House of Commons
Friday 6 September 2013
The House met at half-past Nine o’clock
[Mr Speaker in the Chair]
Deep Sea Mining Bill
I beg to move, That the Bill be now read a Second time.
Mining is not a new industry, certainly not for us in Cornwall. There is a saying, “Wherever there is a hole in the ground, there will be a Cornish miner at the bottom of it.” With over 4,000 years of history, the Cornwall and West Devon mining landscape became a world heritage site in 2006, and I was very proud to be a councillor on Caradon district council when that was decided.
The Cornish have emigrated all over the world to give their expertise in mining, and today have vibrant communities as far afield as Australia and New Zealand. They still celebrate their fantastic Cornish pride and heritage in those communities.
I cannot remember whether I picked this up in 1981 when the Deep Sea Mining (Temporary Provisions) Act 1981 was passed by this House, but I think I am right in saying that most of the exploration that has been going on under the international authority is in the central Indian basin of the Indian ocean, and in the northern part of the Pacific ocean, in the Clarion Clipperton zone. If there are Cornish miners there, I send them my best wishes; I hope they are swimming well.
My hon. Friend is absolutely correct. I am sure that they still pride themselves in taking their lunch in the form of a Cornish pasty: the pastry protects what is inside from dirty hands. Pasties are something else that we Cornish people are extremely proud of.
I hope they withstand high pressure.
It gives me great pride as a Cornishwoman to take this Bill forward in Parliament today. The concept of deep-sea mining is not new, but as we make technological advances, this new industry is fast becoming a reality, and I am keen that Britain should be at the forefront. Everyone will know of my interest in the sea and the marine environment, and no one is more aware than me of the deep sea’s potential in contributing to the great expertise for which we are world-renowned. The United Kingdom is well placed to benefit strategically, economically and in employment terms, and to influence how deep-sea mining is taken forward.
I congratulate my hon. Friend on bringing the Bill to the House. Is the Bill necessary because technology and particularly robotics miniaturisation mean that deep-sea mining can be done remotely so it can be done by an individual or an enterprise rather than its requiring governmental assistance?
My hon. Friend is partially correct. The Bill is all about exploitation. We have the potential in about five years’ time to start looking at exploitation. It is much better that the United Kingdom should control the licence applications because we must be able to control the environmental situation in which exploitation and exploration are carried out.
My hon. Friend probably already appreciates that we must change our provisions because the 1981 Act was passed before the establishment of the authority in Kingston, Jamaica, and we must meet our international obligations. It may also be worth observing briefly that economics matter. When some years ago the price of metal commodities was going up, everyone thought that digging down into the oceans would be a good idea. Now that the commodity prices are not quite so high that may not happen, but at some stage the cycle may turn again and we may find some commercial exploitation.
We are seeing a shortage of some metals, and the deep sea provides the opportunity to gather metals that are needed, particularly rare earths.
The UK is well placed to influence how deep-sea mining is taken forward, what standards should apply and how to minimise the impact on the environment. In 2012, the UK sponsored its first application to the International Seabed Authority for a UK company to explore for polymetallic nodules in the deep sea in the Pacific ocean, as my hon. Friend mentioned. The application was agreed and a contract was signed between the ISA and the UK company. In 2013, the UK sponsored another application from the same company. That still has to be considered by the ISA council, but the UK Government was able to sponsor and issue a licence to that company under the 1981Act.
This is complicated stuff, most of which is way over my head, but it seems rather bureaucratic. Why do people have to get a licence from the ISA and the UK Government? Why do people have to undergo that double whammy? Why is one not sufficient?
Under the United Nations convention on the law of the sea, any resources beyond the 200-mile limit median line were declared the common heritage of mankind. One must be a signatory to the UN convention to be able to apply to the ISA for a licence. We, as a signatory to UNCLOS, are in the best position to apply for the contract with the ISA on behalf of one of our companies because we can then apply the most stringent and best environmental conditions.
In time, my hon. Friend will get to paragraph 9 of the schedule, which states:
“Omit section 9 (the deep sea mining levy) and section 10 (the Deep Sea Mining Fund).”
I think that answers the issue raised by my hon. Friend the Member for Shipley (Philip Davies). Instead of money being paid to us for us to pay to the authority, it will go straight to the authority. The licence has to be obtained from the national Government under legislation, but if payments become due, they will go straight to the authority, which cuts out some of the bureaucracy.
Speaking as an historian, I point out that in 1994 the United States got a modification to the convention. Since 1997, even under George W. Bush, the recommendation has been that the United States should sign it. It has not got around to it yet, but I understand that that is its intention. My hon. Friend the Minister will probably cover the issue of whether a US company could apply to another Government for a licence and therefore get the authority indirectly.
I am grateful to my hon. Friend for his expertise and for updating us.
As I have said, the 1981 Act predates the signing of the 1972 UN convention on the law of the sea and, subsequently, the implementing agreement to part 11 of the convention, which relates to deep-sea mining. In some small, niche areas the Act is not entirely consistent with the convention, including with regard to providing for the enforcement of decisions of the sea bed disputes chamber of the international tribunal for the law of the sea. The tribunal was established under the convention, and I am sure that right hon. and hon. Members will agree that it is totally necessary.
Putting our legislation in good order is important for the UK, not least because we are strong proponents of the convention, which defines the rights and obligations of coastal states, including the entitlement to various maritime zones over which different levels of sovereignty may be exercised.
I hope my hon. Friend will be patient, because I will come on to that later.
UNCLOS defines the rights and obligations of users of the seas, such as flag states and fishing states. I think all hon. Members will understand how passionately I care about the fishing states. A few years ago Canada used UNCLOS to arrest the Spanish fishing vessel the Estai which was illegally fishing outside Canadian territorial waters. It brought her into Canada to measure her nets and confiscated them. Perhaps hon. and right hon. Members will remember that the Canadian flag was flown in many fishing ports at the time in support of their counterparts, the Canadian fishermen. UNCLOS also relates to states that want to lay submarine telecommunication cables across the ocean floor and those that want to undertake marine scientific research.
A convention that is accepted by most states, that addresses those issues and that provides various dispute resolution mechanisms helps maintain international peace and stability in the maritime space.
A mining process could lead to contamination of the sea, which might either contaminate the fish or, indeed, polish them off. Does my hon. Friend agree that it is important that we ensure that any mining operations that are given licences do not cause environmental difficulties?
Deep-sea mining takes place at great depth in specific areas of the ocean. I do not think that the warps, bridles and trawl doors on my late husband’s boat were long enough to trawl the sea bed. We should not excavate in a non-environmentally friendly way, and I will come on to discuss that. This is one of the reasons why the UK needs to amend the 1981 Act, so that we can impose stringent and clear environmental conditions. The UK takes part in the council meetings, which are considering—this was started at the last meeting in July—what conditions should be applied to the exploitation. These are very early days—we are talking about exploration at the moment and not exploitation, which is still some way off—but the UK should be a leader in that sphere.
I am most heartened by the hon. Lady’s response to the hon. Member for Dover (Charlie Elphicke) that one of the reasons why it is important to legislate and ensure that licences come through the UK state system is that we would then be able to apply improved environmental measures. However, I do not see any mention in the Bill of a requirement on the Secretary of State to do that. I would be grateful if the hon. Lady could point out to me any such requirement.
I welcome the hon. Gentleman’s intervention. I think the whole House will know how interested he is in the global maritime environment. However, he may be unaware—I am sure my hon. Friend the Minister will expand on this—that a lot of the environmental requirements will be covered in the wording of the contract with the International Seabed Authority, so we do not to include that in legislation.
If I may assist my hon. Friend, I think that section 5 of the 1981 Act is pertinent to the point the hon. Member for Brent North (Barry Gardiner) raised. It says:
“In determining whether to grant an exploration or exploitation licence the Secretary of State shall have regard to the need to protect…marine creatures, plants and other organisms…from any harmful effects which might result from any activities to be authorised by the licence”.
That is very helpful. I am sure my hon. Friend can reassure the hon. Member for Brent North (Barry Gardiner) when he speaks.
Another important provision in the Bill widens the scope of minerals for which licences can be granted. The 1981 Act is limited to one type—polymetallic nodules—and the Bill widens the definition to all mineral resources. In recent years, there has been a growing interest in polymetallic sulphides and cobalt-rich crusts. There are now agreed international regulations for the exploration of such minerals. In future, other mineral types could be discovered or become commercially viable for deep-sea mining. UK-registered firms should be able to take part in exploration and possible exploitation of such resources, as much as companies from any other state.
Sea-bed mining has enormous potential. Scientists know that lying on the surface of the sea bed at great depths are valuable new sources of nickel, copper, cobalt, manganese, which was mentioned by my hon. Friend the Member for Worthing West (Sir Peter Bottomley), who is not in his place, and rare earth elements in the form of polymetallic nodules. Such metals are vital to new materials technology. Nickel is used in superalloys; cobalt and manganese are used in energy storage technology; and rare earth elements, which are strategically important, are used in low-carbon technology, lasers, superconductors and many telecoms applications.
I must confess that, not for the first time this morning, I am slightly confused by what my hon. Friend says; that has nothing to do with her delivery, but with my lack of understanding. She said that it is important for the Bill to include other minerals because we want British companies to be able to explore and exploit them in the same way that other countries can. Am I right in thinking that if such minerals are not covered by international agreement, British companies are already free to do so without a licence, and that including such minerals in legislation will add bureaucracy and cost to UK companies rather than assist them?
Rare earth metals are used in mobile telephones. I believe that there may be some such metals in the granite rock under the mountains of Cornwall. The Chinese seem to have a lock on that market. Is it not important that rare earth metals are more widely available, particularly for use in our mobile telephones?
Following up on the intervention by my hon. Friend the Member for Shipley (Philip Davies), is a company in a country that is not a signatory, such as the United States, prohibited from undertaking any deep-sea mining, or is it able to go ahead without applying for a licence because it is allowed to do so under its own domestic law? Might we therefore be disadvantaging British companies against American companies?
Companies in countries that are not signatories to UNCLOS would have to find a host that was a signatory to make an application for them.
There are large quantities of these metals. Whether it is because of increased demand, shrinking supply or both, metal prices have increased notably in recent years. As was mentioned by my hon. Friend the Member for Dover (Charlie Elphicke), rare earth elements, which have a particularly limited number of land-based sources, are attracting great interest. Those factors led to the emergence of the first serious commercial interest in deep-sea mining only a couple of years ago. A UK-registered company is now following up that interest.
An event to celebrate the granting of an exploration contract by the ISA to the UK was held at the Excel centre on 11 March this year. I was very pleased that my right hon. Friend the Prime Minister was able to attend. At that event, he spoke of the potential benefits to the UK and of the supply chain jobs that would probably be created in areas such as Portsmouth, Southampton, Plymouth, Bristol, Liverpool, Newcastle, Aberdeen and—I hope this is the case—Cornwall. Jobs are likely to be created in areas such as engineering, high-tech remote underwater vehicles and ship stabilisation. He said that that activity was estimated to be worth up to £40 billion to our economy over the next 30 years.
Many people from my constituency work in Plymouth. I want to ensure that we have the necessary legislation in place to make the most of these new opportunities. I am grateful to my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile), who cannot be here today, for sponsoring the Bill.
I have received one e-mail requesting a meeting from WWF, which is very friendly towards the Bill and is working to progress it. I have also written to my local press and contacted the local media explaining the Bill and its economic benefits, and they have all seen it as a move towards the future by the United Kingdom.
The Prime Minister has welcomed the fact that more than 80 UK companies have been identified as having the relative expertise for the UK contractor to work with them. He also welcomed the industry workshop event that was arranged to follow the ceremony celebrating the granting of the contract.
One immediate example of the benefits to the United Kingdom was the announcement at that event of environmental work planned by the UK contractor. It has assembled a team of six world-class scientists, including one from the National Oceanography Centre in Southampton, which I am sure will please the hon. Member for Brent North, and one from the Natural History museum. They will work alongside the company in an environmental survey expedition to study the taxonomy of deep-sea organisms, of which little is currently known. That is a good reflection of the expertise we have in this country, and it is important for UK scientists to work at the cutting edge of science.
The importance of the new industry is clear, but what exactly is deep-sea mining and what does it involve? By deep-sea mining we mean the deep sea, not anywhere near any coastal settlements. In fact, we mean at least 200 nautical miles out to sea. Of course, the UK does not have a complete 200-mile limit. I cannot really envisage any deep-sea mining taking place in the channel, but we have a median line there because the channel is fewer than 200 nautical miles wide.
The contract held by the UK company for the exploration of polymetallic nodules is for an area in the mid-Pacific, in the Clarion-Clipperton zone. It is important to emphasise that deep-sea mining is not fracking, nor does it involve many of the techniques associated with land-based mining. Specifically, deep-sea mining for polymetallic nodules does not involve the excavation of any rubble or the use of explosives.
I will come on to that, but I can inform my hon. Friend that I was referring specifically to polymetallic nodules, the harvesting of which does not involve the use of explosives. The nodules lie on the sea bed, or are partially embedded in sediment on the sea bed. Techniques to mine them are likely to involve scooping or vacuuming them up from the sea bed.
We are talking about sourcing hydrocarbons, which I will move on to a little later in my speech. If I miss anything out, I am sure my hon. Friend the Minister will pick up on it.
Mining for polymetallic nodules could be a lot less environmentally damaging than land-based mining for the same minerals. To assist my hon. Friend the Member for Bury North (Mr Nuttall), mining for polymetallic sulphides and cobalt-rich crusts is a different matter. It would involve the excavation of rock. Mining for those materials is even further off than mining for polymetallic nodules, and the principles that might apply to nodules would have to be reconsidered for sulphides and crusts. We are determined to ensure that the highest environmental standards are applied to any use of those minerals. The point is that international regulations have been agreed for the exploration of different types of minerals, and they were in place in advance of exploration contracts being issued. The various regulations have been continually reviewed and updated in the light of developments and new considerations.
There are no regulations yet on the exploration of any of the minerals in question—they are probably at least five years off. As I mentioned earlier, it was only this year at the ISA’s annual meeting that the council had a preliminary discussion on the process for the development of a regulatory framework for the exploitation of polymetallic nodules.
My hon. Friend suggests that the industry is still in its infancy, and I appreciate that, but the Act that the Bill would amend was passed in 1981. The matter was regarded then as so urgent that the Act had to be passed without even waiting for the international convention to come into force. Something must have led to that feeling of urgency back in 1981. Can my hon. Friend explain why nothing really happened after the Act was passed?
I have to confess that I was—a long time before, in fact.
All I can say to my hon. Friend the Member for Shipley (Philip Davies) is that we are always unsure how quickly we will see technological advancement. I really hope that Members will support the Bill today, because the UK should be a world leader in the field.
The UK prides itself on taking a close interest in environmental matters and having a good reputation on them—that may have been why the 1981 Act was passed. It follows that, being one of the first states to sponsor a commercial company to undertake exploration—and, I trust, being able to demonstrate the highest regard for international law by passing the Bill—the UK is well placed to ensure that discussions leading towards a regulatory framework for exploitation reflect both the desire for the highest environmental standards and what is practically possible from an industry and technological perspective. I am assured that during the preliminary discussions on a regulatory framework at the ISA this year, the UK delegation emphasised just that.
Now that commercial companies have become involved, deep-sea mining looks inevitable. As much as for the benefits, the UK needs to be involved so that it can shape regulations and standards. I hope that hon. Members show support for the scientists, the commercial companies with the expertise and the people who work in the associated companies, and that we can achieve and secure protection for the marine environment as the technology progresses. By passing the Bill, we can also make a big contribution to the UK economy over the next 30 years. I hope the House supports it.
I am delighted to speak in this debate, which is important not simply because of the economic interests that the hon. Member for South East Cornwall (Sheryll Murray) has outlined; she spoke of a potentially accessible resource that could be worth something to the tune of £40 billion. As she appreciates, it is also important because of the natural environmental resource that could be at risk from both the exploration, and ultimately the exploitation, of those resources.
I was grateful for the clarification made by the hon. Member for Bury North (Mr Nuttall) on clause 5 of the 1981 Act, which I have highlighted in my copy. When he quoted the clause, however, he left out one salient phrase:
“so far as reasonably practicable”.
Let me quote the clause in full:
“In determining whether to grant an exploration or exploitation licence the Secretary of State shall have regard to the need to protect (so far as reasonably practicable) marine creatures, plants and other organisms and their habitat from any harmful effects which might result from any activities to be authorised by the licence; and the Secretary of State shall consider any representations made to him concerning such effects.”
In its time, that was an eminently good and sensible environmental protection to introduce, but 32 years later, environmental law has superseded it. It is no longer the significant protection that it may have been regarded as when it was introduced in 1981.
In particular, we need to pay attention to principle 15 of the Rio declaration—the precautionary approach—in all such environmental matters. Principle 15 states simply that, if there are indications of likely but uncertain significant adverse environmental impacts, an activity should not be authorised to proceed. The principle switches the burden of proof. Of course, in overall terms, deep-sea ecosystem processes, connectivity and the importance of deep-sea ecosystem services are poorly understood by contemporary science.
The hon. Member for South East Cornwall described some processes, and mentioned scooping and vacuuming, but she will also know of the process of crushing when mining for these nodules. More than most hon. Members, she will be aware of the deep-sea ocean currents that can take sediment produced from such operations and disperse it over wide areas. As some of the minerals being explored are so toxic, it is difficult to understand with modern science just what the effect of their dispersal by those deep-sea ocean currents could be.
Is the hon. Gentleman aware that the polymetallic nodules are golf ball-size spheres that occur in ocean bed sediments? I bow to his expertise, but my knowledge of the sea bed suggests that trying to crush a polymetallic would simply bury it further into the sediment. We need the Bill so that the UK can ensure that the environment is cared for and so that the activities are undertaken in the most environmentally friendly way. If he is concerned about the hoovering and harvesting of the nodules, he should support my Bill.
Let me give the hon. Lady the assurance that I am sure the Bill will pass on Second Reading. I have no desire to stuff it and am not foolish enough to attempt to do so. However, I would like to obtain from her and the Minister another assurance: that the environmental protection, which is currently only in the 1981 Act, will be strengthened when the Bill goes into Committee. The burden of proof in the precautionary principle is reversed in the Act, which states:
“In determining whether to grant an exploration or exploitation licence the Secretary of State shall have regard to the need to protect”.
I want to change the focus, so that instead of the Secretary of State having regard to the need to protect, no licence is granted unless full environmental impact assessments have been undertaken.
Does the hon. Gentleman intend to present evidence on any matters that would affect the issue of licences by the UK under the 1981 Act? Has any such evidence given him cause for concern that environmental protection measures are insufficient? I understand where he is going, but does he have, or is he aware of, any concerns about how successive Governments have applied the condition? I take his point and understand where he is coming from, but he can also present these concerns in Committee.
As the Minister knows, few licences have been granted since the 1981 Act took effect, so I would not at this stage seek to adumbrate examples. However, I am aware of many concerns from the environmental community about deep-sea mining and about how the Bill does not reinforce the protections that I believe hon. Members on both sides of the House would want us to have.
The World Wide Fund for Nature position paper on deep-sea mining states:
“Distinct ecosystems are or can be associated with these minerals and will be affected in different ways by different types of mining. Dredging for nodules is likely to damage large areas of the seabed and disperse large clouds of sediment. Polymetallic sulphide mining may destroy active and inactive hydrothermal vents (black smokers) and their associated communities and disperse toxic materials. The extraction of cobalt rich crusts may destroy the benthic seamount communities and dependent fauna.”
I will not quote the paper at length—it is available online for hon. Members to read for themselves—but we need to take those concerns seriously. The global community has a principle on environmental legislation. It is the precautionary principle, which is that when we do not know, we do not do something that we have good reason to believe will cause damage.
