Wednesday 28 November 2012
[Mr Andrew Turner in the Chair]
Transferable Tax Allowances
Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Gauke.)
It is a pleasure, Mr Turner, to speak under your chairmanship for the first time, and it is a great honour to have the opportunity to put these important issues before the Chamber.
One of the key policy focuses in the run-up to the general election, and one of our key election manifesto commitments, was the introduction of a transferable allowance to recognise marriage in the tax system. The commitment to introduce the necessary legislation was included in the coalition agreement—for the avoidance of doubt it was on page 30—with provision also made for the Liberal Democrats to abstain.
The transferable allowance proposal was the main headline-grabbing recommendation among many other recommendations arising from the Conservative party’s social justice policy group and its two reports “Breakdown” and “Breakdown Britain”. Both reports highlighted the centrality of family breakdown to many of the social problems facing Britain today, which are a real issue, as I see in my constituency and as my hon. Friends will see in theirs. The reports recognised that the lack of policy support for marriage—the relationship at the heart of a stable family life—was not helping.
Britain is unusual in having a tax system that does not include any spousal allowance or credit. The group was very clear that addressing that shortcoming and recognising marriage in the tax system through a transferable tax allowance would help to bring us back into line with international best practice, and define the best way forward.
Before going into a more detailed presentation of the rationale for the transferable allowance policy, it is important to be clear from the outset about its importance to my party, as is reflected by the Prime Minister’s frequent references to it. When speaking as the Leader of the Opposition in response to the publication of “Broken Britain” in 2007, he said:
“I welcome this report’s emphasis on the family, and on marriage, as the basis for the social progress we all want to see…Britain is almost the only country in Europe that doesn’t recognise marriage in the tax system”.
“Our support for families and for marriage puts us on the side of the mainstream majority, on the side of a progressive politics, on the side of change that says we can stop social decline, we can fix our broken society, we can and will make this a better place to live for everyone.”
In July 2008, in Glasgow, the Prime Minister continued to affirm that stance by saying that
“when it comes to perhaps the most important area of all, families, we will take action not just to support marriage and family stability”.
He told parents:
“your responsibility and your commitment matters, so we will give a tax break for marriage and end the couple penalty.”
Furthermore, in 2010, during the run-up to the general election, during a speech in Doncaster, my right hon. Friend seemed to become even more vociferous in his support for marriage, saying:
“I absolutely feel at my very core that recognising that relationships matter, that commitment matters and, yes, that marriage matters is something we should not say quietly but something we should say loudly and proudly.”
“What is so backward looking in a country where we have social breakdown and social problems of saying that committed relationships, encouraging people to come together and stay together is a bad thing? Of course it isn’t, it’s not outdated”—
I hope that the Deputy Prime Minister is listening—
“if you look around the European Union, if you look around the OECD, we’re almost alone in not recognising marriage in the tax system. And why do we…think that with our appalling record of family breakdown that somehow we are in the right position and everyone else is in the wrong position; we’re not, they’ve got it right and we have got it wrong.”
The Conservative party is standing up for marriage in the House. With the exception of the representative from the Democratic Unionist party, the hon. Member for Strangford (Jim Shannon), 14 Conservative Members account for all the Back Benchers in the Chamber, so we are clearly showing that the only party on the side of marriage is the Conservative party.
As usual, my hon. Friend makes an excellent point. It will be noted that family policy is low on the agenda for Her Majesty’s Loyal Opposition.
The Prime Minister has said during Prime Minister’s questions:
“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]
That was a seasonal reference. I could go on, but I hope that I have made the point that delivering transferable allowances, about which we have talked so much, is now of central importance if we are to be deemed to be reliable and trustworthy.
I thank my hon. Friend for leading this debate. Does he recognise the concern that many of us have—we will no doubt be feeling it in the months to come—that the changes to child benefit are another example of where the rhetoric about marriage will be undermined? A stay- at-home parent in a household earning only £60,000 will be deprived of all their child benefit if those proposals go through, yet two working parents earning £45,000 each, so with 50% more income, will not lose a single penny of their child benefit. That is one of the unforeseen circumstances of this ill-thought policy.
My hon. Friend makes an astute point and I hope that the Chancellor is listening. We will hear his autumn statement a week today. In fairness to the Government, they have sought to ameliorate the cliff-edge effect of the changes that were announced in October 2010, but uprating benefits by 5.2% while seeming to punish people who are aspirational and have done well for themselves sends a confused message, and the Chancellor should seriously think again about that policy. With respect to the Minister, I am not convinced that the infrastructure is even in place to enact that policy change to the maximum degree, but I must not meander on to child benefit.
Back in February 2007, the fact that Britain came bottom of the UNICEF league table for child well-being hit the headlines and rightly caused a stir. On 16 February 2007, that was picked up in an important speech by the then Leader of the Opposition entitled “Nothing matters more than children”. He gave a strong affirmation of the importance of marriage for child development and said,
“I want to see more couples stay together, and we know that the best way to ensure this is to support marriage. Not because it matters how adult men and women conduct their relationships. But because it matters how children are brought up. Nothing matters more than children.”
Who in this Chamber could disagree with that?
Why is marriage so central to child well-being? As “Breakthrough Britain” demonstrated, fewer than one in 10 married parents have split by the time a child is five, compared with more than one in three couples who were not married. That is hugely important because although most single parents do a fantastic job in very difficult circumstances, the evidence is clear that, on average, children brought up in married families do better than those brought up in single-parent families on every significant measure: educational attainment, health, likelihood of getting into trouble with the law, and alcohol and drug abuse.
As the Secretary of State for Work and Pensions said in February 2011:
“The Centre for Social Justice has found that those not growing up in a two-parent family are: 75% more likely to fail at school; 70% more likely to become addicted to drugs; and 50% more likely to have an alcohol problem…And the Joseph Rowntree Foundation has found that children from separated families have a higher probability of: living in poor housing; developing behavioural problems; and suffering from a host of other damaging outcomes, whose effects spill over to the rest of society.”
Some might be tempted to respond to that by suggesting that the principal cause for those different outcomes is not marriage, but wealth, and it just so happens that wealthier people are more likely to get married. However, that analysis does not add up. No one is trying to argue that marriage is the only important consideration or that wealth is not relevant. However, as the Under-Secretary of State for Education, Lord Hill of Oareford, has noted, research from the millennium cohort study suggests that the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples.
In that context, the least we should do is to ensure that getting married in this country is no more difficult than in other developed countries. Given that Britain is unique among large, developed OECD economies in failing to provide any kind of spousal allowance or credit, the fact that it is relatively insensitive to couple and family responsibility must come as no surprise. In making that point, I am aware that when the recognition of marriage in the tax system is mentioned, it provokes in some quarters embarrassed smiles and sarcastic comments such as, “I got married for love.” I hope that we all did—those of us who are married—but such comments demonstrate a complete failure to understand the situation in which we find ourselves.
Let me be clear that people do not fall in love for fiscal reasons. However, when they fall in love and decide that they want to be together, they face a choice. Do they marry or cohabit? Do they make a public lifelong commitment to each other in front of families and friends that is recognised in law, or do they just move in together relatively casually and see how things go? The suggestion that that judgment is in no way impacted by financial considerations can be made only by people whose wealth is such that they are entirely insulated from the real-world considerations that impinge on the lives of most, and they are in danger of seeming very out of touch—I hope, again, that the Deputy Prime Minister is listening.
What of the pertinent financial considerations? The latest international comparison figures demonstrate that one-earner married couples on an average wage with two children face a tax burden that is 42% greater than the OECD average. Why should we make it so much more difficult for people to marry in the UK than in other OECD countries? That is a pressing question, especially when considered in the context of polling.
My hon. Friend makes a powerful case. Let me emphasise that what he is asking for is not a preserve of the middle classes, and nor would it undermine other forms of cohabitation that people are in, in many cases through no choice of their own—particularly when a husband has abandoned a wife. The reason why people go into marriage in the first place is also not based on money, but the empirical evidence that he has started to reel off absolutely shows that marriage is the most sturdy and stable form of bringing up children.
Does my hon. Friend agree that next week’s autumn statement by the Chancellor is absolutely the last opportunity for the Government to make clear the importance that they place on marriage? A commitment was made in the coalition agreement, but we need a full-blooded commitment, not one that only tinkers around the edges with a half-hearted endorsement of what we all believe in.
I could not have put it better myself. My hon. Friend’s intervention allows me to pay warm tribute to his fantastic work as children’s Minister. I look forward to the day that he is back in government, sharing his plethora of talents with the nation, but I know that he will do a fantastic job on the Back Benches for his constituents and the country.
I return to my argument about polling. My right hon. Friend the Secretary of State for Work and Pensions said during marriage week in February 2011:
“When asked about their aspirations, young people are very clear: three quarters of those under 35 who are currently in cohabiting relationships want to get married, and some 90% of young people aspire to marriage. So perhaps the question we should be asking ourselves is this: if people from the youngest age aspire to make such a commitment in their lives, what stops them doing so? Government cannot and should not try to lecture people or push them on this matter, but it is quite legitimate to ensure people have the opportunity to achieve their aspirations.”
I must, in addressing this point, congratulate the Secretary of State on bringing in the long-overdue reform that our benefits system requires and on introducing universal credit, which takes important steps to erode the couple penalty. However, the couple penalty remains such that, even with a fully transferable allowance, it would still be in place for all couples, apart from those without children. In other words, where one is dealing with one-earner married couples with children, the provision of a fully transferable allowance would not even create a level playing field, let alone any incentive to marry. It would simply erode the disincentive not to marry.
In the current context, where we make it harder for people to marry in this country than it is across the EU on average, the lack of support for marriage gives rise to family breakdown, not primarily through the breakdown of existing marriages, but by making marriage no more fiscally attractive than cohabitation, despite requiring a much higher and much more costly level of commitment than cohabitation. In such a context, cohabiting, which, as we have seen, is far less stable, inevitably becomes more attractive.
“Family breakdown in the UK”, a publication from December 2010, made the point that
“the problem is not divorce. While marriage accounts for 54% of births, the failure of marriages—i.e. divorce—accounts for only 20% of break-ups and 14% of the costs of family breakdown, amongst all families with children under five. Unmarried families account for 80% of the break-ups and 86% of the costs.”
It subsequently stated:
“These new statistics demonstrate dramatically that family breakdown is a huge and growing problem and that the main driver of family breakdown is the collapse of unmarried families. A failure to acknowledge these key points will lead to the inevitable failure of any government policy aimed at strengthening families. Witness the continued rise of lone parenthood since the 1980s at a time while divorce rates remained stable or declined.”
The arguments for a transferable allowance for married couples, defined narrowly in terms of the benefits of marriage, are more than enough to justify the change, but there are other compelling arguments for introducing transferable allowances: first, to make the tax system fairer by reducing the tax burden on one-earner families with modest incomes; and secondly, to make work pay, which is even more important.
In the first instance, it is not fair to place a tax burden on the income of one-earner families that is 42% greater than the OECD average. Crucially, most one-earner families who would benefit from a transferable allowance are in the poorer half of the population. The Institute for Fiscal Studies published figures shortly before the election showing that the transferable allowance proposals in our manifesto would have overwhelmingly benefited families in the poorer half of the population. In contrast, the IFS said that raising the tax threshold—the implementation of which has been prioritised to date in order to please the Liberal Democrats—would benefit mainly taxpayers in the top half of the population.
When independent taxation was introduced in 1990, it was realised that, unless special provision was made for families, they would lose out. As Nigel Lawson recognised at the time, the logical solution was to give a non-earner in a one-earner household the right to transfer their unused personal allowance to their spouse. He was not able to do that and as a compromise, the married couples allowance and the additional personal allowance were introduced. It is now clear that, without those allowances or transferable allowances, one-income married couples, most of whom are relatively poor, were bound to end up bearing an increasing share of the tax burden. That is what has happened, generating a completely unfair situation.
A few years ago, the Treasury published figures showing that, in 2009-10, a single taxpayer on three quarters of the median wage—approximately £20,000—was paying 21% less tax than in 1990. A single-earner married couple were paying 11% more tax. Under the coalition agreement, we are putting considerable resources into raising the tax threshold. For a single person under 65, the tax threshold this year is 170% higher than it was in 1990. However, the tax threshold for a one-earner married couple has risen by only 71%, so in real terms it is lower than it was in 1990. I urge the Minister to examine those figures carefully and to draw them to the Chancellor’s attention.
I commend my hon. Friend on his compelling analysis. Listening to him reminded me of something that my mother—my single mother—said about 40 years ago. She used an old phrase, “When money troubles come in the door, love goes out the window”, which is a good measure of the stresses that are put on families by financial pressures. Does he agree that there is no more important time than now for this issue, when the least well-off in our society are facing job and cost pressures as never before, which will put pressures on marriage as never before?
My right hon. Friend is bang on the money. Although such tax changes would be costly in the short term, the benefits for society would be incalculable, were we to enact them, which I hope we will in the Budget next March.
In considering the fairness arguments, it is also important to deal with the misguided claim made by some that, rather than helping one-earner families, the answer is to make them two-earner families. That logic is the occasion of great unfairness, because more often than not that option is not available. The latest DWP figures demonstrate that in 2.2 million households one member is in full-time work and the other is not earning; that 1.2 million, or 53%, of those households contain children; that in 700,000, or 58%, of those households with children there is a youngest child who is under five; and that a further 300,000, or 21%, have a youngest child between the ages of five and 10. Some 61% of all one-earner couple families have a young child under five, someone who is disabled or someone with caring responsibilities. Many of the remainder are likely to be doing voluntary work. It is clear that the majority of one-earner families are one-earners out of necessity rather than choice.
I congratulate my hon. Friend on securing this important debate. He is making an important point about low-income families and the second person in the family having to obtain work. Does he agree that one of the biggest problems is that, for a second earner on a low wage, there is the massive impediment of child care costs, which usually take up most of that second income?
My hon. Friend makes a good point. We are fortunate that the ministerial teams in the Treasury and the Department for Education are thinking carefully about how important child care is. Balance is important. We must not send a message through the tax system that child rearing, caring for children and bringing up a family are less important than going out to work, but at the same time we must, as Conservatives, take a liberal approach, so we should not put disincentives in the tax system for those who want to work. One of the abiding negative legacies of the previous Government is the appalling, mismanaged tax credit system, which tied so many people up in knots and was a disincentive for them even to consider any form of work.
I will not detain hon. Members too much longer, because other colleagues wish to speak. In addition to the marriage and fairness argument, there is also the important “making work pay” argument. In his Conservative party conference speech this year, the Prime Minister placed great emphasis on the goal of building an aspiration nation. Realising that goal necessitates addressing the principal obstacle, namely that our marginal effective tax rate is currently a staggering 73% for many people in receipt of tax credits. This is hugely out of line with international best practice. The comparable OECD average is just 33%. I am afraid that the elusive right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) must bear that huge burden. Clearly, he has better things to do today than attend this debate and listen to descriptions of the mess he made of the tax credit system.
We have got ourselves into such a situation because we moved from placing the burden of recognising family responsibilities on both the tax and benefits systems, as in most large, developed economies, to placing it entirely on the benefits system. That necessarily inflates benefits and, in so doing, creates an inflated marginal effective tax rate and a huge disincentive to work one’s way out of poverty, wherein the person concerned only gains 27p in every additional pound earned. Across the OECD, comparable employees take home on average 67p for every additional pound earned. The introduction of a transferable tax allowance will restore to the tax system some responsibility for recognising family responsibility and thereby float some poorer families off benefits, releasing them from high marginal effective tax rates.
The transferable allowance policy is timely for those wanting the UK economy to grow, such that those trapped under the burden of crippling marginal effective tax rates are released—liberated into productive, constructive employment, wherein they can deliver the aspiration nation goal.
To date, Ministers pressed on the transferable allowance point have always reaffirmed the Government’s commitment to the policy and said that they will introduce it at the appropriate time. However, the truth is that if they do not act at the next Budget in March 2013 the appropriate time will have passed, because it will take at least 12 months from the passage of the legislation till the law can be implemented, because of information technology and other preparatory changes that Her Majesty’s Revenue and Customs will have to implement. We have now reached the crunch point, which is why I call on the Chancellor to announce in the autumn statement, a week today, that the 2013 Budget will introduce transferable allowances.
I am told that the cost of a transferable allowance restricted to married couples with a child under three would be less than £1 billion. If it were restricted to married couples with a child under six, the cost would be £1.4 billion. The cost would be £2.4 billion if it were restricted to married couples with dependent children or in receipt of carers’ allowance. These are not insignificant amounts, but they must be seen in context. At 2010 prices, £13 billion is being found to raise the threshold for everyone to £10,000, and some £3.3 billion is being found to increase the basic personal allowance by £1,100 next year.
I am sure that the wise point made by my hon. Friend will be heard by the Minister, the Front-Bench spokesman for the Treasury.
In presenting these options, I hope that the Government do not opt to introduce the limited partially transferable allowance mooted in The Sunday Telegraph just published, which would be worth only £150, or £3 a week. If the limited funds available are such that we have to start with a limited transferable allowance proposal, it would be much better to focus a transferable allowance on those with young children, providing such families with a meaningful transferable allowance, rather than something minimal spread over all one-earner families.
My hon. Friend is making a powerful argument. I agree with everything he said. Does he agree that tax allowances should be given by introduction of a transferable marriage allowance, rather than by substantial tax allowance given to higher-rate taxpayers on their pension contributions, even if they are earning six-figure salaries?
Exactly. My hon. Friend makes a good, important point. This is an opportunity to make real our commitment to fairness and equity.
It is worth noting that the Prime Minister himself seemed a bit bothered by the nature of the partial allowance proposal. On 10 April 2010, he told Sky News:
“Of course, I want to go further”
than just a partially transferable allowance
“and I’m sure over a Parliament we would be able to go further, but this is a good first step that says commitment is important, marriage is important. I want us to be the most family friendly country in Europe and this is one step along that road.”
For the reasons I have elucidated in the past 20-odd minutes, the transferable allowance policy is a win-win policy for this Government that will help us make our fiscal arrangement less hostile to marriage, deal with some current unfairnesses in our tax system and help to make work pay. I hope that the Chancellor does the right thing next Wednesday and brings in a transferable tax allowance, which will be good for our constituents and for the country.
I am glad to have the opportunity to contribute to the debate on transferable tax allowances. I commend the hon. Member for Peterborough (Mr Jackson) for securing time for hon. Members to consider this important subject, on which, as the Member of Parliament for Strangford and a member of the Democratic Unionist party, I have received considerable correspondence. It is an important issue.
At Westminster, the DUP has been pushing the Chancellor to introduce recognition of marriage in the system. We are keen to support the Government on that policy, which the Conservative party advocated in opposition. That party’s proposal envisaged a system whereby married couples would be able to transfer part of their personal tax allowance to their spouse. An individual in the UK could earn £8,105 per year tax free under the Conservative party proposals, and if someone did not use their full personal allowances, up to £750 could be transferred to their spouse, which would amount to a tax cut of £150 for that family. Reports in the media have led us to believe that that might be on the way. The Minister will perhaps respond; he may not have Pandora’s box or all the answers today, but if the proposals are in the Budget or the autumn statement, we will give them our full support on the Floor of the House.
Until relatively recently, the UK recognised marriage in the tax system, but that changed as a consequence of decisions taken by the Labour Government. There is only one Labour Member here, and I usually support Labour on many issues in the House, but I am very much opposed to its position on this. The absence of Liberal Democrats from the debate tells a story in itself.
We find ourselves in the minority in the OECD. Only 20.1% of people in the OECD live in countries that do not recognise marriage or have a spousal allowance. In that context, it is not surprising that married couples get a bad deal. In “The Taxation of Families”, Pearson and Binder, using the latest figures from the OECD, illustrate that in 2011 a one-earner married couple on an average wage with two children faced a tax burden 42% greater than the OECD average. The hon. Member for Peterborough mentioned that in his contribution.
The UK tax system currently is intensely individualistic. Taxation gives single people with no family responsibilities a relatively easy ride, by comparison with married couples. That can be clearly seen in the fact that in 2011 the tax burden on a one-earner married couple on an average wage with two children was 73% as a percentage of that placed on a single person on the same wage, while the OECD average was just 5%.
The statistics illustrate that the UK makes things more financially difficult for married couples than our compatriots in the OECD do. To my mind, and the minds of most of us here, that is deeply concerning. I have always believed that marriage is a hugely important social institution, which provides significant benefits to the couple involved, the children born to the couple and society at large. We certainly should not make it more difficult for couples to marry in this country than it is in other developed countries, such as France, Germany and the USA. Why would we not want to recognise the importance of marriage and show our support for children being brought up by parents in the stable environment of marriage?
For the couple, marriage produces significant benefits, including public benefits that are not without consequence for the Exchequer. The figures have already been outlined. Research indicates that even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. Marriage has a positive impact on the mental well-being of the couple. The health gain of marriage could be as large as the benefits of giving up smoking, for example. Such examples are only a small portion of the benefits that marriage can often bring to couples who enter into it.
