payment on those grounds.
In April 2008, Mr. McGaw appealed the decision to refuse payment, but that was rejected. Later that month, he appealed to the financial services ombudsman who, after considerable delay, rejected the appeal. The FSO accepted that Mr. McGaw had fallen foul of the two-year rule and that the diagnosis of retrobulbar neuritis was a relevant pre-existing condition.
Mr. McGaw approached me as his Member of Parliament in April 2009. I wrote to Mr. Otto Thoresen, chief executive of AEGON UK, raising a number of concerns and asking for the case to be reconsidered. Mr. Thoresen declined to reconsider the decision and rehearsed in detail the argument about a known pre-existing condition. The letter emphasised that, under a group policy, no underwriting work is carried out before cover is granted. Had underwriting taken place in June 2005, MS would have been specifically excluded from Mr. McGaw’s cover, given his known medical history. I find that incomprehensible, given that Mr. McGaw’s consultant has confirmed that retrobulbar neuritis is not a cause of MS.
Having exhausted every other avenue, the only method of appeal open to Mr. McGaw is the civil court. That option is prohibitively expensive and carries no guarantee of success. There is case law in regard to a personal, rather than group, policy in which an insurer’s decision to reject a similar claim was overturned. In that case, which came before Lord Eassie, a pre-existing eye problem and subsequent diagnosis of MS were again the matters under dispute. In finding for the plaintiff, Lord Eassie ruled that the insurer requested access to her medical records only to avoid payment, as it did not dispute the diagnosis.
Under a personal policy, insurers are required to allow for three types of non-disclosure: innocent non-disclosure, as in the court case I have just described, where full payment must be made; negligent non-disclosure, where partial payment is made; and deliberate non-disclosure where no payment is made. It is clear that under a personal policy, Mr. McGaw would have been entitled to at least partial payment, if not full payment. Sadly, my constituent appears to be a victim of the very different terms and conditions that pertain to group policies and personal policies.
Throughout the UK, employers offer group policies as part of their package of employee benefits and thousands of individuals take up the opportunity in good faith. They assume that they are gaining, at some considerable saving, the sort of cover and security for themselves and their families that would alternatively be obtained only by taking out a personal policy. I am less than convinced that in promoting such group policies, insurers make it sufficiently clear that the cover members will enjoy is significantly lower than the member might assume. Mr. McGaw is a reasonable and intelligent individual, but at no point did he realise that the policy would not provide him with the assumed cover until his claim was refused.
I trust that the Minister will agree that those who believe themselves to be covered by such group policies should seek further independent advice to confirm exactly what they are covered for. Having acquainted myself with Mr. McGaw’s case, my concern is that thousands of employees in this country who think that they are covered for critical illness, would be put in an intolerable financial position, along with their families, if such an illness arrived. I have come to the unfortunate conclusion that AEGON UK has, through its dubious and cynical processes, severely let down my constituent in a most tragic, callous and unforgivable way.
It is a pleasure to serve under your chairmanship, Mr. Fraser. I thank my hon. Friend for securing this debate.
The regulation of the insurance industry is an extremely important issue and I listened with interest to my hon. Friend’s speech. I was saddened to hear the case of his constituent, Mr. Paul McGaw, in relation to both his suffering from multiple sclerosis and his inability to claim on his critical illness policy. I am sure my hon. Friend will appreciate that I cannot comment on that individual case today, but I will provide an overview of how the insurance industry is regulated and describe recent improvements to the protection of insurance customers. I will cover critical illness insurance and group critical illness insurance in particular. I will go on to mention recent and proposed improvements to insurance industry regulation. I will focus in particular on the proposed Law Commission reforms.
There have been a number of improvements in consumer protection and regulation for insurance before and after Mr. McGaw’s claim in 2007. I recognise that that knowledge will not alter his situation or offer him much comfort. However, it is important that we highlight the excellent work that has been done to improve insurance regulation in recent years.
My hon. Friend will understand that many decisions about the regulation of the insurance industry, especially in relation to consumer protection, are made by bodies specifically established to act independently of Government. The Financial Services Authority is the lead regulator for the insurance industry, and the Competition Commission and the Office of Fair Trading have important roles in ensuring that insurance markets do not function in a way that leads to consumer detriment.
The Financial Ombudsman Service acts as an independent and impartial dispute resolution service and provides a safety net for consumers with complaints against financial services firms, and I am glad that Mr. McGaw sought its opinion on his case. By their nature, financial services, including insurance, often create complex consumer issues. The FOS provides an economical and accessible resolution service to determine what is fair and reasonable on the basis of the facts of the dispute.
It is important that regulators maintain confidence in the insurance sector because the efficient transfer of risk through insurance is an important social function. It allows people to get on with their lives without having to worry about risks that they are unwilling or unable to bear. By paying out hundreds of millions of pounds per day in claims, this crucial industry provides a service to society and individuals when they are in distress.
However, as recent cases involving payment protection insurance and mortgage payment protection insurance have highlighted, poor sales and administration practices can lead to unfavourable consumer outcomes. That is why it is as important as ever that we ensure that a robust supervisory regime is maintained and improved in order to protect consumers while at the same time allowing the industry to continue to innovate and grow.
We as a Government are committed to working with the regulators and the insurance industry to continue to improve consumer outcomes. That aim was restated in last year’s report of the insurance industry working group, which was co-chaired by the Chancellor and Andrew Moss, the chief executive officer of Aviva. Made up of leading industry figures, the group set out its vision for the insurance industry in 2020, stating that it wanted the UK to be the leading global centre of excellence for insurance, and recognising that better consumer outcomes were fundamental to achieving that vision.
In recent years, we have collectively delivered several significant improvements to consumer protection and wider social outcomes. The FSA, OFT and Competition Commission have worked to improve the quality and distribution of payment protection insurance products, which are known as PPI policies. The FSA agreed an end to the sale of single-premium PPI policies in May last year and imposed substantial fines for mis-selling PPIs. It is also consulting on new guidance detailing how companies should process PPI complaints, and requiring firms to reopen 185,000 PPI complaint cases.
The FOS continued to help to protect PPI consumers by offering independent arbitration. Furthermore, the Government have introduced equalities legislation that will prohibit unjustified discrimination in the provision of goods, facilities and services.
To move on to critical illness insurance products, critical illness cover provides a lump sum in the event that the policyholder suffers from a specified illness or undergoes a specified operation. In 2008, more than 50 families and individuals a day were helped at extremely difficult times in their lives by claiming on their critical illness insurance policies. The average claim was £63,000, which is more than double the average UK annual salary. Currently, some 12 million people in the UK are protected by a critical illness policy.
Critical illness policies will pay out if the policyholder suffers from one of a list of predefined illnesses rather than from any condition that could prevent an individual from working. Typically, such policies will also not cover pre-existing illnesses if symptoms had started to develop, or conditions that develop within a relatively short period of cover being taken out.
For group critical illness cover, the employer takes out a policy for the benefit of the members of the group scheme. However, the individual members are not party to the insurance policy. In group insurance, it is common for individuals to be asked relatively few underwriting questions up front and for the insurer to mitigate the risk of having less information through exclusions. That approach is taken because it is cheaper and easier to run, which means that policies can be offered at more affordable prices. It is not unique to group policies; other insurance products—for example, several individual travel insurance policies—also take that underwriting approach.
It is worth noting that individuals who find that they cannot claim on their group policy due to exclusions such as a pre-existing medical condition would most likely also have had an exclusion applied if they had attempted to take out individual cover. As a result, they would not have been able to claim even if they had bought an individual policy and fully disclosed their health status. However, we recognise that it is more likely that the customer taking out an individual policy would be aware of the exclusion at the point of purchase than the group member. Again, that highlights the need for clear, simple products, appropriate financial advice and enhanced financial capability in consumers.
The Government and the regulator have taken several steps to improve regulation and achieve better consumer outcomes from critical illness and other insurance products. In January 2008, the FSA published the “Insurance Conduct of Business Sourcebook”, or ICOBS, which applies to all general insurance and protection products and sets out, among other things, how they should be sold. Under the ICOBS regime, insurers are required to explain the key features of the product, to highlight exemptions and to take reasonable steps to ensure that a customer only takes out a policy on which they would be eligible to claim benefits. The FSA’s Treating Customers Fairly initiative sets a high standard for product design, for information and advice provided to customers and for the after-sale conduct of insurance companies.
However, it was identified in 2007 that too many complaints about critical illness policies were being received and upheld by the FOS, thereby indicating a common underlying problem with how critical illness claims were being treated. I am pleased to say that the industry proactively responded to the issues and acted to restore confidence in critical illness products. In January 2008, the Association of British Insurers implemented its guidance for non-disclosure, which was upgraded to a code in January 2009. This mandatory code sets out how firms should treat customers who have inadvertently or otherwise failed to disclose relevant information to the insurer.
The code states that insurers should pay out if the customer made an innocent error in not disclosing information, unless such information would have meant that insurance would not have been offered in the first place. If the pre-existing medical condition does not relate to the claim, insurers must consider a claim. Therefore, the difference in the treatment of disclosure between group policies and personal policies that was highlighted in my hon. Friend’s speech, and was exemplified in the Scottish judgment to which he referred, would no longer arise. I appreciate that that will be scant comfort to his constituent.
The ABI also has a statement of best practice for critical illness cover. It aims to make the critical illness market more straightforward for consumers through the use of standard terminology and covered conditions. Both of the ABI codes relate to group as well as individual critical illness cover.
The combination of industry best practice and regulation has successfully improved the position of those who take out critical illness policies. The payout rate for critical illness has increased from 80 to 90 per cent. in three years. The number of complaints received and the proportion upheld by the FOS have also decreased as a result of the improvements.
Although significant steps forward have been made in improving customer outcomes through better, more robust insurance regulations and industry best practice, more still needs to be done. Too many consumers still do not fully understand what is and is not covered by their insurance policy. Work will continue on Government and industry programmes aimed at improving customers’ financial capability to ensure that they have the skills that are required to decide what products are suitable for them.
Furthermore, despite the good work done by the FSA, the FOS and the ABI to improve standards for critical illness and insurance in general, we recognise that the law on what consumers have to disclose to insurers is based on a statute that is more than 100 years old: the Marine Insurance Act 1906. It was designed specifically for marine insurance, consumer insurance being practically unheard of at the time. Under that statute, consumers have a duty to volunteer all information that would have an effect on the mind of a prudent insurer. Thus insurers can refuse to pay out if a policyholder failed to disclose any information that the insurer, as opposed to the policyholder, deems to be relevant, even if the consumer answered honestly and reasonably all questions asked, for example, in relation to a pre-existing medical condition—no matter how innocuous.
That position has been mitigated over the years by way of ABI codes of conduct, FSA rules and FOS decisions. However, the result remains unsatisfactory, and the original 1906 statute has merely been over-layered to reduce its otherwise harsh effect. Further, the existence of the current patchwork of rules and codes makes the position confusing for consumers seeking to understand their rights and obligations. We support the Law Commission and the FOS view that in the long term such a disjoint between consumer interest and, indeed, industry best practice and the law is not sustainable. In the event of a dispute over customer disclosure, the FOS can use its powers to rule on what is fair and reasonable. However, if the case goes to court, the court will be forced to apply the 1906 Act.
Although it is commendable that, on the whole, regulatory and industry action has served to mitigate that gap, it is logical that we should consider amending the law to reflect the current consumer position and to provide even greater clarity and protection for consumers. The Law Commission and the Scottish Law Commission published a joint report and the draft Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation Bill in December 2009. That draft Bill would largely reinforce current regulatory and industry best practice by clarifying what it would be reasonable to expect customers to disclose and setting out how insurers should deal with inadvertent non-disclosure.
The Law Commission’s consultation on the draft Bill received a favourable response. The ABI is supportive of the proposals and, out of 39 responses from insurers, only four argued against the reform. We fully support the aims of the Law Commission in reviewing pre-contract disclosure and misrepresentation in consumer insurance law. The Law Commission’s proposals will be considered thoroughly in the round with other priorities for legislation at the appropriate time, and my officials are in regular communication with the Law Commission as it progresses that work.
We have heard that a great deal has been done in recent years to improve the regulation of the insurance industry and to ensure protection for consumers. Particular attention has been paid to critical illness policies and to ensuring that policyholders are treated fairly. I would like to assure my hon. Friend that it is also clear that consumer protection in this area is challenging. We will need to continue to work regularly with regulators and the industry to ensure that insurance products are regulated effectively.
[Mrs. Janet Dean in the Chair]
It is good to have the opportunity to introduce this debate, and that so many colleagues from all parties are present to contribute. I guess the subject of local newspapers is a good way of encouraging Members to attend, as we all have good relationships, even love-hate relationships, with our local papers and therefore feel passionately about their success and survival.
Like many hon. Members, I spend a fair amount of my constituency time meeting people in the local business community, listening to what they have to say, taking up their concerns and learning from them. One such meeting was the inspiration for the debate; it was with Howard Scott, the managing director of Newsquest South and West London at his office in my constituency. Newsquest publishes the “Guardian” series of local newspapers, which are well regarded and well read in many places. At that meeting he talked me through the pressures the industry is under and highlighted the impact that taxpayer-funded council newspapers are having on the health of an independent local press. I hope that all my colleagues agree that local papers are part of the lifeblood of our democracy.
