Tuesday 22 May 2012
[Mr Gary Streeter in the Chair]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Gauke.)
There is obviously a lot of interest in this important debate. I have the power to impose a time limit, but I will not do so from the outset—let us see how we get on. However, a little self-restraint by colleagues would be most appreciated.
It is a pleasure to serve under your chairmanship, Mr Streeter. I thank Gingerbread, the Child Poverty Action Group, the Institute of Chartered Accountants in England and Wales and the House of Commons Library for producing excellent briefings for today’s debate.
Eleanor Rathbone, the great advocate for family allowances, which we now know as child benefit, entered politics in 1909. It is extraordinary that, more than a century later, we have once again had to secure a debate in Parliament to champion the basic principles of child benefit. There have been threats to child benefit before, but since 1945 when family allowances legislation was introduced—a watered-down version of the child support that Eleanor Rathbone and others had campaigned for—only the coalition Government have introduced legislation for the demise of the principle of universality that underpins child benefit.
Not everyone on the Government side is happy with the proposed changes, as demonstrated by the lack, bar one or two, of any Back Benchers on the Government side who wish to take part in this debate. In an earlier debate, the hon. Member for Christchurch (Mr Chope) pointed out that the Government’s proposals ask those on higher incomes with families to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair. I do not usually quote from the hon. Gentleman, especially in agreement, but he has hit the nail on the head.
I would like to concentrate on two issues: the destruction by the Government of the universal principle, and the unfairness and unworkability of the proposed changes. The principle long established and supported on a cross-party basis is that society as a whole should contribute towards the upbringing of children, because we all share in the benefits of a properly supported future generation. Arguing for family allowances, Eleanor Rathbone captured that exactly:
“Children are not simply a private luxury. They are an asset to the community”.
The logic of accepting that view is that in a properly functioning society transfers are made to families with children—not away from them to pay for tax cuts to millionaires.
Her Majesty’s Revenue and Customs recently put out a press statement on the proposed changes, which told us that the Government’s plans for changing child benefit are legal. I have been in the House for a number of years and I am not familiar with Government Departments telling us that policy changes are legal. I can only imagine that it must reflect a measure of concern about the Government’s incompetence that Departments have taken to doing so. My concern, however, is not about the legality of the proposed changes, but that they are wrong and should not happen.
The CPAG has summarised the benefits of child allowances. They achieve horizontal distribution between families, from those without children to those with children, life-cycle redistribution—most people have children at some point and we want to help whenever families are most pressed—and intergenerational redistribution, and they place a value on all children. For those reasons and many others, the benefit should be kept in its universal form. The changes are grossly unfair and probably unworkable.
The ICAEW has branded the legislation seriously flawed in principle and in practice. It points to many problems and I will highlight a few. HMRC will be using the tax system to claw back from one individual a benefit paid to the other, which could be extremely difficult as families in similar situations will be treated differently. Despite the introduction of the taper, the changes could still lead to a huge disincentive for individuals to earn more. The worst aspect of the proposed changes is that a family with a single earner who has an income of more than £60,000 is significantly worse off through the withdrawal of the benefit, while two-earner couples with incomes of up to £50,000 each will not lose the benefit.
My hon. Friend is making a great start to the debate. When meeting people in her constituency during the local elections, was my hon. Friend struck by how hard that unfair and unworkable aspect of the change is hitting them? One voter I met, who voted Conservative at the last election, said that he will never vote Conservative again because of the unfair nature of the changes. I spent a long time talking to him and he just could not believe that they were going to be introduced.
My hon. Friend has made an excellent intervention. The unfairness of the changes goes to the heart of the debate. I suspect that as more and more people wake up to what will happen to their child benefit next January, we will see an even greater public outcry.
The changes disadvantage single parents, and partnerships where one person has decided to stay at home. With changed family circumstances, it may be very difficult to claw back payments or decide who should pay them. Taxpayers could be penalised for failing to submit information that they have no access to, particularly if the relationship breaks down. The extra administration involved could place huge burdens on HMRC at a time of budget restraint, and particularly at a time of cuts in staffing levels. We are therefore left with a number of questions.
Does my hon. Friend agree that one problem is that it will be very difficult for HMRC and families to manage this process, given that family circumstances may change in the course of a year? What a person may believe at the beginning of the year is their child benefit entitlement or their tax liability could turn out to be different, leading to problems such as lump sums having to be paid back and the amount of time required by HMRC for administration.
My hon. Friend makes an excellent point. The workability of the proposals will have to be reconsidered. We seem to be building into the system a number of problems for families. The Government could have learned from previous practice and not gone down this road.
We are left with a number of questions about the workability of the changes and the need for them, as well as questions about fairness. As late as 2009, the Chancellor was promising not to scrap child benefit. No doubt we will hear today that it has not been scrapped, but changed massively. More significantly, it has already been cut massively because of the lack of uprating with inflation. Therefore, child benefit and families with children have already been targeted for cuts, even without the cuts that have been made to tax credits.
Will my hon. Friend reflect on the fact that, in the run-up to the Budget, there was debate about child benefit and the coming changes to working tax credit, which affect some of the lowest-paid working couples in our society? The Government found enough time and energy to make some amendments on child benefit, but none to the proposals on tax credit.
My hon. Friend makes an excellent point. She is right. The overriding question is, why have the Government chosen to target cuts in respect of families, particularly those with children? None of us have received a satisfactory answer; perhaps the Minister will provide us with one.
The second question is, why are women being targeted again by this Government? It is not only families with children that are being targeted, but women—mostly women who are single parents—and it is more likely to be women who are put under pressure not to claim by their partners, so that their partner’s tax does not change. Whether or not that happens in reality, the Government should not even countenance the possibility. Women will suffer in terms of pension credits if they do not claim. This is a real mess and is just one more aspect of the omnishambles Budget that needs to be changed.
It took more than 70 years from Eleanor Rathbone’s entry into politics to get universal child benefit paid to the mother for all children. I hope that it does not take another 70 years for these appalling changes to child benefit to be reversed.
I congratulate the hon. Member for City of Durham (Roberta Blackman-Woods) on securing this debate, which follows up debates during the Budget, during Second Reading of the Finance Bill and on clause 8 of the Finance Bill, and a similar debate before the Budget in this Chamber, which I had the privilege of introducing.
As the hon. Lady said, we have never had a satisfactory answer to why, if it is necessary to find a greater contribution towards reducing the deficit from those on higher earnings, we are targeting people on higher earnings with children, rather than those who do not have children. If my hon. Friend the Minister wishes to intervene at this stage and give the definitive reply, I shall happily give way.
The hon. Lady mentioned loss of support among Conservatives. I am worried and do not wish the Conservatives to lose support, which is why I have put a lot of energy into trying to ensure that this legislation is improved. If the Opposition had just asked to look at clause 8 during the Finance Bill debate on the Floor of the House—we considered clause 8 and schedule 1—we could have discussed the principles and referred to schedule 1, and those privileged to serve on the Finance Bill Committee would then have been able to consider the schedule in more detail. It is now apparent, according to the report by the Institute of Chartered Accountants in England and Wales, that an enormous amount of detail needs line-by-line scrutiny. Sadly, as a consequence of the earlier debate, such scrutiny cannot now be delivered, given the structure of the Committee stage of the Finance Bill, because schedule 1 has already been considered. That is a problem. I shall not ascribe blame or responsibility for that, but it means that the Government do not have the benefit of detailed scrutiny of the workability of their proposals, or, as in this case, the lack of workability.
We have a real problem. I hope that the Opposition spokesman, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), will say what she thinks we can do to bring this issue back on Report in a form that finds favour not just with me and my hon. Friend the Member for Rochester and Strood (Mark Reckless)—two Conservative Back-Benchers. Incidentally, we happen to be men and it is all ladies on the Opposition Benches this morning. Let us see what we can bring about.
I hear what the hon. Gentleman says about clause 8 and schedule 1. We proposed to delete the schedule, as well as the clause, because it was a shambles. However, I hear what the hon. Gentleman says about Report. I am more than happy to consider what we can do together, because, of course, we want the Bill to come out of Committee better than it went in.
I am grateful to the hon. Lady. On such issues, there is a slow fuse as far as members of the general public are concerned. They do not realise what the implications are until quite a long period has elapsed. We must look to people from outside the House—third parties, perhaps—to try to alert our constituents more to the full implications.
Has the hon. Gentleman seen the Asda Mumdex index—a panel of 4,000 mums—sent to Members of Parliament yesterday? The optimism figure on the future of their family finances dropped from zero to minus eight in February, and the latest research found that it has dropped to minus 16. The issue may be on a slow fuse, but people out there—certainly, women in families—are starting to understand that the future looks rather bleak.
I have not seen those figures, but they obviously speak for themselves. Despite that, I am not receiving as many angry letters from constituents as when, for example, I was the junior Minister dealing with the community charge. Let us recall that in 1987 the Government were elected with a specific manifesto commitment to introduce the community charge on the back of its success in Scotland. The proposal on child benefit that we are discussing today was not even in our manifesto. Indeed, it was expressly ruled out by comments made by both the Prime Minister and the Chancellor of the Exchequer in their shadow positions before the general election.
As an aside, I am not so sure that, in 1987, the community charge was such a great success in Scotland. One thing that caused the eventual collapse of the community charge was not just its unfairness, but the sheer impracticality of collection, which had not properly been thought through. The operational issue was as important as anything else. It may be the same in this case.
The hon. Lady makes a good point. There are two issues running in parallel. One difficulty for those of us proposing the community charge was to explain how it was fair that a duke and a dustman should pay the same amount. That difficulty ran through the public debate. At the same time, we went into great detail about exemptions for particular groups of people and an administratively burdensome system of rebates, which created a lot of fresh cliff edges, with people feeling that they had been treated unfairly. I fear that that is exactly what is happening with this ill-conceived proposal.
The difference between the community charge and the abolition of the 10p tax rate by the previous Government and the present issue is that, at some point, taxpayers received a bill for a sum, making it clear that they had to pay it. The alternative, if this is not to become a slow-burn issue, is that come January, taxpayers will be unaware that they have to give up their child benefit or unaware of what their partner earns, so they will simply not pay or will be followed up by the Revenue and there will be mass non-compliance involving people who are unaware, or at least say that they are.
My hon. Friend makes a good point. I am grateful to him for reminding us about the 10p tax rate, because that introduces a bit of political balance into this debate. It is not just the coalition Government, or the previous Conservative Government, who can get on the wrong side of such issues, both in respect of the principle and of the detail. We need an answer to the question of why the single-parent earner on £60,000 loses the equivalent of all her child benefit, while next door the two-earner couple on up to £100,000, with their incomes spread equally between the earners, keep their child benefit. Will there be an answer to that question? Perhaps the Minister would like to intervene. Unless we get answers to those fundamental questions, it will be difficult for us to sell the concept to our constituents.
Of course it does not, because the whole thing is arbitrary. It is all based on the false premise that people on £20,000 or £30,000 a year are cross-subsidising those on higher incomes with children. I have had a letter published in The Daily Telegraph and the Minister has replied to my questions, but it is apparent from my hon. Friend’s answers that there is no cross-subsidy from a person on £20,000 a year to someone on £60,000 a year with however many children—that is a fallacy. I suspect that the policy is based on someone going to a focus group and asking, “Is it fair that someone on £20,000 should be subsidising a family on £60,000 with a whole lot of children?” Of course it would not be fair if it was true, but it is not true—it is a false premise and, on the basis of that, we have a policy that I fear will lose the Conservative party a large number of votes.
Let us not forget, however, that the origins of the policy lie not in the Conservative party but with the Liberal Democrats. Before the general election they were campaigning to interfere in that policy area. With the knowledge that the measure was originally proposed and supported by the Liberal Democrats, this is another example of an area in which the Prime Minister can feel free to make significant change if he wishes to respond to agitation on his Back Benches for a bigger Conservative element in Government policy. Officials have previously suggested that something should be done about taking child benefit away from those on higher earnings but my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), who was a Treasury Minister, said that, after looking at it from all angles, we reached the conclusion that it could not be done fairly. So what are the present Government going to do? They are going to do it, and they are going to do it unfairly.
What worries me is that the measure will be administratively burdensome as well, costing more than £100 million in extra administration. We will be taking on tens of thousands of additional civil servants when the Government are saying that we want to simplify tax policy, reduce the size of the state bureaucracy and so on. There is no consistency, and I fear for my party.
It is a pleasure to serve under your chairmanship this morning, Mr Streeter. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing this important debate and on her excellent speech. If the Minister was not already worried, he should be by now because, as anyone familiar with my hon. Friend knows, she is a tireless campaigner for her constituents and against injustice generally. I am sure that this debate will not be the last we hear from her on this issue.
I am also pleased to follow the hon. Member for Christchurch (Mr Chope), who gave an excellent speech. It is great to see him on the right side, even if he was not on for the poll tax. That shows that with age comes wisdom; I am pleased that the wisdom of his longevity has brought him to the right side on this issue.
We are discussing a complete mess, created by the omnishambles of a Budget, that has been allowed by Ministers to carry on for way too long. If we were being generous, we might suggest that the idea had been sitting on Whitehall shelves for some years, repeatedly pitched by numerous Sir Humphreys and batted away by successive Ministers until a particularly out-of-touch set of Ministers was easily convinced. Once the idea was out there, those same Ministers were too afraid to perform yet another 180° U-turn, so they turned only 150° instead. That would be the scenario if we were being kind.
If we were being less generous, we might wonder whether those out-of-touch Ministers were driving the idea through themselves, despite officials briefing them fully on how ludicrously complex it would be to implement and on the unfairness it would create. Perhaps the Minister will tell us which of those scenarios is the more accurate.
Either way, the high-income child benefit charge—that is what it is called—is a ridiculously complicated idea that fails the basic test of fairness. It is ridiculously complicated because the proposal is to introduce a tax in January 2013 that will not be collected until the following financial year, meaning an affected family with three children will be landed with a bill of more than £600 in additional tax during that following tax year.
If the Government are so determined to drive the charge through, why can they not at least marry up its introduction with the start of collection? The situation is ridiculously complicated; the charge will create hundreds of thousands of new self-assessed taxpayers while HMRC centres around the country, including some in my area, are being thinned out or closed entirely. Can the Minister tell us how many more staff HMRC will need to cope effectively with the increased flurry of returns over the Christmas and new year period as a result of the change? The charge is ridiculously complicated because it seeks to claw back tax from individuals for a benefit paid to other individuals who are separate in the eyes of the taxman, leaving the system open to both fraud and genuine errors.
Worse than all those complications is the fact that the measure fails the test of fairness because, for hundreds of thousands of families, it will take away a benefit that is supposed to be universal, as we heard from my hon. Friend the Member for City of Durham; when the benefit was brought in by Eleanor Rathbone, the principle was that it should be universal.
The evidence shows overwhelmingly that the benefit is used to meet the costs of looking after children, such as ensuring that they are well fed and have the clothes and uniforms that they need for school and the bus fare that they need to get there. Such things apply to all families. The charge fails the test of fairness because it will penalise children in single-earner families, as we heard from the hon. Member for Christchurch, while many in double-earner families who are much better off will continue to receive the benefit. It fails the test of fairness because it is yet another policy from this Tory-led Government, whose leader claimed he wanted to create the most family-friendly Government in history, that will directly hurt children and families. Among many other changes, the policy comes on top of huge cuts to Sure Start and early-years provision, the scrapping of extended free school meal eligibility and child trust funds, and a hike in VAT.
In addition, the proposed measure will take even more money out of our local economies when demand for goods and services is at rock bottom. The Treasury aims to claw back £1.5 billion from 1.2 million households, or an average of more than £1,200 from every family affected, just in the first year, with more families becoming liable as incomes creep up and the threshold remains static. That is £1.5 billion a year that will not be being spent in local shops and businesses on our struggling high streets.
As I highlighted myself, those are the findings. That money is spent on our high street—on books, clothes and food; it is not put into trust funds or saved up. The majority of people, whether in two-earner or single-earner families, will be hurt by the proposal because they use the money for daily necessities and not for luxuries. That is £1.5 billion a year that will not be put to work improving the quality of life of any of the children in the affected families or preserving and creating jobs in my constituency or the constituencies of any other hon. Members.
Children did not cause the financial and economic situation, yet the Government seem intent on making them pay for it. At the same time, high fliers in the City, who might well have played a part in that situation, are rubbing their hands together in glee at the cuts to the top rate of tax. Those are not the actions of a Government who have their policies straight, or who understand the lives of hard-working families; the more the public see of the coalition Government’s choices, the more they realise how out of touch they are.
The Government will regret this ridiculous decision, just as our country will regret voting this incompetent shower of a Government into power. Thankfully, there will be a chance to undo that decision at the next election, and policies such as the child benefit charge will ensure that this incompetent Government serve no more than one term.
It is a pleasure to see you in the Chair, Mr Streeter. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing this extremely important debate. The more I listen to speeches from both sides of the Chamber, the more problems I see. I want to focus on the independent taxation of women.
Clause 8 of the Finance Bill introduces a tax charge on a child benefit recipient if they or their partner’s income is above £50,000. That is wholly objectionable from the perspective of equality for women. One person is being given a tax bill because another person has a high income. Nothing could be more unjust than that. The Government have said that they want to be family-friendly, but there is nothing family-friendly about this provision. Furthermore, the information-sharing requirements to make the system work will cut across the privacy that is intrinsic to independent taxation for men and women.
Treasury Ministers seem to have taken no account of the fact that people’s family circumstances may change during a year. Incomes may go up or down and, more seriously from the point of view of the independent taxation of men and women, partnerships may come together or, unfortunately, collapse. That will provide something else to argue about, and will be the cause of yet more disputes between partnerships particularly, as my hon. Friends have said, when the tax bill arrives months after the income has been secured by the other person in the partnership.