There are always uncertainties, so the precautionary principle would mean that we never did anything. Many of these environmental concerns were raised in the debate back in 1981, and according to Hansard the Labour party opposed that Bill. Does the hon. Gentleman accept that the misgivings expressed back then were unfounded, and therefore the misgivings that he is expressing are also likely to be unfounded?
That is a very interesting interpretation of the precautionary principle—that because misgivings were unfounded in the past, they are likely to be unfounded in the future.
I do not speak from the Front Bench, but I understand from my hon. Friend the Member for Dumfries and Galloway (Mr Brown), who will do so today, that we will not oppose the Bill. I certainly seek not to oppose the Bill, but to improve it. Indeed, the hon. Member for Worthing West (Sir Peter Bottomley) said that it was a good Conservative principle to conserve what we have and to improve it. On the sea bed we have immeasurable riches, and the international community has stated clearly that they are part of the common heritage of humanity. That is what the international community has agreed and that is what the Government have signed up to. That common heritage should be preserved, protected and improved. If the hon. Member for South East Cornwall will give the assurance that in Committee we can ensure that protection through this legislation, I for one will be very happy to see the Bill make progress.
It is a great pleasure, as always, to follow the hon. Member for Brent North (Barry Gardiner), who has raised the issue of environmental protection, which goes to the very heart of the Bill. I happen to take the view that resources were placed on this world for the exploitation of man, but we must ensure that they are exploited with great care and caution, whether they are on land, in the sea or on the sea bed.
Has my hon. Friend identified the contradiction in what the hon. Member for Brent North (Barry Gardiner) said? He said that he supports the Bill, but believes in the precautionary principle. Of course if the precautionary principle had applied back in 1981, the 1981 Act would not have become law in the first place.
My hon. Friend is right. There is a contradiction in that position. It is interesting to ask at what point in the last 32 years the Labour party changed its position on this legislation. Did the conversion happen this morning, at the last general election or at some other point? I look forward to hearing from the shadow Minister on Labour’s conversion, because it voted against the Bill that became the 1981 Act on its Second and Third Readings.
I congratulate my hon. Friend the Member for South East Cornwall (Sheryll Murray) on retrieving this legislation from the dusty Foreign Office shelf where it had been languishing, perhaps for several years—although it may have been drafted this year. It was an orphan waiting to be adopted and I am grateful that she has adopted it and brought it before the House this morning.
Does my hon. Friend endorse the words of our former colleague, Teddy Taylor, who said in the debate in 1981:
“The Bill appears to be a small and sensible measure, but anyone who has Britain’s interests at heart must view with suspicion any measure which has anything to do with our Foreign Office.”——[Official Report, 29 April 1981; Vol. 3, c. 867.]?
I read those comments, although I am sure that with the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt)—a predecessor of mine in Bury North—at the Dispatch Box this morning we have no need to fear, as the Bill will be handled with the utmost care.
Some important economic issues are at stake. It would be easy for an individual or company wanting to exploit the resources of the seabed to relocate to the jurisdiction they thought most favourable to them. Like my hon. Friend the Member for South East Cornwall, who so ably proposed the Bill this morning, I want our country to be the world leader in this industry. Despite the fact that it has been 32 years since the original Act was passed, we can still describe it as being in its infancy, and this nascent industry has great potential for the future.
It is true that this nation has been a world leader in exploring the world. As an island nation we have an affinity with the sea and a natural interest in deep-sea matters, exploring the seas and fishing—as my hon. Friend knows only too well. It is important that we continue that tradition, and I see the Bill as an opportunity to do just that. But there are risks, as my hon. Friend the Member for Shipley (Philip Davies) suggests, in that it would be all too easy for us to try to cover every environmental risk and make the terms of the licences so onerous that we would not only fail to attract companies from overseas to our jurisdiction, and thereby benefit economically from their success, but drive away British companies from our jurisdiction. They would look at our legislation and think, “We might as well relocate our company to some other jurisdiction.”
More than 160 other countries have signed up to the UN convention, so companies would have plenty of choice. It would be easy to shop around the world for a legislative environment that was more economically advantageous than ours. We must therefore exercise great care when examining this legislation.
On the face of it, this Bill is rather dull, and to a casual observer it could appear uninteresting. However, it is one that could open up the high seas—or, more accurately, our deepest oceans—to what could turn out to be the 21st century equivalent of the 19th-century gold rush. It is like the Klondike. The ocean depths contain some of the last unexplored areas on our planet. The Bill seeks to update the existing statute, which, as we have heard, dates back to 1981. It perhaps needs to be explained why an Act passed 32 years ago as a temporary measure is now not only being amended, but turned into a permanent fixture. Indeed, the original Act was so clearly intended to be a temporary measure that its official title included the words “Temporary Provisions”, while section 18(3) made provision for the Secretary of State to repeal it.
My hon. Friend is absolutely right. Indeed, I was coming on to say that my understanding was precisely the same. The 1981 Act set out to regulate mining on the sea bed in the farthest and deepest oceans of the world. The reason it was required was that it had been discovered that valuable hard mineral resources, known as manganese or polymetallic nodules, existed on the seabed, as we have heard, and United Kingdom companies, among others, were interested in mining them.
The hon. Gentleman just used the important word: “hard” mineral resources. The Bill would excise that word to allow for the exploitation of oil and gas as well. Would he care to reflect on the assurance given by the hon. Member for South East Cornwall (Sheryll Murray) in introducing the Bill that operations at a deep-sea level such as fracking would not be used?
I cannot give any assurances about that; it is not for me to do that. I know that the hon. Gentleman is concerned about environmental protection, and quite rightly too, but I venture to submit that if the Bill is not made friendly towards companies, there is a danger that they will go and seek some other jurisdiction with a lot fewer environmental protections than in this country. There is a danger in going too far the other way. We have to strike the right balance on these matters, and I believe the Bill attempts to do that.
United Kingdom companies at that time were among those interested in mining polymetallic nodules. The idea behind the 1981 Act was to provide a statutory framework for the development of a nascent industry. As my hon. Friend the Member for South East Cornwall said, it was passed in the full knowledge that negotiations were taking place at the United Nations. As we have heard, unfortunately, things did not proceed quite as fast as parliamentarians at the time thought they might. That might be due to a difficulty with the technology. Indeed, it is interesting to consider that man was able to send rockets and put men on the moon, the satellite of our planet, back in the 1960s, yet it has proved to be technologically much more difficult to travel to the depths of our planet.
A United Nations conference on the law of the sea had for several years been working towards an agreement on establishing an international system for regulating the exploitation of the mineral resources of our oceans. It was hoped that when a satisfactory agreement had been reached and had entered into force, the international arrangements would supersede the national provisions contained in the 1981 Act. It was for that reason that the legislation was sold to the House as a temporary measure. The Government of the day anticipated that there would be no need for any national legislation once the United Nations convention came into force.
The Government of the day were understandably keen to improve the security and availability of future supplies of vital raw materials for our UK industries. The UK was, and still is, heavily dependent on a small number of countries for supplies of minerals that are critical raw materials for our manufacturing industries. The possibility of securing our own supplies of minerals such as nickel, cobalt, copper or manganese from the sea bed was understandably regarded as a very welcome prospect indeed. Furthermore, the prospect of UK companies participating in the new industrial activity of sea-bed mining promised an economic opportunity for the benefit of the companies involved and the wider British economy.
The nodules that gave rise to that flurry of interest and activity were described at the time not as being like golf balls, as my hon. Friend the Member for South East Cornwall described them, but as like charred potatoes that varied in size and, where they occurred, were like a carpet on the sea bed in a single layer. We do not yet fully understand how and why the nodules form, but it is clear that they apparently require the undisturbed conditions that are found only in the deepest areas of the ocean. Although the nodules were found in various parts of the ocean, only very few areas contained sufficiently rich deposits to justify the enormous costs of establishing commercial mining operations. The deposits of nodules are beyond the limits of national jurisdictions and were consequently treated as resources of the high seas, which any nation could attempt to recover.
It is perhaps worth considering what exactly it is envisaged will be mined as a result of the Bill. There are essentially three types of minerals involved. First are the polymetallic nodules, which contain manganese, copper, cobalt and nickel. As my hon. Friend mentioned, they either occur on the surface or are partially buried, and are discovered at depths of 3,000 to 6,000 metres—in other words, some 4 miles deep, so we are not talking about something that one can undertake lightly. It is estimated that the global reserves of deep-sea manganese nodules are in the order of 10 billion tonnes. Those of greatest economic interest are made up, on average, of about 30% manganese, 1.5% nickel, 1.5% copper and 0.3% cobalt. However, I understand that the presence of traces of other, rare earth elements might also attract interest in these resources, particularly as the supply of such metals from land-based resources is reducing.
Secondly, there are polymetallic sulphides, which are sulphide deposits found at water depths of up to 3,700 metres in mid-ocean ridges, back-arc rifts and sea-mounts. They often carry high concentrations of copper, zinc and lead, in addition to gold and silver. That is what gave me the idea that there could be a 21st century Klondike in the deep sea. Thirdly, there are ferromanganese crusts, in which cobalt-rich iron-manganese forms on the sea floor. These, too, could lead to mining activity.
Before I began to research the Bill, the letters “ISA” had always stood for “individual savings account”. Now, when I see them, I think of the International Seabed Authority. That new body was established under the United Nations convention on the law of the sea, and it plays a pivotal role in deep-sea mining. The authority has stated that the areas of exploration have not advanced much since 1981. They still mainly comprise the Clarion-Clipperton fracture zone in the equatorial north Pacific ocean, south and south-east of Hawaii, and the central Indian basin in the Indian ocean. Exploration for polymetallic sulphides is also taking place in the south-west Indian ridge and in the mid-Atlantic ridge.
Unsurprisingly, in view of the potential economic importance of those resources, there has been considerable international interest in, and concern about, the nature of their exploitation. In 1967 and 1970, that concern was formalised in two resolutions of the United Nations. The first sought to impose a complete moratorium on deep-sea mining until international arrangements had come into force. The second was a declaration of principle stating that the sea bed beyond the limits of national jurisdiction, and its resources, were the common heritage of mankind.
A United Nations conference on the law of the sea was convened in 1973 to negotiate an international system of regulation for sea-bed mining. No agreement was reached by the time of the passage of the 1981 Act, even though the conference had met regularly since 1973 and made some progress on developing an international regime. The negotiations were sufficiently advanced, however, for it to be fairly clear that any convention emanating from the talks would contain complex provisions for operations by private companies and by an international sea-bed authority. Incidentally, the negotiations apparently stalled because the United States decided to carry out a full review of its policy on the law of the sea, and therefore decided not to play an active role in those negotiations.
Those uncertainties demonstrated the problems that would face Governments and mining companies until an international convention could be agreed and ratified. Because of those uncertainties, the United Kingdom Government of the day considered it necessary to pass the 1981 Act as an interim measure to give the UK mining industry a firm basis for proceeding, pending an international agreement being reached.
Does my hon. Friend agree that we had to pass an Act of Parliament even though we were a member of the European economic area because the competency lay with the member state? Because the European Economic Community was not a nation, it could not have that same recognition.
I am extremely grateful to my hon. Friend for bringing up the matter of the European Union. I was wondering whether we might be able to touch on that. She is absolutely right to suggest that the EU plays an important role in this matter. I understand that it has taken it upon itself to become a signatory to the convention, which demonstrates just how it can behave as though it were a single European state. It is clearly positioning itself so that, one day, it will be able to take over the organisation of and responsibility for passing legislation such as this. She might think that that is of little consequence, but she has highlighted a real fear. There is a danger that, if the European Union continues on the path that it appears to be taking, this will be yet another area over which this House will have no competence whatever.
As I was saying, the Government of the day considered the 1981 Bill necessary, because of all the uncertainty, in order to allow British companies to proceed with some certainty, notwithstanding the involvement of the European Community at that time.
I should point out that the 1981 Bill was by no means uncontroversial. Indeed, it divided the House on Second Reading and Third Reading. One concern that was raised at the time was that people wondered why it was necessary to introduce legislation at all, given the progress that was being made on securing an international agreement. Concern was expressed that, if the United Kingdom passed unilateral legislation, it could jeopardise the wider international treaty negotiations.
The answer was that that Government were keen to pass an interim measure because the text of the draft convention available at the time contained a provision for the convention not to become effective until 60 states had ratified it. That was the threshold set in the draft agreement. It was therefore clear that, even if agreement were reached fairly soon after the Bill had reached the statute book, it was likely that several years would pass before 60 states had ratified the treaty.
The Government of the day were absolutely right to predict that it would take several years to bring together that number of signatories. Indeed, although international agreement was reached the year after the Bill became law and the convention was signed on 10 December 1982 at Montego Bay in Jamaica, it was not until some 12 years later on 16 November 1994—one year after Guyana had become the 60th nation to ratify the convention—that it actually came into force. Members might wonder why it was signed at Montego Bay. The answer is that that is where the headquarters of what is now the International Seabed Authority are situated.
Another concern expressed at the time was that the delays and uncertainties in the international arrangements left the developing deep-sea mining industry in a difficult and uncertain position. The industry was in its infancy and had to carry out costly development work before being ready to embark on commercial operations. Understandably, mining companies were not prepared to invest the huge sums required to undertake this development work without a reasonably stable legal framework in which to operate. If the 1981 Act had never been passed, the Government feared that mining companies would allow their development programmes to run down, and if they did run down, there was no guarantee that they would ever be built up again.
A further reason why legislation was required was that the companies that had pioneered the development of sea-bed mining had already expended considerable efforts on prospecting large areas of the ocean floor. They wanted to secure their claims to potential areas of exploration and exploitation—the areas that they had identified as worthy of further investigation, particularly when other countries were already pressing ahead with their own national legislation.
The key concern was, of course, ensuring that the exploitation of the valuable mineral resources did not result in damage being caused to the marine environment. As already mentioned this morning, section 5 of the 1981 Act provided for protection of the marine environment, which was a central part of the legislation at that time, and it is the one section, incidentally, of the Act that is hardly altered at all by my hon. Friend’s Bill.
Of course, the whole purpose of the present Bill is to amend the 1981 Act. Although on the face of it, this Bill is very short, I venture to suggest that it is deceptively short. There are only two clauses, but the real meat lies in the schedule, which extends to no fewer than 12 paragraphs containing 11 separate sets of amendments over six pages.
The first of the amendments to the 1981 Act is designed to substitute proposed new subsections (1) and (2) in section 1 of the 1981 Act. That Act presently prohibits anyone covered by the section from undertaking mining activities in the deep sea without a licence. There are essentially two types of licence: exploration licences and exploitation licences. The provisions apply to UK nationals, Scottish firms or anybody incorporated under UK law and resident in any part of the UK. That is the 1981 definition, and I shall deal later with how the Bill proposes to extend it.
The crucial change is made to the description of what might be mined. The 1981 Act referred to “hard mineral resources”, but it is now proposed to change that to “mineral resource”, which is defined in amended subsection (6) as
“a solid, liquid or gaseous…resource”.
That definition is obviously much wider than the previous one, which was very specifically defined as meaning
“deposits of nodules containing…quantities”
“at least one of the following elements…manganese, nickel, cobalt, copper, phosphorous and molybdenum”
in “quantities greater than trace”. The new definition will allow several different explorers to start prospecting for different minerals at the same time in the same area.
In view of the much wider definition, I wonder what will be the likely increase in the number of explorers who will now need to seek a licence. I am sure that, when we hear from him, the Minister will want to reassure us that the Government have in place sufficient resources to enable them to deal with what I hope will be sudden rush of applicants wanting to take advantage of the opportunities provided once the Bill has passed through here and the other place.
The crucial definitions in amended section 2 introduce references to the International Seabed Authority and to what the provisions refer to as a “corresponding contract”, defined as
“a contract…granted by the Authority to the licensee”
either to explore or exploit mineral resources in a given licensed area. As has been said, this is very much a twin-track approach. It is no good a company only obtaining a licence from the UK, as it must at the same time ensure that it has a contract from the International Seabed Authority.
There is also a requirement to pay a fee to the Government, so we need not think that there will necessarily be a cost to the UK Government, although I express the hope that any fee does not put off potential applicants. As I said earlier, there is a real danger that if we do not establish a friendly regime for exploration companies, they will simply go elsewhere. Nevertheless, the requirement to pay a fee is retained. Proposed new subsection (3) of section 2 makes it clear to applicants that double authorisation is required by specifying that a licence granted by the Secretary of State under the UK legislation shall
“not come into force before the date on which a corresponding contract comes into force.”
It will thus not be sufficient for any individual or company to obtain just a licence.
Proposed new subsection (3A) sets out a minimum list of terms and conditions that a licence may include. I add, although the hon. Member for Brent North is no longer in his place, that this subsection could provide the means and the mechanism by which any further environmental protection that the Government felt necessary in any particular case could be dealt with—without any necessity to amend the Bill in Committee or on Report.
Proposed new subsection (5) provides that where a person has been
“granted an exploration licence, the Secretary of State may not grant an exploitation licence which relates to any part of the licensed area”
“any of the mineral resources to which that licence relates”
to anyone other than
“the holder of the exploration licence”
without their “written consent”.
Of course, that immediately poses the question why, when an exploitation licence can be granted only to someone who has an exploration licence, anyone would want to go prospecting on the patch of someone else. I thought that that could happen only if they had in mind a joint venture agreement with the holder of the exploration licence and cut a deal with them.
The amended section 8 adds two new subsections to reflect the fact that under the terms of the 1994 agreement, there is a requirement for judicial and arbitration decisions to be recognised. This area was not covered at all in the 1981 Act. Sections 9 and 10 of the 1981 Act are then removed. Perhaps worthy of note is just how much debate and discussion took place around the two clauses when the Bill was debated back in 1981. Hours and hours were spent considering them, and we now discover, 32 years later, that neither the deep-sea mining levy nor the deep-sea mining fund have, in fact, ever operated at all.
The schedule then makes provision for the list of definitions to be extended to take into account the new structures and terms introduced by the 1994 agreement. Finally, it removes the reference to the 1981 Act as a temporary measure and it removes the provisions that allowed the Secretary of State to repeal it. I assume that it is the intention of my hon. Friend the Member for South East Cornwall for this legislation to become permanent.
Does my hon. Friend share my view that it is a pity so to tidy up the statute book as to remove the word “temporary”, which always serves as a useful reminder? Even income tax was introduced on a temporary basis. We are very bad at ensuring that the word “temporary” means what it says.
My hon. Friend is absolutely right, and this is a case in point. The House was given all sorts of assurances in 1981, when the original Bill was debated, that it would be a temporary measure, extending even—as I said earlier—to the inclusion of the word in its title. Section 18 of the Act sets out the mechanism enabling the Secretary of State to repeal it, but of course that never came to pass, although, as we have heard this morning, the expected flurry of applications did not materialise. It was expected that once an agreement had been reached there would be no need for national legislation, but, notwithstanding that, the Act remains on the statute book to this day.
I want to make two brief points about clause 2. First, I am pleased that it retains the provision in the Act for the legislation to be extended to the British overseas territories by Order of Her Majesty in Council. Secondly, I note that, unlike the Act, the Bill does not extend to Scotland. I can only assume that deep-sea mining is a reserved matter for the Scottish Parliament, and that the House of Commons no longer has power to legislate in that area. If there is no corresponding legislation in Scotland, I wonder what would be the position of a company that chose to incorporate north of the border. Would it be able to bypass this legislation?