I completely agree with my hon. Friend that local newspapers are the lifeblood of the community. Does he agree that news is something that someone does not want people to know, so by printing news the papers hold decision makers and those with power and authority to account and that without them we would be democratically and socially poorer?
That sentiment will be echoed throughout the debate, and it is certainly one that I want to express in some detail and with examples.
Local papers can and should be challenging. Sometimes, they can even be irritating and they occasionally get their facts wrong, but none of those things outweighs the public interest local papers serve. It is not just my view that local papers are part of the lifeblood of our democracy, it is also the clearly expressed view of the current Secretary of State for Culture, Media and Sport, who wrote about the matter last year in the Sunday Mirror. My purpose today is to urge the Government to act now to safeguard our local newspapers against unfair competition from council-funded local papers.
I will first give some background information. Research by the Newspaper Society last year found that nine in 10 councils now print their own newspaper. Over the past year around 60 local papers have closed across the country, amounting to almost one in 20 titles. Not all of that is due to unfair competition from councils, as clearly other factors are also at work, new media being just one example. Cost pressures have forced cuts in journalist staff, potentially compromising local papers’ ability to get behind the press releases they are bombarded with from all directions.
Does my hon. Friend accept that the question is about not only the closure of newspapers, but the reduction in the number of editions for some newspapers? My local paper, the Cambrian News, which is celebrating 150 years since it was founded, serves a huge area of rural Wales, but we have seen a reduction in the number of local editions, which also affects the effectiveness of local reporting.
The ability of local papers to really get into local communities in that way is clearly a concern, and obviously the cost pressures that many face are leading to such curtailments, so the hon. Gentleman makes a fair point.
I declare an interest, as I was a member of a local authority for several years, and as a former councillor I have no beef with the idea that local councils should be able to communicate directly with local residents about the services they offer, and provide information to the public. That is a legitimate role for any local council.
I suspect that I will agree with much of what the hon. Gentleman will say. He said that local authorities should communicate with their local residents, but does he agree that the main difference between what local newspapers do and what local councils do is that local newspapers hold local councils to account, whereas local council newspapers seem conveniently to concentrate on all the good things that seem to be happening? They never concentrate on the things that are going wrong in their area.
I congratulate the hon. Gentleman on securing the debate. It is an issue that many Members, from all parties, are concerned about. When we are trying to engage more people in politics and the democratic process, surely the local press has an important role. Council publications cannot fulfil it to the same extent because they are informative journals, but we need to get more people interested in politics, and the only way to do that is to have a vigorous local press.
Absolutely. That is the reason why I wanted the debate and why I was so pleased that my name came out of the hat soon after applying for the debate. I agree entirely with the hon. Gentleman’s point.
Many councils have for a long time produced publications that do not compete directly with the local press. They are often magazines that are published less frequently than newspapers and focus on council services. They can provide a useful service. However, they have to be clearly different from newspapers and must not provide a new service to the local public. My council produces such a magazine, the Sutton Scene, which definitely does not compete with local newspapers.
Just imagine that a beleaguered Prime Minister decided to hire a team of journalists and commentators to produce a daily newspaper that created a positive image of the Government, talking up their achievements and promoting them as well as it could—[Interruption.] It might be impossible even for the best journalist in the world. Such a publication would always be on message, and there would be a huge cost to the taxpayer. Clearly, there would be a lot of laughter as a result, but there would also be an outcry, because clearly that is not right, but it is what is happening locally. Taxpayers’ money is being used to pay for the production and distribution of loss-making, council-run newspapers.
A sinister trend is emerging in some local government quarters of directly competing with local independent newspapers, even to the extent of putting them out of business. One council that has developed such an approach is Tower Hamlets council. It has adopted an aggressive approach to running its weekly newspaper, East End Life. The council’s head of commercial operations, Chris Payne, set out the philosophy behind East End Life at a conference in Sheffield in 2008. Many independent local papers, he said,
“churn out a negative diet of crime and grime, often attacking their local council and generally creating a negative impression”.
Council papers, by contrast,
“help create a positive place-shaping agenda, talking up an area and its residents’ achievements, celebrating diversity and opportunity for all. Look at your local newspapers, paid-for and free…Then ask yourself: can you do a better, brighter, more cost-effective, informative, entertaining, valued and positive local paper?”
That vision of a state-run local newspaper goes well beyond providing local residents with information about council services.
The answer is to return to the reputable trade of journalism. Journalists should work only for independent newspapers and should be guaranteed proper training and decent wages. Does the hon. Gentleman agree that it has all gone wrong because we have undermined the trade of journalism?
The hon. Gentleman has a point, and there is also a point about the blurring of the role of press officers and journalists writing news and newspapers. Equally, however, huge numbers of people still want to go into journalism and see local papers as an important starting place for their career.
The vision I have outlined is one that a number of local authorities certainly seem to be embracing. They are spending large amounts of public money to employ press officers to produce what amounts to little more than propaganda masquerading as newspapers. It cannot be healthy for local democracy, or indeed for accountability, as has been mentioned already, for the only source of local news to be paid for by the council.
I will give some examples of the types of practice that need to be investigated. Indeed, the excellent debate pack produced by the House of Commons Library provides many examples of the concerns about the matter up and down the country. As a London Member of Parliament, I shall concentrate on London examples.
In the past nine years, London boroughs have ditched low-key, factual publicity and launched high-frequency, in-your-face tabloids full of good news—even good news that does not bear much scrutiny. I have already mentioned East End Life in Tower Hamlets. Currently, that council paper is produced and distributed to 90,000 homes every week. It runs to 72 pages and contains news, reviews, seven-day TV listings, restaurant reviews and, of course, sport. Circulation for the local paid-for paper, the East London Advertiser, has fallen from 20,000 to 7,500, and its advertising revenues have plummeted since East End Life started to offer subsidised advertising rates that, frankly, it could not match.
How much is all that costing? The council says that it costs £118,000 a year—good value for money for the council tax payer—but that figure hides a great deal. When one looks further, one finds that there is an awful lot of subsidy through advertising paid for by the council and other local agencies. Indeed, on the most recent figures, it amounts to £980,000 a year, so the true cost to the public purse of the publication is £1.1 million.
I am grateful for that point, which is a fair one. It needs to be brought out, and has been brought out clearly in this debate.
In truth, without a huge public subsidy, East End Life would be dead and buried—it would not be able to run. However, if it were acting like a true newspaper, would it not hold the council to account? Let me give an example of what I mean.
Last year, Tower Hamlets paid out £800,000 after cancelling the contract of its chief executive. It paid out another £1 million in compensation to an employee over an age discrimination case, and £500,000 was paid in redundancy to the council’s head of human resources. Large sums of public money are being paid out, but not a single column inch was devoted to explaining any of it in East End Life. When the books failed to balance for that particular operation, and the paper found itself with a £400,000 shortfall in advertising income, it dipped into the council’s reserves to find money for a bail-out. There was no debate, there appears to be no accountability, and there were certainly no column inches devoted to explaining why that was a good use of council tax payers’ money.
How can that be fair competition? Any commercial local paper facing such a drop in revenue would have to take drastic action such as cutting jobs and closing offices.
I do not want to make a long intervention. The hon. Gentleman referred to competition. Is it not a problem if a local authority does its advertising, including statutory notices, in its own paper and takes it away from the independent press? Indeed, the Government should ensure that statutory notices are put in the independent press. Is it not unfair competition when that does not happen?
One thing that I want to put on the record is that the Government did consult on removing statutory requirements to place adverts in independent publications and, I believe, decided not to proceed with that. That was on 21 December, and that good news was welcome.
If I could make a little more progress, I would be happy to give way to my hon. Friend.
I was referring to the drastic reaction—cutting jobs and closing offices—that a commercial entity would need to have to falling revenues. Another example that I wish to give is Greenwich Time, which is delivered 44 weeks a year to every home in the borough. Again, it mimics the format and content of a local paper. Its cost is £708,000 a year, of which at least £532,000 is borne by local taxpayers. Before it goes to print, every page is checked and approved by the council leader. The council claims that it is not trying to put the local independent paper out of business, but it has adopted the practice of holding back stories for exclusives for its own paper.
If we head west, we find that a similar story applies to Hammersmith and Fulham. The council’s h&f news, which is distributed to 75,000 homes, is a perfect example of what I wanted this debate to be about: pseudo-newspapers. It has lots of news, a 12-page property section pull-out, crosswords and a sudoku, a what’s-on section, advertising from local businesses and even a gardening section. Its counterparts in Tower Hamlets and Greenwich and all such publications are written to look at the world through the tinted glasses of the ruling party of the council.
I was looking through my copy of h&f news to find out what is not happening in the borough as the hon. Gentleman spoke. If I get a chance to speak, I have some rather good news, which he may know about, on the local press in my area. He will be pleased to hear that universally—perhaps not originally, but universally—h&f news is known as Pravda throughout the borough, so perhaps it is not quite as effective as some might think.
I hope that the hon. Gentleman gets an opportunity to contribute to the debate.
The consequence of this unfair competition is that Hammersmith and Fulham had been on the verge of becoming the first borough in Britain where the only source of local news was the council newspaper. As the hon. Gentleman intimated, Trinity Mirror Southern, which owns the local titles in Hammersmith and Fulham, yesterday announced a fight back, and I understand that the Fulham and Hammersmith Chronicle will be relaunched as a free weekly paper, to be delivered to 72,000 homes in the area, from this Friday. That has to be good news for the people of Hammersmith and Fulham.
My hon. Friend will know that local newspapers such as our own, the Sutton Guardian, play a crucial role in keeping our local community informed about local matters that affect it. Is he as worried as I am that local newspapers across the whole country are finding it difficult to ensure comprehensive distribution of commercial free sheets, and does he put that down to the competition that they are facing from local councils’ free newspapers?
I am sure that that is one contributory factor that makes it harder for the commercial business model for a local newspaper to be viable and to continue.
Going back to Hammersmith and Fulham, its justification for having a fortnightly council-funded newspaper was interesting: there was not an independent local paper that had a circulation sufficiently robust to be able to communicate with local residents and get messages into the community. Now that Trinity Mirror is planning a free newspaper, which will hit 99 per cent. of households, surely the council should be announcing a timetable for getting out of the state-run newspaper business. Of course, not every area has a newspaper group such as Trinity Mirror, with the resources to change its business model and move to a free sheet. In many cases, local papers are wilting under the pressure of council competition.
My final example is from Waltham Forest. The council relaunched its in-house magazine in 2008 as a local newspaper, the Waltham Forest News, which is distributed free to 110,000 households. The council withdrew its advertising from the local independent press and now places all its ads in its own paper—that goes back to the point that the hon. Member for Leyton and Wanstead (Harry Cohen) made. As well as turning off the tap on advertising revenue, the council is actively marketing its paper for advertising.
Not only has the funding tap been turned off but news stories are being held back to be given to the council’s paper on an exclusive basis. I am told that, as a result, on a number of occasions the Waltham Forest Guardian received complaints from its readers for not reporting events that had a council connection. In fact, the council had kept it in the dark about what was happening. In 2006, Waltham Forest spent £464,000 with the Guardian series. That fell to £177,946 in 2007 and just £9,749 by 2008. That was a crippling drop in revenue for a significant employer in Waltham Forest. The council’s decision to withdraw its advertising damaged the paper and contributed to job losses and the closure of the paper’s local office.
Getting a handle on the true cost of council-controlled newspapers is hard because often it is not clearly set out in a codified set of accounts. The costs are buried in other budgets, making it difficult to pull together a complete picture. Nevertheless, a combination of freedom of information requests, investigative journalism and so on has allowed us to put a figure on what the pseudo-newspapers are costing. In London, some £10 million a year is being spent on them. I understand that in a couple of weeks, under the auspices of the Tower Hamlets business manager, all the business managers of those effectively commercial council-run newspapers will meet to compare notes on how to be even better at selling advertising in their areas in competition with their local papers.
I said that my purpose today is to urge action. In June last year “Digital Britain” reported on and acknowledged the negative impact on independent local newspapers of local authority newspapers:
“they will inevitably not be as rigorous in holding local institutions to account as independent local media.”
It went on to say that there was a need for the Audit Commission to be invited to undertake an inquiry into the impact of council newspapers and to
“make recommendations on best practice and if restraints should be placed on local authority activity in this field.”
That is what happened. That request was made and the Audit Commission is undertaking a study and a report is on its way. However, the scope of the Audit Commission’s study has been narrowed and will not cover all that “Digital Britain” sought: it will not look at the impact of council papers on independent local newspapers. The wider public interest in a free press is not being considered by the Audit Commission because it is outside its remit. If that is so—I believe it is—it is not good enough. Surely the competition issues must be addressed. I have presented some evidence about why that is so.
Last month, the Secretary of State for Business, Innovation and Skills said:
“a healthy culture of local news in particular is a public good and Government can’t just wash its hands of some responsibility for sustaining that public good.”
How will the Secretary of State’s good intention be translated into action? If the Audit Commission does not do a comprehensive job and does just a half job, surely the Office of Fair Trading must be asked to finish it off and do the job that “Digital Britain” asked to be done. Without such action there is a risk of the creation of 21st century rotten boroughs, where the only news freely available to everyone is provided by the council.