Does my hon. Friend agree that it is surprising that the “most family-friendly Government ever” might want to disincentivise couples from forming households and relationships? If someone is considering moving in with a new partner and realises that his income is a bit higher so the child benefit will be taxed away, he might be discouraged from forming that new relationship.
My hon. Friend is absolutely right. The permutations and problems are too numerous to mention.
We raised our questions with the Minister during the debate in Committee on clause 8 on 19 April. I asked him specifically whether independent taxation for men and women could be maintained. He responded:
“Independent taxation will still apply, each partner will still have their own personal allowance and tax rate bands, and the amount of child benefit, even if it is received by the taxpayer’s partner, will not increase the amount of income liable to tax.”
That is absurd, because it is not what independent taxation means. He continued:
“Where there are two high earners in a household and they do not want to tell each other their incomes, there will be a mechanism whereby they can find out whether they have a higher or lower income but without the full details.”––[Official Report, Finance Public Bill Committee, 19 April 2012; c. 617.]
He then said, “my time is up”; he could not explain in any more detail, and we were dismissed. Since then, tax experts at the Chartered Institute of Taxation and the Institute of Chartered Accountants have examined the matter and identified exactly the same problem. The Minister should take account of what hon. Members say. Now that tax experts are saying the same thing, I hope that he has asked his officials to re-examine the matter and can tell us today that he has changed his mind.
When I was first elected in 2005, I had the great pleasure of serving on the Finance Bill Committee with the Minister. He was always telling us what Mrs Gauke thought about things; she is an accountant.
I want to hear from him today what Mrs Gauke thinks about the proposal, because I do not think that she can be happy with it.
This matter is serious. What the Minister said on 19 April shows that either he did not understand it or that he was misleading the House. In either case, I would like him to withdraw what he said then and apologise for it.
I am pleased to participate in this debate, and I congratulate all hon. Members who have spoken, particularly my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing it, and the hon. Member for Christchurch (Mr Chope), who has been a vocal and powerful advocate for families in the context of the Government’s proposals. I am pleased to see him here today.
I am sad—I suspect that the hon. Gentleman shares that sadness—to see a Conservative Government introducing this proposal. There have been threats to child benefit in past decades, but there has always been an alliance with strong Conservative voices that has stood up to protect against those threats and attacks. Conservative women have been particularly strong in their understanding of why the benefit matters so much to families—[Interruption.] As my hon. Friend the Member for Bishop Auckland (Helen Goodman) pointed out, it is disappointing to see so few of them in the Chamber.
I am grateful for the hon. Lady’s generous remarks. It was not only Conservative women who campaigned. She will recall that John Major made the matter a cause célèbre. He said that it was wrong to take away child benefit, and that it should remain as a universal benefit.
The hon. Gentleman is right. I hope to come on to the situation when John Major was Prime Minister, and some of the arguments then.
For the benefit of many hon. Members who do not seem to appreciate the underlying principles of universal child benefit, I want to put them on the record this morning. I am sorry that they are not in the Chamber to have the benefit of my exposition, but they can read it in the Official Report. As hon. Members have said, this benefit, which is important for families, is a mechanism that is redistributive horizontally and vertically, as my hon. Friend the Member for City of Durham said. As other hon. Members have said, in practice that means that families with children receive extra help to meet the cost of raising their children because, as a society, we all share the benefit of those children making a future contribution to our communal well-being. It is right to provide that support universally, and to recognise that we all share in the social obligation to maintain those families.
Over its life, the benefit is redistributive, and it enables all families to manage the additional costs that they face when raising young children, and to plan their finances across their whole lifetime. Importantly, in practice—this has been alluded to—it is a benefit that has been paid mostly to mothers. The vast majority of child benefit is paid to mothers. Even in the richest families, it is the only source of independent income for many women, and it is essential that they have access to it to provide for and to meet the needs of their children.
As hon. Members have said, we know that that money is spent for the benefit of children, either directly on toys, books, activities, clothes, shoes and so on, or indirectly by paying down family debt, ensuring that basic household bills are covered. Things that are essential for children’s well-being are prioritised in all families, and one reason is the label it bears. There is good research evidence showing that because it is called “child benefit”, it is understood that it must be spent for the benefit of children, and that is what happens.
Does my hon. Friend agree that we are talking not only about the income received, mostly by women, but also about national insurance credits that build up to a pension? People may not be in the same relationship when they retire, but the risk is that women will make a credit-only claim and that they will lose out in the long term.
My hon. Friend makes an important point. If women come under pressure to forgo child benefit, rather than their partner seeing an increase in their tax bill—I believe that that will happen in some families—they will lose the benefit of their national insurance credits. That will have a lifetime impact on those women and their pension entitlement. We cannot wish to pursue a policy that risks making women poorer throughout their life.
This benefit is directed towards children and has been designed to follow a child and stay with them even if their family circumstances change. That is particularly important if a relationship breaks down, because a woman may have no other source of income at that point. It may be an acrimonious dispute in which she is struggling to extract money from her former partner, and child benefit is often the only source of income on which she can rely to get through that family breakdown and make the transition to single parenthood. When I was director of the National Council for One Parent Families, even women in relationships that were financially well off described to me how important child benefit had been at that moment of family change. If women start to forgo that benefit under pressure from a partner who later decides to leave the household altogether, I worry that we will disadvantage those women and their children, which is something that we will regret.
I am surprised by the Government’s approach because it introduces a policy that will act as a disincentive to work. Universal child benefit does not disadvantage those who move into paid employment, because the benefit remains. The incentive to increase income through more working hours or going for a promotion will be removed for some families, and I cannot understand why Ministers, who are often concerned to incentivise people to maximise their income from employment, wish to go down such a route. The Government have the right objective, but this policy seems particularly perverse.
As my hon. Friends and the hon. Member for Christchurch have highlighted, the complexity that is being introduced into the system is completely at odds with the Government’s stated intention to simplify the tax system. Simplicity is not just an advantage in itself, but it means that payment is more reliable, and more likely to be accurate and more predictable. There is also much less stigma attached to the receipt of a simple universal flat-rate payment for all families.
One criticism is often levelled against the payment of child benefit to richer people, and it would probably have been made this morning had more hon. Members attended the debate—today there are mostly proponents of child benefit in the Chamber, which is perhaps why the point has not been raised. I want to put on record my response to those who ask why we are giving child benefit to people on higher incomes and asking those on lower incomes to help pay for that. The fact is that we do not—and should not—make the same argument when it comes to the national health service or our children’s education, and we do not make it for the tax system or say that higher earners should not receive the benefit of the recent increase in the tax threshold. As I am sure the hon. Member for Christchurch will remember, the higher rate of child benefit for the first child was intended to replace what had previously been the married couple’s tax allowance. It seems particularly perverse that we are now effectively seeking to tax a tax allowance, instead of understanding that in every other part of the tax system, such allowances stretch across the income spectrum. Now, we have decided to treat child benefit differently.
My hon. Friend is making an excellent speech and she has touched on the heart of the problem caused by the proposed changes. The Government are destroying the principle of universality that has underpinned this benefit for years. We should think of all children as being important to our community, and we all share in the benefits that children bring to society. To denigrate the principle of universality says something about the values of this Government. What will be next?
I am grateful to my hon. Friend. Her point about universality is fundamentally about the social glue, integration and the sense of communal interest in our children that universal benefits bring.
As others have said, these proposals are unjustifiable as a matter of principle, and unworkable in practice. Hon. Members have alluded to the difficulties of coping, both for families and for the Revenue, when family circumstances change. It may be complicated to pick out who has been a member of a household over the course of a year, or to state at what point they became one, so it may be difficult to assess at what point that should result in a tax liability.
Does my hon. Friend intend to refer to the breach of confidentiality in an individual’s tax affairs? That is a serious issue with couples. Years ago, my first piece of casework as a councillor involved a constituent who was being chased by bailiffs for his wife’s community charge. At the time, there were rules on joint liability for the community charge, and that caused huge problems between couples. It seems to me that we are back in the same territory.
I have no doubt that if one member of a household is liable for another household member’s income—which is what will happen—that will distort the balance of power, and in some cases compromise the safety of women in that relationship and lead to something that feels fundamentally irrational and unjust. Why is one member of the household being taxed for a benefit that is paid to another member of the household for the benefit of the children? If Ministers want a fairer and more justifiable taxation system, I suggest that they look at having a more progressive system overall. If they want to take more from the rich and have a more progressive system, they should not have begun by reducing the top rate of income tax, which seems to be the Chancellor’s preferred route.
I will conclude with a couple of questions for the Minister. Has he made an assessment of whether couples are likely to continue receiving child benefit and sweep it up at the end of the year in their tax return, or whether they are they more likely to forgo child benefit at the point of payment? In the latter case, what assessment has he made of the impact that that will have on children’s well-being and on family stability? May we see that impact assessment before any further steps are taken to introduce the proposed policy?
Will this measure be reversible? The Opposition are committed to universal child benefit, and I hope that the Government will consider this change as temporary. Will the changes to IT and the taxation system be reversible? What is the IT plan for this development? Could this policy be unwound, or are we stepping towards a major change in attitude to universal benefits from which it will be impossible to retreat? What advice has the Minister received—this is the point touched on by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley)—on individual confidentiality in relation to tax affairs? How will one member of the household be advised about tax liability on a confidential basis without understanding the income of another member of the household, and can that be reconciled with the principle of tax confidentiality? Ministers seem confident that it can be reconciled, but Opposition Members have their doubts.
I do not intend to say very much in this debate. The reason why I did not seek to catch your eye before, Mr Streeter, was that I thought that I might have to leave. I will have to leave before I have the benefit of the Minister’s response and I apologise for that, but I am serving on the Finance Bill Committee.
I want, however, to say a little about the difficulties that can arise in relation to family structures and so on. As someone who was a family lawyer, I know how relationships can not only break up but re-form, and that may happen over a relatively short period. That is a practical aspect of this issue that I am not sure has been taken fully into account. As family lawyers, we used to joke that we achieved a higher rate of reconciliation than marriage guidance counsellors. People’s lives are not linear. They do not necessarily go straightforwardly through this process: “Oh, I’ve fallen out with my partner. Now we’re separating and that’s it.” It is very common for people to encounter a circumstance that leads to a break-up and then to reconcile. It may be a very serious situation. Even in cases of domestic violence, people reconcile. As a solicitor, I might sometimes have wished that they had not; nevertheless, they do so.
A relationship structure can change quite a lot, even in a single financial year. That is an additional layer of complication. It should not be assumed that just because people are paying higher rates of tax that relationship breakdowns do not happen, because that is far from the case. That is yet another practical issue that must be addressed.
The position could have been very different. Perhaps all Governments wonder how they arrived at certain decisions. If we look back at this one, it seemed to arise from what looked like a clever wheeze. It was announced at a party conference, which is never a good time to announce policy, because it is the headline of the day that is very much wanted. I suspect that the thinking was, “Ah! We can really get the Labour party here. We are going to take a benefit away from higher rate taxpayers and the Labour party won’t dare to oppose that, so we will have got them on the run.”
We said right from the beginning, as well as dealing with all the issues about fairness and the reason why child benefit and its predecessor, family allowance, were introduced in the first place, that there was a practical issue. Many of the practical criticisms were voiced at that time. This all dates back to October 2010. A year later, those practicalities had apparently not been thought through very carefully. Some amendments have now been brought into being—at the last gasp—but those changes produce yet more anomalies. They produce a marginal rate of tax for some families that is far higher than presumably anyone would think was desirable for people who are in the middle ranges of income. Some families will face marginal tax rates of 50% to 60% because of how the changes take place and particularly the tapering. That has been introduced to try to make things a bit better, but arguably may make things a whole lot worse, because it introduces a whole new level of complexity.
Hon. Members have mentioned not just the community charge but the ill-fated and, in my view, ill-thought-out 10p tax rate abolition proposal. I have said this before and I know that many of my colleagues have. I was not in this place at the time, but as party members and activists, we have a view on these things and we thought, “Oh no, this is not good.”
Is not the point about the 10p tax rate debacle—I think we would all accept that that is what it was—that when the outcome of that policy was made obvious, the Labour Government of the day reversed most of the adverse consequences of the policy? We see no indication from the current Government that they will do the same.
I agree. The point that I was making was that, sometimes, what looks like a clever idea to start with quickly unravels into something that is much more difficult. The slight amendments that were made to the current proposal before it was introduced into the Budget, far from addressing the issues, are making the whole thing even more complicated. Not much time seems to have been given to work these things through. Some campaigners are suggesting to the Government that it is not too late. If they are still minded to implement this proposal in some way, shape or form—I hope that they will not want to—they should at the very least not go ahead with it starting from January of next year, given that it has been so poorly thought out and the implications and problems have not yet been fully resolved. To put a hold on it and perhaps come back if they think that they have solved those problems—ideally, they would not come back with it at all—would be sensible at this stage. I urge the Minister to give that very serious consideration.
It is a pleasure to speak under your chairmanship, Mr Streeter. It has also been a pleasure to listen to passionate and well-thought-out and well-delivered speeches from hon. Members who feel very strongly about this issue. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), who brought it to Westminster Hall this morning to give us slightly more time to debate it than we had on the Floor of the House. I remember that the hon. Member for Christchurch (Mr Chope) pointed out then that we had 52 minutes to debate both the clause and the schedule. I heard what he said earlier today and I responded at that time, but I will say again that if we can find ways, across the Chamber, to ensure further scrutiny on Report of both the clause and the very important points in the schedule, that will be very helpful. I would certainly be more than willing to lend our support to see how we can do that.
I thank my hon. Friend for that intervention. I was not going to point out that the Minister seems to be on his own this morning. I am sure that none the less he is very capable of dealing with the questions that have come up and will receive inspiration from various sources in order to do so. However, I will take the opportunity to repeat gently the advice that I tried to give the Minister during the discussion on the Floor of the House: “When you’re in a hole, it’s better to stop digging and find a ladder to get yourself out of that hole.” At that time, we were suggesting that we would be willing to work with the Government to see what could be done to mitigate the worst outcomes of this flawed policy, and that offer still stands.
If I were the hon. Lady, I would take comfort from the fact that there are no Back Benchers here, because it shows that notwithstanding the very powerful Conservative Whips Office, they have not been able to dragoon anyone into coming here to support the Government’s policy today.
I thank the hon. Gentleman for that intervention. It is not for me to interpret what the Conservative Whips Office is able to do to deliver people to the debate and ensure that they turn up. None the less, we have heard some very powerful speeches, not least from the hon. Gentleman himself.
I thank my hon. Friend for putting that on the record. I am sure that note will duly be taken.
I want to use this opportunity to explain how we have got to the position we are in and what we need to do to resolve the problems. It is worth remembering that when the plans were announced, a single-income household earning just over £43,000 would have lost all the benefit, but a dual-income household on £84,000 would have kept all of it. The 2012 Budget increased the threshold for the withdrawal of child benefit to those earning £50,000 or more from 2013-14. That might have gone some way towards solving the problem for some families—the estimate was that about 750,000 might be in a better position—but it does not get away from the essential point that the principle of universality is fundamental to child benefit, as my hon. Friend the Member for City of Durham and other hon. Members have said.
We heard powerful speeches from my hon. Friend the Member for Stretford and Urmston (Kate Green) and others about why the principle is important and why we must do everything we possibly can to defend it. Child benefit is supposed to be about providing families, particularly mothers, with a dependable source of income for the benefit of the children and which a mother knows she will get irrespective of what goes on in the family. As we have heard, research from Child Poverty Action Group and others shows that the money is by and large spent on the day-to-day necessities for children.
I do not want to take us off-track, but the hon. Member for Christchurch mentioned the community charge. He was a junior Minister when it was introduced, as he explained, and I was a young mum. I spent many a wet Saturday campaigning against the introduction of the community charge in Scotland. If anything at that time politicised me and many other women, it was the unfairness of what the Government were doing. I do not say that to be critical of the hon. Gentleman—he has been very helpful this morning—but simply to say that when put in front of Ministers, sometimes issues look like a wonderful wheeze on the basis of the paperwork that the Government have produced, but it is when we look at the impact on people’s lives that such policies begin to fall apart. That is what is happening here.
I want to say a few words about the other issues raised in the debate. My hon. Friend the Member for City of Durham spoke not only about the principles of child benefit and the unworkability of the proposals, but about their legality. She made a powerful statement: these changes are wrong and they should not happen. That is absolutely right and it is the position that we are coming from this morning.
My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) mentioned workability and the fact that the proposals were far too complex. She critically identified the real impact on real families. A family with three kids could find itself with a bill of £600 at the end of the year. That might not seem to be a big deal when someone is writing it in a policy proposal, but for many families that £600 bill will mean the difference between being able to buy necessary items for their kids and not being able to do so. Being asked to pay such a bill suddenly can throw a household budget out for months.
I thank my hon. Friend for her generosity in giving way again. Does she agree that we need clarification from the Minister? If a parent who is entitled to child benefit throughout the year receives a bonus from an employer at the end of the tax year that takes them over the threshold, what will happen to the family?
My hon. Friend makes another useful point. We raised that issue with the Minister on the Floor of the House. Many people, because they get a bonus at work or because they are self-employed, will find at the end of the year that they have earned either more or less than they anticipated. Many self-employed people are not earning huge sums of money, so such issues are critical to them.
I have a further serious example. I have a constituent who from time to time works with his firm in Afghanistan. His firm pays him a bonus because of the difficulties of working in a theatre like that. There must be hundreds, if not thousands, of people who get that sort of payment.
