Tuesday 21 February 2012
[Mr Graham Brady in the Chair]
Rural Bank Closures
Motion made, and Question proposed, that the sitting be now adjourned.—(Miss Chloe Smith.)
It is a great pleasure to bring this important matter to the attention of the Chamber, and to serve under your chairmanship, Mr Brady. About a year ago, I secured a Westminster Hall debate on a similar matter. Another Treasury Minister responded to that debate, but it is a great pleasure that this Minister is present today to respond to my remarks.
I have secured the debate to reiterate my concerns about the closure of bank branches in rural areas. Although 20% of the population live in rural areas, it has never been more difficult for them to access money and financial services. As hon. Members may recall, I raised this issue nearly a year ago following the closure of Barclays bank in Rhayader in my constituency. That town of nearly 2,000 people was left with a single branch of HSBC bank that ran a reduced service just three days a week. Such a situation made it increasingly difficult for local people and businesses to access their money, and meant that they had either to change their account to HSBC, or travel 14 miles to Builth Wells and the nearest Barclays bank.
Sadly, Brecon and Radnorshire now has a new case study. On 9 March this year—unless the bank has a Damascene conversion as a result of this debate—the branch of HSBC in Presteigne will close. That will leave a community of nearly 2,500 people with just one branch of Lloyds TSB that is open only on Wednesday and Friday and between the limited hours of 9.30 am to 3 pm—a mere 11 hours per week. Furthermore, the branch has no cash machine, and I will return to that point. News of the branch closure met with a huge response from the people of Presteigne, who managed to collect more than 500 signatures in a petition against it. They see the closure as a desperate shame; one resident told me that she has seldom seen the bank empty, and that there is usually a queue.
Let me describe Presteigne in a few words. The editor of Country Life magazine, Clive Aslet, considers it to be one of Britain’s top 10 towns in which to live. It is an active, transition town that engages with environmental issues to an extent rarely seen in other places. It is heading towards a strategy of zero waste; a large allotment area has just opened and proved popular. The voluntary East Radnor day centre brings in elderly people from the countryside to share friendship and a meal together, as well as providing other services. Presteigne’s music festival is internationally renowned and premiers many musical compositions.
The hon. Gentleman is describing Presteigne, which sounds almost as beautiful and wonderful as north Harrow in my constituency. That area has also lost its last bank branch, which is impacting on businesses. Does he think that it is incumbent on the Government, perhaps through the Minister, to convene a summit of the big banks and demand that where a bank branch is the last in a community, banks must respect the need of that community for it to remain open? To help the Government achieve that objective, does the hon. Gentleman think that it is worth considering a British version of the Community Reinvestment Act, which forces banks to disclose where they lend and to demonstrate that they are performing well in order to maintain their banking licences?
I believe that the Government have a role to play, and such a summit may be the way forward. We could also support trials of community banks in which a number of different banks come together to provide banking facilities, thereby cutting costs for individual banks but maintaining a facility for the community.
Should we not be a little careful about taking this issue out on the banks that are still in rural areas? We should be going after those banks that were first or second to leave an area, not those that have stuck it for as long as they have.
Should the Government be looking at closures over the past 10 years, and at which banks have closed branches and which have not? They could then force banks to get together and create a common policy for bank closure programmes in rural areas. Each bank would take part of the burden so that it would not be left to just one bank.
There is a theme running through the interventions that I have taken so far. The problem is a responsibility for all the major banks, rather than for a specific bank in a particular town or community, or even in Harrow. Banks should come together and solve the problem.
Presteigne is not only a sleepy country town; it contains a number of innovative businesses such as Mangar International, which manufactures, designs and supplies rehabilitation and assisted living equipment of a sort not found anywhere else in the world. Teledyne Labtech manufactures microwave circuits, and there are a number of other businesses. We were lucky to have attracted those businesses through the Development Board for Rural Wales, and a number of manufacturing facilities sprang up in Presteigne of which we are proud and wish to hold on to. I cannot, however, see us being able to attract that type of development if there is no bank in Presteigne—it is unlikely that businesses will be attracted to areas where banking is not available.
I congratulate the hon. Gentleman on securing this debate; he has made some pertinent points. Last month I had a letter from my bank, HSBC in Y Tymbl. It is closing, so perhaps I should declare an interest. This issue affects valley communities, as well as rural areas. What thought has the hon. Gentleman given to alternative banking models such as credit unions? In Ireland and the USA, for example, those are mainstream institutions, rather than being banking for the poor as they are in Wales at the moment. They also perform an important economic function by lending to small businesses. Could that be part of the solution?
The hon. Gentleman anticipates a theme that I intended to expand later in my remarks. I value the work done by credit unions, but in the area of Wales with which I am familiar, they do not seem to enlarge and extend their capacity to provide facilities for businesses, or even mortgages, but work only at microfinancial level. The hon. Gentleman makes a good point, and in these extreme circumstances it may be that the mutual model will once again establish itself and become more important in our communities, which I would welcome.
The Presteigne chamber of commerce has a very active chair, Rosamund Black. She fears that the closure of HSBC will cause extreme inconvenience and hardship and seriously damage the structure of the town. She said to me that people use the bank for more than simple financial transactions; the staff provide a vital service in offering advice and helping to solve the banking queries of many residents, particularly the elderly, whom they help with bill payments and other financial transactions.
However, despite the efforts of the community—I pay particular tribute to the mayor of Presteigne, John Kendall, to the Assembly Member for Brecon and Radnorshire, Kirsty Williams, and to the chair of the chamber of commerce—they appear to have been unsuccessful in persuading HSBC to maintain the bank. Indeed, that closure will follow other closures.
I congratulate the hon. Gentleman on securing this timely debate. The HSBC branch in Kirton in Lindsey, in my constituency, announced recently that it was closing. The situation mirrors exactly what the hon. Gentleman is describing in terms of the role of the bank in the community. It is one of the key pillars of the community. Taking the bank away unsettles the whole community infrastructure in the way he describes, and that is not driven by customer preference. It is driven by the mission of the bank. In the case of the Kirton in Lindsey bank, it means that constituents will have to travel 9 miles to the nearest banking facility, so this is clearly an issue that needs addressing. I congratulate the hon. Gentleman on airing it today.
The hon. Gentleman makes a very good point, because public transport in rural areas is difficult at the best of times. Requiring people to travel distances of 9 miles or, in an example from my constituency, 14 miles makes it very difficult for people to obtain the advice and support that they need in making financial decisions. There have also been a number of closures by HSBC in Wales. The closures in Llandysul, in Ceredigion, and in Llanrhaeadr-ym-Mochnant in Powys, in the constituency of my hon. Friend the Member for Montgomeryshire (Glyn Davies), have been among six closures in Wales since September. I think that there has been a total of 17 closures across Wales by HSBC since 2009, although I should add that not all of those have been in rural areas.
However, this debate has not been called to highlight cases in my constituency or to single out HSBC. A recent report from the Campaign for Community Banking Services produced a breakdown by region and country of the number of communities dependent on one or two banks, together with a report on the situation for individual banks. The latter revealed the halving of HSBC’s share of one-bank communities in England and Wales to 10% as it continues significantly to reduce its network coverage. Perhaps the case of Presteigne and other closures explain why there is no mention of HSBC’s popular slogan, “The world’s local bank”, in its January 2012 television advertising campaign.
Figures from last year show that since 1990, 44% of all banks, including converted building societies, have been closed. That equates to 7,555 fewer retail banking branches nationwide. That has left the UK with only 190 bank and building society branches per million inhabitants, which is very poor in comparison with the 940 branches per million inhabitants in Spain, 560 per million in Italy and 470 per million in Germany. There is a better geographical spread throughout those countries and they have retained far more locally owned branches. Granted, they generally make modest charges for operating personal as well as business accounts, but at least they have the face-to-face services that so many people still want.
The report of the Independent Commission on Banking, the recommendations of which the Government have pledged to implement in full, stresses the need for a challenger bank and increased competition in high street banking. The German model, for example, provides for excellent competition and a much more community-focused approach. Lowering the barriers to entry and facilitating greater competition could allow for banks specialising in lending to small and medium-sized enterprises, as the Federation of Small Businesses has suggested, for banks that have a more local or community focus or perhaps even for banks that specialise in providing facilities for groups that are normally hard to reach, such as rural communities.
2011 showed no sign of a slowdown in the number of closures. A Campaign for Community Banking Services report that came out earlier this month showed that the number of rural communities with only two banks remaining is 446.
I congratulate the hon. Gentleman on securing the debate. He has been a consistent campaigner on this issue. He is setting out how, since he brought the issue to this Chamber in March 2011, the level of bank closures has continued apace. Is he aware of any improvements on the ground as a result of Government intervention—Government policies—since March 2011, or is the lack of any such improvements the reason for his bringing the issue to the Chamber again?
I thank the hon. Gentleman for that intervention, but I think that I have made it clear that although I believe that the Government can take a degree of initiative in this field, it is really the responsibility of individual banks or banks as a whole to ensure that they are able to service these vulnerable communities, because they owe a debt of loyalty to them.
I thank the hon. Gentleman for giving way to me again. I do not have the exact phrase with me, but does he recall the banker who said, 18 months into the recession, that the time for remorse is over? That banker misjudged the mood of the nation then and, indeed, now. Relying purely on the good will of bankers when that is the feeling from them—the time for remorse is over—is not likely to bring about the change that most of us in this Chamber want.
In the long run, it is in the banks’ interest to ensure that they provide a comprehensive level of service to the communities that they wish to serve and services that are more accessible and more convenient. I think that it is probably the role of the Government to sit down with the bankers, as was suggested by the hon. Member for Harrow West (Mr Thomas), and set out what should be required of banks. Not all the banks were bailed out with public money as a result of the banking collapse, but all banks have benefited from Government action—quantitative easing, for instance—and just about all banks are dependent or have depended on measures that the Government have brought forward. It is time to sit down and see what can be achieved to help these communities.
I congratulate the hon. Gentleman on bringing this matter to Westminster Hall today. My constituency of Strangford has had two bank closures: the Ulster bank in Portaferry and the Northern bank in Balloo have closed. Two campaigns were fought, but not won. We did, however, win the campaign to save the Northern bank in Kircubbin, with community support. Does the hon. Gentleman agree that the impact of closures on elderly people is horrendous? If there are not banks close at hand, they may carry cash around with them, and many of us will be aware of a large number of people who have been robbed as a result. Banks therefore have a responsibility to elderly people and to rural communities. Perhaps the Government could work together with the banks on that. Perhaps, somewhere along the way, banks need to carry a loss leader, covering their losses in such areas through profits in other areas.
I thank the hon. Gentleman for that intervention. Yes, I believe that there may be a role there. There is the American model of a shared bank, whereby one facility houses different banks. They share the costs and maintain a presence in the community. That may be a way forward; the Government could help with, or initiate, a pilot scheme of that type. I had intended to suggest that later.
I am grateful to the hon. Gentleman for supporting the idea of holding a summit with the banks to discuss branch closures. Does he not think that having such a summit is all the more important given that the Government’s attitude to bank branch closures has arguably become more depressing since his previous debate last March? I ask that because the Financial Secretary to the Treasury, who has direct responsibility for this issue, has said:
“The Government do not intervene in…decisions as to whether, and where, banks maintain branches.”—[Official Report, 26 January 2012; Vol. 539, c. 329W.]
In a recent debate, he also suggested that if the Government intervened to stop bank branch closures, banks would continue to face high costs. Clearly, a more sophisticated Minister is answering this debate, and one hopes that she will have the courage to take a slightly different view. The answers to our questions surely underline the need for a summit so that banks do not think that the Government condone further bank branch closures.
I thank the hon. Gentleman for that intervention. One reason why I called for the debate is that I am not prepared to allow the closures to go unnoticed. By bringing the issue to the attention of the Government and right hon. and hon. Members, I intend to bring it to the attention of the big four banks, and a number of other banks. These large organisations have a social duty to which they should attend, but it would be useful if the Government could kick things off with an initiative and call for a summit, as the hon. Gentleman said.
When a bank has the last branch in town, it often makes a pledge of some sort to keep it open, but those pledges are often difficult to define; that creates a lot of uncertainty, which can be fuelled by such comments as those made last year by the British Bankers Association. It said:
“Branches will remain open if they are being used. But if the number of customers…coming into the branch falls, then the bank—like any other retail outlet—will need to look carefully at whether it is…viable to keep it open.”
Well, the bank in Presteigne was being used, but a different target was imposed on it, relating to the selling of financial products such as mortgages, pensions and loans. The population of Presteigne is rather stable; it may have made use of those products in the past, but it still expected services from the bank. However, the bank has decided to withdraw from the community.
Is it not true that banks are encouraging—indeed, almost forcing—customers to go down the route of internet and telephone banking, often against customers’ wishes? That is having an impact on the footfall in branches such as those that the hon. Gentleman describes. These changes are being driven by the determinations of producers, rather than customers, which is a great shame.
I thank the hon. Gentleman, who raises an important point. Information provided to me indicates that two thirds of customers between the ages of 25 and 45 will use internet banking facilities, while only a third of people over 65 have the aptitude to take advantage of such opportunities.
That is another point, and my hon. Friend makes it very powerfully. Perhaps the Minister would like to address that problem, too.
I appreciate the coalition Government’s commitment to keeping open post offices, which provide important outlets for financial products, but banks are still the preferred option for many people, particularly when they need advice and support in difficult times.
I have gone on a bit longer than I anticipated, and I am grateful for hon. Members’ interventions. The Government have a role to play. In the American model of a shared banking outlet, many major banks come together to ensure that their facilities can be provided at one point. The Government could have a role in ensuring that pilots exploiting that approach are set up with their backing. The town of Presteigne would certainly be willing and anxious to take part in such a pilot.
I congratulate the hon. Member for Brecon and Radnorshire (Roger Williams) on bringing this issue to the attention of the House. He has served his constituency with great sincerity for many years. When I was Welsh Secretary, he and I visited many parts of it, and I know he has raised this issue because he feels deeply about it, particularly as far as Presteigne is concerned.
I want to talk about another bank closure. Again, it involves HSBC, but this time it is in my constituency—in Blaenavon, in my valley. Blaenavon, a Welsh mining valley, has the characteristics of a rural area, in the sense that it is geographically isolated, its population is about 5,000 or 6,000, and it is part of the Brecon Beacons national park. It now has only one bank, HSBC, because the others have closed.
The decision to close the bank has caused enormous difficulty and distress among the people of Blaenavon. The town council and I have met the Assembly Member—Lynne Neagle—and bank officials. Hundreds of people attended a public meeting; it is very unusual these days for people to turn up to a public meeting to support banks, but these people did. There has also been a large petition. It therefore means a great deal to the people of Blaenavon that the bank is about to close.
The hon. Gentleman referred to HSBC as the world’s local bank; I was recently attracted by a newspaper headline, “HSBC banks on going deeper into rural areas”, until I discovered that the newspaper concerned was the Shanghai Daily. The article, which was from 2009, said:
“HSBC said…it has opened two more rural banks in China as it seeks to penetrate deeper into the rural financing industry in the country.”
It also said the bank
“is committed to bringing our global rural finance expertise into China’s countryside to help develop a sustainable model of finance and to contribute to the local economy”.
So HSBC is opening banks in China and closing them in Wales and the rest of the United Kingdom.
I understand the point made by the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart), who said that it is perhaps hard to castigate the last bank remaining in a town. Nevertheless, when it has gone, the effect on local communities can be quite devastating because those communities often have lots of older people. In addition, local industry and small and medium-sized businesses rely on the banks. There is also the fact that communities are isolated and that many older people do not have their own transport. In Blaenavon’s case, there is the added issue that the town is a world heritage site, with lots of tourists from across the world coming to visit, but there is no longer a bank. The issue is therefore of great concern.
Today’s debate must concentrate not only on saying that the banks must be much more responsible in looking after rural areas, but on what can be done. The hon. Member for Brecon and Radnorshire made some suggestions, as have my hon. Friends. I want to make one or two points, which I hope the Minister and my hon. Friend the Member for Chesterfield (Toby Perkins), who speaks for the Opposition, will refer to when they wind up.
Clearly, the most important point is that if the bank goes, a cash point should remain, because it is hugely difficult to obtain money in a small town if the cash point disappears. If possible, there should also be some form of deposit facility so that people can deposit their money in a machine.
The issue of internet and telephone banking is also important. As the hon. Member for Brecon and Radnorshire said, however, the number of people over 65 who attempt to use such facilities is small. Clearly, there is a job of work to be done by the banks in trying, when they close, to train or teach their customers to use the telephone and internet banking facilities that many other people use. I pressed HSBC to hold seminars in Blaenavon to show people that.
I am sorry to intervene so often. Does the right hon. Gentleman agree that we might want cash points that do not charge people to take their own money out—in other words, not LINK cash points, which cost about £2.50 every time someone sticks their card in?
Indeed. That is very important; particularly for older people, being charged to take out money is an extra burden.
The Post Office basic bank accounts are useful. People may be able to carry out their transactions through the post office. Credit unions, which were raised earlier, are also important. However, the sharing of facilities between banks needs to be explored. Another intriguing issue is mobile banking. In Ogmore Vale in south Wales, for example, HSBC and, I think, the Royal Bank of Scotland together initiated a mobile banking scheme for the area. It is like a mobile library, and it goes around villages and towns, providing facilities and the opportunity to use the banks.
It strikes me that the Government—both the United Kingdom Government and the Welsh Government—need to be able to come up with imaginative ideas. When it is known that the last bank in a town in a rural area is going to disappear, there should be some sort of action plan. Either the local authority or the Welsh or United Kingdom Government should be able to consider the alternatives for the town, and the possibilities that I have outlined. Often people’s fear is the worst thing. They need reassurance that some sort of facility can be provided in the community, through the exercise of more imagination.
My hon. Friend the Member for Harrow West (Mr Thomas) referred to a summit. That is an important suggestion; the representatives of banks and Government could sit round a table and perhaps come up with ideas for action plans for towns and large villages that are losing their banking facilities.
I congratulate the hon. Member for Brecon and Radnorshire once more on raising the issue, which is hugely important and affects all our constituents, crossing the party political boundaries of the House of Commons. I hope that the Minister will come up with ideas to alleviate the problems of our communities.
I have been a Member of the House for almost two years now, Mr Brady, and you have chaired a huge proportion of the proceedings in which I have taken part. It has always been a pleasure.
I, too, congratulate the hon. Member for Brecon and Radnorshire (Roger Williams) on securing today’s debate. He represents a neighbouring constituency to mine, and they are two of the most rural in Britain. One reason I did not prepare a speech for today was that I knew that I would only be repetitive. I could have filched the hon. Gentleman’s speech, and said pretty much the same, because our experiences are so similar. However, I want briefly to associate myself with the issue that he has raised, and with his remarks. All that I need to change is his references to Presteigne—although I represented it for eight years as a regional member in the National Assembly for Wales, so I know the town well. The point is that very few changes would need to be made in the speech to make it apply to my constituency and, I am sure, rural constituencies across Britain.
The hon. Member for Brecon and Radnorshire and I have worked together for many years on the issues in question, on the Development Board for Rural Wales, and in other contexts. Nearly all that work would come under the general heading of the defence and promotion of rural services. The way in which society has moved in the past half century has put enormous pressure on rural services, and that is a huge threat. Protecting and retaining those services has been incredibly difficult, and we shall not be able to retain and protect them all. However, that work has been a big part of my life, and of the hon. Gentleman’s life.
One of the reasons I have become so engaged with the issue in question is that I decided as a young man that I enjoyed living in the middle of Montgomeryshire and would never live anywhere else. I deeply love the place. All my fellow students from Llanfair Caereinion high school left the area to find work—we did not have any—and even at a young age I became very engaged in seeking to retain and develop our economy, as the key to providing employment that would encourage people to stay. There has been huge pressure across rural services, and the banks issue must be considered within that whole bracket. Rural schools close, because as families have fewer children there is pressure on them, and many village schools are closing. That is still happening and will continue; but what we do will affect the rate of closure. The same is happening with hospital services. Increased specialisation in skills and treatments means it is not possible to retain all rural hospitals. Some of them are closing, and, even more importantly, some of the services available in them are moving away. Transport is another serious issue, because of the acquisition of cars. There is not the same level of rural public transport that there used to be. I do not mean any criticism of the Welsh Government, but the grant for rural transport has been substantially reduced this year. The retention of transport links is strongly connected to the retention of banks; significant reductions are being made, with the result that services will be reduced.
Financial services are a key part of life today, whether those are provided by banks, building societies or post offices. People in rural areas, and perhaps in particular the elderly and the most vulnerable, who are not familiar with the internet or sometimes do not have access to it—because clearly broadband is not as effective in rural areas as it is in the areas now becoming used to it—do not have access to financial services. Yet the bank is crucial. When the last bank closes that is a death knell in the village. We must do all we can to retain those services where it is possible.
My hon. Friend is making a powerful argument about local rural services. Shops are also suffering, because if cash points in villages are lost and people cannot get access to the cash, they do not spend it locally. That has an impact on local shops and on tourism in rural areas.