Chris Payne from Tower Hamlets described council-run newspapers as “place shaping”. Orwell would be proud. I hope that we can do something to ensure that Orwell is not proud and that we do not allow state-run newspapers.
May I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on prompting the stimulating discussion that we will have in the next 90 minutes?
I should like to mention a little bit of history. In 1995, Netscape created a web presence that enabled people not only to read straight e-mails, as we had in those days, but to carry pictures and, inevitably, video. In the first internet bubble of 1999-2000, the only national newspaper that understood what had happened was The Guardian, which then started to run a virulent, clever website called Guardian Unlimited. Of course, The Guardian could do that because it is a trust—a charity, a not-for-profit company—and was able to invest huge amounts of money to become the first national newspaper to measure, understand and put news on the internet. But it did not have to worry about the advertising moving from its paper to its own site, because it was the same business, although, as we know, it is not a business but a not-for-profit company.
Only in the past two years have The Sun, the Daily Mirror, the Daily Mail and The Daily Telegraph fully understood what the net is doing. Why have they done that? They have done it because they have lost their advertising. Since the new year, regular Guardian readers will have noticed that one section is missing—on Thursdays, for example, the information technology has gone—and all the other sections are being rolled into the main newspaper, because the classified ads have gone. Where have they gone? The Government’s classified ads, for example, have gone online, to Direct.gov. The process has changed. Why have The Daily Telegraph, The Sun and the Daily Mirror done that? The Sun gets nearly 3 million hits a day on its website, most of which are from America. Most of the hits on The Guardian are from America, too: two thirds of the traffic on Guardian Unlimited is from America. That is all very well, but advertising cannot be sold to Americans unless there is an American presence and it is being sold from there.
This is a more complex issue than it might seem, because, by and large, Trinity Mirror and Northcliffe are the largest owners of regional newspapers. Over the past 20 years, regional newspapers have been seriously starved of money: perhaps hon. Members visited over that time and saw the antiquatedness of what they had. Some did not have access to the internet in the past 10 years, others have only just got it, and some journalists did not have personal e-mail addresses. On going to the archives to try to find out what was said in the past, all people would have found would have been a cupboard full of 10,000 newspapers. It was impossible. It is all very well for us to say, “This is happening”, but local newspapers have been bled by their parent companies. That is a consideration.
There has been a freefall of advertising—that is the key for all newspapers—because of the power of the net. For example, there is now a website that is supported by the lottery for people who want to work for a Member of Parliament. I wanted a researcher and put an advert on that site, which did not cost me any money; 450 people applied, I had the most amazing shortlist and I got somebody I am thrilled with. In the old days, I would have had to pay for an advert. If I am doing that—if we are doing it as MPs—imagine the implications for the classified advertising market: it has collapsed. The hon. Member for Sutton and Cheam has made a robust case about local authorities paying, but I am talking about the market. The market has collapsed for weekly newspapers, and that is the difficult bit.
What can we do? The problem has been compounded by the development of local radio, which takes local news. If people can hear their transport, weather and local news every day, why buy a weekly newspaper? There are other reasons why the local market is where it is. In Kent, for instance, which has the largest local authority, Trinity Mirror has just sold out to Northcliffe and there is a private family business called Kent Messenger. However, to keep people out of the classified market, Kent Messenger bought six local radio stations, although I am not sure that that should have been allowed. That course of action has been compounded, since we are in a recession, because now Kent Messenger cannot afford to run both the radio stations and the local newspapers and has made the mistake of shutting front-line newspaper offices in the high street.
Journalists who work in a high street know that people pop in. For example, Flo might pop in and say that she not only wants to buy an ad, but wants to tell the newspaper about a fire yesterday in the village that it did not know about; it gets the story. Without journalists in the high street, and with the newspaper office in a car park or a business centre, no one pops in and the news is worse. That is compounded again if companies say, as Trinity Mirror and Northcliffe have latterly, “We’re going to invest in the websites of regional weekly newspapers.” Why bother to buy the weekly newspaper when you can get Monday’s, Tuesday’s and Wednesday’s news free online?
The strategy of the owners of the local newspapers is confused. They do not know what to do. There are only two solutions. First—I have said this before, but I will say it again, because somebody might listen eventually—we set up a licence fee for radio for the cultural good of Britain, which eventually became a television licence. Why is it restricted just to radio and television? It is a cultural fee. What might happen if someone said today, “I’m going to set up a radio and TV licence and by the way we also run six orchestras. I hope you don’t mind, but we’d quite like the BBC to have an orchestra.”
Following my drift, why is only one organisation allowed access to that cultural fee? If it were taken away from the BBC and Ofcom invited bids, and as a result the BBC had access to only 90 per cent. of that fee in the first three years, we would have a fund of £300 million that we could spend on community radio and television, academic publishing—you name it. People would be able to apply for money from that cultural fund, even for music lessons in schools, if it were for the cultural good. If we do not do that, there is no solution to help the local newspaper.
I am not suggesting that we should subsidise Trinity Mirror’s or Northcliffe’s local newspapers, but there will be a Guardian alternative locally and groups of people will want to set up not-for-profit newspapers, often online, that need funding. People cannot make it work. But what if they tried? How much does The Huffington Post lose? God only knows. The person who runs it is amazingly fortunate because she has backers in Los Angeles that allow that to happen. But look at the news she collects and at the cost of it. Tina Brown in New York has 5.5 million readers, but there is no money.
Making news work online and offline is complex and it is harder for local newspapers, because they lack the drive, ambition, aspiration and understanding of the market.
The hon. Gentleman makes a strong case. Let me remind him that some local newspapers are truly independent—I am sure he knows that, but I want everybody to register the point. They do not have a group such as Trinity Mirror behind them, or a big backer who can cross-subsidise. There is a paper called the Southwark News that is entirely independent. It is even more at risk if councils behave as my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) suggests they increasingly want to do.
As I have said, that case is a matter for the Audit Commission, and I am amazed that it has been allowed. Perhaps questions should be asked about that in another place in due course. My instincts are that newspapers have forgotten why they are there. My sense is that they should have a lesser presence on the weekly pages, but go to the net as fast as possible. They should be local social network sites. On my social network site I want to find the Yellow Pages, Facebook, YouTube and Time Out. If such a site can be produced for Sittingbourne and Sheppey, it will get as many readers as the local paper does currently. How do I know that? I set up my website 10 years ago. The circulation of my two local weekly newspapers is between 8,000 and 11,000 people, but my website gets more than 15,000 readers. Who would want to read it? It is read because it contains local news and is produced daily.
My point is that the newspapers were wrong because they should have come to the net earlier. If they are planning to come to the net now, they will need to invest huge amounts of money, which their owners do not have. Therefore, they will need a fund or we will go backwards—hon. Members know where I am coming from. We wait to see how Rupert Murdoch will deal with this issue. Perhaps the iPhone application—or whatever—will cost 5p for the front page, 20p for the op-ed, 50p for the best journalists and more for other things. However, I counsel caution, because The Guardian tried to do that, and less than 12,000 people bothered to pay for an application for their iPhone, which would be updated twice a day. Will such measures work? I do not know, but somehow we must find a fund to help local newspapers.
I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing the debate. In south-west London we benefit from the excellent “Guardian” series. The hon. Gentleman receives extremely positive coverage from the local newspaper, which is down to the excellence of his performance, not necessarily to how well he manages that medium.
The national media are very powerful and can crush people at will. As many hon. Members know, I have successfully sued such media. As mentioned previously, local media are, in the main, owned by big international conglomerates. My local newspaper is part of the “Guardian” series owned by Gannett. The “Advertiser” series in Croydon was part of Trinity Mirror, and is now part of Northcliffe Media, which reflects some of the trends in local media.
It is important that we expect organisations to invest properly in the capital and in the staff of their newspapers. Many people work in the business out of love, care and perhaps a desire to move on to bigger and better things. They are significantly underpaid, particularly when compared with the local government sector, where someone who works in public affairs or producing local newspapers can often earn double.
There are some good points and merits of local newspapers that we should boast about in this debate, to justify support for thriving local media. We are lucky with the Newsquest “Guardian” series, as it has a broad editorial base for its activities. Its contribution to the community can be seen in its green pages, in its campaigns in the interests of business—in our case, for south London businesses—and in its promotion of contributions from individuals to their community.
I went to an event run by the Croydon Guardian which celebrated Croydon champions. That newspaper has taken a positive line on removing sex industry adverts from its newspapers. I hope that Northcliffe will do the same with the Croydon Advertiser, although so far it has refused.
Finally, we should recognise that the industry is extremely efficient. The Croydon Guardian operates with three journalists—Kirsty Whalley, Harry Miller and Mike Didymus, who report to Matt Knowles—but the quality of production is amazing.
Yesterday, I was pleased to meet the editor of the Croydon Advertiser, Andrew Worden. There is a challenge to the Advertiser from the local council newspaper, Your Croydon. There is heavy—top-heavy—investment in the press department of the local authority, and often there is little distinction between Croydon council’s press office and the parliamentary campaign of the Conservative candidate for Croydon, Central. One can see the power councils have in terms of the money provided, and although the amount spent on the council newspaper is probably around £20,000 a month, overall spending for the communication side of the authority is now £2 million a year. That is a substantial amount of money, which might be better spent on the campaign currently being run by the council—in close conjunction with the Conservative parliamentary candidate—calling for extra police officers in Croydon. That is rather surprising given that the Conservatives are in control both at County hall and in Croydon.
We must think carefully about how the intervention of local authorities in newspaper production can be particularly dangerous in communities that are smaller than Croydon. The economies of scale are being increased by such intervention and if we end up with only two journalists on the newspaper, as that is all that can be afforded at local level, the newspaper might go out of business. Many communities to the south of my constituency could face that difficulty.
We often criticise local newspapers for being sensationalist, and that is particularly applied to the Croydon Advertiser. However, we must recognise that they do many good things, and I underline the point raised earlier about the advantages of newspapers investing in regions and little parts of their communities. In my local area, New Addington is a satellite estate and somewhat isolated, so it is great news that the Croydon Advertiser continues to publish the New Addington Advertiser, and the good work done by Joanne Charlton.
Local papers support communities by covering local sports. I primarily read my local paper not to see what unpleasant things have been written about me, but to learn what has been happening to Croydon football club. Only about 60 of us actually go to watch the matches, but it is still important for people to know what is going on. The Croydon Advertiser has done good things in terms of transport for young people who need to be taken for kidney treatment, and in supporting the Chase children’s hospice, which is outside Croydon but looks after young people from Croydon.
Although there is a need to communicate basic public information, it would be possible to have legislation that stopped the marketing of the political views of parties. That is something that one would have expected the local soviet to have produced in Russia, and I agree with the implication of the right hon. Gentleman’s question. I support that approach—£2 million could be much better spent elsewhere.
There must be value in seeing both points of view. In the previous speech, a point was made about the lack of investment in training and in staff. In my local newspapers, many staff probably earn between £12,000 and £16,000 a year, but have the prospect of doubling their pay if they become the equivalent of a junior reporter on their local government newspaper, and that situation is extremely distorting.
None the less, good things are done, and I want to mention two examples of the dedication shown in local journalism. First, my local authority gave an award to a gentleman called Ian Austin, who has been covering local government in Croydon for 40 years. Without him, it would not have been possible for people to have had a balanced view of what was happening.
Secondly, I want to mention a lady called Aline Nassif, who is a campaigning, social issues journalist. I am sure that she will go on to rival the pay of Polly Toynbee, or perhaps a local government press officer, because of her pursuit of important social issues. Work such as hers also informs Members of Parliament, who benefit from what the local media have to say, and one attraction of her work is that she has campaigned on important social issues, such as the very real weaknesses at Mayday hospital. However, I have already taken too much time, and I apologise to other hon. Members. I will make way for others to speak.
I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on obtaining a debate on an extraordinarily important issue. There is no doubt that local newspapers face a crisis, which is why the Select Committee on Culture, Media and Sport is conducting an inquiry into the future of local and regional media and why we have received a lot of evidence. In our first session, Claire Enders, who is one of the most respected industry analysts, told us that half the country’s 1,300 local newspapers will be out of business within five years. We then heard from the chief executives of Johnston Press, Trinity Mirror and the Guardian Media Group, all of whom agreed that the crisis is the greatest that the industry has faced.
This is not just a UK problem, but an international one. I have with me a chart showing the number of people employed in newspaper publishing in America. In 1947, the figure stood at about 240,000 and it grew steadily until about 1992. It peaked at 460,000, but in the 15 years since then it has fallen to 260,000, and it is still plummeting. All of us know of local papers from around the country that have closed, but even where papers have not closed, their offices on the high street are being shut, the number of journalists is falling and the number of photographers is no longer the same. As a result, the quality of local coverage is diminishing.
The first question to address is whether that matters. When the Minister gave evidence to the Committee a few weeks ago, he rightly pointed to the quality of some online content. I think that he mentioned a website called Pots and Pans—
I apologise. The Minister highlighted an example of a good local website, and there is no doubt good local provision.
However, it was pointed out to the Committee that the media industry is a pyramid, with local newspapers at the bottom, forming the base or the widest part. Much of the journalistic investigation and news content that filters up to the nationals, to radio and even to television and the BBC starts with investigations carried out by local newspapers. Furthermore, online provision is largely parasitic. That is a slightly emotive word, but how many journalists does Google employ? Most such sites reproduce content from local newspapers. If we lose those newspapers, the bottom of the pyramid will be removed. I agree with all that has been said about how important it is for democracy and local accountability that local newspapers survive.