My hon. Friends have given very practical, real-life examples of the kind of circumstances in which people may feel penalised for doing particular types of work or for taking on additional risks and responsibilities. A thing that we hoped that we could persuade the Government to do, if nothing else, was not to implement the changes straight away, and perhaps the Minister could come back on that point. If they are intent on doing this—the Opposition believe that they would be wrong to do so, and I hope that they will pull back—at the very least would they be prepared to pause, produce a report and look at the circumstances in which people would be adversely affected?
My hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Stretford and Urmston raised the tax implications, and my hon. Friend the Member for East Lothian (Fiona O’Donnell) mentioned national insurance contributions. The main concern around those is that when organisations such as the Institute of Chartered Accountants and others that deal with tax issues day to day say that the principles are wrong, it is of serious concern. The Minister has to say whether taxing an individual in respect of money that was paid to someone else is not a fundamental change in how individual taxation is dealt with. I will give him the opportunity to intervene if he wishes, but perhaps he prefers to answer in his speech. Such organisations have looked at the proposals and raised serious concerns. It is a shift and could open opportunities in other ways for similar proposals to be brought in, which would be extremely concerning for the reasons that other hon. Members have set out.
Until I heard the Minister’s earlier comment, I was not aware that his wife was a lawyer. I am sure that she has some views about how, rather than defending the policy, the Government now seem to be relying on describing it as absolutely legal, as was identified earlier. None the less, there are questions about how they arrived at that position. When the regulations to justify the legality of this were introduced in Parliament, were they discussed in relation to child benefit or any other benefit issues? Was it ever anticipated that those regulations would be used in such a context? Could he deal with that issue in his response? If he cannot answer today, I have tabled a parliamentary question that I hope he will answer in due course.
I want to give the Minister time to respond, so I will speed up. I have made those points because the report from the Institute of Chartered Accountants identified the issue of HMRC using the tax system to claw back a benefit from one individual that was paid to another. The tax system is based on individuals and the benefit system is based on households, so that undermines the principle of taxation. I have not seen anything from the Minister that describes how a household will be interpreted in the tax regulations. Families in similar financial situations could be treated quite differently, which undermines the policy of fairness. Changed family circumstances could, as we have heard, make it difficult or impossible to calculate the clawback, or determine who should pay it; and, indeed, we have heard examples showing that if family circumstances change during the year someone will be presented with a tax bill at the end of it, leading to greater uncertainty about family budgets.
There has also been concern about collecting the charge through PAYE coding. The report by the Institute of Chartered Accountants in England and Wales states that it could lead to delays of up to three years, and undermine the efficiency of the whole system, because any coding adjustment is an estimate, and it would be necessary to re-estimate the code repeatedly. We are no longer just dealing with the principle of child benefit; we are dealing with a fundamental change to the taxation system. That should be scrutinised further. I hope that the Minister will be able to give some responses to the issues that have been raised this morning. Will he also address the point made by my hon. Friend the Member for East Lothian—she raised, it, indeed, on the Floor of the House—and others about women who might forgo the opportunity to claim child benefit, but would not receive credits for their national insurance contributions? That is a serious matter that has not been addressed.
It is an important point. I want to put another couple of related questions to the Minister. In the budget for dealing with the consequences, a certain amount of money was put aside for marketing. I raised with the Minister on the Floor of the House the issues of what information is available, and how to assess who is likely to be caught by the circumstances. I would like to hear exactly how the Minister intends to communicate to the individuals involved—to get the information out, and get the advice to those likely to be affected. How will he ensure that people do not make damaging decisions at a point in their lives when it may be easier to do that, without looking at the longer-term consequences? We all know that there are situations—we heard examples in the debate—in which an individual in a household may feel under pressure to do something that is not particularly to their advantage.
I hope that the Minister will be able to deal with the points I have made. I will finish by returning to the point about section 18(2)(a) of the Commissioners for Revenue and Customs Act 2005, which the Government have cited, arguing that it makes the use of the tax system legal in the present context. The understanding of the Association of Chartered Certified Accountants is that that use of the provision is a last resort in the giving of one partner’s information to another. ACCA suggests that only where taxpayers who must talk to one another to make the system work correctly do not do so should the section be brought into play. How will the Government assess when to use it and breach confidentiality? There are serious issues about what information about one partner will be given to another. Will it be only “Your partner is in a higher tax band”, or will it be detailed information? I do not think we have had an answer to that.
I hope the Minister can give us the information this morning. It is worth noting that earlier in the week the Institute of Chartered Accountants warned that the new tax would be an “operational disaster”. Surely that should be of concern to the Minister, and should mean that we get answers this morning, and that the Government think again.
It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for City of Durham (Roberta Blackman-Woods) on securing the debate, and thank all the hon. Members who have contributed. A number of factual questions have been asked about the operation of the policy on child benefit, and I shall deal with as many as possible.
The changes that we announced at Budget 2012 ensure a balance between reducing the cost to the Exchequer of child benefit and ensuring that those on low incomes will not be affected. I must put the measure in context; it is the consequence of the state of the public finances that the Government inherited. We have to make decisions because of the Budget deficit that we inherited—the largest in our modern history. It is, unfortunately, the British people who will have to pay for the debt left to us by the previous Administration.
It is because of the state of the public finances that we must take difficult decisions. I will strongly defend the policy, but I must make the point to hon. Members who oppose it that it is helping us to reduce the deficit by £1.8 billion. If we do not find that sum in the way in question, we will need to find it somewhere else, or borrow more. That is the decision that we all face.
My hon. Friend the Member for Christchurch (Mr Chope) made that point. The reason is that child benefit is essentially the only item of welfare spending that goes to households with individuals who earn more than £60,000 a year. I understand the argument that the hon. Lady and my hon. Friend are making: let us keep on spending and raise taxes. That is a tax and spend approach. I do not know whether the hon. Member for Stretford and Urmston (Kate Green) speaks for her party on that; I know that my hon. Friend the Member for Christchurch does not for ours.
If memory serves, the ONS will make that assessment after the policy has come into effect, in January 2013.
As I said, we face a large deficit and seek to reduce it in a way that is both fair and reasonable. It is only right and proper to ask those with the broadest shoulders to bear the greatest burden; because of this measure and others announced by my right hon. Friend the Chancellor in the Budget, that will be the case. Considering the universality of child benefit was never our first choice, but that is the position in which we have been left.
I recognise that many are concerned about the change. Some argue that child benefit must be sacrosanct. However, it is not fair that an individual who earns £15,000, £20,000 or £30,000 should be paying for benefits for those earning £80,000, £90,000 or £100,000. When Government need to raise revenue, it makes sense for them to turn to a measure with a broad base because significant numbers of recipients will not be reliant on the additional payment they receive. Child benefit is just that sort of payment.
The steps that we are taking will raise £1.8 billion for the Exchequer by 2014-15. That is why my right hon. Friend the Chancellor announced in 2010 that we would seek to withdraw child benefit from higher-rate taxpayers. We have always said that we would consider the ways in which to implement the measure, but we made it clear that a new complicated means test is not a sensible way forward. Instead, we should look to the existing systems and processes to ensure that we can achieve our goal.
Let me turn to the changes that we are introducing.
The alternative method, which would have been to do this on household income, would mean applying the tax credit system to all 8 million child benefit recipients. That would widely expand the tax credit system and impose a burden on a far greater number of people.
We propose to withdraw the financial gain from child benefit from those families where one partner has income of more than £60,000, and reduce the gains where one partner has income of more than £50,000. By applying a tax charge on those on high incomes using existing processes, we are doing it in the most efficient and pragmatic way. The charge will apply to an individual in receipt of child benefit, or their partner, where they are married or in a civil partnership, or living as if they are married or in a civil partnership. I hope that that answers the point about what a household is. It uses the current definitions of partners within social security legislation, and means that other adults living within the household do not affect the liability.
It will remain the case that two earners just below the threshold will not have their child benefit withdrawn. To introduce a new means test for family income would be complicated, costly and confusing—the very things that we wish to avoid. We would need to assess all of the 8 million households receiving child benefit, and we would need to do so each year.
Let me turn to the mechanics behind the changes that we are introducing. First, the changes will not affect those receiving child benefit who have income under £50,000, or whose partner does. That will mean that 85% of families receiving child benefit need not be troubled by the changes—85% means more than 7 million families. Where an individual or their partner has income of more than £50,000, the charge will be tapered depending on their income. The equivalent of 1% of the child benefit award will be charged for every £100 increase over £50,000 in adjusted net income. That means that child benefit is fully withdrawn at an income of £60,000. Furthermore, the thresholds between which the taper operates are not dependent on the number of children.
Those affected—around 1.2 million taxpayers—will declare their liability through the income tax self-assessment process, though just over half are already within the SA system. Although we recognise that the charge will bring some taxpayers into self-assessment for the first time, using self-assessment means that the tax can be calculated on the basis of the amount of child benefit received, and the taxpayer’s actual income. That is preferable to including an estimate in a taxpayer’s PAYE code, only to discover an underpayment or overpayment of tax at the year end as actual income proves to be different from estimated income. Even as small a change as £100 will change the amount of tax due for an individual on the taper. As a third of taxpayers affected will benefit from a reduced liability as they are on the taper, using PAYE rather than self-assessment would generate large numbers of under and overpayments.
The changes will take effect from 7 January 2013, with individuals affected including information relating to the charge for the first time in their self-assessment returns for the tax year 2012-13. The first payments of the charge will be due by 31 January 2014 if a taxpayer chooses to pay in a lump sum. Otherwise, the amount due for 2012-13 will be collected through the tax code in 2014-15.
I have a quick point. The Association of Chartered Certified Accountants is concerned that there will be further confusion over the fact that although the new scheme starts in January, the tax year does not start until April. How does the Minister answer that criticism?
Initially, we said that the scheme would be introduced from 1 January 2013—actually, it is from 7 January because that is the first day on which child benefit is payable. Such a time scale is perfectly operational, and there is no reason why we cannot run it from that particular point. Obviously, were we to delay the introduction of the scheme until April, there would be a cost to the Exchequer.
The introduction of the taper means that the vast majority of taxpayers with income between £50,000 and £60,000 will still gain from taking on extra work or getting a pay increase, even if it does take them over the £50,000 threshold.
A taxpayer or their partner would need to receive child benefit for at least eight children before the tax due on their additional income equalled the amount of income itself. Equally, an individual’s income may reduce so that they are no longer liable to the charge. That may also mean that tax due in respect of previous years can no longer be collected through the tax code. In such cases, HMRC will use its usual debt management processes.
Let me address the issue of opting out, which has been raised by a number of hon. Members. We are enabling individuals to opt out of receiving child benefit. Understandably, the point has been raised about state pensions and so on. Let me be clear. National insurance credits, which protect a person’s future entitlement to basic state pension and the state second pension, will remain available to all those who take time out of work to bring up children. The protection is given to anyone claiming child benefit for a child under the age of 12, even if they do not receive any payment or if they or their partner has to pay the new tax charge. The introduction of the tax charge will not affect a person’s right to claim child benefit. Child benefit will remain available to be claimed by anyone responsible for the child.
Parents and carers will have two options to safeguard their state pension, and they will be made clear on the child benefit claim form. First, they can claim child benefit and receive the payments. If liable, they or their partner can pay the new charge. Alternatively, they can submit a claim form for child benefit to establish their entitlement for state pension purposes, but choose not to receive the actual payments. That means that neither they nor their partner will be liable to pay the new charge, but the national insurance credits will still be received.
As for compliance, our approach means that we can use the current HMRC systems. That reduces the cost of implementation both for HMRC and the individuals affected. HMRC will use existing penalty regimes for those who choose not to tell it that they are liable to the new charge or who declare the wrong amount on their self-assessment return.
In the interests of time, let me turn to the issue of taxpayer confidentiality that the hon. Member for Bishop Auckland (Helen Goodman) raised. We have some disagreement over the meaning of independent taxation. It is about individual allowances and assessment of own income. In the 1980s, it replaced the system whereby a husband declared his wife’s income on his return, which increased his income. I understand the concern over taxpayer confidentiality. Information that should be shared between partners relates to whether child benefit is being claimed and which of the partners should have the tax charge—in other words, which tax partner is earning the most income.
The mechanisms in place will provide the minimum of information. Partners who may not be talking to each other can discover who is earning the most, but not the full details and whether or not child benefit is being claimed and for how many children. That is the extent of the information that needs to be shared, and HMRC is developing a process that enables it to share limited information with an ex-partner.
As I have already said, the Government have had to make difficult decisions. To continue to provide child benefit, we must do so in a sustainable manner. The current cost to the Exchequer for those recipients less in need is too high. To pay almost £2 billion to higher-rate taxpayers does not represent good value for money in these challenging times. We also recognise that we must withdraw child benefit to higher earners in a fair manner. The increase of the threshold to £50,000 and the introduction of the taper ensure that we are taking this action only in relation to those who can most afford it.
NHS (Foreign Nationals)
Thank you, Mr Streeter, for calling me to speak. It is an honour to serve under your chairmanship.
I very much appreciate having the opportunity to speak on the issue of foreign nationals’ use of the NHS today. I know that it is of concern to all Members of the House, regardless of political party, because for many of us it is a huge issue for our constituents, who are genuinely concerned about the NHS, which is free at the point of use.
Obviously, the constituents I speak to accept that we should never turn away at the door anybody who is in genuine need, whether they are asylum seekers or not. Obviously, there are big public health issues and I welcome the fact that the Government have extended HIV treatment to those people in need regardless of nationality, because that will benefit the whole of our society. However, we cannot get away from the fact that there is a large issue, and one that is growing, regarding the use of NHS facilities by foreign nationals who are ineligible for free care.
As a member of the Health Committee, I am particularly concerned about this issue and I have put down several parliamentary questions, dating back to last year. The Government responded that roughly £35 million had been written off by hospital trusts, in terms of debts that had been accrued by foreign nationals and that had neither been paid back nor claimed back. The trusts involved did not include foundation trusts, so I made a freedom of information request of all trusts across the country. The data that I received back from the 118 NHS trusts that replied to me showed that just over £40 million of debt accrued by foreign nationals had been written off.
Those data also showed that there is a huge variation in relation to the collection of debt accrued by foreign nationals. The highest figure for such debt was for Guy’s and St Thomas’ NHS Foundation Trust, which had written off almost £6 million of such debt since 2004. My own local trust, North Bristol NHS Trust, had written off £1.7 million of such debt. The data showed that some trusts were acting contrary to the regulations and the current guidance, which
“place a legal obligation on the trust providing treatment to identify those patients who are not ordinarily resident in the United Kingdom; establish if they are exempt from charges by virtue of the Charging Regulations; and, if they are not exempt, make and recover a charge from them to cover the full cost of their treatment.”
That is what trusts should be doing when foreign nationals who are ineligible for free care come through their doors. However, it was clear from the information that I received in response to my FOI request that many trusts were not even collecting those data, which is contrary to the guidance. Of those trusts that were collecting the data, some had gone back to 2000 to collect them and some had gone back to 2004. There was a large variation in the data that cannot simply be explained by the fact that some trusts were more willing than others to claim back the debt that they were owed from foreign nationals.
There is anecdotal evidence, too. I have heard from some Members who wanted to be in Westminster Hall today for this debate but were unable to make it, and they asked me to raise some issues. In particular, one MP had a constituent who had come to them regarding an American visitor who was staying with them. During their holiday, the American visitor became ill and attended NHS facilities for treatment. They then contacted their medical insurer in the US, which suggested that they provide proof of the cost of their treatment; the American visitor would need a receipt from the NHS, so that they could claim back the money from their medical insurer. However, when they contacted the trust in question, they were told that no such receipt was available and the trust itself had not collected the data about the nature and cost of their treatment, even though this visitor was a foreign national and ineligible for free NHS care, and actually wanted to pay the bill because they were very grateful for the fantastic treatment that they had received. Consequently, a receipt could not be provided.
So there are examples of how trusts are clearly not following the guidance and collecting NHS debt from foreign nationals. It is particularly worrying that a 2008 survey of NHS managers suggested that a third of them did not even bother to ask patients whether they were eligible for free treatment when they arrived at hospital.
Is the hon. Gentleman now talking about those foreign nationals who arrive here specifically to receive treatment, or those foreign nationals who come here as visitors, become ill and are then unable—for whatever reason—to pay for their treatment? We must not mix the foreign nationals with political asylum seekers, overstayers and others who, for whatever reason, live here for many years but are not eligible to receive NHS treatment. Is the hon. Gentleman mixing those two groups, or separating them?
No, I am certainly not mixing them and I will come to the issue of eligibility that is defined around the term “ordinarily resident”. I want to talk about that in terms of the historic issues that determine whether foreign nationals should be charged for treatment. Obviously, there have been various reports in the past decade, including a 2007 report by the Joint Committee on Human Rights that examined services available to asylum seekers, and those reports have raised that very issue. If access to care and treatment was denied to those who are vulnerable and in genuine need of care, that would undeniably make the situation worse and cause them far greater distress and harm. In those circumstances, we have a right and a moral duty to ensure that people are treated.
On the other hand, we have what some red-top newspapers might call “health tourism”. I use that phrase with some trepidation, because the situation is certainly more complicated than that phrase implies; it suggests that people are simply flooding in across our borders to ensure that they can receive NHS treatment, and that is certainly not the case. There are eligibility criteria that apply, but my concern is that they are not being applied strictly enough by various trusts. On the back of the previous Government’s consultation on this issue, between February and June 2010, the current Government have now decided to tighten certain eligibility criteria, particularly regarding asylum seekers and specifically when asylum seekers have their right of asylum refused.
There is obviously an issue with border security as well, and I welcome the fact that the Government have introduced measures, through the Home Office, in relation to those who have left the country with unpaid debts to the NHS of more than £1,000. I put down a written question that suggested that each year there are 3,600 foreign nationals who accrue such a debt for their NHS treatment and that they should not be allowed re-entry to this country unless those debts were paid off. There is a spectrum through which one has to view who is a foreign national and who is “ordinarily resident”.