The social science evidence on the impact of marriage on children demonstrates significant public benefit. The scale of the benefits to children raised in married families is striking. The hon. Member for Peterborough outlined the differences between the outcomes of children of married parents and of unmarried parents. I will not go over that again, owing to the lack of time, but the need for a change has been clearly illustrated.
It is important to stress that I am not so naive as to suggest that Governments have the capacity to make marriages happy and strong—they are not marriage guidance counsellors or Relate. The Government do however have a role in not making it more difficult for couples, who fall in love and want to be together, to marry in this country than in it would be in another country. The current policy position is misguided and we urgently need to change direction.
As the hon. Gentleman said, it is not the Government’s role to be marriage guidance counsellors, but does he agree that introducing transferable allowances, as my hon. Friend the Member for Peterborough (Mr Jackson) outlined, would send a strong and clear message to the whole population that we support marriage? I have been married for 26 years—I hope I have got that right! It is a fantastic institution and has been for many years.
As someone who has been married for 25 years—just a year less than the hon. Gentleman—I wholeheartedly endorse what he says. Marriage is important for a great many of us.
The problem can be remedied in a positive way by introducing a transferable allowance for married couples, as the hon. Member for Peterborough suggested. The Prime Minister and the Conservative party have promoted the idea, but the main barrier has been the Liberal Democrats. The Deputy Prime Minister has said that
“we should not take a particular version of the family institution, such as the 1950s model of suit-wearing, breadwinning dad and aproned, homemaking mother, and try and preserve it in aspic.”
That statement clearly demonstrates immaturity and inconsistency on his part. The proposal is not about keeping women away from work and forcing them to stay at home, but about allowing the flexibility that we should have in the tax system, so that if either one of the couple does not use their full tax allowance, a portion of it can be passed to the other. At the same time, the Deputy Prime Minister has called for paternity leave to be increased from two to six weeks, but he does not want to make it easier for parents who already stay at home and do not use their full personal allowance. I suggest that that shows double standards.
Such an allowance would make the tax burden more sensitive to family responsibilities. It would also disproportionately benefit families in the poorer half of the income distribution. The Institute for Fiscal Studies, commonly referred to by all parties in the House, says that 70% of the benefit from a transferable allowance would go to those in the lower half of the income distribution. In other words, it would benefit those who need it most in a fair and balanced way, as it should.
We are all interested in reducing child poverty. The introduction of a transferable allowance would particularly help to address it by reducing the number of children living in households with an income below 60% of the median. In considering that point, it is important to remember that how materially wealthy individuals are depends not simply on income but on the size of their family.
A couple on £35,000 with two children is likely to be better off than only 37% of the population, even when tax credits and child benefit are taken into account, whereas a single person on £35,000 is in the top 20% of the population. We can blind people with figures, but they illustrate a clear trend—those in a marriage are disadvantaged under the current system. A two-earner couple with an income of £35,000—one working full-time and one part-time—is also in the poorer half of the population, but better off than the one-earner family. If the income were split equally, they would probably be in the fifth sector—better off than 44% of the population.
Some 2 million children are in one-earner couple households. Around 900,000 of them are in households with an income below 70% of the median. Of those, between 600,000 and 700,000 live in households with incomes below 60% of the median. A transferable allowance would reduce the number of households with incomes that fall below 60% of the median. It makes sense to make changes and to make them soon. A transferable allowance would reduce the number of households currently facing a 73% marginal tax rate. In so doing, it would particularly help the poorest one-earner families, whose efforts to earn their way out of poverty are jeopardised by the extraordinarily high tax rate.
The 73% marginal effective tax rate is a direct consequence of the UK tax system’s failure to recognise family responsibilities in any way. It places the burden entirely with the benefits system, rendering the withdrawal of benefits a more significant event for marginal effective tax rates. In the current tax year, a quarter of all families have an effective marginal tax rate of 73% or more: income tax accounts for 20%; national insurance contributions for another 12%; and the tax credits taper accounts for a further 41%. A family with two children and an income below £31,356 will pay 73% on any additional income. A family with four children will pay 73% on incomes below £43,838.
The figures do not take account of pension payments, so in many cases the 73% tax rate reaches even higher up the income scale. When pension contributions are taken into account, that 73% could apply to families earning £45,000. Around 2 million families are in that position, so one in four of all families in the United Kingdom of Great Britain and Northern Ireland faces a marginal rate of 73% or higher. That is deeply concerning and is an important reason for change.
Things will get even worse with the introduction of universal credit. The marginal effective tax rate of such families will actually increase from 73% to 76%—another three percentage points. Only 300,000 people have been affected by the top 50% rate, but, by contrast, 2 million will be locked into a system in which the Treasury will take back more than 76p of every extra pound earned. They are not “welfare spongers” but hard-working families, whom we are here to represent, which is why we are discussing this proposal today. I commend the hon. Member for Peterborough for securing the debate.
The economic and social costs of such a high marginal rate on such an important section of the community might be difficult to calculate, but they are considerable. The only way to reduce the number of families trapped by high marginal tax rates is to reduce the number who need to receive credits. The way to do that is to change income tax rates so that they become more sensitive to family responsibilities and place less of a burden on families, who will therefore not need to be compensated through credits. Transferable allowances are an obvious way of doing that.
The Government are right to place the economy at the top of their agenda—I support that—and to try to cut the deficit to reduce our debt burden. However, underlying problems in our country are contributing to the financial burden on the state. Strong marriage and strong families are key to fixing what the Prime Minister has called “broken Britain”, which is why I support them.
In parliamentary debates and questions, I have put it on the record that, as others have stated, it will take 12 months from the passing of legislation to make changes and implement them. If the Government introduce such changes in March 2014, they will be too late; it needs to be done in this autumn statement to come into effect next year.
Supporting the transferable tax allowance and addressing the double penalty of tax credits and the benefit system would send a significant message and signal the importance that this Government—our Government—are placing on marriage. The proposal will have the full support of the Democratic Unionist party. Today’s debate is exactly a week from the autumn statement, so I call on the Minister and the Chancellor to prioritise the announcement next week that the transferable tax allowance will be in the 2013 Budget. That is the best way forward.
I pay tribute to my hon. Friend the Member for Peterborough (Mr Jackson) not only for delivering an excellent speech, but for his dogged pursuance of the issue during this Parliament.
Supporting marriage in the tax system, certainly where children are involved, is a social justice issue. It is about supporting children to flourish, and helping them to get the best start in life and fulfil their potential. The Government support children, especially disadvantaged children, in many ways—providing nursery places, the pupil premium, school dinners and university funding—so why do they not support children in one of the best ways we can, by supporting a stable, secure environment in which they can grow up? We focus so much on ensuring that children have the best education within the school day, but a crucial factor in enabling them to take advantage of that education is if, at the end of the school day, they can go home not to a chaotic environment but to a stable and secure one, not least so as to do their home work, rest and prepare for the next school day.
My hon. Friend cited some excellent statistics from the Joseph Rowntree Foundation and the Centre for Social Justice on the better development outcomes of children from stable families. I do not want to repeat those, but I will mention others. The Centre for Social Justice, to which I pay tribute for its work, has informed me that children in families with transitional relationships are eight times more likely to be on a child protection register, and 50 times more likely to die of a deliberate injury in the home. There is no doubt that children living in families with transitional—indeed, sometimes chaotic relationships—suffer acutely; the converse is also true.
As the Joseph Rowntree Foundation has said, the effects of children suffering behavioural problems spill out to the rest of society. Relationship breakdown for children means that they suffer grief—often far into adulthood—and so fail to fulfil their aspirations. Therefore, not only for children during childhood but for wider society, we should support marriage in the tax system, which is about sending out a message that it is good for children, but it is also good for society, and about saying that we value the commitment, care and self-sacrifice of parents. Children are a blessing, but they are also a responsibility—they involve hard work—and many parents, when one is a non-earner, give up their earning capacity to help bring up the next generation in a positive way, from which we will all benefit as the years go by.
Marriage is a more secure environment, which is why we should support those who are married and not only those who cohabit. The Department for Work and Pensions recently announced that only 55% of children still live with both parents by the age of 15, but 97% of those families are headed by married couples. Another advantage is that a married couple’s tax allowance would effectively target the poorest with that benefit. The Institute for Fiscal Studies has said that such an allowance would have a disproportionately positive effect on those in the lower half of the income distribution, because 70% of the benefit would go to them. We all support an increase in the personal allowance. I would like that to be increased further, but an increase to £10,000 will benefit even those in the highest tax brackets. A married tax allowance is simply more targeted and therefore more effective for benefiting children in the poorest and least advantaged homes.
I therefore join my hon. Friend in calling for the Chancellor to bring in, as early as possible, a transferable tax allowance for married couples: yes, because it was in our manifesto; yes, because it was a coalition agreement commitment; yes, because it will recognise marriage in the tax system and, in so doing, bring us more closely into line with other OECD countries; yes, because it will rebalance the tax burden on married couples compared with single people; yes, because it will send out a signal from Government that they value marriage, and recognise and appreciate the contribution that married couples make to wider society—with elderly relatives or voluntary work—as so many non-earner married people do; yes, because the greatest benefit will accrue to the least well-off; yes, because it is worth making such an investment that will reap its benefits and rewards for society not only in the next few years and while today’s children are growing up, but potentially for generations to come as those children grow up to be responsible, positively contributing citizens; yes, because it will contribute to social mobility, helping children from the poorest households to achieve a better outcome in life and to achieve their aspirations; and yes, as I said at the outset, because it is a matter of social justice. It is simply the right thing to do.
It is a pleasure to follow my hon. Friend the Member for Congleton (Fiona Bruce), and I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing this important debate.
My contention is that marriage is too important an issue for us to be neutral about. We need to be unashamedly positive about its benefits. In doing so, we are not in any way being negative about people who have any other lifestyle. As has already been said, the tax system sends a multitude of messages about things that we approve of and disapprove of. We send positive signals about bicycling to work and Christmas parties—this morning, there is talk about putting up the unit cost of alcohol—and that is all done through the tax system. It is perfectly logical and sensible to do the same on an issue as important as marriage, which has such profound effects on family life, on outcomes for children and on social justice in this country.
I shall briefly repeat the benefits of marriage. When parents split up, their children are 75% more likely to fail at school, 50% more likely to have alcohol problems and 40% more likely to have serious debt problems. It is a shocking fact that by the age of 15, a child is more likely to have a television in their bedroom than a father who still lives at home. As my hon. Friend the Member for Congleton said, for children aged 15 who still live with both parents, 97% of the couples in question are married.
In 1972, there were 426,000 marriages in England and Wales. By 2010, that number had declined by 43% to 241,000. We should not brush that aside, because it is a matter of great concern. We need to try to reverse the trend in order to achieve positive outcomes for children. If we look at other developed countries, we find that Britain is unusual in not having some form of transferable allowance. We have had a lot of statistics already, but the one that stands out for me is that single-earner couples in the United Kingdom are paying over a third more in tax than those in any other major developed country. It is Britain that is the odd one out. If we were to bring in the transferable tax allowance, which is in the coalition agreement, we would be getting the United Kingdom back in line with almost all of our major international competitors.
The Heritage Foundation in the United States has published some interesting data, based on US Census Bureau figures, which show that married school leavers have a lower poverty rate than that of single university graduates. That is a powerful figure. We rightly tell children in this country that it is good for their future to finish school; we would think it extraordinary if people said anything else. We know that people will have better life chances and higher incomes if they complete their schooling, but, as I said earlier, we need to be unashamedly positive about marriage and we need to send out the signal about the beneficial effects of marrying before having children. Bringing in the transferable tax allowance is just one part of sending that message to society.
I have already given the figures for the decline in marriages, which is steep and alarming and needs to be reversed. However, we need to measure such matters more carefully. I contacted Central Bedfordshire council before this debate to get the marriage figures in the two registry offices in my constituency. In 2011-12, in Leighton Buzzard and Dunstable, there were 183 marriages, which was slightly more than the year before and fewer than the figure in 2009-10. Those are the sort of figures that Members of Parliament should be aware of, because it is very true that we value what we measure and we measure what we value. I am proud to be here supporting my hon. Friend the Minister, and asking him to fulfil what was in our election manifesto, which he and I stood on, and which is in the coalition agreement. Publicly, the Government have said that they will do this; it is the right thing to do, and I am pleased that so many colleagues are here this morning to make this important case.
It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on instigating this excellent debate. Most of the statistics and comments that I was planning to make have already been made by other Members, so I will not repeat them. It is important that we, as Members of Parliament, try to be true to the manifesto commitments upon which we stood. Certainly during the numerous campaign meetings that I had in my constituency, the transferable tax allowance was discussed, as was the Liberal Democrats’ policy of increasing the personal allowance. As a Government, we have invested hugely in increasing the personal allowance, but as yet there has been no move towards a transferable allowance. It is important that we get a signal, either next week or certainly before the next Budget, about such allowances.
The historical situation shows quite clearly that the situation for marriage within the tax system has changed quite dramatically over 40 years. We have gone from a situation in which the marital status of an individual was acknowledged by the tax system to a situation in which we have an individualistic tax system. We cannot complain that we have an individualistic society if we have a tax system that basically says that a stable family life has no value, and that is something that we must deal with. Historically, the figures show that the increase in taxation for a single person from the mid-1960s to 2011 has been very slight, moving from 23% to 25% of tax. Very low-income and high-income families have seen their tax burden fall, while the squeezed middle—one-earner families in particular—are penalised by the tax system, with their tax contribution doubling over a period of 40 years.
The signal being sent out by the tax system has been that stable families, or the old-fashioned 1950s family, as the Deputy Prime Minister described them, are the ones who are being penalised. Effectively, their choice is being penalised by the tax system, whereas every other choice seems to be applauded.
I wonder about the position of our Liberal Democrat colleagues, whom I defend on a regular basis because they have been very good at supporting the Conservative party on important changes on welfare reform and on dealing with the deficit. However, I have been surprised by their response to the issue of recognising marriage within the tax system. Of all parties, the Liberal Democrats look to Europe for a lead in so many areas. They should look at all the other countries in the European Union and ask themselves, “Why do they recognise marriage within the tax system and we do not?” We are alone with only Mexico in the OECD in not recognising marriage within the tax system, and I do wonder, even from the Conservative Benches, whether we should, on this occasion, take a lesson from our European partners. If they can recognise marriage within the tax system, we should try to do the same.
Again, on an international basis, it is the average-income family that is penalised in this country in comparison with other countries, and that is a message that is coming through strongly when we read the newspapers and the letters from constituents who are now seriously complaining about the impact of increased prices in the shops and the increased costs of family life. That frustration is increased by the fact that they also feel they are not being supported by the Government in any way, shape or form. Explanations for that will be given by the Treasury, but it is important to recognise that the pressures being faced by families also reflect the fact that they are not, in their view, being supported in the decisions they have made in trying to provide their families with a stable environment.
We should consider a transferable allowance. As for the costs involved, I recognise the fact that even a small contribution towards making a change would be comparatively low cost compared with the cost of increasing the personal allowance. I have supported an increase in the personal allowance, but some of the analysis that has been made of the costs involved indicates that a lot of the benefits being derived from that increase have actually gone towards those in the higher percentages of the income distribution scale. Those in the top half of the income distribution scale have benefited pro rata to a higher extent from the increase in the personal allowance than those in the lower part. Interestingly, the research being done by organisations such as CARE shows quite clearly that if we target a transferable allowance, most of the benefits would go to those in the bottom half of the income distribution scale, which is something that we should take into account. As my hon. Friend the Member for Congleton (Fiona Bruce) stated, this is a social justice issue; it is trying to ensure that if the Government are supporting people within society, then that support should be targeted at those most in need.
CARE has highlighted one big problem with our tax system, which is that we seem to view individuals in relation to their income without taking into account the costs that they face, which come from their responsibilities —whether they have dependants and whether they are a single-earner families. Again, while a transferable allowance would be a small step, it would show quite clearly that the Government value some of the choices that people make in society to ensure that their children have the best start in life. Certainly, there is some merit in the comments made by my hon. Friend the Member for Peterborough about targeting a transferable allowance initially at those with children under the age of three or those with children under the age of six. In that way, we could perhaps start the process of having a transferable tax allowance once again.
As I said, the case that has been made today is very strong. There is certainly agreement within Westminster Hall this morning that marriage is an institution that we value and that we, as a society, should put a premium on. That is in no way a condemnation of any other choice that people make, but the tax system that we have at this point in time is actually stating that it places less value on marriage than it does on other options. That is the key point. We are not asking here for marriage to have a special status; we are simply asking for marriage to be treated in a way that is appropriate and in keeping with the way that the tax system treats other options. That would send a very strong signal to society and to our constituents.
I will close by saying that I fully endorse the comments made by all the speakers so far, and I look forward to hearing the comments of the Treasury Minister.
I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing this important and timely debate as we lead up to the 2013 Budget. It is timely in the sense that the clock is ticking in terms of our fulfilling our clear promise on this issue, which was made both in our manifesto and in the coalition agreement.
I am proud to champion marriage, as we all are. In addition, I am proud of the fact that the Prime Minister has also been a clear champion of marriage—consistently so—both before the election and as Prime Minister. His words in the run-up to the 2010 election were very clear. He said:
“I absolutely feel at my very core that recognising that…marriage matters is something we should not say quietly but something we should say loudly and proudly.”
What my hon. Friends have said loudly and clearly today is that marriage matters and that we need to show in the tax system that it matters. It matters not only because we say so but because it is a social institution that provides many benefits to the whole of society, although today we are particularly focusing on the poorest, who we consider will benefit from marriage being supported by the state.
Given the commitment in our manifesto and, indeed, in the coalition agreement, I recognise that I do not need to convince my hon. Friend the Minister of the principle of recognising marriage in the tax system. We will leave it to the Opposition—indeed, to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who is the lone Opposition Member here today and whom we will hear from shortly—to try to justify why we should continue where the previous Government left off, which is not only failing to recognise marriage but discriminating against married couples in the tax system. The issue facing the Government today is not “if” but “when and how”.
Given the opt-out for the Liberal Democrats under the coalition agreement, the Deputy Prime Minister—as he has always been referred to—last year decided freely to express his opposition to supporting marriage in the tax system. He is free to do so. We are a coalition. I am not sure that we would describe ourselves as a “marriage”, or a cohabitation. It is a relationship that certainly was not formed on the basis of love but on the basis of fiscal reasons, to tackle the huge deficit and the legacy left by the previous Government.
I am grateful to my hon. Friend for that intervention. It is a time-limited contract, unlike other marriages, but the issue is that there are also good fiscal reasons why this partnership, or relationship, should seek to have as a priority the implementation of this promise, despite the differing views in the coalition.
We need to tackle the Deputy Prime Minister’s argument; he freely expressed his views in one way, so we are free to express our views in another. As has already been mentioned, he said in December 2011:
“we should not take a particular version of the family institution, such as the 1950s model of suit-wearing, breadwinning dad and aproned, homemaking mother, and try and preserve it in aspic.”
It is important for us to make the point very clearly and to emphasise, as hon. Friends do, that the Deputy Prime Minister and others, such as the Opposition, are wrong about the two-parent family and wrong about the motives of others. Indeed, their arguments are old and very much out of touch with the British public, and they are themselves increasingly preserved in aspic. We are not harking back to the outdated 1950s model, and it is very condescending to caricature not only our views in that way but the married people up and down the country and those who want very much to support marriage. Marriage is a popular institution—increasingly so—and it is one that the public welcome.
We simply believe that marriage is best for children and for society, and the evidence supports us. A review by the Institute for Fiscal Studies of the research in this area, which has already been mentioned, shows unequivocally that
“children raised by two happily and continuously married parents have the best chance of developing into competent and successful adults.”
The evidence provides clear support for implementing policies that encourage couples to stay together, and shows that married couples with children are far more likely to stay together than their unmarried counterparts.
It has already been quoted, but it is important to keep repeating the evidence of the “Breakthrough Britain” report, which was published by the Centre for Social Justice. It demonstrated that children born to unmarried parents have a nearly one in two chance of seeing their parents split up by the age of five, whereas for children whose parents are married the figure is only one in 12. That is a huge difference that the state cannot ignore; indeed, the state needs to recognise it properly.
We all recognise that stability clearly matters. Most single parents undoubtedly do a fantastic job raising their children in difficult circumstances. We are not here to judge or to make moral judgments on people’s relationships, but the evidence is very clear that on every significant measure children who are brought up in married families do better on average than those brought up in other relationships.
Does my hon. Friend agree that this is particularly an issue of social justice for poorer people? Wealthier people—if they are able to do so—can of course transfer their unearned income to their spouse in the form of dividends, rents, interest and income, and make use of a transferable allowance, whereas poor people cannot. This is therefore about doing the right thing by poor people, because wealthier people can already take advantage of what we want for everyone.
I agree, and it is very important that we recognise the clear data that make that point. The Centre for Social Justice has said that the difference in family breakdown risk between married and cohabiting couples is such that even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. It is very important to recognise that this issue is one of social justice.