I just want to highlight what has happened in Aldeburgh, where HSBC pulled out—its only communication with the wider community was a poster in the window. Retailers responded by offering cashback. Does my hon. Friend agree that the subject in question is a very suitable one for the Office of Fair Trading to look into? After its study of oil supplies it is examining other issues affecting rural communities; access to financial services could be its next topic.
I thank my hon. Friend for that sensible suggestion. There have, indeed, been other suggestions from hon. Members, including one about a summit, which also seems sensible to me. I am sure that more will be made, and I look forward to the Ministers’s response to the debate, to find out where the Government are going with the issue. There is a responsibility on the Government to serve everyone in this country. They have, rightly, worked closely with business and banks to ensure that money is available to business, for the creation of employment. That is currently a huge Government policy issue.
Access to services for our rural areas is also a huge issue. It is not a new issue; it has been there all of my life. The coalition Government have taken a serious and responsible approach to post offices. We need the same discussion and pressure on our banks. If a summit is the answer, that is the way we should go.
The responsibility rests with the banks. The current view of banks is very much influenced by the debate about bonuses and very high salaries. There is a view among the poorest in our society that there is a lot of money available in banks—I know that that is not necessarily the case—so that when they see their banks being closed or their banking hours being reduced for a relatively small saving, as is happening in Llanidloes and Montgomery, they cannot understand it. The banks are disengaged from a major section of the community. The Government must ensure that the banks understand that they have a responsibility not just to the bottom line but to deliver services.
I want to carry on where the hon. Member for Montgomeryshire (Glyn Davies) left off and talk about the public reputation of banks in the UK—in fact in the whole world. Banks today are not in a good place. Earlier, I mentioned the quote, “The time for remorse is now over”. The banker who said that totally misjudged the mood of the nation. Having been through the expenses scandal, we as MPs recognise this situation. We know that we have to build bridges with the public, and the banks and the media must do the same. Of all three sectors, the banks are showing the least remorse and seem less anxious to make good their reputation with the public. They must look again at the balance between profit and social responsibility. Banks are about profit, but as they make that profit from people and from communities, they bear certain responsibilities, which we have not witnessed their fulfilling since the banking crisis. They have the opportunity to learn their lesson and to make amends with local communities, especially in rural areas. It sticks in people’s guts when they hear about billions of pounds being set aside for bonuses while branches are being closed. Such action does not sit well with the British public. Banks should perhaps take some of those bonuses and reinvest them in rural and poor communities across the UK.
The local presence of a bank in a high street or a village is very important. It is about making a commitment to a community. In the past—I will not go too far back—local bank managers were trusted pillars of the community. They were down at the golf club, picking up the local knowledge. They knew who was a sound investment and who was not, so when they were sat across from someone who wanted money, they were able to give the appropriate advice. That cannot be done by proxy from a city 20 or 30 miles away, or from a town 10 or 15 miles away. Understanding the vibes of an area and keeping a finger on its pulse needs to be done in the community; local knowledge and local presence are very important and lead to sound lending. Banks were also involved in the wider community; they were in the business groups and the town centre forums, using their expertise and knowledge to help local people.
There has been a lot of bank kicking today; I have done it a bit myself, but let me mention some examples of good social responsibility that I have come across over the years. About 10 years ago, I wrote to all the banks in my constituency and said, “What is your corporate responsibility agenda? What do you give back to the community?” I had an excellent response from Barclays’ Wendy O’Raheilly, who was based in Cardiff. She said that she would drive 200 miles there and 200 miles back to tell me about it. She told me that at that time, Barclays was the second biggest corporate donor in the country, donating some £52 million. Sue Jones, Barclays’ local person based in Rhyl, attends every Rhyl in Bloom meeting. She brings 70 Barclays personnel from all over the UK to help out in community initiatives. There are clearly some good banks. HSBC has received a kicking here today, but its local person, James Smith, attends all our town centre forum meetings. I wrote to the HSBC chief executive for the whole of Europe, Brian Robertson, to tell him what a great employee he had. He then got on the phone to James Smith, saying how pleased he was to receive such a letter. Some banks take their social responsibility seriously; other banks need to do more. The Britannia building society is now getting active in my local community in Rhyl.
In the interests of transparency, the banks need to advertise what they are doing. They need to tell us the criteria for closing down rural banks. We need to know what is best practice and how we can push the worst practice upwards towards best practice. Some banks inform MPs of their branch closures. Do they inform the town council, the county council or the community council? How far in advance do they do that? Do they produce the criteria for closures so that communities can argue against them, or is it all done and dusted before the dialogue is started?
My hon. Friend the Member for Harrow West (Mr Thomas) made the excellent suggestion of holding a summit with the banks. I hope that the Minister and the shadow Minister, my hon. Friend the Member for Chesterfield (Toby Perkins), will hold such a summit and invite rural MPs from across the House. Actually, why keep it to rural MPs? Perhaps all MPs who are experienced in bank closures should be invited.
We need historical perspective: how many branches have been closed by each bank; what percentage are they of the total number and were those branches in rural, urban or poor communities? That will give us a picture and allow us to say to a bank, “Yes, we can hold you up as best example and you, as worst example.” We need a ranking of banks. Which are the banks that have social responsibility and which are the ones that do not? I am not sure whether there is an all-party parliamentary group on banking. If there is, I have been inspired to join it after today’s debate. Perhaps it would have a role to play. Perhaps we should be tabling parliamentary questions on the matter. Are such closures being recorded by Government? Part of this Government want a hands-off approach towards the private sector because they want to let it get on with its business, but these are big issues affecting our communities. Access to finance can help decide whether communities in rural or poor areas flourish or die. I fully back that idea of a summit, and hope that it is taken up by the Minister, the shadow Minister, the all-party parliamentary group and MPs.
What can be done with these closures? We can look at what the Labour Government did with the post offices; we had to close them in some rural communities and it was a painful process. Can the private sector learn from the public sector? In our closure programme, we looked at where a post office was and where the next one was. We studied the radius around the post office under threat. Everything was done mathematically and systematically. Should the banking sector get together and co-operate? They could cut their costs if they said, “We won’t close a bank here if you don’t close a bank there.” Is there synergy to be had among the banks in the banking sector? Is there enough co-operation? I understand that it is difficult because they are all after the same pot; they are all after profit. If they have social responsibility, they should consider more co-operation.
Mobile banks have been mentioned today. We discussed and implemented such a strategy when we closed the post offices. We had post office mobile vans going around the country. Could there be any co-operation between the post office mobile vans and mobile banks? Such a scheme will cost money, but it might be a sound investment for the banks, not only economically but socially, because their reputation would improve.
Is there room and opportunity for the banks to co-operate with the credit unions, which have already been mentioned in this debate? If banks are pulling out of an area, could they co-operate with credit unions—again, giving them a bit of a subsidy—to move into the areas that they are moving out of? Is more co-operation possible with static post offices, rather than just with mobile post offices? Money is being collected and deposited in those post offices. Are there any synergies between the banks and the post office network?
There have been a lot of good suggestions today from Members of all parties; I think that the debate has been consensual and further progress can be made; and I thank the hon. Member for Brecon and Radnorshire (Roger Williams) for securing this debate, which has been well attended. Indeed, the hon. Gentleman took lots of interventions; he was very generous in doing so, especially with me. And some good has come of the debate.
Like my hon. Friend the Member for Montgomeryshire (Glyn Davies), I had not intended to contribute to this debate, but it has thrown up many useful points and I want to expand on just one of them: the notion of a summit on banking closures. I hope that the Minister might be able to respond favourably in that regard.
A number of hon. Members have mentioned the social impact of bank closures in their areas. However, as part of any banking summit, should we not go down the road that my hon. Friend has hinted at and contextualise the issue and consider the impact on rural communities of the closures of pubs, petrol stations—an issue that no one has mentioned so far, but that has a profound effect—post offices, as we have just heard, and schools, alongside the closure of banks and other services? I say that because in the past there was such a thing as the rural advocate. The Minister will be familiar with the rural advocate, whose job was to rural-proof Government decisions so that, where there might be a disproportionate impact on rural areas, that factor would be taken into account. I fully understand that there was a need to reorganise things, if I can put it that way, within the Department for Environment, Food and Rural Affairs, which I think was the Department that the rural advocate was responsible to, although they might even have been responsible to No. 10. However, that does not mean that the role that the rural advocate undertook is not as important today as it was in the past.
I thank the hon. Gentleman for giving way, especially as I had babbled on for 10 minutes before him. Regarding the loss of those facilities—the pubs, schools, post offices, banks and petrol stations—within rural communities, does he think that there is an onus on those communities to accept more housing and not to lump all future housing developments in urban areas? I represent an urban area and a rural area, and as we look at housing development over the next 10 years, the feeling is that all the houses should go to the urban areas to preserve our rural areas. But each community should expect to have a 10% increase in housing, with social housing, so that there is mixed tenureship, and family housing, so that communities can keep the schools, pubs and post offices open, because people are living in them.
The hon. Gentleman tempts me to engage in a debate about affordable housing and rural areas, and I am not sure that the Chairman would forgive us if we were to do so this late in the day. Perhaps we can have that conversation over a cup of tea after the debate, if he does not mind my putting it that way.
In an earlier intervention, I mentioned the irritation that I experience at being charged exorbitant sums to take my own money out of certain cash machines, but there is another element to the availability of cash that I did not refer to: cash-in as opposed to cash-out. The right hon. Member for Torfaen (Paul Murphy) may have mentioned this point already, but rural areas survive—survive a lot, in the case of my constituency of Carmarthen West and South Pembrokeshire—on tourism-related events and tourism-related industries, which often involve people who carry substantial amounts of cash. When there is a fundraising event in a local area, or indeed a busy weekend in general, the need to get any cash that is made into somewhere that is reasonably safe reasonably quickly goes to the heart of the social responsibility that the hon. Member for Vale of Clwyd (Chris Ruane) referred to. We must bear in mind that there is a proper need—not just a desire to be treated differently—to get that money into places where it is safe, as soon as it is possible to do so.
On the topic of a summit, as yet no one has mentioned the requirement for banks in the rural areas that we are talking about to address—again and again—lending. We all know, and indeed we have heard today, that there are very responsible staff and managers of local banks, but they have their hands, feet and everything else bound by central office lending guidelines. To me, it is one thing to debate the availability of banks on the high street for our rural communities, but let us also get those banks lending. I suspect that the guidelines for such lending no longer lie with the bank manager in Narberth, Whitland, St Clears or wherever it might be. I have here an e-mail from NatWest that is about the closure of the NatWest branch at Whitland in my area, but it comes kindly from the Royal Bank of Scotland at 280 Bishopsgate, which I suspect is where most of the decisions are made with regard to rural banking. Therefore, I say to the Minister that if we are to have a banking summit, let us also deal with lending to some of the small and medium-sized enterprises in rural areas.
I also want to talk about high street prosperity. We had a debate in the main Chamber the other day about the Portas report, the Government’s warm recognition of its recommendations and how we can regenerate one or two of our ailing high streets as a consequence of the advice that the Government has received from Mary Portas. Of course, within all that discussion, there is a need for a vibrant high street banking facility. Such a facility is one of the vital pieces of the economic jigsaw in our rural market towns, and no jigsaw works if a vital piece is missing. So we cannot accept the Portas report and then say, “But not banking.” We have to accept high street banking as part of that package, and as I have already said, I hope that—as part of the proposed banking summit or even perhaps as part of the Minister’s summing-up of this debate—reference can be made to that issue.
Sharing facilities was mentioned earlier by hon. Members from all parties, and it is an extremely helpful development. Mobile facilities have worked in one or two rural areas, as far as post offices are concerned. Having referred to the e-mail that I received from NatWest, I must say that NatWest has been helpful in our area by
“working closely with the Post Office to make changes to its IT systems to enable customers to use the Post Office branch network”,
as its e-mail sets out. That is a positive development in terms of shared working, which I commend NatWest bank for making.
Finally, my hon. Friend the Member for Suffolk Coastal (Dr Coffey) made the point about a possible investigation into rural bank closures by the Office of Fair Trading. It would be helpful if the Minister leaned in the direction of working with the Welsh Assembly Government—or the Welsh Government, as they now like to be called—with regard to making a proper team effort to address the impositions put upon rural communities as a consequence not only of bank closures but other closures of facilities. Rural communities do not want special treatment, but they want to be able to function on equal terms with the rest of the UK.
Thank you very much, Mr Brady, for allowing me to speak. Unlike the hon. Member for Montgomeryshire (Glyn Davies), I believe that this is the first time that I have had the pleasure of attending a debate that you are chairing, but my excitement is none the less for that. I have obviously not been in the right place before.
This has been a good and important debate, and there have been some really important contributions. I congratulate the hon. Member for Brecon and Radnorshire (Roger Williams) on securing another Westminster Hall debate on rural bank closures. The issue is just as relevant and urgent—if not more so—as it was when he secured a debate on it back in March 2011.
The importance of this issue is shown in part by the number of different organisations that contacted me in advance of it to express their views on the problems that rural bank closures are causing their membership and their areas of interest. Those organisations include the Forum of Private Business, the Campaign for Community Banking Services, the Post Bank Coalition, the Federation of Small Businesses and the Countryside Alliance. As I say, they all contacted me to express the difficulties that this issue was causing their members. The Countryside Alliance briefing nicely laid out the fact that access to money and finance in rural areas has never been more acutely limited. It said:
“20 per cent of the population live and work in rural areas and yet only 12 per cent of bank branches and 10 per cent of cash machines are located there.”
What we are seeing is a population shift towards rural communities but at the same time a hollowing-out of services within rural areas. The briefing continues:
“Around 200,000 people living in rural England do not have access to a bank account of any kind. Even before any further bank closures, more than 930,000 households in rural areas live below the Government’s official poverty line and as many as 300,000 people living in the countryside do not have bank accounts.”
There is a broad issue about services in rural communities generally and a specific issue about the role of banking in our society. There is a challenge for the Government in terms of how they can stand up for Britain’s small and medium-sized enterprises. Although those issues are not new, they are becoming more serious, as has been stated in several contributions to the debate. A variety of cogent points were made by Members, to which I will refer.
The hon. Member for Brecon and Radnorshire laid out the importance of exploring the idea of community banks. I look forward to the Government’s response. The Government must take responsibility for co-ordinating and pressing the banks to deliver their public service responsibilities. He also laid out the potential value that there might be in the role of shared banks, which we want to see explored in a lot more detail. My right hon. Friend the Member for Torfaen (Paul Murphy) expressed in graphic detail the devastating impact of the closure of the HSBC bank in Blaenavon, which affects small businesses, the elderly and the community. A cash point is needed there, even if the bank disappears. That point was also made by other hon. Members.
The hon. Member for Montgomeryshire expressed the importance of supporting local businesses and how their presence retains young talent within our rural communities. A difficulty occurs when young people go away to university and do not come back to their own communities, resulting in a hollowing-out of talent in local rural areas. He described how it is often a death knell for village and community life when a bank closes. That is an important point.
My hon. Friend the Member for Harrow West (Mr Thomas) captured the mood of the debate with his call for a summit of the major banks and for the Government to get a summit together. We have seen the NHS summit this week. Perhaps the next summit will include invitations to the people who do not agree with the Government. Notwithstanding that, his idea was seized upon by other hon. Members as having merit. He spoke about the impact of the last bank closing in north Harrow in his constituency. He said that the summit should call for a commitment by the major banks to stick to the principles of the last bank agreement, so that when we are down to the final bank in a constituency, they stick to the commitment to retain it as a public service.
My hon. Friend the Member for Vale of Clwyd (Chris Ruane) supported the call for a summit. He asked for an analysis of the number of bank closures to ensure that we have important information. It is vital for banks to raise their reputation and standing. They can have an impact on our broader community and economy. We need to sense that we are all in it together and that banks realise and recognise their responsibilities.
The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) also supported the call for a summit. He said that it needs to be expanded and should not just be about rural banking closures. He wants it to hold banks to account for their failure to lend to small businesses, and I would entirely support that. He also made the point that this is not just about the banks that go last, because they are the ones that stayed longest. We should also be looking at the banks that go before. We should recognise that banks have business decisions to make every day, but when they become the last bank in the community, there is also the public service issue. When members of the community can access shared banking services and tolerate only one bank in their village—in the town in the case of Blaenavon—it has a dramatic effect when that last one goes.
The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) talked about the impact on small businesses. My hon. Friend the Member for Scunthorpe (Nic Dakin) mentioned the fact that the bank is often a key pillar of the community. That leads me to the broader issue of rural services. Local banks and post offices are the lifeblood of a community in rural areas. They impact on everything, from people’s sense of place and community to the capacity of small businesses to be run there, offering local employment prospects. They impact on tourism in some rural areas. We are seeing an increase in the number of people living in rural communities, yet a retraction in the services actually provided. That then has an impact on the ability of elderly and disabled people to engage in society in the way that we would expect—something that people who have easier access to transport or who live in urban communities take for granted.
The coalition agreement promised a post office bank. I am sorry that the Government have decided to renege on that promise. It was an idea floated by the previous Government. It was in the Labour party manifesto. We thought that it had been taken up by the new Administration when it was mentioned in the coalition agreement. The idea for a post office bank, in which post office facilities were used for some basic financial services, especially in rural areas, has, to the disappointment of many organisations, apparently been ditched.
Alongside the importance of rural services is the issue of what we expect from banks. Banks are both businesses and public services. When the banking crisis struck, the taxpayer provided support in a way that we have not done with numerous other industries. Many other industries, businesses and large firms have been allowed to go to the wall, but the banks were saved by the taxpayer, because we recognised the importance of the banking sector to our communities and, of course, to the business community. We recognised the possible impact on our communities. That role is acknowledged by the banks. It is one of the reasons why the last bank in town commitment is so important.
Evidence from the coalition of community banking services has shown the gradual reduction in rural banking services and the extent to which the number of dual bank communities has reduced, often because banks do not want to be the last bank in town and then come under more pressure than they would if another bank closed. So the suggestion made by the Minister in March 2011 that increased competition in the mainstream banking sector would be a solution is entirely disingenuous. It is an important issue to do with some of the other inadequacies in our banking environment, but once we get to the last bank in town, the decision about keeping it open is often one in which commercial considerations overtake the public service considerations, so the idea that an increase in competition will lead to an increase in the number of banks staying open in such areas is an unlikely one.
Banks are closing because banks have over many years been engaged in a long-term process of centralisation and cost reduction, and small local branches simply do not sell enough financial services products to keep them open. Communities that have invested in a bank, borrowed from a bank and been customers in that bank for many years often find that their loyalty is not returned when the branch is no longer commercially successful. So this is an issue of equality for people on low incomes, and it is an issue about how we support our elderly and disabled people, as well as how we support our small businesses. There is a greater role than ever before for debt advice. The advice sector is hollowing out and centralising in the face of cuts to the voluntary and local government sectors. That could push impoverished people towards payday loans and illegal loan sharks, as well as reducing the access to quality financial advice for elderly and disabled people who are not able to travel 10 or 15 miles to the nearest bank.
There must be a greater role within our banking sector for credit unions and mutuals, and I am interested to know what more the Government can do to promote them. Alongside the failure on rural commitments, as the hon. Member for Carmarthen East and Dinefwr said, is a failure on access to finance for small and medium-sized enterprises. That is recognised right across our business community. One of the biggest single drags on our economic recovery is the failure to make finance accessible to small businesses, owing to the banking sector’s retrenchment and the failure of the Project Merlin agreement, particularly for small businesses. The Government need to do a great deal more on that.
We all recognise that if we are to have a private sector-led recovery, SMEs will play a significant role in delivering growth within our economy. Members will have been as shocked as I was to learn the extent of the current Government’s failure in a YouGov poll yesterday, showing that a quarter of small business owners expect to close within the next two years.
At a time like this, when small businesses are under the cosh more than ever, we must recognise the banking sector’s role in supporting those businesses. Often, such businesses deal in cash and need daily access to bank services. There are clearly security implications for small businesses that cannot cash in their takings daily, as well as efficiency implications. A small business owner who must close early to drive 10 or 15 miles to take their money to the nearest bank will make less profit. At a time when small businesses need all the help that they can get, the Government and the banking sector should be doing a whole lot more. Hon. Members mentioned the importance of the local business relationship between banks and their business customers as well as their individual customers.
I should like to hear the Minister’s comments on the proposal made today for a summit. I should also like to hear what more can be done to take forward the inter-bank agency agreement model, which has been important in enabling businesses to share bank branch services. What does she think of today’s proposal by the Forum of Private Business that banks should share premises?
This debate involves the broad issue of services in rural communities, the specific role of banking in our society and a challenge to the Government to stand up for Britain’s small businesses. We recognise that rural communities exist in a variety of ways, but if they are to be sustainable communities and not just places where people live, services are crucial. That is why this debate is so important. I welcome the contributions made by all Members and look forward to learning more about what the Government will do to address this serious issue.