I do not deny that establishing the difference between those two groups can be very difficult and that there is a very fine balance to strike. Nevertheless, it is clear from the data that I have received in response to my FOI request that the current system is not working. If there is a situation, as there is at the moment, whereby debts are being accrued and not reclaimed, and whereby a third of NHS managers are not even asking patients whether they are eligible for free treatment or whether they are a foreign national, that is a very big issue.
In many ways, one can understand why someone working within an NHS trust would not want to ask someone about their nationality; it might simply be easier to provide treatment. That is because of the simple fact that, once someone has been categorised as a foreign national and therefore they must be charged because they are ineligible for free care, those charges must be recouped. The costs of recouping those charges could far outweigh the charges themselves.
Moreover, I do not deny that some patients will turn up at an accident and emergency department or trust with a particular complication, which becomes severely worse. For whatever reason, they happen to die and there is no way in which the charges for which they would have been liable can be recouped. All those particular situations need to be taken into account.
In the Health Committee, we looked at how different trusts operate and collect their debts, or even monitor which people coming through their doors are eligible for free care and treatment. West Middlesex University hospital has what is called a “stabilised discharge system”. If a foreign national is admitted to hospital, the doctor first establishes whether there is a need for urgent life-saving treatment, which is obviously a priority for the NHS. If that is not the case, the person is told what treatment is required and how much it costs. If they are unwilling to pay, they are asked to leave. That policy in the hospital nearest Heathrow airport has saved the hospital £700,000 in each separate year. Even within the existing guidance and criteria, there are the means and possibilities by which trusts can ensure that the criteria are followed correctly and that savings can be made. I am sure that if every trust acted in the same way as the West Middlesex University hospital, we would see the amount of debts incurred by foreign nationals drop significantly.
The hon. Member for Ealing, Southall (Mr Sharma) mentioned the criteria around a foreign national and who is and is not eligible for care. The context of this debate, as I mentioned, is an historic one. It was not until 1989 that the British Government began to require certain overseas visitors to pay for hospital treatment. That was defined in regulations in 1977, when legislation permitting persons not ordinarily resident in the United Kingdom to be charged for NHS services began to be looked at.
How we define someone who is not ordinarily resident, as opposed to someone who is ordinarily resident, is interesting. In a way, it is a common law concept, but in NHS health care legislation there is no definition of “ordinarily resident”. The only definition comes from a 1982 judgment in the House of Lords, which was actually in the context of the Education Bill that was passing through the other place at the time. The definition of “ordinarily resident” was:
“living lawfully in the United Kingdom voluntarily and for settled purposes as part of the regular order of their life for the time being, whether they have an identifiable purpose for their residence here and whether that purpose has a sufficient degree of continuity to be properly described as ‘settled’ ”.
That means that UK citizenship and past or present payments of UK taxes or national insurance contributions, contrary to what many of our constituents might think, are not directly taken into account in the way that “ordinarily resident” has been defined.
In the review that they are currently conducting, I urge the Government to consider how we will define “ordinarily resident” in future. The NHS is a contributory system that people pay into to receive free care at the point of treatment. That is right. The NHS is free for citizens who have paid into the system. It cannot be a free-for-all for everybody to use. Our constituents wish us, as legislators, to address that concern.
It is clear that the current rules and regulations, having been addressed and re-addressed over time, have caused some confusion. In 2007, the Joint Committee on Human Rights produced a report on services to asylum seekers. It suggested that the new rules introduced in 2004 regarding asylum seekers and whether they were eligible for free care—or, once their asylum application had been turned down, whether they were still eligible for free care—caused confusion about entitlement. It suggested that the interpretation of the rules appeared to be inconsistent, and that in some cases people who were entitled to free treatment had been charged in error.
At the time, the Labour Government began a consultation looking at the use of primary care by foreign nationals using the NHS. It is clear that in acute and secondary care, charging regulations apply. The problem is that the implementation of those charging regulations has not been effective, and we need to be more stringent about the implementation of current guidance.
Currently, there are no charges for primary care, whether people are eligible or not. People can register with a GP for primary care, regardless of status. The Labour Minister at the time, in 2004, held a consultation on whether there should be charges for foreign nationals and people who were ineligible for free care. He suggested that the consultation was necessary because
“the rules about entitlement to primary care are best described as a muddle.”
I agree. In my own experience as MP for Kingswood, I have found a firm of lawyers in Bristol—Deighton Pierce Glynn—that has been writing to doctors urging them to register patients and saying that if they do not, it will take legal action, regardless of the patients’ nationality and eligibility for free care. I raised the matter in the local media, in the Bristol Evening Post. It is wrong, and I am concerned that our NHS will become a legal paradise for lawyers piggy-backing on doctors who are doing the best that they can with the resources that they have. They know that NHS resources are stretched and need to be rationed and that there is a big problem.
One lawyer responded in the Bristol Evening Post by saying that lawyers were not trying to change the law:
“We are trying to apply the law as it is. Nobody is excluded from GP treatment. It is very clear. Hospital treatment is different. People come to us when they have been refused registration with a GP. There is nothing in the law that permits them to do that. Refusing them isn’t lawful.”
This particular case concerned asylum seekers who had had their asylum applications refused. When the GP in question received the letter from Deighton Pierce Glynn, an unnamed member of staff said:
“Someone at the PCT read the letter and panicked. Do we just register everyone who is illegal?”
There is clearly confusion being stoked by certain members of the legal profession who seem to be taking advantage of the uncertainty of eligibility within primary care so that they can profit when their clients wish to apply to the NHS.
On the situation in primary care, I was interested in a question asked by the right hon. Member for Birkenhead (Mr Field) on 23 April 2012. He asked the Secretary of State for Health
“(1) what documentation a foreign national who seeks to register with a GP is required to provide;
(2) whether a foreign national on a six month visitor's visa is entitled to register with a GP;
(3) on what grounds a GP whose list has not been closed may refuse an application to register from a foreign national.”
The reply was:
“Under the terms of their existing contract, general practitioners (GPs) have discretion in accepting applications to join their lists. However, they cannot turn down an applicant on discriminatory grounds. They can only turn down an application if the primary care trust has agreed that they can close their list to new patients or if they have other reasonable non-discriminatory grounds.
There is no formal requirement to provide documentation when registering with a GP. However, many GPs, when considering applications, request proof of identity and confirmation of address, but in doing so they must not act in a discriminatory way.
A decision on whether to register a foreign national who has a six-month visitor visa is therefore currently for the GP to consider.”—[Official Report, 23 April 2012; Vol. 543, c. 701-02W.]
That raises issues. I do not like to quote Sir Andrew Green, the chairman of Migration Watch UK, but he stated:
“What this means is that someone getting off a plane with a valid visitor’s visa is, in effect, able to access the GP services of the NHS without ever having paid a penny into the system. Over one and a half million such visas were issued last year.”
Once someone is registered with a GP, the regulation and guidance mean that if they need further secondary care, it is the relevant NHS body’s duty and not the GP’s to establish the requirement for free hospital treatment. That raises the issue of the extent to which that takes place. Once someone is on the GP’s books, that is almost a rubber stamp into receiving secondary care.
I am not suggesting that GPs act as pseudo-immigration officials checking people’s eligibility for free care, but there clearly needs to be a more joined-up approach between the people who end up on GPs’ books and who are then referred by GPs to secondary care specialists, and what that then involves in terms of charging. When it comes to the issue of primary care and foreign nationals, I do not believe that foreign nationals should be entitled to free primary care. We should extend the charging regulations further.
I apologise; I should have congratulated the hon. Gentleman earlier on securing this debate, which is important not only to his constituents but to people all over the country, who take the issue seriously. It is also important in my constituency, where it is discussed every day.
I am a bit confused; I hope that the hon. Gentleman will clarify. He is mixing foreign nationals and those who have been here for many years. As I see it, in this debate, foreign nationals are those who come especially to register themselves for a few days, who receive treatment and who disappear without paying, due to system failures, although I will not get into that debate. For those already here, if GPs act as immigration officers or work on behalf of the UK Border Agency, that will mean health problems.
I certainly do not mean to confuse or mislead. When I say foreign nationals, I mean those who come to this country requiring care who are not defined as ordinarily resident under the current regulations. Personally, I think that we should consider the definition of “ordinarily resident”. I have no problem with people’s nationality, whether they are British or a citizen of whatever country. If they work in this country and are contributing to society, it is right that they should receive the free care towards which they have contributed.
Equally, exemptions apply for matters of public health and vulnerable groups. As the hon. Gentleman mentioned, if denying access to treatment could worsen the health of the community, let alone the individual, it is right that we should act responsibly. However, that should not preclude the creation of a clear definition of who is and is not eligible for care. One reason why we are having this exchange is that there is no clear, black and white definition. There will, obviously, be shades of grey, as there always are in health care. Health care professionals have a moral obligation to treat people in need, the sick and the vulnerable. I do not deny that, but we also have a moral obligation to our taxpayers to ensure that NHS money is spent as well as it can be.
A few people have come to me and said, “Mr Skidmore, it’s only £60 million out of a budget of £110 billion. Surely you’ve got to factor in debt. We should be able to expect that amount of debt to be written off.” I do not accept that argument. My local community hospital, Cossham hospital, is undergoing a £20 million refurbishment at the moment, and my constituents are so excited that it is taking place. That £60 million is a lot of money; it could have paid for the refurbishment of Cossham hospital three times over. We must count millions in order to save billions. During this efficiency drive, when we are trying to reinvest 15% to 20% of NHS resources in front-line care, it is a key aspect of the Nicholson challenge that we look for waste in the system and for instances where regulations are not being applied effectively.
I agree with the hon. Gentleman that we must be careful about how we define a foreign national. I do not want this to be seen as a xenophobic campaign, because it certainly is not. It is based on the conviction that the NHS is a national health service that provides free care at the point of use, but should not be abused; it should be free at the point of use, but not at the point of abuse.
The GP situation includes the lawyers at Deighton Pierce Glynn, who have been contacting GPs, and the Minister of State’s answer to the right hon. Member for Birkenhead about the issue of visas and documentation, which raises an issue that I think GPs would welcome.
Part of the consultation involves clarity about what GPs must look for when patients register in their practices, and whether they can say, “I’m afraid I cannot register you, because you don’t have the necessary data documentation.” As far as I understand it, the lawyers have been writing to GPs saying that by not registering patients, they are applying a discriminatory process. However, I was interested to read that paragraph 5.16 of the guidance on charging, in the section on GPs in primary care, says:
“It is important to see that all patients are treated the same way, to avoid allegations of discrimination.”
That is also clear in the Minister’s answer. The guidance goes on to say:
“It is not racist to ask someone if they have lived lawfully in the UK for the last 12 months as long as you can show that all patients—regardless of their address, appearance or accent—are asked the same question when beginning a course of treatment. The answer to that question may result in others needing to be asked, but again you will not be breaking any laws as long as those questions are asked solely in order to apply the Charging Regulations consistently.”
It is in the guidance that GPs have the right to ask, as long as they ask everybody. They will not be applying a discriminatory process.
As I said, in 2004—they reported in 2009—the previous Government began to consider whether we should extend charging to primary care and how eligibility criteria should be tightened. The review suggested that charging would not be extended to primary care. I hope that we as a Government might be able to reconsider. I know that this Government are committed to ensuring that national health care resources are spent in the right way. My constituents appreciate that, as I have said.
The Home Office has introduced measures so that anyone owing the NHS £1,000 or more will not be allowed to enter or stay in the UK unless the debt is paid. When that is implemented, the Home Office hopes to capture 94% of outstanding charges owed to the NHS; hopefully, it will have a significant impact. Encouragingly, the review commissioned on 18 March 2011 suggested:
“The existing system is still too complex, generous and inconsistently applied. While the NHS remains committed to providing immediate or necessary care, it is important that a balance of fairness and affordability is also struck.”
I agree entirely.
The review taking place will now consider
“qualifying residency criteria for free treatment; the full range of other current criteria that exempt particular services or visitors from charges for their treatment; whether visitors should be charged for GP services and other NHS services outside of hospitals”,
as I suggested; and
“establishing more effective and efficient processes across the NHS to screen for eligibility and to make and recover charges”.
I suggest that as part of the consultation, they consider West Middlesex University hospital and the good work being done there. Finally, the review will consider
“whether to introduce a requirement for health insurance tied to visas.”
I was encouraged when the Minister said:
“The NHS has a duty to anyone whose life or long-term health is at immediate risk, but we cannot afford to become an international health service, providing free treatment for all. These changes will begin the process of developing a clearer, robust and fairer system of access to free NHS services which our review of the charging system will complete. I want to see a system which maintains the confidence of the public while preventing inappropriate free access and continuing our commitment to human rights and protecting vulnerable groups.”
I agree with all those words.
I initiated this debate to ensure that Members have an opportunity to put their views as part of the consultation, which, hopefully, will report later this year. To reiterate, the NHS is a national health service, not an international one. Although we all believe that health care treatment must be free at the point of use, it cannot be free at the point of abuse. I urge the Minister to consider carefully what I have said and what other Members will say in this debate. We care passionately about the NHS. We want the NHS to continue as it has for six decades now. This issue is one that I know all our constituents and everyone in the House, regardless of party politics, will wish to ensure is solved.
I congratulate the hon. Member for Kingswood (Chris Skidmore) on securing this debate. He tried hard to keep a balance—it is important for us to do so—as did the hon. Member for Ealing, Southall (Mr Sharma) during his interventions. However, whenever I read the background information, I cannot but feel shocked. On 3 May, an article in The Daily Telegraph on the foreign national debt stated that official figures suggest that
“more than £40 million is owed to NHS hospitals by foreign patients who were not eligible for free care”
and that freedom of information requests showed that
“the average unpaid debt for the provision of care to foreign nationals was £230,000 in the 35 trusts which responded.”
The article went on to note the doctors’ trade magazine Pulse’s claim:
“If this figure was the same across all 168 English acute trusts, the total debt would be almost £40 million”.
Those are worrying figures. The article continued:
“The FoI requests showed St George’s Healthcare Trust in South London had the largest outstanding debts, totalling £2 million from £3.55 million invoiced to foreign nationals for health treatment from April 2009.”
Everyone present is proud of our NHS and of the high esteem in which it is held, not only in this country, but throughout the world. I do not want to be a scaremonger. I want to keep my comments balanced. It is not in my nature to stir up angst or discontent. As the hon. Member for Kingswood has mentioned, we do not want xenophobia or discrimination, but the figures are unsettling and there are concerns that our health system is being taken advantage of by some people, which is to the detriment of British people who are waiting to be seen and receive treatment.
Anyone who knows me either inside or outside this Chamber will know that I often put my hand in my pocket to help those in Africa, India and other parts of the world. The same is true of other Members and of our great nation, because we are a nation of givers. Our charity contributions in a time of economic restraint are still above the norm—we are holding our own. In Northern Ireland in particular, our charity giving per head of population is second to none. I am all for international development and believe that we as a nation have a role to play in helping others who need it. The UK makes a significant contribution to third world aid, and we continue to do so—our commitment is to give—while other countries are cutting back. We as a nation are making a significant contribution and will continue to do so. I and other Members support the Government entirely on that issue.
I am also a constituency man and know that people are becoming discouraged. I am conscious that I am speaking as a Northern Ireland MP and that health is a devolved matter. Cancer patients talk to me about new treatments that cannot be paid for on the NHS because of lack of funding. I have asked questions on the Floor of the House about whether new treatment will be made available for those constituents of mine who clearly need it. In the past few days, we have heard on the news about the postcode lottery—that terminology is often used—whereby the treatment depends on the funds available where someone lives and the demands on the system. That is not necessarily a criticism—it is a fact of life. My constituents deserve to have the best treatment in the world and I will work as hard as I can to ensure that that happens.
The fact that £40 million is owed by some foreign nationals needs to be addressed. The Minister and the Home Office have indicated that they intend to introduce a £1,000 threshold to
“capture 94 per cent of outstanding charges owed to the NHS.”
I hope that that will be the case.
I hear that people now believe that we have a lax system. Again, we need to keep a balance. We cannot provide a world health service—it just cannot be done; the moneys are not there. We need to draw the line, and I believe that we should draw it in this place and that it should be a straight, firm line. Will the Minister indicate whether there will be a review or a reassessment of the six-month visa that allows GP registration and access to NHS care? That needs to be clarified, so that we can see where we are going.
There is a clear difference, as the hon. Member for Ealing, Southall has mentioned, between those who are taken ill on holiday and those who come here directly to take advantage of our health system. Again, it is about balance.
I have been encouraged to hear the Government’s proposals, but as a Northern Ireland MP I am concerned about whether they will make their way over to Northern Ireland. I will chat with my colleagues at home to ensure that we implement like-for-like proposals. Health is a devolved matter in Northern Ireland and the Health Minister is a member of my party. I will certainly have some discussions with him. The hon. Member for Kingswood has touched on this issue, but will the Minister explain what interaction there will be with the regional Assemblies—the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly—so that we have a UK-wide policy? It is important that all of the devolved Administrations have a similar policy to that on the mainland in England.
There are so many people in need of our health system at home that if we were to take in every sick person who was able to travel to the UK, it would not take a week until we imploded because of the demands on our system. We have to be realistic about what is expected of us and how we can help others. It about getting the balance right. The NHS is our national health service and one into which we have paid over many years through our tax system.
I had the privilege—some would say that it was not a privilege—of serving on the Health and Social Care Bill Committee, on which both Government and Opposition Members discussed the figures and tried to devise a reorganisation that would save money and still provide a good service. As well as delivering what is best for our citizens in the United Kingdom, it is important that we are able to help those who need it and who come here not with any specific intention to take advantage of the NHS, but who find themselves in need of it due to ill health. Any of us can be taken ill on holiday, so we take out insurance, which covers us for so much. It does not cover for circumstances in which ill health might result in a longer stay than anticipated, but it does help part of the way.