One point that we have not mentioned, and which I am keen that we should, is that local newspapers also do local court reporting. If we did not have that, the only court reports would be about celebrities appearing in court. Promoting an orderly society often involves people realising that others who live on their doorstep, on their estate or on their street might be held to account and punished for what they do. People can then comment on the punishment and on whether it works.
I very much agree and I will mention that issue briefly in a second.
However, we need to look at why these things have happened. The hon. Member for Sittingbourne and Sheppey (Derek Wyatt) is right that the principal cause of the problem is the growth of the internet. That growth has come at the same time as a recession, which has led to a reduction in overall advertising spending. However, this is not just about the recession; there is a migration of eyeballs and advertising expenditure away from traditional media and towards online provision. To cite one example, the value of regional newspaper advertising fell from £2.8 billion to £2 billion between 2002 and 2008. At the same time, the value of internet advertising grew from £0.2 billion to £2.8 billion in real terms. As a result, local newspapers are in a double squeeze and are seeing their advertising revenue fall, with all the consequences that have been described.
In the brief time available I shall focus on one or two things that we might do to address the problem. The hon. Member for Sutton and Cheam is right: local authority newspapers are not helping. There is undoubtedly competition—some might say unfair competition—from many local authority newspapers. Authorities no longer place advertisements in local newspapers, with the result that newspaper revenues are declining. At the same time, local authority newspapers are taking advertising revenue. The Committee had some concern about that when we took evidence, and it may be necessary to take action.
However, there are other elements in the problem. The present crisis faces not only local newspapers, but local radio and regional television. The Government have come up with the interesting idea of using part of the licence fee to fund independently financed news consortiums, and that might help local newspapers, which could play a significant part in such consortiums if they go ahead.
We could also do something about the competition regime. The Committee was told to expect that almost every area of the country would be served by just one local newspaper in the future. That should not necessarily worry us, because there is competition from a lot of different sources, so it is not a case of allowing a monopoly to develop. We need to look at the competition rules again to take account of alternative news provision.
Interesting experiments are taking place with paid-for online content. Like the hon. Member for Sittingbourne and Sheppey, I will watch with great interest how News International gets on if it seeks to impose pay walls on its content. There are two villains in the piece, particularly in this country. The first is Google, which aggregates content and allows consumers to bypass pay walls. Google’s UK managing director assured us that Google was a beneficial influence and that it strongly supported local newspapers. If that is the case, it needs to do more, although it has begun to take steps to address the problem.
The other villain is the BBC. As long as it provides online content for nothing, it will be difficult for local newspapers or, indeed, any news organisations to charge for content. I am not necessarily suggesting that the BBC should charge for all its online content, but the current situation is an obstacle, which will make things hard for other providers.
Does the hon. Gentleman not accept that another way forward might be to enable the BBC to go ahead with its original plans for local websites, but to populate them with news gathered by local newspaper and radio reporters, who would then be paid for their work?
Like me, the hon. Gentleman will remember local newspapers’ fury at the suggestion that the BBC should provide local news. He might be right, but such an arrangement would be regarded with huge suspicion. It was suggested at the time that the BBC would use material gathered by local newspapers, but the proportion was likely to be small. The local newspaper industry is likely to regard such an arrangement more as a threat than an opportunity. However, it may be that we should at least consider it.
I am conscious of the number of people who want to speak, so I want to raise one final point. I do not fully share the view of the hon. Member for Sittingbourne and Sheppey, who mentioned the interesting principle of public service reporting. The hon. Member for North Southwark and Bermondsey (Simon Hughes) mentioned the court service, which is just one example. It is terribly important that we know what is going on in our courts, health authorities, police authorities and local councils—in all the various institutions that underpin local government and local democracy. The truth is that local newspapers no longer cover those things. We no longer see someone from the local paper sitting in the corner at every meeting of the local council or its sub-committees or in meetings of the health authority. That coverage is disappearing from local newspapers, and we should at least consider whether there is a case for public service reporting to be made available to anybody who wishes to carry it, be that local newspapers, local radio or local TV.
Similarly, we no longer have every newspaper represented in the Gallery of the House of Commons. Papers rely on the Press Association to supply them with independent and objective content and to tip them off if anything dramatic happens in the Chamber. There may be a case for considering whether the same kind of service should be extended to local council chambers and the other local institutions that are so important. How that would be financed is a matter for debate. There is a case for it to receive public support, and if so the licence fee is an obvious source. We need to have that debate. I agree with the hon. Member for Sutton and Cheam that if we allow local newspapers to continue to close and to withdraw from their terribly important local role in sustaining our democracy, we shall all suffer.
I am pleased to speak again in the series of debates that have taken place in this Chamber on this subject. I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing the debate. What gives me particular pleasure is the fact that on each occasion the number of hon. Members who attend grows, and the penny appears to have dropped on all sides that the issue is not party political. It is an issue on which all three parties are guilty, at local level, and which is a serious threat to local democracy and perhaps wider democracy.
I can do no better than to use a quotation to sum up where we are in the borough that may suffer most from the problem—Hammersmith and Fulham. Andrew Gilligan wrote in his blog last week:
“One of the biggest threats to journalism is the growth of Britain’s new state press—free propaganda papers, either weekly or fortnightly, produced at great public expense by local authorities and delivered to all homes. The idea is to destroy the independent local press, thus ensuring that the only news you read about your local council is written by your local council…The frontline of the struggle is the Tory flagship borough of Hammersmith and Fulham, which looked like being the first place in Britain where official news became the only news. The council’s propaganda organ, H&F News, is a brilliant facsimile of a proper local paper—unless, of course, you are looking for any mention of the Labour Party, or any criticism of the council, the police, the NHS or any other branch of officialdom. The local independent paid-for paper, the Fulham and Hammersmith Chronicle, meanwhile, was on its last legs, with a circulation of 1,500.”
Now, however, the Chronicle”—
as the hon. Member for Sutton and Cheam mentioned earlier—
“has decided to fight back. It too is going free—boosting its circulation to 72,000 with no loss of editorial jobs—to take the fight to H&F News.”
The blog also praises the hon. Member for Shipley (Philip Davies) for his robust comments on the matter in the Select Committee and says that some councils are already closing their newspapers. I shall be asking Hammersmith and Fulham council why, from next week, it will not close its newspaper, as its only excuse for publishing one was that there was no independent local paper in circulation.
The other unusual thing about the debate is that it gives me an opportunity to praise Trinity Mirror, of which I have been somewhat critical in the past. I hope that its ambition in this case—clearly it has the necessary resources—will be followed throughout the country. Clearly it recognises a commercial threat, because although a minority of local authorities may be affected at present, you can bet your life—it is human nature, is it not?—that all those councillors sitting in their offices would love a completely supportive and uncritical press. I am concerned about what will happen if we do not tackle what is happening and nip it in the bud.
What action do the Government intend to take to stop politicisation through the council press, and the destruction of the independent local press? We will shortly need action at national level. This cannot be left to Trinity Mirror and the other newspaper groups. Let us make no mistake: the problem goes further than the watering down or manipulation of news. Very large sums of money—millions of pounds—are involved. Hammersmith and Fulham admits to spending £750,000 on the newspaper; but that is only the cost that it admits. It is the tip of the iceberg. There are magazines, newsletters, banners in the streets, poster vans driven around the borough, whole tube stations kitted out with advertisements, and online material, all advertising the Conservative party, in effect, in all but name.
I shall give two examples of what I have described. One was a letter sent to tenants and leaseholders in response to a Labour party publication, directly criticising the Hammersmith Labour party. I feel sorry for the Conservatives. They had only £200,000 to spend politically in my constituency last year. Clearly they were a bit short with regard to what the council could provide in subsidy by putting out that material. Just before Christmas a glossy six-page brochure went out about Building Schools for the Future. I could find no mention of its being a Government-funded scheme, but I found a half-page picture of my opponent saying that he had been invited into schools to talk to pupils, with a hagiography of him and an account of what he did.
I received an e-mail today from the borough solicitor, about that picture and publication:
“We recognise this is a sensitive political period and we regret the final sentence of the article we published. The council’s normal procedure for vetting potentially controversial publicity did not work properly on this occasion and I apologise for this and for any dissatisfaction you feel as a result. The newsletter has been removed from schools, libraries and the council’s websites, and no further copies of the article will be distributed.”
They must think I was born yesterday. Such things happen on a regular, weekly basis. Hon. Members may regard it as a warning if they will.
In the hon. Gentleman’s area, as I understand it, the cost is not the big issue. My understanding, from what the local authority says, is that its publication does not lose money, because of the advertising revenue that it brings in. However, does he agree that it is not just propaganda that is a problem with local council newspapers? It is the fact that it is propaganda masquerading as independent news. Whereas real, independent news will expose wrongdoing in the local authority, such publications merely highlight all the supposedly positive news stories that they want to get out.
The hon. Gentleman is right. I shall finish by responding to that point. The cost is an issue, because the admitted cost is £750,000 and some of that—about half—is subsidised from advertising, a large chunk of which is advertising by the council itself, or its mates in the public sector; the rest is taken from the local newspapers, to help run them down. However, the actual cost, when one considers the on-costs and hidden costs that councils provide, runs into millions of pounds. With the other advertising that is an issue. However—I direct this comment to those who are fortunate enough not to suffer from the problem at the moment—I agree that at root the problem is that however much the Conservative party or, indeed, any other party spends on party political material such as glossy leaflets or DVDs, at least it is clear where the money comes from. The pernicious nature of the material we are discussing is that it suppresses any news hostile to a particular political party—whichever it is—and exclusively promotes its interests. That is what is happening in local authorities throughout the country.
Yes, the issue is one of press freedom and of support for our very good local newspapers, which I want to praise—particularly the Fulham and Hammersmith Chronicle: I wish it success in the first issue on Friday. However, the matter goes deeper—to the root of local democracy, and if we are not careful, because national and European elections are targeted as well, to democracy generally. I have said this previously, and am glad to say it before a larger audience today: I ask hon. Members to be warned—the threat may be the most serious we face. We would not tolerate it at national level. We resile from regimes around the world that suppress a free press in such a way, to promote state propaganda. Why should that attitude not apply to our town halls?
I shall not keep hon. Members long at all.
In my borough of Hillingdon the demise of local papers has been going on for some time. I recognise the problems that have been discussed: the rise of the internet and of council publications—we have had one under both Conservative and Labour councils and I do not think that it interfered with the circulation of local papers. I would probably put it down mostly to something else. I agree with the hon. Member for Nuneaton (Mr. Olner), who is not now in his place—and I am not a businessman who knows that much about the press—that one of the problems has been chronic lack of investment in local newspapers.
Large multinational or national companies have come along and diminished the number of journalists, and diminished their skills, to the point where the Gazette series, which is the one we have in the London borough of Hillingdon, has its offices in Chertsey, which to all intents and purposes is a million miles away. The people one talks to—the reporters, of whom there are one or two on the ground, operating with a laptop and a digital phone—tend not to understand the area, so people are not interested in what is in the newspaper. Advertisers like me do not think it is worth while to advertise, so things go down the pan.
The local newspaper is a fundamental part of the whole. The internet will never replace it, because many people, including many of the more vulnerable people, do not have the internet. The local newspaper is a very important thing, and we must do something, but it is no good just blaming one set of things.
This is about the sixth debate that we have had on local newspapers in the past two years. May I say to my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt), on the proposals that he made, that actually the Government have listened. When we had the debate about 18 months ago, proposals were made that the Secretary of State should convene a meeting of all sides of the industry. He did that last April, and there was a summit at which a number of us from the National Union of Journalists parliamentary group were present, along with representatives of newspaper conglomerates and other representatives of the media. My hon. Friend’s exact proposal that there should be a form of public funding to support local news and local quality journalism was taken on board. A presentation was made by Ofcom, and the Government have introduced the Digital Economy Bill, which includes the proposals on independently financed news consortiums.
I hope that that will provide part of the solution to the problem that we have been trying to address during this series of debates. I agree with the hon. Member for Uxbridge (Mr. Randall) that part of the problem has been both a lack of investment in the good times, when companies such as Trinity Mirror were making significant profits, and management not looking to the long-term future.
The Government have listened to those discussions and the debates here, and I welcome their proposals. My only reason for speaking in the debate is to ask the Secretary of State to give us an indication of the time scale now. We know that the tenders were put out for the pilots for the consortiums in November. It would be useful to know the time scale for the decision making on the process. That is also important for the sake of the staff, because we are worried about the loss of quality journalism, which was based on quality journalists. Assurances need to be given—for example, that existing staff within the area of the consortiums are protected by TUPE and will be transferred across into the new consortiums if they are established. In addition, an assurance is needed that there will be full involvement of the trade unions in the discussions on those proposals at the next stage. An assurance also needs to be given that in the next stage of the development of policy, we will keep in place the mechanism of the summit that we had last April, so that we can be ahead of the game, rather than continuously responding to crises.
I congratulate my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) on securing the debate, which has demonstrated, for once, all-party concern about an issue—an all-party desire that action be taken. My hon. Friend described local and regional newspapers as the lifeblood of local democracy—words that echo those of the Secretary of State. They are also very similar to those of Lord Mandelson, who recently described local newspapers as the
“bedrock of local democracy and public life”.