I hope you will excuse my slightly unorthodox speaking style, Mr Brady, due to a broken foot. I thank the hon. Member for Brecon and Radnorshire (Roger Williams) and his colleagues, who are now giggling in the back row. I also thank the other Members who have contributed to this important debate. It follows the interesting and useful debate secured last year by the hon. Member for Brecon and Radnorshire, to which my hon. Friend the Financial Secretary responded. He is in Committee today, considering the Financial Services Bill. I am sure that he will read today’s Hansard with deep interest and mull over the calls for a summit and the suggestions about with whom he should work if he is minded to hold one. I recognise the concerns expressed capably by all hon. Members about the impact of past and planned branch closures by high street banks in their constituencies and about the availability of banking services in rural areas more generally.
The hon. Gentleman will appreciate that I shall have to leave that to the consideration of my colleague at the Treasury, whose portfolio it more properly is. However, as I said, I am sure that during a slow moment in Committee upstairs, he will read today’s Hansard and take the hon. Gentleman’s views deeply into account.
The Government recognise that people in rural areas experience much the same financial challenges as people living in towns and cities, even Harrow. However, living in a rural area can bring additional challenges apart from the obvious examples of bank closures. Exclusion from financial services can be less visible in rural areas than in urban areas. My hon. Friend the Member for Montgomeryshire (Glyn Davies) and others have highlighted a range of rural challenges. I have some understanding of them myself, having grown up in the fens in rural Norfolk. My first bank account was in a branch in a market town.
With regard to access to bank accounts, the Government are committed to improving access to financial services, as I shall explain, and in particular to bank accounts. It has been amply demonstrated that having a bank account is an essential aspect of modern life and that being able to access counter services at a branch while interacting face to face with staff is a service valued not only by individuals but by businesses. I have also heard the points made today about its tourism value. However, I must point out that decisions whether and where to maintain specific branches are commercial decisions and, as such, for the financial institutions in question. The Government do not intervene in such decisions, as a matter of principle.
All banking service providers must balance customer interests, market competition and other commercial factors when considering their strategy. I note the call by the hon. Member for Vale of Clwyd (Chris Ruane) for banks to balance social responsibility with those factors, but I will say at the outset that the Government have been clear about the need for a change in bonus culture and for banks to contribute to the real economy, support small and medium-sized enterprises throughout the UK and lend to families. The bottom line of today’s debate is that banks have customers, and it is clear that they must treat them fairly in taking decisions about them.
With that in mind, I will set out briefly the regulations that apply. Banks’ and building societies’ treatment of their customers is currently governed by the Financial Services Authority in its “Banking Conduct of Business Sourcebook”, which includes a general requirement for firms to provide a prompt, efficient and fair service to all their customers. The guidance agreed by the industry and the FSA sets out expectations of how banks should live up to that code of conduct and specific guidelines for how banks should behave when considering closing a branch.
The guidance states that if a firm plans to close or move a branch, customers should be notified at least 12 weeks beforehand and told how the firm will continue to provide retail banking services. That includes providing micro-enterprise customers with information on any existing inter-bank agency agreements. A notice should be placed in the branch, and consideration should be given to other local advertising and notification of local councils and community groups. The bank should provide information on alternative facilities offered by the firm in the locality, including its nearest alternative branch and nearest free ATM, as well as other channels through which banking services are provided.
My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) mentioned free ATMs. I believe that the LINK network, of which, I note, he is perhaps no great fan, runs a phone line that customers can use to propose sites for new free-of-charge cash machines. Perhaps he might encourage his constituents to take that up.
The guidance also requires that customers be notified at least 12 weeks in advance of significant alterations to counter services or opening hours. On the back of those points, first, such arrangements clearly help customers make alternative arrangements to meet their banking needs. Secondly, they enable options to be considered, such as the action plans for which the right hon. Member for Torfaen (Paul Murphy) called. Thirdly, to use an example that we heard today, I am pleased that people in Suffolk, Coastal could respond in that way. When people see a notice in branch buildings, some are clearly able to respond. Fourthly, however, that does not change the end fact that a branch may still be withdrawn.
Let us move on and note what banks offer in addition to their face-to-face services. Several Members have made the point today that banks offer services by telephone and by internet. My hon. Friend the Member for Carmarthen West and South Pembrokeshire raised the significant issue of broadband, which I am sure is on everyone’s minds. The Government have laid out significant plans to improve and complete broadband for rural areas. I could go into that more, but I suspect that that is a different debate and that you, Mr Brady, will not allow me to speak on it. I reassure Members that the Government understand that point and are acting on it.
It is fair to say that the channels I have talked about are not always appropriate for every customer and every service. As hon. Members have noted, having access to a branch with face-to-face services is particularly important for older people and for small businesses that may require cash facilities to trade. However, the fact is that phone and online channels are increasingly popular, and the provision of such services is expanding and diversifying rapidly, giving customers a range of choices as to how they manage their affairs.
It is important to note that many bank account providers have an arrangement for customers to access their accounts via post office counters, which I am glad that hon. Members have noted throughout today’s debate. I know that Members will welcome the Government’s stance on post offices, notably making clear commitments regarding the future of the network—that there will be no further closure programmes and that we will maintain a network of at least 11,500 branches and ensure that specific access provisions for rural areas are included. I understand that 80% of customers now have the possibility of withdrawing or depositing funds or checking their balance at a post office branch.
Hon. Members raised shared branching, which is where several banking providers pool their services in some way. That is an interesting idea that clearly requires a high degree of commercial collaboration. I return to my point that the best people to judge that are the banks themselves, and I would certainly encourage them to consider that idea and also mobile banking, which was also raised in today’s debate.
I am afraid that that would not be something that the Government could introduce, as the Government do not run banks. Regarding the banks in which the Government are the majority shareholder, they are run at arm’s length, as all hon. Members know, but I hope that my words will serve as a small measure of encouragement. It is a positive idea that could and should be looked at by banks themselves.
Regarding what the Government are doing to promote access to financial services, we are taking a number of important actions to help consumers access the services that they need. We are strongly committed to promoting a diverse financial services sector that serves the needs of the wider economy, which is the one of themes of today’s debate.
To start with, we need to encourage access to savings products. The Financial Secretary to the Treasury announced last week that the Government have launched a steering group to design a range of simple financial products, which will help new participants enter financial markets to provide straightforward and easy-to-understand products. I am sure that all hon. Members present today will welcome that.
I reiterate that we want the industry to take a lead in designing simple products, because we want the products to be viable commercial propositions for customers that will stand the test of time. There is an opportunity for industry to innovate properly, which may include mobile or shared services, and to develop a range of simple products that—again we return to the key point—meet their customers’ needs.
I am about to respond to the hon. Gentleman’s points, so if he will allow me to continue with my comments, I will do so later.
I think we have all acknowledged in today’s debate that the needs for access to finance go far wider than banks and building societies. The Government strongly believe that credit unions can act as alternatives to banks and building societies in providing affordable financial services to people who may not otherwise be able to access them. The Government are providing additional support to such institutions through the Department for Work and Pensions, which I know hon. Members will welcome. The results of some of its feasibility studies will be published in due course. That forms just one part of the Government’s efforts to promote a diverse and competitive financial services sector, on which I am sure the hon. Member for Chesterfield (Toby Perkins) will have something to say.
I am delighted to hear that there is an interest in credit unions, and the Minister is absolutely right to say that they can play an important part.
Regarding the substantive issues that have been raised today, Members will be forgiven for thinking that they are walking away from the debate with little sense that the Government are doing much about the issue. What we are hearing is that such decisions are for the banking sector. Regarding the main thrust of the debate, which is about customer service and public service responsibilities of the bank, I think Members will leave with the sense that there is little pressure from the Government to get banks to face up to their responsibility and recognise the broader economic impact if we do not sort the issue out. I think we need to see a far greater sense of urgency and action from the Government on the issue.
The hon. Gentleman will in that case be pleased to hear me move straight on to the next section of my speech, which deals exactly with what the Government are doing this very day in Committee: acting on the part of the financial system for which they have responsibility, which is to talk about financial conduct and competition in financial services. The key to the hon. Gentleman’s question is in his own words. There are two things at stake: customer service and public service. Banks and commercial institutions must be responsible for customer service, and I will now turn to some aspects for which the Government can reasonably be said to be responsible.
It is essential that consumers are able to apply competitive pressure and to understand where they can hold their bank to account and how the broader market operates. Customers should be able to vote with their feet and to switch their custom to banks that provide the best products for them, including access to a branch. The Government are therefore committed to fostering diversity and promoting competition in the banking sector. To that end, the Government have accepted in principle the competition recommendations of the Independent Commission on Banking, which was mentioned earlier in the debate. The Government will now consider the proposals in more detail.
In line with those recommendations, I am pleased to note that the banking industry has already made some commitments, such as introducing a faster and safer switching service to ensure that customers can switch within seven days. Along with the more enhanced transparency measures that are already being implemented in the personal current account market, including making charges clearer and providing annual statements of charges to each customer, the new service will make it easier for customers to exercise what they have to do, which is vote with their feet if they feel that their bank is not meeting their needs.
To ensure that consumers are adequately protected in accessing financial services, the Government are also reforming the regulation of financial services. I remind the House that as part of the Financial Services Bill that is being discussed in Committee as we speak, the Government are creating a new and dedicated conduct of business regulator, the financial conduct authority. Also, the Office of Fair Trading has already committed to reviewing the personal current account market in 2012, about which I hope my hon. Friend the Member for Suffolk Coastal (Dr Coffey) will read later.
It is clear that customer service is at stake here, and there is public interest in how rural communities can best be supported. However, it is also clear that the issue spans a substantial regulatory and non-regulatory agenda, and the Government are pursuing that. The landscape is changing rapidly, just as customers’ needs are changing, and the financial services sector will need to change to take account of that. It is vital that the sector continues to meet the needs of ordinary consumers, including those who prefer to access banking services via a branch.
Once again, I thank the hon. Member for Brecon and Radnorshire for his continued work on the issue. Clearly, we all share appreciation of that. I would also like to thank all the others who have contributed today. The Treasury will continue to take the issue into account as it pursues the wider financial inclusion agenda.
Gangmasters Licensing Authority
It is a great pleasure to have secured this Westminster Hall debate under your chairmanship, Mr Brady. I am delighted to have been given time by the House to hold this timely debate on a very important authority.
I start by paying tribute to a number of hon. Members who have done so much in this area. First, I pay great tribute to my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan), whose 2004 private Member’s Bill commenced the legislative process that created the Gangmasters Licensing Authority. I also pay tribute to my hon. Friend the Member for Wrexham (Ian Lucas), who was the Minister responsible for taking the Gangmasters (Licensing) Act 2004 through the House of Commons, and to my hon. Friend the Member for Birmingham, Erdington (Jack Dromey), who has been a champion of vulnerable workers, and the Gangmasters Licensing Authority in its various guises, for many years before becoming an MP.
It is also appropriate to pay tribute to the trade union movement, which has championed the cause of vulnerable workers for many decades and has been a stalwart defender of the Gangmasters Licensing Authority when it has been attacked by this Government. I should also pay tribute to everyone who works in the authority for doing the incredibly challenging and difficult job of making sure that workers are not exposed to exploitation.
I should remind hon. Members why the Gangmasters Licensing Authority was created in the first place. It was created as a result of tragedy: the drowning of 23 cockle pickers in Morecambe bay in 2004. The deaths of the Chinese cockle pickers put back into use a word that had almost been forgotten in British public life since the 1960s: “gangmaster.” A Chinese man who had organised the group was described as their gangmaster and was later found guilty of the manslaughter of 21 of those who had drowned. The incident led to a wider debate about those who organise casual workers and sometimes exploit them. It resulted in the creation of the Gangmasters Licensing Authority to regulate that form of labour.
The new legislation was groundbreaking, as it was widely assumed that working gangs and gangmasters had disappeared. In agriculture, European migrant labour has generally moved from areas with smaller farms to places where prices and wages are higher. That movement created the gang system, particularly in the eastern counties of England, where accommodation for permanent farm workers is scarce and there is high demand for seasonal labour. So the gangmaster was alive and well, had been exposed through tragedy, and was often linked with organised criminal activity.
New versions of the old exploitation developed over time, encouraged by the relentless pressure to cut food production costs. The new licensing authorities are attempting to prevent exploitation, but the poverty of some countries compared with Britain will sustain such a system in the future. Once it was Irish migrants; now they might be Latvians or, as we saw with the cockle pickers, Chinese. What continues is the movement of migrant agricultural labour and the abuse-prone gangs that have historically always been associated with such labour.
Once the Gangmasters Licensing Authority was established, it was supported by a coalition of national retailers, food industry representatives, labour providers and trade unions. Crucially, there was cross-party support in this place for the regulation of those who supply labour in the areas of agriculture, forestry, horticulture, shellfish gathering, food processing and packaging. However, we are not simply talking about a piece of employment legislation that the Government would have people believe is a burden on business. This is a life-saving body that safeguards the welfare of workers, while regulating the providers of such workers and protecting some of the most vulnerable workers from exploitation, abuse and modern-day slavery.
As stated in many independent reports—I shall mention just a few—the GLA has been a huge success. Independent evaluations conducted by Sheffield and Liverpool universities have confirmed the effectiveness of GLA enforcement. In a survey of licensed gangmasters in 2008, eight out of 10 respondents were in favour of licensing; seven out of 10 felt that the GLA was doing a good job; and only 18% described their contact with the GLA as burdensome. The Joseph Rowntree Foundation has had a major research programme on forced labour for several years, and much of its work has touched on the GLA and the role it plays. What it says sums up the GLA:
“To put our position simply, we are big supporters of the GLA. All of our research and contacts with businesses, employers, unions, campaigners—everyone—suggests they are doing a vital job. They are a hugely effective tool in preventing contemporary slavery. Indeed, there is a case for expanding their remit out with the sectors they currently regulate.”
The Equality and Human Rights Commission’s inquiry into human trafficking in Scotland commented that:
“Apart from the Gangmasters Licensing Authority (GLA), the Inquiry did not identify evidence of regulators linking anti-trafficking efforts with their work”.
Crucially, the Hampton report, which looked at reducing regulatory burdens on business, and which led to an inspection programme covering all regulators, strongly endorsed the GLA’s approach, concluding that:
“The GLA’s impact in improving working conditions for some vulnerable workers has been impressive, particularly in view of its relatively small size.”
That report was endorsed by the Institute for Human Rights and Business, the Ethical Trading Initiative, anti-slavery organisations, the Association of Labour Providers, the Ecumenical Council for Corporate Responsibility and, of course, Oxfam.
Since its inception, the GLA has protected workers by ensuring that they receive their pay and holiday rights, and that they work in a healthy and safe environment. Inspectors also check that vulnerable workers are not housed in substandard conditions while being charged excessive rents. The GLA has played a central role in reducing human trafficking in the UK. The authority also helps to recover unpaid tax and national insurance, thereby increasing revenues for the Exchequer.
According to the GLA’s annual report last year, 845 cases of worker exploitation were identified. The financial cost of that exploitation amounted to £2.5 million. Some 91% of the GLA’s intelligence-driven operations identified serious cases of non-compliance. Some 36 cases of unlicensed activity were uncovered, and 33 licences were revoked. There were also 12 successful criminal prosecutions.
I congratulate my hon. Friend on securing the debate. Does not the GLA’s success mean that the problem is being moved across to the construction industry? A major problem is that there is no regulation in the construction industry to match the regulation that the GLA provides for other industries. Therefore, there is a good argument to say that the GLA should be expanded to cover the construction industry. That would help to deal with the industry that has the highest rate of accidents in the UK.
I am grateful to my hon. Friend for raising that point. He has a private Member’s Bill on extending the GLA’s remit to construction workers, but because it is low down on the Order Paper, it will never be passed. I hope that the Minister will say in his response whether the Department for Environment, Food and Rural Affairs will examine the possibility of extending the GLA to cover other areas. The forestry and agricultural industries are becoming more regulated, gangmasters are becoming licensed, and the GLA has been successful, but there has been a migration of exploited labour into other parts of industry. I may mention that later.
The hon. Gentleman is making a very good case. I was co-sponsor of the Gangmasters (Licensing) Bill 2004 with the hon. Member for Paisley and Renfrewshire North (Jim Sheridan), who should be congratulated. Would he add to the many benefits he has listed as having resulted from the GLA’s introduction those relating to farmers? They feel much more reassured that they are dealing with gangmasters on a sound basis. Also, the many legitimate gangmaster operations in existence know that the GLA is driving the illegal trade out of business altogether.
I am grateful for that intervention and I congratulate the hon. Gentleman on co-sponsoring the 2004 Bill. The point he makes is critical. This is not just about protecting vulnerable and exploited workers; it is about cleaning up supply chains. That feeds right into the argument about good business being rewarded for doing good things, and the need to support initiatives that get rid of businesses doing bad things. It is crucial to recognise that it is good for good businesses to be involved in initiatives such as the Gangmasters Licensing Authority. That emphasises the point made by my hon. Friend the Member for Midlothian (Mr Hamilton) about potentially extending the GLA to other areas, and clearing up the supply chains to which the hon. Member for St Ives (Andrew George) referred.
The GLA has discovered a number of cases where trafficking for financial benefit, linked directly or indirectly to labour exploitation, is to the fore. Some of the activity appears to have direct links to the targeting of vulnerable people in homeless refuges in the host country, and to persons of interest to the police in their host country. Workers are sometimes left in a no man’s land: they have no means of supporting themselves in the UK, but are unable or unwilling to go home. They are exploited; to work in a promised land, they pay up-front fees that they are never likely to be able to repay.
I have some examples that give the issues a human face. The GLA has discovered workers living in squalid accommodation; the rent is often high—above the market rate—and deducted at source. One person described 12 workers living in a caravan with no water, sanitation, lighting, heating or cooking facilities. Another talked about 30 workers who lived in a structurally dangerous two-bedroom house; they were subject to summary eviction by men wielding baseball bats if they complained.
Transport problems were an issue. Those problems included unreasonable wage deductions for transport, and unsafe vehicles. The GLA uncovered the case of a worker who lost a leg when an unroadworthy van was involved in an accident. The gangmaster’s licence was revoked, and he could no longer provide farm labourers, but two weeks later he was back in business, supplying builders’ labourers. That highlights the point made by my hon. Friend the Member for Midlothian.
An eastern European worker discovered on a farm in Cornwall was promised a job in Scotland, but was then sold to another gangmaster. Having worked all week for £5, they were told that they owed the gangmaster £6.17 in costs, which of course they did not have. They were obliged to keep working to pay the debt, which continued to accrue, resulting in bonded labour.
Those are just some of the human examples of what happens in an unregulated trade, but the GLA is identifying exploited workers in contemporary slavery and is able to do something about it. The question that people will ask is: are UK companies involved? The Joseph Rowntree Foundation found that some, possibly many, UK-based companies rely on supply chains that involve the use of slave labour, both in the UK and abroad. The complex chains of subcontracting through a variety of labour agency networks, both in the UK and abroad, mean that many companies are unaware of, or can deny knowledge of, the conditions under which their goods are produced.
The UK supply chain is inherently based on a low-cost, labour-intensive business model. The GLA identified that price pressures from competition have led to a culture where gangmasters and labour users will exploit the most vulnerable link in the chain—the worker—to protect their profits. They will often accept a charge rate that, realistically, does not allow the labour provider to meet legal requirements. Workers are being paid below the national minimum wage so that labour providers are able to make a meagre profit by charging an unrealistically low amount.
The GLA has sought to tackle this insidious problem by developing a protocol with supermarkets and suppliers—a point was made by the hon. Member for St Ives about clearing up supply chains—that allows for the exchange of information. It has garnered the support of the majority of key retailers in the food sector. By working in partnership with supermarkets—that is key—the GLA has been able to encourage them to deal with allegations of exploitation in their supply chain, and to establish an audit standard for labour supply; that allows them to clear up their supply chain. The protocol is supported by every major supermarket in the UK. It is welcomed by them as a way to allow them to monitor their supply chains.
What is the future of the GLA? I welcome Ministers’ announcement that they do not intend to abolish it. Nevertheless, the Government are considering limiting its role, and the role of licensing remains under review. The Minister needs to be crystal clear that there will be no watering down of the GLA and its powers. This is not about counting paper clips, but saving lives, preventing exploitation, promoting clean supply chains, exposing organised criminal activity and undermining human trafficking—there could be no greater cause. The GLA is especially important in difficult economic times when labour supply exceeds demand and the pressures on work increase.
Does my hon. Friend agree that there is a frightening aspect to the rhetoric we hear from the Government about health and safety, and health and safety legislation in particular? Will he ask the Minister to give an assurance that the Government believe that health and safety legislation is necessary to protect individuals at work? Some of the rhetoric on this issue, particularly from the Prime Minister, is deeply worrying.