Some have taken advantage of the system. The Government are right to tighten the system and to ensure that there is a good NHS for the whole of the United Kingdom. The hon. Member for Kingswood referred to the term “health tourism”, which others have used and which sends out signals. Whether that term is correct or not, some people are doing it. We need to make sure that we have a system that can help those when they need it. We are a caring nation—we do not want to turn people away—but our system needs to ensure that that is done correctly. As I have said, this is all about balance. It is about ensuring that we, as a caring nation, can offer help to those who need it. No one who needs help should be turned away—that is clearly where I am coming from—but at the same time we need to tighten the criteria, close loopholes and at least ensure that the £40 million drain on NHS care is restricted or comes to an end.
We are all proud to have such a wonderful NHS in Britain. It is a unique service compared with those available in the rest of the world. Everybody appreciates that, but at the same time we need to consider how much it costs us and how best we can improve it. This debate is not only about the NHS, but about immigration, the role of the UK Border Agency and the Home Office, and the delays in the Ministry of Justice that mean that people have to wait for years before learning whether they can stay, until which point they need the services. That is why I intervened on the hon. Member for Kingswood (Chris Skidmore) to ask which foreign nationals he was talking about. My main concern is to control those people who abuse NHS services by coming here especially to receive treatment.
Other foreign nationals, however, have been here for many years, yet their position has still not been recognised. There is no clarification about whether they are entitled or not entitled. We have all heard about GPs who have a dilemma when somebody approaches them and says, “I’m living in this area. I want to register with a GP”, but from a health service point of view, everyone must receive a good quality of health provision. We—and GPs—need to consider whether we can deny such families or individuals the ability to register. That is what needs to be clarified before we can find the solution.
Through the Minister, can we put pressure on the Minister for Immigration to ensure that the Home Office takes such cases seriously and decides on them as quickly as possible? In my experience—and I am sure that of many other Members who deal with immigration cases—people are waiting for many years for a decision. What will happen to those people? We need to clarify that point.
I did not intend to make a major speech, but I was impressed by the contributions made. I can assure the hon. Member for Kingswood that there is no question about his credibility on the subject or about there being any intention on his part to criticise an individual or a particular community. He has raised a serious issue that affects all of us in our constituencies and our lives. I hope that the Minister will note that it is not only a question of the £40 million or £60 million, but of how we can solve the problems relating to immigration and health together rather than separately.
It is a pleasure to contribute to a debate under your chairmanship for the first time, Mr Streeter. I congratulate the hon. Member for Kingswood (Chris Skidmore) on securing the debate. The use of the NHS by foreign nationals is a growing problem and it is important to take a moment to reflect on why we are discussing the issue today. It is a concern among hon. Members from all parties and, as my hon. Friend the Member for Ealing, Southall (Mr Sharma) said, among people representing all communities throughout the country. The issue is of paramount importance to a number of people.
As the previous Labour Government delivered the lowest ever waiting times and the highest ever level of patient satisfaction, along with 44,000 more doctors and 89,000 more nurses, the NHS became the envy of many other countries. The recent Commonwealth Fund comparative study of the state of the NHS makes that absolutely clear. However, a consequence of having one of the—if not the—best health services in the world was, and is, that it became increasingly attractive to foreign visitors. That has brought a number of issues that need to be addressed.
The commonly agreed figure that the hon. Member for Kingswood has mentioned is that the debt accrued by foreign nationals to the NHS is around £40 million. He is right to point that out. It is a lot of money—whether it is £40 million or £60 million—that would buy a lot of medicine and fund a lot of projects in a lot of communities. If the figure is £40 million, it is approximately 0.1% of the £3.5 billion that the Government are wasting on NHS reorganisation now. None the less, that figure is an awful lot of money.
The NHS is built on the principle that it should provide a comprehensive service based on clinical need, not ability to pay. However, at the same time, it is a national health service—not, as has been repeated on a number of occasions, an international health service. There must not and cannot ever be any doubt about that. Therefore, it is right that we impose charges for overseas visitors, who are defined in respect of NHS hospital treatment as people who are not ordinarily resident in the UK.
The previous Labour Government were committed to maintaining the existing system of charges, but they proposed a series of further safeguards, including amending the immigration rules so that anyone who accrued substantial medical debts would not be allowed back into the country if they left without settling their bill. I am genuinely pleased that the current Government have adopted so many of those recommendations. However, we need to look again at the ability to make and recover charges, and we would be happy to work with the Government on that issue. For example, the previous Government considered whether foreign nationals should be charged for NHS services outside the hospital. That issue warrants further close discussion.
We also need to learn from those hospitals that are more successful at recovering charges. The hon. Member for Kingswood referred to some of those. Hospitals have a legal duty to recover any charges made to overseas patients and, frankly, some hospitals need to be much better at that. Sometimes dealing with that problem can be as simple as improving the recording of contact details, so that the patient can be pursued for payment, but I accept that the rules and procedures could be demonstrably improved. The Government should ensure that that is done and, again, we will support them in their efforts to do so.
A relevant issue that has not been touched on today is the Olympics. It would be helpful if the Minister explained what plans are in place to ensure that the NHS can meet the rise in demand from overseas visitors during the games. Will she tell hon. Members what exemptions are in place for athletes and officials? “Newsnight” recently reported that Olympic VIPs could receive fast-track emergency care. With A and E waits already increasing, is there not a danger that taxpayers who are paying for the NHS and the Olympics will be pushed to the back of the queue?
I would have raised the Olympics in my speech had it not been for the fact that I wanted this to be a cross-party debate. The criterion that Olympic officials and athletes should receive free treatment was part of the bid that was successful in 2005 under the previous Government. We would not have been awarded the Olympics if that had not been part of the 2005 bid.
The hon. Gentleman makes a good point. He is obviously aware of the fact that although he, I and other hon. Members are privy to those details, the general public are not. There is a salient concern out there about the perceived emergence of a better standard of care being afforded to people who are involved in the Olympics. I visited Homerton hospital in Hackney, which is one—if not the—Olympic hospital in London. I saw some tremendously innovative professionals there who are developing innovative medical treatments and systems of working. They need to get the message across that local people who use that hospital on a daily basis will not be disadvantaged by the Olympics. We need a clear exposition of why that will not be the case.
Although I have considerable sympathy with the contributions I have heard this morning, all hon. Members must recognise that, under the UN convention on human rights, the UK has an international obligation to provide free NHS treatment to those seeking asylum here. All of the contributions I have heard today indicate that that will not be too hard to achieve, but hon. Members must guard against those Members who advocate that we should not fulfil that obligation, because the temptation will be too much for some. When we produce facts and figures used in support of the arguments, that must be acknowledged.
We must also guard against Members from all parties who advocate that the NHS should turn away pregnant mothers or patients in need of emergency care. Overall, this issue requires a diligent, careful approach. It is not the platform for a weird, xenophobic virility contest. I look forward to hearing what the Minister has to say. There may be little common ground between my party and the Government on the NHS, but we can agree that NHS care must always be based on clinical need, not ability to pay. At the same time, first and foremost, the NHS must serve the people of the United Kingdom—those whose taxes fund the NHS, those who believe in it passionately as the guarantor of a better society and those who expect it to be there for them when they need it. I hope that we can agree on that principle as we continue to debate the issue constructively and develop the fair and appropriate policy responses that the issue deserves.
It is a pleasure to serve under your chairmanship this morning, Mr Streeter. I thank my hon. Friend the Member for Kingswood (Chris Skidmore) for securing the debate, which has provided a useful opportunity for hon. Members from all parties to come together and share their views. I express some disappointment at the fact that the shadow Minister, the hon. Member for Copeland (Mr Reed), was somewhat party political, but I commend the hon. Member for Ealing, Southall (Mr Sharma) for his generous comments. It is important to have that on the record: we all want clarity and fairness in the system.
I have met my hon. Friend the Member for Kingswood before to discuss the matter and, again, I commend his efforts in raising the subject, which has provided an opportunity to put some things on the record. Access to NHS care is very poorly understood—indeed, that is also the case for Members of Parliament. This is about foreign nationals using and potentially abusing the NHS. Like the health system of any country, the NHS provides for foreign nationals. Millions of people come to this country every year for various purposes and stay for different periods of time. Some become ill or have accidents, and have immediate health care needs that need to be met. We have a duty to treat them, just as other countries have a duty to treat British citizens who become ill abroad. I assure the shadow Minister that there is no question of anybody wanting to undermine that duty—nobody has raised that in the debate, it is not being discussed either and that will remain the case. However, we have a duty to taxpayers who pay for the system.
Questions were raised about who should be charged. To clarify the situation again regarding ordinary residence—settled, lawful residency in the UK—access to the NHS is not based on nationality, the payment of taxes or national insurance contributions. I accept that that is not widely understood. The service is paid for by taxpayers, so they have an interest in who has access to it. We exempt some categories of visitor from charges, such as those working or studying and those visiting from countries with which we have bilateral health care agreements. A few services are free to all—my hon. Friend the Member for Kingswood may have mentioned them—such as treatment in an A and E department, which I have mentioned, and treatment for certain infectious diseases, as there are wider public health reasons for ensuring that people receive prompt treatment.
Under the legislation, charges can only be made for hospital treatment. Charging is not in place for registering with or seeing a GP, although prescriptions are subject to the usual charges. GP registration or the holding of an NHS number does not trigger free hospital treatment. The hospital to which a non-resident has been referred should check separately for eligibility, but I know that that does not happen as it should. Current legislation allows only for charging overseas visitors for NHS hospital treatment. There are therefore no rules of entitlement governing overseas visitors’ access to GP services, and visitors are able to register.
GPs are self-employed and are contracted to provide primary medical services for the NHS. Under the terms of their contract, GPs have a measure of discretion in accepting patients on their list, but they can only turn down an applicant on reasonable, non-discriminatory grounds. My hon. Friend discussed that at length and made it quite clear what the guidance says. In practice, a GP’s discretion to refuse a patient is limited, and a GP cannot refuse to register a patient just because they cannot provide identification or proof of address—that is unlikely to be considered reasonable grounds.
The European economic area confuses the issue further, but our obligations are simple. Each country is responsible for the cost of providing treatment for their own citizens while they are in other EEA countries, unless they are working. Workers are entitled to the same access to health care as that country’s own residents, on the principle that the country to which an individual makes social security contributions is liable for that person’s health care needs. In practice, that means we pay other EEA countries for treating our state pensioners who have retired there, and for the emergency needs of our own citizens who need health care when visiting another country, using their European health insurance card. The same is also true in reverse—other countries must reimburse the UK for treatment provided to their citizens. EEA nationals who come here to work are entitled to free NHS provision.
Overall, we pay out more than we receive, simply because many more of our state pensioners choose to settle in Europe than vice versa. This is sometimes the subject of large tabloid headlines, but it is important to make that point. We may see that change in the coming months. I acknowledge, however, that we need to do more to recover income due to us from other EEA countries for providing health care to their visitors and pensioners. We have an extensive programme of work under way to address that.
As the shadow Minister said, unpaid debts are a small amount of the total spent on the NHS. However, as my hon. Friend pointed out, £30 million or £40 million pays for a lot of treatment, a lot of care and a lot of medicine. Although it is a small percentage of the total budget, for an individual it is significant. We need to recognise that in any system that charges, debts are sadly inevitable. Guidance is clear that hospitals should not provide non-urgent treatment until a chargeable patient has paid in full, but they have a legal duty to provide emergency care. When a patient is responsible for repaying a debt, if a debt is incurred, the NHS has a duty to the taxpayer to recover that debt. Audited NHS trust accounts and data from Monitor show that last year, £14 million was written off due to unpaid debts—a small but significant amount for taxpayers. We are determined to reduce that write-off without compromising the provision of urgent treatment. My hon. Friend related the terrible story of the American visitor for whom the hospital could not even provide any documentation for him to claim from his health care insurer. The statistic of a third of NHS trusts not even pursuing debts is shocking. On the other hand, we have the example of West Middlesex, which is clearly doing an excellent job.
The hon. Member for Ealing, Southall expressed his frustration with some immigration and Home Office issues, and he is absolutely right to discuss the UK Border Agency. My hon. Friend the Member for Kingswood discussed the fact that GPs do not want to be gatekeepers on immigration issues. We are therefore reliant on UKBA to ensure that people who are entitled to be here are here, and that people who are not entitled be here are not here. He also made a distinction regarding foreign nationals who come here specifically to access NHS care. I remind the shadow Minister, probably because I am significantly older than him, that this issue goes back a great deal further than the previous Labour Government. It probably goes back further than previous Conservative Governments, which have to be thanked for making the NHS such an attractive option that people came here as health-care tourists a long time before 1997.
I share the concern and frustration of the hon. Member for Ealing, Southall about immigration status. I have a university in my constituency. A lot of foreign students try to regularise their status in this country and fail to do so—their passports are left with the Home Office for goodness knows how many months and the situation becomes very confusing. I think that the people he is talking about are in the grey area in the middle. We need to address this matter and will continue to work with the Home Office. To repeat for the record, the recently amended immigration rules state that a person with a debt to the NHS of £1,000 or more can now be refused a new visa or extension stay. That should not only assist in recovering more debts, but act as a deterrent against failing to have health insurance when visiting the UK.
[Mr David Crausby in the Chair]
It will bring the focus closer to home. I would expect the shadow Minister to welcome this change, because GPs will now be much more acutely aware that registration with them should not automatically entitle people to NHS acute trust care. We are undertaking a review that I will mention in my concluding remarks. It is early days in respect of the UK Border Agency and the change in the immigration rules, so we do not have sufficient information adequately to evaluate how effective they are, but I think that we will see a significant impact. The shadow Minister asked specifically about the Olympics.
The Minister said that £14 million in debts was written off by the Government. Do the Government contact the countries that people have come from to try to recover some of those debts, or is it too costly administratively to do that? Is it cheaper to write off debts than to chase them up?
That is true of all debts. Trusts are not always aware of the rules and the obligations placed on them. Sometimes, they do not have the infrastructure in place to chase such debts and sometimes the costs of chasing debts are greater than the debts themselves, so they write them off. Either way, it is clearly not fair on the taxpayer. West Middlesex is an exemplar. We in the NHS are not good at sharing best practice, but practice at West Middlesex should be spread more widely.
Back in 2005, when the Labour Government were in power, as part of the UK’s successful bid for the 2012 Olympics they committed to provide games family members with free medical care. The games family is a tightly defined group of people—athletes and their support teams, officials, accredited media and IOC members—who are directly involved in taking part in or supporting the games. We have introduced a specific exemption for those people in respect of hospital treatment that might otherwise be chargeable, which will last for only nine weeks around the time of the Games and will be limited to treatment, the need for which arises here, so pre-planned or routine ongoing treatment that can wait will not be free. Normal charging rules will apply to all other visitors, including those coming to see the games.
The NHS has been briefed to be particularly vigilant in screening visitors who seek treatment and in applying the charging rules, given the large influx of visitors to the country. Let me reassure the residents of Hackney—the shadow Minister rightly said that Homerton is one of the designated hospitals—that treatment will be given on the basis of need. Local people should not suffer at all as a result of these rules which, as the shadow Minister will be aware, were an important part of the previous Government’s bid.
My hon. Friend has mentioned some of the details of our review. It is important that there should be qualifying criteria, a full range of other criteria exempting services or visitors from charges, and criteria for charging for services outside hospital, as we move towards more care being delivered outside hospitals. We need to be mindful of costs that could be incurred, thereby ensuring that we have more efficient and effective processes throughout the NHS, including the ability to screen eligibility. Let me reassure the hon. Member for Strangford (Jim Shannon) that it is important that we work closely with the devolved Administrations, and have close discussions with them, to ensure that there are not unforeseen and unintended consequences.
Once again I thank my hon. Friend the Member for Kingswood for introducing the debate, and I thank hon. Members for the balanced, moderate nature of the discussion. It is important that we set an example—all parties desire to do so—and demonstrate to the public that such difficult issues, which can involve distinct communities, can be discussed and considered in a fair and balanced way and are matters of cross-party concern, with all political parties working together. It is not becoming for any politician to score party political points on an issue of such fundamental importance to the taxpayers of this country.
Incandescent Light Bulbs
It is a pleasure to serve under your chairmanship, Mr Crausby. This debate will not be a complaint about poor light quality, which some people have mentioned in the past, or about the ugliness of some of the light bulbs in question when they appear under a beautiful lampshade. [Interruption.] Some hon. Members are raising their eyes towards the ceiling as I speak. Finally, I do not seek to become part of a crusade by the Daily Express against the European Union, as happened when I tabled an early-day motion on this subject.
This debate is about a serious issue for people, perhaps relatively small in number, who could not sit in this Chamber, as I and other hon. Members are doing, underneath these lights. Those people could not stay in this Chamber to take part in this discussion, even if they were able to, because of the effect that these light bulbs would have on them.
My interest in this matter was stimulated by a constituent, Catherine Hessett, who contacted me shortly after my election in 2010. She is the co-ordinator of Spectrum Alliance, a group that campaigns on behalf of individuals who have suffered negative effects from low-energy lighting. Those people have suffered ever since the roll-out of low-energy lighting, and they need to use what are considered to be the old-fashioned, high-energy, incandescent bulbs in their homes. At the moment, they can do that because they are still able to source those bulbs, but that is coming under serious threat from the regulations that are set to remove incandescent light bulbs from the market by September this year.
