House of Commons
Tuesday 29 October 2013
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Business before Questions
London Local Authorities and Transport for London (No. 2) Bill [Lords]
Third Reading opposed and deferred until Tuesday 5 November (Standing Order No. 20).
Hertfordshire County Council (Filming on Highways) Bill [Lords]
Second Reading opposed and deferred until Tuesday 5 November (Standing Order No. 20).
Oral Answers to Questions
Foreign and Commonwealth Office
The Secretary of State was asked—
Palestinian Child Detainees
1. What assessment he has made of the treatment of Palestinian child detainees in Israel. (900728)
Before answering, may I briefly place on the record my appreciation of the work of my predecessor, my hon. Friend the Member for North East Bedfordshire (Alistair Burt)? He will be greatly missed by his many friends in the House and across the region.
Despite some progress, we retain serious concerns about Israel’s treatment of Palestinian child detainees. The British ambassador in Tel Aviv wrote again to the Israeli Justice Minister on 14 October to urge further action.
I welcome the Minister to his new post. May I commend the Foreign Office report “Children in Military Custody” for exposing how the authorities in Israel arrest Palestinian children in the middle of the night, interrogate them without parents or lawyers present, bully them into signing confessions in a language they do not understand, and jail children as young as 12 years old? Will the Minister outline what action he is taking and tell the House how many of the 40 recommendations in the report have been carried out?
I am due to make my first visit to the region next week, so will be addressing many of the concerns outlined in the hon. Gentleman’s question. As he knows, the Foreign Office funded the report carried out by Baroness Scotland. We continue to urge the Government of Israel to implement it in full. As I have said, I will be taking that up next week.
I warmly welcome the Minister to his responsibilities—if I may say so, he brings a terrific track record.
Does the Minister agree that the question of detainees is inextricably linked to the overall security situation in the region and progress in peace talks? Does he share my concern that Hamas is resolutely and literally trying to undermine the peace process in the region by building a tunnel from Gaza into Israel, no doubt for the purposes of promoting terrorism? What can we do to remove that obstacle?
That was quite a cheeky attempt by the hon. Gentleman. I think the Minister should try to focus his remarks on the issue of child detainees. We are grateful to him for doing so.
Thank you, Mr Speaker—it will, of course, be a great pleasure.
As I said in my answer to the previous question, I look forward to my initial visit to the region next week. The concerns that my hon. Friend raises will be a topic of much discussion. The encouraging thing is that, for the first time in many years, we are in a process. I encourage both sides to engage in that peace process for the greater good of the country and the region.
When the Minister visits the region, will he raise with his Israeli counterparts why Israel is the only country in the world that systematically tries children in military courts, and why about a quarter of the children currently in custody are held in Israel, which is also contrary to international law?
Yes, I will do so. As I have said, the Foreign Office helped to fund Baroness Scotland’s excellent report into many of the issues surrounding child detainees. We not only funded that report, but entirely support it. During my time as a Minister, I will do everything I can to ensure that its recommendations are properly and correctly implemented.
I join hon. Members who have concerns about the treatment of detainees, but is it not important to focus on the source of the problem, which is Palestinian children being infected by the glorification of violence and hate education, which, sadly, are supported by the Palestinian Authority? Can the Minister assure me that taxpayer funding does not support such activities?
Yes, on the basis of three weeks’ work, I can give my hon. Friend that assurance. In a sense, his question points to the importance of everybody concerned getting behind the peace process. If that comes successfully to fruition, many of those problems will be solved in its wake.
Detention of British Nationals (Russia)
2. What representations he has made to the Russian authorities regarding the recent detention of six British nationals in that country. (900729)
My right hon. Friend the Foreign Secretary raised the matter with the Russian Foreign Affairs Minister on 25 September and again on 6 October. Our ambassador in Moscow did the same with Deputy Minister of Foreign Affairs Titov of Russia on 22 October.
I thank the right hon. Gentleman for that answer, but there are reports that some British nationals in Murmansk prison have not had access to medical attention, and that some are in solitary confinement. What representations have the Government made regarding the conditions of their pre-trial detention and their access to medical treatment? What response have the Government received?
Since the detentions were announced by the Russian authorities, we have sent a team of British officials each week to Murmansk to ensure that the detainees’ consular needs are being properly looked after. We have taken up with the prison authorities, or with other Russian authorities as appropriate, all the concerns that the detainees themselves have expressed to us about the conditions in which they are being held. At the moment, they are telling us that their conditions are “broadly acceptable”, but we stand ready to take up any further concerns that they may have.
Given the unjustifiable detention of British citizens, will Ministers follow the example of Councillor Wendy Flynn, mayor of Cheltenham, which is Sochi’s twin town, and refuse any offers of hospitality or visits in connection with Sochi’s winter Olympics in 2014?
I am afraid that the Government rules on accepting hospitality are already strict and limit what Ministers can do. The key point is that the Sochi winter Olympics will provide an opportunity for people from this country, including journalists and editors, to meet and engage with Russians of all backgrounds and to stand up for the values in which we believe.
As these exchanges have reinforced, there is concern on both sides of the House about the continuing detention of the British Greenpeace activists and journalists. Given the growing fears about the conditions in which they are being held—conditions condemned by the European Court of Human Rights last year, I understand—and the length of time they are likely to be incarcerated, can I ask the Minister gently what exactly it will take for the Foreign Secretary to persuade the Prime Minister to intervene on their behalf?
First, may I welcome the hon. Gentleman to his new responsibilities? Of course this is a return to European activity from the days when Tony Blair appointed him as one of his champions of the single currency in the Labour party. Having served his time in quarantine, he is now being allowed out again.