The Minister has heard that challenge on health and safety. The red tape challenge website, which I am sure every hon. Member has dipped into and had a look at, is wide-ranging. The first line of every category, including the Equality Act 2010 and health and safety legislation, poses the question: “Should this be scrapped?”. I appreciate that it is a consultation, and that the Government are looking for ideas and views on the current make-up of regulation, but there is no greater challenge than maintaining health and safety regulations to protect workers whose lives or safety may be at risk. I hope the Minister will tell us categorically that some of the questions in the red tape challenge are challenges to seek answers, rather than an overall strategy to diminish workers’ rights and health and safety regulation.
To date, the Government have been rhetorical about the dilution of workers’ rights, but a statutory instrument changing the unfair dismissal period has been laid before Parliament and will come into effect in the next few weeks. There have been leaked reports from No. 10 Downing street about making it easier to fire, rather than hire, people. There is anti-regulation sentiment and rhetoric coming out of the Department for Business, Innovation and Skills, with its “one in, one out” policy on regulation. There is real concern that some of the enforcement actions that are critical for protecting vulnerable workers and good businesses through such authorities as the GLA are being challenged.
The Macdonald report suggested an end to gangmaster licensing completely, and a move to a system of self-regulation combined with “earned recognition”. It also suggested that the GLA should change from being a heavy enforcement body to a light-touch advisory body. I am not sure that anyone would deny earned recognition to good businesses, supply chains and supermarkets who are working in partnership with the GLA, and to the good farmers who want supply chains cleaned up. The problem is that all earned recognition does is divert attention away from where gangmasters may infiltrate in the future.
There is significant confusion about the future, what with the red tape challenge and what has been termed the star chamber process. That was highlighted by the Under-Secretary of State, Department for Environment, Food and Rural Affairs, Lord Taylor of Holbeach, who said initially:
“I am pleased to say that the need for the GLA to enforce protections for vulnerable workers in its sectors”,
which is crucial,
“was endorsed by the red tape challenge ministerial star chamber, although it recognised that the GLA needed to better target non-compliant operators and reduce burdens on the compliant. The GLA will of course continue to be monitored under the Government’s ongoing reviews of public bodies and enforcement agencies.”
That is not particularly clear. In a later exchange on the same question, he says of the star chamber process and the red tape challenge:
“From my knowledge of star chambers…they are where conflicting views which may need to be resolved are discussed in an informal way. That is exactly how the star chamber has functioned in this way.”—[Official Report, House of Lords, 12 December 2011; Vol. 733, c. 993 and c. 995.]
I hope that the Minister will clear up some of the confusion this morning on the Government’s view of the GLA, and on the perceived and reported fight between the Department for Environment, Food and Rural Affairs and BIS on the where the GLA should sit. It is right that it sits with DEFRA in its current guise. It should not be transferred to a Department that is considering deregulation and stripping out the safeguards put in place by the GLA.
On that point, the hon. Gentleman appears to be contradicting himself. On the one hand, he is saying that the GLA should be extended to the construction trade and other trades. On the other hand, he is saying that it should remain in DEFRA. If it goes beyond the parameters of the operation of DEFRA, does he not agree that it would be appropriate to rest the body in another Government Department?
I was about to come to that. I agree that that seems inherently contradictory, but the key fact about the Gangmasters Licensing Authority sitting in DEFRA is that it is there to do a particular job, which it is doing rather well. Moving the GLA from DEFRA to BIS would be putting it into a Department that is looking at deregulation and is running the red tape challenge. A previous Under-Secretary at BIS—now the Secretary of State for Energy and Climate Change—has made clear remarks about where the GLA should sit and what its function should be. Indeed, he initiated the Macdonald report, which recommended a light-touch regulatory approach. If the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Newbury (Richard Benyon) commits the Department at least to examining the extension of the powers of the GLA, there might be an argument about which Department it would sit in, but my point is that in this particular confusion, DEFRA is the best place for the GLA to sit. Moving it to BIS would merely be an act of deregulation, rather than showing support for an organisation that is prone to be hugely successful.
Will the Minister at least examine the possibility of not diluting the GLA, but extending it to other areas? We have heard about similar problems of exploitation and unlawful practices in construction, the social care sector and hospitality. There is evidence that the limited GLA remit has led to the displacement of rogue operators from GLA sectors into other parts of the labour market—the point made by my hon. Friend the Member for Midlothian. The Trades Union Congress has identified a strong case for extending the GLA licensing scheme, a view shared by the Select Committee on Home Affairs in its report on “The Trade in Human Beings” back in 2009.
There is also support for an extension to the GLA’s remit in the business community; that is critical to where the GLA currently sits in the Government’s thinking. Nearly three quarters of the gangmasters who responded to the 2008 survey by Liverpool and Sheffield universities, which I mentioned, said that the GLA scheme should be extended to other sectors—either to all sectors, or especially to the construction and hospitality sectors. That is significant, because many gangmasters operate in other sectors that are not subject to GLA regulation, most notably non-food manufacturing, distribution, cleaning and construction. Good business wants a level playing field, which can be delivered only by dealing with this contemporary slavery.
Recently, controversy has surrounded areas that the GLA has looked at, such as dairy farming, but the courts have recognised that, again, it is clearing up the supply chains. There is also a strong view that forestry should be removed from the GLA remit, but does that not provide a reason to allow the GLA to follow the evidence of gangmasters into any industry? I pose that question to the Minister. That way, gangmasters, rather than the industry, become the issue. Let the evidence follow the crime, if the evidence is there to investigate.
May I draw attention to my hon. Friend’s point about the support of the Scottish Trades Union Congress and the TUC? There is other support, too; the Select Committee on Work and Pensions took evidence in Midlothian many years ago, and the construction industry was represented there. It felt aggrieved about what was happening. Good, honest employers are having to compete against some unruly organisations, and they feel that they are in a deficit position as a result. It is important that we recognise that good employers also want regulation.
Absolutely. I could not agree more with my hon. Friend. His private Member’s Bill, which I have already mentioned, looked at similar aspects of the construction industry. The critical point is that good businesses want good regulation—this is not about the amount of regulation—to clean up the sector, so that those good businesses benefit, as they deserve to benefit. As my hon. Friend said, “unruly organisations” and employers can then be rooted out, protecting not only workers but the industry. That is key, and it is why supermarkets have been so keen to work in partnership with the GLA, to bring that together.
May I summarise for the Minister some of the questions to which I would appreciate an answer? I am grateful for his presence—the Minister with responsibility for the GLA is otherwise engaged. Will he at least guarantee that there will be no watering down of the GLA regulation and enforcement powers? Will he keep resources in place, because the GLA is needed more now, in tough times, than in better times? Will the ministerial team at least examine the evidence for the GLA going into other sectors and, perhaps, following the evidence, rather than dealing only with particular sectors? Will the Minister look at the potential for more flexibility for the GLA, perhaps making it self-financing or providing it with the powers to examine other industries in less stringent terms, so that it looks not just at criminality? For example, I mentioned the dairy farmers: a slap on the wrist might have been more appropriate than a proper criminal process in that case.
There is widespread evidence that the GLA and the licensing system have been effective in raising standards in the fresh food processing sector, and other sectors covered, and in protecting some of the most vulnerable workers in the United Kingdom. The confusion and uncertainty on the part of the Government are not helpful, and the red tape challenge has proven that confusion can reign in such matters. Finally, let me return to where I started: the Gangmasters Licensing Authority was set up on the back of a horrendous tragedy. Any reduction in the remit of the GLA would put vulnerable workers at risk of exploitation, modern slavery and perhaps even death. Let us not scrap something that works.
I congratulate the hon. Member for Edinburgh South (Ian Murray) on securing this important debate.
I also congratulate the hon. Member for Paisley and Renfrewshire North (Jim Sheridan), who is present and who was responsible for the original proposals, which went through the House of Commons and into legislation. I followed and supported his private Member’s Bill, turning up on a few Fridays to ensure that it ran the course. That might seem strange, because I represent a seaside constituency, but it is one that has a large agricultural hinterland. It was obvious to me, when he was promoting his Bill, that something needed to be done. I was acutely aware of a number of workers whom I saw around the town who were there illegally or were trafficked—they were certainly not treated at all well. In many cases, they were appallingly housed. In one celebrated case, a large number of Russians were found in a big house in Southport in conditions resembling the black hole of Calcutta. Those who were better housed might still be extraordinarily badly treated, with their rent often deducted from the pittance they were paid; every conceivable regulation for houses in multiple occupation was violated by gangmasters who often owned the property concerned.
It was also apparent to me at that time that there was some criminal involvement. Conversations that I had with the police and immigration authorities indicated that that was indeed the case. Clearly, from conversations that I had with valid employment agencies operating properly within the law, the situation was also a considerable restraint on their trade and was a problem in the labour market. As the hon. Member for Edinburgh South said, such people were breaching the law not only by using illegal labour but by not paying full taxation or proper national insurance. It was rather puzzling, when looking at the accounts of some large agricultural suppliers, as to how much they managed to get done with so few people seemingly employed on the books. That was before the Morecambe bay tragedy, which focused people’s minds on the seriousness of the issue and on how right the hon. Member for Paisley and Renfrewshire North was to bring it to our attention. Had people acted sooner, we certainly would not have had that tragedy.
I had a foretaste quite recently of what might still happen in the absence of a similar piece of legislation. Southport has a long history of shrimping, but we had a bonanza—almost a freak of nature—of cockles and other shellfish quite recently. It was a sudden surge, perhaps because of some tidal movement. However, it became well know that in the northern part of the constituency an awful lot of money was to be made from prestigious restaurants by going there quickly, taking appreciable risks and obtaining what was there. The local authority took the matter under control very effectively, but it was obvious in the circumstances that many strange people were suddenly showing up in town, and were prepared to take appreciable risks on behalf of themselves and those they employed in trying to obtain a quick financial return.
I wholly support the thrust of the legislation. As the hon. Member for Edinburgh South said, it prevents a number of wholly undesirable activities. It prevents people from being treated badly, and prevents abuse of health and safety legislation. It even saves lives. It is not an underestimate to say that lives would be put at risk in the absence of proper supervision of the gangmaster business. It certainly ensures that more taxes are paid than would otherwise be the case, and it goes a long way towards cleaning up the supply chain, which has been fairly murky in the past. I have no real evidence for this, but I am fairly confident that supermarkets were receiving vegetables that had been provided through gangmaster chains that required some inspection, to say the least.
At the moment, the Government are against red tape, as we all are. No one makes a case for red tape. The issue is what is meant by red tape. There is no clear definition. I am told by people in the Department for Transport that they were asked to look at traffic regulation orders as a sample of red tape, which shows how vague and blurred the definition is. If it means over-regulation and unnecessary regulation, we are against it in principle, but what we are discussing is not an example of that. There is clear evidence that an authority such as the GLA is needed, and I would be sorry to see it abolished.
The hon. Member for Edinburgh South has made a case for an extension of the GLA’s remit, and I am slightly wary of that. He drew a valid distinction between dealing with gangmasters as an industry-specific issue, and dealing with them in terms of the business model involved. My instinctive preference is to look at the industry-specific aspect.
I draw the hon. Gentleman’s attention to the construction industry. Many foreign companies come to the UK and bring their employees with them. The very problem of employment and accommodation to which he referred exists here now. Such companies give with one hand, and take away with the other. They pay wages to their employees, but then increase the rent for their accommodation. That happens now in the construction industry, and it goes against local British firms that are trying to get into the market and do a fair job with people they care about: their employees. The regulations should apply to foreign employers, and ensure that exploitation does not happen.
The hon. Gentleman has slightly anticipated me. There is a prima facie case in the construction industry, and there has long been a history of gangmaster behaviour, which used to be called the lump. Building firms sometimes employ people as a gang instead of employing them individually to avoid some of the penalties that might be incurred because work on a building site is intrinsically risky. A construction firm might incur liabilities, but sometimes, by arrangement, they fall on the gangmasters, who accept no ultimate liability whatever.
There is a decent case for including the construction and agriculture industries, but it becomes more difficult in the catering industry, which the hon. Member for Edinburgh South mentioned. We seem to be moving into territory where we may be imposing on an industry regulation that, strictly speaking, is unnecessary.
Perhaps I could provide some clarification. I examined whether there should be an extension to other industries, but I particularly asked the Minister to examine whether it would be appropriate for the GLA to cover other industries, rather than saying that it should have a blanket involvement. I was asking for some proposals from the Government, and whether it would wise and prudent to do so.
The hon. Gentleman makes an entirely valid point. He is suggesting a benchmark or threshold that must be met before imposing additional regulation. Surely, that benchmark or threshold has been met in the agricultural industry. In my view it has certainly been met in the construction industry. Removing existing controls when there is clear evidence that they are needed would be regressive and wholly detrimental to the interests of British commerce and to the people who work in those industries.
I shall be extremely brief. I thank my hon. Friend the Member for Edinburgh South (Ian Murray) for introducing the debate. I know that it is customary to do so, but I genuinely want to. He expressed eloquently and concisely why we are here. I agree that any Government must regularly review the organisation of workers, so I welcome the review of the Gangmasters Licensing Authority, but it is important to consider very carefully its three aspects.
First, is the GLA still necessary? I do not know of any organisation or political party that argues that there is no longer a need for it. Employers have come forward to argue that there is a continuing need for it, as have trade unions across the piece, and many civil society organisations that helped us campaign for it to be set up. Anyone who doubts whether the GLA is needed should go on the website, which describes examples of continuing and horrendous exploitation, some of which have been cited today.
Sometimes in this House, we do not thank people enough. We have heroes among us today: those hon. Members who campaigned long and hard to achieve the breakthrough in the legislation that established the GLA. I want to put on the record my thanks to them on behalf of all those people who have enjoyed the benefits of the GLA so far. I chair the Public and Commercial Services Union cross-party parliamentary group that represents staff who work in the GLA. I have met the staff, and they have explained some of the issues that they have encountered, and some of the remedies that they have been able to introduce to tackle exploitation.
The first issue is that the need continues. The second is whether the GLA has the right powers and appropriate terms of reference. At one point, a lobby was building up, certainly in the farming community, which feared that the GLA might have too many powers, but that is wrong. The farmers are not inspected; the inspection falls on the gangmasters, not the farmers. There is no additional burden on farmers. The argument that is coming across is that those who work in agriculture have supported the GLA for its maintenance of standards and prevention of exploitation.
The issue that has arisen today is that the GLA has too few powers. It does not cover enough areas of industry. I understand the concern of the hon. Member for Southport (John Pugh) about creeping and additional red tape, but I want to give two examples of anomalies that arise when powers are ineffective. In one instances, GLA officers went to scrutinise the conditions of workers in a bottling factory. They could scrutinise the conditions of the workers who were bottling fruit juices from farm-grown crops, but they could not take any action for workers who were bottling water on the production line beside them. There are anomalies in the powers.
Another example is a gangmaster who was guilty of malpractice in the agricultural sector, and then boasted of moving into the care sector. I understand the concerns that have been raised, but as we review the GLA, we must state the criteria that determine whether we move into other sectors and industries. It is clear that we must overcome the anomalies of gangmasters being found guilty of malpractice in one area, and then setting up camp to exploit workers in another. What came out of discussions with staff on the ground and other organisations is that there are real difficulties in securing adequate prosecutions. We need to look at the GLA’s powers of investigation and its ability to prosecute.
My third point is about staffing resources and location. I agree with my hon. Friend the Member for Edinburgh South regarding location, that it does not matter which Department, as long as it does not go to a Department that does not give it sufficient priority. That is the anxiety about moving into the Department for Business, Innovation and Skills. There has been some argument about the merger of the GLA with the Employment Agency Standards Inspectorate. The worry about that is that that is an advisory body; it is not an enforcement and licensing authority. A merger of that sort, undermining the GLA’s licensing and enforcement powers, would be severely detrimental. It would certainly contradict the original intentions of the legislation. That is why there is a protection to keep it in the Department for Environment, Food and Rural Affairs, and why there is anxiety about any lessening of its role as a licensing authority.
There is also an issue about staffing and resources. The GLA, like every other Government body, has been subject to cuts, staffing freezes and so on. We have to be careful that the staffing cuts made so far or threatened in the future do not undermine the role of the GLA. I would welcome the Minister’s looking at that, so that the organisation is adequately staffed.
Finally, I want to commend the staff and management of the GLA for their excellent work. They have outlined some horrendous examples of gangmasters’ operations in this country. They have tackled them and won the support of employers and trade unions alike.
I congratulate my hon. Friend the Member for Edinburgh South (Ian Murray) on securing this important debate. I am concerned that, almost eight years on, we are still talking about the threat of the GLA legislation rights being diluted. That gives me serious cause for concern and I think we need to move forward.
I thank the staff at the GLA—in particular, the former chairman Paul Whitehouse, who got the agency up and running and hit the ground running. He has certainly done a very efficient job. I also thank the National Farmers Union. A strange coalition of trade unions came together to fight and organise for a GLA. I think that it was the first time that the TUC and the NFU have campaigned on the same side. The Transport and General Workers Union, as it was known then, was at the heart of the campaign, under its then national secretary, now my hon. Friend the Member for Birmingham, Erdington (Jack Dromey), who helped drive the legislation through.
The legal gangmasters also played an important role in introducing the legislation, as did the legal employment agencies that were right behind it from the start. There was cross-party support from Conservatives, Liberals, Labour and so on. That was extremely important. Last, but perhaps not least, we eventually managed to convince the major retailers that it was to their benefit to have some credible employment legislation and not to exploit farmers, as they were doing at that time. Eventually, they did come on board.
In practical terms, my contribution to the debate on migration and employment rights has been to take through Parliament the private Member’s Bill that became the Gangmasters (Licensing) Act 2004. I would like to run briefly through the main points of the Act, before I highlight some of the challenges that lie ahead in ensuring that the Act does exactly what it says on the tin and why it must be retained.
The Act introduced a licensing, registration and auditing scheme for the providers of agricultural and horticultural work, shellfish-gathering and in the food-processing and packaging industries. Many people think the Act was drafted as a response to the Morecambe Bay tragedy. That is not factually correct; it was drafted before that tragic event. However, the introduction of the Bill stands testimony, in memory of those poor Chinese people who died. That tragedy was the catalyst that made the Government of the time accept the Bill.
The Bill was drafted as a response to the deregulation that led to the loss of so many lives on the sands of Morecambe Bay. Years of deregulation had left rogue operators beyond the reach of the law and vulnerable workers, especially migrant workers, beyond the protection of the law. The Act was therefore designed to regulate the activities of gangmasters, to drive the rogues out of business, put the criminals behind bars and stop the exploitation of migrant and indigenous workers.
I will quickly walk through the details of the Act to show how it has delivered on its key objectives. First, we have always argued for the widest possible scope. That involves closing down any loopholes or rat runs through which rogue gangmasters might evade the law or escape licensing. The Act applies to the whole UK and, as I said, covers agricultural and horticultural work, shellfish-gathering and the processing or packaging of any products derived from those industries. It defines a gangmaster as anyone employing, supplying or supervising a worker in those sectors. It also applies to gangmasters, whether based in the UK or offshore, and all subcontractors. It also covers employment agencies and employment businesses if they operate in the sectors covered by the Act.
Secondly, we have always argued for a robust and effective body to regulate gangmasters and enforce the licence conditions. The Act set up the GLA, chaired by former Chief Constable Paul Whitehouse, and run by a board of key community and industry stakeholders, from Departments such as the Department for Environment, Food and Rural Affairs, the Department for Work and Pensions and the Home Office, and from enforcement agencies such as the Inland Revenue. It set licence conditions and the licence fee and established a public register of licensed gangmasters. It also has the ability to carry out investigations of abuse by gangmasters and the power proactively to enforce the licence conditions, with a line of accountability leading from the GLA, through the Secretary of State to Parliament.
Thirdly, the Act provides for effective enforcement by creating offences that will help to bring about a real culture change in the industry. The offences are operating without a licence, obtaining or possessing a false licence, using an unlicensed gangmaster and obstructing an enforcement officer. The Act also amends the Proceeds of Crime Act 2002, so that the assets of convicted gangmasters can be seized, and it also amends the Police and Criminal Evidence Act 1984 to make operating without a licence and possession of a false licence arrestable offences.
The Act carries penalties with real deterrent value: 12 months in prison for operating without a licence or possessing a false licence; up to two years’ imprisonment for a second offence; and up to 10 years’ imprisonment for a third offence. Out of the 30 sections of the Act, section 26 may be the most important in protecting migrant workers:
“A person is not prevented from being a worker for the purposes of this Act by reason of the fact that he [or she] has no right to be, or to work, in the United Kingdom.”
In other words, regardless of whether a person is regular or irregular, documented or undocumented, indigenous or migrant, if they work in the areas covered by the Act, they are legal workers.
Not only are people protected by the conditions attached to the gangmasters licence, but they are also entitled to the rights and protections offered by UK employment law. Under the Act, there is no such thing as an illegal worker—a worker is a worker is a worker—and that is a huge advance in the rights of migrant workers in this country. It is also an important step on the road to building a just and humane system of managed migration.