We recognise that most of the serious social problems that face us have their roots in the breakdown of the family. It is important for Conservatives to recognise and to make the point clearly that we support marriage. Far from making the case for the 1950s model of supporting marriage that I referred to earlier, we want a thoroughly modern and progressive measure that is underpinned by social justice.
As my hon. Friends have said, we are out of step with the majority of other developed countries. Most of the individuals living in OECD countries who are in a system that does not recognise spousal obligations are in either the United Kingdom or Mexico—and that cannot be right. Among highly developed economies, the UK is on its own in operating a tax system that ignores spousal obligations.
As my hon. Friends and I have said, this is an issue of social justice. The Institute for Fiscal Studies and others have made it very clear that, if a transferable allowance were implemented, 70% of the benefit accrued would go to those who are currently in the lower half of the income distribution level. The introduction of a transferable allowance would also reduce the number of children living in households below 60% of the median income, and that is where we want to be.
It is important that we properly urge the Chancellor—my hon. Friends and I have clearly done that this morning—to make good our collective promise and introduce a transferable allowance for married couples with young children. That is where the focus is. We recognise that it is not adequate simply—in a minimalist way—to have a partial transferable allowance that would be worth—what?—£150 a year, or £3 a week. That would also open us up to some criticism. We need to focus on and target married couples with young children.
Perhaps I could mention that some polling from the Centre for Social Justice has found that more than 80% of adults agree that more should be done to help parents who wish to stay at home to bring up their children in the early years. Does my hon. Friend agree that support for child care does not always mean that child care needs to be outsourced, and that some of the best support can be to help parents to stay at home to bring up their own children?
I heartily agree with my hon. Friend. We need to look in the round at the benefits of child care—the social and economic benefits. Many of us know the value of well-supported care at home, which we sometimes do not properly quantify. That is a message that we need to amplify.
In conclusion, we are on the side of some of the poorest families in Britain, and we can help them by fulfilling the promise in our manifesto and in our coalition agreement. An unimplemented promise would not be a promise kept. We need to implement our promise properly and fully in the Budget of 2013.
It is a pleasure to serve under your chairmanship, Mr Turner.
I congratulate the hon. Member for Peterborough (Mr Jackson) on securing this debate. We have heard many sincere contributions. The previous speaker—the hon. Member for Enfield, Southgate (Mr Burrowes)—said that he was looking forward to hearing my response, but I think he should be looking forward instead to hearing the Minister’s response, because that is where the lack of clarity lies about what is actually going to be happening with this policy proposal that hon. Members have so vociferously supported this morning.
This is an important debate, given the lack of clarity and detail from the Government on what kind of scheme—if any—they plan to introduce. Conservative Members have repeated—I agree with their comments—that they intend to introduce some kind of recognition for marriage in the tax system; indeed, the Prime Minister himself repeated his commitment to such a plan at one of his first Prime Minister’s Question Times. Since that day, however, we have had no confirmation of what the policy might look like.
I want to tackle head on the allegation that families are a low priority for Labour Members. Quite the contrary: the Labour party stands up daily for hard-pressed families, who are feeling the squeeze in these tough economic times. However, we look to stand up for all families, not just couples who are married where one spouse stays at home and the other earns at the 20% rate of tax. It is those couples that the hon. Member for Peterborough and the Members supporting him propose to support.
It has been quite interesting to hear the number of comparisons made with our European neighbours and to hear them spoken of with such great admiration, with Members wanting to follow their lead. That is refreshing in many ways.
I understand the importance of marriage, but I am not convinced that recognising it through the tax system as proposed is the right way to go about this, and I will set out clearly the reasons why.
Perhaps the hon. Lady is feeling her way towards informing us of what the Labour party would do if this issue were brought to a Division in an indicative vote on the Floor of the House. However, I should remind her that the previous Labour Government established the precedent of recognising marriage in the tax system in 2007, through transferable allowances in respect of inheritance tax, so it is not as though the Labour party has never considered transferable tax allowances to support the family.
As I said, I am going to set out clearly why we do not agree that this policy is the right way to go about supporting the families Members believe it will support.
When the Minister without Portfolio told The Daily Telegraph that married couples should not count on getting a tax break before 2015, the party machine swung into action to correct it. A retraction was issued within 24 hours, and the Minister without Portfolio now completely accepts that a tax break will be introduced and that tax is a matter for the Chancellor. It is therefore good that we have the Exchequer Secretary with us to clarify what the Government plan to do, because it has been two and a half years, and Members on both sides of the House are waiting to hear the Government’s proposals. As Members have said, the Conservative party set out in its election manifesto its view of what a tax break for married couples might look like, but times have changed significantly. I therefore look forward to the Minister telling us what the policy might look like and whether it will be implemented, and I am sure other hon. Members look forward to his remarks in the same way.
The strength of feeling on this subject is clear from the number of Conservative Members who have contributed, and that is entirely appropriate. There are, however, serious concerns about the proposal, and Members have referred to the Liberal Democrat party.
I apologise to the hon. Gentleman; I was going to pay tribute to his comments a little later. I am facing the Conservative Benches, and I take his point.
Many Members have mentioned the Liberal Democrat party, which was very ready to abandon its principles on tuition fees and the VAT bombshell, which it campaigned so hard against. However, Liberal Democrat Members have said clearly that they refuse to support this policy in principle, although no concrete proposals have come forward, so we still do not entirely know what they will do or whether they will support the proposal in its final form. We await clarification on that too.
At a time when families up and down the country are being hit hard by cuts to tax credits, a squeeze on their living standards, rising prices and frozen wages, with pensioners losing their tapered relief, and young people finding it harder than ever to get into work, many people will find it regrettable that Conservative Members’ focus today is on securing a tax break for a limited number of married couples. The previous Labour Government based their help for families on need and on a clear and targeted approach to alleviating child poverty, rather than on distinguishing between particular family structures.
If the policy the Government announce is the same as that set out in the Conservative party’s manifesto, it will, as Members have acknowledged, be worth just £2.88 a week. Furthermore, it has been targeted at an extremely narrow group: the only people who will be able to claim this tax benefit will be married couples where one partner earns above the income tax threshold and the other does not; whether the couple has children will be entirely irrelevant.
The previous Labour Government recognised family breakdown as a cause of child poverty; indeed, the Treasury Minister and I were shadow Ministers when the Child Poverty Act 2010 went through the House. Would the hon. Lady like to confirm that now? Will she acknowledge that family breakdown is a significant cause of child poverty?
What is rather counter-intuitive about the arguments being put forward today is that this tax incentive, small though it is, would be targeted at the very families that are not in dire straits. Members seem to be turning their backs on children in families that are facing the difficulties they have described. Unmarried couples, including those with children, have lost out on tax credits—many have had their tax credits cut because they cannot find more hours of work—or have been hit with housing benefit cuts, but they will not benefit from these changes. If a marriage ends for circumstances entirely out of somebody’s control, or if they are widowed or have to flee the marriage because of violence, they will lose the proposed benefit, but it could still be available to the perpetrator of the domestic violence, who could get married again. Nor would this benefit be available to married couples where both partners are working, unemployed or low earners.
Hon. Members have mentioned analysis by the Institute for Fiscal Studies, but that analysis shows that this benefit will be available to only 32% of married couples. This policy is meant to recognise marriage in the tax system and to send an important signal that we value couples and the commitment people make when they are married. Do Members believe that only 32% of marriages should be valued, while the other 68% are of less value and less worthy?
Unfortunately, I do not have much time. I appreciate this is an important subject, and I would like to give Members more time, but I want to finish my comments.
I strongly disagree with the hon. Member for Enfield, Southgate, who attempted to dismiss out of hand any notion that this policy recognises not marriage in general but just one type of marriage, where one partner is the breadwinner and the other stays at home. He dismissed the Deputy Prime Minister’s comments that such things are a throwback to the Edwardian era, but that is a sincere concern for many people.
I appreciate the comments of the hon. Member for Strangford (Jim Shannon) and the sincere manner in which he made them, but I disagree with him. Designing the system in a way that penalises all couples and families that do not fit in with one specific model, regardless of need, sends out a strong signal—intentionally, it would seem—that one type of family is worth more than another and that one type of parent is worth less than another. That is a very dangerous signal to send to children. It is unfair and out of touch, and is not the best way to support families in the tough times of 2012.
I do not have much time, and I wanted to make a final point. The hon. Member for Cities of London and Westminster (Mark Field) made a powerful point, which I would make too: the Government, while talking about promoting or supporting marriage in the tax system, are removing valuable child benefit for many families and children.
Unfortunately I have run out of time, but I will be interested to hear what the Minister has to say in response to my concerns and those of other hon. Members.
It is a pleasure to serve under your chairmanship, Mr Turner.
I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing the debate, on making such a forceful, passionate and well-informed speech and on ensuring that there would be significant participation—at least among my hon. Friends. I congratulate all those who made speeches: the hon. Member for Strangford (Jim Shannon), and my hon. Friends the Members for Congleton (Fiona Bruce), for South West Bedfordshire (Andrew Selous), for Aberconwy (Guto Bebb) and for Enfield, Southgate (Mr Burrowes).
The debate has demonstrated the degree to which members of my party value commitment and how important we believe the institution of marriage to be to society. That point came across clearly, and, as has been pointed out on several occasions, the Conservative party said, in our 2010 manifesto, that we would recognise marriage and civil partnerships through the tax system. We want to send a clear message that marriage is important and commitment is valued, and that we want to encourage and support hard-working families.
In the past two and a half years, the Government have taken a lot of action to help hard-pressed families in difficult economic times, and I want to say a word or two about some of the steps we have taken before returning to the specific issue of marriage. The Chancellor has said, in his principles for good taxation, that our tax system should be fair, rewarding work and supporting aspiration, and that it should ask most from those who can most afford it. In the context that the Government inherited a difficult financial position in 2010, we have taken steps to bring Britain’s tax system into line with those principles. First and foremost, we chose to focus on tackling the deficit and promoting growth. Among other things, we have focused our efforts on reforms that are intended to ensure that work pays—that point was raised by several hon. Members—including through the introduction of universal credit and our successive increases in the personal allowance.
Given the current economic climate, it is more important than ever that we recognise the wide variety of pressures faced by working families, and we have taken action to help them. For a start, our policy on the personal allowance has helped low and middle earners by improving rewards for work and putting money in their pockets. We have said that raising the personal allowance to £10,000 is our priority for the income tax system, and we stand by that. In the June 2010 Budget, we announced a £1,000 increase in the personal allowance for those aged under 65. We talked about making real-terms steps through the rest of the Parliament to achieve our goal, and those were not idle words, because a further increase of £630 followed at the 2011 Budget. This time, the benefits were passed on to higher rate taxpayers, which meant that there was a real-terms increase of £42 for every taxpayer earning up to £115,970. We promised that we would raise the personal allowance by at least the equivalent of the retail prices index until our objective of £10,000 was reached, but both those increases were significantly above inflation, thus making a real-terms difference to hard-working people.
Those two announcements have taken the personal tax allowance from £6,475 in 2010-11 to £8,105 in 2012-13, and basic rate taxpayers have gained £210 a year in real terms. In the 2012 Budget, we went further and announced an increase of £1,100 from April 2013. That is both the largest real-terms increase in the past 30 years and the largest ever cash increase in the personal allowance. The increase will take the allowance to £9,205 from April 2013, which will provide a real-terms gain of £170 for most basic rate taxpayers in 2013-14. The £10,000 goal is now within touching distance.
Other policies, such as on cutting fuel duty, on council tax, and on keeping interest rates low, have of course helped hard-pressed families. We have provided extra funding to support family support services. The Department for Education set up a relationship support division worth £30 million over four years, which will encourage stability—the very thing that several hon. Members have raised in the debate—and provide support for couples who are experiencing difficulty in their relationship. We hope that that will help some couples to stay together, and that when that is not possible, for whatever reason, it will lessen the impact that the breakdown of parents’ relationships can have on children.
We have touched during the debate on child care. The Government have taken steps to help families with three and four-year-olds by increasing the child care support that they get in a week, as well as to extend support to 260,000 disadvantaged two-year-olds. Indeed, we are looking at what we can do to improve the affordability and accessibility of quality child care.
Universal credit has been touched on in the debate. We are reforming the benefit system to ensure that work pays. Entitlement to universal credit will be based on household income and a single payment will be made to the whole household. That will support family budgeting and ensure that there is no penalty for families, whether one parent chooses to stay at home or both choose to work. Families will be able to keep their benefits for longer before withdrawal at a single rate, which is a much needed improvement on the current system of multiple earnings disregards, as multiple withdrawal rates can leave families confused and trapped out of work.
Will the Minister disabuse the Opposition of the notion that the policy is about giving married couples an unfair tax break? It is about nudge behaviour, so that they can make a proper choice between cohabitation and marriage, which is a different thing.
My hon. Friend was right to point out that the previous Government recognised marriage in the context of inheritance tax, which is generally applicable to wealthier households, yet seemed resistant to any recognition of marriage in the tax and benefits system that would help poorer households.
Marriage and civil partnerships are about commitment and stability. They represent a firm promise to stick to something and keep working at it. We want to rectify the way our tax and benefits system relates to that. Studies have shown that married couples are less likely to split up than cohabiting couples, and stability is vital to children. An unstable home life can have a detrimental effect on their happiness and development, and that has been shown by numerous studies, some of which have been quoted today. A recent example is the “Understanding Society” survey by the Institute for Social and Economic Research, which found that parents’ happiness in their relationships had a quantifiable effect on the happiness and well-being of their children. Family is one of the most important influences on a child’s development. The family is where one learns a sense of responsibility. It is where people learn how to behave and how to treat others, and about the things that are important in life.
We are committed to finding ways to support marriage in the tax and benefits system. My hon. Friends will be aware that at the general election we set out a policy of allowing married couples and civil partners to transfer up to £750 of unused tax-free personal allowance when the recipient is a basic rate taxpayer. There is, as we have heard, a reference to that in the coalition agreement, with a statement that the Liberal Democrats can abstain on transferable allowances. None the less, the Government—from the Prime Minister downwards—have made it clear that we remain committed to recognising marriage in the tax and benefits system. I reassure hon. Members that considerable work has been done to examine ways of doing that, and we have heard various ideas about where we should focus our attention during the debate.
During difficult economic times, we want to provide real, tangible support to families. We remain committed to recognising marriage in the tax and benefits system, the case for which was powerfully made by several of my hon. Friends. Our policies have helped hard-working families. It is true that we are prioritising increasing the personal allowance, which increases the rewards for work for those on low and middle incomes, but we remain committed in the way that I have set out.
Transit Visas (UK Trawlers)
It is a great pleasure and delight for me to make my speech under your chairmanship, Mr Turner. I pay tribute to the Backbench Business Committee, which selected the debate.
The aim of the debate is to draw to the attention of the Minister for Immigration, my hon. Friend the Member for Forest of Dean (Mr Harper), my concerns about the living and employment conditions of non-EU nationals on some UK trawlers and fishing boats. I pay tribute to the Catholic charity, Apostleship of the Sea, and to Martin Foley who came and briefed me. Following a problem in my constituency, which is one of the foremost fishing ports in the south-west, the charity drew my attention to the issue. I will not talk about that incident itself, as I understand it is now the subject of a police investigation. I will be careful to ensure that I do not in any way prejudice any investigation that might be taking place. I will talk in general terms about breaches of UK immigration law and the consequent abuse and exploitation of migrant workers, which is a stain on parts of the UK fishing fleet and needs urgently to be addressed.
The context is that the UK fishing fleet is the sixth largest in vessel numbers in the EU, and the second largest in capacity—more than 12,000 fishermen work in the UK. During 2010, the UK fleet landed 606,000 tonnes of sea fish into the UK and abroad with a value of £719 million, so it is no small industry. We should be proud of the UK fishing industry, and I, for one, am incredibly proud of my own Plymouth-based fishing fleet as well. Across many of our coastal towns and ports, the fishing industry is a mainstay of the local economy. It is an industry steeped in tradition. Deep-sea fishing remains one of the most demanding and dangerous occupations, not just in the UK but throughout the world.
In previous debates, I have talked about the physical dangers that many of our fishermen face every day. Those dangers were demonstrated last year when my hon. Friend the Member for South East Cornwall (Sheryll Murray) lost her husband in a tragic accident while he was going about his commercial activities as a fisherman. The dangers that our fishermen face cultivate a deep sense of togetherness and belonging in fishing communities.
The overwhelming majority of employers in UK fishing fleets are upright, honourable individuals, who take great care to ensure that their crews are properly trained and fairly remunerated.
This issue is important to a great many constituencies across the United Kingdom, not least mine. I represent the fishing village of Portavogie in my constituency, and we also have the villages of Kilkeel and Ardglass in the South Down constituency. Many of the reasons for the problems that the hon. Gentleman outlines are related to EU bureaucracy—the quotas, and the reduction in the number of days at sea. The EU focuses on the financial position in deciding whether boats can go out and whether they can be staffed. Does the hon. Gentleman feel that when it comes to addressing the issue Europe has a lot to answer for as well?
I have my own strong view about UK fishing waters, which is that they should be brought back under UK control, but that is not really what I want to talk about today. I want to talk about living and employment conditions. Migrant fishermen should be treated in the same way as we would expect people who are employed in the EU to be looked after. Great care is taken to ensure that conditions on board vessels meet the highest health and safety standards, and that is very much the issue.
The phenomenon of migrant workers travelling to the UK for employment is nothing new. Such workers make a vital contribution to our economy. Like most sectors of our economy, the UK fishing industry has in recent years employed increasing numbers of foreign nationals, many of them drawn from countries in the developing world that have a strong maritime or fishing tradition. Although the majority of migrant workers are well looked after by their employers, in recent months I have become aware of foreign nationals working in the UK fishing fleet, on vessels owned by UK citizens, being subjected to the most appalling abuse and exploitation. Incidents have occurred in my own constituency.
I am not talking about abuse in the overseas fishing sector. Many Members will be aware of the long-standing problems of abuse, including slavery, in the fishing sector in south-east Asia. Rather, I want to highlight what is happening on some UK-flagged vessels, albeit a minority. Foreign nationals have alleged serious physical and emotional abuse, including beatings and sleep deprivation, while working on UK-owned vessels. Fishermen have described appalling conditions, which would indicate that they may have been exploited and subjected to forced or compulsory labour. My understanding is that non-EEA—European economic area—fishermen are brought here on transit visas to work in the UK fishing fleet. They are not entitled to work in the UK, including in our territorial waters, but some of them end up working, often temporarily, in UK ports before joining a fishing vessel, which, I believe, is in breach of immigration rules.
The transit visas that the individuals have entitle them to transit the UK to work on vessels operating outside UK territorial waters. Whether the vessels are operating inside or outside UK territorial waters is, however, unclear, yet the distinction is important as far as the fishermen’s immigration status is concerned. In the cases I have been made aware of, individuals arriving in the UK on transit visas end up working in the UK, so although we are told that fewer foreign nationals are working in the UK fishing fleet compared with a few years ago, I fear the reality is somewhat different. Fishermen are working on UK-flagged vessels, their identity and whereabouts unknown to the police and the UK Border Agency.
For a small minority of UK fishing vessel owners, the foreign nationals are a source of cheap labour—expendable and to be exploited for maximum profit. I am aware of some foreign nationals living in cramped, filthy conditions on board UK fishing vessels, spending days and sometimes weeks effectively trapped in UK ports, unable to leave their vessels and out of sight of the UK immigration authorities. It is time a light was shone on what is happening in parts of our UK fishing fleet. For the sake of the vast majority of the fleet, it is vital that the breach of our immigration law and the consequent abuse and exploitation of foreign nationals by a small minority of vessel owners is stopped.
First, I invite the Government to review and report on the practice of employing non-EEA migrant fishermen on UK-flagged vessels. Such a review should include an analysis of the application regime and procedures for transit visas. Secondly, I urge the Government to work with the police and the Border Agency to identify and expose vessel owners and crewing agencies that are involved in the exploitation and humiliation of migrant workers, and who fail to comply with international human rights treaties and conventions. I would like to see the Government work with the maritime authorities to develop structures and mechanisms to provide and enforce appropriate health and safety requirements in the fishing industry, including fishing-crew training. That should help to identify and weed out the unscrupulous operators who use foreign labour to circumvent established safe working practices.
Where it is necessary and appropriate to employ non-EEA nationals as fishermen in the UK fleet, we must work to ensure they are protected against abuse and exploitation and that they are given the full rights, including those regarding wages and conditions, afforded to migrant workers under current immigration rules. I also invite the Government and my hon. Friend the Minister to explore and report on the labour supply and training difficulties faced by the UK fishing industry that lead to the apparent necessity to employ non-EEA migrant workers. Why is it that in fishing communities plagued by unemployment, particularly youth unemployment, UK fishing vessel owners are not employing more UK nationals? Are increasing numbers of UK nationals unwilling or unable to work in the UK fishing fleet, hence the need to recruit people from overseas?