Until my constituent contacted me I was unaware of such concerns, and I imagine that that is widely true elsewhere. After some investigation, however, I concluded that the views of the Spectrum Alliance needed to be raised in Parliament, and that the Government need to do something to prevent people such as my constituent from being forced to live in the dark for the rest of their lives.
I will go on to talk about the legislation, but first I will give a little more detail about the impact of this problem on certain individuals. The Spectrum Alliance has evidence to suggest that low-energy lightning—for example, compact fluorescent lamps such as those above us—aggravate a range of pre-existing medical conditions that include lupus, migraines, autism and ME.
The first example I will cite is that of a woman who suffers from lupus, a systemic auto-immune disease in which the immune system attacks the body’s cells and tissues. She develops a visible burning skin reaction, sore red eyes and a headache within minutes of exposure to fluorescent lights. In the past, doctors have suggested the use of bulbs that screen out ultraviolet light, but that makes no difference. Other lupus sufferers have reported similar experiences. It is important to stress, however, that although some individuals do not have recognised pre-existing conditions such as lupus, they nevertheless find that these bulbs impact on their health.
My second example is of a lady who has no pre-existing medical condition. She worked for an employer for several years, was happy in her job and had good prospects. However, when her employer moved into a newly-built office, she developed disabling headaches from the first day as a result of the low-energy lighting in the workplace. She had to take time of work because of the problem, and is likely to lose her job.
I congratulate the hon. Lady on securing this important debate. To add some context, I should say that a close relative of mine suffers, although not as seriously as the people in the cases mentioned by the hon. Lady, from migraines brought on by a pre-existing condition that is worsened by long-term exposure to this sort of bulb. Although there are extreme examples, there is also a whole spectrum of ways in which these bulbs can have a negative impact on the lives of our constituents.
I thank the hon. Gentleman for his helpful intervention. In the two examples that I mentioned, the reaction to exposure to the bulbs was extreme and rapid. Many people suffer in a lesser way, but it is nevertheless an issue for them and something that we could, and should, avoid. However committed we may be to our energy obligations—and we should be—it is important not to ignore the adverse effects on some of our population.
The scale of the problem is not insignificant. In answer to a written parliamentary question on 1 February 201l, the Under-Secretary of State for Health (Anne Milton) referred to figures that estimated that 250,000 people in the EU are at risk from increased levels of ultraviolet radiation or blue light generated by compact fluorescent lamps.
I am grateful to my hon. Friend for securing this debate. Does she agree that the Departments for Environment, Food and Rural Affairs, for Business, Innovation and Skills, and for Energy and Climate Change should work in a cross-departmental way to see what further research could be done in the European Union to look at the long-term effects of new technologies on people who have a pre-existing condition? We must start looking at what long-term changes might be needed, while also having regard to those who are suffering now, and we must see whether there is a way of obtaining a dispensation so that such people are not exposed to those causes of ill health, as appears to be the case at the moment.
As chair of the all-party lighting group, my hon. Friend has extensive knowledge of that subject and the issues that should be raised. Although long-term research is always helpful, we must also focus on the impact on individuals. As the Health Minister indicated, the figures she gave could equate to 30,000 or 40,000 people in the UK being affected by this problem. Those, however, are people who are known to have a pre-existing condition, and the Spectrum Alliance estimates that the true number of people affected in the UK—with, as has been said, varying levels of impact—could be as many as 2 million, many of whom are already suffering from conditions such as migraines or autism.
The science behind this issue may not yet be entirely resolved, and although the light bulbs in question have a clear impact on people, we must do some research into the matter. Low-energy lighting operates differently from incandescent bulbs in terms of levels of ultraviolet radiation, electric fields, flicker and peaks in light wavelength, especially with blue light. As yet, research has not been sufficiently in-depth to enable us to say which features of fluorescent bulbs have an effect on health, because they differ from incandescent bulbs in multiple ways. We do know, however, that people’s health is not affected in the same way when they use incandescent bulbs.
Let me be clear: I do not seek to discourage the use of low-energy light bulbs and lighting where that is useful and helpful. I acknowledge that climate change is one of the most significant challenges that we face as a country and I welcome the positive contribution that lighting can make in reducing our energy consumption. However, I do not believe that it would be right to implement the ban on incandescent light bulbs so dogmatically that people suffered. That is the crux of what I am saying.
I am grateful to my hon. Friend for securing the debate. I am sure that many hon. Members agree with the point that she is making. This is not about being against low-energy light bulbs as a generality, but about recognising that some individuals have a particular problem with that lighting. There is a danger in just dismissing their concerns, which need to be taken seriously. That is all we are asking for, and I hope that the Minister will respond positively at the end of the debate.
I thank my hon. Friend for his intervention; that is indeed the outcome for which I am hoping.
The key legislation in this area started with the ecodesign of energy-using products directive in 2005. That was updated and recast four years later by the ecodesign directive of 2009. Those directives set down rules on the environmental performance of products that used energy, such as light bulbs, and those that related to energy use, such as windows. They set the framework for further implementing measures, and the relevant Commission regulation of 2009 set out a timetable for the phasing out of the manufacture and import of incandescent bulbs. The position is that 100 W bulbs were banned in 2009, 75 W bulbs in 2010 and 60 W bulbs in 2011. The remaining 40 W and 25 W bulbs will be banned as of 1 September 2012. That regulation was not voted on by the European Parliament—it went through without debate—and it is directly applicable. That is why there is no transposing legislation at our level.
Concerns about health impacts have been acknowledged at EU level, although that has not yet been reflected in better policy. In 2008, the European Commission scientific committee on emerging and newly identified health risks—commonly referred to as SCENIHR—produced a report that concluded that although single-envelope CFLs could induce skin problems among some people, that might be alleviated by the use of double-envelope CFLs. However, Spectrum Alliance is clear that its members have tried those double-envelope bulbs and that, although they are an improvement for some people, they still induce similar symptoms in most of those affected.
The concerns were acknowledged when the European Commission asked SCENIHR to produce an updated report in March 2012. That was published in draft form in July 2011 and in full in March this year. It, too, referred to the possible health impacts of low-energy lighting, but SCENIHR itself does not carry out first-hand research; it simply reports on research that has been carried out. It concluded that because of the considerable variability of the components for lighting technologies, no general advice could be given to individuals about how they could avoid those health impacts.
It is possible that some people will be able to find means of lighting other than incandescent bulbs. It has been suggested that they could try light-emitting diodes—LEDs—or the double-envelope CFLs, but again the Spectrum Alliance campaigners are clear that neither of those technologies has yet succeeded in overcoming the problems that people are suffering.
My hon. Friend the Member for Stoke-on-Trent North (Joan Walley) chaired a meeting of the all-party lighting group last October. Present were representatives from Spectrum Alliance, the lighting industry and the relevant Departments: BIS, DEFRA and the Department of Health. We discussed a number of options. It was made clear that the Government would not wish to defy the regulation, that they did not simply not implement things that they did not agree with and that they could be fined under the infraction proceedings if they sought to do so.
We then discussed the possibility of an exemption for people with medical needs. There is a precedent: rough-service lamps are already exempt under the regulation. Rough-service lamps are incandescent bulbs that are used for industrial purposes where a low-energy alternative would not work properly. There is, therefore, a precedent for having an exemption for industry. We argue that an exemption should also be made for people with specific health needs.
Earlier this year, my hon. Friend and I met Lord Taylor of Holbeach, the Minister with responsibility for this area. On hearing the arguments, he expressed some concern that people might seek to take advantage of any exemption, but I would have thought that it was possible to configure a system to prevent, or at least to minimise, that risk. For example, incandescent bulbs could be dispensed by prescription at pharmacies.
The Minister also expressed the strong hope that emerging technologies would resolve the problem for us. That may be the case in the future. There may be—I sincerely hope that there is—a lighting technology around the corner that will resolve the problem. It would meet the low-energy requirements but without the health effects that I have described, but at the moment it does not exist. That is a serious practical problem.
Lord Taylor also indicated that he would be keen for further research to be carried out, and I certainly would not in any way say that there should not be further research. However, although I support further research, I want to suggest that both the Government and the European Commission are coming at this issue from the wrong direction. It makes sense to resolve any uncertainty about the safety of products before we force people to use them—rather than afterwards, when the alternatives have been withdrawn. In this case, consumers are being expected to prove that certain products are unsafe, rather than the Commission and the Government having ensured that they were safe in the first place.
I ask the Minister this central question: if nothing is done, what are my constituent and many more like her to do? Are the Government comfortable with forcing people to live in the dark for the foreseeable future? I am sure that the Minister finds that situation no more acceptable than I do. I understand that limited options are available, but I ask him to do whatever he can to allow people who suffer negative health impacts from low-energy bulbs to continue to purchase incandescent bulbs when the ban comes into full effect in September.
I congratulate the hon. Member for Edinburgh East (Sheila Gilmore) on securing the debate and on representing her constituents—indeed, all our constituents—who are suffering in the way that she describes. There can be an extensive discussion about the extent to which the problem exists, but I think that we all recognise that it is a problem and that she was right to bring it to the House today.
It is important to place on the record the context in which the current changes are being made. Then I shall talk about the health issues that the hon. Lady raised so forcefully. The Government recognise, as I think the hon. Lady does and as the hon. Member for Stoke-on-Trent North (Joan Walley) certainly does in her role as Chair of the Environmental Audit Committee, that climate change is one of the gravest challenges that we face and that urgent action is required to tackle it. Failure to transform how we produce and consume in the UK will expose the economy to many risks—from the damage wreaked by the effects of climate change to constraints on future growth from unsustainable depletion of our natural capital. The Government have set out clearly how they want to be the “greenest Government ever” and that that must be based on action, not words. Ensuring the sustainability of products is one way in which we can act now.
The amount of energy consumed by household electrical goods is staggering. Products targeted by the European eco-design and energy labelling directives account for an astonishing 50% of the European Union’s energy consumption. We need to promote the most efficient products to consumers, which in turn rewards the businesses developing and selling them. Energy labels are an effective way of doing that. The EU’s A to G energy labels enable consumers to choose efficient appliances. Labelling also enables manufacturers to compete against one another on the environmental performance of their products.
There are, none the less, occasions on which policies such as labelling and consumer awareness fail to produce the necessary switch to more sustainable products. In those cases, choice editing by removing the least efficient products from the market remains one of the most cost-effective ways of reducing energy consumption, while at the same time benefiting consumers and businesses by reducing their energy bills. As a member of the European single market, the UK cannot by itself introduce mandatory minimum energy performance standards for appliances because it would inhibit free trade. The EU eco-design for energy related products framework directive is a single market directive under article 95 of the EU treaty and provides the legal framework within which implementing measures set standards for the environmental performance of products or product groups. Those measures can take the form of regulations or voluntary initiatives.
To date, 12 regulations have been agreed under the eco-design directive and two voluntary initiatives are close to agreement. The regulations are expected to save the UK almost 7 million tonnes of CO2 a year by 2020. They are expected to generate just over £850 million a year in net benefits for British consumers and businesses through reduced energy bills. I recognise that the hon. Member for Edinburgh East is keen for me to move on to the health issues, but it is important to put these points on record. Lighting is a major contributor to global energy consumption. The International Energy Agency estimates that electricity consumption for lighting represents almost 19% of global electricity use and is responsible for approximately 8% of world greenhouse gas emissions.
The regulation of 2009 became directly applicable in all EU member states after agreement by the European Parliament and Council in spring of that year. It sets minimum standards for non-directional household lamps—in other words, bulbs that provide a spread of light, such as those under which we are sitting, as opposed to, say, spot lamps. Incandescent light bulbs waste 95% of their energy as heat. They are therefore too inefficient to meet the standards, so are being in effect phased out in the EU. Other countries phasing out or planning to phase out incandescent light bulbs include Australia, Brazil, China, Japan, Russia, South Korea and the United States. The regulation is predicted to save 39 TWh across the EU annually by 2020. Within the UK, it will mean net savings each year of 0.65 MtCO2e and 0.3 TWh by 2020. The average annual net benefit to the UK between 2010 and 2020 is predicted to be £108 million.
CFLs use 20% to 25% of the energy an incandescent light bulb uses. Halogen light bulbs offer anything between 20% to 45% energy savings on incandescent bulbs. The Government are working to encourage the development and use of ultra-efficient lighting, which could produce even greater savings. For example, DEFRA and the Technology Strategy Board ran a successful £1.2 million challenge to develop LED lighting to replace conventional incandescent lamps. The initiative successfully supported two small and medium-sized enterprises—Juice Technology and Zeta Controls—to prototype stage. That is an excellent example of how minimum standards are driving innovation and transforming the market.
Problems, such as slow warm-up times and poor quality light, were reported with some early CFLs. However, the industry has responded well to the challenge to produce new quality products. Regulation 244/2009 assisted by putting in place minimum standards for the performance of CFLs, which protects consumers from substandard products and the manufacturers of quality products from unfair competition. The hon. Lady mentioned flickering, which did cause problems in older light bulbs, and it was believed that that contributed to considerable difficulties for migraine sufferers, but it has been improved, although not to the satisfaction of all. I will come on to those issues now, but both the performance and the choice of CFLs has improved a great deal.
Although energy efficient lighting produces significant environmental and financial benefits, we need to ensure that lighting solutions remain available for people with light-sensitive health conditions. CFLs can generate higher levels of UV and blue light than incandescent lamps. Those levels are much lower than a typical summer’s day, but present a potentially greater risk to a number of people with light-sensitive skin disorders. The European Commission’s scientific committee on emerging and newly identified health risks—I, like the hon. Lady, will call it SCENIHR—estimates that up to 30,000 people in the UK are potentially at risk, but I accept that the figure is disputed and could be higher.
DEFRA and the Department of Health have been closely engaged with patients’ support groups and charities, the lighting industry and the Health Protection Agency. In fact, as the lead DEFRA Minister, Lord Taylor of Holbeach, whom the hon. Lady met, will shortly meet one such group—Spectrum, to which she referred—and I hope that the meeting will include the constituent she mentioned. The Department of Health and Health Protection Agency have fed evidence into SCENIHR’s opinion on the health effects of artificial lighting, published in 2008, and its updated opinion, published in March this year. SCENIHR concluded that the use of double-envelope CFLs, which look like a traditional light lamp, can mitigate the risk of aggravating the symptoms of light-sensitive individuals. The hon. Lady has reported that there is some scepticism on that, and we have more work to do.
Anecdotal evidence suggests that halogens might be an adequate alternative in some cases. Most LEDs for general lighting emit little or no UV radiation. They therefore potentially offer an even better alternative. Nevertheless, the updated opinion recommended further research on the relationship between artificial lighting and various health conditions.
We are lobbying the Commission to bring the research forward before 2014. That is a key point that we want to get across. I will discuss the matter with my colleague, Lord Taylor, and he in turn will talk to Health Ministers to see if there is any wriggle room that will allow some form of exemption, such as the one that the hon. Lady described. I liked her suggestion about the possibility of using pharmacies. We are open-minded. What we do must be legal and recognise that there is a problem that we want to resolve.
The regulation includes a requirement for it to be reviewed before 2014, but we think that that should be done sooner. We will work with our European partners to ensure that the review takes full account of the best available scientific evidence on the health effects of artificial light. We are therefore pressing the Commission to ensure that the research is completed much earlier in order to feed into the review.
Energy efficient lighting, with other energy efficient products, can produce significant energy savings.
I am listening hard to the Minister. Can he give my hon. Friend an indication of the time scale? Will he report back to her on the discussions that he intends to have with Lord Taylor about the health issues and what he referred to as the “wriggle room” within what is legal?
I will talk to Lord Taylor, as I agreed, subsequent to the debate. If the hon. Lady will allow me to say so, it will be for him to contact her and the hon. Member for Edinburgh East to see how we can take things forward. I recognise the genuine concerns that have been brought to the attention of the House through the early-day motion and today’s debate. I assure the hon. Member for Edinburgh East that the Government take these matters seriously and we will seek to resolve the concerns of her constituent and our constituents who are affected.
I am delighted to have secured this debate on fracking—or, to give it its proper title, hydraulic fracturing. I hope that by the end of the debate we shall have laid some myths to rest, and that the House will be satisfied that the opportunity that fracking presents is being explored in a responsible manner.
I would not describe myself as either pro-fracking or anti-fracking; I support the exploration of any new energy source as long as it is safe. We need a mix of different energy sources, so that we are never reliant on one in particular. I think that we all agree with that. I understand that the Minister who would usually respond to the debate, my hon. Friend the Member for Wealden (Charles Hendry), is unable to be here and I thank his colleague, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), for stepping in. Both my hon. Friend the Member for Wealden and his Parliamentary Private Secretary, my hon. Friend the Member for Fylde (Mark Menzies), have done a huge amount to help explore the important technology in question, while dealing with the safeguarding of our constituents and calls for tighter regulation. The House owes them a debt of gratitude for their tireless work.
I suppose I should explain my interest in this subject. The Bowland basin is not in my constituency, but many of the people who would work in the industry are. Furthermore, Morecambe and Lunesdale is one of the biggest energy producers in the UK. Heysham 1 and 2 produce 4.5% of the national grid’s capability; Centrica’s liquefied natural gas support station brings gas in from across the world to the UK; a number of offshore drilling operations exist in Morecambe bay; and, most controversially, wind farms, if they cannot be built in the lakes, are threatened in our area.
Engineering and energy production are major exports for my constituency and the whole of north Lancashire, so we are positive about any opportunities, especially given that 5,600 jobs could be created nationally—and, potentially, 1,700 in the wider Morecambe and Lunesdale area. Obviously, when local people are trained to do that sort of work they will have opportunities to go abroad, as happened in Aberdeen after the North sea oilfield opened—something that became known as the Aberdeen effect.