I believe that the Bill presents the United Kingdom with an enormous opportunity to become a world leader in this emerging industry. I believe that, if we adopt a sympathetic and light-touch approach, we shall be able to attract exploration companies from all over the world which will choose to set themselves up in the UK to take advantage of both the licensing regime established by the Bill and the fact that, thanks to the actions of the Chancellor of the Exchequer, they will benefit from one of the most competitive corporation tax regimes and lowest corporation tax rates anywhere in the G20. Conversely, I believe that, if we make our regime too onerous, it will not encourage applications, and other countries throughout the world will profit from this new area of human activity.
I do not wish to be in any way critical of the Bill, but I wonder whether it would not have been simpler to repeal the 1981 Act and introduce a new Bill, which might have made it easier for people to understand what the legislation was all about. Notwithstanding that small point, however, I wish the Bill well. I trust that it will receive an unopposed Second Reading today—time will tell—but, regardless of whether it is opposed or not, I hope that it will be given a Second Reading, that it will then enjoy a smooth and speedy passage through both Houses, and that, in the fullness of time, this country will be able to benefit from the enormous opportunities that it affords and we shall be world leaders in an emerging industrial activity.
It is a pleasure to follow my hon. Friend the Member for Bury North (Mr Nuttall), who, as usual, made many comments with which I should like to be associated. I join him in congratulating our hon. Friend the Member for South East Cornwall (Sheryll Murray) on her Bill, which she presented with her customary charm. I think that that will stand her in good stead today, and, like my hon. Friend the Member for Bury North, I hope that the Bill is passed without too much trouble.
Reading up on this subject has been a learning curve for me. I was not particularly well versed in it before, unlike the Minister, who, I know, is a long-standing expert in the field. My starting point was to establish what deep-sea mining actually was. I had not realised that it was such a controversial subject until, like my hon. Friend the Member for Bury North, I read the report of the 1981 debate. Having assumed that the debate must have been fairly consensual and that the issue had not been particularly controversial, I was astounded to discover how heated the discussion had become on some occasions. If I detected accurately what was said earlier by the hon. Member for Brent North (Barry Gardiner), the Labour party had changed its mind about the legislation, so I am delighted. However, I think that some of the reservations that have been expressed about this Bill are similar to those expressed in 1981. It is strange that people who now say that they are in favour of the 1981 Act and who seem to be in favour of the Bill should express the same reservations that they expressed in 1981.
Deep-sea mining, I learn, is the process of retrieving minerals, raw materials and precious metal from the deep-sea bed. The United Kingdom has a great tradition of oceanography and similar activities. The modern age in that respect—certainly the modern age as far as my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is concerned—began in 1872, when HMS Challenger set out on its four-year voyage to explore the oceans. The expedition was led by John Murray and Charles Thomson, who should be commended for the fact that, as my hon. Friend the Member for Bury North pointed out, much of our present exploration and exploitation activity is thanks to their discovery of what was out there. We should be incredibly grateful to them for that. Only yesterday, I believe, the Prime Minister said that pretty much everything that was worth inventing was invented by people in this country. Much of what was worth discovering was discovered by people in this country, too, and we should be immensely proud of that great tradition.
I had not previously been particularly well versed in polymetallic nodules and deep-sea hydrothermal vents—or, for that matter, manganese nodules—but they are actually more fascinating than people may think. They are very productive, and not only rich in minerals but home to unique organisms that have evolved to live in extreme conditions and are of interest to scientists for their genetic properties, which have many remedial, medical and other practical applications.
I may be doing him a disservice, but it is possible that the hon. Member for Brent North has read—as I have—the briefing on the Bill that was sent to us by Greenpeace, which I am sure was also read with great interest by my hon. Friend the Member for South East Cornwall. Greenpeace fears that if sea-bed mining is allowed to proceed in the absence of a comprehensive system of environmental protection, we may be destroying species for ever before we have fully explored what they are. That returns us to the precautionary principle mentioned by the hon. Member for Brent North.
Some of the cone-shaped polymetallic nodules are alive and smoking, and certain marine creatures live in their environment. I understand that the harvesting will be restricted to the dead ones. I think the Greenpeace paper refers to the living ones, which we see in films with smoke coming out of them, but I understand it is the dead ones that are going to be mined.
My hon. Friend has far more expertise in this field than me, and I am grateful to her for that clarification. I do not necessarily agree with the Greenpeace stance, but I think there are certain points that are worth putting on the record. The concern is that problems we are not yet aware of may arise from deep-sea mining. It is always difficult to counter such arguments: if we are not aware of the problems, how can we give reassurance on them? I suspect we cannot. Sometimes we have to take a leap of faith, however; otherwise, we would never do anything. We would never do anything in this country if we were constantly concerned about things we are not yet aware of. Such an approach would not take us very far forward.
My hon. Friend makes a good point, and I hope that such detailed questions, which go way beyond my sphere of expertise, will be covered by the Minister. He has much more expertise in these matters than me, and I have hopes that he will be able to cover much of this ground in more detail than I could.
Environmentalists are also concerned about pollution of the deep sea, which they say is likely to occur from deep-sea mining activities as the ocean currents may carry sediments and toxic pollution far from the area of mining activities to areas of fishing, which would potentially have a terrible impact on fishing levels. However, it is worth quoting from a magazine that I am sure is read by many Members called Mining Weekly—I am sure you are a regular reader of it, Mr Speaker, so you will be able to correct me if what I say is wrong. The environment principal and marine ecologist for De Beers, Dr Patti Wickens, said:
“An environmental-impact assessment was undertaken in the early 1990s to assess the impact of offshore diamond mining on the seabed in Namibia. It was found that while mining activities alter the nature of the seabed landscape or habitat, this effect is not permanent.”
We should bear that point in mind: there may be some changes, but they will not be permanent, and the habitat will return to its normal state after the mining ceases in an area. I hope that gives comfort to those with concerns.
I agree to a certain extent with what the hon. Gentleman says, but what if the damage is so significant that the environment cannot repair itself as he blandly indicates? Is there not a real risk that damage may not be reparable?
I am grateful to the hon. Gentleman for giving me more credit than I am due. I was not claiming anything; I was merely quoting what a principal marine ecologist said. I would not wish the hon. Gentleman to think that was my theory. I would not want to claim credit for what Dr Patti Wickens said in Mining Weekly. I can only refer him to her if he wants to argue the case. I suspect he will get much further if he argues the toss with her rather than me. I will leave on the record what she said, however, and people can make their own minds up as to whether the hon. Gentleman or Dr Patti Wickens knows more about this subject. That is a judgment we will all have to make at some point.
The deep-sea bed is defined in the schedule as an
“area of the sea bed situated beyond the limits of national jurisdiction of the United Kingdom or any other State”.
The main marine mineral content of interest is manganese nodules, manganese crusts and seafloor massive sulphides. Two metallic mineral resources of the deep-sea floor incorporate dissolved metals from both continental and deep ocean sources. One of these is what my hon. Friend the Member for South East Cornwall—and, I think, my hon. Friend the Member for Bury North (Mr Nuttall)—described as golf ball-sized polymetallic modules. I have heard them described as “golf-to-tennis” ball size, but I am not sure whether there is any mileage in arguing about the size, as we know what we are talking about here.
These nodules precipitate from sea water over millions of years on sediment that forms the surface of the deep ocean. It is understood that they require the undisturbed conditions which are found in areas of the deepest oceans. That serves to highlight again the environmental point that the undisturbed conditions are what is important. To clarify:
“Polymetallic massive sulphides are types of minerals discovered in the oceans in 1979 that were previously known only from deposits that have been mined on land since pre-classical times for copper, iron, zinc, silver and gold.”
Rather than get bogged down in all the science, which my hon. Friend the Member for Bury North covered in some detail, I will focus on some of the impacts of this proposed legislation and ask some questions, which I hope the Minister may be able to answer.
The history is important. The oceans had long been subject to a freedom of the seas doctrine, a principle dating back to the 17th century essentially limiting rights and jurisdiction over the oceans to a narrow belt of sea surrounding a nation’s coastline. The rest of the seas were proclaimed to be free to all. That seems to me to be a sensible doctrine. It has been challenged by some countries, however, which have tried to claim the rights to certain seas beyond what international agreement indicates.
Does my hon. Friend think there is any merit in the international community, through the auspices of the United Nations, simply stating by way of further agreement that all these international seas should be dealt with only by the International Seabed Authority, and leaving the matter of national jurisdictions out of it altogether?
I certainly agree with that. I am not sure that what my two hon. Friends are saying is necessarily incompatible, but I am sure they will be able to discuss that in the Tea Room at a later date. I am certainly one for upholding British sovereignty, however, as most people will appreciate.
Let me now deal with some of the points that I would like the Minister to cover. I am interested in the licences that the UK Government offer and give to people who apply for them. My hon. Friend the Member for Bury North referred to the resources that the Government provide to ensure that the licences are dealt with properly and in a timely manner. I am not entirely sure what the fees are for these licences and how our fees compare with those in other countries. As he said, we want the UK to be an international leader in this field. If companies can, in effect, apply to any signatory country for a licence, in order to take that to the International Seabed Authority, we want a commitment from our Government that the fees they charge for these licences will be competitive—more competitive than those charged by other countries. I would be interested to hear whether or not they are.
This is not just about the fee; it is also about the timeliness of how a licence application is determined and a licence issued. I hope that the Government also make a commitment to ensure that licences are processed more quickly here than in competitor countries, because, again, that might be a factor in which country a company chooses to go through. I would be interested to know how many licences have been applied for and how many applications have been rejected. That would allow me to see whether the process was strenuous or whether licences were just given out on the nod.
My hon. Friend makes a good point, and we certainly would not want what he describes to have been happening. As he said, we want the UK to be a world leader in this field and to be seen as such, so I hope that the Minister can give some assurances on those points.
I would also be interested to know how the licences are policed once they have been granted and who does the policing. The international authority, presumably, polices the contract that it has agreed can be carried out. However, given that the UK Government has also issued a licence, are they happy just to accept the policing carried out by the ISA? Do they have their own policing to ensure that the licence conditions they have applied are being adhered to? If that is the case, how many of the licences that have been granted have been subject to a revocation because the conditions were not being met? Alternatively, are the licences given and that is the end of the matter, everyone just cracks on with it and nobody will bother contacting the people involved again?
I would like clarification on a further point, which relates to the heart of why it is important that we have a competitive system, particularly when it comes to time scales. What happens when different companies in different countries all want to explore or exploit the same area at the same time? That must be a fairly common situation. It is a bit like supermarkets really: when one company decides it wants to open a store in a particular place and its competitors get wind of it, all of a sudden two or three applications are made for the same place, because all the companies think, “That’s a good area. We all want a slice of that action.” Presumably the same things must apply in this field, so if different companies in different countries are all looking to exploit the same area, is the company that can do so decided on a first-come, first-served basis? Is the company that gets its licence first and gets a contract agreed with the ISA the one that gets to do the exploring? Or are more rigorous criteria used? If this is done on a first-come, first-served basis, it is crucial that we process these licences as quickly as possible.
My hon. Friend the Member for South East Cornwall made a good job of dealing with my next point, but I just ask the Minister to say a little about whether we are unnecessarily introducing or increasing bureaucracy at the expense of UK companies. That point was also made by my hon. Friend the Member for North East Somerset in intervention. Although we want the licences and legislation in place to allow UK companies to get involved in this field, we certainly would not want them to have to do it in an overly bureaucratic way or one that disadvantaged them in relation to what other countries would expect them to do. How has this country’s licensing regime stacked up against those of other countries?
I hope that the Minister can answer those issues satisfactorily. Many of those points are not really about the principle of the Bill but about the application of the regulations, the legislation and the licensing. I hope he will make sure that this country is at the forefront in this field, and that he will help UK companies rather than hinder them—I am sure that is the case.
Teddy Taylor is a great man and this House has a lot to be grateful to him for. I am sure that the point he made about the Foreign Office in the debate in 1981 is somewhat unfair, although probably only slightly; I am sure that the Foreign Office always has the British people and British companies as its priority and wants to do its best for them. I hope that the Minister will be able to reassure us that, on the points I have raised, the British Government are at the forefront of making sure we are world leaders so that the Bill will what do what I am sure my hon. Friend the Member for South East Cornwall intends, which is to ensure that this country becomes, as my hon. Friend the Member for Bury North said, a world leader in this field.
It is a great pleasure to follow my hon. Friends the Members for Shipley (Philip Davies) and for Bury North (Mr Nuttall), who have been, for a Friday, most amazingly reticent and brief in their remarks. I am worried that this Bill may not therefore get the scrutiny that it deserves, given that people who normally go into every detail have skated over some of the more important points—perhaps that will come at a later stage, however.
The great thing that we should bear in mind as a nation is that our companies and our businesses should never be disadvantaged against foreign businesses and foreign companies. Any regime we have of licensing and of regulation should be as light-touch as possible, particularly when this enormous and exciting resource is available for us. We have heard of the metals that there may be—of molybdenum, of rare earth metals. It occurs to me that at the depths of the ocean there may even be gold, and it might be possible for us, through the ingenuity of British companies, to go down fathom after fathom to explore and find the gold that could be used to replace that which was sold by a former Chancellor of the Exchequer at an extraordinarily low price and against the advice of the Father of the House, my right hon. Friend the Member for Louth and Horncastle (Sir Peter Tapsell), who thought it was very unwise to sell that gold at a rock-bottom price. That is what it is really about: exploring these resources that could add to the wealth not only of the nation but of the globe at large. As we have seen the emergence of the new economies—of China, India, Brazil and Russia—so we have seen demand for resources grow extraordinarily. The demand has been for steel, obviously, and all that goes into manufacturing it: the components and the other metals that make steel of a particular strength to ensure that the skyscrapers that have gone up across Asia can be built safely.
As demand increases we will find that the traditional sources of metals and minerals can be exhausted. We will then find that economic growth across the globe slows down because the prices of commodities will rise. As you know, Mr Speaker, the laws of supply and demand would come into effect and if the supply is limited in relation to the demand, the price rises. If the price rises, the burden of higher prices will ultimately fall on the consumer and standards of living in the country at large and, indeed, in the world at large would be reduced. There could be an exciting resource in the depths of the ocean in an area where mankind has hardly dared go before—there have been limited efforts, and cables have been laid, but we have otherwise been able to do very little in terms of exploration. If we find on the base of the ocean little things the size of golf balls, or possibly even cricket balls, that could add to our wealth, that would be exciting, but we want British companies to be at the forefront. We do not want to allow the Americans, who are not following this regulatory path, to get ahead of us as they have on other occasions.
I hope that the Minister will focus on international law. I am always very suspicious of internationalism. I think that the nation state is the right way of dealing with problems. It is the right way of legislating, of representing a democratic mandate and of ensuring a fair and better economic outlook for the country. If there are international agreements to which major countries are not signed up, in what position are those countries and their companies left? International law is only enforceable by the acceptance of the people on whom it is enforced. There is no equivalent to this Parliament that can pass a law for the whole world nor is there a court that can lead a judgment against a country that refuses to accept what international law proposes.
Indeed, we discussed how, by the 17th century, the oceans were viewed as owned by everybody and as free, but we did not go on to develop how that freedom was protected. It was protected by the might of one great nation and one great navy, the Royal Navy, which went across the world ensuring the freedom of the seas. Although the argument was that the seas were global, they were global by the fiat of the British empire, which enforced internationalism and the security and safety of those travelling on the high seas. Indeed, it was a deliberate change of British policy. In the reign of Elizabeth I, letters of marque were issued to allow piracy on the high seas as a means of getting at the Spanish wealth. We changed our policy to internationalise and that is the situation that we are now in, but sadly our Navy is not what it was.
Do we have the hundreds of capital ships that we used to have? Do we have the dreadnoughts that we used to have ready to save the high seas from dangers? No, we do not. So, we must think about who will enforce the freedom of the seas. Which great navy is left today that can patrol those open spaces? The US navy, of course. Which state is not a party to the agreements that will regulate mining at the depth of the ocean? The United States, of course. So we must consider who will act against an American company that has not come along dutifully to get a licence from the Secretary of State and applied to an international body for confirmation of that licence. What if an American company goes out? Who will say no? Perhaps the Russian navy might go out, but I doubt it. The British Navy would certainly be unwise to take on the United States in such circumstances. We must consider what we are imposing on our companies and our fellow subjects that is not necessarily being applied internationally.
Is my hon. Friend saying that, given the lack of support for internationalism, so to speak, we should not have the International Seabed Authority, and that we should have a free-for-all whereby, if our companies want to go out there and explore or exploit somewhere, they should just get on with it irrespective of what any international body might say?
That is an exciting way of looking at it—to adopt a real free-market approach, which allows companies to go out to prospect, as they did in California in the 19th century, and as Cecil Rhodes did when he went to South Africa. He found great acres of space and he made a claim and he dug and he dug and he dug, and he found gold, diamonds and platinum, and he put them into a great company, and he made millions—in modern money, billions—of pounds by doing that. That was not through state regulation, not through international bodies, not through the United Nations reaching an agreement to say, “You may do this,” or “You may do that,” but by enterprise, hard work and energy—by all those great British virtues of which we should be so proud. Why not say that of the oceans? Why not mount expeditions? We could launch one together, Mr Speaker, to try and find the lost city of Atlantis, which we would expect to have all sorts of valuables—metals, gold, excitements—in it.
We could have other companies, perhaps, doing more careful geological surveys to locate those metals—the rare earth metals. An interesting fact about rare earth metals is that they are not particularly rare. The Chinese sold them very cheaply to start with, but they became a monopolist and then they raised the price. In doing so, they showed absolutely classic monopolistic behaviour. Those metals are not particularly rare, although they are quite expensive to gather together. People could go off as a free-enterprise endeavour, without having to pay for licences and regulations.
Every pound that is spent on a licence is a pound that cannot be spent on exploration, or on exploitation of the asset once it is found. How relieved I was to hear from Mining Weekly about the speed with which the sea bed—the mighty sea bed—restores itself to pristine condition after someone has been down and done a little digging. That conjures up wonderful images. I was delighted to hear my hon. Friend the Member for South East Cornwall (Sheryll Murray) say that there is always a Cornish miner involved, and that they go down and dig, even at the depths of the ocean, to find valuable assets that we may be able to exploit for the benefit of the British people. That is a free-enterprise endeavour.
Interestingly, those who spoke in the debates in the early ’80s thought there would be a great expansion of activity at the depths of the ocean. Why did that not happen? Is it not obvious, Mr Speaker? The dead hand of legislation and bureaucracy came crushing down on those who wanted to be enterprising in their prospecting activities. So there was no equivalent of the Californian gold rush. There was no shout of, “There’s gold in them there hills,” or anything of that kind, of the undersea hills.
As we are talking about geology, it is worth mentioning that the great father of geology, a Mr Smith, started all his work in North East Somerset, in the village of High Littleton. Going down in a mineshaft, he saw the different layers of the earth and worked out—
Order. I am all agog at the racy and intoxicating oration that the hon. Gentleman is delivering to the House, but I have two concerns. First, if the hon. Gentleman leads a lengthy sojourn, either accompanied or unaccompanied, in the terms that he describes, he may be sorely missed in North East Somerset. Secondly, I feel sure that, ere long, notwithstanding the quite legendary eloquence that the hon. Gentleman has thus far deployed, he will turn his attention to the contents of the Deep Sea Mining Bill itself.
Because so many other Members are keen to speak in the debate, I shall keep my remarks short. I know the Benches are not currently filled, but people are waiting in their offices to come racing down into the Chamber the minute the Minister has said a few words, such is their excitement to talk about the details of the Bill.