The hon. Gentleman may not have been here yesterday, but my right hon. Friend the Prime Minister made it clear at the Dispatch Box that he stood ready to speak to President Putin whenever that would best help the welfare of those who are being detained and lead to a satisfactory outcome for them. The search for a satisfactory outcome to this case remains at the top of the Government’s priorities, and it determines how we handle individual representations.
Sri Lanka (Human Rights)
3. What recent assessment he has made of the human rights situation in Sri Lanka. (900730)
We have serious concerns about the human rights situation in Sri Lanka, including freedom of expression and judicial independence. I will use my attendance at the Commonwealth Heads of Government meeting to see the situation on the ground and raise our concerns directly with the Sri Lankan Government.
I thank the Foreign Secretary for that reply. However, if he and the Prime Minister are to attend the Commonwealth Heads of Government meeting, what will their strategy be to ensure that the Sri Lankan authorities hear loudly and clearly the representations that are being made and, more importantly, take action?
Of course we will take up these issues. Between the Prime Minister and I we will be visiting the north of Sri Lanka to see for ourselves what is happening. We will press the Sri Lankan Government to investigate all human rights abuses, including the shocking allegations of acts of sexual violence committed during and after the conflict. We will urge them to allow free expression and to stop intimidation of journalists, and call on them to bring about reconciliation and political reform. It is important that we give that message to them in person.
19. It is both unfortunate and disturbing that the Commonwealth Heads of Government meeting is being held in Sri Lanka at this time. While the intention of the Prime Minister to visit northern Sri Lanka, where the Tamils mainly live, is very much to be welcomed, will he and my right hon. Friend the Foreign Secretary raise at CHOGM the recommendations of the Commonwealth eminent persons group that were discussed at the last Commonwealth conference, in particular the recommendation of a commissioner for the rule of law, democracy and human rights? If such a commissioner had been appointed at the last CHOGM, we would have a much more objective assessment of the true circumstances in Sri Lanka at this moment. (900748)
My right hon. and learned Friend played a distinguished role in the eminent persons group report. It is a pity that not every aspect of that report was adopted by the Commonwealth as we debated it over the last couple of years, although the charter for the Commonwealth was agreed, as was a more active role for the Commonwealth ministerial action group. We will continue to raise these issues in the Commonwealth.
Just a moment or two ago, the Foreign Secretary said, in relation to human rights abuses in Sri Lanka, that he will be taking up these issues when he travels there. However, in answer to a written question in July, the Foreign Office stated that they “expect progress” in human rights and post-conflict reconciliation in the run-up to the summit in November. Despite writing to the Minister responsible to follow up on that answer, we have not yet received a reply. Will the Foreign Secretary set out now what specific progress on the two key benchmarks identified by the Government has been made since July?
First, I must congratulate the right hon. Gentleman on being appointed Labour’s campaign co-ordinator for the next general election. As he ran its last general election campaign and David Miliband’s leadership election campaign, we on the Government Benches are delighted with the appointment, even if it makes him a slightly part-time shadow Foreign Secretary.
There have been some steps forward in Sri Lanka, which we have to recognise, including the northern provincial council elections that took place in September. They were generally peaceful and well-regarded, but all the issues I listed remain. While there have been some steps forward, many more are needed.
Does the Foreign Secretary accept that there is mounting evidence that Sri Lanka is heading in the wrong direction? It is not simply that these issues “remain”. This month, the Foreign Affairs Committee criticised the
“scant evidence of progress in political and human rights”.
In August, the UN human rights commissioner said that Sri Lanka was
“heading in an increasingly authoritarian direction”,
and even the Government’s own 2012 human rights report warned of “negative developments”. The Prime Minister’s announcement six months ahead of the summit has proved both a misjudgment and a missed opportunity. Will the Foreign Secretary, even at this late stage, urge the Prime Minister to reconsider his decision to confirm his attendance at the summit?
No. There are many serious criticisms, including in our own reports, of the human rights record in Sri Lanka. Of course these are issues that we want to take up in Sri Lanka, but the right hon. Gentleman must recognise that the Commonwealth Heads of Government meeting will consider matters such as the future of the millennium development goals, expanding international trade and upholding human rights in other parts of the world. We need to be present at those discussions with a quarter of the globe. We also need to recognise that the consequences for the Commonwealth of the United Kingdom not attending a Commonwealth Heads of Government meeting would be very serious and could be long term. That is why it is important, and that is why we decided to be there at the table, as well as raising the concerns so well expressed in this House.
For British Tamils in Wycombe, the situation in Sri Lanka is a cause of profound and continuous concern. Does the Foreign Secretary agree that British people who hail from troubled territories overseas are entitled to the most robust representation from the British Government?
Yes. My hon. Friend is absolutely right and those people will continue to see that robust representation, including at the Commonwealth Heads of Government meeting.
4. What recent assessment he has made of the situation in Kashmir. (900731)
The UK is deeply concerned about recent violent incidents in Kashmir. These incidents have caused regrettable loss of life on both sides of the line of control. We welcome the call for dialogue from both sides in response to these incidents and the steps they are taking to prevent future hostilities.
The territorial dispute in Kashmir is the longest running in the world. It is a particular issue for many of my constituents, and the violence and human rights abuses have spanned decades. I have been disappointed with the Minister’s response. What specifically can he tell me about action being taken on conflict resolution programmes in this area?
The first thing to put on the record is that we believe any solution should be between the two Governments of India and Pakistan. We welcome progress made in September during a meeting of both Prime Ministers in New York. The British Government do help, and we have had discussions on human rights as recently as last month. From our conflict pool, we support key work on projects to promote trade, development and capacity building in the area.
Does my right hon. Friend agree that Jammu and Kashmir are part of India and that part of India they should stay until such time as India says otherwise? Will the Government take action to ensure that state-sponsored terrorism in this disputed territory is not allowed to continue?