Finally, when do the Government intend to ratify the International Labour Organisation work in fishing convention 188/2007 and implement it in national law? The convention, termed a bill of rights for fishermen, should make a significant difference to the living and working conditions of fishermen, particularly migrant workers.
It is a pleasure to serve under your chairmanship, Mr Turner.
I congratulate my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) on securing the debate, which I know is important to his constituents. I am, of course, looking forward to visiting his constituency some time in the new year, when I am sure we can discuss the matter further.
I am also pleased to see the hon. Member for Strangford (Jim Shannon) in the Chamber. I know he has a long-standing interest in this matter from a constituency and a wider Northern Ireland perspective. I listened carefully to what he said, and I will draw his remarks to the attention of the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon), who has responsibility for fishing. He works closely with people from all parts of the United Kingdom when we set out our policy on fishing and fishing quotas, and when we have debates in the European Union. Thankfully, my job today is not to talk about wider fishing policy, but to talk about the specific issue of crewing and visas.
The use of non-European economic area crew on UK vessels has been an issue for several years, and I know that it is an ongoing concern for my hon. Friend the Member for Plymouth, Sutton and Devonport. The issue has also been raised in Northern Ireland and with colleagues who represent constituencies in Scotland, where fishing is also an important industry. The subject is complex and wide-ranging, and its scope goes beyond immigration. The concern raised by my hon. Friend’s constituent and the Catholic Church in his constituency is about the living and working conditions of people employed in the sector, and I know that that concerns my hon. Friend, too.
I will set out the background of the visa regime for those who work in the sector. Non-EEA migrants can come to the UK to join ships that are currently in the UK but operate outside UK territorial waters—those ships that mostly operate more than 12 nautical miles beyond UK territorial waters. Because those people are joining ships that operate outside the UK, they do not fall under the scope of normal immigration rules, which means they do not need permission to work. However, they do need permission to enter the UK to join the ship—effectively to transit, hence the title of my hon. Friend’s debate. To do so, they must obtain permission to join the ship, either by way of a visa issued overseas, or with the permission of an immigration officer at the UK border. Those provisions are necessary to allow international vessels to change crew, thus allowing fresh crews to arrive in the UK to join ships and outgoing crews to leave ships and return home.
Within the fishing industry, the arrangements mean the UK’s deep-sea fleet has been able to bring in non-EEA fishermen without prior permission to work because the fleet operates mainly outside territorial waters, which is a perfectly legitimate use of the immigration system. Migrants entering through that route are not migrant workers in the usual sense, so the system is not a loophole through which employers can bring in non-EEA workers to carry out work that is not deemed to be sufficiently skilled, as the work is largely taking place outside the UK. We recognise the need for migrant labour in some specific and highly skilled roles in the United Kingdom, but, as my hon. Friend said, businesses should be looking to the local labour market for opportunities to fill lower-skilled roles. That is why non-EEA nationals cannot come to work on vessels that operate within the 12-mile limit—the inshore fleet—under the “to join ship” provisions.
One of the problems in Plymouth and the area I represent is around incentivising local people to go out on the fishing boats. The danger is apparent, and there is also a skill level that has to be achieved. Those on the boats have great skill, because they also fillet the fish. As the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) asked, how can local people be more incentivised to participate in the job opportunities on fishing fleets?
The hon. Gentleman raises a good point. I chose my words with care. I did not say that the work was low-skilled, but that it was not sufficiently skilled to meet our criteria. The Migration Advisory Committee, which is the expert committee that the Government often commission to consider the appropriate skill level required for jobs before we allow people to come to the UK from outside the EEA, did not think the jobs were sufficiently skilled. He raises an important point, however, which I think was the nub of the question asked by my hon. Friend the Member for Plymouth, Sutton and Devonport: in an environment in which UK nationals are without work, what is the industry doing to ensure that we can train UK or EU nationals to the appropriate skill levels so that they can staff the inshore operations without needing to bring in people from outside? I will touch on that later.
Visas would not be issued for people to come to work on inshore vessels. People who work—or employ people to work—on vessels in the inshore fleet after they have come to the UK on a “to join ship” visa, or sought to enter at the border to join a ship, are breaking immigration law and behaving unlawfully.
Some years ago, it became apparent that some in the UK inshore fishing fleet were using non-EEA labour to crew their ships. The UK Border Agency made it clear that that was not acceptable and that immigration rules needed to be enforced in that area. However, genuine concerns were raised at the time, including by the Scottish and Northern Ireland Governments, that the UK fishing fleet relied on non-EEA labour and that immediate enforcement of the immigration rules would have a significant and negative impact on that fleet.
In light of those concerns, in March 2010, the previous Government introduced temporary—I stress the word “temporary”—concessions that allowed for up to 1,500 visas to be issued to non-EEA fishermen to work on the UK inshore fleet to give it sufficient time to transition to using local labour for such jobs. In other words, that was to give it time to identify the labour requirement and put in place the relevant training mechanisms so that people could gain the appropriate skills to staff our inshore fleet.
Those concessionary arrangements came with strict conditions. Permission was granted only after appropriate assurances were given that the workers would be paid the minimum wage and—this addresses the point raised by my hon. Friend—that they would be given suitable onshore accommodation when their ships were in port. The take-up of the concession was relatively low. The route was extended last year, and we closed it down for good this August. We will no longer grant permission for non-EEA migrants to work on inshore UK fishing vessels.
The point at the heart of my hon. Friend’s concerns was about how we enforce the rules and ensure that people are playing by them. I shall also address the living and working conditions on board the vessels, which clearly concern him and his constituent, because although the UK Border Agency is not responsible for enforcing that part of the law, and thus I will not go into incredible detail on this, our officials do some work in that area and we work closely with other agencies.
The “to join ship” visas for the fleet that operates outside our territorial waters are granted in the same way as any other visa. They are issued only when a UK Border Agency official overseas or on the border is satisfied that the applicant meets the requirements of the rules. The official therefore has to be satisfied that the applicant is genuinely joining a ship at a UK port and that that vessel will be leaving UK territorial waters in the near future.
The British Chamber of Shipping has expressed concerns that “to join ship” visas are increasingly difficult to come by, particularly for ships that are tied up awaiting cargo, sailing instructions or repair. Our officials rightly question whether crew are actually required in such circumstances, given that the ship will not depart port imminently. The individual circumstances of each application are examined by officers from the UK Border Agency and UK Border Force on a case-by-case basis. Our Border Force officers will always question fishermen and other crew seeking to enter the UK. If they have any doubts about the individual, the company or the vessel that they are joining, they will refuse entry to the United Kingdom.
UK Border Force also regularly undertakes enforcement action to ensure that those who employ non-EEA fishermen do so legally. Border Force cutters regularly patrol UK waters, monitoring vessels, gathering information and intervening when appropriate and necessary. The monitoring allows us to ensure that vessels using non-EEA crew who are here on “to join ship” visas are indeed operating outside UK territorial waters. Alongside that, regular enforcement visits are conducted to ensure that those working on board vessels have the right to do so.
If we find people working illegally on vessels, we treat them in the same way as any other immigration offender and they are liable to removal from the UK. If employers employ people illegally on inshore fleets, they are liable to fines of up to £10,000 for each illegal worker employed. As with all our enforcement activity, we do not accept people hiring outside the immigration rules, and we seek to deal with that in a tough manner.
During the course of enforcement activities on vessels, Border Agency officers may come across unsuitable living and working conditions. There have been tragic consequences of such conditions. My hon. Friend may be aware of the fire on a fishing boat in 2008 in which two Filipino and one Latvian crew member were tragically killed.
Border Force and UK Border Agency officers are concerned primarily with enforcement of the immigration rules and do not have enforcement powers in areas such as employment rights or health and safety, but we certainly do not close our eyes to those things. If, in the course of enforcing immigration rules, Border Force and Border Agency officers come across such conditions, they will draw them to the attention of the appropriate enforcement officials in other agencies, such as the Maritime and Coastguard Agency, with which we have close working relationships. Our enforcement activities are often multi-agency efforts involving the police, the MCA and other agencies, so not only do we enforce immigration rules, but our partners enforce rules on employment rights, the minimum wage and health and safety conditions.
We will continue to work to ensure that all those who do not have a right to work here cannot do so, that those who have a right to work on ships outside UK territorial waters can do so, and that any rogue employers who exploit vulnerable workers, as my hon. Friend suggests, face the full extent of the law. If the inshore fishing fleet requires people to work in the industry, it should look first to the domestic labour force and ensure that people there are appropriately trained.
My hon. Friend raised a point about the International Labour Organisation convention. That, of course, is a matter for the fisheries Minister, so I will draw my hon. Friend’s remarks to his attention and ensure that my hon. Friend receives a reply outlining the Government’s position on the ratification of the convention from officials in the Department for Environment, Food and Rural Affairs or the Minister.
The hon. Member for Strangford raised a point about training and skills, which are devolved issues. I know that the Scottish Government and the Northern Ireland Executive are working to provide training to the local work force. The Governments, as well as the industry in those parts of the United Kingdom, are engaged in efforts to ensure that the local work force is appropriately skilled for our inshore fishing fleet.
I think that I have covered all the issues raised by my hon. Friend the Member for Plymouth, Sutton and Devonport, and I say again that I look forward to visiting his constituency in the new year, when we can no doubt talk further about these matters.
I look forward to welcoming my hon. Friend to Plymouth, when we will certainly want to talk about these issues with the organisation, and I take my hat off to the Apostleship of the Sea, which runs a good, effective operation in Plymouth for migrant workers who need help. Occasionally, the organisation finds that migrants do not have food and therefore has to provide them with some, and their living conditions can also be bad.
I am grateful for that extra detail. When I visit my hon. Friend’s constituency to talk about a range of issues, if it will be at all possible to talk about that to people at first hand, it will be a valuable opportunity.
I am grateful to my hon. Friend for securing this debate and for the interest shown by the hon. Member for Strangford.
UK-Listed Mining Companies
[Mr Joe Benton in the Chair]
I should like to draw hon. Members’ attention to the new clock displays in the Chamber. The top display is the current time, as before. When a speech is not being timed, the bottom display will show the time it started, also as before. If it becomes necessary to introduce a time limit, the bottom display will change to show the time remaining to the Member who currently has the Floor. As in the House, this display can award an extra minute for each of the first two interventions in a speech.
It is a privilege to speak under your chairmanship, Mr Benton, and in front of these magnificent new clock displays, as described.
I am interested in UK-listed mining companies—other hon. Members will be interested, because of the UK dimensions of these companies’ operations—primarily because I have spent a fair amount of time in developing countries and seen that the way mining companies operate can have a significant impact on all sorts of things locally.
I started going to the Democratic Republic of the Congo shortly after I was elected to the House a dozen years ago and I have been there a couple of dozen times. Each time I go to a country like that—particularly ones that are resource-rich and often without any meaningful extraction going on, although sometimes with some pretty good stuff going on—I am struck by how good companies, and countries, with proper governance can return substantial benefits, providing all the right environmental and social aspects are properly observed. Conversely, when that is not done, it can be disastrous.
People sometimes refer to the resource curse, meaning that a lot of countries have enormous potential wealth but no actual wealth, because they are not able to extract as their governance makes the country too much of a risk. The environment might be too physically risky, or, more to the point, the risk to reputation and capital—for example, if there were an expropriation of some sort—is too great. Shareholders will often not be prepared to put up with that. Back in the 1990s in Liberia, we saw the damage that was done with the diamonds to some companies that mined across Africa and which now, as a consequence of that shock, take great care to pay close attention not just to rules but to public perception. Some companies will not go near countries such as the DRC because of the risk to their capital, to some degree, but also to their reputation.
When looking at the mining industry as a whole, we begin to realise the importance of UK listing. Companies across the world with no particular links with the UK have mining operations in far-flung places such as Kazakhstan and Azerbaijan or, indeed, Australia, Canada and Brazil, but they choose to list in London for strong commercial reasons, partly to do with their reputation and partly because that is the best hub within which to get access to all the people they need to do business with, both in markets and banks and in all the other ways that benefit companies with a UK listing.
About 18 months or so ago—without mentioning particular companies; it is probably helpful if I do not now, although I did then—it became clear that some companies were coming to the UK and listing in London without wishing to accept the broader constraints and rules, which were often not written but were general understandings among the business community of things that people do and do not do when they have a listing.
A company can be listed, in some cases, with less than 25% of its total stock in the UK, which is normal, but it can be even less than that. That means that shareholders’ control over such a company can be quite limited and it can carry on as before, without changing its practice. I was worried about that. For a while last year, the Government mooted the possibility of relaxing the rules in respect of companies that were not really British, but eventually that was passed over and it did not happen, which was good news. There was a great deal of lobbying to that effect and the Government listened to it.
The principle is that a company listed in the UK is not an asset of that country, and that applies in the same way as it does to companies listed anywhere. Such a company has simply chosen to list in the UK. For example, we generally perceive BAE Systems—the best known of certain companies that tend to be known by acronyms—as a UK company, but that is no more a UK company in some respects than any other foreign-owned company. It is simply in the UK and has a British heritage, and that is about the size of it. It is important to see what is listed in the UK. We have some degree of control over companies that choose to list here through our voluntaristic methods and regulatory measures. It is important that they are all treated equally.
I noticed in the past year or so that some companies that were relatively new to the list had an ownership structure that was not what would normally be found in the UK, where one or two people own most of the shares. They have therefore had to take on shareholders, but they have perhaps felt that things do not need to change because they make such a lot of money that the shareholders will be happy. However, in a couple of cases they have taken an enormous hit—perhaps a 50% discount on shares—so now they are looking again at how they can work properly as a UK-listed company. That has to be good trend. That was essentially what drew me to this debate.
I have had some contact with companies that work and exploit in the UK and know that there are issues to do with planning presumptions for open cast, and so forth. Other hon. Members may wish to mention that. My primary message is about the impact of UK-listed companies on the developing world.
Public discourse in the UK on the subject has been dominated historically by industrial struggle, mainly to do with coal, the changing world, changing fuel and energy options, and changing working patterns and political assumptions. That has been the dominant theme in recent years and decades. If a Member of Parliament mentions mining to a constituent, that is what they are thinking. They are not thinking about this huge beast, which is the UK listed sector, or about the scale of the contribution that mining makes. Some of the largest companies in the FTSE 100 are miners and they are the ones that often move the figures across the board—just that one industry.
The companies from around the world that list in the UK are not British in the conventional sense. That is true of most commercial organisations across the world. These organisations transcend international borders, coming together to trade where it best suits them. London, of course, is pre-eminent in the world in respect of mining.
The UK is important in this regard and, on the whole, that is a good thing. We do not have a perfect system, but we subscribe to some important conventions. I will mention some important conventions in respect of other parts of the world—big parts, without naming names. Legislation will come into place shortly that enhances those conventions and takes them further, making them, to a large degree, legal requirements. London listing is therefore fundamentally a good thing.
London has justly developed a broadly good reputation, alongside the United States, for going some way to ensuring that corporate governance in the mining industry is respected. That is not to say that everything in the garden is rosy—often, it looks to be far from that—but the fact remains that if large international entities wish to trade in and from the UK, certain rules of decency apply. In the UK, the rules include the Bribery Act 2010 and a series of important regulator measures put in place by successive Governments. In the United States, the rules include the Cardin-Lugar amendment to the Dodd-Frank Act, which demands a considerable level of transparency from those doing business in the developing world.
In Europe, about which I will say more, legislation will be passed shortly. I will leave that to the Minister, because it is probably for her to speak about that, given her role. There will be some important legislation soon reflecting what has been going on in the US. The legislation in the US has been powerful, but not perfect. Interestingly, as I discovered from a position of some naivety a year or so ago, some of the entities that are most critical of the Dodd-Frank Act and the Cardin-Lugar amendment, which require that high degree of transparency, are highly commercial lenders or hedge funds. They are, however, critical in the opposite way to what we might expect: they are critical of the legislation for not driving enough transparency. We might think, “Well, that’s a surprise, I thought these guys would want less transparency”, but they want to know where the money is and where it is going—they want to chase the money up. The large hedge funds that are owed lots of money by countries and commercial entities want to drive greater transparency. That is an unusual but good alliance between, on the one hand, some good non-governmental organisations with their meagre resources, digging away and trying to root out graft in parts of the developing world, and, on the other hand, these guys with quite a lot of money who know their stuff and have good, strong commercial reasons for driving transparency and good governance. To some degree, that is what is happening in the US and with the European legislation to which the Minister will probably refer.
When it comes to the extractive industries and the developing world, it is essential for two things to happen. First, the activity must help to ensure that income generated by some of the world’s poorest states benefits their citizens, by reducing graft and helping difficult countries—if we can call them that—to reduce internal corruption. There is some corruption in many of those countries, although not in all of them and not even routinely in a lot of them, but there is a considerable amount and it is difficult to fix. Transparency can help the people running such countries to fix the considerable levels of graft that still exist.
Secondly, transparency helps UK-listed mining companies and companies in all sectors to do business in areas where they would otherwise be loth to risk their reputation and capital. Mining is affected more than most industries. Throughout the world, mining companies in geographically big, developed states such as Canada and Australia have been able to exploit their local geological assets. In recent years, people have become more aware of the environmental implications, but in those countries people have benefited from mining in a big way. The same is true in other parts of the world with huge natural resources and the industrial capacity to exploit it, such as Kazakhstan, South Africa and Brazil. As those companies have expanded and used up much of the stuff under their homelands, as it were, they have moved throughout the globe looking for new sources with which to satisfy the huge and growing demand for energy, for example.
We all know the debate about energy and our consumption of it, but as countries develop economically —China is the best example—they, too, demand more energy resources. That is simply an empirical fact. As the companies respond to that demand, they need to find another place to mine, and in many cases that other place—that other continent—is Africa. Those companies have also come together to trade in, and to the great benefit of, the City of London and its markets. The pattern, therefore, is one of productive exploitation of Africa’s geological riches and of greater transparency of the organisations doing the digging, through London and New York—London is significant, but not the only centre. Potentially, there is a neat symmetry about the whole process.
I have just noticed that I still have a lot of notes to get through, so although the structure of the debate has been perfect so far, I might extemporise a little to enable some other Members to speak.
In the meantime, in my experience—for a politician, I have had a fair amount recently—the great majority of operators are behind the symbiosis I outlined, which has historically been reflected in large listed companies that have been in the UK for years, or that have their origins here. It is also increasingly true of companies that want to trade out of the UK in spite of the fact that their ownership structures have traditionally led them into different practices before listing in the UK. They are learning as well, and to give them some credit—I have not always done so in the past—they are now beginning to learn that if they want to do business out of London, they have to change and, essentially, to modernise their practices and assumptions.
In the developing countries, the World Bank, the IMF and other bodies—organisations such as the Revenue Watch Institute or the Association for Geographic Information from the UK, or the worldwide George Soros Foundation and Open Society Foundations—have done a lot to get countries such as the DRC to move towards becoming a place where serious companies can operate. I mention the DRC because I am confident that governance is lacking there, but other places have no democratic elected Government at all, and in the west of Africa four or five countries currently have dictatorships and there is no governance. It is perhaps too easy to criticise only countries with flawed democracies when many in Africa are without any kind of democracy, so we need to keep such things in context.
About 18 months ago, as I mentioned, I got involved in a case in which an asset had been expropriated. The two companies eventually settled, but that took several years of no one being employed on the site. Some 5,000 people had been paying tax and the company had been the largest corporate taxpayer in the Congo, yet for that period, there was nothing at all. That was due to a wrangle that was not caused by corruption in the commercial sector, although perhaps it was because of a bit of nescience, in some respects; Government graft led to that terrible situation.
The companies have actually worked things out between themselves, and a large amount of money changed hands so, in a couple of years, that asset in the Congo might again start to produce some fruit with exports and—from my perspective—through earnings for the people on the ground, who were earning money there before. If that happens, it will be because one of the companies was listed in London; otherwise, it might simply have been cutting about the world and not necessarily paying heed to public opinion. The company was listed in London and wanted to be a proper, large, serious mining company based there, so it paid heed to the concerns of the international community, the NGOs and, of course, the other company, which was savvy about how to pursue its objectives. I am avoiding saying the names so as not to indentify the companies, which would not be fair at this point because they have behaved relatively well. My point is that the London listing made a profound difference to one important project. If that project gets off the ground again, which I think it will, it will show that even in a place such as the DRC, it is possible to get the standards right. I have some constructive scepticism about how long that might take to happen, but let us see.
Before I conclude, I will refer to a couple of important organisations. The International Council on Minerals and Metals, which has its origins in Canada, is now based in London. It has members from the industry, which funds it, and has a series of standards based on core principles and auditing—public reporting and assessment—to ensure that companies maintain certain standards for environmental imperatives and the local social imperatives of any particular operation, which is a new but important thing. There are 22 members and 34 national or regional mining associations and global commodity associations are affiliated.