Fracking is not a new technique; it has taken place in the UK for decades. What is new is that the established technology is being used to extract shale gas, which has revolutionised gas production in north America. In the past, the USA and Canada had a shortage of gas, but today their industry is booming. The rise in shale gas production is striking, going from 28 billion cubic metres in 2006 to 140 billion cubic metres in 2010. Gas reserves are now at their highest since 1971—an amazing thought, given the dire predictions for their supplies a few years ago. I think we would all like the UK to benefit from that kind of gas supply.
The industry is keen to point out that we are unsure how much shale gas we have in the UK, but one estimate by Cuadrilla suggests that the Bowland site alone could have 5.6 trillion cubic metres. Obviously, not all that gas can be extracted, but that estimate would make the field comparable in size to the second most productive field in America—the Barnett shale in Texas.
In 2010, the Department for Energy and Climate Change predicted that gas prices would rise by 21% by 2030. Suddenly, by taking into account more and more shale gas, they revised that estimate down to 11%, so shale gas may well halve the rise in gas bills over the next 20 years—a welcome thought to those struggling to pay energy bills.
I congratulate my hon. Friend on securing this debate on an important issue. I am a supporter of the economic and environmental benefits of shale gas. Does my hon. Friend agree that the data show that it has cut carbon emissions in a way that wind, solar and biomass have singularly failed to do?
Yes, I agree, and we should be striving towards a lower-carbon economy. Shale gas would contribute to that. It is better for the environment than other energy sources—that has already been acknowledged—and it now helps to meet Government targets for low emissions, as my hon. Friend has just said. Research by Policy Exchange states that if China were to switch from coal to shale gas that would cut its emissions by five times the UK’s total carbon output, so there is a big prize. If we get things right and sort out the concerns, we can have a good and healthy market in the UK.
At the end of the process, we will need to know that we made the best use of our technology and natural resources, but in an environment that protects the public, so I want to ask the Minister to clarify some points. What steps are being taken to ensure that waste water does not contaminate the environment? How will we prevent fugitive emissions? What steps are being taken to reduce seismic activity? What rights will landowners and local communities have to benefit from mineral rights? Overall, what steps are the Government taking to ensure that our regulatory environment is fit for purpose?
I congratulate my hon. Friend, and neighbour, on securing the debate. On the issues he listed, does he agree that what is not understood by the powers that be is that the water source for residents in my area—particularly in Bleasdale—is their own bore holes? Residents are extremely worried about a process that involves the water table, which fracking seems to hit. My hon. Friend talked about mineral rights; again, it is not understood that in most parts of my constituency the mineral rights do not belong to the landowners, but to the Duchy of Lancaster, even if the land is sold on. There is little direct benefit to the farmers who own the land on which the fracking will potentially take place.
I thank my hon. Friend, whose constituency is next to mine, for the work that he has done locally on the issue. There are issues to be addressed in the contexts that he mentioned. Like him, I am worried about contamination of water supply in the area. I want to touch later on the possibilities of mineral rights for landowners.
I am sure that my hon. Friend is coming on to this point. I endorse the comments of my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). Just as mineral rights and the benefits from wind power are felt not by the wider community but by an individual farmer or energy company, so it is with fracking. I suggest that if mineral rights were to benefit the whole community, rather than an isolated individual, fracking would be a great deal more popular and bring much more benefit to the community.
Hear, hear! I agree with everything that my hon. Friend said.
We have all seen things go wrong in certain parts of America, but we must also bear in mind that last year the Americans drilled 45,000 wells, with very few problems. They are also operating much older wells that exist in a less strict regulatory environment than here in the UK. That must be understood. I hope that we can benefit from their success and, most importantly, learn from their mistakes.
Today we stand at the beginning of a revolution in UK gas production. We have a community with the expertise. Lancaster university, the nuclear power industry and small and medium-sized enterprises are already geared up to exploit that resource and we look forward to falling energy bills as a result. I hope that the Minister can clarify my concerns. Most of all, will he assure me that DECC is doing everything it can to push this project forward in a safe and responsible way? That is the road to a safe, profitable and cheap supply of energy for the 21st century.
I congratulate my hon. Friend the Member for Morecambe and Lunesdale (David Morris) on securing the debate and giving the issue such rigorous, thoughtful and well researched attention, as it deserves.
The role of unconventional gas and hydraulic fracturing, or fracking, is indeed topical. I have just come back from the United States, and no one there who takes the slightest interest in the energy or climate change agenda can fail to be moved by the huge impact that it is having on the economics and politics of energy—the huge potential benefits to the US economy, the challenges presented to other parts of the energy sector, and the questions raised about the long-term climate change implications of the new fossil fuel.
I am grateful to the Minister for giving way and I apologise for interrupting his speech just as he was gaining momentum. He talks eloquently about the way in which America is transforming its energy provision and dramatically reducing its energy bills. In his State of the Union address in January 2012, President Obama said that any company drilling on Government land would have to disclose the chemical used for fracking so that
“America will develop this resource without putting the health and safety of our citizens at risk.”
Is not that the right way for us to be going ahead as well?
Absolutely. I could not agree more, and I will elaborate on those points during the course of my speech and endeavour to answer the questions that have been raised.
There are not only huge opportunities here for us, but some big challenges. We need to be rigorous and thoughtful in addressing this issue, not least because of the significant impact that the exploration and development of shale gas is having on the US, and stands to have in the UK, Europe and Asia.
The resource has, as I have said, revolutionised the energy market and allowed the US significantly to increase its indigenous production and benefit from lower gas prices, which have not proportionately flowed through into lower electricity prices to consumers. None the less, there are benefits feeding right through to the manufacturing base, which obviously raises the question of what impact shale gas would have on the UK and its energy supplies. I hope to shed some light on that pertinent matter during this debate.
As my hon. Friend the Member for Morecambe and Lunesdale will be aware, the Government are considering the implications of the seismic tremors that occurred last year in the Blackpool area, adjacent to his constituency. The Royal Society and the Royal Academy of Engineering are currently conducting a study of the potential risks of shale gas extraction. For the UK, therefore, the subject is very much in the public eye, and the debate here is timely.
Let me be clear about the Government’s position. This weekend, press stories suggested that there has been a sudden reversal in the Government’s position on shale gas, but I am afraid that that is not the case. The Government’s position has remained cautious but balanced throughout. If there is a change, it is only in media perceptions.
There has been some rather breathless speculation that shale gas in the UK could be the “game changer” that it genuinely is in the US. What has happened in the US has been dramatic. Shale gas production has grown from a very small base in the 1990s to supply about a fifth of US demand today, and it is set to increase still further. However, there have been problems, such as the reported pollution of drinking water, and there are concerns about the fracking process on which shale gas production depends.
Our position on UK unconventional hydrocarbon resources is a balanced one, and matches that which we take towards conventional oil and gas exploration and development. We support the tapping of these resources where it is technically and economically viable. As imperative as it is that we meet our climate change targets, it is also a matter of common sense that we continue as an economy and nation to be dependent on fossil fuels for many years to come. Wherever there is an opportunity to harvest or extract those fossil fuels in the UK or in our territorial waters, of course we should do so, provided that it can be carried out with full regard to the protection of the environment.
May I raise another problem on top of the two that I raised with my hon. Friend the Member for Morecambe and Lunesdale (David Morris)? The north part of Lancashire, which is in the constituency of my hon. Friend the Member for Fylde (Mark Menzies), faces shale gas exploration, and across the river Wyre from Fylde, there is a proposal to excavate salt mines to store imported liquefied gas. We also have a proposal for new wind farms to be sited off the Isle of Man, and the National Grid is proposing to bring in the power down the river Wyre—between fracking on one side and the storage of gas on the other. At the top end of my constituency, near the seat of my hon. Friend the Member for Morecambe and Lunesdale, there is a proposal for another nuclear power station. Added to that, National Grid wants to bring power from existing wind farms off Cumbria through even bigger pylons that will be sited in the middle of my constituency, adjacent to the M6 motorway. Although people in Lancashire recognise the nation’s need, they wonder who will secure a balance in relation to what they will get out of it. Will Lancashire be left covered with pylons, transmission towers, and wind farms on the hills and out at sea? After the extraction underground of everything in the region, will Lancashire even exist in 25 years?
But apart from that—[Laughter.] No, my hon. Friend makes a serious point and I understand his concerns. No one could suggest that Lancashire is not taking more than its fair share of the burden of the energy economy. However, there are many opportunities to be gained. Each of the points that he raises bears serious consideration. Let me assure him that my Department not only looks at these things individually, on their own merits and in their own right, but takes into account the wider picture that is created by these individual interventions.
I welcome the point about the wider picture. In Northumberland, which is no less deserving than Lancashire, there are applications for two open-cast mines. Given that those open-cast mines will exist for years and will produce barely eight to 10 days’ worth of coal for particular power stations, and that fracking has the potential to produce about 150 billion cubic metres of gas, one has to add up the relative benefits. The people of Northumberland, and of the wider country, want an energy strategy that takes into account these points. On that issue, I endorse entirely what was said by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw).
My hon. Friend’s eloquent intervention is on the record, and I certainly take on board his points. I now want to crack on because I want to reply in some detail to the serious points that my hon. Friend the Member for Morecambe and Lunesdale raised in his opening speech.
I very much welcome the cautious way in which the Minister is explaining this issue to the Chamber. It is important that we balance the apparent short-term gain against the serious danger of long-term detriment, which will be impossible to reverse once the process is under way.
There are good reasons to think that, whatever the resource may be, shale gas will not develop as dramatically here as it has in the US. Britain is a much more densely populated country, and shale gas is still in its very early days here. Just one well in the UK has been drilled and fracked, so the production prospects are simply unknown at this stage. Whatever they may be, the Government will continue to seek full economic recovery of UK hydrocarbon resources—both conventional and unconventional—when that can be done safely and with environmental integrity.
I am very grateful to the Minister for giving way; I know that time is of the essence. Regarding the environmental integrity that he has just mentioned, can he tell us what cross-cutting work he is doing, first with the Department for Environment, Food and Rural Affairs in respect of the concerns about the possibility of groundwater contamination, and secondly with the Department of Health in respect of the health concerns about the potential risk of air pollution?
I will come to the points about groundwater pollution later in my remarks—if I am able to get to them. In respect of the work with the Department of Health and DEFRA, I fear that I will have to write to the hon. Lady to let her know about that work in more detail.
I turn now to the role of gas and carbon capture and storage in UK energy supply, because changes in the UK energy sector during the next 10 to 20 years will create new sources of gas demand. We will need gas to retain sufficient electricity generation capacity margins in the face of coal-nuclear closures, to manage intermittency from increased use of renewables, and to continue to meet the majority of our heating needs. Equally, we are taking steps to address the possible use of fossil fuels in the low-carbon energy economy of the future.
In the long term, there will be a fundamental shift in the role of gas in electricity supply. By 2050, a major role for gas as a base load source of electricity will only be realistic with large numbers of gas CCS plants. One of our key policy objectives is to enable cost-competitive deployment of CCS by the early 2020s. Last week, we announced the names of the companies who have indicated their interest in the new UK CCS competition, which is a flagship policy for this Government. I am very encouraged by the high level of interest that those companies have demonstrated. It shows that we are on track with CCS, a key technology that is enabling us to make use of fossil fuels while protecting, enhancing and driving forward our climate change objectives.
I now turn to shale gas specifically. It has been said that it is still very early days for shale gas in the UK. However, I am told that the pattern of development of a new shale gas basin in the US has shown roughly three phases: first, initial discovery and the use of appraisal wells to prove the presence of the gas and the size of the resource; secondly, an experimental phase in which the explorers work out the best techniques to obtain production from the particular type of shale; and thirdly, the production phase, in which an efficient pattern of production wells can be drilled to extract the gas on a commercial basis.
Clearly we are right at the beginning of this whole process; only a handful of wells have been drilled and their production potential has yet to be quantified. However, it is encouraging that Cuadrilla believes that there are good quantities of shale gas in the rocks underlying its licence area in Lancashire. Nevertheless, it is still too early to say whether those resources can be extracted economically and safely.
The answer to the question, “What contribution might shale gas make to UK energy supplies?” is even more uncertain. I will not speculate on that issue today. However, if shale gas can be safely and economically exploited here, the Government would obviously welcome any positive contribution it would make to energy supplies, jobs and the economy.
I will now address the specific questions put by my hon. Friend the Member for Morecambe and Lunesdale. First, what steps are being taken to ensure that waste water does not contaminate the environment? That question was echoed by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). Secondly, how do we prevent fugitive emissions, which is a big problem in the US? Thirdly, what steps are being taken to reduce any seismic activity? Fourthly, there is the overall question of what steps the Government are taking to ensure that our regulatory environment is indeed fit for purpose?
In response to the first question, which was about water waste, I must say that my hon. Friend the Member for Morecambe and Lunesdale made a very important point, which was echoed by my hon. Friend the Member for Lancaster and Fleetwood. It is essential that any waste water or flow-back fluids that come from fracking operations are handled carefully and treated properly. Disposal of waste water falls within the regulatory responsibilities of the Environment Agency, which has a range of regulatory powers to ensure that such operations are carried out without causing harm to the environment. The agency will consider all proposed operations and will only permit them if it is satisfied that the intended disposal route will not harm the environment. The waste water could either go to a waste treatment plant that is already permitted, or specific disposal arrangements would need to be agreed with the agency. With regard to Cuadrilla’s current operation, the return fluids are currently being retained on-site by the company and stored in double-skinned tanks. A permit for correct disposal of them is required, and Cuadrilla is in discussions with the Environment Agency.
Secondly, how do we prevent fugitive emissions? That is a very important issue; indeed, I was also asked about the control of fugitive emissions. Most aspects of shale gas operations—for example, the construction of the well, the well-head equipment and any pipeline—use exactly the same technology as conventional gas production. Provided that that technology is competently constructed, there is no reason to think that unintended emissions from shale gas will be different from conventional gas emissions or will pose new problems. At present, methane emissions from gas production are estimated to comprise less than 1% of our total greenhouse gas emissions, so fugitive emissions from current gas production activities are not a major contributor to greenhouse gas emissions.
At the exploration stage, however, it is normally necessary to dispose of any produced gas by venting or flaring, as there will not be any export facilities in place. Nevertheless, my Department imposes controls to ensure that venting—the release of methane—is minimised, so far as it is technically possible, and to ensure that any gas that is released is flared, which reduces the greenhouse warming potential of the gas by a factor of at least 20.
However, there is one aspect of shale gas production that is different from conventional gas production: with shale gas production, the rock is, of course, fracked by injecting water under pressure. Much of that water flows back and is collected at the surface. That flow-back water will then contain methane, which could add significantly to emissions if it was simply allowed to escape. Having said that, there is technology available—described as green completions—that can capture that methane. If the well is purely for exploration, the gas can be flared; as I have said, that reduces its greenhouse warming potential. In production, the gas will be exported and sold. As we have no proposals for production as yet, it is too soon to say precisely how that aspect of production operations will be controlled, but my Department will continue to control flaring and venting, and the Environment Agency is also considering how its powers might apply if there is production.
What we can safely say at this stage is that both my Department and the Environment Agency will expect all shale gas projects to demonstrate best practice, including green completions, and they will apply suitable controls to the operations in question, with exploration or production to ensure effective control of emissions.
Thirdly, what steps are being taken to reduce any seismic activity? If any future shale gas operations are allowed to commence, it is vital that they do not result in further seismic activity at the level that was experienced near Blackpool last year. That is why detailed analysis has been undertaken to determine the linkage between the seismic activity and the fracking, and to consider the best way to mitigate the risk that such events will occur again.
An expert study was commissioned by my Department, which found a link between the fracking and the seismic tremors near Blackpool, and it recommends a number of measures to mitigate the risks in any future operations. They include micro-seismic monitoring on the site and a traffic light system that would shut down operations if early signals suggest that seismic events are being generated. However, the Government have not yet decided whether to allow fracking to recommence. We will not be finalising a view on that issue until we have considered all the additional comments that have come in as part of the consultation process, which finishes this week.
Finally, what overall steps are the Government taking to ensure that our regulatory environment is fit for purpose? Although we do not have a robust regulatory regime for the onshore industry—[Laughter.] Sorry, we do have a robust regulatory regime for the onshore industry. I apologise; my contact lenses are a bit blurry. However, it is important that we consider how that regime sits for any longer-term development of shale gas. Consequently, we are proactive in relation to the regulatory position.
My Department, the Health and Safety Executive and the environmental agencies work closely together to share relevant information on shale gas activities, to ensure that there are no material gaps and to ensure that all material concerns are addressed. We consider that the regime and the co-ordination of the work of the regulators are adequate, at least for the current exploratory phase of shale gas activity. However, with a view to ensuring the continued adequacy of the regime if shale gas proves to be commercial and moves into the development phase, the Environment Agency is currently undertaking a detailed environmental assessment of shale gas extraction, so that it has all the information it needs to ensure that regulation is appropriate to protect the environment. Other regulators, including my Department, will contribute to that review. Furthermore, the Royal Academy of Engineering, along with the Royal Society, is currently conducting a review of the risks posed by shale gas extraction. That review is expected to report in the summer.
The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry), or I will be delighted to meet my hon. Friend the Member for Morecambe and Lunesdale to address any further concerns he has that have not been addressed in this debate.
Art Asia (Southampton)
I am grateful for the opportunity to have this debate and I thank the Minister for his offer yesterday of a meeting. The problems that I will raise have been going on for more than two years and it is time to put them on the public record, but I hope that the Minister will still be prepared to meet after we have had the debate.
There are serious questions about how Arts Council England, with Southampton city council, has treated the important arts charity, Art Asia. Art Asia was offered a capital grant to develop new facilities, but today it faces the loss of the grant through a murky and underhand process to which it has had no proper chance to respond.