That has been reflected by all hon. Members who have spoken. No one denies the vital importance of such newspapers in holding bodies such as local councils and primary care trusts to account, reporting from our local courts, as we heard, or simply providing local news and local information. We all agree that we need a vigorous local and regional press.
We also heard that there have been problems with the continued existence of local and regional newspapers. Threats have come particularly from structural changes as more and more people get their news and information from local radio and online. For once, we have heard a lot of praise for Trinity Mirror. We should perhaps reflect on the fact that it has seen huge increases in the profits that it takes from its online assets. In fact, in 2008, it spent £13 million acquiring new digital assets and, in the same year, closed 28 of its local newspapers.
We have seen, as a result of that problem, other problems coming along. We have seen a decline in advertising revenue. That is critical because local newspapers depend very much on local advertising revenue. We are also seeing the growing threat, as we heard, from the increasing number of councils producing publications that are newspaper-like and magazine-like. Some 90 per cent. of councils now produce such publications.
As a result, 60 newspapers closed last year. That is about 5 per cent. of the total. A number of daily newspapers have changed to be weekly newspapers. Hundreds of qualified journalists have lost their jobs, and many of the high street offices of our local newspapers have been closed. As we heard from the Chairman of the Culture, Media and Sport Committee, the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale), the situation seems destined to get worse.
That said, I was delighted to read in a briefing from the Newspaper Society that it thinks that there is an element of optimism: the decline in advertising has begun to stabilise, readership is currently being maintained, and local papers are availing themselves of opportunities in connection with the web and multi-media.
The reason for the threat continuing comes from three key areas. We have already heard about the first from my hon. Friend. It relates to the current requirement for councils to publish statutory notices—planning notices, compulsory purchase orders, footpath orders and so on—in a local newspaper. There was a real threat that that requirement would be removed. My hon. Friend rightly says that it was great to hear on 21 December the Government saying that that would not happen.
However, I say to the Minister that that threat may still be a real one, because my understanding is that a number of councils have now either had their local publications registered as a newspaper so that they can be the body—the organ—in which those statutory notices are put, or are considering ways of doing that. The threat has not totally gone and I would be grateful if the Minister responded on what the Government are doing about that.
The second cause of concern is the fact that some of those publications are being used for councils’ own advertising and therefore advertising is being taken away from local newspapers. The Minister might want to comment on what the Government themselves are doing, because the Government, too, have started to withdraw some of their own advertising opportunities from local papers. Perhaps there is a course of action that they could take in that respect.
My third concern is that council publications, as we heard, are accepting private advertising. For instance, 90 per cent. of the publications of local councils in London already accept or already contain private advertising, so there is real cause for concern.
The newspaper industry is arguing, rightly, that councils should be running core services, not newspapers, and certainly should not be producing propaganda. They should not be using council tax payers’ money for that purpose. The industry is concerned about local and regional newspapers being undermined by such organs taking advertising, and so on.
It is interesting to hear what each newspaper thinks. I hope that hon. Members will forgive me for referring to my own local paper. The editor of that paper wrote to me only today saying:
“The aim of any local newspaper is to provide unbiased, balanced news. If we don’t provide it they won’t buy us. The local council meanwhile is there to provide services for residents. But if they don’t provide them, then who will let people know? It is certainly not the in-house council newspaper.
Local councils have a right, and indeed a duty, to inform their residents about what they are up to. However, without balance and independence, council newspapers can be seen as, at best, biased products and at worst simple propaganda. And that is why local newspapers are so vital for local democracy for giving people all the facts without the prejudice.
As a newspaper we can reflect the good things that local councils get up to—and we do so, far more than we are often given credit for. But we can also be there to represent local people who don’t feel they have been well served and want their voices heard.”
The editor continues in a similar vein.
There are arguments on both sides. There is an argument that says that councils have a duty to provide information and so on, but equally there are concerns that we have got into a situation in which there is unfair competition that is damaging what my hon. Friend the Member for Sutton and Cheam calls the lifeblood of local democracy.
What can we do? First, councils should be able to find ways of working more effectively with their local newspapers. They could take out longer-term advertising contracts. They could run long-term campaigns in their local press. They could distribute their product alongside the local newspaper, sharing the distribution costs. We could also be looking, as the Government already are, at the local authority publicity code to see whether we can firm that up.
The Government are doing that; they have 300 responses in. We await the outcome, which I hope will include council papers being required to concentrate on relevant local council information, not on general local news, and certainly not on sudokus. We should also reduce the frequency with which they are published. It is ludicrous to have cases such as those in Tower Hamlets, Greenwich, Hammersmith and Fulham, Waltham Forest and elsewhere that we heard from my hon. Friend the Member for Sutton and Cheam. Those are the things that could be looked at. Codes are one thing, but what we need is real action. My biggest worry is that when the Government requested the independent bodies to look at the competition issues, they refused. We now have a situation in which they are looking only at whether the council papers provide value for money, and that is not good enough. It is absolutely crucial that the Office of Fair Trading now carry out an investigation into the competition issue.
I am grateful for the opportunity to speak under your chairmanship for the first time, Mrs. Dean. I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on calling this excellent and important debate. As the hon. Member for Hayes and Harlington (John McDonnell) indicated, this is the fourth time that I have participated in a debate on the future of local and regional news, and we may even have debated the matter on five or six occasions in the past two years. That is a reflection of not only the importance of the issue, but the keenness of hon. Members to suck up to their local newspaper editors to improve their local coverage. I sucked up like mad before the expenses scandal and a lot of good it did me—I can tell Members—with my local press.
It is important to start the debate from first principles. We are debating the importance of local unbiased news and of investigative reporting. To an extent, I take the remarks of people such as the editor of The Bath Chronicle with a pinch of salt. I am not sure that most newspaper editors would say that it was their job to provide unbiased reporting. There is a tendency in these debates to pretend that all our local newspaper editors are somehow the local version of Woodward and Bernstein, constantly uncovering corruption in high places. The business of a local newspaper editor is to sell the local newspaper, and local newspapers as much as national ones can distort or sensationalise the news to attract readers.
It is also important to put the situation in context. As the excellent note from the Newspaper Society that has been circulated to Members participating in the debate, points out:
“It would…be wrong to paint a picture of an industry in crisis”.
Many of the titles that have closed are free weeklies in a competitive local marketplace, and there is still a plethora of news sources, not only the 1,300 regional newspapers that have been referred to, but the 159 community radio stations, the success and vibrancy of which over the past five or six years the Minister and I were debating only yesterday in Committee, and of course BBC local news and websites and commercial local radio. Such is the proximity to power that the Conservatives now have that I have started to receive the Goldman Sachs media and telecoms daily update, and in between counting its humungous bonuses, Goldman Sachs has found time to put a buy note on Johnston Press and Trinity Mirror, which perhaps indicates that those news organisations are healthier than we had perceived.
We also have to acknowledge that technology is changing, with blogs and so on beginning to fill a back gap. On “The Westminster Hour”, an excellent programme that goes out on Radio 4 on Sunday evenings at 10 o’clock with some of the most talented hon. Members participating, I heard a report from John Beasley about a group in Lichfield that was holding its excellent local Member, my hon. Friend the Member for Lichfield (Michael Fabricant), to account, although there is not much to hold him to account for apart from the excellence of his service. Local blogs and so on are therefore coming out; there is a technology revolution.
The hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter) and I have jousted before on local newspapers, and he has even had the temerity to refer to my contradicting him as somehow being churlish. I am sure that he would agree, if he were able to just step outside of himself for one minute and look objectively, that it is hard to take his remarks seriously, knowing that he was the local council leader who created HFM. That was a local glossy free magazine put out by the council; I have a picture of one of its covers here. The titles are “Cross Roads: Lollipop John waves goodbye”, with a picture of a nice lollipop man, “What’s on”, “News”, “My Borough”, “Interviews” and “Letters”. There is nothing to say that it is from the council. The only difference between the hon. Gentleman’s publication and H&F News is that his, because it was put out by a Labour council, lost £400,000 a year. The current publication put out by a Conservative council costs the council tax payer absolutely nothing. What else upsets me about the hypocrisy of some Members is that Labour Members voted themselves—
I think that that will appear as “interruption” in Hansard. Labour Members voted themselves a £10,000 communications allowance, and I hope that the hon. Gentleman will now pledge to use that allowance to take a page in H&F News, which goes out free to every resident.
I promise to not hurt the hon. Gentleman’s feelings on this occasion, but I must defend the integrity of lollipop persons across London. I really thought that the hon. Gentleman was getting it at last—I sound like the right hon. Member for Witney (Mr. Cameron) now. There is a difference between council publications that are clearly council publications, giving lots of tedious but useful information to people in a non-political way, and what we now get which are things masquerading as independent newspapers. I think that the hon. Gentleman understands that, and if he wants to address that issue I am sure that we would all like to hear him.
I certainly shall. As I said, the Conservatives have pledged to abolish the communications allowance. I am a huge admirer of the hon. Member for Sittingbourne and Sheppey (Derek Wyatt) and regret deeply his retirement, but it was astonishing to hear that his own website paid for by the taxpayer is now beginning to put local newspapers out of business.
Ah, I stand corrected. Let me get on to the substance of what I wanted to say. First, there is another element of hypocrisy that concerns me. We have talked about the code of conduct for publicity in local councils. Let us not forget that it was this Government in 2001 who relaxed that code and allowed councils to cover issues that—
I am afraid that I cannot take any more interventions, even from one of our most eminent independent Members. [Interruption.] Or is it UKIP? I cannot remember. The Government allowed local councils to cover issues that were not their core responsibility. The hon. Member for Bath (Mr. Foster), in a typically polite Liberal Democrat fashion, gave the impression that the Government are on top of the issue. In fact, they announced a review of the code in December 2008, and the consultation closed in March 2009. We were promised the Government’s response in December 2009 and then on 7 January, but it still has not appeared. The Government are dithering, and we cannot go on like this; they must come out and say what they are going to do. We do not support independently-funded news consortiums, as that is the Government simply recreating the old analogue system of regional news that nobody wants anymore, particularly in this internet age, nor do we support the Government’s proposals to top-slice and undermine the independence of the BBC. We will protect the BBC from the Government, and work day and night to protect its independence from people such as the Minister.
What do we intend to do? Many Tory councils are already leading the way. Lancashire Tory council has closed down its newspaper. The hon. Member for Ealing, Acton and Shepherd's Bush will, of course, want to praise Mayor Boris Johnson for closing down The Londoner, as he wrote all the time to Ken Livingstone to tell him that he was wasting £3 million of council tax payers’ money.
I will not give way. We intend to review the local authority code and tighten it up. We also have campaigned rigorously for the relaxation of cross-media ownership rules, to allow media companies to build up across different platforms—newspaper, web, radio and local TV. We welcomed the announcement in November that Ofcom will recommend that relaxation, and we would support that in the Digital Economy Bill.
I am working up to our exciting proposals for a network of ultra-local television. That is what I call leadership. We have out for consultation Roger Parry’s document “Creating Viable, Local Multi-media Companies in the UK”, and I advise the Minister, who does not have a policy on that issue, to respond to that consultation, because he is clearly unable to publish the conclusions to his own. That proposal would put in place a network of 81 local television stations, combined with newspaper, web and radio, and provide the ultra-local news and accountability that local communities desperately need.
It is a tremendous pleasure, Mrs. Dean, to serve under your chairmanship again. I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing this debate, which has been widely attended and intelligently and cogently argued.
I shall begin with a jocular remark. I will then reply to points raised during the debate. I shall also take interventions from Members who have not already intervened. If I have any time left—
So that the hon. Member for Wantage (Mr. Vaizey), who speaks for the Tories, cannot be accused of hypocrisy, may I ask him to have a word with the local Tory-controlled council in my borough? It publishes a newspaper at public expense but refuses to give the contact details of the local MP. How political can it get?
The hon. Member for Castle Point is lucky that I am not doing the four Yorkshiremen skit.
My name is prohibited from appearing in the Hammersmith and Fulham News, even though, as the House will have heard, my opponent, a prospective parliamentary candidate, gets half a page to himself. However, I agree with the hon. Member for Wantage (Mr. Vaizey). I would like to praise Boris Johnson for cancelling The Londoner, but I do not need to because he is on the front of the Hammersmith and Fulham News, with a number of other Tory politicians appearing inside.
It is fair to say that everyone understands why my hon. Friend the Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter) is unhappy.
I want quickly to get on with my jocular remark—although it may not be good enough to stand up to all this waiting. The hon. Member for Wantage talked about sucking up to local newspaper editors. Last week, in a debate on the Video Recordings Bill, he was extravagantly sucking up to Matthew Parris. This afternoon, he was sucking up to Polly Toynbee. I take the opportunity to salute Alan Watkins, the greatest living newspaper columnist, and to recommend his book “Brief Lives”, which is a masterpiece on the art of column writing. [Hon. Members: “What about the jocular comment?”] That is what passes for humour when I am on my feet.
To a large extent, the debate has been more about the rights and wrongs and abuses of council free sheets.
I shall take the right hon. Gentleman’s remark on the chin, with thanks.