The details of the Bill are of course crucial. Its worst aspect is that it removes the Secretary of State’s ability to repeal legislation. If there is one thing that I take particular exception to, it is the idea that legislation that was temporary and could be removed is now to become a permanent burden on our statute book. When we look, in the No Lobby, at the statutes of this great nation, we see one volume covering the first few hundred years of the existence of Parliament, and now we see a volume barely doing a Session of Parliament. How glorious it would be if more Bills gave Secretaries of State power to take them off the statute book—to deregulate. I would urge that the Bill should have a more deregulatory ambition, and therefore in the early stages of its consideration we should delete the conversion of the 1981 Act from temporary to permanent, because the temporary nature of legislation is one of the pious hopes that all legislators should have. We should wish our legislation to deal with a temporary problem and then restore the liberties of the British subject as soon as possible. That would be my first concern over the Bill and the regulations within it.
My hon. Friend knows that I agree with him about this, and in my time I have unsuccessfully tried to introduce sunset clauses or expiry dates into Bills. But will he concede that, in essence, every Bill is temporary in the sense that it can be repealed at any time?
If only that were true. I would hope that Bills would be repealed at any time, but sadly the House is much keener to pass new Bills than it is to repeal old and defunct ones. Every so often a Session will pass 20 repeals of ancient Bills. I think we had one earlier in this Session or at the end of the last Session, which repealed some Bill relating to the purchase of the Isle of Man from whoever previously owned it to make it part of the Crown territory. That does happen, but not often enough.
A sunset clause in this Bill would be particularly attractive, especially if the Americans are not part of this. I rather like the American approach to internationalism; that is to treat it with the deepest caution, and not to sign up to every international body that comes along. My hon. Friend mentioned what Sir Teddy Taylor said about the Foreign Office. It is interesting that in the United States the State Department almost always wants to sign up to any bit of internationalism that is going. But the sensible people in the Senate who have to ratify treaties almost never do, because they do not think it is in the interests of the American people. Because of our system, we seem to be rather too keen to sign up to international agreements, when, as I was saying earlier, we should do things by free enterprise, which will often ensure more success, riches and wealth for the nation at large.
It is a pleasure to see you in the Chair, Mr Deputy Speaker. Mr. Speaker has done a long stint and we are glad to have you standing in for him.
Then Mr Deputy Speaker will no doubt be pleased that I will try to entertain him for at least part of his stint in the Chair.
Following that preamble and my concerns about the nature of the Bill and internationalism, including the risks that that has for democracy and the problem of it being a dead hand on enterprise, if we are to have this type of regulation, the Bill is obviously sensible. It is obviously wise to extend it from purely metals to include gas and liquids, because there may be all sorts of exciting things at the depths of the sea. There may be endless supplies of gas. There may be oil spurting out as if Saudi Arabia was on the sea bed rather than in Arabia where it is more normally located, and therefore one would find that there is this enormous wealth that could reduce the price of oil to the enormous benefit of our constituents, particularly those in rural seats where the price of petrol is a serious problem. These resources, liquid and gas, could be sucked out of the earth and used to the benefit of our constituents.
To that extent, I am happy to support the Bill. I do not think that there will be much opposition to it. It is a sensible level of amendment to what already exists, bearing in mind my overarching concern that we are being too internationalist and that, in principle, we are not encouraging enough enterprise.
I suspect that he would have been.
I congratulate the hon. Member for South East Cornwall (Sheryll Murray) on introducing her private Member’s Bill this morning. Like many others in the House, I fully understand her passion for all things maritime. She is steeped in the very issue. The Bill would amend the Deep Sea Mining (Temporary Provisions) Act 1981. Like one or two others in the House this morning, I knew very little about deep-sea mining until I discovered that I would be at the Dispatch Box this morning. I thank the House of Commons Library for producing a standard note, which has been used by other Members this morning and which was my starting point.
I want to make clear my interest in the environment and that I make a monthly contribution to the WWF, but I say to those on the Government Back Benches that that does not colour my position. It is a contribution that I make to the WWF, not one that it makes to me. It does not lobby me in any shape or form; let me be frank about that.
I had breakfast this morning with an expert, my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller), who is chair of the Parliamentary and Scientific Committee. Members present may be interested to know that the committee will undertake a programme of work during the autumn and bring in experts to examine the issue of deep-sea mining. Back Benchers who have spoken this morning may wish to attend those sittings.
Just because we cannot see something does not mean it is not precious. There is much going on down in the depths of the seas and oceans, and as I said earlier, if we do things in a radical way we could do damage that can never be repaired. I believe that we should explore—I do not know whether exploitation is the right word, because it worries me—what could be of benefit to mankind. That is what this is all about: we have explored space, so why not explore the depths of the oceans as well?
We must, however, be measured in our approach. My hon. Friend the Member for Brent North (Barry Gardiner) completed a quote that the hon. Member for Bury North (Mr Nuttall) gave earlier by pointing out that we have to be “reasonably practicable”. As a trade unionist, I know that the Health and Safety at Work etc. Act 1974 is littered with the term “reasonably practicable”.
I would like to think that we have moved on since the Deep Sea Mining (Temporary Provisions) Act 1981, which is the very reason why the hon. Member for South East Cornwall has proposed the Bill. It is 30-odd years later and I know that the hon. Member for Bury North will be wondering why the Labour party has changed its mind. We need clarification—perhaps the Minister will provide it—on how many applications have been made for licences and how many have been refused, and on the important issue of how we will police the companies that have secured them. I will not be anywhere near as radical as the hon. Member for North East Somerset, because I think we need some kind of control over what is happening. Our environment is precious not only to us, but to those who will come after us.
I am sure that my hon. Friend will understand that the provision of inspectors relates more to the other functions under the 1981 Act, whereby certain minerals could be made available to the Secretary of State and the Government for inspection so that there was a clear understanding of the quantities and qualities of the minerals that were being mined. I think that that is the inspection regime that was envisaged in section 11, not going down to the sea floor and seeing how the mining was being carried out.
My hon. Friend is absolutely right to provide that distinction. Again, without wishing to put pressure on the Minister, perhaps he will be able to give the history of what has been done.
Greenpeace, as quoted in the standard note, draws attention to
“the rapid increase in license applications being made to the International Seabed Authority to exploit the mineral resources found in international waters.”
It also states:
“If seabed mining is allowed to go ahead without a comprehensive system of environmental protection in place we may be destroying species forever before they have even been scientifically described.”
The hon. Member for South East Cornwall gave an explanation of what Greenpeace is talking about. There are things down there that have not yet been determined or detected.
Let me make it absolutely clear that the Opposition will not oppose the Bill. However, as was said earlier, we would like certain parts of the schedule to be improved. The Bill is about the protection of our environment and the opportunity to use the resources that are there for this nation—I am sure that the hon. Member for North East Somerset would agree with that. We should be able to fully utilise what lies in the murky waters of our seas and oceans, but we must consider the manner in which that is done.
At the end of the day, we are passing legislation that must meet the needs of mining companies and other businesses not just in this country, but elsewhere. We should definitely be looking at what best meets the needs of the UK, but we cannot ignore what is going on internationally.
To conclude, I wish the hon. Member for South East Cornwall well in taking the Bill through Committee. I do not know whether her Back-Bench colleagues who are in the Chamber today will assist her with it as it progresses to its next stage, but if Opposition Members in the Committee table amendments—I know that only one has turned up today to take part in the debate—I hope that she will take them on board, because they will be intended not to destroy it but to improve it. I wish her well in the Bill’s next stage.
It is a great pleasure to be able to respond to the debate. I begin, of course, by congratulating my hon. Friend the Member for South East Cornwall (Sheryll Murray) on her success in the ballot and on introducing a Bill that is so appropriate to her interests and her constituency. She speaks with passion about fishing, Cornwall and the heritage of the sea, and she has been able to apply that passion to concerns about how we balance the opportunities presented by the resources of deep oceans with the environmental protection that we need if we are to ensure that we all have the type of world that we wish to live in.
I do not often get the chance to speak on a Friday in my current position, and I feel as though I were taking part in a pro-am tournament—I am speaking on a day when the professionals get to work. We have heard some exceptional speeches by colleagues who take a broad and deep interest in matters before the House, even if they are not subjects with which they have been familiar. They have an ability to turn their forensic minds to issues of importance to the House, so that they can quite properly ensure that private Members’ Bills and the Government response to them are under full scrutiny.
The hon. Member for Brent North (Barry Gardiner) is a regular here and always ensures that particular points of interest are raised, in this case concern about the environment, which he frequently expresses. I very much appreciate his comments and the way he went about making them.
My hon. Friend the Member for Shipley (Philip Davies) made some pertinent comments about the importance of business and enterprise to the United Kingdom and how that consideration should be balanced. I am old enough to remember his predecessor, the late Sir Marcus Fox, a great man. Many Members have fond memories of him, and it is a great pleasure to be reminded of him by my hon. Friend’s presence.
I am old enough actually to be the predecessor of my hon. Friend the Member for Bury North (Mr Nuttall). As you will be aware, Mr Deputy Speaker, I could spend the next hour reminiscing about Bury North.
As I think the House knows well, Bury North is not only a constituency that I was proud to represent for 14 years but my birthplace and home, and the place to which my fondest memories are attached. It remains a matter of great pride that I was able to represent my home town, and I only ask that my hon. Friend take my very best wishes to the metropolitan borough, all those in it and the diverse community of Bury.
I will take the Minister’s good wishes back to Bury, but to return to the Bill, does he agree that it has potential advantages for businesses based there? Opportunities will open up for them as a result of it, maybe not directly but through the supply chain.
Order. I am now intervening. It is a great temptation to listen to the Minister talk about the wonders of the north-west as I represent a north-west constituency, but I am sure he is itching to get on to the Bill. The problem is that the rest of the Chamber is also itching to hear him on the Bill rather than on the virtues of our great north-west.
With that admonition, Mr Deputy Speaker, I will leave the subject of Bury North when I have reminded my hon. Friend to take my best and fondest wishes to Bury football club, and to Gordon and Morris who do the commentary on Shakers Player every week. I am young enough to have played football regularly with the hon. Member for Dumfries and Galloway (Mr Brown)—
Order. I will help the Minister. I do not want to hear about football or about Bury, and certainly not about whether he plays football with the shadow Minister. I want to hear about the Bill. I know he will tell me about it. If not, we will move on.
I should like to set out responses to the Bill, which was introduced by my hon. Friend the Member for South East Cornwall, and, when I have made some progress, to deal with the series of questions colleagues have raised during the morning. This has been a wide-ranging debate, and I thank colleagues for their contributions. Deep-sea mining is in its infancy, but by being at the forefront of developments, we can ensure that the UK economy sees the benefits and that any environmental concerns are fully addressed.
The subject of the Bill is probably, in all fairness, unfamiliar to most colleagues. The hon. Member for Dumfries and Galloway was honest enough to say that it is a relatively new subject for him. I could pretend that my situation is different, but I will not. I am indebted to Mr Chris Whomersley and other Foreign and Commonwealth Office colleagues for their assistance in preparing me for the debate.
On the background, I want to fill out what colleagues have said about the origins of the Bill and the importance of correct definitions of, for example, the deep sea bed. Deep-sea mining does not come up every day, so it is important to alleviate concerns, particularly bearing in mind recent concerns about mineral extraction and the environment on land, by noting that any activity would take place a long way from any coastal area.
The term “deep sea bed” is defined in amendments in the Bill to the Deep Sea Mining (Temporary Provisions) Act 1981. The UN convention on the law of the sea calls it the “area” of the
“sea-bed and ocean floor, and the subsoil thereof, beyond the limits of national jurisdiction”.
That is commonly referred to as the common heritage of mankind, a phrase that has found its way into the UN convention in article 136. The concept, which goes back to the 1960s, expresses a profoundly important point, namely that the area and its resources do not belong to any one state. They should be developed for the benefit of everyone on the planet. They are controlled through the International Seabed Authority, an international organisation to which all states can become a party. I will say more about the ISA later.
To refer to a point made by my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), getting the balance right between what is controlled by regulation and legislation and what is allowed to run free, as it were, is difficult. My hon. Friend the Member for Shipley spoke about the freedom of the seas and the like. Access to the sea and freedom to roam on the seas is important, as is the enforcement of such rights to freedom. However, the world recognises that the resources of the sea and what lies on the sea bed and below are genuinely precious. Hon. Members are aware how resources can be badly exploited—I am sure my hon. Friend the Member for South East Cornwall knows that some countries have badly exploited resources through their fishing practices. That gives us pause to say, “Simply having a free-for-all will not work.” My hon. Friend the Member for North East Somerset can be assured, however, that the attitude of the United Kingdom is to ensure that, if international regulation does curtail freedoms, it must be because that is the right thing to do. We have to take our responsibilities seriously, and our responsibility to the environment and the need to ensure that the regulations cover that adequately are as important as ensuring that opportunities for prosperity are not lost through over-regulation or complicated bureaucracy.
The “area”, or the common heritage of mankind, is the area beyond the limits of any coastal state’s continental shelf. Under article 76 of the UN convention, a coastal state is entitled to a continental shelf of at least 200 nautical miles from coastal baselines, and more where the slope of the continental margin meets certain specified criteria. This entitlement is without prejudice to the question of delimitation of the continental shelf between states with opposite or adjacent coasts. The exception to the rule is for a small islet or rock that cannot support economic life. Under the UN convention, such rocks only generate a territorial area—a maritime zone up to 12 nautical miles from coastal baselines.
The UK has one such rock which is sometimes the subject of academic debate. That is Rockall, some 186 nautical miles west of St Kilda in the Outer Hebrides of Scotland. Anyone who has seen this rock, or seen pictures, will well understand why we could not claim that it could support economic life, being only a jagged spike of rock jutting up some 60 feet above sea level. Therefore, and contrary to some of the sometimes ill-informed comments about Rockall, the United Kingdom does not regard Rockall as capable of generating a continental shelf of its own. Does this mean that deep sea mining could take place in the vicinity of Rockall? No. While the UK uses a baseline on St Kilda—which, coincidentally, is uninhabited but has in the past supported a human population—the UK claims a continental shelf beyond 200 nautical miles in a westerly direction, way out into an area known as the Hatton Rockall plateau. Other states have overlapping continental shelf claims in the same area, but while the claims exist and their validity is yet to be considered by the appropriate international body, the area does not fall within the definition of one
“beyond the limits of national jurisdiction”.
To be clear, deep sea mining as provided for by the Bill, would not take place anywhere near the coast of the UK, or the UK’s overseas territories, or any other coastal state for that matter. Indeed, most of the current applications relate to areas in the Pacific ocean, as my hon. Friend the Member for Worthing West (Sir Peter Bottomley) mentioned, and are a long way from any landmass.
I have described the “where”, now let me explain the “what”. As hon. Members appreciate, we are not talking about hydrocarbons, at least not at the moment. My notes suggest that it is safe to say that many hon. Members will be unfamiliar with the mineral types, but the debate suggests that they have made themselves very familiar with the mineral types we are discussing. Those minerals currently being explored for in the deep sea are composite mineral deposits, in formulations unique to the sea bed, which is why they are so special.
Presently there are international regulations in place for the exploration of three mineral types in the deep sea. The first, polymetallic nodules, have already been the subject of discussion today. Polymetallic or manganese nodules contain manganese, copper, cobalt and nickel, and are—as far as the FCO is concerned—potato-shaped balls generally found on the sea bed surface. I have no information about whether they may be tennis-ball sized, and it is the official view of the Foreign and Commonwealth Office that they are potato-shaped balls. They are generally found partially buried in sediment, and cover vast plains in the deepest areas of the sea bed.
Secondly, there are polymetallic sulphides. These, mainly sulphide deposits, are found in ocean ridges and seamounts, and often carry high concentrations of copper, zinc and lead, in addition to gold and silver, as my hon. Friend the Member for North East Somerset will be pleased to hear. Not for the first time, he is right on the ball—the tennis ball-sized ball. Such deposits are associated with previous volcanic activity, where the deposits have built up over time via plumes from vents. Where such vents are active, they tend to be places of unique fauna and flora. However, mining would take place only when such sites were extinct, not least because of the very high temperatures associated with live vents. That deals with one of the questions that my hon. Friend the Member for Shipley raised. There is no question of mining such areas when they are live, because frankly the temperatures would make it impossible.
The third group of mineral elements to which the current legislation applies are found in cobalt-rich crusts or ferromanganese crusts, which form at the flanks and summits of seamounts, ridges and plateaus. They contain amounts of iron and manganese, and are especially enriched in cobalt, manganese, lead, tellurium, bismuth and platinum. Such minerals are important. Mineral prices have increased noticeably since 2000, largely as a result of increases in demand, especially from emerging economies such as China and India, as colleagues have noted. According to the United States geological survey in 2013:
“China has advanced from consuming less than 10% of the global market for metals to over 25% of the market in the past few years and that trend is increasing; India is following on a similar path.”
As I will explain, changes in demand have created a need for legislation.
I might have missed it in the Minister’s remarks about the various chemicals, but the briefings that I have read refer to deposits of submerged massive sulphides—the hon. Member for Bury North talked about the ISA, but this is SMS. Will the Minister say what category SMS falls into? My understanding is that a different treatment might apply in their mining.
The point I was making in going through the three mineral types is that they are the ones that are currently affected by regulation, but we are moving on. The hon. Gentleman is absolutely right: as he will be well aware, seafloor massive sulphide deposits are the modern equivalents of ancient volcanogenic massive sulphide ore deposits—or VMS deposits, as we call them in the Foreign and Commonwealth Office. The term has been coined by mineral explorers to differentiate modern from ancient deposits. SMS deposits are indeed relevant; I will come to the reason for changing the legislation.
There is also an issue of limited sources of supplies. For example, in 2010 it was estimated that the Congo produced 40% of global cobalt supplies, South Africa 79% of global platinum and China 97% of global rare earth elements. That factor can distort total global supplies and costs. Access to supplies makes these strategically important minerals. An increase in available stocks of such minerals should increase competition in the global market, reduce the price faced by consumers and help to ensure sufficient future supplies to satisfy rising global demand. For example, present estimates suggest that there is a 100-year supply of cobalt deposits on land, which might increase to 200 to 300 years if deep-sea supplies are included.
As the world, we hope, exits recession—helped in the United Kingdom, of course, by this Government’s economic policies—it is inevitable that demand for minerals will increase. It is certain that commercial companies will be looking for new sources of such minerals, and the deep sea bed is the new frontier for them. We in the United Kingdom must be at the forefront of such developments.
The Minister has drawn a parallel that will have ramifications for the environmental agenda. He will know that the mentality of the Klondike and the frontier, and the rush for the extraction of minerals on land, resulted in some of the worst environmental degradation. Will he accept that the Opposition are simply trying to ensure that the Bill contains proper safeguards and environmental protections relating to the new frontier that he is describing, so that a similar laying waste of the environment that happened as a result of the extraction of natural resources on land does not happen on the sea bed?
That is the intention not only of the hon. Gentleman and his party; it is part of the Bill’s raison d’être and of the working environment on which the regulations are already based. There is already a double lock. The reason that UK legislation provides for licences is to ensure that those whom the UK sponsors for licence applications to the ISA have already passed the standards that this House, and this country, would expect from those involved in mineral extraction and exploration. Once the UK has been satisfied, the second lock comes into operation. That involves the environmental controls put forward by the ISA, and I will cover that subject in more detail in a moment.
There is no difference between us on the importance of this matter. In answer to some of the hon. Gentleman’s previous questions, there has not, to date, been any challenge to the existing arrangements. Only two licences have been granted under the 1981 legislation. The original reason for introducing those temporary provisions was that the possibility of Klondike-type activity was in the minds of companies in the early 1980s. That proved to be a false expectation, however, and the pace of exploration has been slow. The reason for introducing this legislation now is that we anticipate the pace picking up, given the increase in information and technological development.