I could mention other organisations, but I have been to visit the ICMM, and I am still learning about its regulation, which is voluntaristic and appears to have a correlation with strong, voluntaristic companies such as Rio Tinto, which has been based in the UK for a long time. That is not to say that there is not controversy about the mining industry and foreign operations, but some companies have been subjected to the rigours of the UK market for a long time, and that can have a considerable impact on the new ones.
I have noticed that NGOs, which are rightly looking for the best for the developing world, have deployed language that sometimes looks hostile to the principle of investment. That is not how they mean it, because they see the stuff that happens on the ground, but it is important to make it possible for companies to invest, providing that they come up to the standards expected of a London-listed company.
Despite that voluntaristic stuff, it remains true that international legislation is essential. I have mentioned the Dodd-Frank legislation and our Bribery Act, and I want to mention the efforts of organisations such as Publish What You Pay, the One campaign, the Open Society Foundation, which is funded by George Soros, Tearfund, and Global Witness. All are stressing the importance of legislation that is pending in Europe—the Minister may be able to say something about it—which the Prime Minister stressed last week in Brussels. There might be quibbles around the margins about exceptions, the definition of a project and so on. I am not an expert and I know that some people have raised what I consider to be finely tuned issues. However, the general principle of the legislation is certainly accepted by NGOs, and seems to be accepted by all the responsible operators.
The new accountancy and transparency directives will greatly enhance efforts to improve governance in developing nations. They will also make it easier for UK-listed companies to do business in such places. Big commercial companies are not altruistic organisations; they are there amorally, in the purest sense, to do business and to make money for their shareholders. We must appeal to that imperative in companies, rather than pretending that they simply want to be good guys. We must appeal to their ability to make money decently, subject to proper regulation, and in ways that return benefits to local communities in places such as the Congo and Guinea.
The extractive industries transparency initiative is led by Clare Short. The UK led the way with this worldwide initiative, and it has taken us several steps along the path to proper accountability. The initiative measures payments made to Governments by mining companies, for example, and the income declared by those Governments. It is not perfect, and it will not prevent graft elsewhere, so if there is expropriation, which is then passed on by a third party, and the money goes who knows where, it will not appear in the books. However, those are important steps down a path that is enhanced and augmented by legal measures such as those that will be forthcoming in the EU.
I apologise for only just arriving in the Chamber. I raised the extractive industries transparency agreement in the House last week. Is not one of the problems that the machinery of government in the DRC is so inefficient and ineffective, and there is so much corruption, that the effectiveness of the agreement is strictly limited, in that many of the mining companies can just ignore it?
My hon. Friend is absolutely correct. There is no argument—it is simply a fact that is part of the tragedy of the DRC. It has applied to join the extractive industries transparency initiative, but at this stage it could not possibly do so. There is eternal tension between wanting companies to come into something like the EITI, and saying that if it takes anyone, it will become a daft badge that means nothing.
Graft is widespread in the DRC. EITI reports show that pretty much all the income reported is accounted for, but that the level of income is tiny, so there is a neat diagram showing that 96% of the income is accounted for, yet the level of income is lower than it should be, so the question is what should be done about that great big chunk. However, I do not want to go into too many names or bang on about that kind of stuff at the moment.
There is an interesting situation in Guinea, which is not like the DRC. The President of Guinea is trying to do the right thing, but he is beset by all sorts of graft at a lower level. The context is difficult, and a large expropriation might be about to take place. I worry that that will make it impossible for other companies to go into Guinea.
I should also mention the all-party group on extractive industries, which was recently formed. That is good, and we have a website—“Investing in Development”. That reflects a growing awareness of the scale of the industry throughout the world and especially in London—among large companies at FTSE-100 level, as well as smaller companies. I could list them, as could many hon. Members with a background in the mining industry.
The trend in the House is that as some people have a background in the industry, we occasionally hear it mentioned, but this is never regarded as a huge issue that permeates other areas of debate, such as international development. I hope that this is a small gesture towards that and that, in time, the whole issue of extractive industries can be more fully developed in this place.
Mining is part of the north-east’s industrial heritage, and in my constituency alone there are more than 100 former mines. Lead, tin and coal mining shaped my local area. The hon. Member for Falkirk (Eric Joyce) made miners abroad the focus of his speech, and I should make it clear that I wholeheartedly back the extractive industries transparency initiative and the Financial Conduct Authority’s proposals. All efforts are being made to ensure that a vital trade is conducted ethically and transparently. It is entirely right to say that we have an obligation to support the poorest states in the world and to help countries in Africa, whether through our international aid commitment or by other means, and that effort should be supported. My focus, though, will be on the actions of UK mining companies in this country.
I want to focus on the more controversial issue of open-cast mining, which is relevant to my constituents for three reasons. I have three of the most significant open-cast sites in the country, including the huge site at Shotton, which is run by Banks. I should make two declarations. As a lawyer, I have previously represented individuals who have sued mining companies. I believe that I have some limited shares in BHP Billiton, a company that is obviously relevant to this debate.
From a constituency MP’s point of view, the way in which mining companies engage with the community is significant, whether they are local, national or international. We all know that people are inherently distrustful of significant change that they cannot control. For example, we resent all our decisions and power being taken away from us by large unitary authorities. Mine is based in Morpeth, which seems more interested in other parts of the county. The issue is particularly significant when we lack a local development plan or a local minerals plan to determine how our county is to approach mining development and management of the green belt.
UK Coal has proposed a significant, large open-cast site in Whittonstall. On Saturday I met the protest group who are campaigning vigorously against the proposal, which would blight their community tremendously. UK Coal has promised a £1.2 million sweetener for the local community if it gets planning permission. All well and good, one might think, but that money is not secured. As is well known, UK Coal, which is the largest miner in this country, had an emergency meeting just last week at which it voted through a range of measures in an attempt to rescue the company. It is already on the verge of closing mines such as Saw Mill and Maltby, and my constituents are worried that the £1.2 million sweetener will not be placed in a secure trust controlled by a third party, so that whatever happened to UK Coal that money would still be available to the community. The comparison between how international communities are treated and how local communities are treated is very relevant.
A development is proposed at Halton Lea Gate, a small village on the Cumbrian border. It has a tradition of mining, but my constituents face three and a half years of open-cast mining as HM Project Developments Ltd attempts to dig out 140,000 tonnes of coal. That open-casting will take place 57 metres from the nearest home. I have persistently campaigned against that, not least because the village is on the edge of the north Pennines area of outstanding natural beauty, and is within sight of the Pennine way.
We held a village hall meeting in August, when we were amazed that the decision of an inspector, who had decided that there was a national need for the mineral in question—coal—clashed with a decision at Bradley, a similar open-cast site in Durham. The latter decision was taken by a different inspector on 23 February 2012. Both decisions are being reviewed by a High Court judge, who must come to a view on the correct way ahead. That is particularly relevant in the context of our energy policy in this country, because we need to decide whether we are focused on gas, renewable, nuclear or shale gas and—with particular relevance to mining organisations—what role coal has in our future energy programme.
The third site that I am concerned about is the Shotton mine run by Banks, which is a traditional north-east company. I accept that companies wishing to get community support, whether internationally or locally, for mining projects must engage the local community. It can be done. By and large, Banks has been very successful with the significant mine at Shotton next to the A1. The company pays good wages; there are many local jobs, and the way in which it engages with the community is excellent. There is also a significant tourism benefit, which I recommend to all Members of the House and to the country, in the form of Northumberlandia, the largest earth sculpture in the country. It could well be the new Angel of the North, even if it is slightly more horizontal. However, Banks has chosen to diversify and move away from a traditional mining environment into property speculation, with proposals to build houses around the village of Ponteland. I cannot express enough my disappointment that a good mining company is attempting to form a cash cow of housing on the green belt. Frankly, it should be ashamed of itself.
Banks is not the only one. A company called Lugano is universally detested for the way that it is buying up huge swathes of land for green-belt development. Lugano is not registered in this country and appears to be owned by a private trust in Guernsey. I have no way of finding out who the real owners are, where the profits go or where it pays its taxes. Sources tell me that the beneficiary of the trust is a Jewish organisation based in Lugano, Switzerland, and clearly, as a result, it would not be liable for any taxation in this country. It certainly has no experience of the sort of development that it is proposing. Furthermore, Lugano seems to be employing former officers of the local county council. Those officers have failed to produce the mineral plans and local development plans that we all require under localism and, having been paid off £500,000 by the local authority, they are now being employed to advise developers how to get round the planning system that they so grievously failed to organise prior to their departure with the pay-off.
I would go much further than that, and within the bounds of libel, say that it is outrageous. It is totally wrong and it takes the local community for fools. It will be resisted, and I am assured that the provisions on the green belt—these proposals all concern the green belt, whether they are for open-cast mining or for housing—are greatly supported, for example, by the comments of the Secretary of State for Communities and Local Government:
“The green belt is an important protection against urban sprawl, providing a green lung around towns and cities. The national planning policy framework delivers the coalition’s agreement to safeguard the green belt. Inappropriate development should not be approved in the green belt, and boundaries should be altered only in exceptional circumstances.”—[Official Report, 17 September 2012; Vol. 550, c. 619-620.]
I endorse that entirely.
I finish my brief contribution by assuring my constituents and colleagues that such actions are not what localism is about, nor is it what responsible mining companies are about. This kind of shady operator creates an atmosphere, frankly, of nimbyism, and I do not blame people in the slightest for being against such developments. I, for one, will be doing everything that I can to support them, as well as everything in my power to stop such companies.
I congratulate the hon. Member for Hexham (Guy Opperman) on his forthrightness in protecting his constituents, and my hon. Friend the hon. Member for Falkirk (Eric Joyce) on securing the debate. I want to return to the operation of London listed mining companies in the developing world. My hon. Friend has taken that matter up over the years and I congratulate him on that work.
Back in October, I launched a report with the London Mining Network and a number of non-governmental organisations. It was part of a campaign to try to persuade the Government at that stage, while the Financial Services Bill was going through the House, to ensure that a duty was placed on the Bank of England and the Financial Conduct Authority—the new architecture for regulation of the City—so that when companies were listed, there would be a commitment to monitoring their adherence to certain basic elements of corporate responsibility. That included ethical corporate responsibility, and in particular their operations in the developing world with regard to the protection of human rights, tackling climate change, and their adherence to international law and conventions—and, importantly, the convention on protecting indigenous peoples.
Unfortunately, we never secured those amendments to the legislation, but I hope that in dialogue with the FCA, we can move forward and at least ensure that there is not only openness and transparency but action by the FCA. Being listed on the London stock exchange is critical for such companies. It demonstrates—or should demonstrate—to the world that there is financial probity and good governance. It should also demonstrate a commitment to ethical corporate responsibility and behaviour standards, but at the moment I do not think that is the case.
I will name individual company names, because I think it is important that we know what has gone on, and part of our role in the House is to help people to bear witness to what has happened in recent years. When we launched the report, I said:
“We cannot stand by and witness these global mining companies brutally impoverishing and destroying the lives and environments of whole communities. We need not only to expose this exploitation but also to demand that a firm system of…regulation”—
both national and international—
“control and accountability is put in place that halts the destructive activities.”
Those activities are not just destructive in the developing world and of the long-term interests of those individual companies and their employees; they are destructive of London’s standing in international markets, because the reputational damage that such companies are doing to London will undermine the long-term future of our economy.
At the launch of the report, Peter Frankental from Amnesty International said:
“This report…presents a challenge to the Government to ensure that the proposed regulatory body has the powers to require mining companies to meet acceptable human rights and environmental standards as a condition for listing on the London Stock Exchange”.
That is exactly what we were arguing for. I pay tribute to people such as Richard Solly, who has co-ordinated the London Mining Network over the years, for the effective work that they have done.
Let us consider a few examples; I want to do a quick ABC of some companies and their impact. They have been outrageous in their behaviour—abroad and, in some instances, in this country.
I thank my hon. Friend for giving way. He and I have sat through a number of meetings with groups from the Congo, Colombia and a number of other countries, where the most appalling damage has been suffered because of the irresponsible behaviour of mining companies. Many of the mining companies claim in their defence that the actual mining work is done by some mysterious subsidiary—another supplier, another contractor—in order to evade their corporate responsibilities and the law of the country. Does he agree that we need to frame responsibility in law that guarantees the whole supply chain and not just the convenient end-part of it, where the large profits are made?
That is one of the important issues, and my hon. Friend has raised it before with regard to the extractive industries transparency initiative. It is important that we have full transparency, particularly with regard to subsidiaries.
Let me cite some examples that relate to my hon. Friend’s point. I shall start with Anglo American. At its AGM this year I met a number of people lobbying there. In particular, the company has come under fire for its involvement in the Cerrejon coal mine in northern Colombia. I met a number of local people who live near the mine and have been forced out of their communities. There has been forced relocation of farming communities, without any adequate compensation. It has taken years of campaigning just to get some dialogue going with the company. It was involved, with Rio Tinto, in the Pebble mine copper and gold project in Alaska, which has threatened vast swathes of the caribou calving grounds, the ecological integrity of Bristol bay, and the fisheries.
The company promised to create 100 jobs, but it has actually destroyed 600. Its Anglo American Platinum division continues to attract heavy criticism from farming communities in South Africa for its handling of community resettlement and for polluting water supplies. AngloGold Ashanti, which is also owned by Anglo American—as my hon. Friend the Member for Islington North (Jeremy Corbyn) said, these companies are subsidiaries—retains a standard listing on the London stock exchange, and it has been accused of profiteering from paramilitary intimidation of mining opponents in Colombia. De Beers, which Anglo American controls, has been criticised for potentially benefiting from the forced removal of indigenous bushmen from their ancestral territory in Botswana.
It goes on. BHP Billiton, in addition to its role in the Cerrejon mine, is in dispute with the Colombian Government over the derisory royalties it has paid at its Cerro Matoso nickel mine. It is under fire for toxic spills and health impacts at its Antamina copper, zinc and molybdenum mine in Peru. It is accused of providing poor conditions for workers at its Escondida mine in Chile, ignoring native American sacred sites at the Resolution Copper project in Arizona, and leaving a toxic legacy at the Ok Tedi mine in Papua New Guinea.
I will not go into Glencore, because my hon. Friend the Member for Falkirk has dealt with it in previous debates, but it is well known for its role, particularly in Africa. Let me come on instead to Global Coal Management Resources plc and its responsibility for the open-cast mine at Phulbari in Bangladesh. According to the Bank Information Centre in Washington, the project is acquiring almost 6,000 hectares of land and displacing anything between 50,000 and 200,000 people. It is destroying ponds, fruit and timber trees, businesses, homes, barns, boundary walls, schools, health facilities, mosques, temples, churches and archaeological sites. This displacement is taking place in one of the most densely populated countries in the world, and it is destroying a critical agricultural region, threatening Bangladesh’s food supply. More than 80% of the land that is being threatened is fertile agricultural land, which cannot be replaced. That leaves farmers and families with few options for employment, and it risks impoverishing a massive number of people, turning hundreds of thousands of farmers into landless wage earners who will be competing for jobs in entirely different sectors.
What is interesting is that the company is one of those that have been promoted by this Government, as it was by the previous Government. Despite receiving a series of freedom of information requests recently, the Government have refused to provide information about their relationship with the company and about the support they have given it and its operation in Bangladesh. In its response, the Foreign and Commonwealth Office explains it will not provide the information
“because we consider that the disclosure of this information would be likely to prejudice relations between the United Kingdom and Bangladesh”
and because it would
“prejudice the UK Government's internal relations with the Bangladesh Government”.
In other words, the Government would be ashamed of the support they have given this company if it came to light, and the Bangladeshi Government would be furious—understandably so, from the sound of the work that has been undertaken to promote the devastation of the region.
Monterrico Metals was originally linked to the Phulbari project through the company’s previous chairman. Monterrico has also received help from the British Government. In fact, the former British ambassador to Peru, Richard Ralph, spent part of his ambassadorial time talking up the advantages of Monterrico’s Rio Blanco copper project in the Andes. He tried to reassure local organic farmers, most of whom are vehemently opposed to the project, which threatens their livelihoods, that the production of large amounts of toxic waste and the pollution of local water supplies would be good for them. What an extraordinary coincidence it is that when the ambassador retired, he became chairman of Monterrico Metals. Later, he was prosecuted as a result of insider trading. Again, a huge majority of local people rejected the company’s proposals for the Rio Blanco mining project, and there were protests, during which people were killed.
Rio Tinto is also listed on the London stock exchange. It has been the subject of one of the longest running anti-corporate campaigns in the world by Partisans—People Against Rio Tinto and Subsidiaries. It is accused of anti-union activities and of ignoring aboriginal rights in Australia. Its nickel-copper mine on the Yellow Dog plains near Lake Superior has been criticised. I have met representatives from Mongolian organisations concerned about the Oyu Tolgoi copper and gold mine in the Gobi desert.
The hon. Gentleman mentioned the individual who was monitoring and then went to work as the chairman. I used the example of someone who worked for the local authority and turned from gamekeeper into poacher straightaway thereafter. Does the hon. Gentleman agree that, just as we require Members of the House not to do business connected to matters they have dealt with as a Minister, we should encourage companies set up in this country to ensure, through the shareholders’ action, that such persons, with whom the companies have dealt, are not then immediately hired on to their boards?
I fully agree, but it needs more than shareholder action. I think it is the responsibility of the Financial Conduct Authority, under the auspices of the Bank of England, to introduce specific regulation to prevent some of these things from taking place. That will give confidence to those who want to invest in these companies and who want to look on London as a place where companies operate properly, legally, with probity and with a commitment to ethical corporate behaviour.
Let me give two last examples. I protested at the Vedanta annual general meeting this year because I was so angry about the company’s behaviour. Vedanta has been criticised for its behaviour in Armenia and Zambia, but it is in India where it has come in for the heaviest criticism, for the manner in which it ignored environmental legislation and literally bulldozed its way into tribal land in Orissa, in the hope of constructing a huge bauxite mine on land sacred to the Dongria Kondh people to feed its illegally constructed alumina refinery.
I have also been dealing with the company in Goa. I met representatives of the Save Goa Campaign recently. I congratulate the Indian Government on setting up the Shah commission, which ruled in September that all the mines in Goa were operating illegally because they were not abiding by environmental standards. All the mines were shut overnight, and a court case is going on this week to see which ones can reopen if they have abided by basic environmental standards. Vedanta and others have undermined the agricultural base of the Goan economy, polluted the water and threatened the tourism industry. I commend the Save Goa Campaign: local people and the Goan diaspora have exposed what has gone on. I also commend the Indian Government for taking decisive action. However, Vedanta, as the main company involved, has made fortunes from exploiting the Indian subcontinent.
Finally, there is Xstrata. It is involved with the Cerrejon mine in Colombia; it is involved in the hugely controversial Tintaya mine in Peru, which has been a focus of fierce conflict over the years as a result of the pollution; and it is involved in the Philippines, where its Tampakan project is strongly opposed by indigenous people. The Argentine federal appeals court has also upheld criminal charges against Xstrata general managers in the past.
My view is straightforward. I have read out that list of examples because they are shocking. These companies are all listed on the London stock exchange. We need to take responsibility in this country, and I wish this had been more decisively dealt with when the Financial Services Act 2012 was before us. If these companies wish to be listed on the London stock exchange, they must first show complete openness and transparency; they must ensure that there is financial probity; and, above all else, they must be prevented from doing London reputational damage. We will achieve that by making sure that they abide by corporate ethical standards, and that means ensuring that the FCA and the Bank of England have a role, including in delisting companies, if necessary, because of their behaviour in the developing world.
One day we will depend on the developing world for a whole range of relationships and for the distribution of a whole range of raw materials and national assets, which will benefit the whole globe. We are alienating people now we will want to co-operate with in the future, because we are not controlling these mining companies, which are doing so much damage to our reputation abroad. In addition, we are doing long-term damage to our economy. That is why I urge the Government to act.
In conclusion, it should not take freedom of information requests to this Government or any Government to get real information about the relationship between the Government, their Departments and individual companies. Even when freedom of information requests come back, they are heavily redacted to keep secret the malevolent role that Governments have played over the years in supporting these companies.
It is a pleasure to follow the hon. Member for Hayes and Harlington (John McDonnell), who raises some serious concerns about London-listed companies, and to speak in this debate. The hon. Member for Falkirk (Eric Joyce) gave an excellent introduction and spoke about the importance of overseas issues. Like my hon. Friend the Member for Hexham (Guy Opperman), I refer hon. Members to my entry in the Register of Members’ Financial Interests, and in particular to the fact that before I came to this House, I advised a number of international mining companies on their financial communications. I no longer have any such financial relationship although, like my hon. Friend, I own a very small number of shares in the company BHP Billiton. I also want to mention a constituency interest: a mining supplies and parts business called Joy Mining Machinery, which employs a number of people and supplies mining companies around the world, including UK Coal. I appreciate the concerns about that that my hon. Friend raised, and I shall point them out to the company in my constituency.