It is precisely for that last reason that we urge discussions between the two countries, and I am pleased to report that some progress has been made. Along with other positive measures, both countries have agreed to double bilateral trade by 2014 and India has lifted a ban on direct investment from Pakistan. As the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) said, however, this is a long-running conflict, and we stand by to help; but ultimately it can be resolved only by the two countries in question.
Attacks on Christians (Pakistan)
5. What recent discussions his Department has had with the Government of Pakistan regarding attacks on Christians in that country. (900732)
We have publicly condemned the attacks on the Christian communities in Peshawar and raised the issue of religious minorities with the Pakistani Prime Minister and other Ministers, including during recent ministerial visits to Pakistan and at the UN General Assembly in September.
I share the Minister’s horror at the recent incident, as do many people in this country, particularly in the Christian community. We are accustomed to tolerance here. What practical steps are the Government taking to ensure that the Pakistani Government take steps to protect Christians in their country?
That assistance effectively comes in two ways, not only through the help we provide to tackle counter-terrorism, such as the enhanced strategic dialogue and the joint working group on counter-terrorism, but through our aid programme to Pakistan, which I hope addresses—and I am sure does address—the root causes of extremism and tries to ensure that this does not happen again.
What steps is my right hon. Friend’s Department taking to protect freedom of religious expression not only in Pakistan, but across the world?
That is a good one for my first Foreign Office questions. I will restrict my answer purely to Pakistan. The guarantees to which my hon. Friend alludes are established in the constitution of Pakistan, and we would urge everybody involved in the process to uphold those guarantees and ensure that these sorts of acts do not happen again.
21. The recent bomb attack on All Saints’ church in Peshawar, which the Minister referred to, was felt deeply not just in Pakistan, but by many in Scotland of Pakistani origin and others, because it was the home church of a Church of Scotland minister, who lost his mother and two other relatives in that dreadful attack. Besides going through the United Nations, how can the Minister raise this issue within the international community? For example, can the EU not also be involved in raising these concerns with Pakistan? (900750)
Yes, of course it can. Many other countries will have links to Pakistan in the same way that this country and the church the hon. Gentleman mentioned do, and I know that the EU will be raising the issue in the same way. There are very special relationships between this country and Pakistan, however, and the help that communities such as the one he represents and mentions can offer will be of enormous benefit at a time like this.
Does the Minister agree that the treatment of Christians is the canary in the mine for the treatment of other minority faiths and ethnic groups—especially, in the case of Pakistan, the Hazaras and Ahmadis—and will he press the Pakistani authorities first to provide protection for Christians and their property, and secondly to take action against discrimination, whether by the state or by other groups?
The answer has to be yes. It is a good question and a good point. Absolutely a key part of our intervention and conversations with the Pakistani Government is about ensuring that minority rights and religious freedoms, as enshrined in the constitution of Pakistan, are indeed protected.
Iran (Nuclear Capability)
6. What recent assessment he has made of how close Iran is to producing (a) sufficient weapons-grade nuclear materials to make a nuclear warhead and (b) a ballistic missile capable of delivering such a warhead to Tel Aviv or Riyadh. (900733)
Iran continues to enrich uranium to 20% and to expand its capacity for enrichment. This brings Iran much closer to having sufficient material for a nuclear device, should it decide to enrich further. Most large middle eastern cities and some major cities in Europe are within range of Iran’s several hundred medium-range ballistic missiles.
Clearly, enriching uranium beyond the 3.5% required for civilian use sends a very dangerous signal. Is not Iran’s apparent enthusiasm for talks nothing but a protective smokescreen to dissuade the Israelis from undertaking military engagement and to allow Iran to cross the nuclear finishing line and develop a nuclear warhead?
I believe we have to test to the full Iran’s willingness to negotiate and to come to an agreement with the international community on its nuclear programme. The programme continues: Iran claims that its 20% enriched uranium is fuel for its one small research reactor, but it already has enough enriched uranium to fuel that reactor for the next 10 years. That is why we argue that there is no plausible peaceful explanation for the continuation of enrichment and of many features of Iran’s programme. But we must test Iran’s willingness to negotiate, and we continue to do so.
But is not one of the dangers of Iran pursuing this nuclear ambition that it could empower some of the terrorist organisations that Iran sponsors around the world, and particularly in the middle east? Does not that further undermine the process of peace in that region?
Yes, it absolutely undermines the process of peace. The threat of nuclear proliferation in the middle east, which is what the Iranian nuclear programme presents to the world, is of course a major danger to the future of the middle east, just as we are trying to make progress in the middle east peace process and to bring together a peace conference on Syria. It is deeply unhelpful across the board.
Given that reciprocity has been a sticking point in previous nuclear talks with Iran, with, perhaps, opportunities missed by both sides, what thought has been given by the west to making a gesture of good will as a first move, perhaps with a relief of sanctions—time-limited if necessary—given that such a move might reinforce the hand of the moderates within the country?
Substantive changes in our policy on sanctions will require substantive changes in Iran’s nuclear programme, of course. Negotiations took place in Geneva on 15 and 16 October and a further round of such negotiations is now planned for 7 and 8 November, the end of next week. We welcome the improved tone and posture of Iran in those serious negotiations, but it will have to take serious and real steps for us to be able to reciprocate.
Iran (Nuclear Programme)
7. What recent assessment he has made of the prospects for successful negotiations with Iran on its nuclear programme. (900734)
I welcome the more positive approach taken by the Iranian Government at the recent E3 plus 3 talks in Geneva. Foreign Minister Zarif presented a basis for negotiations and we have begun more substantive discussions on how to address the serious concerns about the nuclear programme. If Iran is willing to take the necessary first steps on its programme, we are ready to take proportionate steps in return.