The debate has tended to be about council free sheets rather than local newspapers and the tremendous pressures that they are under. The tendency has been to assume that free sheets constitute a serious pressure on commercial local newspapers. We clearly do not know to what extent that is the case. We do not know exactly how many, but 60-something council free sheets are taking paid advertising out of a total of 420 local authority newspaper areas. However, we do not have good evidence to show the prevalence of the practice.
That is the key point that I wanted to make today—we do not yet have a robust evidence base to allow us to be clear about the matter. There is plenty of anecdotal and other evidence of the sort that I mentioned earlier, and it makes a compelling case, but surely the Office of Fair Trading should consider the competition matters, as the Audit Commission will clearly not do so.
It has taken a while, but we are told that the Audit Commission is about to reach a conclusion on what has turned out to be a relatively constrained set of issues. Once we have those conclusions, the next step will be to present that information to the Office of Fair Trading and ask it, perhaps with Ofcom, to consider the question of competition and the potential impact on the paid-for newspaper market.
One point has not been raised. It is argued that we should keep profits locally, rather than nationally—across the width of the country—but it troubles me that more and more newspapers are being bought up nationally rather than by local people, yet it is the local people who should benefit most.
I understand the hon. Gentleman’s point. One hopes that over time there will continue to be a blend between locally and nationally owned local newspapers. As the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) told us, Claire Enders says that the market will shrink by half. Any papers that exist in that market, whatever their ownership structure, can be considered a democratic good in the local community. For the moment, we will have to settle for that.
My hon. Friend the Member for Ealing, Acton and Shepherd’s Bush was right to raise the question of free papers potentially having their context changed as commercially owned papers go free. It will change the landscape. The hon. Member for Croydon, Central (Mr. Pelling) referred to a local authority newspaper that was costing some £700,000 a year. Given such sums, I shall be astonished if Trinity Mirror or any other commercial operator in this hard-pressed sector will invest for long at those prices.
I said that the disclosed cost was £750,000. I entirely agree with my hon. Friend the Minister that Trinity Mirror is taking a bold step. We will see how deep its pockets are when it comes up against state-subsidised competition that is completely bankrolled by the taxpayer. Does my hon. Friend not see that there is a role for the Government here? As I said earlier, we cannot rely on commercial companies to compete with people who are bankrolled by the taxpayer. What will the Government do about it?
As I said, the DCLG will imminently report its views on the matter.
There is another side of the coin, which is not represented by my Department and may not find great favour in the Chamber. However, it is important that councils communicate with their citizens—good information is vital—and that they do so in a way that represents good value for the taxpayer. The arguments that my hon. Friend the Member for Ealing, Acton and Shepherd's Bush makes against propaganda are unanswerable. It is for the DCLG, in its revision of the code, to come up with convincing answers. However, it might be that the code needs not to be revised but adhered to.
On the point about value for money, does the Minister not agree that it would make sense for local authorities to be required to publish in a clear form all information about the costs incurred in the production of local authority publications and newspapers, so that people can see much more clearly whether the expenditure gives value for money.
That is something for DCLG Ministers to answer. They received 300 responses to the consultation, and they will reply imminently.
My hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about a timetable for independently funded news consortiums. This morning, we announced eight successful bids for the three pilots. We intend to stick to our timetable. We will have reached a preferred bidder status in each of the pilot areas by March. It will be clear before the election who is to run the independently funded news consortiums in the English, Scottish and Welsh areas.
Sitting suspended for a Division in the House.
Back to Work Initiative (Wales)
In the past 13 years, the number of people employed in the Vale of Clwyd, my constituency, has gone from 23,000 in 1997 to 29,000 today. That is the fifth biggest increase in the number of people employed in a constituency among the 40 parliamentary seats in Wales. Five of the top six biggest increases are in north Wales constituencies, which is something that I am very proud about.
The St. Asaph business park in my constituency, which was built by the previous Conservative Government at a cost of £11 million, was empty for 10 years. There are now 3,500 jobs on that business park. The Labour Government have applied for objective 1 funding, which was granted in 2000. The previous Conservative Government did not even apply.
The issue is not the total number of jobs in my constituency but their distribution, especially in poorer areas. In 2002, I asked for the unemployment statistics for my county of Denbighshire. There are 32 wards in Denbighshire. Most unemployment was concentrated in two wards: the south-west ward of Rhyl, the council estate ward in which I was born and brought up, and the west ward of Rhyl.
I thought that was unfair, so I asked the professionals what joint action was being taken to counteract unemployment. Organisations were working in silos, and few were working together, so I formed an unemployment group in 2002. Initially, I asked about 20 agencies to join, including representatives from the Department for Work and Pensions, the careers service, the local college, the economic regeneration team, the local education authority, the health service, the police and the probation service, as well as one individual I would particularly like to mention: Gareth Matthews, who then worked for Working Links. I believe that he is one of the finest practitioners of the back to work agenda in the whole country.
Meetings were convened about four times a year. We set our minds to improving work opportunities in those two wards. We met and made progress for three years, but the catalyst for the group was the DWP’s announcement that it would form city strategy pilots across 15 UK cities, including bigger cities such as Birmingham and Glasgow. I approached the then Minister—now the Secretary of State for Scotland—and asked him whether Rhyl could become a pilot city, even though it is a Welsh town of only 27,000 people. I asked that we be considered for the seaside pilot for the back to work agenda in 50 traditional UK seaside towns.
The Minister listened, and we did some further lobbying with the then Minister of State—now Minister of State, Department for Culture, Media and Sport—my right hon. Friend the Member for Barking (Margaret Hodge). She summed up the problem with the back to work agenda by discussing her visit to Glasgow, where she learned that 200 different organisations were working, some in isolation and others in competition, to get people back to work.
That crystallised for me what we needed to do in my constituency and my home town of Rhyl, which suffered from so much unemployment. We needed to ensure that everyone involved in the back to work agenda was fully apprised of what others were doing. Where there was scope for joint working and co-operation, it should be flagged up at an early stage. Competition should be minimised, co-operation maximised and ignorance eliminated. The Minister of State listened carefully to our request, and we were made a city strategy pilot.
One of the first tasks that the Rhyl city strategy faced involved governance arrangements. We did not want to become an arm of the county council; we wanted flexibility and the ability to respond rapidly to the issues facing us. We decided to set up a community interest company. I believe that of the 15 pilot areas in the UK, we are the only one with a CIC. It was proposed by Ian Eldred, the head at the time of Clwyd Leisure, another CIC.
With city strategy status came additional funding allowing the employment of key personnel who professionalised our approach to unemployment in Rhyl. They include Ali Thomas, the inspirational local manager of Rhyl city strategy, and Julia Cain, whose lateral thinking on employment has led to engagements for ex-offenders caring for bees in an apiary. I will come to that later. Other initiatives developed local butchers and fishmongers in Rhyl. Those two officers were ably helped by Jennie Walker and Suzanne Jeffrey.
Two projects illustrate our success. The funding administered by the RCS comes from a variety of sources. The biggest source is the DWP through deprived area funding and specific grants made to the Rhyl city strategy. The Welsh Assembly Government have also stepped up to the mark. Their Department for Children, Education, Lifelong Learning and Skills provides big chunks of funding for basic skills.
The funding is critical to raising the skill profiles of local workers, many of whom face multiple barriers, including low literacy and numeracy, drug and alcohol problems and low self-esteem and confidence. I pay tribute to DCELLS officer Ian Williams, a key member of the city strategy team who has secured much-needed funding for our projects. The core funding is often supplemented by other agencies and bodies, sometimes in the form of gifts in kind and staffing contributions.
One project is the Dewi Sant centre, which I have mentioned. It is run by a chap called Geoff Bainbridge, who works with ex-offenders, many of whom have multiple problems. One initiative that he has come up with to engage them is an apiary on the outskirts of Rhyl where ex-offenders look after bees and develop allotments.
Another is Football in the Community, run by Jamie Digwood and Tracey Jones at Rhyl football club. They use sport as a means of engaging unemployed people by training and employing young people in the Rhyl area as football coaches. The workers then go out into the community and on to council estates to engage young people and keep them fit, healthy and on the straight and narrow. It is an excellent project. Ministers and TV crews have come from as far away as Ireland, Scotland and England to see what we are doing at Rhyl football club. The work is inspirational.
The project with perhaps the most visitors is the Rhyl youth action group at the Hub. The project is led by Shane Owen, a grass-roots professional who is setting the pace for youth engagement in the UK. The project is located in the heart of the most deprived ward in Wales and works with young people, providing accommodation above the project, youth club facilities, access to top-of-the-range computers and a retail training unit.
The facilities act as a honey pot for young people in the area, and the project has 1,000 people on its books. The key to its success is that in the same building are most of the professionals who deal with the back to work agenda in Rhyl, including Llandrillo college, the Rathbone Society, Remploy, Want 2 Work, Serco, Working Links, the Anti-Poverty Network and Mentrau Iaith. More office accommodation is being built as we speak.
Those organisations pay rent to the Hub, which means that within 18 months, that youth facility in the heart of the community will be self-sufficient. In return, the organisations have access to 1,000 young people in the same building as their offices. Synergies between organisations are enhanced by the fact that they are in the same building. Again, everyone is a winner because of the level of co-operation.
I want to mention two groups: Serco and the Wales Council for Voluntary Action. Serco is a private sector back to work organisation that is leading the way. It has established an outpost in Rhyl. In the heart of that poor community, it employs 14 local people and hopes to increase the number to 28. The employees work in a refurbished building in Edward Henry street in Rhyl. The WCVA’s national office is in Rhyl. It took some of its functions from Cardiff and located them in Rhyl, in Morfa hall.
As a consequence of the investment by those two prestigious organisations, other organisations are following suit by investing in the town and employing local people. I pay tribute to Dafydd Williams of the WCVA for the investment, the work he does and the role he plays in the future jobs fund and the Rhyl city strategy.
Jobs are provided by the private sector. I highlight the work that Tesco has promised to do in my constituency, where it intends to open two stores, one in Prestatyn and one in Denbigh. Asda hopes to open a store in the west ward of Rhyl. I wrote to Tesco to ask if it would participate in our national-local employment partnership project at 50 per cent., meaning that when the stores open, 50 per cent. of the people employed there will have come off the unemployment register. Tesco has agreed. That could make a huge difference: 1,000 people employed and 500 of them off the register. I thank Tesco for that and hope that Asda follows suit.
One novel project—please pardon the pun—is the initiative of the author David Hughes, who grew up on the same council estate as me and wrote a book about his experience. He is now turning it into a film using children and young people from the council estate as extras. He will teach them the media skills needed to make the film.
Pobl@Gwaith is an existing initiative that the Rhyl city strategy has helped. It is run by Clwyd and Alyn housing association, under the Pennaf banner and is one of the best unemployment projects I have come across. It runs on a shoestring, but its impact on the community and the unemployed is massive. It is headed by Rukhsana Nugent, who is inspirational. She works with clients, some of whom have been unemployed for more than 20 years. They include ex-offenders and people with alcohol or drug issues. To date, 115 clients have been on her course and she has found employment in the care sector for 92. The key to her success is that she takes a direct and personal interest in each and every attendee. She manages the scheme and delivers the courses. Her clients are taught health and safety theory, diversity, self-respect and communication skills.
The key to the scheme’s success is that clients have meaningful work placements, for which they receive a pay packet at the end of the week. Many of the placements are with Clwyd and Alyn housing association, which used to spend tens of thousands of pounds on recruitment and now uses that money for Pobl@Gwaith. It spots the best workers and employs them itself. That is a win-win-win situation.
I ask the Minister to reflect on the benefits of that excellent initiative and the difference it has made to at least 100 people in my community. It has given each of those people back their pride, belonging and sense of self-worth. The state has also benefited because instead of those people being unemployed, they are employed and paying taxes.
The police and the probation service have played a big role in the success of the Rhyl city strategy. I highlight the work of the divisional commander for Conwy and Denbighshire, Rob Kirman, and Steve Ray from the probation service. Both have enlightened viewpoints on the role of employment in their fields of policing and court issues. Both realise that meaningful work and training are the key to an inclusive society. I believe our success has resulted in Denbighshire being the third best crime and disorder reduction partnership of all 360 in England and Wales.
Rob Kirman came up with the idea of having unemployment advisers in custody suites. I asked the Minister to monitor the progress of that idea. The adviser will literally have a captive audience. Many people are in the custody suite for 10 to 15 hours, and they have certain issues. An adviser will be there to give advice on health, drugs, alcohol, basic skills and employment.
None of the schemes would have been successful without Rhyl college. The local community college is key to many of the successes. It offers top-class training to the many community initiatives. The principal, Celia Jones, is a passionate believer in community education and open access. She has built on the success of previous principals, Irene Norman and Jerry Jenson, and the college has just won a merit award for open access in the UK further education beacon awards. The college is going from strength to strength.
Rhyl city strategy has not rested on its laurels. It has scanned the skies for new DWP national initiatives and applied to be part of them. In the past three months, it has been successful in bidding for the future jobs fund. It has received £2.4 million to put 340 young people between the ages of 18 and 25 back to work. There is a £1 billion national investment. Such young people will not be left on the margins, as happened in previous recessions. The offer of a job and training will ensure that they have the skills, self-confidence and work record to access long-term employment when the upturn in the economy comes later this year.
