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Written Statements

Volume 522: debated on Wednesday 26 January 2011

Written Ministerial Statements

Wednesday 26 January 2011


Mortgage Market (Consumer Protection)

Today the Government have announced a package of measures intended to enhance consumer protection in the mortgage market. These measures will:

transfer the regulation of new and existing second-charge residential mortgages from the Office of Fair Trading (OFT) to the Financial Services Authority (FSA);

ensure consumer protections are maintained when a mortgage book is sold by a mortgage lender to an unregulated firm; and

extend the current regulation of the sale and rent back market to all providers.

An additional measure relating to a devolved matter—providing an exemption from FSA regulation for registered housing associations in Northern Ireland—is also included in the package.

This package is part of the Government’s wider programme to reform financial regulation, to improve consumer protection and strengthen financial stability. It will simplify the mortgage regulation landscape by making the FSA responsible for all residential mortgages.

The statutory instruments will be published later in 2011. In advance of this, the Government expect the FSA to begin work immediately to implement these measures.

Independent Commission on Equitable Life Payments (Report)

On 22 July 2010, I announced that the Government would establish the Independent Commission on Equitable Life Payments. This was in line with the Government’s pledge to

“implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure”.

Following the spending review, the Commission was asked to carry out two tasks. The first was to advise on the fair allocation of funds totalling £775 million among all policyholders, with the exception of with-profits annuitants (WPAs) and their estates. We had already announced that there should be no means-testing and that the estates of deceased policyholders should receive payments. The second was to advise on any groups or classes of policyholders that should be paid as a priority with regard to the timing of payments, again with the exception of WPAs and their estates.

The Commission has met with various interested parties, including the Equitable Members Action Group and Equitable Life, as well as receiving representations from a wide range of individual policyholders.

I would like to thank Brian Pomeroy, John Howard and John Tattersall for all their hard work on this issue. They have taken the time and care to find out policyholders’ concerns and have used this knowledge to help form their very useful advice. The work that the Commission has carried out helps bring us a step closer to resolving this issue.

Today, I am publishing the Commission’s advice and depositing a copy in the Library of the House. The Commission has recommended the following for the allocation of funds:

a pro rata allocation of the available funds, in proportion to the size of relative losses suffered. This equates to 22.4% of each policyholder’s relative losses;

a single policyholder view, wherever practicable, offsetting relative gains against relative losses where policyholders have multiple policies; and

a de minimis amount, in the region of £10, beneath which payments should not be made. This reflects the Commission’s view that administering very small payments below this sum would be disproportionate to the administrative costs of making them while being of negligible significance to recipients.

The Commission recommends that the following groups be prioritised for payment, subject to the practical constraints laid out in the Commission’s advice:

the oldest policyholders, as they are least able to wait for payment and are also least likely to be in a position to mitigate the effects of a delay; and

the estates of deceased policyholders and, as far as possible, the estates of those who die, before receiving a payment, in the next three years.

The Government accept the principles recommended by the Commission. Our task now is to work out how best those principles can be applied in practice to groups of policyholders while allowing us to begin making payments as soon as possible.

The Government will publish a detailed scheme design document that includes the practical application and delivery implications of the Commission’s recommendations. I will make this available for parliamentary scrutiny in the spring.


Single Source Pricing Regulations

I am today announcing that Lord Currie of Marylebone is to chair an independent review of the regulations used by the Ministry of Defence (MOD) when pricing work to be procured under single source conditions without reference to competition. The existing framework is described by the Government Profit Formula and Associated Arrangements (GPFAA)—the so-called “Yellow Book”—of which MOD is the sole user.

The GPFAA stems from an agreement between HM Treasury and the Confederation of British Industry in 1968. Operational aspects have been reviewed since that time but successive Governments have left the underlying principles in place. Getting single source pricing right is of great significance to all stakeholders, not least taxpayers: MOD typically places annually around 40% by value of work on this basis.

The formula sets out profit rates allowed as addition to costs, as recommended by the Review Board for Government Contracts; my predecessor announced acceptance of the board’s last report to Parliament on 30 March 2010, Official Report, columns 97-98WS. The GPFAA also includes Government accounting conventions setting out what costs are allowed when pricing single source work.