I am grateful for the constructive reply from the Foreign Secretary. Given that Lakhdar Brahimi, the UN and Arab League peace envoy on Syria, has recently said that Iran’s participation in the Geneva talks would be fruitful, natural and necessary, will the Foreign Secretary consider an invitation to him to help in that process and in the negotiations with Iran on nuclear weapons?
It will ultimately be up to the UN to decide who can be brought around the table in a Geneva peace conference. I have already discussed Iran’s approach to Syria with the Iranian Foreign Minister and have put it to him that it is time that Iran accepted—along with Russia and many other non-western countries—that last year’s Geneva communiqué is the basis for discussing the future of Syria and that we are out together to create a transitional Government and bring the conflict to an end. Iran has not yet indicated that; it would be very helpful were it to do so.
Notwithstanding the many problems that there have been between our two countries, there are people on both sides of the House who thought that the initial response from the Government to the change in tone from Iran was overly cautious. Surely this situation warrants a little risk. To what degree is the Foreign Secretary prepared to travel to try to solve, if at all possible, this ongoing situation?
We are all prepared to go a long way to resolve this problem and have indicated that in the direct discussions with Iran. I have already had two meetings with the Iranian Foreign Minister and a telephone call with him earlier this month. As the right hon. Gentleman will know, we have agreed to appoint non-resident chargés as a step up in our bilateral relations. We are, as he can gather, busily engaged in these nuclear negotiations and our officials will meet bilaterally again in the margins of the negotiations. Of course we have to conduct ourselves cautiously on something of such immense importance as Iran’s nuclear programme, but there is no lack of readiness to engage with Iran and to open up our diplomacy to them.
15. My right hon. Friend might have seen the BBC “Newsnight” report last night showing that there has been strong Iranian intervention to support the Assad regime. If it is wrong for the west to intervene militarily to stop mass murder in Syria, would it not be right for the United Nations to condemn Iran for supporting the Assad Government? (900744)
My hon. Friend is right to say that foreign intervention in Syria—directly so in the case of Iran—is helping to prop up a regime that is engaged in the brutal murder of huge numbers of its own people. That is now well known around the whole world. That policy will have to change if Iran is to play a constructive role in bringing peace to Syria.
In the discussions with Iran, has the issue of a nuclear weapons-free middle east been raised? When it came up at the nuclear non-proliferation review conference, Iran supported that principle. A conference that would include Israel has been envisaged. Does the Foreign Secretary have any plans for such a conference, and any news on when it might take place?
We do have plans for that. The hon. Gentleman and I have discussed this matter before and, as he knows, the United Kingdom was instrumental in putting a commitment to such a conference into the nuclear non-proliferation review in 2010. A Finnish facilitator has been hard at work trying to assemble the conference. The atmosphere in the middle east has not exactly been conducive to doing so, but the United Kingdom will continue to press for that conference to be brought together.
8. What recent assessment he has made of the effects of the conflict in Syria on stability in the region. (900736)
The situation in Syria is worsening. There are now more than 2 million refugees putting severe strains on neighbouring countries. One third of the UK’s £500 million humanitarian funding for Syria will go to Lebanon, Jordan, Turkey and Iraq, and we are redoubling our efforts to find a political solution to the crisis.
What specific request for humanitarian assistance have the Government received from the Lebanese and Jordanian Governments?
They have requested large-scale assistance to deal with the huge refugee population. Syrian refugees now make up roughly one fifth and one twelfth of the total populations of Lebanon and Jordan respectively. The total assistance that we give to Lebanon has gone past £70 million, and we also give tens of millions to Jordan, so a great deal of British assistance is going to those countries. We are the second biggest donor in the world to the Syrian humanitarian crisis.
May I put it to my right hon. Friend that, despite his great personal effort—on which I warmly congratulate him—to try to bring about a successful Geneva II conference on Syria, it is unlikely to make much real progress unless all sides are involved: not only Iran but the Alawites? I ask him to reflect on the success of the Geneva conference of 1954, which against all expectations put an end to the Indochina war, in which enormous casualties were suffered by France. Anthony Eden insisted, despite the strong opposition of John Foster Dulles, that all sides should be present. Why cannot my right hon. Friend do the same?
It was around that time that the right hon. Gentleman was personal assistant to the said Sir Anthony Eden. It is modesty only that prevents him from pointing out that fact to the House, but I have done so in his stead.
There are certainly lessons to be learned from 1954—and, indeed, from other successful peace negotiations—and the process does require all sides to be ready to make the necessary compromises for peace. We would base a Geneva peace conference on the outcome of our talks in Geneva last year, with the aim of creating a transitional Government with full executive authority, made up of figures from the regime and from the opposition in Syria, by mutual consent. Of course it is envisaged that Alawites would be represented in any regime delegation to such a conference, as my right hon. Friend has suggested.
The Foreign Secretary has referred to the large amounts of aid given by the UK and the US to help the humanitarian refugee crisis in the middle east, but in a recent meeting the Jordanian interior Minister contrasted the amount committed by the UK and the US to the amount actually delivered on the ground. Will the right hon. Gentleman comment and clarify whether the money to help with the refugee crisis is getting through?
The UK has a very strong record of delivering our assistance, and I am not aware of any dissatisfaction on the part of Jordan, although I will discuss these matters with His Majesty the King of Jordan tomorrow, so I will check whether there is any further assistance or more rapid delivery of it that we can provide to Jordan over the coming weeks.
We all agree that progress at the Geneva II talks is vital to stability in the region, but when I spoke to the Syrian National Coalition last week it told me that it had not yet decided whether to attend the talks. Will the Foreign Secretary tell us what efforts he is making to ensure that it is in the room for the vital discussions that are needed?