The hon. Member for Falkirk is, like me, a member of the all-party trade out of poverty group, and he pointed out that the work of London-listed mining companies in developing countries can help with that, as long as governance is good and clear regimes are in place to ensure that royalties are paid. There are several countries where that has happened, such as Chile, Botswana and, from time to time, Zambia, and there have been substantial benefits. Good governance and transparency are vital. The hon. Gentleman also brought up two initiatives, which, I think, started in London: the extractive industries transparency initiative, and the International Council on Mining and Metals. Both were supported in their beginnings by the UK, and UK-listed companies have played an important part in setting them up. It is a great shame that although the EITI is embraced by countries around the world—even the likes of the Democratic Republic of the Congo are looking to sign up to it—this country is not yet a signatory. I encourage the Minister to consider whether the UK can become a signatory to the EITI, because that would encourage every listed UK company to maintain the degree of transparency that we would expect about where payments go in the countries where they operate. It would also send a powerful message to other countries that we might wish to encourage to join. They would include countries such as Brazil that have arrived on the international economic scene and consider themselves as no longer developing countries but developed countries, as well as other developed countries. Norway has signed up, as the UK should.
Most of the mining companies that I dealt with in my career understood that corporate social responsibility was crucial to their licence to operate, and most would embrace improved UK listing requirements. Indeed, in my previous career, I heard concerns that the listing requirements in Hong Kong are, in theory, tighter than those in the UK. For the sake of our international competitiveness, we should ensure that ours are just as strong.
We have heard much about the amount of tax paid by international companies. Of course it is right that companies operating elsewhere in the world and listed in the UK should pay most of their tax in the jurisdictions where they operate, especially when that can help a developing country. However, I will be interested to know whether the UK Government or the Treasury have ever carried out an analysis of the benefits to the UK economy and taxpayer of having so many international companies listed in London, and therefore employing people at headquarters for investor relations and as consultants in the London market. Such a piece of work would be interesting.
Wherever mining companies operate, they need to balance the environmental and social concerns that are rightly raised by many UK NGOs with the benefit that can be brought through employment and investment in infrastructure. One aspect of the debate that we should consider is the fact that it is not only UK-listed mining companies that carry out work in developing parts of the world—with the potential to do good or damage. We have enormous competition, not just from other areas of the world where companies are publicly listed, but from the likes of China, which are investing huge amounts in projects and may not necessarily hold businesses to account as we would like on the way in which they benefit the economies in question. We should champion greater transparency and more listing of international companies in London so that we can ensure that they are held to account. A challenge for this country is to ensure that the whole industry understands the importance of acting responsibly and the benefits of greater transparency, and for the UK to show that the EITI, which we helped to launch, is not just for developing economies, but something to be embraced across the board by all economies.
The hon. Member for Falkirk pointed out that, in the developing world, mining can encourage development. We should examine the UK’s position as a leading destination for listings and see how we can take the most advantage from that to encourage best practice in the industry and responsible development around the world.
It is always a pleasure to serve under your chairmanship, Mr Benton. I still have fond memories of the Committee that considered the Bill that became the Housing and Regeneration Act 2008, which we endured together.
I congratulate my hon. Friend the Member for Falkirk (Eric Joyce) on securing the debate, and my hon. Friends the Members for Islington North (Jeremy Corbyn) and for Hayes and Harlington (John McDonnell), and the hon. Members for Hexham (Guy Opperman) and for Worcester (Mr Walker), on speaking so eloquently on such an important matter.
Hon. Members have spoken with one voice in the debate. The hon. Member for Hexham mentioned UK open-cast mining—I shall come on to that in a moment—and also talked about the importance of increased transparency and better corporate governance, because that improves accountability. There is a strong argument that if mining companies disclosed their payments to Governments on a country-by-country and project-by-project basis, it would be easier to see which companies were paying tax—and in which countries they pay it—who was paying bribes, the circumstances in which local officials or representatives were accepting bribes, and which projects were being waved through. That, in many respects, is the most striking example of what has in the past few years been called responsible capitalism—ensuring that big companies do not pillage and exploit the developing world’s natural resources, but provide mutually acceptable terms of trade, in the interests of all, that can benefit all the populations of mineral-rich nations, rather than just a narrow, privileged elite.
My hon. Friend must be aware that high-value rare earths and minerals—coltan, diamonds and so on—are often smuggled out of countries such as the Congo, which is possible because they are dealt with in relatively small volumes. Neighbouring countries re-export them and then they are bought by dealers around the world. We will find that the traceable line almost disappears unless we force the countries that host the headquarters of a number of the dealing companies, such as Switzerland, to be part of the transparency process.
I agree with my hon. Friend. A balance needs to be struck, with the UK being the centre of the world’s financial operations through the City of London, between moving unilaterally and providing for a multilateral approach to ensure that we can adopt my hon. Friend’s suggestion.
My hon. Friend the Member for Falkirk mentioned something in which I am particularly interested: ensuring that valuable resources such as rare earths, or minerals in general, are not sold for a fraction of their real market value. There is an argument, as we heard, that if developing nations received the fair market share for those important and valuable resources, the international aid budget could be reduced, because those mineral and resource-rich nations could develop their own economies and societies, and make progress along the value-added chain.
When dealing with reporting and regulatory requirements, critics often say that any additional requirements would be too onerous and would impose additional costs. It is often argued that it would be wrong to increase costs for mining companies at a time when the long-term global boom in commodities is coming to an end. However, an interesting article in The Economist earlier in the year stated that, in 2011, Angola awarded several new deep-water oil concessions to firms covered by the Dodd-Frank requirements with no apparent difficulty. It said that no oil company had cited increased openness as a material risk in its Securities and Exchange Commission filings.
My hon. Friend the Member for Falkirk talked about how hedge funds want improved transparency and reporting requirements because they want, to use his vivid phrase, to know where the money is going. Paul Bugala, a senior analyst for extractive industries at Calvert Instruments, which manages a $13 billion fund, states that such improved disclosure and reporting requirements would help him and the market better to assess political and regulatory risk, and would therefore allow for better investment and stock selection, improving share prices in the sector in the long term.
Companies already collect such data for internal use, so there is a strong argument that such a process would merely make the data public. The additional costs that are often cited would therefore be minimal, if not non-existent. If all companies had to fulfil this additional requirement, no competitive advantage would be lost. The article in The Economist concluded by saying:
“'The expense has been minimal for the few, such as America’s Newmont Mining, that already provide country-level reporting.”
In July 2011, in a speech in Nigeria, the Prime Minister said:
“It is not enough to import labour, extract Africa’s resources and move on. It’s vital that when foreign companies invest in a country, the benefits of that investment reach the African people, so they become less reliant on aid.”
The Prime Minister complimented the United States for introducing legally binding measures to require oil, gas and mining companies to publish key financial information for each country and project they work on. He said in the same speech:
“I'm calling on Europe to do the same. We want to disclose the payments our companies make to your Governments so you can hold your Governments to account for the money they receive.”
Although the Prime Minister made that speech and that pledge 16 months ago, there has been slow progress at a domestic or European level. One of the first replies that the Minister gave in her new job, with her shiny red box, was to state in mid-October that the Government are engaged in EU-level negotiations on transparency laws. She added that the European presidency would soon begin discussions with the European Parliament and the Commission to try to achieve some agreement on improved transparency in the payments that extractive industries make to foreign Governments. I will support her in that.
I appreciate that the Minister is relatively new to her post and her response was made only six weeks ago. However, there had been some movement in the month prior to her appointment. I am not suggesting for one moment that the Minister’s appointment has stalled progress—I hope she will not take offence; it genuinely was not intended—but a Committee of the European Parliament passed a vote in September requiring a European version of the US system through which oil, gas, mining and timber companies should publish their payments to foreign Governments. Will the Minister outline any progress that has been made in the six weeks or so since she answered that parliamentary question, together with any time scales that she is pressing on her European counterparts to reach European-wide agreement?
It seemed to me that the Prime Minister’s speech in Nigeria suggested that he wanted country-by-country reporting. The Minister’s parliamentary answer of six weeks ago seemed to confirm that stance. When the International Development Committee investigated tax in developing countries, it recommended:
“The Government should enact legislation requiring each UK-based multinational corporation to report its financial information on a country-by-country basis.”
In their response to that recommendation, the Government dismissed the idea of unilateral positioning on this matter, stating that they merely support mandatory reporting requirements at the EU level. I can understand that approach but, as I said in response to an intervention from my hon. Friend the Member for Islington North, what is the correct balance between moving in a unilateral fashion—given our financial importance in the world with the City of London—and moving at a European level? Is there anything that the UK and the Minister can do outside the EU? I would be interested to hear her opinion of the appropriate policy balance.
One of the areas of today’s debate has been the extractive industries transparency initiative, about which my hon. Friend the Member for Falkirk and the hon. Member for Worcester spoke particularly eloquently. As we have heard, the EITI was established a decade ago by the UK Government with the clear and specific aim of addressing corruption in the extractive industries. As the hon. Member for Worcester said, the UK has never signed up to EITI, despite being at the forefront of founding the organisation, so that seems to be a mismatch.
When the then Under-Secretary of State for International Development, the hon. Member for Eddisbury (Mr O'Brien), gave evidence to the International Development Committee investigation that I mentioned, he said that the UK’s reason for not signing up to the EITI was that we as a country are not “resource-rich”. I have looked at statistics from the Office for National Statistics, and disregarding the City of London’s position in terms of UK-listed mining companies, 16.4% of the UK total economic production constitutes mining and quarrying. That seems fairly resource-rich to me, given that we also have North sea oil. Will the Minister comment on that? Does she agree with the then DFID Minister? Does she not agree with the suggestion made today that the UK, as the founder of EITI, should lead by example? Does she agree that the UK’s joining would encourage other countries to join? Does she also agree that as this country is the world’s acknowledged centre for financial services and accountancy standards, and at the forefront of world-class corporate governance, and given that the City of London is the headquarters for so many multinational mining corporations, the UK should and could send out a powerful message by joining the EITI?
In response to the investigation, the Government said that they welcomed the strategy review of the EITI, which is looking at developing a broader standard for consideration by the EITI board, with a view to possible introduction in 2014. Has the Minister any thoughts on the criteria that would need to be met as part of the strategy review that would satisfy her enough to recommend to her DFID counterparts that EITI membership should be sought?
My hon. Friend the Member for Hayes and Harlington mentioned the London Mining Network. Has the Minister seen the network’s report on UK-listed mining companies and the case for stricter oversight? It is incredibly interesting reading. Will she comment on whether the Government would be amenable to the eight recommendations put forward in the report on such matters as the reporting of non-compliance with IFC and OECD standards, as well as ensuring—we have heard about this many times in the debate—that the FCA has powers to enforce section 172 of the Companies Act 2006 with regard to corporate reporting requirements relating to environmental and social impacts?
That report also raises interesting points about the reporting requirements of companies listed on the alternative investment market. I fully accept the differing reporting and regulatory requirements between AIM-listed companies and those listed on the FTSE 100, but it would be interesting to hear the Minister’s thoughts on the Government’s policy on whether AIM requirements for mining companies should be changed.
The hon. Member for Hexham talked about open-cast mining in his constituency and made the important point that the north-east was at the centre of mining. It has a rich heritage and helped the industrial revolution to come about. He mentioned two important points that I hope the Minister will address, including about individuals who want to sue mining companies because of what might be happening in their communities. Is the Minister concerned about the effect of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which makes it virtually impossible for any UK citizen to seek redress in such a respect?
The hon. Gentleman also mentioned planning and, quite rightly, the importance of the green belt in the planning system, and he cited what the Secretary of State for Communities and Local Government said in a speech in September. Will the Minister address the comments made by the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), in the past 24 hours, when he said—I paraphrase—“Let’s just build over the green belt”?
I assure the hon. Gentleman that the planning Minister did not say, “Let’s build over the green belt.” He specifically said that we should not build on the green belt, but look at other land, which is a perfectly reasonable proposal.
May I briefly ask about one of the hon. Gentleman’s points? The legal aid changes would not have affected the several cases that I brought as a lawyer against such planning applications. Such action would still be available and, because of what we did, there is now a protective costs order to protect litigants bringing such actions. Does the hon. Gentleman accept that successive Governments have allowed applications for developments to be made by companies that are UK-based, but ultimately hiding behind a parent company? That cannot be right.
The hon. Gentleman has brought to the debate his impressive forensic skills, which he has honed as a barrister. He is right that the planning Minister did not say, “Let’s build all over the green belt,” but, “Let’s build on green land.” I was a planning Minister, and green belt regulation is important. Brownfield development, as opposed to greenfield development, is always the most appropriate approach.
The hon. Gentleman gave us his experience of the importance of legal aid and asked an important question to which I hope the Minister will respond. In different areas of public policy in the past month, we have seen companies using their power and breadth of scope in a globalised world to make profits in the UK despite having no corporate responsibility whatsoever, particularly over paying tax. I am interested in the Minister’s comments on any proposals to make companies to pay tax where they earn their turnover, as opposed to allowing them to move their responsibilities elsewhere through transfer pricing.
This has been an important debate in which many serious points have been made. I am a big believer in the notion that improved transparency and reporting requirements, and better corporate governance, can benefit all society, and indeed the economy. I will be interested to hear the Minister’s response.
Thank you for chairing the debate, Mr Benton, and for drawing our attention to the new clock regime, which is a very good innovation, particularly the advent of seconds. We can feel the anticipation of the countdown in the closing seconds of our speeches. I congratulate the hon. Member for Falkirk (Eric Joyce) on securing the debate. It has been an important opportunity to highlight what we are doing to increase transparency. I pay tribute to his hard work, particularly in his role on the all-party group on the African great lakes region.
I would also like to thank the hon. Gentleman for his kindness and understanding. When the debate was initially scheduled for a few weeks ago, I was suffering from the cold that was going round and had entirely lost my voice. It would not have been a particularly instructive debate in which to hear the Government’s view, because I would have been very much in listening mode only. I am glad we were able to reschedule. In doing so, it has changed from a half-hour to a 90-minute debate. I do not know whether that is pure good luck in the ballot or karma from the powers-that-be for the hon. Gentleman’s understanding. I am sure that we all appreciate having this opportunity, because we have been able to hear not only his views but contributions from other hon. Members.
In my summation, I shall outline the Government’s position and our commitment to transparency, in particular. I shall go through the latest developments on the EU rules and talk about corporate governance, with particular reference to reporting requirements and the composition of boards. I will also talk about the extractive industries transparency initiative, which several hon. Members mentioned. I will then deal with the impact of mining on the UK economy.
For far too long, the world’s poorest people have struggled to benefit from the vast natural resources in their countries. Millions of people in developing countries languish in poverty while their corrupt Governments squander or hide large payments from foreign companies. Strong EU action to create a new global standard for transparency in the extractive industries is vital to help those citizens to hold their Governments to account. I am determined that the UK will play a leading role within the EU to make the most of opportunities.
The Government are keen that the mining industry, as well as other extractive industries, provides more information on the payments it makes. Countries rich in natural resources—the minerals that industrialised nations need—can use that wealth to boost economic growth and improve social conditions for some of the poorest people in the world, who badly need that. International mining developments have the potential to boost economic growth dramatically and provide a route out of poverty for resource-rich developing countries. All too often, however, such resources act as a curse, owing to the temptations of corruption that tend to go with them.
To provide some context, the value of exports of oil, gas and minerals from sub-Saharan Africa in 2009 was five times greater than the aid it received, and prices have risen since then. There is huge potential to unlock positive development. Botswana, Zambia and the Democratic Republic of the Congo top the global chart of mineral-dependent countries—those that depend on minerals for more than a quarter of their tangible exports. Well managed extractive resources can provide a big economic jolt, but citizens of such countries are too often unable to find out how much their Governments are paid for access to the resources or how the payments are reinvested, so there is no way to hold them to account.
The Prime Minister has expressed his strong support for the transparency agenda. When he spoke in Lagos in July 2011, he made clear his support for EU action to improve the information available at both country and project level. More recently, he reaffirmed his commitment to the UK leading efforts in the EU to require oil, gas and mining companies to publish details of the payments they make to Governments. The Deputy Prime Minister has also been active in this regard, and last month he and I met campaigners, including that rather well known supporter, Bono. The Deputy Prime Minister has been a strong advocate of transparency and in particular of ensuring that the agenda is driven forward at the centre of Government with the important support of the Prime Minister.
The hon. Member for Falkirk and others talked about the accountancy and transparency directives and where we are with them, and I hope to update the House today. The Government are keen that the EU agrees strong reporting requirements—rules that could improve the lives of millions of people around the world. For the first time, the extractive industries will have to report the payments that they make in all countries in which they operate. It is proposed that such companies, whether listed or not, publish details of what they pay to each level of government—nationally, regionally and locally. Crucially, they will also have to report payments to state-owned organisations, such as energy providers. That will give citizens the information that they need on, for example, the taxes, royalties and other payments made in host countries. If we get the measures right, it will have a huge impact in helping to combat corruption in developing countries and ensure that natural resources benefit all the citizens of the countries where they are mined.
The hon. Member for Falkirk mentioned the action in the United States, which has already agreed new rules, as we know. The US Dodd-Frank Act requires listed companies to report to the Securities and Exchange Commission each year. That means giving details of the payments, whether in money or in kind, that they make to Governments. The new legislation, published in August, raised the bar on global transparency standards, which I warmly welcome. US-listed companies will have to comply with a set of strict rules that will considerably increase the amount of information available to citizens. Although the EU has been discussing the issue for a long time—things tend to take a long time with the EU—the publication of the US rules has given us an opportunity to go further than we had thought possible in the EU, because, on exemptions, project-level reporting and the threshold for reporting, the rules are more ambitious than many had expected.
In response to that bold move by the US, the coalition Government are pushing for the EU to match the US approach, on, in particular, project-level reporting and setting a low threshold above which payments must be disclosed. The threshold is $100,000 under the US rules, and it would be helpful if the EU agreed to a similar amount in negotiations. It is worth mentioning in passing that if standards in the EU and US were, as far as possible, shared, it would help companies complying with the transparency rules, because it would mean one set of requirements to comply with, rather than extra complexity and therefore extra cost. In America, there will be no exemptions from reporting, which has been a real bone of contention.
Concerns have been raised with my predecessors and me that the disclosure of payments made to a Government might be prohibited by the criminal law in some countries. I have yet to see the titles of specific Acts of Parliament in specific countries that would prohibit that type of transparency. I encourage anyone reading the debate in Hansard who strongly believes that exemptions are absolutely necessary to furnish me with the titles of the Acts that people would be unable to comply with, in whatever foreign country. I will happily receive and respond to such information, if it exists, as I expect it does not. When mining companies based in the United States and Europe have to provide the information, that will cover a large proportion of the extractive industries operating in the developing world.
The hon. Member for Hartlepool (Mr Wright) raised the challenge of the EU process. I am glad that he did not say it was my fault that things were taking a while in Europe; I assure him that it is not. I may have been in this role for only two and a half months, but my predecessors were very active, as am I, on the issue. Since January, there have been 16 meetings of the Department, campaigners and the industry, five of which included Ministers. Since I took on this role, I met members of the Publish What You Pay coalition and representatives from the extractive industries on 12 September, and I again met members of Publish What You Pay on 25 October. We are therefore in close contact on the issues, because it is important to make progress. My right hon. Friend the Secretary of State for Business, Innovation and Skills had an article in the weekend newspapers on this issue, and we are determined to keep up the pressure.
The hon. Gentleman encourages me to fill my diary with more meetings—I am sure that my private office will be delighted. I will certainly look at whether it is possible to undertake that commitment. If he writes to me with more details, I will see what can be done.
The hon. Gentleman asks a genuinely interesting question. One thing that became clear to me at the first round table I held on this issue was that the industry and the campaigners started in quite contradictory positions. Getting people to a position where they have agreed to make progress has been a rather long and perhaps slightly tortuous process, which has required a great deal of engagement. Both sides have had concerns, but, to their credit, they have both recognised that tweaks to their proposals might be needed, and genuine points have been made that ultimately led to concessions. Certainly when I joined those discussions, we were getting to a much clearer position, particularly with the catalyst of the strong US rules, and that is very welcome. It is important to have strong rules on transparency, but the industry recognises that it must comply with the US rules, and it wants to make sure that it is not a bad neighbour, as it were, in the countries in which it operates. There is therefore a recognition that change is necessary.
The EU negotiations are in the trialogue process, the delights of which are not always as swift as we would like. We are keen to make sure that, if possible, that agreement is reached through the First Reading process, because that would allow us to implement the rules. I understand that there have been three sets of meetings so far. They are practically weekly at the moment, and I think the dates were 7, 9 and 14 November, but do not quote me on that. Things are prone to change in the EU—for example, there was due to be a meeting on Friday, but I heard it was off and then that it was possibly on again. None the less, whatever the specific dates, there are very regular meetings of COREPER—and other lovely EU acronyms—to ensure we get some progress.