The future jobs fund has also been taken up by the Wales Council for Voluntary Service and BTCV, which will supply additional placements for unemployed young people in my constituency. The majority of those young people will be employed in environmental projects. The primary concern of my constituents is the quality and feel of our local environment, in particular the built environment. The impact of 200 young people planting trees and flowerbeds, putting up hanging baskets, laying hedges and cleaning up derelict land and grot spots will be enormous. It makes so much sense.
In conclusion, I shall summarise why we have a unique winning formula for the back to work agenda in Rhyl. The first reason is the national leadership of the Government, who believe that long-term unemployment in specific communities must be addressed. I am thankful for national initiatives, such as the city strategy, “Fit for Work” and the future jobs fund. A hands-off, laissez-faire, unemployment-is-a-price-worth-paying attitude will not help the communities I represent.
Secondly, I believe our success is to do with partnership at strategic and grass-roots level. There is partnership between the public, private and voluntary sectors and between all levels of government, including local government, the Welsh Assembly Government, the UK Government and—dare I say it—the EU, through objective 1 funding. There is a partnership in which ideas, initiatives and funding are shared.
Thirdly, the agencies delivering the services are located in the heart of the communities they serve, not tucked away on a leafy business park discussing theory. Fourthly, our unique governance arrangement as a community interest company has given us the flexibility and independence to achieve results.
The Minister has been to see many of the projects in my constituency, as has the Secretary of State for Wales. Will the Minister relay my request to the Secretary of State for Work and Pensions to visit my constituency, look at our successful initiatives and spread such best practice throughout the UK?
I congratulate my hon. Friend the Member for Vale of Clwyd (Chris Ruane) on securing this debate and on his tremendous and assiduous work on behalf of his constituents to tackle one of the main concerns of this Government, namely unemployment.
The Rhyl city strategy is an extremely good example of the best possible practice. My hon. Friend outlined the partnerships that are in place. He has done great work in pulling people together and providing coherent local leadership. He stressed the co-operation between the local college, Serco, the Wales Council for Voluntary Action, the private sector, Tesco and voluntary organisations. Such partnership undoubtedly produces effective results.
As my hon. Friend said, I have had the privilege of visiting the Rhyl city strategy and seeing the good work for myself, as has the Secretary of State for Wales. I join him in paying tribute to Gareth Matthews and all his staff for their enthusiasm and the strong leadership they have provided for the local community.
My hon. Friend mentioned a number of extremely successful initiatives linked to the Rhyl city strategy. He mentioned the successful future jobs fund bid, which will help to create 340 jobs, principally for young people in the local community. He has described a microcosm of the best possible practice. It would be good to replicate that good practice as much as possible and the Government are seeking to do that.
This debate is about the efforts being made to tackle unemployment. Although my hon. Friend has focused on his constituency, I am sure he would agree that the measures he has mentioned can be successful only with a proactive Government who intervene effectively. As the Prime Minister said today, the Government must not stand on the sidelines, but adopt policies and strategies that are about involvement, engagement and stimulating the local community.
We can point to the great success of the new deal. In Wales alone, the new deal has so far helped more than 120,000 people into work and more than 55,000 of those were young people, who are especially important because we are determined not to have a lost generation. We are doing everything that is humanly possible to get young people in particular back into work. We can also point to the future jobs fund in a more general sense. Some £1 billion investment will create 170,000 new jobs throughout the United Kingdom. Again, that will focus on young people.
The co-operation to which my hon. Friend has referred is in evidence in a whole raft of local organisations, but also, significantly, in relation to the Welsh Assembly Government. The good partnership arrangements that are in place between the Welsh Assembly Government and Jobcentre Plus are certainly delivering for the people who need that support—for example, there is the £32 million Want2Work package. So far, that has helped some 2,500 people back into work in Wales and has given added value to the work that has already been conducted by Jobcentre Plus.
We can also talk about the ReAct programme, which is, again, a Welsh Assembly Government initiative. That has helped 129 people in Denbighshire to start training to improve their skills and has assisted them to return to work quickly. Similarly, we can talk about the extra £20 million that has been allocated by the Welsh Assembly Government to tackle youth unemployment in Wales. All of those measures are extremely important and they are all big macro-national initiatives. What gives them added value is how they are put to effective good use. My hon. Friend has given us a clear and graphic example of the kind of co-operation that can produce concrete results.
I conclude by saying that, as I said, I am hoping to see the excellent work that is being done in Rhyl, and we will continue to give our support to the excellent initiatives that are taking place. I would also like to make the point that there is a clear political divide between the sort of measures that have been outlined by my hon. Friend and I, and the alternative that is available and on offer. We experienced that alternative in Wales during the dark years of the 1980s and 1990s, when mass unemployment became endemic and a hallmark of Wales. We must judge the successful measures that are taking place against that backdrop.
The last thing the people of Rhyl, the people of Wales or the people of Britain want to see is the clock being turned back to the bad old days of long-term mass unemployment and a whole generation of young people being cast to one side and forgotten. As we move closer to a general election, which I believe will be in the not too distant future, it is very important that people realise the active work that is taking place, the good work that is being promised and the clear choice that is before us and the people of Britain.
IBM Pension Scheme
I am delighted to have the opportunity to raise this matter today. Given the number of hon. Members in the room for a short debate, it is a pity that we could not have had a longer one. I have received representations from the hon. Members for Isle of Wight (Mr. Turner), for Croydon, Central (Mr. Pelling) and my hon. Friend the Member for Solihull (Lorely Burt), who have expressed support for what I am about to say.
Many other hon. Members and I have received large numbers of representations as a result of IBM’s proposed changes to one of its pension schemes. The proposals have particularly impacted on workers in their 50s, who had carefully planned their retirement. Many of those employees feel aggrieved on two levels. First, they feel let down by IBM, which made certain promises about pensions a few years ago and is using the changes to force workers to retire earlier than planned. Secondly, they feel aggrieved that the Government’s pension law does not provide them with sufficient protections.
It might be helpful to the Minister if I provide a little background. In 2003-04, many IBMers with a final salary scheme agreed to increase their pensions contributions by 50 per cent. There was much unhappiness about having to do that because the company had taken a pensions holiday for several years and also took funds from the final salary plan to fund the new defined contributions plan. In 2006, further changes were made to the defined benefit plan and there was a clear attempt to move workers to an enhanced defined contributions plan. Workers who did not transfer were effectively punished because they were told that only 67 per cent. of future salary increases would count towards the pension. That makes something of a mockery of the fact that it was supposed to be a final salary plan.
Although there was some unhappiness, the company ultimately managed to sell the scheme by promising that funding would be available until 2014 and that there would be no further changes until that date. Let us fast forward three years to 2009, when, seemingly out of the blue, IBM announced further changes. Employees were understandably unhappy that IBM proposed to close the final salary scheme, although there has been an acknowledgement from some that that is the way many company pension schemes are going.
There was also concern about the timing of the consultation, which was over the summer holiday period when many people were taking a break, and there was a feeling that the consultation period should have been extended. In the annual report from the pensions trustee, the trustee stated
“The trustee feels that the Company has not lived up to the Trustee’s expectations”
in asking to change the plan and the scheme so soon after the changes made in July 2006. That is quite a telling and unusual statement. Unfortunately, to add insult to injury, IBM made some hard-hitting changes to the early retirement terms and conditions and that has had a significant impact on workers who had planned to retire over the next few years. The scheme was that any employee retiring early would have 3 per cent. deducted from the pension for each year they are under the age of 60. That effectively compensates for the fact that a person will be receiving a pension for a longer period of time. For example, someone retiring at 54 with an estimated pension of £20,000 would have it reduced by 18 per cent. to £16,400.
The changes effective from April mean the discount is calculated differently. The calculation is now based on age before 63, with a market reduction that is estimated to be 6 to 7 per cent. So if we assume a 6 per cent. rate, the reduction in the above example would be 54 per cent., giving a pension of only £9,200. As one constituent put it to me:
“They are effectively stealing £7,200 every year for the rest of your life”.
Much of the correspondence received has been rather emotive, for example:
“In short, IBM is a very wealthy and very successful company, even in the midst of the credit crunch. It’s not a question of IBM not being able to afford to fund its pension scheme, it’s a matter of IBM, choosing instead to give the ‘saved’ money to its shareholders.”
Does the hon. Lady agree that constituents such as mine, who are now having to retire as a consequence of the new orders that have been put in place, feel themselves immediately aggrieved about the proposals made by this company?
Obviously the matter is important; a lot of constituents have been affected by the closure of this pension scheme. Does the hon. Lady agree that this is intimidation and bullying by a very wealthy company that is taking advantage of its employees? People are being forced out and we need to do more to protect them.
I would like to reinforce the point for the Minister. When my hon. Friend, other hon. Members and I met the chief executive of IBM UK to discuss these matters, we pressed him on whether there was any reason why the finances of the company meant it needed to act in such a way. The chief executive was unable to give any comparative data during that meeting to show why the company was under particular stress, nor did he provide any subsequent data. Frankly, if we consider that IBM made record profits in 2008, that tells me that it has no reason for reneging on the obligations it has undertaken.
Is the hon. Lady aware that more than 70 people in IBM Greenock have been forced out the door by this shoddy move? At a time when we are encouraging long-term thinking in business, the loss of such highly experienced and excellent people will have a detrimental impact on IBM. Perhaps that is connected with yesterday’s announcement that the chief executive who made these decisions has gone.
I hope that the hon. Lady understands that the number of interventions shows the anger in the country on the issue and from IBM employees. Does she agree with me that IBM’s treatment of its employees is severely affecting its reputation?
There is something more fundamental to the matter—I declare an interest, as I know someone who works for IBM—because many such pension schemes, when we look at their origins, are subject to wage negotiations, and it is the over-50s in particular who will be hard hurt by that. For example, sometimes pensions were negotiated to offset a wage increase and additional holidays. The concern is far more fundamental, and if there was ever a group of people entitled to get their full pension without changes, it is that group of workers.
On that point, it is not just the over-50s who are affected. Several people in my constituency are affected, and I would like to quote briefly from an e-mail I received from one gentleman:
“As I will not be 50 by next April, I have no option to take early retirement now and avoid the worst impact of these changes from April 2011. My biggest concerns are therefore that…IBM is not only closing its Direct Benefit pension plan, as are many other UK companies, it is also taking the more dramatic step of massively increasing the penalties for early retirement”,
a point to which my hon. Friend has referred. My constituent continued:
“This will have a devastating impact on my future pension”,
as it will for people like him. Does she agree that that is a shabby way to treat loyal and dedicated employees?
Yes, I do. In some respects, the fact that IBM has so many employees who have stayed with it loyally is testimony to the sort of employer it had been. Those employees have now reached their 50s and do not feel that they have been treated well after the time, investment and professionalism they have devoted to the company.
I am grateful to the hon. Lady for her generosity in giving way so often. She will know that the pension trustee is taking IBM to court over that. Would it not be more sensible for the company to hold back on the changes until the legal challenge has been determined?
I reiterate my support for the hon. Lady’s comments, particularly on behalf of my constituents who are working for IBM, particularly those who are older, who feel that they have effectively been forced into redundancy by the measures being taken. Does she share my concerns that IBM is unwilling to discuss the details of those constituents’ concerns with their local Members of Parliament?
It is very difficult. Some of us had a meeting with IBM, but it was not an easy meeting to obtain and the company was not terribly open. What is almost worse is that its members of staff are gagged from saying anything in the press, so they feel that opportunities to highlight the way they have been treated by IBM, such as this debate, are very useful.
I am grateful to the hon. Lady, whose constituency neighbours my own—like her, I have many constituents who work for IBM. I share my constituents’ anger about that, but I am also very sad. Is she sad that a great company like IBM should have sunk to this? Today I went to its website to check out what it really feels about life by going to the sections “Our values” and “Corporate Social Responsibility”. I tried to open the “IBM Corporate Responsibility Report”, but it brought up the following message:
“Our apologies…The page you requested cannot be displayed”.
Who is surprised?
I must now try to make some progress. I was referring to the emotive comments that have been made. One constituent has said
“we feel that the system has let us down, badly. This is our Robert Maxwell moment. We have saved in our pensions for many years, in the belief that our old age would be one to which we could look forward. IBM seems to have the right to rip up a longstanding contract, without redress, and leave our future plans in tatters. IBM is robbing us just as Robert Maxwell robbed his pensioners.”
I would like to devote some time to the early retirement discount factors, because that is the issue that has generated the most anger. In effect, it is widely regarded as a means of forcing employees to retire early, with the added bonus that IBM escapes having to put together redundancy packages. I have been sent an e-mail that highlights why the employees feel that they have no choice in the matter. It is from a 53-year-old who had originally planned to retire in two years at the age of 55. If he takes the option to go now, his pension will be reduced by 21 per cent., which is more than it would have been reduced by, but that is the situation. If he waits to retire at 55, as he had planned to do, his pension will be reduced by a massive 48 per cent. Given that the employees stand to take such a large hit, many of them feel that they have no option but to cut their losses and leave. As I mentioned, 800 employees are leaving.
The only change to IBM’s original proposals is that, even though the majority of employees will leave by the end of the first quarter of 2010, the company has added a little flexibility to phase the leave over a further one month period. Clearly, that is only in the company’s interests, not those of the workers.