This review implies no criticism of the Review Board for Government Contracts, which is a valued part of the existing framework and whose remit has been to maintain the profit formula and examine only those issues set before it by MOD and industry.

The defence sector has evolved beyond recognition since the inception of the 1968 agreement. At that time, labour constituted over three quarters of costs in the defence sector. Now it is less than one quarter. The Government owned many more of the assets than we do now. Furthermore, the sector is facing an era of consolidation and restructuring. The Government inherited a fiscal situation that makes it more important than ever that industry is incentivised to reduce costs through the use of modern, fit-for-purpose commercial arrangements (including for small and medium-sized enterprises), additionally making UK industry more competitive on the world market. Therefore, I believe the time is right to carry out this review and have asked that an MOD team, working with the CBI, be established to support Lord Currie’s investigation.

Lord Currie will be consulting widely with other stakeholders and will present his initial recommendations to me by July 2011, after which there will be further consultation with stakeholders to agree an implementation plan, at which time I will report back to the House. In parallel, MOD has requested that the Review Board for Government Contracts continue its work to maintain the existing processes through completion of its 2011 annual review of the profit formula, due to conclude in April 2011, and thereafter until the outcome of this review is known and a way forward agreed.

Special Representative to Gibraltar

I am pleased to announce today the appointment of the hon. Member for Epping Forest (Mrs Laing) as special representative to Gibraltar for defence.

The strategic defence and security review reaffirmed the importance of the permanent joint operating base in Gibraltar, which provides the armed forces with the ability to deploy force around the world and respond to changing strategic circumstances.

The hon. Lady’s role as special representative will be to work with the Government of Gibraltar, the Ministry of Defence and Commander British Forces Gibraltar on a range of issues connected with the continued presence of the permanent joint operating base.

She will also work closely with the Governor of Gibraltar, whose constitutional responsibilities include defence and internal security and external affairs.

The special representative may also undertake additional defence tasks by agreement with the Ministry of Defence.

The hon. Lady has agreed that she will resign as chair of the all-party parliamentary Gibraltar group.

Environment, Food and Rural Affairs

Independent Review of the Science Advisory Council to DEFRA

I wish to update the House on developments related to the Science Advisory Council (SAC) to DEFRA.

I am pleased to announce a new model for the SAC following the outcome of the review of all arm’s length bodies, and a separate and independent review of the SAC.

The ALB review sought to ensure better co-ordination between science advisory bodies in DEFRA. As part of this, the Department reviewed the role and functions of its 18 scientific and technical advisory bodies. On 14 October 2010 it was announced that the majority of the advisory bodies will become expert committees. They will continue to provide independent advice, but the change will allow for greater co-ordination as the scientific expert committees will work more closely with the Science Advisory Council and DEFRA’S chief scientific adviser.

DEFRA’S Science Advisory Council is to be retained as an NDPB, and will support the CSA in oversight of all relevant DEFRA scientific committees. It will continue to provide independent advice and challenge to the chief scientific adviser and Ministers on the science underpinning a range of DEFRA policies

The independent review of the SAC, led by Professor Charles Godfray and commissioned by DEFRA’S chief scientist, Professor Bob Watson, contained 12 major recommendations. Professor Watson and I are content to accept these recommendations which include:

that the SAC be reconstituted as a leaner body of around six people plus an external chair;

the need to articulate more clearly the role of the SAC and how it adds value to the Department’s use of science and evidence;

the need to provide challenge and scrutiny to other bodies providing science advice to DEFRA.

A new model for the Science Advisory Council will be established in line with the independent review’s recommendations. With these recommendations in mind, new terms of reference and a revised code of practice for members will be raised. The recruitment of new members will commence in February 2011, with the first SAC meeting scheduled for September 2011.

The SAC will support the CSA by independently assuring and challenging the evidence underpinning DEFRA policies and ensuring that the evidence programme meets DEFRA’S needs.

The DEFRA CSA will have oversight of, and offer support to, all DEFRA scientific expert committees, and the new SAC will support the CSA in this role. This approach will ensure that the Department achieves a greater and more co-ordinated level of evidence assurance.