In the interim, however, the environmental protections in section 5 of the 1981 legislation have proved entirely sufficient, as have the inspections. If the hon. Gentleman does not believe that and wishes to raise a challenge to what we have done, he is entitled to do so. He is right to be concerned about this, but I am genuinely not aware of any challenges to those who have taken licences through the United Kingdom. We must protect for the future, however, and I will go on to explain how that is being covered by the ISA, how we are dealing with negotiations as we look forward four or five years to mineral exploitation—which is not anticipated yet—and how we are involved with the ISA in relation to that. He need not fear that we are not considering these matters. Nor need he fear that this matter has caused any concern to date.
I am grateful to the Minister for trying to respond fully to my concerns. I appreciate that. However, it is not sufficient to say that there is no cause for concern simply because only two licences have been issued to date and because there have been no problems with the way in which section 5 of that 32-year-old Act of Parliament is being implemented. He knows very well that section 5 states that
“the Secretary of State shall have regard to the need to protect”
the marine environment. The words “have regard to” do not provide for a strong protection. All we are asking is that that wording should be upgraded in the Bill.
I am sure that my hon. Friend the Member for South East Cornwall will give that matter her consideration. I was not seeking to link the fact that only two licences had been issued to the issue of environmental protection. There have been only two applications because only two consortia have felt it necessary to do that kind of work. Others have not been prepared to do it. There is no linkage between the two points. My point was that we have no evidence that environmental issues have ever been a matter of concern in relation to those applying for a licence under our legislation and going on to be sponsored for permission from the ISA. The protections that are in place have in no way been considered inadequate. Had they been, that would have been an important point of evidence, but we do not have any such evidence to date.
No. The sort of work we are talking about is immensely expensive. If a company is to get down and explore the resources in deep sea, that will mean a very expensive financial commitment. Companies have not come forward because it has not been worth their while to do so, but the world is moving on. There is no evidence to suggest that anything in UK regulation has been in any way off-putting; indeed, quite the contrary. The most recent company to go through the process made reference to the helpfulness of the British Government as it pursued its licence. I hope I can set my hon. Friend’s mind at rest: regulation does not seem to be an issue.
Let me make a little more progress. When one thinks of the offshore, what inevitably springs to mind first is the search for oil and gas. However, industry has yet to express an interest in possible supplies of hydrocarbons in the deep sea, which is why no international regulations have been developed for their exploration. That is not to say that it will not happen. It may sound odd to suggest that international regulations for the exploration of hydrocarbons would be needed when exploration for hydrocarbons is not new. Multinational corporations are exploiting hydrocarbons all around the world, often in very deep water, but the point is that when we talk of the deep sea and “the area”, we talk of the role of the International Seabed Authority in managing the resources. So any exploration or exploitation would need to be under those ISA regulations, not national ones.
Let me deal now with some of the questions raised about the Bill, as it would be pertinent to do so now that I have set out the background, before providing some comment on the history of the Bill and why we are where we are with it. If I may, I shall discuss the issues in relation to the hon. Members who raised them.
I thank the hon. Member for Dumfries and Galloway for setting out the position of the Opposition and for indicating that the Opposition will support the Bill for the reasons that he set out. He rightly emphasised that policing needed to be done in respect of those who had applied for, and been successful in gaining, licences. The need to get on with the job has to be balanced with concern for the environment. Our intention is closely to scrutinise the activities of contractors. The current contractor is a highly reputable company, and we are satisfied that it will act appropriately.
The ISA has responsibilities, too, in respect of those who apply for licences from it. Reports have to be made to the ISA, whose legal and technical commission scrutinises them. We are pressing for improvements in the quality of the licences, which will become part of the negotiation; we anticipate greater exploitation of these resources. I shall say a little more about that in a few moments.
My hon. Friend the Member for Bury North raised a series of points. He mentioned the involvement of the European Union, but I am conscious that this is a track down which it would probably be inadvisable to go or spend any time; there might be some differences between him and me on certain elements of the EU. I would like to give him an absolute assurance, however, that there is no question of the UK ceding any powers to the EU, which is represented on the ISA for two reasons. First, a number of states without maritime interests want the EU to represent them, and secondly, a number of areas in the convention on the law of the sea fall within Community competence. They are listed in a declaration and include issues such as the marine environment, trade in minerals and fishing, and there is no intention to go any further.
Questions were raised about a company from a country outside the parties that had committed to the convention—and the United States came up as an obvious example. How would it go about things if it was prevented from participating? As my hon. Friend the Member for South East Cornwall suggested, it would need to seek a sponsorship from a party in a participating state. Such a sponsorship is not lightly handled; the regulations are covered by the ISA, which has set out in regulation 11 details of a certificate of sponsorship and the exact connection between a state and company wishing to apply for registration by using either its own state or another.
As for the position of the United Kingdom, we have a contractor that is largely based in the United States but has a subsidiary in the UK which allows it to apply through the UK to the ISA. Companies are not prevented from being sponsored by the fact that their nation states have not signed the convention, but they will be sponsored in a way that is properly controlled.
Members have asked what penalty would be imposed on a company that operated outside that sphere, and just went rogue and mined. I understand that there would then be a question mark over the title to the minerals, as a result of which the company would be at risk in selling on those minerals or anything else. As far as we are aware, however, the issue does not arise at present. The legislation has encouraged companies to operate in accordance with the rules because it is in their interests to do so. The costs of exploitation of resources in the deep sea are such that a company would not wish to be involved unless it was absolutely sure that it would be able to sell on what it had, and that it was protected. The legal ramifications of not going through international regulation would be enormous.
Obviously I cannot speak for the United States Government. I am not sure whether they would be able to protect a company based in the United States under their laws if that company was in breach of the international regulation and convention that apply here. However, as I have said, that does not arise at present, and there are ways of handling the accession of companies whose nation states are not party to the convention.
My hon. Friend the Member for Bury North asked why the 1981 Act was being changed now, and why it was passed at the time. I dealt with that question a moment ago. The atmosphere surrounding the exploration of deep-sea minerals was very different in 1981. Things have moved on since then, and we need to upgrade the legislation. The Act was passed at a time when early and rapid exploration was anticipated, but it did not happen, so there has been no need to replace that temporary provisions legislation during the intervening years. However, market and technological developments now suggest that the time is right to amend it, and the Government will therefore support the Bill.
My hon. Friend the Member for Shipley raised questions about the prosperity agenda. He asked how we could ensure that our determination to enforce environmental controls and licensing did not get in the way of those wishing to become involved in business. Fees are prescribed with the consent of the Treasury. I must admit that I do not have the fees in front of me, but I can assure my hon. Friend that I will have them in time for the Committee stage. I can tell him that only two licences have been applied for over the years, and I have no reason to believe that the fees have posed any difficulty. Indeed, as I said earlier, the company that was most recently involved in the process thanked the Government and congratulated them on their help and support. What I do know is that the fee for application to the ISA for a licence is some US$500,000. We are not talking about applications by companies operating on a small scale. We are talking about big business and serious sums, which is understandable if the authority is to be allowed to do its work and ensure that no one makes a frivolous application.
As I said, only two licences have been issued in the United Kingdom under the 1981 Act. We monitor carefully the compliance by the contractor with the terms of the licence, and we are not aware that any company has applied for a licence and been refused, or had its licence revoked. I can reassure Members who are worried that there is no evidence that the regime is in any way putting anyone off.
I mentioned in an intervention that I had been interested to hear that an application had been granted under the existing legislation. That prompts this question: if that licence is valid under the existing legislation, why is there a need to change it? Also, will that company have to reapply under the new legislation?
I doubt it very much. Speaking off the top of my head, I imagine there would be a passing-on provision that would assume that those who had complied with the terms of the 1981 Act will be, as it were, automatically passported under new legislation. The new legislation will expand the scope of the minerals being sought and cover associated issues. I am sure I can assure my hon. Friend that nothing in relation to the practical operation of the new legislation would require what he asks about.
My hon. Friend the Member for Shipley asked how the licensing regime in the UK compares with those in other countries. Because of the scale of the issues involved here, very few states have any legislation on deep-sea mining. We are confident that UK legislation balances the need to ensure proper control over contractors with the need to avoid having an over-burdensome regulatory regime.
My hon. Friend also asked how long it takes to issue licences. We act very quickly. We have worked with contractors to ensure that licenses are issued promptly. The most recent licensee expresses happiness with its relationship with the Government.
On the ISA, my hon. Friend asked how overlaps are avoided. That question reminds me of the situation in the Klondike, as represented in the 1950s black-and-white B-movies we remember so fondly, when people would go out and stake the land. Occasionally, I believe, fisticuffs might have been involved if there were disputes. We have moved on from that, although it is still a first-come, first-served business as the licenses are processed. The ISA is the stakeholder and once it has granted a licence for a particular piece of the sea bed, that is it. That prevents any overlap. The system ensures there is no problem in terms of competing claims.
The hon. Member for Brent North raised some environmental concerns. We have made it clear that the ISA should consult relevant NGOs in developing mining regulations. That goes to the heart of the issue of where we go from here. As has been made clear, the expectation is that the licences being sought will be for exploration. There is a distinction between exploration and exploitation. Exploitation under the wider scope of the legislation is not expected in the next four or five years. At present the ISA is consulting member states about what their regulations should be for that mining and exploitation. The UK has a crucial role to play in that, given our history of, and engagement in, environmental protection. We are engaged with the ISA in working through the new regulations that will govern mining.
As far as UK-based NGOs are concerned, there is an understanding that this is going to happen and it will not be stopped. Accordingly, it is a good thing for the UK to be involved and NGOs are very supportive of our engagement. There has been a meeting between officials and the WWF in relation to this Bill. I understand it is content with the way we are going about things. A further meeting is promised and we will keep in close touch. Bearing in mind the record of some other states, the fact that a British Government—of any party—should be involved in dealing with these issues should be of comfort to international NGOs. We will be fully engaged.
Let me again deal with the point about section 5 of the 1981 Act to which we may return in Committee. My note from my colleague says that nobody has suggested before that section 5 is inadequate, and that although the Act can change the duties imposed on the Secretary of State, it is for the ISA to establish environmental standards for applications from other countries. We have our own standards, but a double lock and a double check are in place. I am happy to go into that in further detail in Committee, making sure that I have got absolutely up-to-date information on how this has been handled. I am very content with the general reassurance I can give that it is not complacency but experience to date that leads me to believe that there has not been a challenge. However, we will double check and then see whether there is any need for any increased provision. If there is, I am sure that my hon. Friend the Member for South East Cornwall will be the first person to introduce it.
My hon. Friend the Member for Dover (Charlie Elphicke) raised the issue of fracking. As I said at the beginning of my remarks, we are hundreds of miles away from that; it is not an issue in relation to this Bill and there is no connection with this activity. My hon. Friend the Member for North East Somerset raised issues relating to our companies being disadvantaged compared with US companies, and I believed we have covered that. I do not think there is any evidence of that happening, and I hope that we have the balance right between that problem of international regulation and the prosperity agenda and the like.
I have answered a number of specific questions, but I have not dealt with some key parts of the Bill that I would like to address. Of course, if hon. Members have further questions, I am happy to take interventions. The 1981 Act was passed at a time when the prospects for a United Nations agreement on deep-sea mining were uncertain. The United Kingdom, along with a number of other countries, therefore decided to enact its own legislation to enable the Government to license British companies to undertake deep-sea mining. That was coupled with a system under which the various other countries that had enacted legislation would reciprocally recognise each other’s licences.
The 1981 Act provides for the Secretary of State to issue exploration and exploitation licences, and for licences issued by reciprocating countries to be recognised. It also made provision for the revocation of licences where, for example, there was a threat to safety or the welfare of persons, or there was a need to protect the fauna and flora of the deep-sea bed—even then, such issues were a matter of concern to this House. As we have discussed, the Act also included provision in section 5 to place a strong obligation on the Secretary of State, in exercising his or her powers, to have regard to the protection of the marine environment. That is likely to be unchanged by the new Bill, but I have given a commitment to the House that we will take a hard look at whether there is genuinely any need to consider that further, and we will do so. The Government expect any company that we sponsor, as well as those sponsored by other states, to comply with the highest environmental standards.
Although certain UK companies were interested in deep-sea mining, in fact no mining was conducted in accordance with the licences issued under the 1981 Act. The UN convention on the law of the sea was adopted in 1982, with part XI dealing with deep-sea mining. However, the United Kingdom, again in the company of a number of our allies, did not find those provisions acceptable. We did not believe that they were conducive to encouraging commercial companies to engage in deep-sea mining. We therefore did not become a party to the convention at that time, even though most of the other provisions were acceptable and, indeed, welcome, to us.
I should add that I very much endorse what my hon. Friend the Member for South East Cornwall said about the importance of the convention; it has rightly been called the “constitution of the oceans”. The United Kingdom is a strong supporter of the convention, which we believe, overall, provides an appropriate balance between the rights of the various users of the seas. As a maritime nation, it is especially important to the United Kingdom that the international rules on the law of the sea should be clear and fair. A number of colleagues have mentioned that our good friend—and our closest or oldest ally, whichever is the current term—the United States has not yet ratified the convention. I know that the Administration in Washington have expressed an eager desire to do so, and we wish them well with the endeavour. We look forward to their participation in the convention and, in particular, to their playing a full role in the ISA.
This is a fact never lost on the Foreign and Commonwealth Office. I also have in my room at the FCO a copy of a treaty with Algeria that dates back many centuries; we have such treaties scattered around the place. There are many claims to be our oldest ally and we can be quite sure that the facts would prevent the United States from claiming that. For the avoidance of any doubt, however, let me make it clear how close and warm our relationship is with the United States across the board. Environmental protection and the law of the sea is another area where the House can expect the warmest and closest engagement between us and the US. We look forward to the US’s playing a full role in the International Seabed Authority.
As I have said, the UK, in common with other industrialised countries, did not feel able to participate in the original convention because of the terms of part XI. There was a general recognition that it was unsatisfactory for the industrialised countries to remain outside the convention. So in 1990 the then Secretary-General of the United Nations, Mr Perez de Cuellar, convened informal consultations, which continued for several years. The UK played a key role and the result was the adoption by the United Nations General Assembly of an agreement on the implementation of part XI of the convention in July 1994. Such agreements assisted the UK’s joining the convention.
The part XI agreement is particularly pertinent to the Bill. It remedied the major defects of the original convention and, in particular, it addressed the costs to states parties and ensured that they were kept to a reasonable level. It clarified and streamlined the procedures for the approval of applications to explore for or exploit the mineral resources of the deep-sea bed. The agreement reduced the possibility for the so-called Enterprise, an international organisation composed of states parties, to participate in exploitation or exploration. It emphasised that decision making in the authority should normally be by consensus. It resolved satisfactorily the problem of how to ensure equitable representation of all states in the council, including the industrialised and developing states, as well as the consumers of metals and land-based producers.
The agreement ensured that any transfer of technology to developing countries should be by agreement. It also stated that the development of the resources of the area should take place in accordance with sound commercial principles. It emphasised that the system of payments to the authority should be fair to both the contractors and to the authority and established a finance committee, on which the United Kingdom has a member, which has a key role in scrutinising the finances of the authority.
The adoption of the part XI agreement paved the way for the United Kingdom to become a party to the convention in July 1997. When the UK became a party to the convention, we considered whether the 1981 Act was sufficient to enable us to comply with our obligations under the convention. At the time it was concluded that it did—although, as I think it is fair to say, only just. Obviously the intention behind the 1981 Act was not to implement the convention, which had not even been adopted when the Act was enacted, but the essential elements were thought to be sufficient. In particular, as we have seen, the Act provided for the issue of licences to prospective contractors and we are satisfied that that gives the United Kingdom sufficient powers in relation to such contractors to comply with the requirements of the convention, particularly that the sponsoring state should have effective control over its contractors.
The International Seabed Authority is the body that under the convention is responsible for regulating deep-sea mining. It has its seat in Kingston, Jamaica. The House will be aware of the extent of my portfolio in the FCO—Iraq, Iran and various countries throughout the middle east—so I hope it will not mind if I apply to the Foreign Secretary to suggest that it might be necessary for me to visit the ISA in Kingston, Jamaica at some point, with, of course, an appropriate delegation including Members of the Opposition, to ascertain that the proposals made by my hon. Friend the Member for South East Cornwall in her Bill will be accepted by the authority. With the permission of the House, I will make that request to the Foreign Secretary. However, that is a digression.
Just to correct the impression that may have been given to the House by the hon. Member for North East Somerset (Jacob Rees-Mogg), the treaty of Windsor in 1386 was of course a treaty between Portugal and England, and as so often with the hon. Gentleman, the key is, who is the—
Order. I think the hon. Gentleman is testing the patience of the Chamber a little bit, and I will be quite honest with him. We have had a lot of long interventions, and the last thing I want to get into is a history lesson from either side of the House, because other Bills want to get a hearing, and I am sure he has an interest in those as well.
Thank you, Mr Deputy Speaker.
The procedures for handling applications to explore for minerals on the deep sea bed are set out in the regulations adopted by the authority—one set for each type of minerals, polymetallic nodules, polymetallic sulphides and cobalt-rich crusts. The applicant makes an application to the authority, and pays the fee of $500,000. But as we have indicated, there is a certificate of sponsorship from the state party concerned; it is stipulated in the convention that all applications must be sponsored by a state party.
Because of the concerns voiced about environmental protection, I have taken the liberty of obtaining a copy of the two applications for licences that we have made under that sponsorship. The House will be pleased to know that in both, the issue of environmental standards is put forward by a representative of the United Kingdom, who makes the application on behalf of the company being sponsored. So environmental protection is at the heart of the application that is made by the United Kingdom when sponsorship applications are made.
I do not know yet, because these are applications relating to commercial companies. I will check. My understanding is that when the application is made to the ISA, there is a nomination process which is led by a speech or a recommendation by the representative of the sponsoring state, to explain that it backs the application. So the document relates to a specific company. I genuinely do not know whether these are public documents. If they are, I do not think there would be any problem, but I must check.
However, I do not think there would be any problem in my reading out the appropriate section in one of the applications. It states:
“As was made plain last year—and indeed the United Kingdom has said on a number of occasions in the Assembly and the Council—the United Kingdom is committed to ensuring the highest environmental standards for companies which it sponsors under Part XI.”
Again, our experts have looked at the application by this particular company and are entirely satisfied that the company will be applying the highest environmental standards. I know from my personal contacts with the company that they feel equally strongly about the need to do so.
So not only is there a pledge on behalf of the United Kingdom Government, and accordingly we can be held to that, but there is a recognition, because it is a narrow field and people know one another, of the importance of it personally to those involved. I say that simply to give a sense of how seriously environmental protection is taken; the House need not be worried that it is glossed over in any way.
The standard clauses for exploration contracts granted by the ISA are also covered by published documents, which set out what environmental monitoring is necessary. Those documents are available. We might talk to the Library about making any of these documents available before the Committee, so that Members will see what the ISA says, what we say, and so on. I hope that that will help.
Having made the sponsored application, the applicant makes a presentation to the legal and technical commission of the authority. As I have said, in the case of applications sponsored by the United Kingdom, the Government send representatives to speak during the presentations in the legal and technical commission, to demonstrate not only our support for the applications but the responsibility that we take as a Government for them. I hope that is reassuring. After approval by the legal and technical commission, the applications are forwarded to the council.
We were very pleased that the first application sponsored by the UK was successfully approved by the International Seabed Authority in 2012, and that the contract between the British company and the authority was signed earlier this year. The second application was put to the legal and technical commission this year, although, disappointingly, it was not approved by the commission because of lack of time. We hope, however, that the application will be approved by the commission next year. We are convinced that it is a first-class application.
I would like to pay tribute to the staff of the International Seabed Authority, particularly its Secretary General, Mr Odunton of Ghana, and his deputy, Michael Lodge, who is British. We have found them knowledgeable and helpful, and we have enjoyed a fruitful working relationship with them over many years.