On a range of issues, particularly the three I mentioned—exemptions, and threshold-level and project-level reporting—we are getting a greater degree of consensus. The European Parliament is still pushing some elements, in relation to the involvement of other parts of industry, on which it wants to go beyond what the US does. That runs the risk of just delaying or preventing the process, when there is a lot of consensus on extractives, so there will be further discussions.
As the hon. Member for Islington North (Jeremy Corbyn) explained, he has unfortunately had to leave for another engagement. He made a point about outsourcing parts of the mining industry to avoid transparency. It is worth putting it on the record that the project definition is likely to tie in contracts and licences in such a way that avoidance will not be straightforward and that subcontracting will still be captured. The hon. Member for Falkirk talked about how listing companies in London might be a positive step, even when they were not UK-based. The hon. Member for Hayes and Harlington (John McDonnell) was characteristically forthright and passionate about some of the failings that he has identified. I am sure that he appreciates why I cannot go into the individual cases that he mentioned.
On the overarching issue of corporate governance, it is important that investors have information to hold companies to account. The London stock exchange has four of the top five mining exploration and extraction companies by market capitalisation—BHP, Rio Tinto, Xstrata and Anglo American. There are 119 extractive and mining companies listed on the London exchanges, of which 12 are UK companies. We want to ensure that investors can hold boards to account and encourage responsible business behaviour. We have high standards of corporate governance, but it is important that we are not complacent. Further strengthening those standards will help London stock markets, because it will give major investors more confidence.
It is important that companies are held to account, and it is also important that Governments are held to account. Will the Minister personally examine the information that has flowed between the Government—that is, the Foreign and Commonwealth Office—and other Government agencies with regard to GCM and its operation at the Phulbari project in Bangladesh? A freedom of information request for the release of that information has been denied.
I will endeavour to look at the issue the hon. Gentleman raises, and write to him. I want to conclude my remarks, as there are a couple of points I want to pick up.
The tax issue is one for the Treasury, but it is important that companies pay the tax that they owe. If some of that needs discussion with other OECD countries, to make sure we have a regime that works, we should do that.
We have recently published draft regulations for narrative reporting. It is important that we make sure that it is explicit that relevant social and community issues in such reports should include a consideration of human rights. It is absolutely appropriate that investors should want to assess that in making their decisions.
Diversity on boards is also relevant to the extractive and mining industries. In the FTSE 100, there are currently 12 mining companies, half of which have no women on their boards. That means that, of the only eight companies in the FTSE 100 that have no women on their boards, three quarters are mining companies. I hope that those companies look at that in detail, because the rest of the FTSE 100 companies seem to be taking significant action, so they are lagging significantly behind. [Interruption.] The hon. Member for Hartlepool mentions Cynthia Carroll, whose departure shortly from Anglo American, will leave only two female bosses in the FTSE 100.
Various hon. Members, including my hon. Friend the Member for Worcester (Mr Walker), raised the issue of the extractive industries transparency initiative, although, as the hon. Member for Islington North pointed out, it has limited effectiveness. There are 16 compliant countries so far, and another 20 are in the process. The rules that we want to agree in the EU will go much further, so it is important to get them right. However, with my colleagues in the Department for International Development, I will look at that issue. We are trying to assess the impact of any such additional burden on small UK companies that operate exclusively in the UK. However, I hear the views expressed.
Mining is, of course, important to the UK economy. My hon. Friend the Member for Hexham (Guy Opperman) spoke as a passionate advocate for his constituency. Some of the issues he raised relate to other Departments, but it is the responsibility of local authorities to establish local development and local mineral plans so that it is clear how their areas will be developed. The Secretary of State for Communities and Local Government has made it clear that the green belt will be protected. He recently said in the House:
“Inappropriate development should not be approved in the green belt”.—[Official Report, 17 September 2012; Vol. 550, c. 619-20.]
That is clear. It is up to local authorities to implement conditions that are put in place, including those from the Planning Inspectorate.
In conclusion, the issue is important, and the Government are very committed to transparency. I thank all hon. Members for their contributions to the debate.
Let me begin this important debate by paying tribute to the bravery and dedication of police officers across the United Kingdom. They do a unique job that is without parallel in the public sector. We are rightly proud that our police service is the best of the best. The Minister and I saw for ourselves very recently such acts of bravery when we attended the police bravery awards evening, organised by the Police Federation.
The whole country saw the danger that officers put themselves in every day to keep our community safe when two young unarmed and exceptionally courageous officers, Fiona Bone and Nicola Hughes, lost their lives in the line of duty. Thanks to the police and other stakeholders, there has been a 40% reduction in crime over the past 15 years. It was police officers who, along with the Army, were responsible for the safety and security of the magnificent Olympic games this summer after we were all let down by G4S. As we hold this debate in the warmth of Westminster Hall, police officers are out saving lives, helping people in towns and villages to escape the rising floodwaters.
As this is the first debate with the Minister since he has taken over his new portfolio, may I congratulate him on winning his asylum appeal and moving, after seven long years with the immigration brief, into policing? He must be missing the UK Border Agency terribly, but I can assure him that we will keep him very busy with policing issues.
I am also pleased to see so many right hon. and hon. Members from all parts of the House here today. They will forgive me if I take a limited number of interventions because time is short, but I promise that I will acknowledge their presence at the end of my speech.
The Government’s proposal to increase the pension age to 60 is wrong. The Winsor review found that the average age at which police officers currently retire is around 50 to 51. Some police officers may want to continue to serve and work beyond that age, but it is unfair and unjust to mandate them to serve until the age of 60.
I thank the right hon. Gentleman for giving way and congratulate him on securing this important debate. May I make two brief points? First, is it not distasteful to change a contract of employment halfway through and, secondly, given the special nature of the work that these brave men and women do, should we not be careful about expecting them to defend us on the streets at the age of 60 plus?
I have a quick answer to both questions, which is yes and yes, and I cover them both in my speech. If we expect police officers to stay on until the age of 60, it is a matter of fact that some will find their roles harder as they become older, as people like me know. Those officers will have to be relocated to back-office positions, which are precisely the functions that the Government are urging forces to cut while maintaining front-line numbers. The consequence of these proposals for police officers and forces will be seriously damaging.
I thank my right hon. Friend for allowing me to intervene and for the time he spent with me recently meeting people in Corby. He will know that this is an issue not just for police officers and their families, but for all of us who want to show our hard-working police officers that they are valued. Does he agree that, at a time when there are 20% policing cuts and, now, a steep rise in pension age, morale in the police force is really being undermined, and we must not let that happen?
Sitting suspended for a Division in the House.
Among the Government’s proposals are changes to the contribution rate. At the moment, a contribution rate of 10.5% of gross pay secures a contribution with a value of 24.2%. Under the proposed changes, a much higher contribution rate of 13.7% of gross pay will secure a contribution with a value of just 14.3%.
Police officers have told me that the proposed rate of 13.7% is simply too high and is not even-handed when compared with other public service workers. In fact, the rate is so high that there is a significant risk of opt-outs, including by new recruits who will not be able to afford to join the pension scheme. The Winsor review, upon which these proposals are based, also proposed lower starting rates of pay. Taken together, the two elements will have a devastating effect on recruitment. In addition, current pension contribution rates are already increasing. They increased in April and future increases are expected in 2013-14 and 2014-15, to meet Lord Hutton’s recommendations of an average contribution increase of 3.2%, which effectively means a 3% pay cut for officers.
Every single police officer in the 134,000-strong force will be affected by these changes. I have spoken to many officers, both in my constituency and here at Westminster, who are extremely anxious about them. When this debate was announced, I asked officers to contact me with their stories. I expected one or two to reply. In just seven days, I have received upwards of 120 e-mails, phone calls and letters from concerned officers across the country. Not one of them agrees with what the Government have suggested.
I thank the right hon. Gentleman for giving way, because I know that this is a very short debate. My police officers have shared similar views with me, but a particular issue that has been raised is the disproportionate effect of these proposals on women police officers—the right hon. Gentleman named two brave women police officers earlier—who have had career breaks, and on coming back they will find that, under the new system, the years they have served will not add up to the pension that they hoped for when they started in the police.
The hon. Lady is absolutely right and she is also right to raise the specific issue of women police officers, which has not been raised in the debate so far. I agree with what she said.
Apart from all those representations that I have received, the e-petition for a debate on this issue was started by Sergeant Nigel Tompsett of the Suffolk force, and it now has more than 100,000 signatures. This debate today in Westminster Hall is not an alternative to a debate on the Floor of the House on this issue; I hope that it is a curtain-raiser for such a debate.
The pension reforms need to be seen in context. They are part of a wider picture of sweeping reforms to the landscape of policing. In comes the National Crime Agency and out goes the Serious Organised Crime Agency; in comes the college of policing and out go the police authorities; and then in come 41 newly elected police and crime commissioners as well. Those are, in my view, the most significant changes to be undertaken since Sir Robert Peel laid the foundations for modern policing nearly two centuries ago. At this moment of seismic change, it is clearly wrong to destabilise the very people we expect to implement the changes.
Morale in the police force, as we have heard, is at an all-time low. The Metropolitan Police Commissioner, Bernard Hogan-Howe, told the Home Affairs Committee yesterday that this was a very difficult time for many in the service. His predecessor, Lord Stevens, through a survey of 14,000 officers and superintendents conducted by the London School of Economics, found that 95% of police officers do not feel that they have the support of the Government, and that 56% of those surveyed had recently contemplated leaving the force. It is because of measures such as these that officers who risk their lives for our communities feel short-changed and undervalued. The proposals will drive gifted and experienced officers out of the service.
Will the right hon. Gentleman give way?
The right hon. Gentleman is very kind. Does he agree with the Scottish Police Federation, which feels that control over the pensions of police in Scotland should be given to the Scottish Government, rather than be under the control of Westminster? The police in Scotland fully fund their own pension anyway.
I have not spoken to any Scottish officers and none have made such representations to me, but the Minister has heard what the hon. Gentleman said and I am certainly happy to talk to them after the debate.
We have to recognise the unique role, responsibilities and restrictions that apply to police officers. Each sworn constable is an independent legal official, not an employee. Police officers are required to deploy force, put themselves in the way of harm and make discretionary ethical judgments. Failing to carry out their duties, whether on or off duty, leaves officers open to the charge of misconduct in public office. As Nathan McLean, a police officer in Greater Manchester, put it to me:
“Each day when I go to work I understand that I may not return—yet I, like thousands of other police officers across the country, wear the uniform with pride and just get on with it in order to protect the public.”
Regulations provide for restrictions on the private lives of police officers, and despite being faced with the most wide-ranging reforms to pay and conditions in 30 years, police officers, unlike other professionals, do not have the right to strike or take industrial action. Police officers joined the force, and accepted these unique restrictions and limitations, on the understanding that they would be fairly provided for in retirement.
All those who represent our police service need to be consulted on the changes, and listened to very carefully. We are fortunate in this country to have robust representative organisations in the form of the Police Federation, led by Paul McKeever, and the Police Superintendents Organisation, led by Derek Barnett, along with people of outstanding ability, such as Sir Hugh Orde, president of the Association of Chief Police Officers, and the recently retired chief inspector of constabulary, Sir Denis O’Connor. I urge the Minister to ask them questions, to talk to them, to listen to them and to act on their advice.
Before I conclude, I would like to leave the House with some of the individual concerns of ordinary policemen and women who have contacted me. PC Gareth Spargo of South Wales police said:
“I increased my mortgage to pay for treatment so my wife and I could have children. Now my pay has been frozen for 2 years and I am paying an extra £100 a month in contributions....I love being a police officer and I joined in the knowledge that I was never going to be a rich man. I did however expect the terms that I joined under to remain constant for the duration of my service”.
PC Jason Ford told me:
“I have been spat at, punched, kicked, beaten with a wooden bat, been confronted with knives, swords and guns...my police pension has kept me going through some very difficult times, it is a little bit of light at the end of a very long tunnel”.
PC Matthew Ransom, of Kent police, contacted me to say:
“My mortgage was to be paid off in the last month in the job, leaving my lump sum to be used for university fees, or assistance in getting my boys on the property ladder. I cannot do those things now I have to do another 10 years’ service, contributing more and receiving the same or less in pension. How can this be fair?”
In addition, PC Turnbull from Bolton has made representations to my hon. Friend the Member for Bolton South East (Yasmin Qureshi).
In conclusion, I want to acknowledge the colleagues who have come here today to participate in the debate. They include the hon. Members for Hexham (Guy Opperman) and for St Albans (Mrs Main). We have heard from the leader of the Welsh National party, the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd), and from my hon. Friend the Member for Corby (Andy Sawford). My hon. Friend the Member for Barnsley Central (Dan Jarvis) is here, as are my hon. Friends the Members for Bolton South East and for Ynys Môn (Albert Owen), the hon. Members for Worcester (Mr Walker) and for Falkirk (Eric Joyce), my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Oldham East and Saddleworth (Debbie Abrahams), the hon. Member for Nuneaton (Mr Jones), my own Member of Parliament the hon. Member for Hendon (Dr Offord), the hon. Member for Rossendale and Darwen (Jake Berry), my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith), the hon. Member for New Forest East (Dr Lewis) and my hon. Friend the Member for Coventry South (Mr Cunningham). If I have left anyone out I am sorry. I did leave out the two Parliamentary Private Secretaries because I did not know which side they were on and I would not want to drag them into my side of the argument. And, of course, there is the Scottish National Member, whose constituency I cannot pronounce, who also spoke.
These are, of course, times of austerity, and the police are not the only organisation being asked to deliver more for less, but the reforms are wholly disproportionate. There is an alternative lower contribution rate within the Government’s 28% cost ceiling but, very disappointingly, it was rejected not by the Home Office but by the Treasury. I ask the Minister to reconsider that decision.
Finally, the Government must honour the existing pension arrangements of serving police officers, under section 2 of the Police Pensions Act 1976, and any new pension scheme should be applicable only to those who join for the first time. It is time for action to back up the words of praise we lavish on the police service whenever our communities are under threat. We need to act now and change the proposals before it is too late.
I thank the right hon. Member for Leicester East (Keith Vaz) for initiating the debate and for the kind remarks he made about me at the start of his speech. I can confirm that I am already nostalgic for the UK Border Agency. I entirely echo his remarks about the tremendous service that police officers give to their communities and the whole country. As he said, he and I attended the police bravery awards a few weeks ago. It was the first time I had attended, and I was struck dumb by the courage and heroism shown by all the winners. Even more importantly, I know from my own experience as a constituency MP, as well as from other experiences I have had as police Minister, how that kind of service is provided on a daily basis across the country.
This afternoon, I would like to clarify the Government’s approach to public service pension reform as a whole, as well as what it means for police officers. As the right hon. Gentleman acknowledged, these are difficult economic times and we have to take difficult decisions, but we have equally made it clear that we are committed to reaching a fair outcome for police officers, and I hope to explain why I believe that that has been achieved. In the course of his speech, the right hon. Gentleman enjoined me to listen to the comments made by a number of organisations.
I should start by reminding the House of the context for pension reform. From the outset, we have been candid about the need for a fundamental review of public service pensions and of how they are funded and maintained. That is why my right hon. Friend the Chancellor invited Lord Hutton to chair the independent public service pensions commission. As a member of the previous Government and a former Secretary of State for Work and Pensions, Lord Hutton was well placed to undertake an independent and comprehensive review. He did a thorough job and made a compelling case for change. As he set out in his findings, the costs of public service pensions have increased over recent years, mainly because people are living longer, and the increasing costs have fallen largely to the taxpayer.
The Government are committed to providing good occupational pensions for public servants, but we must do so in a way that is affordable, sustainable and fair both to those workers and other taxpayers. That means, across the public services, moving to the career-average pension model in place of final-salary schemes. That also involves increasing the contributions that workers pay for their own pensions and raising the retirement age. The Public Service Pensions Bill, which is currently before the House, sets out the high-level framework for those reforms, with work force and scheme-specific details to be implemented through regulations in due course.
To put all that in context, the latest figures from police forces show that, in the 2011-12 financial year, across England and Wales more than £2.8 billion was paid out in police pensions. Such pensions are paid to retired officers who have a legal entitlement to receive them. I hope that gives Members a sense of the scale of the issues and finances involved.
The right hon. Gentleman raised a specific point about police pension contributions. It is true that police officers pay among the highest contributions in the public services. That is because the pension is significantly more valuable than most others, as it should be.
As part of his report, Lord Hutton commissioned a comparative analysis of the benefits that workers get out of pension schemes based on what they contribute themselves. He found that, aside from those in the armed forces, who do not contribute to their pensions, police pensions are more valuable than most, as they are generally drawn from an early age and paid for longer in retirement. That is even taking into account the relatively high contributions paid by police officers.
I was struck by the verdict of Police Mutual, an independent financial adviser that specialises in services for the police. Its assessment, in response to the increased contribution rate, states that
“the Police Pension Scheme remains one of the best financial investments you are ever likely to make.”
People should listen to Police Mutual, because it knows whereof it speaks.
While I am on that subject, I am happy to reassure my hon. Friend the Member for St Albans (Mrs Main) that the new scheme does not have a service requirement, so female officers will not be disadvantaged for taking career breaks.
I thank the Minister for bringing that information to the House’s attention. Police Mutual may have a vested interest, because it deals with such financial affairs and might benefit in some way. I do not know the organisation’s position, but the organisations that have spoken to us are clear that their members will be affected. The Minister is new to his position, and he is not responsible for this. He did not write the Winsor review. He has just become the Police Minister, and he has to work with the police for the two-and-a-half years at least that he has this job. Will he agree to meet the representatives—the Police Federation, the Police Superintendents Association, the Association of Chief Police Officers and others—again to discuss one more time the effects that the changes will have on their members? If he agrees to do that, he will get a better impression of what is going on.
I constantly meet not only police officers in my constituency who wish to discuss this but, as the right hon. Gentleman would expect, the fed and the supers. This item is clearly on that agenda, and I am happy to reassure him that I will continue to discuss it. I will come on to what the federation said in a second.
We have maintained throughout the process that police officers deserve to be treated with respect and even-handedness. We have worked hard with partners in policing to reach a fair outcome that recognises the particular nature of a police officer’s work. That is why we asked Tom Winsor to reflect on Lord Hutton’s findings and consider some of the issues in the context of his independent review.
I am not sure whether the hon. Gentleman is aware that the Scottish Government’s Cabinet Secretary for Finance, Employment and Sustainable Growth has this afternoon made a statement on his intention to take forward such issues in Scotland. I hope the hon. Gentleman will go away and reflect on what the Scottish Cabinet Secretary said.
The Minister was helpfully explaining why female police officers will not be disadvantaged, but female police officers have told me that the career-average scheme will disadvantage them, and I am concerned about that. Will the Minister explain that point a little more fully?
There is no service requirement, but we could discuss that for the rest of the time available. I would more than happily have that conversation with my hon. Friend offline.
Tom Winsor agreed with Lord Hutton that a normal pension age of 60 is appropriate for police officers. Given the findings of the two independent reviews, the Government believe there is a strong and coherent case for the framework, which will be in place from April 2015.
The Police Federation has been mentioned a lot, and having engaged in the process that followed those reviews, it confirmed that it accepts the outcome as the “best deal possible” for police officers in the context of the reform across public service pensions. Paul McKeever, chair of the Police Federation and the staff side of the Police Negotiating Board said, and I will quote him in full for balance:
“Despite being disappointed with aspects of this announcement, Staff Side accepts it within the context of the Government’s wider public service pensions reform agenda. It is clear from our discussions with the Home Office that, compared to the reference scheme offered by the Home Secretary of 27 March, this was the best deal possible to protect the unique position of police officers.”
The right hon. Member for Leicester East asked me to listen to the Police Federation, and I do in that regard.
The right hon. Gentleman also asked me to listen to ACPO. The ACPO lead for reward and recognition, Chief Constable Simon Ash, said:
“The changes to the Police Pension Regulations by the Home Office are broadly supported by ACPO, who have worked constructively with other stakeholders since March to ensure that the best possible balance is achieved for longer term reform whilst providing sufficient transitional arrangements.”
The degree of consensus is often under-recognised. The right hon. Gentleman set out the general picture, but nevertheless both ACPO and the Police Federation have accepted the proposal. There is much of the detail still to arrange for new pension arrangements to be in place for 2015. Obviously, we will maintain the dialogue to make those arrangements work.
The deal means that the normal pension age for police officers will be 60. Aside from the armed forces and firefighters, other public service workers will have a higher normal pension age linked to the state pension age, which is 65 rising over time to 68. That means that police officers will continue to retire earlier than most others, reflecting the nature of the work they do.
We have heard today that some officers are concerned about the prospect of working to 60, but the evidence shows that the average age of those joining the police in recent years is 26. The current open pension scheme—the 2006 scheme—has a 35-year accrual period, so many officers will already be working beyond 60 to accrue a full pension. I recognise that that is a genuine concern for some officers. The framework, therefore, includes flexibility for officers to retire from 55 with an immediate pension and an actuarial reduction linked to the normal pension age of 60.