The reason the Syrian National Coalition was here in London last week and why the hon. Gentleman was able to meet it was that it had come to meet me and 10 other Foreign Ministers to discuss going to the Geneva talks. That was the whole purpose of the day! The hon. Gentleman is right to point out that the full body of the national coalition has not yet taken the decision on that. It has to convene a general assembly to do so, and the date for it keeps shifting; it is now most likely to be towards the end of next week, around 9 November. It did receive a clear message from me and from many other Foreign Ministers, including Secretary Kerry and Prince Saud, the Foreign Minister of Saudi Arabia, that it should be prepared to go to Geneva and to take part in a peace conference.
We need to speed up; progress is desperately slow.
9. What progress his Department has made on increasing UK exports to established and emerging markets. (900737)
Between 2009 and 2012, UK exports increased by 23% in the wake of the deepest recession in post-war history. This growth has primarily been driven by demand in emerging markets. In South Korea, exports have risen by 103%; in China, excluding Hong Kong, by 80%; in Russia by 76% and in Brazil by 64%. Exports to the US increased by more than 8% between 2010 and 2012, although UK exports to the EU were flat.
I thank the Minister for his response. During the past decade, the value of bilateral trade between the UK and Israel has increased by over 60% to about £3.8 billion. It gives me particular pleasure to note that the trade between Wales and Israel with respect to life sciences is doing extremely well. As a result of these facts, will the Minister join me in welcoming this growth in trade between the UK and Israel—a country that is forward looking in its economic performance.
We greatly welcome the flourishing of UK-Israel trade, which is the result of concerted efforts by the Government, including, as my hon. Friend said, the creation of the UK-Israel tech hub, which celebrated its second anniversary this month, and our burgeoning co-operation with Israel in respect of life sciences, which was cemented in an memorandum of understanding on science co-operation, signed by my right hon. Friend the Foreign Secretary during his recent visit to Israel in May.
Half of Scotland’s trade is with the rest of the UK, and half of the UK’s trade is with the rest of Europe. Will the Minister outline the benefits Scotland gets from the wider exports that the UK does with the world and the economic benefits that that brings for my constituents and others in Scotland?
Yes, with both pleasure and conviction. Scotland benefits from being part of the UK in this renaissance of trade that the UK is undergoing. I must point to a recent fabulous article in Le Monde, which said we can now predict sustainable future growth—gone are fears of repeated recessions and new injections of liquidity. The jobs market and consumer confidence are both improving—improving for the United Kingdom and improving for Scotland, as well as for England, Wales and Northern Ireland.
What conclusions does the Minister draw from the fact that exports from some countries outside the EU to the EU are increasing more rapidly than our own?
My right hon. Friend will be aware of my earlier comment that trade with the EU has been adversely affected by the downturn in the EU economy. I think what it shows is the flexibility of the British economy, not least because we did not join the euro and because this Government have a more determined approach to driving exports globally, both with our existing partners and in emerging markets.
The British embassy in Washington part-sponsored a state-by-state study of jobs in the United States that are linked to exports and the potential gains from a comprehensive EU-US trade and investment deal. No such study has been carried out in relation to the United Kingdom. Will the Government commission a similar area-by-area analysis of British jobs, output and exports?
The hon. Gentleman raises an interesting point. I shall certainly look into it, and I should be happy to discuss it with him in more detail. British trade with the United States remains incredibly important. I will not rehearse the statistics again, but we have been vulnerable to the rather changeable circumstances in the domestic UK economy of late.
10. What assessment he has made of opportunities for the UK arising from recent ministerial delegations to China. (900738)
Recent visits by my right hon. Friends the Chancellor of the Exchequer, the Secretary of State for Energy and Climate Change and the Secretary of State for Transport highlighted the huge potential of the UK-China relationship. Their visits achieved significant breakthroughs in relation to civil nuclear co-operation, low-carbon partnerships, financial services, transport and inward investment.
I welcome that news, and, in particular, the jobs that the investment will bring. Perhaps most significant is the fact that Britain will be the first country outside China to have its own renminbi investment quota, which will establish London as a leading centre for renminbi trading. Does the Foreign Secretary agree that this success is founded on our open society and our long record of promoting open economies, and demonstrates to our partners in China that Britain is most certainly open for business?
My hon. Friend is absolutely right. Britain is very much open for business, and it is in China’s interest to invest in it. According to official Chinese statistics, the United Kingdom is now the most popular destination in Europe for Chinese investment, and the fourth most popular globally. Last year, our own exports to China hit £1 billion a month for the first time.
Some of the ministerial delegations included British business men so that the case could be made for British business. How many of them were of Chinese origin?
I do not have that information at my fingertips, but I imagine that quite a few of them were. I will write to the right hon. Gentleman with the details. What I can say is that we have built a tremendous relationship—in both directions—with China, founded on the activities of Chinese business men and British business people of Chinese origin, and we will continue to do so.
LGBT Community (Russia)
11. What recent discussions he has had with the Russian Government regarding violence against lesbian, gay, bisexual and transgender people in Russia. (900740)
My right hon. Friends the Prime Minister and the Foreign Secretary discussed our concern about those attacks when they met their Russian opposite numbers last month.
As the Minister knows, there is significant and growing concern in this country about violence in particular but also about the banning of certain publications, and about threats to remove children from LGBT couples. Will he consider raising the issue with the Council of Europe?
We will certainly consider raising, at every possible opportunity, our concern both about Russian legislation on the matter and about what is, inevitably, anecdotal evidence of appalling attacks on individual LGBT Russian citizens and civil society organisations.
Does the Minister agree that, while these attacks are quite outrageous—as is the fact that the Russian Government seem to be legislating towards such behaviour—it is better to engage with Russia than to boycott events if we are to bring about change?