My hon. Friend the Member for South East Cornwall rightly referred to an event in March this year to mark the signing of an exploration contract granted by the International Seabed Authority to a UK-registered company. That licence, for the exploration of polymetallic nodules, is in an area of the mid-Pacific ocean at depths of around 4 km below sea level. The Minister for Universities and Science, my right hon. Friend the Member for Havant (Mr Willetts), who spoke at the event, called the new venture a
“huge vote of confidence in the UK”,
and declared that we have the skills and technology to make it a success. As a number of colleagues have said, we want the United Kingdom to be a world leader in this regard. He talked of how the decision to grant a licence reflected British technological strengths in areas such as marine engineering and marine science, and how it would give British companies and British scientists the opportunity to undertake groundbreaking work in fields such as deep sea biology.
The 1981 Act was sufficient to do the job—to ensure the UK Government had sufficient jurisdiction and control over the UK company in order for it to sponsor its first application in 2012. Now we want to ensure that British companies are able to take up the opportunities available to explore for different mineral types—the point made by the hon. Member for Brent North—namely polymetallic sulphides and cobalt-rich crusts, and we want to ensure that we are fully compliant with UNCLOS.
The Bill is really about the balance between commercial companies’ need to find the resources that the world seeks and environmental protection. It is also about saying, “The United Kingdom is open for business in this sphere.” We can say to any company that seeks the United Kingdom’s sponsorship of an application for polymetallic sulphides or cobalt-rich crusts, “Yes, we can sponsor your application.” But at present, without this Bill, because of the changes in technology, if they were applying for minerals outside the scope of the legislation, we would have to turn such companies away. That is why the change is necessary. The Government simply do not believe that that would be the correct position for our country to be in. At its heart, the Bill is designed to enable the United Kingdom to take advantage of the opportunities that this new, emerging and very exciting technology offers us.
As we have discussed this morning, the Bill is quite a technical measure, with all the substantive amendments to the 1981 Act being set out in a schedule to the Bill. I could say a good deal about each of the amendments, but that might stretch the patience of the House, so I will not go through them in any great detail. We have covered a lot in the interventions and discussions that we have had. The point to make is that the Act is being brought up to date in relation to the sort of minerals that are now available for exploitation and in relation to changes in the law. It deals with some of the technical aspects relating to Scotland and other jurisdictions, but it keeps at its heart the need to balance commercial opportunity with environmental protection, which has already proved to be successful. But none of us is naive, and none of us can forget that there are states that operate differently. Without being absolutely certain that international regulation will follow the sort of intentions that we in this House would have, the Government will not be happy. In our dealings with the ISA, we will look to ensure that that works its way through.
The amendments in the schedule refer to changing definitions of the minerals to be exploited, appropriate dates for corresponding contracts with the ISA, the tightening up of the licences, and ensuring that reciprocal recognition is brought up to date. They provide for important work to be done to arbitrate disputes and deal with the international tribunal for the law of the sea and to ensure that it is relevant in relation to this work. They remove redundant terms and bodies and ensure that the terms used in the Act are up to date.
As we have heard, despite the Bill’s title and the 1981 Act, no mining or exploitation has been conducted in the deep sea by a UK company or any other company. Even with the most optimistic outlook, this is probably five years off for polymetallic nodules and longer for other mineral types.
The International Seabed Authority developed regulations for the exploration of polymetallic nodules some 10 years ago. To date it has issued 13 contracts and is in the process of issuing more. They are all for areas in the Clarion-Clipperton fracture zone in the equatorial north Pacific ocean, except for one in the central Indian basin of the Indian ocean. Exploration regulations for polymetallic sulphides were agreed in the past few years, with the authority issuing contracts to China, Russia, Korea and France, and cobalt-rich crust regulations were only agreed in 2012, since when there have been only a couple of applications.
Of the total of 23 contracts awarded or pending, over half were submitted in the past few years. That gives an indication of how the pace of interest and demand has changed, which is another reason why my hon. Friend the Member for South East Cornwall has proposed this Bill at this stage and why it is important to support it and make progress.
At this year’s annual meeting, the ISA’s council discussed a paper on the process towards development of a regulatory framework for the exploitation of polymetallic nodules. As I have said, so far the activity in relation to deep-sea mining has been confined to exploration, but the time for exploitation—that is, mining—is coming. I know that the secretariat to the authority is acutely aware of the challenges that will be posed by the development of regulations for the exploitation of polymetallic nodules. It has, therefore, sensibly engaged a well-respected team of consultants to look at the issues. I have here a copy of the consultants’ report, which is on the authority’s website. It sets out clearly and carefully the issues with which the authority will have to grapple. It is entitled, “Towards the Development of a Regulatory Framework for Polymetallic Nodule Exploitation in the Area”, and I commend it to the House and to colleagues who have expressed their interest in the affair today.
It is worth reiterating two points that the UK made clear in our statement. First, we emphasised that polymetallic nodule exploitation must be conducted in accordance with the highest environmental standards. Secondly—I believe we were alone in the states that spoke to make this point—we called for full engagement with all stakeholders, including contractors, technology providers and non-governmental organisations, in the development of a regulatory regime. I hope that that is of interest to the House and its needs.
I repeat those points because they are essential and lie at the heart of our approach. It is only by working together to develop a regime that we will be able to strike the right balance between protecting the environment and encouraging commercial enterprises. Stakeholders need to pool their knowledge and expertise, including that in the economics of deep-sea mining, the technology available and the biology of the environment involved, in order to begin to understand the full picture and reach the best solutions. We see environmental NGOs as important contributors in that process. Officials already engage with NGOs at authority meetings. I had a meeting with officials in advance of this Second Reading debate and have promised more consultations in advance of future meetings. We see this as an ongoing collaboration.
The Government believe that, given the advances in technology, a likely increase in future demand for mineral resources and a steady if not increasing cost for those resources, deep sea-bed mining is inevitable. It is a question of when, not if. In other words, deep-sea mining is going to happen and we could not stop it even if we wanted to. The fact that companies have started to take up exploration licences from the ISA when previously they were the domain of research institutes is a sign of a new phase in development. A UK-registered company is one of those that have taken up a licence and it is our clear intention to be at the forefront of this emerging industry. It is important that the UK should be in that position. This is an opportunity for us to ensure that our values, particularly in the protection of the environment, should be taken into account.
We believe that this Bill, modest though it is in some ways, is a crucial stepping stone in ensuring that the United Kingdom can be in the right place to influence developments. We believe that, as a responsible sponsoring and licensing state, we will be able to fulfil our obligations to ensure that the highest environmental standards are adopted and applied by our licensees in the work that they carry out. I can also assure the House that we will make use of our leadership role as a sponsoring state to try to ensure that the best possible practices are adopted when the ISA develops a regulatory regime for mining.
In conclusion, the Government believe that the Bill will signal our support for and readiness to uphold UNCLOS, provide leadership in calling for and upholding the highest possible environmental standards, and ensure that the UK aims to make the most of the opportunities offered by this increasingly important industry. I cannot commend the House enough for the attention it has paid to my hon. Friend the Member for South East Cornwall’s Bill and I cannot commend her enough for proposing it. I look forward to taking it further with the consent of the House, with the intention of maintaining the balance we have all strived to achieve in the past few years.
On a point of order, Mr Deputy Speaker. The Minister referred to placing papers that contain confidential information in the Library. You will be aware that Mr Speaker ruled in 2006 that any confidential papers that are referred to ought to be placed in the Library with the confidential information removed. Will that practice be followed today?
The explanatory notes that accompany my Bill state that a copy of the impact assessment will be available in the Vote Office. I understand that it is not, but I will ask that it be made available to interested Members before the Committee.
I thank hon. Members on both sides of the House for their support for the Bill today. My hon. Friend the Member for Worthing West (Sir Peter Bottomley) brings a lot of experience, because he sat in the House during the passage of the 1981 Act. I thank my hon. Friends the Members for Bury North (Mr Nuttall), for Shipley (Philip Davies), for North East Somerset (Jacob Rees-Mogg) and for Dover (Charlie Elphicke), who all made valuable contributions. I also welcome the contributions from the hon. Members for Brent North (Barry Gardiner) and for Dumfries and Galloway (Mr Brown). In particular, I thank my hon. Friend the Minister for all the support he has given in ensuring that the Bill reached this stage. I hope the House will support the Bill, so that it can move to Committee.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).
United Kingdom Corporate and Individual Tax and Financial Transparency Bill
I beg to move, That the Bill be now read a Second time.
At the outset, I want to say that this is the only time I can remember witnessing a Government Front-Bench spokesperson engaging in a time-wasting filibuster on the scale we have seen today. It was an abuse of the House. The Deep Sea Mining Bill is widely regarded as a Government hand-out Bill and yet the Minister took more than an hour over it—two or three times longer than he would have taken over a Government Bill. The practice needs to be stopped.
Order. May I say to the right hon. Gentleman that I did stop the Minister at the beginning of his speech over time-wasting? The right hon. Gentleman may remember that I interrupted the Minister to suggest that he moved on to the subject at hand. The Chair did its job. The right hon. Gentleman is in danger of questioning the Chair if he is not careful.
I am entirely of the same mind, Mr Deputy Speaker.
Tax avoidance and financial transparency, or perhaps I should say the lack of financial transparency, have of course been high on the Government agenda for the past two years. They even led Prime Minister to make tax transparency and trade his central international focus at the G8 at Lough Erne in June. However, having marched his troops up the hill, rather like the Grand Old Duke of York, the Prime Minister has since proceeded to march them down again. Rather little of significance—that is being generous—has happened on the tax and transparency front since then.
At the G8, the UK published an action plan on tackling some of the issues involved, but it is not unfair to say that it was decidedly modest in its ambition. The same can certainly be said of the scope of the subsequently announced consultation on disclosing the beneficial ownership of companies. The Government have, of course, published the general anti-abuse rule, but as has often been said, it will cover only the most egregious forms of tax abuse and is consequently in danger of appearing to legitimise lesser forms. The GAAR is rather like the lobbying Bill that is currently before the House—the Government are extremely keen to be seen to be doing something, but they have no intention whatever of actually doing much. If we are really serious about tackling tax avoidance and the financial opacity of our tax system, a more robust approach is needed. That is what my Bill is intended to offer.
The Bill was drafted by Richard Murphy, who is the founder and director of Tax Research UK and, I think everyone will agree, one of this country’s foremost tax accountants. I am extremely grateful to him, as I believe the whole House should be.
There are two drivers behind the Bill. One is the demand for fairness and social justice. The country is in the middle of a deep economic recession caused by the bankers, yet the Government have imposed on the victims the liability for meeting the ensuing very high national debt and budget deficit.
No, I am not going to give way. The hon. Gentleman was one of those who engaged in the filibuster, and I am not giving him any more time.
By and large, those victims are the poorer and poorest households, which bear no responsibility whatever for the crash five years ago. According to the Sunday Times rich list, the wealthiest 1,000 persons in the UK—just 0.003% of the adult population—have increased their gains by a staggering £190 billion since the crash. Most of that has now been squirreled away in tax havens, hidden behind nominee shareholdings or secreted in opaque trusts. Frankly, that is utterly intolerable. It is high time that the very richest people in this country made a fair contribution to resolving the financial crisis. The Bill would help them to do so.
The second driver behind the Bill is sheer, plain, down-to-earth, honest-to-God common sense, if I can put it like that. My right hon. Friend the Member for Edinburgh South West (Mr Darling), the last Labour Chancellor, reduced the budget deficit by about a third by the end of 2010 through his stimulatory measures, but it has now been stuck at about £120 billion after flatlining for most of the past three years.
The current Chancellor has, through his enormous expenditure and benefits cuts, persistently squeezed virtually every last drop of demand out of the economy. That is a counter-intuitive and self-destructive policy if ever there was one, because it has plainly not reduced the deficit, but extended austerity indefinitely. A policy that will reduce the deficit significantly is patently needed. The obvious way to do that is to take public sector-driven stimulatory measures to kick-start real growth, but as the Chancellor has a fetish for cutting and is adamantly opposed to giving the public sector any role in promoting growth, I submit that my Bill is the next best option.
First, following the revelations of which we have heard repeatedly in the past few months of colossal tax scams perpetrated by US multinationals Starbucks, Apple, Facebook and Amazon—I recognise that those scams are more or less exactly the same as those perpetrated by a great many UK multinationals—the Bill proposes that the tax details and implied tax liabilities of both the wealthiest individuals and the biggest corporations are made public, and that the beneficial owners of companies who hide behind nominee shareholdings are also made known. That has repeatedly been discussed but never done. My Bill proposes that it should now happen. The tax enforcement that will result from what is revealed will raise tens of billions of pounds for the Exchequer and significantly deplete the deficit and interest payments on the debt. Therefore, the Bill tackles the extreme opacity in the tax affairs of both the largest companies and the wealthiest individuals in the UK by requiring that the tax returns of the top 250 in each group are put on public record.
Four criteria are used to define the 250 largest companies, starting with the FTSE 100. The Bill will ensure that other companies with substantial sales, profits and numbers of employees are also required to disclose. As a result of my Bill, companies that seek to avoid UK corporation tax but that still have a significant undertaking in this country will, for the first time, be required to disclose the full range of their tax dispositions. On individuals of highest net worth—to use the commonly used phrase—the Bill will reveal how income is commonly shifted into capital gains, and in turn reduced by allowances and relief. In respect of both companies and individuals, the data will enable the tax abuse that, according to Her Majesty’s Revenue and Customs and Treasury data, costs this country at least £35 billion a year, to be effectively addressed for the first time.
Secondly, multinational corporations have, as hon. Members know, hidden their activities behind complex and often secret corporate networks that conceal their tax liability—the networks are set up to do that—especially if a subsidiary is incorporated in a tax haven. The Bill requires any multinational corporation to publish the accounts of all its subsidiaries on public record.
Thirdly, the Bill requires that companies identify their beneficial owners and pass the details to Companies House. That is important because the registered legal owners can easily disguise who is behind a company, and thus present an entirely false view of its structure. For example, many quoted companies list only some of their shares on the stock exchange; the rest are in beneficial ownership. Limited liability partnerships are widely used for tax abuse, because members of an LLP are taxed, but not the partnership itself. If the details of ownership are known and put on the public record, the tax liabilities can be correctly assessed. Unlimited companies are almost routinely inserted into major corporation group structures in order to disguise ownership or control, often in ways that are designed to mislead about the true nature of transactions being undertaken. Obviously, foreign branches must be included if an enormous loophole is not to be created in the disclosure of beneficial ownership.
I would be the first to recognise that to presume that a company bent on tax avoidance or other dishonest purposes will necessarily comply with its obligation to disclose its beneficial owners is, frankly, naive. The Bill would therefore also place a new obligation on UK banks to report the information they collect on their limited company clients under money-laundering regulations, including the real trading address of a company, who its directors and beneficial owners really are, and where they are located. The banks would be required to submit that information to Companies House, which would then be required to publish it. The banks would also have to supply the information to HMRC, which would then be required to demand a tax return from any company with a bank account.
The sanctions—and sanctions are the only thing that will make the legislation work—for failing to supply any information demanded from the company by Companies House or HMRC would be either the removal of limited liability status or making directors and beneficial owners liable for the debts. Under the Bill’s provisions, HMRC would also be granted the power to access the company’s bank account data, so that estimated tax assessments could be raised if the company refused to supply accounts. Again, the directors and beneficial owners would be held responsible and would have to pay the consequential tax.
In order to avoid an obvious loophole, the requirement for a company to have information on its beneficial ownership and its accounts on public record—on its own website, or wherever—would be extended to the tax havens in Britain’s Crown dependencies and overseas territories, although of course only if the company in question had a beneficial owner outside that territory.
Finally, the Bill deals with the question of trusts and would require that they, too, declare the true identity of their settler, the trustees and beneficiaries to HMRC. If they do not, the sanction would be that the trust property would pass to the Crown. Trust data will also be placed on public record, but only in the case of those with significant assets or income, and those that control companies—I am not worried about trusts that are relatively trivial in their economic impact. Those measures are necessary to enforce the requirements. The information has always been available to the Government, but under both parties there has been an unwillingness to use the measures that are patently available to ensure that tax is paid in accordance with what Parliament has determined.
It is no exaggeration to say that the effect of these measures on the UK system’s capability would be nothing less than transformational. We have repeatedly been shocked by multinational corporations and their armies of City lawyers and accountants regularly running rings around the UK tax authorities—sometimes, one might think, with the apparent complicity of Government—but that is not inevitable or irreversible. My Bill will redress a massive injustice in tax burdens, put a stop to enormous tax abuse by large companies which has persisted for far too long and make a huge contribution to reducing the budget deficit. I commend it to the House.
It is a pleasure to follow the right hon. Member for Oldham West and Royton (Mr Meacher), partly because I disagree with almost everything he has said, but also because it is rather refreshing that Opposition Members are willing to say it. Most of them hide their true socialist credentials, but the right hon. Gentleman is a socialist red in tooth and claw. That is admirable, because it gives us on the Conservative Benches something to get our teeth into and oppose.
I disagreed with the right hon. Gentleman from the very outset of his speech. I disagree with the way he examined the financial crisis and the blame he places. He puts it exclusively on the bankers, but it is not as simple as that. It takes two to tango—not, I must confess, something I do very often, if ever. The crisis needed people and institutions to borrow the money that the bankers were lending. It needed the regulatory system that was set up by the last Government, which took the Bank of England out of regulating the banks.
That is a complete non-sequitur. The issue is bad regulation, not too much or too little. It is perfectly logical to argue that there was too much bad regulation prior to the financial crisis and not simply think that we need more to solve the problem. I would argue that the Governor’s eyebrow is not something that can be regulated particularly effectively. No Act of Parliament, powerful though Acts of Parliament are, can determine how the Governor should raise his eyebrows or not; on the other hand, that was an effective way of regulating banking and ensuring that banks did not become overextended. Ticking boxes to comply with regulation often ensures that people obey the detail of it, but get away from the spirit. That is certainly what happened with some of the bank capital regulations prior to the financial crisis and some of the behaviour of financial institutions, which followed the letter of the law but got into a great deal of trouble. It was not that there was too much or too little regulation; it was that there was bad regulation.
I disagree with the right hon. Member for Oldham West and Royton on his understanding of the crisis, but I disagree with him even more firmly on the Government’s approach to solving it. Getting the public finances back into good order is the essential foundation for an economic recovery. The idea that the situation could have been improved by spending more each year in deficit, when tax revenues were low and the economy was weak, than we had ever spent in peacetime, is absurd. It would have just put us into a debt spiral. The United Kingdom’s credit would have declined and we would have been unable to finance our annual deficit and our cumulative debt.
I was not proposing any increase in public expenditure at all. The whole point of my Bill is that raising money from the extremely wealthy individuals of this country, and possibly also some corporations, would provide the money to generate probably 1 million or 2 million jobs within a couple of years. That would lead to a far bigger reduction in the deficit than anything the Government have done or just concentrating on cutting expenditure.
The Government had a fiscal tightening and a plan for increasing taxation—which has come through—that forecast taxation going up to over 38% of GDP. Taxation at 38% of GDP is about the highest level that Governments ever achieve. If we go back to Harold Wilson’s prime ministership, we still find that it is almost impossible to get taxation at much more than 38% of GDP. The issue was that spending was so high, not that taxation was too low. The ability to squeeze imaginary rich people to get a lot of money coming in was simply not there. Such fiscal tightening on the taxation side as was possible was undertaken by the Government, but had they gone as far as the right hon. Gentleman proposes, any prospect of economic recovery would have been postponed. The tightening would have been too great, which would have harmed the economy. It would have taken money out of the economy simply to put it into the Government’s coffers. That would have led to a shrinkage of the economy, not least because people would have changed their affairs so as not to pay that extra burden of taxation.