The increased flexibility of the career-average model also means that there is no cap on the amount of benefits that can be accrued. Under current arrangements for police officers, benefits are capped after 30 or 35 years, depending on the pension scheme. Under the reform framework, there is no cap, so years worked beyond age 60 would provide an enhanced pension.
We are protecting accrued rights for police officers for pension built up by 2015, as we are for all public servants. Most police officers are members of the 1987 scheme, which is a complex scheme that includes uneven periods of pension accrual, so we have developed tailored arrangements to reflect that, thus honouring the Government’s commitment to protect accrued rights and to give police officers a fair outcome.
The Government also made a commitment to give transitional protection to those who were within 10 years of their current normal pension age on 1 April 2012. That applies across the public services, recognising that those nearest to retirement are likely to have least time to plan for that retirement. Again, the complex design of the 1987 scheme has led us to create specific arrangements. As there is no set pension age under that scheme, we have decided to give protection based on age and length of service. All officers aged 45 at 1 April 2012 will be able to remain in their current scheme rather than moving to the new pension arrangements in 2015. We are also giving protection to those who, at 1 April 2012, were within 10 years of retiring on a full police pension. That will give full protection to a further group of officers, including some who were as young as 38 or 39 at 1 April this year. On top of all that, there is also further tapered protection for those who were within four years of qualifying for full protection, in order to smooth the cliff-edge effect that often happens with pension reforms. That tapering again demonstrates, I hope, that the Government have entered into the process in good faith with a view to finding a fair outcome.
I am conscious that going through the details of pension reform does not make for great parliamentary rhetoric, but it is such a serious issue that detailing it is important. I appreciate as well as anyone the degree of understandable emotion caused by the issue, but the underlying point is that, under the new arrangements, the police pension deal is still one of the best deals on offer. I do not underestimate the level of concern among police officers about pension reform, and it is right that they should have clarity at the earliest opportunity about what it means. Many details of how the reforms will be implemented have still to be decided. I repeat the commitment that the right hon. Gentleman wished me to make: the Government will continue to work with our partners in policing on the issue, including specifically those who represent rank-and-file officers.
Throughout the discussions, we have been committed to reaching a fair outcome for police officers. We have done all that we can to achieve a fair pensions package for police officers that reflects the front-line nature of policing work and protects those closest to retirement. Police officers will continue to retire earlier than most public servants, and will continue to benefit from significant employer contributions on top of their own.
I am grateful to the Police Federation for making it clear that they encourage their members to remain in the scheme and will continue to do so after the proposed reforms. I hope that police officers will be reassured by that eminently sensible advice. It is difficult to envisage another investment that would provide the same guaranteed level of income—
National Park Authorities (Elections)
It is a pleasure to serve under your chairmanship again, Mr Benton. I am extremely grateful for the opportunity to raise the issue of accountability in relation to Britain’s national parks. The matter is raised with me almost daily by local businesses and residents of the Lake district and the Cumbrian part of the Yorkshire dales, not because local people are desperate for more elections or because we are constitutional obsessives but because decisions made by people who are not accountable to those affected tend to be bad decisions.
As a result, businesses are under unnecessary pressure because they cannot expand, farmers are struggling because they cannot diversify, and local people, especially young people, are leaving our communities never to return because of the lack of affordable housing. Meanwhile, the rise in second home ownership has gone unchecked in recent years. A conservative estimate is that one in six properties is now a second home owned by folks wealthy enough to have a property in a national park that they occasionally visit, while locals who are desperate to stay are forced to leave.
That said, Britain’s national parks are stunning countryside protected for the nation. The 1945 to 1951 Attlee Labour Government spent a good six years implementing Liberal policies, among which was the establishment in 1951 of the national parks, including both the Lakes and the Dales. That was good legislation; it was a wise and visionary move. The motivation behind the Act was to preserve Britain’s most spectacular landscape and its environment and to promote the heritage of our national parks for the benefit of all the people of Britain. There was a sense that the national parks were the lungs of Britain’s towns and cities, and that they therefore belonged to the whole country, not just to those who lived, worked or indeed owned property or land there.
Today, those of us who are blessed to call the Lakes or any other national park home are proud to live in such beautiful places. We embrace the fact that our area is cherished by the nation. We are determined to be stewards of our countryside and to share it with all comers. The Lake district has 16 million visitors a year, the tourism economy of Cumbria is worth roughly £3 billion a year and, outside London, the Lake district is Britain’s most important attack brand for overseas tourism, drawing in millions of tourists every year, many of whom then visit other, less famous parts of Britain, adding hugely to the economy of the whole country.
It is vital for our environment, for biodiversity, for our tourism economy and for our fight against climate change that our national parks are protected, and it is vital for our nation’s heritage and for our sense of collective ownership that that heritage is propagated and that decisions taken about our national parks should be taken on behalf of the UK-wide community well as the local community.
I contend that the evidence of recent years shows that the local community’s interests are most likely to be overlooked when the balance of considerations is made. We in Westmorland and Lonsdale are blessed with two national parks: within the constituency are the most populated part of the Yorkshire dales, including Sedbergh, Dent and Garsdale, and the most populated part of the Lake district, including Ambleside, Grasmere, Windermere, Bowness, Hawkshead, Coniston and the Langdales, to name a few. For those towns and villages, the national park acts in many ways like the local authority: it decides on planning, environmental matters, provision of housing, car parking prices, tourist information and a range of other services.
Although I am talking about beautiful countryside, I am not talking about empty spaces. The Lake District is Britain’s most populous national park: 45,000 people live within it, and thousands more who live near it make their living there. The national park boards act almost identically to local district or county councils. There are 22 members on the Lake District national park board and 22 on the Yorkshire Dales national park board. Of those, six are appointed by the Secretary of State and by local district or county councils. A further four are appointed by parish councils.
The idea is that local council appointments tick the box when it comes to demonstrating that local people have a voice, but it is worth pointing out that many local authority representatives see themselves, understandably, as there to represent their local authority’s institutional interests rather than the interests of residents. To underline that point, many of those local authority representatives do not actually live in or represent wards in the national parks. Also, many parish councils that nominate members of national park boards tend be made up of people who, although able, decent and committed, became members of their parish council without being elected, owing to a lack of demand to take up parish council places.
That prompts the question whether there would be any interest in or demand for elections to the national park boards. Hon. Members might be interested to know that South Lakeland had the highest electoral turnout in the country in the police and crime commissioner elections on 15 November, but even then we managed only 23%. Perhaps that underlines the public’s antipathy to those elections. I suspect that one reason why the turnout was so low is that people felt that the post should not be politicised, and that we already have too many elections.
Maybe this is not the best time to be asking the Government—or, more important, local residents—to consider holding more elections, but let us look at it this way: we would not tolerate a district or county council making decisions about housing, planning, economic development, environment and tourism without its members being elected by the residents who had to live with those decisions. In fact we would be outraged, yet to the people who live and work within them, our national parks are effectively unelected and unaccountable local authorities.
That does not mean, however, that the national parks do a dreadful job. In fact, they do a good job. They protect our world-class landscape and environmental heritage to the extent that the lakes are potentially a world heritage site. They have done outstanding work, enhancing biodiversity in the Howgills and the Yorkshire dales, for example. They have performed an almost miraculous clean-up operation in respect of water quality in many of our lakes. They have made massive strides in reducing carbon emissions through improved cycle routes and rail integration. But they make silly decisions—for example, about aggressive car park ticketing prices in Hawkshead and Ambleside, and they choose to develop their main visitor centre at Brockhole in ways that are almost designed to damage local hotels. They throw out exciting, completely appropriate commercial ventures, such as the Honister zip wire, but they put pressure on farmers to reduce their livestock numbers, forcing many of them to abandon farming altogether. I suspect that they do such things because too often they do not listen to what local businesses, residents and farmers want.
My hon. Friend sets out the importance of national parks and some of the failings. Does he agree that experience in the Scottish national parks, which have had elected members since their formation, proves that the elections can be well contested and of great interest to local people?
I am grateful to my hon. Friend for making that point. That is true. I will mention the Scottish example in a moment. The elections in the Scottish national parks have engaged people and made them take the national parks seriously, providing a sense of ownership rather than a sense that this is a national thing deposited upon them.
It is important that our national park boards are chosen by local people, not simply chosen by others, so that a strand of legitimacy supports their decision making. Of course, that is not to say that people who are elected will make perfect decisions. We hon. Members present are proud to be elected to this place, but there are occasions when we do not get things perfectly right. Decisions made by people who are accountable will tend to be better, because those people have had to listen to those who have put them where they are.
I agree with the thrust of what the hon. Gentleman is saying. Is he proposing that all or most of the NPA members should be elected? There are a couple of pilot schemes under way, whereby a proportion—about half a dozen—members will stand for election. I am pleased to say that the New Forest national park authority volunteered to be one of the two authorities to go down this route. The NPA in the New Forest got off to a bad start, cutting across the grain of society, leading to protests, but after a complete reorganisation it now works with the community, which is why it is not afraid to volunteer to have at least some of its members elected.
My hon. Friend makes a superb point and underlines the case. I envisage a minority of people, rather than a majority—these are national parks—being there as the local voice. It is commendable that the New Forest NPA has put itself forward and it is to be congratulated on that.
If our national park boards were in part elected, they would, as my hon. Friend said, be far more legitimate in the eyes of local communities, residents and businesses, because there would be a far greater sense of collective ownership of decisions. Local communities would be far more willing to accept even difficult decisions, if they felt that they had at least been arrived at with the local case having been made.
This is about the quality of decisions, not about the quality of the people. The Lake District and the Yorkshire Dales national parks are led by outstanding chief executives. Cumbria’s two national parks are led by Richard Leafe and David Butterworth, decent people with vision and immense competence. The Lake District national park is chaired by Bill Jefferson and the Yorkshire Dales national park by Carl Lis, both of whom are staggeringly hard-working servants of our local community and who are desperate to do the right thing, both by the nation as a whole and by local residents. All the board members I know—I know most of them—are good, decent people who are dedicated to their roles and selflessly give their time and service.
I return to what I said at the beginning. The national parks are there for the enjoyment of the whole nation. It is right that a proportion of the board membership should be selected nationally, but wrong that none of those members should be elected locally.
I welcome the proposed pilots in the Peak district and the New Forest. I note that Scotland has blazed a trail with national parks, with Loch Lomond and the Trossachs electing many of their board members for some years now. But why are all national parks not required to elect some of their members, and why was the nation’s biggest, highest-profile and most populated national park, the Lake District national park, not first on the list in the selection of the pilot project, whether it volunteered or not?
Is there not a special case for introducing democratic legitimacy in the Yorkshire Dales national park, given the genuinely mixed response received in some quarters to plans to extend its boundaries? Many residents and businesses in and around Barbon and Casterton retain deep concerns about proposals that would bring their communities within the boundaries of the Yorkshire dales, not least because these are Westmorland communities and have never been in Yorkshire. Their concerns mostly focus on their fears that, whereas planning and housing decisions affecting them at the moment are made by the democratically elected and accountable South Lakeland district council, in future they may be made by an unelected and unaccountable national park.
There are, of course, dangers in introducing elections to the national parks. Just as many of us do not want our police service party-politicised, we do not want our national parks to become arenas for party politics. I would advocate for party political labels not being allowed in the contest, for example, to ensure that there was no sense that national parks would simply ape local councils in that respect. Nor would we want vast amounts of public money to be spent on such elections. However, given that every year in Cumbria there are parish, district or county elections, it would be possible to ensure that national park elections coincided on the same day to ensure cost savings and, at the same time, to maximise turnout.
If we thought that electing a proportion of national park board members would ensure decisions that everyone was happy with, we would be deluding ourselves. However, life can be tough in our national parks, because incomes are often low, and housing and the cost of living are high. Businesses need to be able to thrive, communities must be able to hang on to their young people, and farmers must be able to continue to farm. What point is there in attempting to maintain a thriving tourism industry in the lakes and the dales, if the dead hand of restriction kills off expansion and innovation?
Do we really want national parks that can only be lived in by the wealthy few, or do we want our national parks to be open to people of all income backgrounds? lf we want thriving businesses and thriving communities for people from all income backgrounds in our national parks, we need to ensure that decisions are taken by people chosen by our local communities, who will be responsive to those communities and will answer to them for decisions that they make, both good and bad.
As Winston Churchill said, democracy is not much of a system, but it is infinitely better than all the alternatives. He was right. It is time that that applied to our national parks, too.
I congratulate my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) on securing this debate. I do not know if any other hon. Members have two national parks in their constituency, but my hon. Friend certainly brings with him real authority on this subject. From contact that he has with me over the past two and a half years, both by letter and through parliamentary questions and other means, I know the extent of his interest in this important subject. I am grateful for this opportunity to respond to the debate.
The Government are committed to breaking down the perceived barriers between local communities and those making decisions on their behalf. As my hon. Friend mentioned, we have introduced directly elected police commissioners. There may be some doubt about the glee with which the electorate crammed themselves into the polling booths to elect them, but I feel sure that things will change over time. We also have directly elected mayors, and we have made other changes to increase local accountability. My hon. Friend is right to say that the issues we are debating today are political, as is the case with policing. They are matters of great concern to our constituents and they are vital to people in such areas who know and care about these landscapes.
Through the Localism Act 2011, the Secretary of State for Communities and Local Government made changes to give more power directly to communities and individuals so that they can challenge local authorities and take over and run the community services that are so vital. This is important to both parties in this coalition Government.
This is a timely debate, as my ministerial colleagues and I are actively considering the results of our consultations on the issue. That is why I should address the points in detail. I should say something about the importance of national parks to our country and this Government. As my hon. Friend rightly said, in 1936 the then Standing Committee on National Parks lobbied the Government for measures to protect and allow access to the countryside for the benefit of the nation. That pre-war world of 1936 might seem a long time ago, and many aspects of our world are unrecognisable from that time, but some constants remain, one of which is what the national parks can offer us. We need a sense of challenge in our lives just as much our forebears did, and we need the uplift that comes from contact with nature, as they did. The parks style themselves as Britain’s breathing spaces, which is exactly what they are for their more than 50 million visitors a year from home and abroad. That is of enormous benefit to our society. Those visitors help to support more than 22,000 businesses, the vast majority of which are small or medium-sized enterprises.
My hon. Friend the Member for Westmorland and Lonsdale is absolutely right to praise the leadership of his local national parks. Whether we are talking about a parish in our constituencies or a large area such as that covered by the national parks that he knows so well, there will be issues on which there is a divergence of opinion. What might seem good to one of us might not seem so good to another, especially when dealing with something such as planning. He was right to allude to the complexity of these issues at times and to the fact that many good things that are done are not always appreciated by everyone.
The national parks continue to deliver on their two core purposes: to conserve and enhance natural beauty, wildlife and cultural heritage; and to promote opportunities for the understanding and enjoyment of the special qualities of those national parks by the public. The means we use have, of course, changed over time, and they may change again. For the first 40 years of their lives, national parks were essentially managed by local government.
The Minister sets out the two purposes of the national parks, but the legislation also includes a duty to take into account the economic and social needs of the communities that the parks serve. Surely at the heart of this demand for democracy is a better understanding of those issues.
I will come on to talk about that, but it is important that the three legs of the stool of sustainability are considered at every stage: environmental, yes; economic, absolutely; as well, of course, as the social dimension the parks give to their inhabitants and visitors. My hon. Friend is absolutely right.
To turn to the main issue of the debate, the coalition’s programme for government said:
“We will review the governance arrangements of National Parks in order to increase local accountability.”
That commitment was honoured with a public consultation that ran from 9 November 2010 until 1 February 2011. The question of accountability and transparency was central to the consultation. The Government take seriously the improvement of the transparency of decision making and an increase in the accountability of national park authorities. We have made it clear that variety between authorities is possible, which would allow that governance to reflect better the national parks’ individual circumstances and histories as part of our commitment to decentralisation and localism.
Since the original legislation was enacted in 1995, there have been calls for some members of park authorities to be directly elected, which now already happens in the Scottish national parks authorities, as my hon. Friends suggested. I said in September 2011 that I had concluded that the time had come for us to explore that option more thoroughly in England, so I consulted on legislation that would allow for the possibility of elections to the national park authorities and the Broads Authority. Initially, we proposed to apply new legislation on a pilot basis in two parks, namely the New Forest—as my hon. Friend the Member for New Forest East (Dr Lewis) mentioned—and the Peak District. They provide different contexts in which to assess the effect of directly elected members.
First, I should be clear that although national parks cover some 9% of the country, have a population of more than 320,000 people, encompass in excess of 700 local authorities and parish councils and handle some 9,500 planning cases each year, fewer than 170 responses were received on the question of direct elections, which is a staggeringly low figure. Fewer than 40 of those responses came from individual members of the public. While a majority of responses were generally in favour, there was no clear consensus, even between parks, that direct elections were the answer to improving local accountability. As the Deputy Prime Minister recently made clear, opinion is divided.
Secondly, while much is made of the possible benefits of introducing some elected members into the national park authorities, views are divided and some practicalities need to be taken into account. The legislation required to implement direct elections would be significant, so we would need to identify a suitable opportunity in the parliamentary timetable. I must share with hon. Members the fact that such legislation would not only create a significant call on the time of the House but, as we face the reality of the financial situation, we would be bound to ask if this would really be a good use of public money. Initial estimates indicate that the costs of the proposal could run into many hundreds of thousands or even millions of pounds, although obviously there would be a full cost assessment nearer the time.
Thirdly, the consultation proposed holding pilot elections in the New Forest and Peak District national parks during May 2013. Given that we have not yet secured the required legislation, those pilots obviously will not go ahead on time. It is also clear that we cannot and should not commit to any wider programme of direct elections without piloting so that we can fully understanding what impact, if any, the changes would have on the performance of the national parks in question.
Finally, direct elections are not the only mechanism for improving accountability and openness, and some of the suggestions from the governance review are already being taken forward by individual parks. Many avenues could be explored and, in conjunction with the park authorities, we will continue to look at what can be achieved. It is also worth making the point that local authority members of a national park authority are elected members of the local authority, so they are already held accountable through the ballot box, although not to the satisfaction of some. Similarly, parish council members are sometimes elected.
I am not entirely happy with the thrust of what the Minister is saying. Are the pilot schemes therefore on hold indefinitely? With the greatest respect to the Government, the legislative pressure on the time of the House of Commons means that it should not be impossible for such relatively uncontentious legislation to be slotted into the timetable, especially if the past few weeks are anything to go by, when we have frequently finished our business earlier than scheduled.
I am happy to share with my hon. Friend the information that I have been given about the complexity involved. I can give him my absolute solemn commitment that I think that this is something that the Government should do. I do not believe, unlike some colleagues in both our parties, that everyone down to the dog warden should be elected, but I believe in localism and local accountability, so I have been progressing things in a meaningful way.
I was surprised by the complexity of something that initially, I agree, sounds like it should be simple. However, I have been concerned about conversations that we have had with the Boundary Commission about matching boundaries, which sometimes follow more ecologically-based routes than politically-based ones, as well as about the many measures that would need to be included in a Bill. I am happy to go into more detail, but I can absolutely give my hon. Friend my commitment that if the resources were there and if we could find the parliamentary means, we would take this forward, as it is something that the coalition is firmly united in wishing to achieve. I will give him more detail at a later date.
I am a little concerned about the direction in which the Minister is going, but I am pleased that he thinks the Government should make progress. However, we already effectively have pilots in Scotland, so we have learned what to do constitutionally and about how the impact is felt in the national parks.
There is time to act in this Parliament. When I challenged one of the Minister’s predecessors in the previous Government about this, their view was that as the national park authorities had been asked whether they wanted to be elected, and they said no, they would not be elected. Turkeys do not vote for Christmas, even though I greatly respect the high quality turkeys in the New Forest.
I appreciate my hon. Friend’s point, and I can only give my commitment that although we remain in favour of direct elections, we must ensure that we achieve that in the necessary time scale and with the resources we have.
It is interesting that Scottish national parks have all-postal ballot elections. When I raise potential complications, it sounds as though I am being negative, but I assure my hon. Friends that I am not. However, we need to mention the fact that there is concern about such elections.
My hon. Friend may like to share his thoughts with colleagues in the Cabinet Office, who are looking at greater participation in elections. After what happened two weeks ago, I want more participation in local elections, and if we could get more people voting by post, that would be good.
I was delighted to hear that the Peak District magazine Park Life recently published the names, photographs and telephone numbers of all members of that authority. That is the start of real transparency. It does not happen in every national park authority, so we must press them to look at such innovations.
In an ideal world, I would like to devolve decisions to national parks if they can prove that there is local demand, and we can introduce enabling legislation that allows them to take that forward and let a thousand flowers bloom. I assure my hon. Friend the Member for Westmorland and Lonsdale that I will keep him in touch with any progress and ensure that what we are doing is affordable for the resources in my Department, feasible in terms of the primary legislation that I am convinced that we will have to introduce, and workable locally. I assure him that the Government remain in favour—
Sitting adjourned without Question put (Standing Order No. 10(13)).