As far as I am aware, it has not given any good reasons, but cited the long-term prosperity of the company. It claims that Britain is poorly performing, compared to other countries, but the company hit all its targets here for making profits, so that is something of a surprise.
Interestingly, the company retains the flexibility to offer a more attractive discount rate. IBM would say that that is so that it can make early retirement decisions on compassionate grounds, but many of the workers have expressed the view that that flexibility could also be used, perhaps in a few years’ time, to get rid of another tranche of the company’s most loyal and experienced workers. Many of them have expressed regret that the company does not appear to value their lifetime commitment and feel that they should be entitled to a proper redundancy package if the company wants to get rid of them.
The scheme is really rather clever, and there are concerns that other companies might look at how IBM has managed to handle a large number of job losses and that the manipulation of the early retirement discount factors might become a commonplace mechanism for avoiding redundancy payouts. If the Government are serious about workers’ rights, I urge the Minister to investigate that aspect of the problem and take steps to ensure that manipulation of pension scheme terms is not used by companies as a way of avoiding redundancy payouts.
The company would claim that it has made some concessions as a result of the consultation, but in reality those are minor when compared to the scale of the changes overall and have no significant impact for employees aged 50 or over.
Unfortunately, it is fairly common to see final salary schemes end. In many cases they are unsustainable in the long term, but a principle of fairness would suggest that employees should be given an opportunity to minimise the impact of any changes. The closer one is to retirement, the more important that is. The manipulation of the early retirement discount factors in no way passes that fairness test. As I have already pointed out, those who are planning to retire in as little as two years’ time have been forced into going now to reduce their financial losses. They have simply had no opportunity to try to make good the difference or to phase in to their retirement in a more acceptable way financially.
I have also become aware of another practice that one would not usually expect of a world-class employer: people have been offered pay rises, but only on the condition that they agreed that the pay rise would not be pensionable for the purposes of the defined benefits scheme. If employees disagreed with that condition, they did not receive the pay rise. There are also concerns about manipulation of the performance management system, but I must stick to pensions for the purposes of the debate.
It is not just workers and local MPs who are concerned by the way IBM has manipulated its pensions system. The pension trustee has referred the matter to the courts and IBM has refused to delay implementation of its plans until the outcome of any court case is known. In the light of the pending court case, the Minister may like to respond in principle to the following questions.
It is clear from this case that there is a lack of clarity about the financial implications of the scheme and the factors that have prompted the company to renege on its 2006 promise. Is there not a case for more detailed financial modelling being made available to workers so that changes to such schemes are fully justified and fully understood? Should there not be a principle of no sudden changes, so that when changes to pension plans are necessary, those who are affected have time to take measures to minimise personal financial loss?
Will the Minister look at the manipulation of the early retirement discount factors and reassure herself that they are not being used as a means of avoiding redundancy payments? Will she also examine whether there is an age discrimination aspect to the manipulation of them? It is strange that the company seems to want to get rid of so many of its most skilled workers. Will she consider legislating so that workers are protected from the impact of such sudden changes?
I have received e-mails from IBM employees from all round the country as a result of calling for this debate. Almost without exception, they feel let down by the company to which they have devoted the best years of their life, and they feel that the Government offer them no protection against what they see as bully-boy tactics.
I congratulate the hon. Member for Romsey (Sandra Gidley) on securing this debate. It is clear from the attendance in this Chamber what anxiety and outrage the decisions have caused for right hon. and hon. Members throughout the country, as IBM is a large employer. Many colleagues from both sides of the House are here today precisely to express their worries about what IBM has chosen to do and to pass on the feelings of the constituents whom they represent. Even in this short debate, the outrage and sense of injustice have certainly been communicated.
As the Pensions Minister, I have received several letters about the proposed changes to IBM’s pension scheme, so I know that the issue has caused upset, outrage and worry up and down the country. It is always disappointing when an organisation such as IBM decides to close its final salary pension scheme to future accruals. Of course, this remains a matter for IBM to work through with the trustees and employee members of the scheme. It would be inappropriate for me to comment in detail on the case, especially as, as the hon. Member for Romsey pointed out, the trustees are currently going before the court to seek clarification, if I may put it that way, on some aspects, particularly those of early redundancy rights and how they impact on the scheme.
I am not directly privy to the company’s specific proposals, and I would not expect to be, but I note that IBM US appears to be pursuing a similar policy. Only IBM can comment on its motivation for making the changes, and I am certainly not about to try to answer for it.
However, I sympathise with the IBM pension scheme members. I understand the anxieties that arise for members when such events occur. As has been hinted at by all hon. Members who have made contributions, however short, to this debate, and particularly by the hon. Member for Romsey, some employees’ future financial situations have suddenly changed quite dramatically, and it is clear that they now face difficult choices that they had not anticipated having to face.
The changes that IBM has made to its pension scheme are disappointing but they are for it to defend—I certainly shall not try to do so. I only hope that the IBM board is watching this debate and taking note of the reaction that its decisions have provoked, albeit they have not been expressed directly but indirectly through those in this place who represent the views of constituents.
This Government believe that all workers should have access to workplace pension saving, which is why we continue to make good progress with our plans to introduce automatic enrolment from 2012. Hon. Members may wish to note that the Government published a suite of 10 sets of draft regulations and orders which combine to help deliver pension reform and the national employment savings trust—formerly known as personal accounts—which will be the new low-cost, simple pension scheme for employers to use.
For decades, employers have been moving away from defined benefit to defined contribution schemes. Membership of defined benefit schemes peaked in the 1960s, when I was still at school, and has been in decline ever since, so this is not a new phenomenon.
What is clear from what is happening is how the company is using the pension scheme to encourage people to leave early. In effect, it is loading the costs of what would normally be picked up in a voluntary redundancy scheme on to the pension fund. Does the Minister agree that that shows that the legislative framework is not adequate to protect people in pension schemes from such behaviour, and what does she intend to do about it?
It is not unusual for companies to retain significant discretion over early retirement, both for cost and manpower planning purposes. We have seen that phenomenon for many years.
I hope that the hon. Gentleman does not think that I am condoning what IBM is doing. I am making a general observation in this area. It is often more of a company human resources issue than a pension scheme issue. If he wants to give me details that he thinks make his case, I will be happy to look at whether there are public policy implications, but it is important to realise that there has to be some flexibility, and that not all flexibility is written into the rules of pension schemes. Quite often, it is available as long as there are surpluses in the scheme that can be used for such purposes.
In the past, many employers and employees have benefited from the flexibility that that kind of procedure has offered, if downsizing happens to be the case. We must be careful not to react with understandable emotion to what has happened and end up throwing out the baby with the bath water in terms of flexibility. However, as I said, I am happy to have a look at things that the hon. Gentleman thinks impact directly on this area.
The Minister is being generous with her time. Further to the point that was just made, would she agree with a constituent of mine who e-mailed me to state:
“IBM has used these changes to force current employees over 50 into a ‘Hobson’s Choice’ of either taking early retirement now or risking the massively worse impact of early retirement penalties in the future. This is really ‘redundancy by stealth’”?
This is about not flexibility but redundancy by stealth, and there clearly is a loophole in current legislation that needs to be addressed.
Only IBM can comment on its motivation for making the changes. I sympathise with IBM employees who find themselves in this situation. Indeed, the hon. Member for Romsey—I want to address some of her points because, after all, this is her debate—asked whether age discrimination is involved. My only observation on that is that it depends on the exact circumstances, and the way to test whether there is age discrimination is through industrial tribunals. It is a bit difficult to make more than that general observation on the proceedings, but some members of the IBM pension scheme or, indeed, their trade union may wish to think about resorting to industrial tribunals to test whether age discrimination is an issue.
Coming back to a point that was made earlier, I would have thought that the Minister could look at the principle of redundancies being funded out of pension schemes. That is something that should have been addressed a long time ago, and I know that there is a great deal of anger in the trade union movement about it. I know that we have to have flexibility and so on, but the Minister could at least say that she will look at that element.
One of the jobs of a Pensions Minister is to look and see how things are developing out there and always to check whether, in the circumstances, our rules and regulations are fit for purpose with respect to developing practice. I am more than happy to do that and I always have an open mind about such things.
My hon. Friend says that she is not in a position to speculate on IBM’s reasons and she is right about that. However, when some of us met IBM we were told that this change was made because of the comparatively poor performance of IBM UK and Ireland. Yet in his final missive to workers issued yesterday, Brendan Riley said that it had been a privilege to lead one of the best performing parts of IBM UK. So there is a clear inconsistency in the message that IBM is sending out: either it is a poor performer or it is a good performer.
I am afraid to say that the reality is that hon. Members are right. Whether the Government can do anything about this, I do not know. This is redundancy on the cheap: that is what IBM is up to.
My hon. Friend has made his point in his characteristically laser-like manner. I am sure that IBM will be looking at what he said. However, the company meets the balance of cost in the defined benefits scheme and there is nothing to suggest that it takes it below a requirement or minimum that pension law would require. I put that on the record. Flexibility in respect of that does not take it into territory that puts it on the wrong side of regulation or the law, as the regulator has pointed out.
My constituents do not believe that it would be possible to make changes of this nature in other parts of Europe. Has my hon. Friend looked into that? Does British pensions law give the same protections as in other parts of Europe? If not, is she willing to look at that?
It is difficult. I am always willing to try to learn from the systems and approaches to industrial relations, pensions law, welfare or any other area in other countries. The more we all do that, the more we have to learn from each other. However, in the pensions area it is quite distinct: Britain is unusual because such a large proportion of its work force have accrued rights in defined benefits schemes, compared with other European countries. That usually leads people down some peculiar and not very accurate paths, generalising about European issues and then trying to bring the discussion back to a different circumstance, with additional pensions, in this country. I am not saying no, but it is often not easy to compare, and people are not comparing like for like when they do that.
One thing this Government have done is greatly to increase the responsibilities of trustees, one of which is to ensure fairness between the different members of the pension scheme. Will the Minister join me in encouraging the trustees to think carefully about their responsibilities in this field?
Again, I am more than happy to endorse the observations that the hon. Gentleman has made about the duties, fiduciary and other, of trustees, who have a great responsibility in respect of defined benefit pensions law that can sometimes be quite complex. I note the current plans of the trustees in this pension scheme to check some of these issues by going to the courts. Obviously, they have to do their duty as expected and laid down in law to protect the best interests of the people who benefit from their pension scheme—their members—and they must consider how fairness goes across the system. We have legacy defined benefit schemes here that other employees are involved in, which were particularly generous but have become less generous as time has gone on. How one would balance fairness across those schemes is a moot point in terms of access to rights.
The Government can guarantee, as they have done in law, accrued rights: those rights that have already been paid for and have been gathered up by individual employees with the contributions that they have made over the years. It is a lot harder to get ourselves into a circumstance where companies cannot redesign in any way pension schemes that have been set up for many years. As Pensions Minister, I have to ensure that the law tries to make the right balance between defending those rights that have already accrued, which is an absolute certainty in law passed by Parliament, but also getting to a circumstance where the law is flexible enough to allow flexibilities both for employees and employers, because we are not talking about the provision of pensions in defined benefit final salary schemes, which are not compulsory in this country. The provision of a defined benefit scheme is voluntary and it is for employers to decide whether they wish to offer them. I am acutely aware, when looking at any potential policy changes that I might wish to bring to Parliament to discuss, that I have to think about what effect those would have on the willingness of employers out there to continue to provide defined benefit schemes.
Further to the point raised by the hon. Member for Gosport (Sir Peter Viggers) about the trustees, my constituents, Nick Hodgson and Helen Sparling, tell me that after the 2006 changes the subsequent changes that IBM made were not agreed by the trustees. Is my hon. Friend prepared at least to look into that, as it seems to be a fertile area for further examination? If these current changes were not approved by the trustees, what is their role in this matter?
If my hon. Friend has any information of that kind he should certainly put it before the regulator. The regulator has been written to by several hon. Members of this House and members of the IBM scheme and has had a look, but has, so far, found nothing illegal or which would fall foul of current regulations about the way that IBM have technically dealt with the scheme. If my hon. Friend has further evidence of that sort, I suggest that he sends it to the regulator.
I want to deal with the Government’s legislating, perhaps, to stop sudden changes, which the hon. Member for Romsey mentioned. I do not believe that sudden changes in pension funds are ever particularly desirable. We have legislation in place requiring employers to consult for at least 60 days before they bring changes into being, but we have to keep a balance in the law and not put employers off offering defined benefit schemes at all by making the way that the regulations work too inflexible.
There are still 2.6 million people in the private sector accruing rights in defined benefit schemes. I am acutely aware that we have to put in place a structure of law that enables us to try to assist both employers who wish to offer such schemes and employees who benefit greatly from them, and that they continue to do so. Again, there is a balance to be struck, but there is a requirement to consult and I understand that IBM has done that.
I understand—perhaps hon. Members who know more will correct me if I am wrong—that IBM has extended the time by which it was going to introduce these changes from April 2010 to April 2011. That is what a local trade union representative told me when I had a word with him.
It is important that the IBM board looks at our debate today and that it takes due notice of the surprise, worry and anger that have been expressed. I have a great deal of sympathy with those feelings, which have been well reflected in the debate, and I hope that IBM will take note of them.
Sitting adjourned without Question put (Standing Order No. 10(11)).