I agree with my hon. Friend both about the importance of making our views clear and about the importance of engagement. Our diplomats who are stationed in Russia make a point of attending meetings of civil society organisations, including LGBT organisations, to demonstrate that we are standing up for the values in which we believe.
Iran (Child Executions)
12. What recent reports his Department has received on child executions in Iran. (900741)
We receive regular reports on the human rights situation in Iran, including information about executions. Executions for crimes committed by people under the age of 18 are a breach of international law, and the UK opposes the use of the death penalty as a matter of principle.
According to leading human rights groups, Iran has the shameful record of being the world’s largest executioner of juvenile offenders. What representations can the Government make to ensure that that barbaric practice ends, in accordance with the country’s obligations under the convention on the rights of the child?
My hon. Friend is absolutely right. This country has, under the EU sanctions regime, helped designate over 80 human rights violators in Iran, and, of course, helped establish the UN special rapporteur on Iran’s human rights and lobbied for his mandate to be renewed at the March UN human rights council.
Is the Minister aware of growing concern about the human and civil rights of Baha’is in Iran and, in particular, about the UN special rapporteur’s report? What action does he intend to take?
I thank the hon. Lady for raising that point. I am absolutely aware of that concern, which is a key concern of the UN special rapporteur. As I said in answer to the previous question, our country lobbied extremely hard to ensure that the mandate was extended for a further year and will do so again in the future precisely so that these concerns can be addressed.
13. What recent discussions he has had with the Colombian Government regarding human rights and peace talks in that country. (900742)
The Prime Minister, Foreign Secretary and I met President Santos during his visit to London in June and discussed a range of subjects, including the peace process and its potential to improve respect for human rights. Officials from our embassy in Colombia regularly make representations to the Colombian Government on human rights cases.
The Minister of State recently told the House he would make representations to the Colombian Government regarding the arrest of leading trade unionist Huber Ballesteros. Will the Minister update us on what progress has been made, including a possible visit to Mr Ballesteros in prison, and what does he think the future holds for trade unionists and others in terms of human rights in Colombia?
As the hon. Gentleman knows, we are aware of the detention of Mr Ballesteros. He was detained on 25 August. Our ambassador to Colombia wrote to the Colombian prosecutor-general on 28 August highlighting our interest in the case and requesting information on the charges. Staff at our embassy in Bogota are seeking permission to visit Mr Ballesteros in prison.
The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) does much to champion the cause of Colombian trade unions, but does the Minister agree that it is more important to protect British citizens from the flow of illegal drugs from Colombia, and will he therefore tell the House what discussions he has had with the Colombian narcotics team about how to stop this flow of illegal and damaging drugs?
Order. I think not, actually. That is a very important matter, but it does not directly relate to human rights or peace talks. The Minister of State requires no encouragement, and on this occasion I do not wish to offer him any.
Overseas British Risk Register
14. When he plans to issue guidance to UK businesses through the overseas business risk register on trade with illegal settlements. (900743)
We will update our online guidance for citizens and businesses on overseas markets, including Israel and the Occupied Palestinian Territories, in the coming weeks, in line with the UK action plan on business and human rights.
I thank the Minister for his reply, but may I ask him urgently to review the documentation on the UK Trade & Investment website’s “Doing Business in Israel” section, which, according to Oxfam, encourages British businesses to invest in settlements in the Jordan valley by giving details of Israeli grants available for settlements business?
Yes, I will certainly look at the guidance the hon. Lady mentions. The UK Government’s policy on this is very clear: settlements are illegal and they are an obstacle to peace, but we work in concert with our EU partners in producing guidelines that affect this issue.
May I remind Members to ask pithy questions and Ministers to provide pithy answers, because there is a lot of interest and I am keen to accommodate Members?
T1. If he will make a statement on his departmental responsibilities. (900753)
Today I am hosting the World Islamic Economic Forum. This is the first time it has ever been held outside an Islamic country and Asia, reflecting London’s growing position as a major centre for Islamic finance.
Prageeth Eknaligoda is a Sri Lankan political cartoonist who has disappeared. Both I and pupils at St Austell’s Penrice community college will be interested to learn what my right hon. Friend knows about his whereabouts and whether he will raise this matter with the Sri Lankan authorities.
We regret that Mr Eknaligoda’s whereabouts are still not known more than three years after his disappearance. We have made clear to the Government of Sri Lanka the need to take decisive action to guarantee press freedom, including by investigating attacks on the media and disappearances and ensuring those responsible are brought to justice. The forthcoming Commonwealth Heads of Government meeting in Colombo will be our opportunity to shine a spotlight on this and other matters.
Last week, I had the great privilege of meeting Aung San Suu Kyi, following her discussions with Government Ministers. She impressed upon me the urgency of the international community seeking to put pressure on the Burmese Government to reform the constitution in Burma. I would be grateful if the Foreign Secretary would set out what steps the Government anticipate taking to achieve that goal.
Aung San Suu Kyi was very clear about these things in all the meetings she had, including the one with EU Foreign Ministers in Luxembourg last Monday. These are issues that we have taken up for some time with the Government in Burma, including directly with President Thein Sein on his visit to the UK earlier this year. Of course, we are continuing to raise them, as there is an urgency about constitutional change ahead of elections in Burma in 2015. So we will continue to raise them over the coming weeks directly with Burmese Ministers.
T3. We have heard today about the strength of the trade relationship between this country and Israel. Will the Government use the influence that that relationship brings to make progress on peace, particularly in relation to the settlements? (900755)
Yes, of course, we will. As I said in answer to an earlier question, there is now a moment of hope—or perhaps I should say opportunity—that has not been there for some years. I am visiting the region for the first time next week and will certainly do what the hon. Gentleman urges.