That is what the Act does and how it works. However, getting an Act on to the statute book is not the end but rather the beginning of the process. If this country is to prosper economically, socially and culturally, we must have a just, humane and well-managed migration policy. A key ingredient of such a policy must be the opening up of legal routes for migration by ensuring that every migrant worker who comes to the country can earn a decent living in well-regulated, safe jobs that are free from exploitation. The Gangmasters (Licensing) Act 2004 is legal proof that we have the political will to do that in the UK. We do not have to let vulnerable migrant workers fall prey to criminals who run the black economy, and that is not only my opinion, but that of legal businesses that operate in the industry.
I am conscious of the time, Mr Brady, and that other hon. Members wish to speak. I will therefore conclude by saying that there is an overwhelming case for the Act to be extended, starting with the construction industry—my hon. Friend the Member for Midlothian (Mr Hamilton) spoke about the problems faced by legal employers in that area. There is also an argument that exploitation takes place in the service industry, and many of the main hotels in the country will be staffed by illegal migrants or people who have been organised by gangmasters. There is therefore an overwhelming case, not only in the construction industry but also in the service sector, that if we are to be a decent country that treats people with respect, the Act should be extended to other industries.
It is a pleasure to serve under your chairmanship, Mr Brady, and I pay tribute to my hon. Friend the Member for Edinburgh South (Ian Murray) for initiating this debate.
I want to tell a story about what happened in February 2008. Five years after the Morecambe bay tragedy, a commemorative event was organised by the Chinese community in London. Given my involvement in the Gangmasters (Licensing) Bill and its passage into law, I was asked to attend. Two young Chinese women read out letters from relatives of those who had died at Morecambe bay. I do not mind admitting that I, together with everyone else, was in tears as we heard heartbreaking stories of Chinese workers who had come to build a new life in Britain, ringing home on their mobile phones. One story in particular always sticks in my mind. The daughter said: “He was weeping. He asked me to quickly get his mother and his wife. He wanted to say farewell because the water was lapping at his chest. He knew that there was no way out and that he was about to die.”
My hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) did the cause of social justice in Britain an outstanding service by taking through the Bill, and he is right to say that its origins predated Morecambe bay. However, the appalling tragedy of February 2003 brought together the country, all political parties, communities and the industry, to ensure that never again would we have a Morecambe bay tragedy. There was a remarkable coalition of support from Plough to Plate and the National Farmers Union to the supermarkets, and there was also a remarkable all-party coalition. I remember appearing on many platforms with my hon. Friend the Member for Paisley and Renfrewshire North and with Gillian Shephard, who was then a Member of Parliament and spoke in support of the Bill.
At the time, I was deputy general secretary of the Transport and General Workers Union, and I saw an utter determination across party politics and throughout the industry to end modern day slavery and ensure the fair treatment of workers and fair competition. There were honourable gangmasters such as Zad Padda, who spoke out and complained bitterly about how difficult it was to be a reputable gangmaster in what he described as a jungle. Workers were not only treated unfairly, but reputable gangmasters were undercut. The legislation sought to reassure decent farmers that they were using reputable gangmasters and assure shoppers in supermarkets that the goods they were buying were not the product of modern day slavery. It was the most complex private Member’s Bill in 30 years, but it became law.
[Jim Dobbin in the Chair]
I was privileged to be asked by Members from across the parties, and by the industry, together with the then president of the National Farmers Union, Tim Bennett, to appoint the first chairman of the Gangmasters Licensing Authority, Paul Whitehouse. He is a remarkable man who provided outstanding leadership in setting up what was, without doubt, the most effective of the enforcement agencies. It was governed by a board that brought together the other enforcement agencies and the totality of the industry.
The track record of the Gangmasters Licensing Authority is remarkable. The Hampton review pointed out that it has been impressive given its size, and indeed it has. Its achievements in raising standards throughout agriculture and fisheries were welcomed by the overwhelming majority of gangmasters, including the Association of Labour Providers. The authority has rightly driven rogues out of the industry, and recovered millions of pounds for the public purse, including by combating tax avoidance.
The Equality and Human Rights Commission was right to say that the Gangmasters Licensing Authority is the most effective of the enforcement agencies. Its approach to raising standards has been positive and underpinned by the unmistakable message that has been sent to rogue gangmasters and disreputable farmers—there are some—that if they break the law, penalties will be rigorously enforced.
If the Gangmasters Licensing Authority was powerful in the past, it is all the more powerful now because of the issues that it is tackling, which include labour and human trafficking. It works in close consultation with agencies that range from the Home Office to the police. Given the reasons why the GLA was set up, its success and the issues that it now tackles, it seems extraordinary that we should need such a debate because of the red tape review. We should start by celebrating the success of a remarkable organisation and ensure that it has continuing resources to do its job. We should not debate scaling back the Gangmasters Licensing Authority, but consider how we can make it yet more effective and extend its powers and scope.
I take the point that such decisions should be evidence-based. If we consider the evidence, however, there is a powerful case for extending the authority of the GLA into the construction industry. Evidence suggests that the same gangmasters found in agriculture and fisheries also operate in construction. Powers, including the ability to impose civil penalties, should make it easier for the GLA to act against disreputable gangmasters and recover moneys for the public purse. That is the debate that we should be having; we should not have to defend the GLA in the way that I am doing, albeit proudly. I therefore hope that the Government will seriously reflect on the red tape review and put beyond doubt any question mark over the future of the GLA.
I suppose that it is right and responsible that we always check red tape. That is being done through the red tape challenge, the red tape review or whatever it is called. However, I am not aware of a single employer, during the time that we were negotiating, raising objections to the Gangmasters (Licensing) Act 2004. Perhaps through my hon. Friend, I can ask the Minister whether there is any evidence of a single employer who has asked for the 2004 Act to be rescinded or for the authority to be merged into some obscure department.
My hon. Friend makes a very powerful point. I remember a meeting in the House during the passage of the Bill that he addressed. I chaired the meeting. Sitting to my left was Gillian Shephard. Sitting to my right was the president of the National Farmers Union. Sitting to his right were two senior chief executives of two of the major supermarkets. Sitting to Gillian Shephard’s left were two gangmasters. It was a remarkable meeting. All of them were saying the same thing—the time had come to tackle what was a jungle, characterised by serious exploitation, because it shamed our society, and together we were determined to act to end that modern-day slavery.
The debate should be about considering how we make an outstanding organisation yet more effective, tackling exploitation wherever there is evidence of it, including in other sectors, and following the evidence into those sectors—the case in relation to construction is particularly powerful.
I will conclude by saying—this is not aimed at the Minister here today—that I have sometimes been involved in debates with Ministers who, when the word “regulation” is mentioned, hold up a clove of garlic in one hand and a cross in the other. Unashamedly, this debate is about regulation, but this regulation is right. It is effective. It tackles extreme exploitation. Ultimately, the debate is about what kind of society we want to live in. If what happened at Morecambe bay shamed Britain, there should be an utter determination to say, “Never, ever again.”
I will not take up much time, Mr Dobbin. I did not intend to speak, because the previous contributions were so good, but I would like to make one or two points. We all come to the House with our own experiences from the lives that we led before becoming Members of Parliament. That is one of the characteristics that is strong in Parliament. I came here with nearly 20 years’ experience as a coal miner. The comparisons between the mining industry and the construction industry are stark. They are very similar, in that the numbers of deaths and injuries in each are extremely high. Like my hon. Friends the Members for Birmingham, Erdington (Jack Dromey) and for Paisley and Renfrewshire North (Jim Sheridan), who spoke before me, I do not lean away from regulation. Regulation saves lives in many areas, and the construction industry is one of the areas that I believe is very important.
I take the point made by my hon. Friend the Member for Edinburgh South (Ian Murray), who initiated the debate, that the GLA should follow the evidence that comes forward. I will just make one or two observations. When I was unable to get my private Member’s Bill through—technically, it is still there, but I think that I am about 120th or so in the list—among the examples that I intended to raise was Pure Recruitment Solutions, based in Glasgow. Its licence was revoked in 2008. However, the company still operates and provides labour to a number of sectors, one of which is construction. The same is true of Prestige Recruitment Ltd. Its licence was revoked in 2007, but it still operates in a number of sectors, including construction. It is also true of Victor Wolf Ltd, which lost its licence in January of last year, and of ASAP Recruitment, which lost its licence the year before. It still works in various sectors, but not in agriculture.
The fact is that we close companies down in one sector and they re-establish themselves in another. I refer to construction unashamedly, because I strongly believe that the number of deaths and serious accidents in the construction industry can be reduced if regulation is applied. The regulation is supported by the representatives of the workers and by the honest employers in the construction industry. I meet them regularly, as other hon. Members must. People can go round the businesses in my area, where the building sites and so on are. Subcontractors are, by nature, local firms. However, in many cases, the subcontractors are being squeezed out of the market simply because labour is being brought in from other places. Bed and breakfast is included for those workers; their board and so on is included.
I remember my father telling me about the situation in the mining village of Newtongrange. Images of it can be seen in the Scottish mining museum. I am talking about a time just before the second world war. A person called Mungo Mackay owned all the houses in Newtongrange. He was also the coal owner. He gave the miners a rise and then put the price of bread up in the shops and put the rent up. It was a case of giving with one hand and taking away with the other.
The people who are being exploited today are the foreign workers who come in, but the situation is also completely unfair to local employers. It is about time that we recognised that if we want to make progress in this country and create an environment that is worth working in, we must ensure that the honest employers are protected and protect the workers at the same time.
I wanted to make one or two points, because the 2004 Act is under threat. We should be looking at extending the Act, not reducing it. We should be ensuring that we protect British workers. Disasters happen because of a sequence of events. I fear that one of these days there will be a disaster in the construction industry and then people will be concerned. I was part of the Bill that went through Parliament; my hon. Friend the Member for Paisley and Renfrewshire North allowed my name to go down. I question whether the Bill would have been able to go through if the disaster in Morecambe bay had not happened. The reason why it received support across the board was the disaster that happened at that time. If it had not happened, there might have been difficulties in getting the Bill through. I do not want the same to happen in the construction industry. There are deaths and serious accidents in the construction industry on a regular basis. The numbers will grow if employers are unregulated. They will exploit that avenue. We should not be allowing that to happen.
In the run-up to the Olympics in Athens, many lives were lost on the building sites. In the run-up to the Olympics in London, no such event or no event of such a size has taken place. Does that not help the argument that regulation on British building sites is at any rate better, if not good enough?
There were a number of reasons for that. I can give the example of the headquarters of the Royal Bank of Scotland—admittedly, that is not the best subject in the world to be talking about at present. Only one accident happened there, and the reason why only one accident happened was that at the beginning the contractor who got the contract sat down with the work force and the trade union movement and agreed with all the subcontractors a strategy whereby accidents were unacceptable. The problem is that very few employers of that magnitude take that view. That employer did it, and better than that, it was able to prove that the contract came in under budget and under time.
Let me contrast that with the Scottish Parliament. The Bovis company was running things at the Scottish Parliament. If someone walked on to the Scottish Parliament building site, they would hardly find an English-speaking worker, yet the signs were all in English. They had to go to serious classes and there were a number of accidents at the Scottish Parliament.
There are good employers and there are bad employers. I do not criticise all employers. However, if we un-regulate or do not regulate and employers recognise that there is a gap, they will go to that gap.
I will just add this, Mr Dobbin. The other side of the coin is that every serious accident is one step away from a death. It should be recognised that the number of deaths could increase quite dramatically. I am an ex-miner. I recognise that disasters happen because of a sequence of events. I do not want such a sequence of events to happen in the construction industry, and one way of ensuring that it does not is by telling bad employers, “You’re not welcome.”
I am pleased to speak in this timely debate. I thank all hon. Members for their contributions to it, and I particularly thank my hon. Friend the Member for Edinburgh South (Ian Murray) for introducing it. The red tape review is going on, and the Minister will have taken note of the passion and expertise among Opposition Members, who have spoken strongly of the support across parties and across civic society for the introduction of the original legislation, and I am sure that that support remains. He will have taken note of the genuine ambition that he should ensure that there is no diminution, weakening or dilution of the GLA as currently structured, and that, as my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) said, the licensing regime’s proactive enforcement is not watered down.
We have had a good debate about where we go from here. That has been the nature of the debate; we are not trying to find the be-all and end-all solution. I hope officials and the Minister, in carrying out his departmental responsibilities and in his wider discussions across Whitehall, will take some of our messages away with them.
My hon. Friend the Member for Edinburgh South made an all-encompassing and powerful contribution. He put the case exceptionally well, and I will come back in a moment to some of his points. My hon. Friend the Member for Hayes and Harlington (John McDonnell) referred to his role as chair of the PCS union group; I have previously engaged with him in that role. I commend him on his work, and on the constructive way in which he has always represented the interests of PCS union members. As my hon. Friend has shown, they can make a contribution to ensuring that we have better workplaces and better ways of working.
My hon. Friend referred to the criteria by which we could judge whether the GLA should move into other sectors. That is the sort of issue we need to debate. Under what circumstances, and judged against what criteria, could we say that the GLA’s great success, testified to today, could be replicated in other areas into which the evidence leads it?
My hon. Friend referred to the fact that licensing and enforcement powers are critical, wherever they are located in government. There is an active debate about what the most appropriate place is—concerns have been raised about whether the Department for Business, Innovation and Skills would be the right place—and whether the GLA’s core values would be best preserved in a Department that is simultaneously trying to drive down regulation.
The point was well made in the debate that there is good regulation as well as bad regulation. The great benefit of the way the GLA has been constructed and the way it has acted over the past few years is that it does the right thing in the right place at the right time. If hon. Members will excuse the comparison, it punches like a good Welsh bantam-weight—well above its weight. It has relatively few resources, it is very fleet of foot and it really packs a clout.
Tribute has rightly been paid to my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) for introducing the original private Member’s Bill, and for the work that he and others did to build tremendous consensus, which is sustained today. He referred to the necessity of proactive enforcement, and that is key. He put the case very well.
My hon. Friend the Member for Birmingham, Erdington, has a great background in this issue, not as a Member of Parliament, but as part of the wider civic engagement through the trade union movement. He reminded us that behind all the debates about where the GLA goes is the human tragedy that inspired it, and that necessitates its continuation in a dynamic, proactive form. He talked about support extending from plough to plate, across all parties and across society. He also said that we can look at using the model we have to end the scourge of modern slavery, which still exists.
The GLA, which was established in 2004, was designed to do a number of things. One was to establish a level playing field across industry, so that we could avoid undercutting and take out rogue operators. It was about improving the working lives of the vulnerable, and its success in doing that has been proved. It was also about assisting in the battle against criminality and human trafficking.
It is important to set out the GLA’s successes, and we heard earlier about its measurable, tangible successes. The annual report for 2010-11 showed that 845 cases of worker exploitation were identified in that year. Some 91%—that is, 78 cases—of the GLA’s intelligence-driven operations identified serious cases of non-compliance. Thirty-six cases of unlicensed activity were uncovered, and 33 licences were revoked, with 12 successful prosecutions. The case for the GLA continuing its work is therefore still crystal clear; abuses are still happening. Even with the GLA’s dynamic, fleet-of-foot approach and proactive enforcement, there are still cases out there to be pursued and prosecuted.
The GLA has had a significant wider impact because of its deliberate efforts to go after high-profile cases with a high media impact to get the message out to rogue employers that they cannot continue doing what they are doing. That has been very successful.
There has been continuing support for the GLA. When surveyed in 2008, eight out of 10 respondents said they were in favour of licensing, while seven out of 10 felt the GLA was doing a good job. Only 18% described contact with the GLA as being in any way burdensome.
In that respect, does the Minister have a view about the GLA’s role on forestry? There has been great discussion with forestry employers and unions about whether forestry needs to be retained in the remit of the GLA as currently structured. Some have put forward the view that certification means it is very difficult to find unregulated, rogue operators in the forestry regime. Does the Minister think there might not be a case for forestry remaining in the current structure? I would be interested to hear his views on the issue, and particularly what discussions he has had on it with the unions.
Let me turn to the question of whether the GLA is efficient as well as effective. There is no doubt that it is effective. As to whether it is efficient, the organisations using the GLA as an example of how to implement an efficient regulatory control framework include not only the TUC, but the Joseph Rowntree Foundation, with its research reports, the Centre for Crime and Justice Studies, Oxfam, the Wilberforce Institute for the study of Slavery and Emancipation, the International Labour Organisation, the Organisation for Security and Co-operation in Europe, the Dutch national rapporteur on trafficking and the Harvard university programme. One after the other, they line up to say that the GLA is not only effective, but efficient. It does what it does leanly and with minimal resources. If it works so well, my question to the Minister is: why would the Government tinker with it without a darn good reason?
That is before we look at the issue of where the GLA should go now. In one sense, the debate is about the future of the GLA as currently formed and in the sectors it currently looks after. In another sense, it is about where the GLA goes from here. As we have heard from hon. Members, the TUC and others believe that there is a strong case for extending the GLA licensing scheme, and the Select Committee on Home Affairs said the same in its report on the issue.
Baroness Kennedy’s report for the Equality and Human Rights Commission commented:
“Another problem is that the remit of the GLA is currently confined to the oversight of labour in the food and agricultural sectors, while exploited foreign labour may now be found in the service and construction industries as well as in care homes. In our evidence-gathering it became clear to us that there seemed to be no good reason for the vital work of the GLA not being expanded to include these other sectors and to cover other forms of contract employment and outsourced work, and that employers who used such labour should hold some responsibility for wages and conditions.”
There have been other reports, such as Oxfam’s “Turning the Tide: How to best protect workers employed by gangmasters, five years after Morecambe Bay”. We have also had the TUC’s commission on vulnerable employees and the Health and Safety Executive’s report on deaths in construction, “One Death is too Many”. They all proposed that the scope of the sectors covered by the GLA should be under consideration for extension.
Finally, I recommend that the Minister reads, if he has not done so, the report by the TUC and the Union of Construction, Allied Trades and Technicians, “The Hidden Workforce Building Britain”. One of the many examples in it concerns a UCATT investigation in July 2008, which showed that on a private finance initiative hospital site in Mansfield, workers were being paid a total of £8.80 for a complete 40-hour week. The union took the case to the employment tribunal. It was contested. The company is a large one, by the way, which carries out many large public sector contracts throughout the UK. It, of course, insisted that the workers were self-employed and did not come under the national minimum wage regulations. On and on it went. The GLA would be effective for that sort of anomaly.
The debate is a genuine one. We want the GLA to be safe in its current form, not weakened; and we want to ask what consideration is being given in government and Whitehall to extending its remit, and how that would happen. Where would that remit go, and is anything happening at the moment? There is strong support for the Minister to take the matter forward proactively, rather than simply putting it under the banner of the red tape review so that the GLA becomes diminished without our even considering its success and whether it should be taken further.
I start by paying tribute to the hon. Member for Edinburgh South (Ian Murray) for raising this important matter. I am desperate not to sound patronising; it is in the finest tradition of this House, when the Government are considering a way forward, for the Opposition—rightly—to push their view and to push the Government in the direction they want.
It has been a useful debate and a very good one, showing the passion that surrounds the issue, and reminding us that the Gangmasters Licensing Authority was created at the time of an appalling tragedy, which we must never forget. We narrowly avoided a repeat this year in the Ribble estuary when there was a bonanza—a sort of Klondike operation—for cockle-picking. Interestingly, as my hon. Friend the Member for Southport (John Pugh) said, the GLA worked well in those circumstances with the local authority, the Inshore Fisheries and Conservation Authority, the police and the Marine and Coastguard Agency to close down that activity. I deeply regret that the fishery had to be closed, but it was necessary because of the activities of certain people; in many cases it was individuals who were involved, but there was also some evidence of illegality. That is an example of the GLA working well with other agencies.
I am pleased to have a debate today about the future of the GLA. It is a body that the Department for Environment, Food and Rural Affairs sponsors because its remit is focused on agriculture and food processing. As has been mentioned, normally the Minister of State would have responded. However, today is a significant one in the farming calendar and he is attending the National Farmers Union annual conference in Birmingham. So, too, is the Secretary of State, who made a keynote speech at the conference this morning. In that speech she announced the publication of our response to the farm regulation taskforce.
As hon. Members would expect, the taskforce, which was chaired by Richard Macdonald, had a very informed view about the work of the authority and made recommendations on how the GLA might be improved. The GLA is also subject to continuing Government reviews, including one on workplace rights compliance and enforcement, and the red tape challenge, which have been mentioned by hon. Members. The review process is under way and the views that have been expressed today, very eloquently, will be considered as part of that. We have already announced, and confirmed in our response to the farm regulation taskforce, that we endorse the need for the GLA to enforce protection for vulnerable workers in the relevant sector—those who are least able to take action on their own account. I hope that that offers some reassurance to hon. Members.
I want to take up some of the points that were made, and I have already alluded to cross-agency working; we must not think that the GLA operates in a bubble. It is vital, particularly when it works in areas of high criminality and large amounts of money—where there can be criminality through the supply chain—that it should work with other agencies. That holistic approach is important. The hon. Member for Wrexham (Ian Lucas) talked in an intervention about health and safety legislation and I would link that with the point made by the hon. Member for Birmingham, Erdington (Jack Dromey) about regulation and where the Government sit on those two matters. I assure him and other hon. Members that there is no clove or garlic or cross in my hand. We are not talking about no regulation, or less regulation per se; we are talking about better regulation. We are not talking about ending health and safety legislation through any Government review or challenge. What we want is regulation that is better, more fleet of foot and less cumbersome, but also effective. We want to provide that for employers, who will hopefully, in the future, employ people who are currently unemployed; and we want it to be part of the rights of workers, wherever they come from.