Separately, DEFRA are taking forward plans to replace many of its advisory NDPBs with expert committees. Further announcements will be made in due course.

Foreign and Commonwealth Office

BBC World Service

I can inform the House that I have reached agreement with the BBC Trust on the strategic priorities for the BBC World Service for the period 2011-14. We have been engaged in close discussion with the BBC in the period leading up to and following the 2010 spending review (SR10).

As the House is aware, the context for the spending review was the fiscal legacy left by the previous Administration. We agreed total expenditure limits of £253 million/£242 million/£238 million over the first three years of the SR10 period. This represents a 16% cut in real terms. The FCO has provided a settlement that keeps the BBCWS’ proportion of the FCO family’s overall budget at or above its 2007-8 level through to 2013-14.

This settlement required difficult decisions to be made, and we agreed with the BBC that the overall objective was to ensure the World Service should remain an articulate and powerful voice for Britain in the world, and a trusted provider of impartial and independent news.

Under the terms of the broadcasting agreement between the Foreign and Commonwealth Office, and the BBC World Service, no foreign language services can be opened or closed without my written authority. As part of the BBC World Service’s strategy, I have therefore approved the BBC Trust’s proposal to close five language services: Albanian, Macedonian, Serbian, Portuguese for Africa and English for the Caribbean. I have today placed in the Libraries of both Houses copies of my correspondence with Sir Michael Lyons, Chairman of the BBC Trust, confirming this. Some 3.5 million people currently listen to the services that will be closed. The total World Service audience is 180 million.

The BBC World Service have also made strenuous efforts to find efficiency savings and drive down non-editorial costs, and will also be able to make savings from their move to Broadcasting House in 2012.

The BBC World Service asked for funds to help them with the additional contribution necessary for the deficit in the BBC pension funds. In the settlement, the Foreign and Commonwealth Office were able to provide them with £13 million per annum to help them with these extra costs. I have also exceptionally agreed that if the additional contributions are less than the £13 million which the World Service have estimated, then the World Service can use the remaining funds for other purposes.

We are also providing an extra £10 million per annum for new services in markets that we and the BBC World Service have identified as priorities. These proposals include TV programming in Urdu, in sub-Saharan Africa and in Hindi to be provided to local partners. We have also guaranteed the capital for the move of the World Service to their new offices in West One.

These savings, together with the other changes the BBC World Service have announced today, should enable the World Service to prioritise their efforts away from shrinking markets and platforms (where there are developing local broadcasters, or short-wave audiences are falling) to growing markets.

The BBC World Service has an unparalleled international reputation. This Government are committed to supporting the BBC World Service, and ensuring it continues to retain its global influence and reach in a rapidly changing world.

Home Department

Intercept as Evidence

The lawful interception of communications is a vital tool for tackling the threat posed by terrorism and other serious crime. The coalition Government are committed to building on this by seeking to find a practical way to allow the use of intercept evidence in court.

The issues are complex. Because of this a first step has been to review previous analysis, including that in the Privy Council review (Cm 7324) and in “Intercept as Evidence a Report” (Cm 7760). Having done so, the Government are now in a position to set out next steps.

As recognised in the Privy Council review the state has an overriding duty to protect the public, including from threats such as international terrorism and serious organised crime. Bringing prosecutions against and securing convictions of offenders is an important means of doing so. Equally, the effective use of intercept as intelligence already makes a vital contribution to public protection and to national security more widely.

Therefore, the programme of work to be undertaken will focus on assessing the likely balance of advantage, cost and risk of a legally viable model for use of intercept as evidence compared to the present approach. The intention is to provide a report back to Parliament during the summer.

Recent work on intercept as evidence has benefited significantly from the experience of the Advisory Group of Privy Counsellors, comprising the right hon. Sir John Chilcot, the right hon. and noble Lord Archer of Sandwell, my noble Friend, the right hon. Lord Howard of Lympne and the right hon. Sir Alan Beith MP. I am pleased to be able to confirm that the members of the advisory group have, at my request and that of the Prime Minister and Deputy Prime Minister, agreed to continue to provide assistance and oversight.