T2. Which competences will the Government seek to repatriate from the European Union? (900754)
What the Government have already shown in their three and a half years in office is that they have been able to bring powers back to this country: through the reform of the fisheries policy, which has abolished the practice of discarding that the hon. Gentleman’s Government tried and failed to reform in their 13 years in office; in getting a cut on the budget for the European Union; and in getting us out of the bail-out mechanism to which his Government committed us. That is a fine track record on which to look forward with high hopes for the future.
T5. The UN envoy, Mr Brahimi, is in Syria today and he has said that President Assad can play a constructive role in the transition in Syria. The Friends of Syria group has said that President Assad can play no role in the transition, so what is the UK’s position on whether he can play any such role? (900757)
It was agreed in Geneva last year that a transitional Government in Syria would have full executive authority, and that it would be formed from regime and opposition “by mutual consent”. That phrase is very important; I do not think anyone can envisage circumstances in which opposition groups in Syria would give their consent to President Assad being part of that transitional Government.
T4. Rocket attacks on Israel from Gaza have resumed, and Hamas threatens to restart suicide attacks. Will the Minister condemn the statement from the leader of Hamas that the Palestinians should withdraw from peace talks and launch a third intifada? Does he believe that the Palestinian Authority are sufficiently strong and well motivated to resist that call? (900756)
I believe that the Palestinian Authority are certainly well motivated—that is a good way to put it. I believe that President Abbas is a courageous man of peace, and he has taken many risks and overcome much opposition in order to get back into the peace process and into negotiations with Israel. I absolutely condemn any encouragement to him to do anything other than that, and Hamas for saying that that should cease. We want to see those negotiations continue over the coming weeks and bring success.
T6. Much of the instability in various parts of the world is caused by volatile and high food prices, a driver of which is the conversion of agricultural land into biodiesel, a practice described by the United Nations last year as a crime against humanity. What discussions have the Government had with the EU to encourage it to drop its 6% target on sources which could and should be food? (900758)
My hon. Friend is right to identify this as an important issue. Our colleagues in the Department of Energy and Climate Change have the lead on it, and I will make sure that their attention is drawn to his comments. I assure him that they take the issue particularly seriously.
T8. What discussions is the Foreign Secretary having with European Governments, particularly the Italian Government, about the tragedy unfolding in the Mediterranean as a result of refugees drowning? (900760)
Yes, we have already had discussions with the Italian Government. The Italian Foreign Minister, Emma Bonino, was here on Friday and that, of course, was one of the subjects we discussed. In addition, the Prime Minister has discussed it with his counterparts in the European Council. It is important that European countries work effectively together on this matter and, in particular, that we work to help Libya, for instance, to secure its land borders. The insecurity of those borders is causing a lot of the problem for the maritime borders of EU states.
I call Mr David Ruffley—not here.
Many of my constituents are concerned about human rights abuses not just in the north of Sri Lanka but in the east. They are also concerned that the visit by the Commonwealth Heads will somehow legitimise that desperate reality. Will the Secretary of State undertake to leave the Sri Lankan authorities in absolutely no doubt that that is not the case?
Yes, absolutely. My hon. Friend is quite right. The authorities are in no doubt about our position as things stand, as I explained to the House earlier. They will be left in no doubt by me, the Prime Minister and the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for East Devon (Mr Swire), on our visit to the Commonwealth Heads of Government meeting.
What assessment has the Secretary of State made of an independent Scotland’s place in Europe and the world compared with the advantage that Scotland derives from being part of a strong United Kingdom?
Scotland derives enormous benefit, of course, from being part of the United Kingdom and the United Kingdom benefits enormously from Scotland’s being part of it. It is important to understand that if Scotland left the United Kingdom, it would also be leaving the organisations of which the United Kingdom is a member, including the European Union.
T9. I thank the Minister for his answer to my earlier question. May I now encourage him to congratulate not just this House on issuing a yellow card to the Commission’s proposal for a European public prosecutor but the Parliaments of France, Hungary, Ireland, the Netherlands, the Czech Republic, Sweden, Romania, Slovenia and Cyprus? Does that not show the value of national Parliament’s power to tell the Commission to stop interfering and is there not a case to go— (900762)
Order. I think that the hon. Gentleman should seek an Adjournment debate—but it might take him some weeks to get it.
My hon. Friend is right to draw attention to the fact that the deployment of the yellow card as regards the European public prosecutor’s office is the second time that the number of national Parliaments submitting reasoned opinions has passed the threshold set by the treaty that forces the Commission to reconsider its original proposal. I wish all strength to the arm of national Parliaments in continuing to use those powers to the full.
I am sure that this House has every confidence in the Foreign Secretary to represent the Government at CHOGM and the Prime Minister should clearly make a gesture and stay away. When he is making representations, will the Foreign Secretary seek the signature of the Sri Lankan Government to the declaration of commitment to end sexual violence in conflict?
I seek that all over the world. It is my declaration, which I proposed at the margins of the UN General Assembly, and I am pleased that, by the middle of this month, 134 countries had signed it. Sri Lanka is exactly the sort of country we want to add its signature to it, so I will press the Government hard on that subject at the margins of CHOGM.
Is a judicial system that encompasses stoning for adultery, severance of limbs for theft and flogging for alcohol consumption compatible with membership of the Commonwealth and is it something that the Foreign Secretary intends to raise with the sultanate of Brunei at CHOGM?
We are aware of the announcement of the phased introduction of criminal sharia law in Brunei and are looking into what that means. I shall be raising the issue with the Deputy Foreign Minister of Brunei, Pehin Lim, in London tomorrow.