We will continue to look at what more the GLA needs to do to tackle non-compliant high-risk operators while also reducing unnecessary burdens on those who are compliant. Those are complementary and mutually reinforcing goals, which we are keen to bring about. We are actively looking at what needs to be done to ensure that they happen. We are not—with respect to the GLA and employment law more widely—removing essential protections for vulnerable workers. What we are doing is about ensuring that there is a legislative framework that safeguards workers’ rights while reducing onerous and unnecessary demands on business. I hope that hon. Members understand that. That is surely an objective we all can, and should, share.
It is also important that the GLA should continue to be supported by industry, including by retailers who work with the authority because they want to maximise assurance about the proper working of the supply chain. I entirely take the point that was raised by hon. Members about good farmers, employers and businesses being disadvantaged by those who act illegally. It is important that we understand that. The GLA should also be supported by labour providers and other employers, who need to be able to operate on a level playing field, where good employers are not undercut by those who seek to gain a competitive advantage by flouting the law and taking advantage of their workers.
I am happy to recognise that the GLA is widely regarded in many circles as having brought about significant improvements to the treatment of the most vulnerable workers in the areas it regulates. I join the hon. Member for Hayes and Harlington (John McDonnell) in paying tribute to the staff of the GLA, and to those who were at its birth and campaigned for it. Often the workers about whom we are concerned share a number of common factors: they have no fixed place of work; they are located in rural and less accessible settings; they are undocumented and often unsupervised labour; they are low-skilled migrant workers with little or no working knowledge of English, and accommodation or transport is provided as part of their employment. However, the GLA’s experience of operating under the terms of the Gangmasters (Licensing) Act 2004 suggests that there is room for a number of improvements. It is clear, for example, that there are areas that it covers that are dominated not by the presence of vulnerable workers who are at risk, but by skilled workers who are articulate and more than capable of enforcing their own employment rights.
I am conscious of the time, and I want to get on to the point about the construction industry, if the hon. Gentleman will forgive me.
The issue I have just outlined is one of those that we want to look at in more detail as part of the ongoing red tape challenge process. We want to come forward with proposals on it in due course. Building on the successes it has already had in improving its operations, the GLA is running its own pilot project in the forestry sector, designed to apply a light-touch enforcement approach. To answer the point made by the hon. Member for Ogmore (Huw Irranca-Davies), the forestry regulation taskforce will report shortly, and make some recommendations, which will no doubt be of great interest to him.
There was some talk in the debate about the construction industry, which is obviously not an area covered by my Department. However, the industry has made significant improvements in the past 10 years in the number of serious accidents and fatalities. I cannot say that about agriculture, which is the industry I come from. I am not proud of that. I am happy to debate the issue when we have more time, but the Government are considering the issue of enforcement as a whole, across Government. No doubt the statistics will be part of that. We are not talking just about safety in the sense of health and the number of fatalities in an industry, but about exploitation, which is more complex and requires a more nuanced approach. There is a lack of hard evidence about employment abuses in construction. It does not feature in the Low Pay Commission’s top 12 low pay sectors. According to data from the annual survey of hours and earnings, only 0.7% of construction workers were paid at the national minimum wage rate in April 2009. Pay is sometimes below union-negotiated rates but above the minimum and not illegal. The issue then is not about extending the scope of the GLA—
The purpose of this short debate is to use the force of argument to put further pressure on the Government to abandon their policy of taking child benefit away from children who have a parent who is a higher rate taxpayer. I also wish to address the alternative approaches if the Government wish to raise even more money from higher rate taxpayers.
Last Thursday, the lead in The Daily Telegraph was, “Penalty for paying off student loan early is lifted.” The following words were attributed to a Downing street source:
“This is hopefully good news for tens of thousands of families, as well as many Conservative MPs who had raised concerns about the penalties.”
I congratulate and thank the Prime Minister for having responded to those concerns, which I and many others had expressed on that issue. I hope a similar response will be forthcoming to the even greater and more widespread concerns that are the subject of this short debate.
I recognise that a substantive response may have to wait until the Chancellor’s Budget speech next month. I can assure him that all MPs will be raising their papers if he is able to use similar phraseology about good news for families and Conservative MPs. One essential difference between the two issues is that the removal of child benefit from higher rate taxpayers is something that concerns many more MPs, not just Conservative MPs but MPs right across the house. Many more families are affected as well—anything between 1.5 million and 1.8 million families with, collectively, about 3 million children.
There are relatively few political issues on which, over the generations, there has been a cross-party consensus. One issue is the support for the principle of a universal, non-taxable cash payment for families with children. That is now known as child benefit, which was initially introduced in 1977. Child benefit replaced child tax allowances, which dated back to 1909, and family allowances, which were introduced following the Beveridge report in 1946.
Beveridge regarded a universal system of children’s allowances as a fundamental plank of the welfare state, providing
“help to parents in meeting their responsibilities, and as an acceptance of new responsibilities by the community.”
Beveridge did not support the means-testing of children’s allowances any more than he supported means-testing for access to NHS services.
When child benefit was introduced by the Labour Government, it enjoyed all-party support. Indeed, its introduction proceeded despite the desperate financial crisis at that time, in 1976-77, when this country was under the cosh of the IMF—the IMF was effectively running the Treasury. No politician at that time made the argument that the Chancellor of the Exchequer did in the House on 20 October 2010. He said:
“The debts of the last Labour Government, and the need to ensure that the better-off in society also make a fair contribution, make this choice”—
the removal of child benefit for families with a higher rate taxpayer—
“unavoidable.”—[Official Report, 20 October 2010; Vol. 516, c. 959.]
We have afforded universal benefits for children in families from 1976 to the present day. The state has grown in size since then. Why are we talking about removing this universal benefit at this stage? In my submission, it is avoidable, and must be avoided.
To emphasise just how far the Government are now proposing to go to destroy the previous consensus, it is worth noting that the Child Poverty Action Group, which supports universal child benefit, says:
“Those with children have higher costs than those without and they need additional support at whatever level of income they live on.”
Margaret Thatcher’s Government described child benefit as simple, well understood and popular. Indeed, it has a take-up rate of over 97%.
There was no hint at the last general election that the consensus would be broken. Conservative party policy was set in stone. Indeed, the Prime Minister, as Leader of the Opposition, made this boast:
“I want the next Government to be the most family friendly Government we’ve ever had in this country.”
At a public meeting in Bolton on 5 March 2010, he said that he would not “change child benefit”. He was undoubtedly taking a leaf out of the then shadow Chancellor’s book who addressed the matter at the Conservative party conference on 6 October 2009. He said:
“We will preserve child benefit”.
The early decisions of the coalition Government announced in the June 2010 Budget were consistent with those promises. In his Budget speech, the Chancellor said that
“we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.”—[Official Report, 22 June 2010; Vol. 512, c. 173.]
I will not give way. I want to put my points on record, and it is a very short debate. If I have time later on, I will take some interventions.
The Prime Minister and his predecessors have so frequently professed their support for “hard-working families” that the expression has become a political cliché. How extraordinary, therefore, that the Government are still persisting with a policy that will undermine those hard-working families, especially those families in the squeezed middle. What families could be more hard working than those 55,000 or 60,000 single parent families where the lone parent works long hours in a demanding job to earn more than £43,000 a year, thereby qualifying as a higher rate taxpayer and a victim of this policy? Such families also often have very high child care costs. In the league table of hard-working families, they are closely followed by two-parent families where the breadwinner supports a spouse who cannot work, whether because of disability, long-term sickness or the need to support a child who is disabled or sick.
A family in the last category came to my constituency surgery in autumn 2010 and impressed on me the utter folly of the Government’s proposals. I then engaged in correspondence with the Treasury. On 18 January 2011, the Exchequer Secretary responded to my letter of 16 October—the fact that it took three months to get a response indicates something—in which I had specifically asked the Chancellor about the impact of his policy on those in receipt of carer’s allowance. My constituent’s wife earns slightly above the higher rate threshold, while he stays at home to look after his two children, one of whom has Down’s syndrome. The point that I wished the Chancellor to address was my constituents’ concern that in households where, through circumstance rather than choice, only one parent is able to work, the higher rate tax payer is normally compensating for the lack of earning capacity of the other. As my constituents said:
“This penalises families of those who live the true spirit of social responsibility each and every day.”
After a three-month delay, I received my reply; I had hoped for a better response. It merely asserted that the policy is tough but fair and that affected families are within the top 20% of the income distribution of all families. I immediately wrote back asking my hon. Friend the Exchequer Secretary to address specifically how the impact of the proposals on families such as that of my constituent could be regarded as fair. I am sorry to say that it was another three months—on 12 April—before my hon. Friend replied. He said:
“Inevitably, introducing a simple change to a universal system can create some difficult cases and it would unfortunately be difficult to create an exception for families where one partner is a carer.”
He repeated the assertion that the Government believed the policy to be fair, but how can it be fair to target such families, by asking them to make a greater contribution to reducing the deficit, while exempting families with earnings of up to £84,000 a year that are spread equally between both parents?
Fewer than one in 10 of the families from whom child benefit is to be taken away contain two higher rate taxpayers; I think that the number is 130,000 families. Almost all the remainder, therefore, will or may be in a weaker position to bear such a loss of benefit than those households with two persons earning up to £84,000 a year between them.
When I corresponded with the Treasury, the threshold for higher rate tax was £43,876. Since then, despite rising inflation—there has been a 3.1% increase in the retail prices index in the last year—the starting rate for higher rate tax has been reduced by £1,400, while the threshold for 2013-14 is still unspecified. Therefore, even more families will be affected by this change than was originally envisaged.
The policy that we are discussing today has never been properly thought through. By all accounts, it was included in the Chancellor’s speech at the 2010 party conference at the last minute, after an earlier plan to announce the withdrawal of child benefit from all children over the age of 16 was scrapped. That is why the early estimate of the contribution that this policy will make towards reducing the deficit was £1 billion. That early estimate was wrong, but in typical Treasury fashion the Government now say that anyone who opposes the withdrawal of child benefit must come up with an alternative means of producing £2.4 billion a year to go towards deficit reduction.
It is worth reminding ourselves that families are already contributing to the reduction of the deficit through the freezing of child benefit. That policy alone will save about £1 billion in 2013-14 and the total contribution that it will make during the three-year freeze is about £3 billion. In addition, many of the families who are affected by withdrawal of child benefit will lose £550 a year in basic child tax credit from this April onwards.
In responding to this debate, I expect the Minister to argue that he is in pre-Budget purdah and that he will treat what I have said as a representation, but I want him to say specifically why the Government’s proposal to increase the tax burden on hard-working families is not being defined as a tax increase but as an expenditure reduction. We know that the Chancellor has always been keen to present his deficit reduction plan in terms of achieving a fair balance between Government expenditure reductions and tax increases. Without getting into an argument about the extent to which the original target of expenditure reductions has been missed, I must ask: is it not disingenuous to regard the withdrawal of child benefit in terms other than a tax increase? After all, the antecedents of child benefit lie in the concept that there should be a higher tax allowance for those with dependent children than for those without dependent children. In essence, the Government’s policy is to remove that tax allowance and thereby increase the tax burden.
My hon. Friend makes a powerful case. Does he share my inclination to believe that the Government might be able to extricate themselves from the set of powerful problems that he describes through some combination of a transferrable child tax allowance and the universal credit system?
My hon. Friend makes a really good point. Many of us thought, because we went into a general election committed to having transferrable tax allowances and to promoting family values, that those allowances would be implemented. Although there was provision in the coalition agreement for the Liberal Democrats to abstain or vote against those allowances, it was expected that the Conservatives would introduce them and that the House would have an opportunity to judge them.
A lot of the difficulties that have been brought about as a result of the analysis of the proposal to remove child benefit come from the fact that we have abandoned the idea of using the tax system to say, “Well, if you’ve got two equivalent families, one with three or four children and the other without any children then the costs of the family with children must be greater than those of the family without children, and therefore there should be a greater tax allowance for the family with children than for the family without children.” That is the basic principle. We could have restored it or indeed enhanced it by having transferrable tax allowances, which was a commitment in our manifesto.
What depresses me, however, is that in the 16 months since October 2010, when the original proposal was made by the Chancellor, nothing seems to have been done to take forward those issues and to try to find a fair solution. Obviously, implementing something like transferrable tax allowances would take some time; we would need to have draft legislation and any such allowances probably could not be implemented by January 2013, when the Government have committed themselves to impose this burden on higher rate taxpaying families.
The Government have missed a big opportunity on transferrable tax allowances, and I hope that my hon. Friend the Minister will have time to explain why that happened—because, as I have said, introducing those allowances was a Government policy that had been announced—and also why the Government recently reconfirmed that they have no intention whatsoever of proceeding with transferrable tax allowances.
I will give my hon. Friend the Minister some time to respond to this debate, but I should like to make some other points. I think that the Liberal Democrats are rather in favour of the policy of withdrawing child benefit from higher rate taxpayers, because they want to remove as many tax benefits from higher rate taxpayers as possible. But of course the Liberal Democrats would also like that policy to be dressed up as an expenditure reduction, because that expenditure reduction would be balanced with a tax increase and therefore there could be an additional tax increase on top of removing child benefit from higher rate taxpayers. That would also take the pressure off finding genuine reductions in expenditure, which would be achieved by reducing the size of the state.
I hope that my hon. Friend the Minister can address that issue in his response to the debate, because there is a real definitional problem here. The way that the Government are proposing to introduce this tax penalty on higher rate taxpayers with children is effectively to require the family to declare whether or not the taxpayer or their partner are in receipt of child benefit, and then the taxpayer would be taxed 100% on that child benefit. Surely, that is a tax increase rather than an expenditure reduction.
As a contribution to this debate, the Institute for Fiscal Studies has produced a devastating but none the less very useful report, and I hope that some of the issues identified in that report, which my hon. Friend the Minister will probably have been studying closely since it was published about a fortnight ago, will be addressed in his response to this debate.
Why do the Government want higher rate taxpayers with children to make a greater contribution towards deficit reduction than higher rate taxpayers without children? Surely, it would be fairer if all higher rate taxpayers contributed equally towards deficit reduction. Any changes in the higher rate tax band needed to achieve that aim would be simple, fair, easy to collect and difficult to avoid. In other words, they would meet all the original objectives of a good tax, unlike the Government’s current proposals, which, as I have said, have been the subject of withering criticism from the IFS. In its report, the IFS estimates that £90 million of the supposed yield from this new policy would be uncollectable, that £60 million would be lost through non-compliance, that £280 million would leak through what is described as tax planning and that, in addition, there would be administrative costs and a need for extra Inland Revenue staff. There has not been a defined estimate of those additional administrative and staff costs, but a rough estimate of at least £130 million has been proposed.
Could anyone think of a more absurd and ludicrous policy to introduce than this one? It increases the complexity of the tax system; it adds to the demand for more civil servants in Her Majesty’s Revenue and Customs to examine the changes that will be made; it encourages people to fiddle their arrangements; and it exacerbates the problem of what happens when people live together during a year without declaring it. The Government were committed to reducing the couple penalty, but this proposal will actually exacerbate it. I do not think that there is anything commendable or sensible about this policy, and there are alternatives to it.
I asked the Library if it would be possible to come up with an alternative. I do not take this view myself, but if one thought that the way to deal with this issue was to say, “If there are two higher rate taxpayers in a family, they should forfeit their child benefit”, that change would affect only 130,000 families. It would not generate much income, but it would apply to those 130,000 families who definitely have a joint income that is greater than the £84,000 to which I referred earlier.
I asked the expert in the Library whether it would be possible to have a system whereby people could claim relief against loss of child benefit by certifying that the total gross income of their household did not exceed £85,000. The answer was that, in principle, that would be possible, but that it would require joint filing for households with at least one higher rate taxpayer. One presumes that having made a return at the end of the year showing total joint income was no more than £85,000, child benefit would not be withdrawn from that household.
There are ways of generating some income in the context of this policy, but I do not think it is worth the candle, because it cuts across the dearly and long-held principle that we should have a universal benefit for families with children.
Thank you, Mr Dobbin. It is a great pleasure to serve under your chairmanship. I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on securing the debate.
Government policy towards higher rate taxpayers and welfare go to the very heart of the challenge to tackle the tough economic circumstances that we face today. It is right and fair that we support hard-working families through these difficult times, and it is vital to ensure that all parts of society contribute to tackling the economic legacy that the Government have inherited.
When we came to government, we had been through the deepest recession since the war. We inherited an economy crippled by the biggest financial crisis in almost 100 years and the largest budget deficit in our modern history. Tackling that deficit is the vital precondition of sustainable growth. Only by tackling the deficit can we provide the certainty, stability and low interest rates that are critical to our recovery and renewing our prosperity across the country. Cutting the deficit is a vital precondition of growth. It has meant that we have had to make some very difficult choices to tackle the profligacy of the previous Government and target spending where it is most effective.
The Government believe that the welfare system must remain fair and affordable while protecting the most vulnerable, and that work must pay. To achieve that, we have had to make tough decisions such as raising the state pension age to 67 between April 2026 and April 2028, not going ahead with the planned £110 above inflation increase to the child element of the child tax credit, and not uprating the couple and lone parent elements of the working tax credit in 2012-13. Those are tough decisions to make, but we have sought to make sure that they are fair across income distribution. That is why the Government have, for the first time, undertaken and published a distributional analysis of the impacts of the autumn statement 2011 and previous fiscal events.
After combining the impact of tax, tax credit and benefit and public service spending changes introduced at the autumn statement 2011 and previous fiscal events, the analysis demonstrates that the top 20% of households will make the greatest contribution towards reducing the deficit as a percentage of their income and benefits in kind from public services. It is fair that higher rate taxpayers, who are better off, make a greater contribution to those savings. We are committed to the same approach as we reform child benefits.
Let me start by saying that we fully understand how important child benefit is to millions of families across the country. For many families, it provides a vital income boost to parent income, recognising the extra costs that they face compared with non-parents. Currently, child benefit is paid to around 7.5 million people, around 95% of whom are women, in respect of 13 million children and young people. Child benefit is paid at a rate of £20.30 a week for the first child and £13.40 for each subsequent child. It is a substantial income boost to families, but it also comes at a substantial cost to the Exchequer. Child benefit already makes up around 7% of total social security and tax credits spending, and each year those spending levels rise.
Furthermore, we already pay more than £2 billion pounds a year in child benefit to higher rate taxpayers. At a time when we face constrained resources, we have to focus the resources that we have where they are needed the most.
If that is so, why was that not said by the Chancellor of the Exchequer in the June 2010 Budget? Why did he say that he was going to freeze child benefit? Why did he not say what my hon. Friend is now saying? It seems that the Government—perhaps because of the minority party in the coalition—have now shifted their ground and are reneging on a pre-election promise not to interfere with child benefit.
As I said earlier, we were conscious that we had to take difficult decisions in the run-up to the comprehensive spending review in October 2010. We had to come up with spending decisions that would enable the Government to have plans that met fiscal targets. In the process of preparing for the spending review, tough decisions had to be made. When faced with the various options, the Chancellor decided that it was necessary to look again at child benefit and to ensure that that spending was targeted as best as possible.
Given the need to target child benefit as well as possible, can the Minister tell us how much child benefit is being paid for children resident outside the United Kingdom—for instance, in Poland and Lithuania? Would it not be appropriate to tackle that issue before dealing with the 40% taxpayer?
I have a great deal of sympathy with my hon. Friend’s concern. I may or may not be able to furnish him with the numbers that he has asked for. None the less, we have looked at that issue on several occasions. He will not be surprised to learn that we are constrained by European regulations relating to social security payments, which means that we are not able to address his concern in the way that he would like. European economic area nationals can claim child benefit and tax credits as long as they meet the relevant conditions. That is the constraint, I am afraid. There is not the easy choice that he seeks.
I am conscious that I have three minutes left and I have barely begun to deal with the various points raised by my hon. Friend the Member for Christchurch, who secured this debate.
We recognise that most higher rate taxpayers are not super-rich. But, as my right hon. Friend the Chancellor has said,
“a system that taxes working people at high rates only to give it back in child benefit is very difficult to justify at a time like this.”
He went on to say:
“We simply cannot ask those earning just £15,000 or £30,000 to go on paying the child benefit of those earning £50,000 or £100,000.”
The debts of the previous Government have to be addressed. Consequently, we have had to make difficult choices. By removing child benefit from higher rate taxpayers, the Office for Budget Responsibility estimates that we will save £2.5 billion a year. The savings mean we can continue to direct child benefit support to where it is needed most, supporting millions of families, and millions of children from birth until the time when they leave full-time education at the age of 18 or even 19.