Did not that intervention from the right hon. Member for Oldham West and Royton (Mr Meacher) go to the heart of the difference between his views and ours? His view was that the Government would create all those jobs, whereas it is our view that the private sector companies that he so hates will create those jobs for the economy.
My hon. Friend is absolutely right. It is certainly my view—I accept that it is not the view of the right hon. Member for Oldham West and Royton—that it is the private sector that creates employment. Every job in the public sector has to be paid for by the taxes of the private sector. The public sector has no ability to create jobs without imposing a burden of taxation either now or in the future. I shall not go into the details of Ricardian equivalence, but the electorate understand that extra spending that is borrowed is merely taxation postponed.
In the depths of a recession, the private sector will not take this country or any other country out of that recession. There is £775 billion in corporate cash stockpiles in this country that is not being used. The problem is a lack of demand. The only way to insert demand into the economy is, initially, through a public sector-driven promotion of stimulatory measures. Only when the economy starts to rise will the private sector take off.
Once again, I do not agree with the right hon. Gentleman’s assertion. Placing an extra tax burden on the private sector during the lowest point in a downturn will make that downturn even worse. The cash that has been built up by the private sector is waiting to encourage the recovery as it begins and as the private sector begins to recover. At that point, people become more confident because they have kept their own money, rather than it having being taken by the Government.
I am very glad that my hon. Friend has put it in that way. Sometimes, the Government claim that they have created 1.3 million private sector jobs, and that is a turn of phrase that I particularly dislike. It is not the Government who have done it; it is the private sector.
I am particularly enjoying discussing the right hon. Gentleman’s Bill. It is sometimes alleged that politics has all become too similar and that all the parties agree. That might be true of those on our Front Benches, but there are still some of us on the Back Benches who are willing to put forward in a more forthright way the views that we hold according to our respective political traditions. That certainly makes the debate in the Chamber more interesting.
Having set out my broad-brush objection in principle to what the right hon. Gentleman has proposed, I want to move on to the details of the Bill. And here it gets worse. The Bill is an astonishing, fundamental attack on some of the basic principles that we ought to enjoy. As a taxpayer—I am sad to say that I am not in the top 250, although I would not mind if I were—I have a right to privacy. The Government do not have a right to publish my financial information; that is my private, confidential affair. I am not advocating tax evasion, which is a criminal activity. It is quite right that it should be criminal, and the Government should enforce those laws. However, the prevention of that crime does not require the Government to deny people their fundamental right to privacy.
People’s most personal and intimate financial details, as set out in their tax return, should not be made available to all and sundry, and it is quite right that the tax authorities should maintain vigorous rules of confidentiality, even when appearing before Select Committees of the House of Commons. It is a right that we all enjoy as British subjects that our financial affairs are a private matter. Yes, we have to pay a degree of taxation and, yes, we have to make declarations to the Revenue, but we do so on the understanding that they will be kept confidential. Once this begins with the top 250, the next stage will be the top 1,000 and it will develop further so that nobody has the right to maintain privacy of their own financial affairs. I thus oppose this provision very strongly.
I oppose less strongly the requirements for disclosure by public companies because they have exchanged a right to privacy in return for limited liability, so they are expected to make disclosure and are obliged to do so to their shareholders. Clause 1 deals with “Disclosure of financial information by large companies” and from the perspective of a shareholder as an investor, I believe that I am entitled to such information anyway; and with large public companies, the shareholder list is so extensive that, once that information is given to shareholders, it is effectively in the public domain.
I add at this point that my background and career have been in investment management, so I know that the more information we get from listed companies, the easier it is to do the job of an investment manager and the better the investments it is possible to make. Perhaps inadvertently, then, the right hon. Gentleman will help the investment community in that, if clause 1 were introduced, financial analysts in the City of London would practically be dancing with joy at their ability to find out every single financial statement of large private companies. It might be quite helpful in stopping them from hiding unwelcome, loss-making subsidiaries somewhere at the bottom of the balance sheet, tucking them away under a contingent liability. Because this is essentially dealing with already public companies, I would make no objection to the clause, but I would maintain the privacy of individuals—and of trusts.
I do not think that trusts should be attacked in this way. Trusts are, in fact, one of the glories of the British legal system. They are much less understood on the continent, but they allow many protections to be built into ownership. Trusts allow the protection of minors in how they are structured and they allow continuity in the holding of assets, including allowing some of this country’s great historic treasures to be kept within the country through the trust structure of ownership. Putting unduly onerous charges on them and requirements to report would, I think, be unreasonable.
Looking at the detail, the idea is that, if trusts do not meet the requirements, their income should go to the Crown. That is what happened in the Court of Wards in the 17th century. It was one of the things that caused such trouble between Parliament and the King because the Crown was able to take the estates of minors and effectively ruin them during the minority of the beneficiary. We moved away from that type of arbitrary rule of giving power to the Crown—in this context, it is not a personal Crown; the Crown is the Executive—to do things such as take funds from private property, not in the form of tax, but in a regulatory way, squeezing income for a certain period until onerous requirements are met.
I think that would be an extraordinarily unsatisfactory way of proceeding. It would undermine the right of property—again a fundamental right that we ought to enjoy. Going back to the Magna Carta, the Crown cannot take property away from people unless there is a judgment—a judgment in a court—against them; it cannot be done on the basis of some failure to meet some bureaucratic standard. This seems to me to illustrate where the Conservative, a believer in the rights of property and a believer in the individual, stands up against the socialist, a believer in the collective and the rights of the collective to override the rights of property. I stand four-square in favour of the rights of property and four-square, too, in favour of the rights of the Crown dependencies, by and large, to regulate their own affairs.
The Bill is again onerous in what it requires to be done, by Order in Council, for territories that, by and large, are no longer treated as mere colonies. The Crown dependencies are allowed to develop and run their own affairs and have their own elective councils to take charge of those affairs. The Bill is a throwback to how this country behaved in the 19th century when we felt we had a greater right to order about the non-dominions—with dominions starting, first with Canada, in the latter part of the 19th century. We seem to be taking the Crown dependencies back to a period before dominion status started to be granted. I consider that to be undemocratic, and unfair on them. It attacks their fundamental livelihoods, namely, their ability to provide financial services and a degree of confidentiality at the same time.
There is a fundamental disagreement—and I am not entirely of the Government’s view either—about the attempt to elide tax avoidance and tax evasion. It is very important to be clear about the difference between the two. Tax evasion is criminal, illegal deliberate breaking of the tax law; tax avoidance is following the law as it is written. It seems to me that, when people are being accused of avoiding tax, it is the job of Parliament to pass good laws that make that avoidance difficult, and to make the tax collectible by Act of Parliament, rather than turning the position the other way round and saying “We are not very good at writing tax law, and therefore we will make you disclose absolutely everything so that, ex post facto, we can determine how much tax we think you ought to have paid.” That strikes me as fundamentally unjust.
It has been a solid principle of British law for decades formally, but for centuries effectively, that the individual taxpayer does not have to arrange his affairs so as to increase the amount of tax that the Revenue is entitled to take. It is an important part of justice that the law should be clear, and should be enforced fairly.
I entirely agree with my hon. Friend. It seems bizarre that people should be criticised for following the law of the land.
The Government have introduced a new concept, that of “aggressive tax avoidance”. Given my hon. Friend’s expertise, I wonder whether he can explain to us the difference between tax avoidance and aggressive tax avoidance.
My understanding of aggressive tax avoidance is that it is, in fact, tax evasion when the Revenue has not yet got around to taking action. One of the schemes reported in the newspapers involved some comedian whose name escapes me: he is modern, and apparently very funny if you like that sort of thing. What he was doing struck me as evasion, not avoidance, although that was not directly his fault. It seemed to me that the scheme was so far removed from any sensible understanding of the tax law that “aggressive tax avoidance” was essentially a euphemism for “We will try to scrape things back rather than charging people.” I should prefer to see Her Majesty’s Revenue and Customs using the law as it is, and testing the law in the courts to establish whether such activity really is evasion. If it proves to be evasion, people should be punished accordingly, and if it proves to be avoidance, it should be considered legitimate.
I do not think it is possible to say that there is the law, there is the non-law, and somewhere in between there is something that the Government would quite like us to do. There are an awful lot of things that the Government would quite like us to do. At one point, they wanted us all to eat five vegetables a day. Indeed, they probably still want us to eat five vegetables a day, but that cannot be law. It is wrong to try to say that good behaviour, generosity and charity should be a matter of law. That is a different concept. The law, with all the might and power and sanction behind it, is a more absolute thing than that.
Sometimes the Government want people to avoid tax. Sometimes they allow people to do that because, although they do not much like it, they cannot stop it. Let us take, for example, people who bring cigarettes into this country from abroad. There is an agreement with the European Union that, if people have bought cigarettes in another member state, they are entitled to bring them in. In that way they collectively avoid, probably, billions of pounds’ worth of tax. Duty free is tax avoidance, a form of tax avoidance that some of us rather enjoy when we have been a bit further afield than the European Union. Pension funds are tax avoidance. Individual savings accounts are tax avoidance. All those elements of tax avoidance are elements of which the Government approve. It is, I think, unreasonable to say that people should arrange their affairs so as not to take advantage of legitimate tax avoidance that is in the legislation—and who is then to decide whether the tax avoidance provided by pension contributions is legitimate or the tax avoidance provided by some business start-up scheme has suddenly become illegitimate? It is the law that should be deciding these things, and the best way to solve the problem is not by denying people the right to privacy, not by confiscating their property, not by excessive and onerous burdens on the taxpayer, but by having a much simpler and clearer tax system without the Government giving all sorts of incentives to do one thing rather than the other.
We need a more Ronald Reagan-style approach to taxation where deductions are removed and rates come down. That leads, by and large, to more people paying their tax. If we go down the other route and have an incredibly onerous reporting system and put ever more burdens on individuals and on trusts, all that will happen is that those on The Sunday Times rich list—a vast number of whom are foreign nationals who have come to live in this country, and who are very mobile and who bring wealth, prosperity and employment into this country—will take up their wealth and leave.
What sort of a nation do we want to be? Do we want to be a nation that encourages enterprise, that believes in freedom, that respects the right of property and, crucially, the rule of law, or do we want to be a nation of arbitrary Government? The choice is very clear, and I am very grateful to the right hon. Member for Oldham West and Royton for bringing before this House the question of whether we want the fundamental arbitrariness of socialism: the belief that the state—the collective—comes first, and individual rights and privacy are trampled upon to ensure that the state can get what it feels like. That is not the nation I want to see us become. I want one, as we have historically been, based on strong and enterprising individuals who obey the law because they feel that the law is part of them and part of the nation they belong to. Therefore, I hope this Bill will be utterly rejected.
It is, as always, a great pleasure to follow my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). I entirely concur with his remarks and rise to oppose the Bill. I entirely accept that the right hon. Member for Oldham West and Royton (Mr Meacher) has introduced this Bill with the very best of intentions. I am sure he wants to achieve for the people of our country the same as I want to achieve for them: improved conditions and high-quality public services. However, I am by no means convinced that the way to do that is by introducing measures such as those contained in the snappily titled United Kingdom Corporate and Individual Tax and Financial Transparency Bill.
When I first read this Bill, I did not know where to begin in expressing my thoughts as to just how bad a piece of proposed legislation it was. I do not criticise the manner in which it has been prepared and written, I hasten to say. I am sure that Richard Murphy, who prepared it, has done an excellent job, and I have read the article he wrote about it. I am sure that he, too, had only the best intentions when he put this Bill together. However, it does absolutely nothing to increase the wealth of this nation. It does nothing to help generate new industry and new services, or to promote economic growth. I am prepared to accept that the Bill is born out of intentions that were good, but I fear that it will have nothing but the opposite effect.
I was surprised and disappointed, perhaps in equal measure, that no explanatory notes accompanied the Bill—there were none in the Vote Office when I asked for them—and no assessment had been provided of its possible impact on British companies and individuals. Without an impact assessment, I can only imagine what the impact would be. I shall discuss my conclusions and imaginings in due course, but I assure the House that they were not that the Bill augured well for this country’s prosperity.
I am grateful to my hon. Friend for that intervention, which I can answer in one word—yes. I absolutely believe the Bill would increase the regulatory burden on companies. We must draw a distinction here, as my hon. Friend the Member for North East Somerset did. Large, well-resourced public companies may have the capability and capacity to deal with yet another piece of legislation, and, as has been mentioned, there may well be good grounds, particularly for financial analysts, for this information to be in the public domain. However, the Bill goes far, far wider than just the top 100 public companies—the FTSE 100 companies.
My reading of clause 2, on which I am prepared to be corrected if I am wrong, is that the next 150 companies are not necessarily public companies. Subsection (1)(b) refers to
“those 50 large companies, not being members of the FTSE 100, that have, when arithmetically combined with their UK resident related undertakings, the largest by value UK taxable profits before the offset of all tax allowances and reliefs of any sort whatsoever in a year ended 31 March”.
That does not restrict the provision’s scope to public companies, so one must conclude that private companies will be included. The same applies in respect of paragraph (c), which deals with the next 50 largest companies by their
“value of supplies in the United Kingdom, whether chargeable or exempt, for the purposes of value added tax”
and paragraph (d), which deals with
“those 50 large companies”
“the largest liability to make payment of income tax and national insurance contributions”.
In other words, the greatest employers in our land are being attacked by this Bill. I cannot believe that the Bill will encourage those companies, so the answer to the question asked by my hon. Friend the Member for Dover (Charlie Elphicke) is yes, it will undoubtedly add to the burden, particularly for the banks.
I praise the right hon. Member for Oldham West and Royton (Mr Meacher) for bringing the Bill to the House as he is a sincere campaigner against tax avoidance—a concern I share. Does my hon. Friend agree, however, that a better way to tackle tax avoidance is to get rid of the loopholes by simplifying our tax system and making it easier for people to understand?
My hon. Friend is absolutely right. My view—I suspect it might well be that of my hon. Friend, too—is that if the Government wish to increase the tax yield on behalf of the nation and to make it easier for individuals and companies to abide by their obligations, the way forward is to pass simpler tax legislation that we can all understand. I am sure that my hon. Friend has greater expertise in these matters than I do, but I have always found tax legislation particularly difficult to follow. I do not know the latest figures for Tolley’s tax guides, but when I was in practice in the legal profession they were substantial volumes and I suspect that they can only have grown in the past few years. Each one, on one tax alone, is a substantial doorstop.
It is no surprise that loopholes are discovered by accountants and tax advisers because the law is so complex and convoluted. There are so many different taxes, some of which overlap, that there is scope for tax loopholes to arise by accident. Governments do not set out to create tax loopholes other than those that are set out in legislation by design, they are precisely what they are called—tax loopholes.
As has been mentioned, it is often the Government’s desire to create what might be called loopholes, such as ISAs. I have been waiting to get to this point, as it gives me my second opportunity this morning to refer to ISA. This time, I do not mean the International Seabed Authority but the individual savings account. Before I looked into deep-sea mining, that was the only form of ISA I had heard of. ISAs are a form of tax avoidance set up to replace personal equity plans and were established as a means of encouraging people to save. They were set up to encourage private individuals to save in a tax-efficient manner in that they would not have to pay income tax on the income their account had earned. That could be called a tax loophole, but it is a legal tax loophole set up by the Government.
Let me return to the Bill. We must draw a distinction between tax evasion and tax avoidance. Let us be clear: tax evasion is already illegal, but almost weekly in this House I hear the two terms being confused. People say that someone has been a tax avoider, suggesting that they have acted illegally. Well, if they have, they are not a tax avoider; they are a tax evader, and they should be brought to book and prosecuted. I have no sympathy with them whatsoever. If someone has deliberately under-declared their income, I entirely agree that they should be brought to book by the Revenue and Customs, that they should be prosecuted and, in certain cases, sent to prison. Let us not beat about the bush. I am sure I am in agreement with my hon. Friend the Minister on that. I do not want to go easy on people who have deliberately avoided their obligations to society by breaching our tax legislation in such a way as to avoid paying their dues and demands under the law. That increases the burden on everyone else.
Of course, we already have measures in place to provide the mechanism for the Revenue to ferret out these people. It can open up inquiries into their tax affairs, and it frequently does. A whole industry exists around dealing with inquiries into people’s tax affairs. My accountant sent me details of an insurance policy that I could take out for that very occasion. I could pay a premium, and then if my tax affairs were investigated by the Revenue, the policy would cover my accountancy costs while the inquiry was dealt with.
However, returning to the Bill, our Government have already taken a great deal of action on tax avoidance and tax evasion. Since 2010, the Government have collected over £23 billion in extra tax by challenging the tax arrangements of large businesses. I am informed that, by tackling transfer pricing alone, the Government have collected £2 billion since 2010. It may well be that the right hon. Member for Oldham West and Royton is introducing the Bill because he thinks that those figures are not high enough. If the measures in the Bill are such a good idea, why, in the 13 years of the previous Labour Government, under Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), was none of these measures introduced? If it is such a good idea now, why was it not such a good idea then? I do not know whether my hon. Friend the Minister ever went to the Treasury team at the time with this Bill and said, “Look, here is the answer to our problems.”
Order. The debate is not about then; it is about now, and it is about the Bill before us. I do not want a debate on whether it should have been done in 1985 or 1998; it is about now. I know that you are very good at wanting to get into the detail of the Bill; you must get back to it.
Thank you, Mr Deputy Speaker. I would just make the point that perhaps the reason why such legislation was not introduced by the last Labour Government is that it is not a very good idea. I will attempt to demonstrate, if I may, by looking, as you rightly suggest, at the detail of the Bill, why it is not a very good idea.
Detailed the Bill indeed is, running to 13 clauses. It deals essentially with three elements: the disclosure of the tax affairs of large companies, the tax affairs of individuals, and the tax affairs of trusts. Those are the three primary areas that the Bill seeks to attack. The first of those relates to large companies, which, in answer to the question of my hon. Friend the Member for Dover, we have already established covers not just public limited companies but those purely in the private sector.
The Bill provides that the Companies Act 2006, passed under the last Labour Government, should be amended by adding new section 409A, which would require a company to provide in respect of each one of its related undertakings its registered name; the jurisdiction of its incorporation; its company number; the jurisdictions in which it trades; the trading name it uses in each jurisdiction if that is different from its registered name; the precise nature of its trade, sufficiently described in such a manner as to enable those activities to be accurately identified; the percentage of the related undertaking controlled by the company; a statement of the turnover, net profit before tax, current taxation liability owing, number of employees and their total employment cost and the net assets of the related entity for the period for which the company is reporting, whether such data be audited or otherwise; and finally, the web address where the most recent financial statements can be found. If that does not increase the burden on companies, I do not know what does.
The real danger with all this added bureaucracy and red tape is that it makes this country a less desirable place to do business. As I said earlier to my hon. Friend the Member for North East Somerset, there may well be merit in respect of a public company putting this information in the public domain, but I do not see that to be case in respect of private limited companies, which are not excluded. Certainly I do not see the benefit in respect of individuals.
Clause 3 places on HMRC an obligation, no later than 1 March each year, arithmetically to combine for each taxpayer who has submitted a tax return by 31 January in respect of all their taxable income of all sorts, with a few exceptions, and to publish those in descending order of magnitude—in other words, the 250 wealthiest individuals. This clause gives the revenue just one month to complete the task. The tax returns need not be in until 31 January, and within one month it has to have carried out this rather complicated calculation, which I will not go into the details of. Subsection (2) requires HMRC to publish, no later than 15 March each year, the 250 tax returns for the previous tax year ended on 5 April that ranked highest on the listing produced in accordance with the provisions of subsection (1). Subsection (3) requires that they should not be anonymised, and this is the crucial point about this clause—they would all be public information. In other words, the private tax affairs of any individual will no longer be private.