Over the past 30 years, Art Asia has become one of the country’s more significant south Asian arts organisations. Under its director, Vinod Desai, it began with two simple aims. The first was to enable young people, usually the children of first-generation migrants, to learn, perform and appreciate the music and dance of their parents’ and grandparents’ home culture; and the second was to bring high-quality live performances to those older generations.
Art Asia has how moved well beyond achieving those initial aims, and has brought Asian culture to a wider audience, notably through the highly successful Southampton Mela, which attracts tens of thousands of people from all communities each July. The charity has also influenced mainstream arts programming. For example, because Art Asia has been able to establish that there are audiences for Asian culture, the Turner Sims concert hall and the Nuffield theatre now include it in their own mainstream programmes. World-class musicians have been brought to many parts of the UK, including to Southampton and other parts of Hampshire, so Art Asia is a significant organisation regionally and nationally, as well as in Southampton itself.
In 2000, Arts Council England established a £20 million capital programme for black, ethnic minority and Chinese arts organisations, which recognised that such groups had not received their fair share in previous funding rounds. Given Art Asia’s strength, it is not surprising that it applied for and, in 2001, received, a promise of funding of just short of £750,000 from the programme. Clearly, Art Asia would not have received the award unless there was confidence in its leadership, management and financial conduct, and in the quality of its programming.
There are, of course, limits to what can be achieved with £750,000. At the time, Southampton city council was developing, with Arts Council England, plans for a city arts complex. Everyone sensibly recognised that more could be achieved if Art Asia joined as a full partner in the arts complex, and there were also the potential advantages of VAT-liability reduction in a joint, but city-led, project. In 2003, Art Asia agreed to pool its award as part of the funding for the larger project, a deal that would guarantee the organisation its own dedicated facilities and give it a clear, formal role in the management of the centre.
Perhaps Art Asia was a little naive in assuming that Arts Council England and the city council would act in good faith and with integrity, but rather than insisting on a formal legal agreement it relied on written assurances. The paper that went to the Arts Council England management committee to approve the joint project stated that
“the public benefits from Art Asia’s element of the project are that it will place south Asian arts in the mainstream of Southampton’s cultural life; through high-quality facilities enable Art Asia to attract first-class national and international artists to Southampton; provide a wider range of audiences with performance and participatory work of the highest standards; through larger premises enable Art Asia to offer greater accessibility to participants in its classes; provide audiences with high-quality auditoria of an appropriate size; and offer an increased range of education services”.
Art Asia’s role was, therefore, recognised at the most senior level within Arts Council England, and a cost allocation between the partners was agreed.
Arts Council England’s south east office wrote to Art Asia on 4 January 2007 confirming that an award of £5.7 million to Southampton city council included
“the £724,000 awarded to Art Asia in July 2005 in recognition of Art Asia’s decision to be part of Southampton’s New Art Complex”.
The letter continued:
“Art Asia’s involvement in Southampton City Council’s capital development is strategically important to us. We will continue to support your organisation as it prepares for the opening of the new building and an increased regional presence”.
That seems to have been a clear commitment of principle and practice by Arts Council England.
The planning of the major arts centre project went ahead, moving slowly as such things often do, but in early 2010 things began to change. First, in the run-up to the 2010 election, Arts Council England began to raise doubts about the whole arts complex project. A report by Arts Council England officers recommended the withdrawal of the project, citing among other things concerns about the artistic leadership of the arts partners, which included not only Art Asia but the Nuffield theatre and the John Hansard gallery. It was the first time that such concerns had been raised, and they were less than specific.
I intervened with the then Secretary of State to secure a further review of the project. That happened, but it became clear that Arts Council England wanted to exclude Art Asia from its central role in the project. By April 2010, Arts Council England was negotiating with only the city council and excluding the other partner organisations. In June 2010 the city council submitted a new proposal, which replaced Art Asia and the Nuffield theatre with an unspecified “Performing Arts Organisation”, and Arts Council England agreed a grant on that basis in July 2010.
The grant, which had been awarded because of Art Asia’s work as an ethnic minority arts organisation, was absorbed into the Southampton arts complex funding, and Art Asia itself was excluded. In effect, Arts Council England and the city council took the money and made off with it, without taking any measures to secure the public benefit that had been identified by Arts Council England’s management in 2005.
With Art Asia, I have spent two years trying to establish how and why that happened. At no stage has either Arts Council England or the city council given any reasonable justification, reason or excuse to Art Asia. At no point has any organisation raised any clear concerns about Art Asia’s work, management or programming to which it could respond, nor has any reason been given for totally ignoring the whole basis of the original award, which was to support black and minority ethnic arts programming.
In 2010, I wrote three times to Arts Council England requesting an explanation, and also to the then leader of Southampton city council, who replied:
“It was made very clear to us by officers at the Arts Council that some significant changes were required if it were to have any chance of succeeding in securing the funding provisionally allocated to the project”.
His letter referred to
“fundamental concerns about the performing arts offer, including the two organisations identified to provide this: Art Asia and the Nuffield”.
In the end, it has taken freedom of information requests to shed more light on what happened. An internal memo from a senior Southampton council officer, Mike Harris, dated 18 May 2010, records a meeting he had with Arts Council England. In saying that Arts Council England was rethinking its “total investment” in Southampton, the note reports
“grave doubts about Art Asia’s artistic quality and sustainability”,
“a potential need to free the project from the Nuffield and, possibly Art Asia.”
A note of a conference call on 2 July between Arts Council England—ACE—and city council offices recorded that the
“Arts Council is nervous that some of the arts partners may lobby against the application”—
the city council’s new application—
“as there is no longer a guaranteed place for at least two of them (Nuffield and Art Asia). This would be unfortunate as it would look to the ACE Investment SubCommittee as though Southampton was divided in their desire for the arts complex”.
My reason for referring to those internal memos is that it is crystal clear that the Arts Council was active and instrumental in bringing about a situation in which Art Asia would be excluded from the project and lose its grant funding. However, it must be remembered that none of the criticisms uttered behind closed doors and used to force the city council to exclude Art Asia from the project were ever shared with Art Asia—nor was any evidence produced to support them, nor was Art Asia ever given a chance to respond or address them. Nothing in previous public assessments of Art Asia’s work substantiates the criticisms made in private.
In public, the Arts Council was telling a totally different story. I received a typical reply from its south-east executive director in January 2011, in which she mentioned an
“unwieldy and unviable business case”,
but then went on to say:
“Southampton city council and Art Asia requested that their capital grants be brought together in one single funding agreement that named Southampton city council the client. At this stage, Southampton city council and Art Asia are still in discussion about Art Asia’s role and space in the project”.
Given what I discovered through a freedom of information request, that response is disingenuous in the extreme and does not reflect well on the Arts Council. It is clear that decisions were being taken behind the scenes of which Art Asia was not aware and to which it could not respond. Significantly, none of the material that I have seen through my FOI request seems to have considered the moral and perhaps legal responsibility to respect the original reasons why the grant was made in the first place. There is no record of any attempt to secure the future of south Asian arts in the city of Southampton and the wider region.
I fully support my right hon. Friend’s comments about the huge respect in which Art Asia is held throughout Southampton and the whole of south Hampshire. It undertakes extensive artistic endeavours and brings ethnic minority art and cultural activities to the region.
As I understand it, Southampton city council gave a written assurance of the position of Art Asia’s grants, and informal assurances on the usability of its grants should the arts centre project not go ahead. Does my right hon. Friend agree that the record certainly appears to suggest throughout that Art Asia had a grant that was absorbed into the larger arts centre proceedings for technical and operational reasons, and that—morally, at least—Art Asia’s grant should remain protected if Art Asia wishes to use it for purposes other than the arts centre, if it is not to be a part of the arts centre in future?
My hon. Friend makes a good point. Nothing in the early discussions, when Art Asia and the city council sensibly came together to pool their resources, suggested that Art Asia was putting its grant award at risk, but that is what now seems to have happened.
The Minister is responsible for voluntary organisations—as I have been in the past, as my hon. Friend has been and as you may well have been, Mr Crausby. Anyone who has funded voluntary organisations knows that there are times when frank discussions must be had, and when it must be made clear that changes will be needed in an organisation’s work for funding to continue. But that never happened in this case.
I have appreciated hugely the contribution that Art Asia has made to the life, culture and vibrancy of Southampton and the surrounding region. I am not an expert on south Asian arts; if there were criticisms of Art Asia, it should have been given the chance to respond to them. That would have been a proper process and natural justice, but it simply has not happened. As my hon. Friend said, that leaves Art Asia in a difficult position. It has been excluded from the leading role in the arts complex project that was originally proposed, it is being denied the right to remove its original grant funding from the arts complex project to develop its own facilities and, as I understand it, should the arts complex project not go ahead for any reason, Art Asia’s money will be withdrawn along with any other Arts Council funding.
I am sure that the Minister will agree that that is an unsatisfactory position. I have four points to put to him. First, I hope that he will acknowledge—if not today, then after he has had a chance to consider what I have said—that the issue has not been handled well, and that the Arts Council has not operated with the transparency and openness that a public body distributing taxpayers’ money should have shown.
Secondly, I hope that he will reaffirm his commitment to the original aim of the Arts Council BME and Chinese capital programme, which was to ensure that minority arts organisations get a fair share of public funding. That means ensuring that in one way or another, the original intention of giving the grant to Art Asia is fulfilled, whatever happens in future. Thirdly, will the Minister use his best endeavours to find a way forward that works for all parties, including Art Asia?
Finally—I hesitate to raise this point—I hope that the Minister will give his commitment to ensuring as far as possible that Art Asia is fairly treated in future. I have tried to be as accurate and factual as I can in what I have said, but such organisations are heavily dependent on grant funding. Like many arts organisations, Art Asia has suffered a significant cut in revenue funding, about 60%, although the funding for the Mela is to continue.
At the moment, members of Art Asia are torn between their feeling about the unfairness with which they have been treated and their fear that by raising questions, they will suffer further cuts. One reason why this debate refers to events that happened two years ago is, frankly, that everybody wanted to complete the Arts Council funding round before the issues were raised in a public forum.
I know that the Minister would not want Art Asia to suffer for raising these issues legitimately with its Member of Parliament. I look to him for a public assurance of fair treatment in the future.
I am grateful for the opportunity to speak under your chairmanship, Mr Crausby, and to respond to this important debate secured by the right hon. Member for Southampton, Itchen (Mr Denham) on an issue important to his constituency that might have wider implications.
As a colleague in the House, I know only too well how rare an opportunity it is to secure a Westminster Hall debate. I am looking at two colleagues with distinguished careers. The fact that they have taken the time to come to the Chamber to raise the issue speaks volumes about how important it is. To put it in a slightly more vernacular way, I do not think that either the right hon. Gentleman or the hon. Member for Southampton, Test (Dr Whitehead) would use any weapon in his locker on an issue that was frivolous or unimportant. It goes without saying that it should be taken extremely seriously.
It is also nice, as I have some time, to be able to take a brief moment to praise Southampton as a city of the arts and an important cultural city, being the home of the great film maker Ken Russell, the great hymn-writer Isaac Watts and, of course, the songwriter sans pareil, Mr Craig David. I congratulate both Members on their contribution to Southampton’s return to the premier league. I look forward to seeing Southampton play at the home of the European champions next season, perhaps accompanied by the Chancellor of the Exchequer.
Despite my mildly humorous opening, the serious point is that the Arts Council has made a commitment to the arts in Southampton. That is why we are here today. We would not be here if the Arts Council had not made serious capital commitments to the city. As has been indicated by the right hon. Gentleman, that capital commitment is now focused exclusively on Southampton’s new arts centre. He went into a great deal of necessary detail about the issue, but to rehearse some of the chronology, the decision was made in June 2005 to grant Southampton’s new arts centre—known, I gather, by its acronym SNAC—some £5 million and give a £750,000 grant to Art Asia. At the time, neither organisation wanted to accept the money and put it in its bank account. There were a number of complicated reasons for that—all related to getting the project off the ground—including changes of developers, difficulty in meeting funding conditions, issues of leadership and artistic vision, and a concern that capital costs were increasing.
It was later agreed by the Arts Council’s management committee that a revised funding agreement of £5.724 million would be awarded to Southampton city council for SNAC, which named Art Asia and other arts organisations in its bid, and that included Art Asia’s award, which by that time was £724,000, not £750,000, because it had already received a capital sum of £26,000. However, things became slightly more complicated and an extraordinary review of the entire project took place under the auspices of the Arts Council between January 2009 and March 2011. I am told that since March 2010, the Arts Council’s south-east office has worked closely with Southampton city council to develop the governance and artistic vision for SNAC. As the right hon. Gentleman has mentioned, the office has also worked with the university of Southampton, because it is responsible for the John Hansard gallery, which is based on its campus. The aim of the review was to ensure a shared understanding of the strategic direction and any other issues before going ahead with the project.
I am pleased to note that a great deal of progress has been made. There has been a change to the operating model and design, and about two years ago, in July 2010, ACE provided another £1.5 million of capital to support SNAC. That means that the total capital investment for the project is about £7.2 million. The current position, as I understand it, is that Southampton city council has reviewed the design of the new arts complex as well as the governance and operating model. I also understand that the Arts Council regularly meets Southampton city council to discuss the project as part of the monitoring of the award of capital. Discussions are taking place on the external context in which the new development is taking place—that is, its place in the local, regional and national arts ecology—as well as on the design of the centre. The Arts Council’s clear goal is to give Southampton a high-quality arts offer and to galvanise its position as a cultural hub in the south-east. That is why Southampton city council has become a national portfolio organisation. It will receive almost £350,000 over the next three years to recruit an arts champion to lead on artistic vision and to work with SNAC.
That is the current position, but I have listened to what the right hon. Gentleman has said and will set out briefly what I am able to do. We fund the arts at arm’s length through the Arts Council, which is what every Government have done since the Arts Council was established. That is the absolutely appropriate way to fund the arts. Since we are debating controversial issues relating to the Arts Council, I should put on record the fact that, certainly during my time as a Minister, overall it has done an excellent job. In Alan Davey, it has a fantastic chief executive who has tackled a difficult financial position, as well as the review of the organisations that the Arts Council funds, with a deft hand. It is testament to his leadership that the Arts Council is now a widely respected institution.
I should also note that the problems that the right hon. Gentleman has brought to our attention began some time before Alan Davey was in post. Indeed, the Arts Council has had to cope with a recent inquiry into the funding of The Public in West Bromwich—given that one of the Members of Parliament there is the hon. Member for West Bromwich East (Mr Watson), it is not a place to make too many errors—and there were some criticisms, but I would not hold that against the current chief executive, who, to a certain extent, has inherited one or two problems that arose before his time.
I agree completely with both the right hon. Gentleman and the hon. Member for Southampton, Test that if there were problems with Art Asia as an organisation, it should have had the chance to respond. Although Art Asia’s funding has been reduced—as has the funding of many arts organisations—it continues to receive regular funding and to be a national portfolio organisation. Alan Davey and his colleagues at the Arts Council handled the process well, and one of the reasons why the process was held in high regard and earned a great deal of respect is that it was rigorous and based on artistic merit. Art Asia would not have survived and would not have continued to receive funding unless it was a well-run and important arts organisation. The fact not only that local MPs have been prepared to back it and give their time to raise the issue in Parliament, but that Art Asia has continued to receive funding from the Arts Council, speaks volumes—without my knowing a huge amount about Art Asia as an organisation—about its status as an important organisation that deserves support.
Turning to the four issues raised by the right hon. Member for Southampton, Itchen at the end of his contribution, first, I would hesitate to go on record at this early stage and agree with him that the issue has not been handled well. It might be worth while to undertake some form of independent review of the process in the future, to decide whether that is the case. Of course, as the right hon. Gentleman acknowledged, that relates to events that have already taken place and what we are concerned with is the here and now.
Secondly, the right hon. Gentleman invited me, almost as an issue of national policy, to commit myself to the aims of the BME and Chinese capital programme. I would not hesitate to agree with him that it is important that the Arts Council focuses on support for BME organisations. That is not an issue of political correctness. It is a straightforward matter of fact that many such organisations are not well represented and, to be frank, many of them do not necessarily have the insider knowledge—if I can put it that way—of how to apply to the Arts Council or of what opportunities it presents. I would always encourage the Arts Council to reach out to such organisations to encourage them to apply and be part of its funding programmes.
Thirdly, and perhaps most pragmatically, the right hon. Gentleman invited me to use my best endeavours to find a way forward. I will certainly agree to do that. I have written to him to suggest a meeting. I like nothing better than a good round table. I invite him and his colleagues from Southampton, Southampton city council, the Arts Council and Art Asia to sit around a table to discuss the issues and see whether we can find a way forward. Such comments tend to give my officials a dose of the heebie-jeebies, but given that they are also trying to deliver a £9.2 billion Olympic games, this should be a walk in the park for them. I promise that I will not cross the line by interfering in the Arts Council’s decision and that I will act exclusively as a neutral operator to bring the two sides together to discuss openly and frankly, but behind closed doors, a possible way forward.
That leads me to the right hon. Gentleman’s final point, namely whether Art Asia will continue to be fairly treated and avoid any comeback as a result of raising this issue in such a prominent fashion. I wholeheartedly agree with him that it is absolutely right and proper that any organisation that feels that it has been unfairly treated or that has concerns about something should be able to talk to its local MP, and that that local MP should be able to raise that issue in a way that he or she thinks appropriate. I can tell the right hon. Gentleman that I am completely confident, given how closely I have worked with the Arts Council over the past two years and the excellent men and women who work there, that there will be no comeback on Art Asia for raising the issue. I very much hope that all that will have been achieved is that we can progress at a more rapid pace than has been achieved in the past. I will certainly, along with the right hon. Gentleman and his colleagues, put my shoulder to the wheel to try to establish a way forward.
Question put and agreed to.