I am grateful, because I want to respond directly on that point. The Government, as stated in the coalition agreement, want to recognise marriage in the tax system. We remain committed to that and we will introduce proposals at an appropriate time, as is consistent with the coalition agreement. We remain committed to what is in the coalition agreement.
No, I mean within this Parliament, which I assume does not mean what my hon. Friend suggests.
I appreciate that there are a number of concerns about how this policy will be implemented and how it will impact on hard-working families. We have been clear that the reform needs to be as simple as possible. That is why we have sought to withdraw child benefit from households with the higher rate taxpayer and not pursue a complex means-testing regime that would require Her Majesty’s Revenue and Customs to contact 7.8 million households in receipt of child benefit.
From a customer perspective, this delivery option does not place a burden on all child benefit claimants and it limits the impact on households containing a higher rate taxpayer. The Chancellor and I will be working closely with our officials to scrutinise the available options as to how we will implement this policy and find a sensible way forward. Plans for implementation will be set out in the next few months.
I have no declarable interests relating to the sustainability of the London Olympics, other than that more than a decade ago I was the founding chair of the all-party group on the Olympics. We formed the group to encourage a then hesitant Government to bid for the Olympic games. My father was an Olympian in 1936, playing as a Scotsman for the British football team—those were the days when the Scottish Football Association had no qualms about joining the football associations of the other home nations to field a strong British team. My point is simply this: if I am critical of aspects of the 2012 games, it is not because I am or ever have been antipathetic to the Olympics; it is because I care passionately that the games in London this summer should be the best ever staged and that nothing should be allowed to bring them into disrepute.
At the start, let me make common cause with the Minister in applauding much of the work done by the Olympic Delivery Authority in achieving so much of the vision of an Olympics that respects sustainability. I praise the London Organising Committee of the Olympic Games and Paralympic Games for becoming the first games organising committee to be certified to the British standard 8901 specification for sustainability management systems for events.
I recognise that the Olympic Delivery Authority for London 2012 is creating venues, facilities and infrastructure that will leave a lasting social, economic and environmental legacy for London and the UK while minimising any other adverse impacts during the design and construction of the Olympic park, venues, infrastructure and housing. The creation of new infrastructure, sporting facilities and housing in an area currently experiencing high levels of deprivation will help to create neighbourhoods and vibrant places where people will want to live and work after the games are over. Communities are being reconnected by the building of more than 30 bridges across the waterways, railways and roads that currently divide the Olympic park area. All that is good.
The ODA has also sought to minimise carbon emissions associated with the development and to optimise efficient water use—indeed, many of the construction materials have been brought on site by barge via Prescott lock to reduce road traffic congestion. To reduce the risk of flooding in the Lea river valley, 100 hectares of new green space has been created. The ODA has worked with the construction industry to source environmentally friendly and ethically produced materials to produce a low-carbon construction footprint. Even rubbish and waste have been thought through: a contractor has been engaged specifically to compact and transport waste from site by barge, and 90% will be recycled or reused. For all that, John Armitt, the ODA’s chairman, and Dennis Hone, its chief executive, deserve Parliament’s thanks and praise. On the site itself, the ODA has spent in excess of £1.8 million cleaning up the toxic legacy of chemical contamination that blighted the area. The remediation of the site has brought the land back into public use and has been a wonderful focus to improve the environment and quality of life for people in that part of London.
What an irony, then, that this most sustainable of all Olympic games should embrace as one of its key sponsors a company whose name is inextricably linked with the worst chemical disaster in human history—a company that owns Union Carbide Corporation, which was responsible for up to 25,000 deaths that have been directly associated with the Bhopal gas tragedy in India. To this day, the company has failed to remediate the Bhopal site: the water table is now so contaminated that children in Bhopal are born with deformities at 10 times the rate elsewhere in India. In this debate, I will claim that the Dow Chemical Company, which owns Union Carbide Corporation, has failed to live up to the high corporate social responsibility standards that are supposed to characterise the Olympic movement across the globe and the London games in particular—standards that Lord Coe, the chairman of LOCOG, referred to in his evidence to the Select Committee on Culture, Media and Sport as ethical, social and environmental.
Does my hon. Friend agree that Union Carbide is different from Union Carbide India, and that Union Carbide was bought by Dow nearly 12 years after the Bhopal disaster? It would be good to clarify ownership.
I assure my hon. Friend that I will address that point later in my remarks.
The sustainable sourcing code published by LOCOG states:
“Sustainability is one of a number of core elements which together represent what value for money means to LOCOG. As a result it will place a high priority on environmental, social and ethical issues when procuring products and services for the Games. This means we want to do business with responsible suppliers and licensees; companies who treat their staff and sub-contractors well, who understand the nature of the products and materials they are supplying, and who recognise their responsibility to protect the environment and foster good relations with their local communities.”
The Minister is here today to respond to this debate on behalf of the Secretary of State, who is, after all, the chair of the Olympic Board. With reference to the sustainable sourcing code, I challenge the Minister to provide justification on three distinct points relating to the appointment of Dow Chemicals Ltd as a sponsor of the London Olympics: first, the propriety of the procurement process itself; secondly, Dow’s legal responsibility for Union Carbide and the consequences of the Bhopal tragedy, which my hon. Friend the hon. Member for Linlithgow and East Falkirk (Michael Connarty) mentioned; and thirdly, the wider ethical concerns about Dow’s practice as a company and its suitability as a sponsor.
I want to be sure that the Minister has no grounds to think that I have misled him, so I ask him to intervene on me at any stage if he thinks that I have misrepresented a fact pertaining to the case. If he does not I will assume that, although he may disagree with the conclusions I draw, he none the less accepts the facts as I have stated them.
To pick up on the hon. Gentleman’s kind invitation, I might intervene if I am so concerned, but it is also possible that I will want to reserve my remarks until the end in order to wrap them all up in one go. Therefore, if I do not intervene, it is not because I necessarily accept what he is saying. I will deal with it either then or later.
Yes indeed. I am grateful to my right hon. Friend for his intervention.
First, I will raise my concerns about the chronology, openness and transparency of the Olympic wrap procurement process. I understand that just three months after Dow was confirmed as an official partner of the International Olympic Committee, LOCOG chose the Olympic stadium wrap as one of the areas of the Olympic budget that would be cut. I accept that that was a perfectly proper response to the spending review, but reports from LOCOG at the time estimated savings from the wrap at £7 million. It was also reported at the time, by the tenacious Sunday Express journalist Ted Jeory, that the Secretary of State for Culture, Media and Sport had been informed that finding a private sector partner for the wrap was highly likely—that was in an e-mail from the Department on 16 December. We now know from Architen Landrell, a UK company based in Chepstow, that it was appointed under a tier 3 contract by Sir Robert McAlpine, the main contractor for the stadium’s construction. Architen Landrell was asked to produce eight test panels and give a final costing for the stadium wrap, which it did, at a price of approximately £1.5 million.
Two questions arise from that. Why did the Secretary of State believe it was highly likely that a private sponsor would be found for the stadium wrap? Why were the media given the figure of £7 million as the projected saving, when the actual saving was known to be only £1.5 million?
On 8 February 2011, it was reported that the tendering process for a company to sponsor the wrap would go ahead, with expressions of interest due by 18 February. That was an extraordinarily short time in which to source a major supplier. The public might consider it inconceivable that only 10 days were allowed for such a major tender, unless there had been clear and ongoing discussions with potential partners before the announcement. In a recent response to a written question to the Department, I was told that the shortest period that the Department had allowed in the previous 12 months for any tender where the contractor would be paid more than £1 million was 28 days, yet LOCOG allowed only 10 days for someone to bid to pay a sum, publicly estimated to be £7 million, to sponsor the wrap. Does the Minister think that LOCOG would have set the tender window at a mere 10 days if Dow Chemicals had not already been lined up as a sponsor?
In his letter to London assembly member Darren Johnson, Lord Coe said that the Government took the decision to ditch the wrap in order to achieve the announced saving. That prompts several further questions. What discussions did the Department, the ODA and LOCOG have about the decision to put the wrap up for sponsorship? Did the International Olympic Committee put any pressure on LOCOG to provide a niche for Dow as a sponsor of the London games? If the Government simply wanted to achieve savings in the original budget, why did they not press on with the Architen Landrell wrap, which would have shown a saving of £5.5 million against the original budget and given the project to a British company?
The ODA procurement policy on the Olympics states:
“As a public body the ODA is required to operate in the procurement framework set out by European Union Procurement Legislation and UK Regulations.”
Was that the reason why the procurement of the wrap was passed from the ODA to LOCOG—LOCOG is not a public but a private body and was therefore not obliged to follow the standard EU and UK procurement rules?
Another company, the Nottingham Textile Company, is adamant that it submitted an expression of interest before the deadline of 18 February. It heard nothing for a long time and eventually inquired why it had received no response. The company was told by LOCOG that its submission had been too late. Will the Minister undertake to check the date on which Nottingham Textile Company’s submission was received by LOCOG and whether, in fact, it was in time?
Let me be clear: I believe that the Government quite properly wish to achieve savings in the cost of the Olympic games. I also believe that Dow Chemicals was putting pressure on the IOC to find a way for it to become a key sponsor with sector-exclusive marketing rights for the London games. I believe that LOCOG wished to assist the IOC in that endeavour and therefore suggested that £7 million could be saved by taking the wrap away from Architen Landrell and procuring it under a sponsorship deal with Dow. I believe that the Government knew that a sponsorship deal was being negotiated and were content to collude with the IOC and LOCOG to facilitate a major IOC sponsor and to pretend to the public that in doing so, they were saving £7 million. In short, the procurement process was rigged in favour of Dow Chemicals. It was a sham.
I congratulate the hon. Gentleman on securing this important debate, and I agree with much of what he says. I hope he does not mind my adding that Dow Chemicals has or shares responsibility for 96 of the US’s so-called superfund toxic waste sites, which are the most polluted sites in the entire United States. That makes it one of the world’s most polluting companies. Given that the emphasis is on a green Olympic games, it is hard to imagine a less appropriate partner.
I am delighted to have spared the time to give way to the hon. Gentleman, who makes an important observation. I will come back to that in the final section of my speech.
Sadly, LOCOG is a private organisation that is not subject to the Freedom of Information Act 2000. On 18 December last year, I therefore wrote to Lord Coe, chairman of LOCOG, asking many of the above questions and many more. To date, he has not seen fit to answer them. When asked on 24 January this year in the Select Committee whether he thought it
“appropriate for London 2012 to be so closely associated with a company like Dow Chemicals”,
the Secretary of State replied:
“Obviously it is a decision for LOCOG, but it is a decision that, as a result of the controversy that we had last autumn, I looked into very carefully. After looking at it very carefully, I…wholeheartedly supported the decisions that LOCOG had taken.”
He went on to justify Dow’s involvement, saying that
“they did not own Union Carbide at the time of the Bhopal disaster in 1985”—
a point made by my hon. Friend the Member for Linlithgow and East Falkirk. In fact, it happened in 1984, but that was perhaps just a simple slip of the tongue by the Secretary of State. He also said that Dow did not own Union Carbide
“at the time of a final settlement with the Indian Government in 1989”
and added that
“that has been upheld three times in the Indian Supreme Court”—
twice, in fact—which made him confident that
“it was a very reasonable decision.”
Many commentators have found it frankly astonishing that both LOCOG and the Secretary of State seem to have taken Dow’s claims regarding those cases at face value and repeated Dow’s press lines verbatim. Surely the Secretary of State knows that when someone purchases a company, they purchase both its assets and its liabilities. Before the Minister repeats his Secretary of State’s evidence to the Select Committee, where the right hon. Gentleman opined of Bhopal:
“I do not believe that Dow were responsible and I think we should support them as a company”,
let me ask the hon. Gentleman whether he is aware that Dow’s wholly owned subsidiary, Union Carbide Corporation, is wanted by courts in India on criminal charges of culpable homicide? Because UCC is considered to be a fugitive from justice in India, and because Dow wholly owns UCC but has not produced it in court, I understand from legal advice that I have taken that that puts Dow in the position of sheltering a fugitive from justice. Does the Minister’s own legal advice concur with that?
Is the Minister aware that Dow Chemicals itself is a named respondent in public interest litigation in the Madhya Pradesh high court, seeking remediation of the abandoned Union Carbide factory site? Is he aware that Dow is a named respondent in a forthcoming curative petition in India’s supreme court that aims to address the inadequacies of the 1989 civil settlement made by Union Carbide of $470 million—a figure that equates to approximately $600 per victim? Compare that with what happened in the Gulf of Mexico and the payout that the American Government demanded of BP. By some ironic coincidence, the hearings on the petition were granted on 28 February 2011—the same day the sponsorship contract closed—by a five-judge bench that included India’s chief justice.
Union Carbide is also subject to a civil action in the southern district court of New York. The action relates to the ongoing contamination in Bhopal through chemical dumping by the company in and around the factory. Significantly, the US court accepts that that is a distinct case from the 1984 disaster and that it has not been dealt with under any pre-existing settlement. In New York, Dow’s wholly owned subsidiary UCC has pleaded that only Indian courts can order it to remediate the site; but in India, both Dow and UCC have pleaded that the Indian courts have no jurisdiction over them.
Dow has consistently claimed to the Indian authorities that Dow and UCC are independent entities and that on those grounds Dow should be held immune from prosecution in relation to the Bhopal disaster. Documents made public in The Independent by Nina Lakhani two weeks ago, however, have revealed that Dow Chemicals secretly traded through a network of intermediaries to avoid a legal ban imposed after the Bhopal tragedy on the sale of UCC products in India. The documents prove that, far from being a separate company, Dow Chemicals controlled and manipulated its wholly owned subsidiary, setting prices and setting up supply chains to secure profits for Union Carbide products that in India were illegal. As Tim Edwards from the Bhopal Medical Appeal said,
“these documents...show Dow shielding UCC and obstructing justice. If however Dow is also misrepresenting its relationship with UCC, then it is obstructing justice and shielding itself from trial. Either way, LOCOG’s insistence that Dow is a fit sponsor for Britain’s Olympics appears perverse.”
In a letter addressed to IOC President Jacques Rogge, a copy of which was sent to Lord Coe, V. K. Malhotra, the acting president of Indian Olympic Association, stressed that there were active court cases against Dow. He said:
“A false campaign has been launched by the Dow Chemicals saying that the matter has been settled. It is not correct. The case is still pending in the court and no final compensation has been made.”
Why have LOCOG and the Government chosen to believe Dow Chemicals over the acting president of the Indian Olympic Association?
Let me repeat the words of LOCOG’s sustainability code:
“This means we want to do business with responsible suppliers and licensees; companies who treat their staff and sub-contractors well, who understand the nature of the products and materials they are supplying, and who recognise their responsibility to protect the environment and foster good relations with their local communities.”
When LOCOG awarded the sponsorship contract to Dow, was it aware of the pending criminal charges for culpable homicide against Dow’s fully owned subsidiary UCC in the Bhopal criminal court? Was LOCOG aware that Dow’s fully owned subsidiary, UCC, was declared by that court as an absconder from justice as long ago as 1992, and that the company remains an absconder from justice to this day?
I am conscious of the passage of time and want to make one point en passant, in case I do not have time to cover it. The hon. Gentleman asks whether LOCOG was aware of the situation when it awarded the sponsorship contract. I am not clear whether LOCOG was aware of it. I understand that he has already asked LOCOG that question, and LOCOG is the body who can answer it. However, he should bear in mind that LOCOG did not award the sponsorship contract: it was awarded by the International Olympic Committee, not by LOCOG.
The Minister really needs to get a much better brief because the Olympic programme contract was the contract awarded by the IOC. The contract for the stadium wrap was taken away from the ODA and put to LOCOG precisely because LOCOG was in charge of sponsorship contracts. If the Minister does not know that, he does not understand the core of this debate.
I apologise to the hon. Gentleman if I have misunderstood him. When he was discussing sponsorship, I thought he was talking about becoming a sponsor of the Olympic movement. I have been using a different term and have been talking about the contract for the Olympic stadium wrap as a commercial supplier deal. If he is using the word “sponsorship” to cover both those terms, of course, I appreciate what he is saying and I will happily adjust my language to match his.
The sponsorship was tendered under a tier 3 arrangement by LOCOG, and it was the body that awarded that sponsorship contract to Dow Chemical.
Was LOCOG aware that Dow is a party to a public interest litigation suit in India concerning clean up and environmental rehabilitation of UCC’s factory site? If LOCOG was aware of those issues, how were they considered in the decision-making process on Dow’s suitability as a partner for London 2012 on ethical, social and environmental grounds? Did LOCOG seek any further legal or other advice in relation to the issues mentioned, other than that given by Dow and its representatives?
Last month, the procurement process and the Dow sponsorship deal suffered its biggest blow to date. Meredith Alexander, one of the 12 sustainability commissioners, resigned in protest over what she believes was the airbrushing of Dow out of Bhopal and into the Olympics. She has made her case as follows:
“In 2010, the International Olympic Committee appointed Dow as an international sponsor for the Games. This decision was taken in Geneva, and the commission had no ability to take a stand. Then last year, LOCOG, the London Games organiser, invited companies to tender for a major contract to provide a wrap for the main Olympic stadium. Dow won this bidding process.”
That is the point the Minister failed to appreciate. Meredith Alexander goes on:
“Many groups and individuals raised questions and finally the commission was asked to investigate. I was shocked to see that the result of our investigation was a public statement from the commission that essentially portrays Dow as a responsible company. I had been providing information about Bhopal to commission members and I was stunned that it publicly repeated Dow’s line that it bears no responsibility for Bhopal. I did everything I could to get the statement corrected or retracted. When it became apparent that this would not happen, I realised that the only way to ensure that my name was not used to justify Dow’s position was to resign.”
No, I will not. Meredith Alexander goes on:
“And the only way to ensure that the victims’ side of the story was told was to do so in public.”
“I would like to see Dow take responsibility for the Bhopal tragedy and finally ensure that real justice is achieved for the victims and the families of those who died. This would be a true Olympic legacy.”
Finally, I turn to the wider issues regarding Dow’s reputational and ethical suitability to be an Olympic partner. In relation to ethical sourcing, the Olympic Delivery Authority guidelines on procurement policy state:
“The ODA will seek to work with suppliers who have a good track record in human rights and who use goods and materials that have been produced ‘ethically’. This includes seeking suppliers who operate within the laws of their country and who do not have discriminatory practices.”
Bearing that in mind, it is difficult to see how LOCOG could justify appointing Dow as a sponsor, given the facts that were known at the time about the company and its wider regard for law and regulation. The key facts are these. In February 2007, the Securities and Exchange Commission in New York imposed a cease and desist order on Dow Chemical for its improper payment practice and improper accounting. In September 2010, Dow was blacklisted by the Indian Government for bribing officials in order to fast track licensing of the chemical Dursban, which has been found to be dangerous to human health in the USA. A report by Innovest indicates that Dow failed to disclose in statements to investors its $2 million settlement of a consumer fraud lawsuit brought by the New York State Attorney-General in 2003.
I am sure that the Member leading the debate would like to hear the Minister’s response as well, but unfortunately time is running out. If the Member who is in charge of the debate wants to get complete answers, he must take that into consideration.
Since then, earlier this month, Dow Chemical lost its bid to overturn anti-trust fines totalling in excess of €25 million imposed by the European Union for its part in colluding to fix prices of chloroprene rubber. Just last week, Dow was penalised and heavily fined for underestimating the greenhouse gas emissions from its Grangemouth plant in Scotland.
What is perhaps most incredible is that the Chairman of the Commission for a Sustainable London 2012, Shaun McCarthy, has gone on record as saying:
“LOCOG carried out its due diligence exercise with regard to reputation risk in relation to this procurement. At the time, when the bids were being considered in early 2011 LOCOG found no current media, political or NGO commentary that would give cause for concern.”
As ever, Meredith Alexander makes the best riposte. She has said:
“Even a twelve year old could have found them”.
The Minister is not a 12-year-old, and he knows that the public are not naive either. He must not reply with a speech that is long on examples of sustainability and good practice but short on answers to the questions that I have posed about Dow. To assist the Minister in preparing for the debate, I sent all the questions I would be raising to his office—[Interruption.] I did so at 3 o’clock this morning, to enable him to come to the House prepared.
Today, the Minister should have the courage to stand up and accept that Dow is not a fit and proper company to be a sponsor of the most sustainable Olympic games ever staged. If he does so, everyone would accept that although a mistake had been made, the Government have the determination to put it right. If he does not do so, he must accept that a cloud will hang over the London games. They will be tainted by a sham procurement process and a sponsor that has shown it is contemptuous of the law, defiant of regulations, willing to engage in bribery and corrupt practices, but indifferent to the continuing suffering of thousands of human beings.
Thank you, Mr Dobbin. I am, indeed, aware that I have only two minutes. I am very sad about that, because many important points have been raised and there is virtually no time to respond to them.
I was glad to hear the hon. Member for Brent North (Barry Gardiner) start his remarks by pointing out that there has been a great deal of cross-party support for the entire Olympic bid process, of which he is a long-standing supporter, and for maintaining and delivering the most sustainable Olympics ever. I completely agree with his support for that, and I hope that hon. Members on both sides of the House will continue to provide such support.