I can draw only one conclusion from that: there is a real risk that, were the Bill enacted, it would cause the wealthiest individuals in our society—I hasten to add that I very much doubt the Bill would ever bother me—to go elsewhere. We as a nation would lose their wealth and the income it produces. To return to the point with which I started, I fail to see how that would benefit what both the right hon. Member for Oldham West and Royton and I want to see, which is improved public services. We would not be able to improve our public services if the wealthiest individuals in our country and all the tax they pay disappeared as a result of onerous and intrusive obligations that the Bill imposes on them. They would simply use their wealth to look around the world, find a more suitable home and tax regime and leave our shores.
I want to address in particular the obligations that the Bill places on our banks, because they give rise to a great deal of complication. Clause 5 requires financial institutions to
“notify Her Majesty’s Revenue and Customs and Companies House that they have opened or closed an account in the United Kingdom for a company within thirty days of that account being opened or closed stating—
(a) the name and registered number of the company;
(b) the address at which they correspond with that company;
(c) the names and full addresses, dates of birth and nationalities of those persons who they have accepted as having authority to take action with regard to the account;
(d) the names and addresses, dates of birth and nationalities of those persons who they have identified as the beneficial owners of the company in question as required by Regulation 5 of the Money Laundering Regulations 2007;
(e) the number of the account that they have opened; and
(f) the numbers of any other accounts that they maintain for the company.”
I may be reading this wrongly, but there does not appear to be any question whatsoever about the size of the company. It does not say that the company has to be of a certain size; it simply says that if a company opens a bank account, it has a duty to report it. That covers literally thousands and thousands of bank accounts. It would increase enormously the burden on our financial institutions and banks at a time when we want them to concentrate on the much more important task of getting the British economy moving again and on lending to businesses. I do not want our bankers to have to fill in forms and write down the names and addresses of companies and the addresses to which they write. That would stop them doing their primary task, which is to play their part in getting the British economy moving and growing. As we know, it is starting to grow, but there is much more to do.
Let us be clear: no one is suggesting that the Bill does not have the best of intentions behind it. However, the Government have already increased significantly the compliance yield, which is the amount that the Government expect to get from tax—
The debate stood adjourned (Standing Order No. 11(2)).
Ordered, That the debate be resumed on Friday 1 November.
Business without Debate
Face Coverings (Prohibition) Bill
Motion made, That the Bill be now read a Second time.
Bill to be read a Second time on Friday 28 February 2014.
National Service Bill
Motion made, That the Bill be now read a Second time.
Bill to be read a Second time on Friday 28 February 2014.
European Communities Act 1972 (Repeal) Bill
Motion made, That the Bill be now read a Second time.
Bill to be read a Second time on Friday 28 February 2014.
Local Government (Review of Decisions) Bill
Motion made, That the Bill be now read a Second time.
Bill to be read a Second time on Friday 13 September.
Specialist Printing Equipment and Materials (Offences) Bill
Motion made, That the Bill be now read a Second time.
Bill to be read a Second time on Friday 13 September.
Work Capability Assessments
Motion made, and Question proposed, That this House do now adjourn.—(Mr Syms.)
I welcome this opportunity to raise an important aspect of employment and support allowance and the work capability assessment. This is my fourth Adjournment debate on the subject. In each debate, I have started by highlighting the scale of the problems with the benefit. Although many people who listen to or read this debate will be familiar with the procession of figures, it is important to put them on the record again.
Between the introduction of the assessment in October 2008 and May 2012, 1.47 million new claimants were assessed and 846,800 were declared fit for work. Of those, 332,300 appealed the decision and 123,700 were successful and were awarded employment and support allowance. That means that nearly one in 10 of the assessments has been overturned. Although the proportion of the assessments that are overturned has started to fall a little, the overall number remains very high. Those are the figures for new claims. They do not include the regular reassessments of those who are already on ESA, nor do they cover all the incapacity benefit claimants who are being migrated to ESA—a process that is due to be completed in 2014.
I will briefly summarise the progress, or lack of it, with regard to the other concerns that I have raised in the past 18 months. In May last year, I argued in favour of a new set of mental health descriptors that had been drawn up by Mencap, Mind and the National Autistic Society. An evidence-based review was commissioned to evaluate those descriptors and I understand that the report is due to be published imminently. In December, I highlighted the fact that claimants were regularly being called back for reassessments just months after their previous claims had been granted on appeal. I regret that that is not being properly addressed by Ministers. I continue to meet constituents who are still on that stressful and unnecessary merry-go-round.
Just before the summer recess, I secured a commitment from the Minister that claimants would be informed that they could have their assessment recorded, and that the time limits that were preventing that from happening would be dropped. I continue to urge the Minister, when assessing whether audio recordings improve the quality of assessments, to consider the rate of successful appeals, rather than just the demand among claimants for audio assessments.
Before I move on to the specific issue that I want to cover today, I must highlight the announcement that the Minister made on 22 July. He admitted that some Atos reports were so poor that staff were being retrained and additional providers brought in. Given that the Government now acknowledge that there are major problems with the assessment process, it is even more important that we ensure that financial support is available to those who are wrongly found fit for work. That is what I want to focus on today.
To put the matter into context, as soon as a claimant contacts the Department for Work and Pensions to claim ESA, they are paid it at what is known as the assessment rate, which is equivalent to jobseeker’s allowance. That lasts until they go through the first assessment and a decision is made on their claim. If they are declared fit for work and believe the decision is wrong, they can ask the decision maker, who is a DWP official, to reconsider it before they lodge a formal written appeal with HM Courts and Tribunals Service. I want to focus on that in-between period, which is referred to as reconsideration but is effectively an informal appeal.
Although claimants are not automatically paid ESA at the assessment rate during that in-between period, they are entitled to it and can apply for it if they know about it. That entitlement continues if the decision remains unchanged and the claimant decides to appeal. However, following the passage of the Welfare Reform Act 2012 and subsequent regulations, that is set to change. Claimants will have to apply for reconsideration before they can lodge an appeal, and they will no longer be entitled to ESA at the assessment rate during that period.
The Minister’s colleague Lord Freud admitted in the other place on 13 February that, as a result of that change, there would be a “gap in payment”. Initially, that might not appear problematic. Claimants will be told that they can simply apply for jobseeker’s allowance instead while their reconsideration request is being considered, then go back to claiming ESA at the assessment rate if they go to formal appeal. Leaving aside all the procedures involved in doing that, there is a serious problem for people in that position in claiming JSA. It comes with a great degree of conditionality. In particular, claimants have to be available for and actively seeking work. They must attend regular work-focused interviews, undertake job searches and make a minimum number of applications every week. That in itself may prove tiring or stressful, and it could exacerbate people’s existing physical or mental conditions. More importantly, those who apply and fail to meet those conditions can be sanctioned or refused benefit altogether. I have encountered situations where Jobcentre Plus has advised claimants that they cannot claim JSA because they are not fit for work, for example because they have a fit note—what used to be called a sick note—from their doctor.
Conditionality is not new, but the new mandatory reconsideration stage will interact with it to have an adverse effect on people who are ill or disabled and have to apply temporarily for JSA while their ESA claim is undergoing reconsideration. The state will effectively be telling those people that they are too fit to claim ESA but too sick or disabled to claim JSA—a veritable trap.
Although mandatory reconsideration has yet to come into full effect, my constituent Ms Rose Burgess already faces that predicament in a related situation. She suffers from arthritis and depression, and she applied for ESA earlier this year. She underwent a face-to-face assessment and was declared fit for work. She appealed, and the judge upheld the DWP’s original decision. However, when she then claimed jobseeker’s allowance, she was told she was ineligible because she had a fit note from her GP. She was not entitled to ESA, and she was told that she was not entitled to JSA either. Her condition has since deteriorated further and she has now reapplied for ESA and is awaiting the application of her fresh application, but her example shows how easy it already is for people to slip into the limbo between ESA and JSA, even without the mandatory reconsideration period.
Similarly, another constituent who suffers from back problems was claiming JSA. His problem flared up when he was due to attend his work-focused interview. When he arrived at his jobcentre and explained that he would be unable to manage to climb up the stairs to where the interview would take place, he was told that his claim would be ended because he was not fit for work. He raised the matter vigorously and the situation was rectified fairly quickly, but that example demonstrates the emphasis placed by jobcentres on JSA claimants being fit and available for work.
For people whose claim to ESA is marginal and whose health problems are not too great—some people might believe that is what I am describing—a brief period on JSA might be just about manageable. However, Camberwell Myalgic Encephalomyelitis Support Group has told me that it currently works with many people who score zero points on their initial assessment, but who, after appeal, are placed in the support group. The appeal shows that they have serious health conditions, but they might find themselves in that position. The Camberwell group says that many of those whom it helps find that they cannot physically get to a jobcentre on certain days, as is required under JSA.
The scale of the problem that people are likely to face is exacerbated because there is less discretion on sanctions than previously. A leaked memo from Walthamstow Jobcentre Plus showed earlier this year that a targets culture appears to have emerged on sanctioning, whether or not Ministers have explicitly sanctioned it. At the very least, we must consider reintroducing a degree of flexibility in the sanctions regime when we are dealing with people who have health problems.
In the other place, Lord Freud referred to other sources of income that people could access during that period, but I am not clear what he meant by that. I expect that most claimants are similarly at a loss. I would be grateful to the Minister if he could explain what other sources of income people could access.
One way to limit the impact of the gap in payment would be for the Government to set a statutory time limit on how long the Department for Work and Pensions can take to complete a reconsideration. However, they have deliberately omitted to do so. On 13 February, Lord Freud stated that “a number of respondents” to the Government’s consultation
“suggested that there should be a time limit on the reconsideration process…we are not making any statutory provision for this. Some cases are more complex and require additional time—particularly, for example, where extra medical evidence needs to be sought. However, we recognise the concern here and are considering the scope for internal targets.”—[Official Report, House of Lords, 13 February 2013; Vol. 743, c. 744-45.]
I fear that non-binding and non-public internal targets simply will not be adequate, especially given the pressure that the much-reduced Department for Work and Pensions staff are under. As a result, it is possible that people who will eventually be deemed entitled to support will be left without income for a protracted period.
I raised the issue with the Minister at the Select Committee on Work and Pensions on 21 November 2012, and asked about it again at Work and Pensions questions on both 11 March and 20 May 2013. On the last occasion, he emphasised that, if people do not claim JSA, their ESA claim would be backdated should they appeal and have their fit-for-work decision overturned. However, in many cases, the damage will have been done. With no income during that period, people run the risk of becoming destitute. Many will have to rely on already stretched food banks. Some will be driven into the hands of payday lenders, amassing debts they will struggle to repay even if benefits are subsequently reinstated.
The Minister can do a number of things to address the problem. At a minimum, it would be helpful if he provided the House with information, first to confirm exactly when the new system of mandatory reconsiderations will begin. Secondly, he could give the House information on what alternative sources of income people have if they cannot claim either ESA or JSA. Thirdly, he could tell us what internal targets he will introduce on the time taken for mandatory reconsiderations.
Several changes would help at least to alleviate the worst effects of this policy. One example would be to reintroduce a degree of flexibility into the sanctions system, so that ESA claimants declared fit for work and having their claim reconsidered are not subject to normal JSA sanctions. Alternatively, the Minister could put a statutory limit on the time DWP can take to conclude the reconsideration process. But the one thing that would resolve this issue entirely would be to amend the regulations to allow ESA claimants to continue to receive ESA at the assessment rate during the reconsideration period. Otherwise many people who the state will later conclude should not be available for work will be required to claim a benefit that explicitly requires that they should be. Many people will end up without any support from the state, being too fit for ESA, but too sick or disabled for JSA.
I thank the hon. Member for Edinburgh East (Sheila Gilmore) for raising the issue of the reconsideration of work capability assessments and for letting me see a copy of her speech in advance, which I hope will enable me to answer the points that she has raised. She may not be satisfied, and doubtless she will come back again if that is the case.
The hon. Lady is interested in how the new mandatory reconsideration process will affect ESA claimants who are found fit for work. In this regard, I intend to address her main concerns on the length of time a mandatory reconsideration will take and the availability of JSA to those people who are found fit for work. Before I consider those concerns, it is important to give the issue some context and explain why we have introduced mandatory reconsideration.
To put the matter at its simplest, the current disputes process does not work for benefits in general or ESA in particular. The introduction of the ESA in 2008, and particularly the conversion of incapacity benefit awards to ESA, has—as the House will know—resulted in a high volume of appeals, with more than 500,000 last year.
The Government have taken a series of steps to improve the WCA process but we accept that people will appeal. The Government do not believe that it is acceptable to write people off to a lifetime on benefits because they have a health condition or impairment. Many people with health conditions are able to sustain and progress in employment. Evidence points to the negative impacts of being without work and suggests that work is generally good for people regardless of whether they are disabled or not.
The Department therefore needs to ensure that people currently receiving incapacity benefit and ESA are supported in preparing for a return to work where some form of employment is a possibility. Claimants are being reassessed using the WCA. This is based on the principle that a health condition or impairment should not automatically be regarded as a barrier to work. It has been designed to be a more accurate reflection of an individual’s capability for work, taking account of modern workplaces, health care and legislation.
The volumes of appeals are placing some strain on the appeals system. We also recognise that the process can put pressure on claimants too. That is why a claimant can ask for a decision to be reconsidered. It was intended that people would ask for this reconsideration in the first instance if they felt their decision was wrong. In practice, however, many people do not do so and instead make an appeal from the outset. This is more costly for the taxpayer; more time consuming and more stressful for claimants and their families; and, for a significant number of appellants, unnecessary. I say unnecessary because a significant number of decisions are overturned on appeal because of new evidence presented at the tribunal—more than 55% in recent months. This is mainly oral evidence, which accounts for 70%, but also includes written evidence that has not been considered by the decision maker.
I hope that hon. Members will agree that we need a process that enables this evidence to be seen or heard by the decision maker at the earliest opportunity. Mandatory reconsideration does just that. Another decision maker will review the original decision, requesting extra information or evidence as required via a telephone discussion. If this means a decision can be revised, there is no reason for an appeal—an outcome that is better for the individual, the Department and the Tribunals Service. We hope that, because of the robust nature of the reconsideration and the improved communication, the process will result in either decisions being changed or claimants making an informed decision not to escalate their dispute to an appeal tribunal.
The Minister’s argument about the appeals process often relates to whether evidence is available in the first place. However, a number of my constituents and those of a lot of my colleagues say that such information is not requested in the first instance, at the time of the WCA, more and more of which are done through paper-based applications, as I am sure he is aware. If people were asked for that information, it would not have to be looked at later.
The hon. Lady has looked into this matter in detail, and I am sure she will recollect my comments about where we seek further medical information from health care professionals, as nominated by the appellants themselves. The problem is straightforward. Too often, either the information is not supplied by the health care professionals from whom we have sought additional medical evidence or it is supplied too late to be taken into account. Where we seek medical evidence, there is a broader responsibility on those from whom we seek it to respond in a timely manner. That, too, would help the process.
Let me turn to the concerns raised by the hon. Lady. The first was the time it will take for a reconsideration. Although we are not introducing a statutory time limit for decision makers, I assure the House that we will have a process geared to timely decision making. Anything less would be frankly unacceptable. We owe it to claimants not to delay their right to exercise their right of appeal. However, the time taken will depend on whether the claimant intends to provide new evidence—obtaining it could take some time, as I said in connection with the first request for further medical evidence—and whether the decision maker needs to seek further advice on that evidence from Atos. If there is nothing new for the decision maker to consider, he or she can get on and make that decision.
However, the key is quality, not speed. There would be no benefit to anyone in rushing the process, effectively forcing an appeal and then having it allowed at a hearing some time later. The new process is aimed at getting decisions right, not simply passing disputes to the tribunal to resolve. Equally, however, it is in no one’s interest for this to be an open-ended procedure. We will monitor the introduction of the change for the first six months. In April 2014, we will look at the times taken and consider whether we have enough information to introduce realistic internal targets.
During the mandatory reconsideration phase, when someone is fit for work and not in work, they will be entitled to jobseeker’s allowance. I accept that someone seeking a reconsideration is likely to protest to the jobcentre that they are not fit for work. However, that does not rule out entitlement to jobseeker’s allowance. That is the case even where the claimant presents a fit note. Disability employment advisers, trained by specialist staff from the Department, will work with those who identify themselves as having a health condition or disability. They will take into account individual circumstances, including any advice given by the claimant’s doctor, and will consider placing limitations on a client’s availability or modifying their conditionality. There is nothing new about this.
The hon. Lady also expressed concerns about claimants being sanctioned while on JSA. Let me address that point. To reiterate, the modified conditionality militates against a sanction being imposed. If the adviser has agreed to modify conditionality, it would be perverse if they then took a heavy-handed approach. As I have previously informed the House—let me take the opportunity to repeat this—there are no sanction targets. It was this Government who removed the sanction targets—they were in place under the previous Government. We continue to monitor to ensure that sanctions are applied consistently and only where appropriate. The hon. Lady asked what would happen if a claimant were subject to a sanction. She will know—I think she might have served on the Delegated Legislation Committee that dealt with this—that a claimant can still apply for hardship payments.
A health condition or impairment should not automatically be regarded as a barrier to work; in fact, there are many people who juggle work and a health condition. Such claimants might be disputing their decision, but at that time they have been through an assessment process and are, in the eyes of the law, fit for work. The appropriate benefit is jobseeker’s allowance, and it is appropriate that we apply conditionality that is tailored to claimants’ needs so that we can move them closer to the labour market and, we hope, back to work.
It has been suggested that we should pay employment and support allowance during that period because of the standard of decision making on ESA, as evidenced by the number of decisions overturned on appeal. Let me just remind the hon. Lady of the statistics that demonstrate the quality of the decisions made. Between October 2008 and February 2012, around 800,000—about 15%—of those decisions that found the claimant fit for work were overturned on appeal. She will know, having looked into this, that a significant proportion of decisions are overturned at tribunal because of oral or written evidence being presented at the tribunal that has not been discussed with or seen by the decision maker. It is that new evidence that is the reason for the overturning of a decision. As I stated earlier, we hope that mandatory reconsideration will allow that new evidence to be discussed at an earlier stage, leading to a decision being revised if necessary. We need to try to accelerate the process so that we can get the decision right first time and as soon as possible.
Given that the Minister has conceded that there were substantial failings in the initial WCA process, and that steps have been taken to retrain staff, to bring in outside staff to give further advice and to bring in other providers, surely this is not simply a problem of new evidence being presented to the tribunal. Is there not a flaw in the system?
No, I do not agree with that. If the hon. Lady goes back to the statement that my noble Friend Lord Freud made in the other place in July, she will see that that is not the case. There was an issue with the quality of the recording of the assessments, but not necessarily with the quality of the assessments themselves. That is a very different matter.
We are not complacent. That is demonstrated by the tough way in which we have responded to Atos’s failings. There is always room for improvement, and much is happening. The hon. Lady will be familiar with the recommendations made by Professor Harrington in his three reports. They included proposals for improving the ESA forms to encourage claimants to provide their own evidence, for better contact between decision makers and claimants at the decision-making stage, and for enhanced training and guidance for decision makers. There was also a proposal for a simpler and more empathetic process to be adopted for the assessment of cancer sufferers, with more claimants being placed in the support group, the better to reflect their difficult circumstances. We are also learning from the tribunal decisions made as part of our summary reasons pilot. I am confident that accuracy will continue to improve and that the proportion of decisions overturned will continue to be reduced.
I understand the Minister’s concern about information and about ensuring that the process is carried out timeously. One suggestion that has emerged from the discussions is that the time for submitting the ESA50 could be extended from four to six weeks, which would give people more chance to get the necessary information together.