Incidentally, I should mention that the reason why I am responding to the debate rather than the Minister for Sport and the Olympics is that he is opening an iconic sports facility in Durham, which will be part of the nation’s sporting legacy. I am therefore responding on his behalf.
The limited amount of time available means that all I can say is this. As I am sure the hon. Gentleman is aware, LOCOG is an independent company. The Government have one board member out of 19 or 20. Most of the decisions he is criticising were taken by LOCOG, and asking the Government to respond on behalf of a private organisation on which we have one board seat is, I am afraid, shooting at entirely the wrong target.
I understand the hon. Gentleman’s concerns and, indeed, I doubt anybody here would disagree with his point. I am sure that everybody here shares his concern to ensure that there is justice for the victims of the Bhopal disaster. As another contributor to the debate mentioned, there is a difference between legal liability for the company that Dow Chemical bought after the awful tragedy at Bhopal—as he rightly observes, that persists; when someone buys a company, they inherit its legal liabilities as well as its assets—and being morally responsible for causing the problem. Those two things are linked but distinct. We need to be careful in how we talk about responsibility. He was using that term rather loosely throughout his remarks. I am terribly sorry to have run out of time but, fundamentally, the answer to the vast majority of the hon. Gentleman’s questions is: ask LOCOG.
It is a pleasure to serve under your chairmanship, Mr Dobbin.
According to the Association of British Insurers, Oxford West and Abingdon is the constituency with the 49th highest flood risk in the UK, with more than 2,000 homes and businesses at significant risk of flooding. That assessment excludes risks associated with surface flooding caused by heavy rainfall. Despite the high level of local flood risk, the Oxford flood risk management scheme received such a low cost-benefit analysis that even under the new “all or part or none” funding provisions, it will be necessary to find non-Department for Environment, Food and Rural Affairs funding for 92% of the project, or approximately £127 million of the £133 million project. At the same time, in Abingdon, where nearly 500 homes and businesses were flooded badly in 2007, neither of the flood storage proposals for the River Stert or the River Ock reached even that level of cost-benefit threshold: they were rejected outright as “not economically viable”.
Those decisions have been disappointing to many, especially those whose homes and families are at risk of flooding, but everyone understands that we are in a time of austerity and that the money must go where it will do the most good—that is fair. Having said that, we heard just before the recess the good news that there would be a lot of weir work going on: Osney weirs A and B and Godstow weir B will receive funding. Design and appraisal work for raised flood defences at Lower Wolvercote, and the Farm road scheme in Abingdon in partnership with the Vale of White Horse district council, will go ahead. This last project’s bid for £40,000 in funding was rejected in December. I am pleased that the Environment Agency has had a change of heart on its viability.
I began this debate by outlining at some length the flood context in my constituency, and will come on to discuss the key issue—funding the replacement for Northmoor weir from flood defence funding—for two reasons. The first is to make the Minister appreciate fully that for far too many people in my constituency, the spending of flood defence money is not a bureaucratic issue to do with balance sheets. Hundreds of people were made homeless for months in 2007, losing prized possessions, mementos and even pets to the floods. Those memories are still raw. Given the current economic situation, we have had to cut flood defence funding by 6%. I need to be able to assure those constituents that, even where money cannot be spent locally, the Government are spending, transparently and accountably, each and every penny of available flood defence funding in the best possible way. Anything less than that is unacceptable.
Secondly, I am not taking issue with flood funding provision in other parts of my constituency today. My concern, and that of my constituents, is the Environment Agency’s programme to replace all paddle and rymer weirs on health and safety grounds and, in particular, the replacement of the Northmoor weir in the village of Appleton in my constituency. My constituents in Appleton and elsewhere have opposed the idea since before my election. Indeed, my first meeting with the Environment Agency and local residents on the subject dates back to before I was elected in 2010. The Minister knows the background only too well following our extensive correspondence, but for the sake of colleagues, I will outline the salient points.
Northmoor weir, like all paddle and rymer weirs, is manually operated by lock-keepers who pull the paddles and rymers out of the weir system to adjust the water levels. The weir has been operating in that way for more than 200 years. Northmoor weir was extensively refurbished in 1995 and given a 40 to 60-year lifespan. Between 2008 and 2010, however, the Environment Agency decided to conduct extensive health and safety tests on the weirs. It is unclear why it suddenly decided to do so, given that the relevant legislation dates back to 1992, before the refurbishment of Northmoor weir, and given that there is no record of a serious injury, which might reasonably be supposed to have triggered such a response.
The report, by HJ Consultants, was of the opinion that it was only a matter of time before there was a major injury on the paddle and rymer weir. That is despite the fact that the only injuries recorded under the safety, health and environmental reporting and management system since 2000 are strains, sprains and splinters. Even before the introduction of that system, the assessor could only record one brain haemorrhage, in 1991, that may or may not be attributed to the pulling of a paddle and, before the introduction of safety harnesses, an incident in which a lock-keeper at Blakes weir fell in. I assume that safety harnesses have now addressed that situation.
The consultant found that the loads at the weir exceeded the levels recommended by the Health and Safety Executive, but found no evidence that that had caused any significant problem in more than two centuries of use, even though the consultant found that there had been no regular programme of health and safety training offered to lock-keepers, with one lock-keeper last receiving manual handling training more than seven years ago. Just think how many fewer sprains and splinters there might have been if regular training had been provided during that time, and if there was a work pattern that provided a formal break for lock-keepers in the morning, as recommended on page five.
Should the Minister think I am being a little hard on lock-keepers, here is what one of them wrote to the Prime Minister on the issue:
“My work over the years included the operation of both Paddle and Rymer and more modern weirs, and I can say that, with proper training, care and safety precautions, there was very little danger involved. Any equipment can be worked dangerously. The worst scenario was the possibility of misjudging the placing of a rymer or a paddle in the flowing water: one had the choice between trying to save it or losing it through the weir! It was not a very hard choice! Also, it was not actually lost, and would float around in the vicinity until retrieved later.”
That is just one of many similar comments I have received from Thames lock-keepers. Nevertheless, it was on the basis of that health and safety report that the Environment Agency decided it was imperative to spend £2.6 million from the flood defence funds to replace Northmoor weir.
I congratulate the hon. Lady on securing this important debate, which of course touches on matters that affect my constituency, too. Will she join me in congratulating the Oxford Flood Alliance for its work, and does she agree that the Environment Agency generally takes better decisions when it takes notice of what the OFA and local residents have to say? Even if the health and safety case was accepted, the Environment Agency should be funding the project not from flood prevention money, but from some other budget.
The right hon. Gentleman makes a very good point. The Oxford Flood Alliance has stated publicly, and to me personally, that it has significant reservations about the project.
The Environment Agency has stated that the project will improve the weir’s resilience and speed of operation. At a meeting of the Environment Agency, Northmoor and Appleton parish councillors and me in December, the EA acknowledged that there had never been any problem with the operation of the weir, even in times of flood. It is important to note that the project will not reduce flood risk. The EA specifically confirmed to me in writing, and at the meeting of December 2011, that the project will not reduce flood risk in any way, and that in any case—according to the EA—the number of properties affected directly by the operation of the weir amounts to five. That comes out at £500,000 per property, if we are counting. Nevertheless, the finance will still come from the flood defence budget.
According to the EA in December 2011, the project has such high priority that it would go ahead even if it cost £10 million. On hearing that extraordinary statement, I became uncomfortably well acquainted with the health and safety apparatus of Whitehall, as every good constituency MP should. On writing to the HSE, to ask whether such a position was reasonable, I was told:
“The EA has carried out an extensive risk assessment. The aim of the risk assessment is to help the EA identify reasonably practicable ways of reducing or controlling the risks of injury from operating the weirs. As part of this, the EA would need to consider costs and their likely effectiveness in reducing the risks.”
I have been astonished to learn, however, that EA policy is apparently not to conduct cost-benefit analyses for health and safety projects, even if they come from flood defence funding, a budget considered so precious that all flood defence proposals must be subjected to rigorous cost-benefit analysis. I was told by the EA in December that that was because the policy was to eliminate all risk.
Being joyfully unfamiliar with the health and safety world until then, I thought that cost-benefit analyses might not generally be conducted for health and safety. In fact, the Manual Handling Operations Regulations 1992, which are the relevant health and safety regulations, state:
“The extent of the employer’s duty to avoid manual handling or to reduce the risk of injury is determined by reference to what is ‘reasonably practicable’. This duty can be satisfied if the employer can show that the cost of any further preventive steps would be grossly disproportionate to the further benefit from their introduction.”
The concept of “so far as is reasonably practicable” was tested in case law as far back as 1949, in Edwards v. National Coal Board, which established that a computation must be made in which the quantum of risk is placed on one scale and the sacrifice, whether in money, time or trouble involved in the measures necessary to avert the risk, is placed on the other. If it be shown that there is gross disproportion between them, the risk being insignificant in relation to the sacrifice, the person upon whom the duty is laid has discharged the burden of proving that compliance was not reasonably practicable.
It is clear, therefore, that what is required by law is not to eliminate the risk, as I was informed, but to reduce the risk to what is reasonably practicable and to consider the cost of doing so. Any action in which the cost was grossly disproportionate would not be required by law, and the HSE expected the EA to have considered the cost. Indeed, freely available on the HSE website I found not one but two helpful documents that walked me through how to do a cost-benefit analysis for a health and safety project, one of which even had a user-friendly checklist. I am not a lawyer, though, so I asked to see the EA’s legal advice, to see if there were grounds for the multi-million-pound health and safety investment that I had failed to grasp. The EA, however, confirmed that before committing to the full replacement of nine paddle and rymer weirs as the only appropriate level of response to its legal responsibilities under health and safety legislation, it had taken no legal advice of any kind.
The picture is now fairly clear, but before closing, I will express one further concern that has arisen in discussions about EA plans for Northmoor weir. It is about the really poor standard of consultation and communication that has marked the process from the beginning. Appleton residents, who will bear the brunt of building disruption if the project goes ahead, found out about the project when there was an application for suspension of parking along the route to the weir. Understandably, that led to outrage in the village and a vigorous local campaign by the parish council and the Weir Action Group, but despite delaying the work for a year, ostensibly to consult with the local community, the only change that the EA has made to the project so far was the proposal for a change of access route, so that Appleton residents experience less disruption during the two years that the work will take.
Obviously, if the weir goes ahead regardless of every objection I have put forward today, it is clearly preferable that the works route is not directly through the village, but the local objections, and the objections from some on the far side of the river and from others at risk of flooding in the rest of my constituency, are not simply about a works route. They are about the whole justification of the project, and its funding from the flood defence budget. To characterise them as anything else is simply inaccurate and misleading.
Other concerns about the quality of consultation have come to me from owners of nearby land considered for use in possible access routes. One wrote to me to say:
“At no time has the EA been in direct contact with us (or any of the relevant landowners I believe). I first heard of the whole project in February 2010—the proposed start date for the project then was 1 April 2010! I was then rung by a neighbouring farmer to warn me that the Contractors for the EA were going to come and survey our land but…the Contractors…had been unable to find out who owned our land and had contacted him for our telephone number. I phoned the contractors who paid me a visit prior to doing the survey. They were perfectly pleasant but I think as shocked as I was that the EA had not been in contact with me. The survey was duly done but we have never received any information or follow up from either the Contractors or the EA since”.
I am afraid that that example is not isolated. Failure to follow up meetings, to contact individuals or to communicate more widely have been hallmarks of the project so far.
The EA accepted in the December 2011 meeting that there had been significant such failures, but that does not seem to have stopped it, as is evident from a letter from the chairman of the board of the Environment Agency—briefed, I assume, by his officials—to the Minister. The letter claims that I believed that the £2.6 million being spent on the weir should be transferred to other local flood defence schemes. The Minister must know that I have never made that suggestion, and nor would I.
I said that when other flood defence schemes locally were being turned down, it was difficult to justify spending £2.6 million on health and safety, which is what it is. I said that flood defence money must be allocated on the grounds of greatest need, wherever that might be. I fully accept that, and my constituents fully accept that, but I am unable to assure my constituents that that is what is happening in this case, because the necessary due diligence on the project was never done. I said that when every flood defence proposal that is granted funding is first tested to destruction by EA cost-benefit analysis models, it is incomprehensible that in this case the EA is willing to spend millions of flood defence money with no cost-benefit analysis of any kind, with no legal advice of any kind and with no analysis of alternatives that would work for Northmoor weir specifically.
I ask the Minister, therefore, to ensure that the EA suspends the project until there has been a full and transparent cost-benefit analysis. On Wednesday, I discussed the project with the Prime Minister, as the MP for the other side of the weir, so I know that he has also written to the Minister asking for that to be done. The Prime Minister is also concerned that we should be able to defend our flood defence spending fully to the public. We will not be able to do so, however, until there is also sound legal advice that this multi-million pound health and safety investment is reasonably practicable, and not grossly disproportionate, and, most sensible of all, until we have a genuine Northmoor-specific study to see if there are more proportionate options that will meet the EA’s genuine health and safety obligations.
My constituents face flood risk daily, but they are not asking for preferential treatment or for funding of projects that do not meet the cost-benefit thresholds set by DEFRA. All they want to know is that flood defence money is being spent on genuine flood defence projects, and that every single penny of that budget can be transparently accounted for. All they want is a fair playing field.
I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on securing the debate and her reputation around Whitehall as a doughty champion of her constituents. I am delighted to respond to her concerns about the replacement of the manually operated paddle and rymer weir at Northmoor with a mechanised radial gate system.
My initial reaction was similar: how can the Environment Agency justify spending £2.5 million on a weir when the money could be better spent protecting people and property? I can appreciate people’s frustration with the expenditure of such a large sum of money on the works and with two summers of disruption in the constituencies affected, apparently just to meet a health and safety requirement with little flood risk benefit. My hon. Friend also expressed concerns about the decision to proceed without undertaking a full assessment of the flood benefits of the new structure. I shall take those points in turn.
First, I ought to set out the Environment Agency’s case for replacing the structure. A succession of weirs along the Thames, some in my constituency, regulate water levels. In a flood event, it is vital that the weir does not obstruct the flow of water, otherwise the north side of the river—in the case of the Northmoor weir—will flood.
I shall come on to that, because there is a flood risk issue, which I will cover later in my remarks.
The Northmoor weir is one of five major weirs being replaced as part of a single contract. The other four are already under construction or are now in place. The high price tag is a consequence of the size of the structure: the weir is more than 22 metres wide, stretching right across the Thames. The replacement has a predicted operational life of at least 60 years, and similar structures elsewhere have already proven effective and reliable. The problems with the existing weir structure have been known for some time.
During flood conditions, Environment Agency staff must lift an effective weight of up to 60 kg to shift the paddles. That is four times the safe working load recommended by the Health and Safety Executive. It is just about possible for two people to operate the paddles together, but at an awkward angle and at twice the safe working load. In the mid-1990s, an attempt was made to find a cheap and cheerful approach to solving the problem by replacing the wooden paddles with fibreglass. That reduced the weight of the paddles, but did little to solve the real problem. The sheer force of water, particularly on the deeper paddles, makes the job hard.
Two independent reports have been produced on the operational risks involved. As well as the weight, manual operation of the weir in response to flood alerts means working in difficult weather conditions for several hours. It is dangerous and tiring work. There are many weirs and gates along this stretch of the river that all need to be operated in tandem to prevent flooding of the houses to the north of the river. That is a key point. The structures need to be operated quickly when flooding is predicted, and an injury to a staff member halfway through would exacerbate local flooding.
First, will the Minister accept that, despite those working conditions, there is no record of any serious injury on the weir? Secondly, will he accept that the number of properties directly affected are, as the Environment Agency stated at the December meeting, five?
If the weir does not work, properties will be flooded. We can argue that the existing paddle and rymer weir works perfectly well, but as my hon. Friend knows, the Environment Agency has received consultants’ reports stating that the working load is way in excess of what one would normally allow for employees. I am sure that that she would agree that she and I as employers in business would have to take note of advice that is given. One always tries to do that proportionately, but it must be understood that the advice was given. It would be difficult for the Government to sit at arm’s length and ignore advice that the loading is four times too high and the risks that emanate from that. It is difficult for Ministers to overrule such advice, but I will talk about that further.
The Health and Safety Executive has seen the reports from the Environment Agency and the Appleton Weir Action Group and has written back in support of the agency’s position. As a responsible employer, the Environment Agency cannot ignore the advice of the Health and Safety Executive. Sitting back and doing nothing is no longer an option. The weir clearly poses risks to those who must operate it and to those live in the neighbouring constituency. An assessment of risk is not just about whether there have been accidents, but about the potential for accidents. I am a sceptic of all matters relating to health and safety, and I do not come to the matter as a quisling of the health and safety industry, for that is what it has become. I come to it as a sceptic, like my hon. Friend. I have looked at the matter in great detail, and if I were an employer on the board of the Environment Agency, I would find it difficult to ignore the report.
That brings me to the flood benefits of the weir, and why they have not been assessed for this project. The flood risk in the area is well known. Around 80 houses behind the north bank have a 1% chance or greater of flooding each year. In flood conditions, the Northmoor weir is opened, so that flood water can pass through as quickly as possible. The relationship between the weir structure and flood risk is well understood and would not benefit from further investigation. Doing that would have added unnecessary and damaging cost to an already expensive project.
If the Minister is relying for this part of his argument on the flood prevention benefit that he supposes exists, is it not right, as the hon. Member for Oxford West and Abingdon (Nicola Blackwood) said, that there should be a cost-benefit analysis? If that is not made and he is relying on the health and safety part of his argument, how can be justify taking the cost from the flood prevention budget? Surely, he cannot have it both ways.
During my long discussions with the Environment Agency, I became convinced that it really does understand the flood risks. I do not believe that it spends money without looking carefully at the alternatives. I have seen all eight or nine alternatives that have been presented—many of them were untried and untested as a means of lifting the paddle and rymers out using mechanical systems—as well as replacements with alternative schemes. All of them, because of the design processes that would have to be applied and the further delay, would have cost more. I assure the right hon. Gentleman that it is understood throughout the Environment Agency and my Department that every penny that we spend must be spent in the right way. We ensure that the budgets that we manage go as far as possible, and I will come on to explain why the spending must go ahead.
Given that something must be done, the Environment Agency has focused on identifying the cheapest and best way to solve the problem. It looked into the matter in considerable detail, and I have seen the summary of the detailed analysis, which points to the radial gate solution that the agency is pursuing. The other options would be more expensive, and in some cases there would be no guarantee that they would even work, because they are untried in other areas. Replacing the weir will not remove risks altogether, but it will reduce them to a reasonable level for the staff concerned and provide more reliable long-term protection for those living on the flood plain to the north.
When reviewing the background to the matter, I also considered the steps the Environment Agency has taken to consult local residents on the project. Objections have been raised, primarily from those who are not at risk of flooding, but who will suffer increased traffic and disruption during the work, and I entirely understand that.
I entirely accept that. I am talking about the local community, and the most vociferous objections are about disruption. I do not want to disrupt people’s lives more than we must. I am sure that my hon. Friend understands that I want to put on record that others are strongly supportive. Northmoor parish council has twice written to the Environment Agency urging it to proceed with the work as soon as possible.
Proposals to replace the five weirs have been considered by the Thames Regional Flood Defence Committee, and it has agreed to include them in the flood defence programme. That is important because the committee is made up of elected councillors from local authorities in the region. They provide a degree of local democratic input and accountability for decisions to allocate funding. They will not have taken the decision to allocate £2.5 million to Northmoor lightly, and they recognise other flood defence priorities in the region.
Over the past two years, the Environment Agency has consulted extensively with local residents and listened to their concerns about the scheme. I am sure that many would like to have had more, and I will take up the matter of the contractor, which causes me genuine concern. The agency has heard what people have been saying about the increased traffic south of the river and made substantial adjustments to the plans, at an additional cost of £100,000 to the project.
The work has the support of Northmoor parish council and the Thames Regional Flood Defence Committee. Despite limited national funds, the Environment Agency’s board has allocated funding to allow it to proceed. The chair of the Environment Agency wrote to me last week setting out the justification for the project. I have heard my hon. Friend’s points, and the views she expresses on behalf of her constituents. I have considerable sympathy but, as is common, there are two sides to the story. I am satisfied that this is a case not of health and safety gone mad, but of something needing to be done to solve a problem that perhaps should have been sorted out some time ago. I am sorry, but I do not take the view that, just because there has not been an accident, one may not occur.
I understand that there may be areas where consultation could have been improved. I will make every effort to ensure that the points that my hon. Friend raised are answered, and I will do so in a letter as we are running out of time. I assure her that I will continue to converse with her and do my best to minimise the impact on her constituents. I want to put it on the record that I fight to ensure that every penny of money that is spent on flood alleviation schemes is spent in the best way possible, and I hope that she will come to realise that the problem has been dealt with in the best possible way.
Question put and agreed to.