Have Ministers considered using the large number of influential Russians who live in London in their efforts to persuade the Russian Government to take a more liberal line on human rights?
We are prepared to consider all appropriate opportunities to ensure that we influence the Russian authorities for the better on human rights. I would not rule out the hon. Gentleman’s suggestion, although it depends a little on which individual we are talking about.
Democratic elections in the Maldives were suspended nearly two months ago. What are the Government doing to make sure that these elections take place?
It is very important that these elections are now allowed to take place. The legal actions that have been taken to try to stop the elections and to stop the second round going ahead after a successful and well-regarded first round of elections have increasingly looked just like attempts to disrupt the elections and to prevent the people of the Maldives from being able to have their democratic say. The strong statement that I issued on this on 19 October has, I think, been noticed in the Maldives. We hope the authorities there will now allow an election to go ahead that will be able to determine freely and democratically the presidency of the Maldives.
What representations has the Foreign Secretary made to the Burmese Government on the recent violence in Kachin state, which makes constitutional reform that much more urgent?
Again, this is one of the subjects that we discuss regularly with the Burmese Government and, indeed, that we discussed with Aung San Suu Kyi on her visit last week. Progress has been made, of course, in bringing ceasefires into effect in ethnic conflicts, but the conflict in Kachin state has been the most serious in recent times so it is always very high on the agenda for our discussions with Burmese Ministers.
Small businesses produce the kind of niche products that are well received in export markets, but they often lack the expertise and confidence to sell abroad. What steps is the Department taking to assist and encourage smaller businesses in particular?
I think I am right in saying that since the formation of this coalition Government, we have had a net gain of more than 400,000 small businesses, which is a tremendous success. My hon. Friend is correct. We need to do more to encourage small businesses to export. It is incumbent on all of us in the House to encourage our local businesses to raise their game. With respect to UK Trade & Investment, the reconfiguration of the British chambers of commerce initiative is designed to help small businesses, but each of us has a part to play in making sure that our small and medium-sized enterprises grow into large export businesses, which are so important for the economy.
Barclays bank made the decision to end banking facilities for money transfer companies such as Dahabshiil and that decision will devastate countries such as Somalia. Will the Foreign Secretary take this opportunity to speak up and explain what he will do to try to prevent the closure of this legitimate route of money transfer to a country that depends on it for its security and to achieve transformation there?
I am grateful for the hon. Lady’s question. She is right to make the point that remittances are extremely important, particularly as they relate to Somalia. But most Somali remittances are made through small scale businesses that operate in cash and do not have bank accounts. They will therefore be unaffected by a commercial decision by Barclays bank. However, the Government are taking the decision seriously. The Treasury, which is leading on this matter, the Department for International Development and the Foreign and Commonwealth Office are working to find a solution, and DFID is developing a pilot project to help secure international remittance channels.
Everyone will have been appalled by the tragedy which occurred off Lampedusa recently. Many of those who died were Eritreans fleeing one of the most repressive states in Africa. What steps are the Government taking to try to improve governance in Eritrea to reduce the push factor?
My hon. Friend is right to raise this important issue, but it is not solely an Eritrean problem, although he is right to point out that Eritrea continues to violate its international obligations and domestic law and has taken no steps to improve its human rights record. It also needs to be said that poor governance, corruption and a lack of economic development are fundamental drivers for the sort of migration that we saw and the terrible tragedies. I can assure my hon. Friend that we in the Foreign Office will continue to work to try to improve all those aspects to limit the necessity for migration.
Will the Foreign Secretary update the House on the work of the chemical weapons inspectors in Syria, and will he say when he expects the destruction of precursor chemicals to begin?
This work is going reasonably well so far. The Organisation for the Prohibition of Chemical Weapons staff have had access to 21 of 23 sites that have been identified. The actual destruction of munitions and of production equipment for chemical munitions has been taking place. Based on the submission made by the Syrian regime on 27 October—just a couple of days ago—decisions now need to be made about the resources needed and the timetable for the destruction of all chemical stocks, including precursors. That programme will be put together by the middle of November.
Licensed Hackney Carriages and Private Hire Vehicles (Closed Circuit Television)
Motion for leave to bring in a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to require the installation of closed circuit television in licensed hackney carriages and private hire vehicles; to establish a minimum standard for such installations; and for connected purposes.
Like many right hon. and hon. Members on both sides of the House, I am sceptical about the value of the pervasiveness of CCTV in our lives and in our communities, but I wish to explain to the House why I believe that its provision in private hire vehicles and taxis is warranted and justified. For too long our private hire and taxi drivers have been treated like second-class citizens. Indeed, they are an overlooked community when it comes to personal safety. Yet they are an essential part of our public transport system, for in many towns across the country, who is going to take people home in the evenings? It will be a private hire cab or a licensed taxi. However, the safety provided in those circumstances is below that provided in other forms of public transport. It is the most trusting of circumstances: one, two or three people in a single vehicle late at night, with nothing to provide any evidence if a crime is committed.
The types of crime that are committed run the gamut, from theft to racial abuse and assault. Many of our taxi drivers are drawn from ethnic minorities. Racial abuse, wherever it happens, is unacceptable. In Doncaster, taxi drivers requested that the local council bring in CCTV because they were concerned about the incidence of racial abuse. They noted a significant decline in racial abuse following the introduction of CCTV. Theft is almost thought of as a cost of doing business. We should consider what it must be like for a taxi driver when two or three people they have driven home simply refuse to pay. What evidence does the driver have that a crime has been committed? What power does he or she have to stop those people perpetrating that crime? There is little ability to stop the crime and little evidence that it has happened. The number of assaults that occur in disputes between drivers and passengers is horrifying, and occasionally they lead to murder.
Having CCTV in taxis is about providing safety not only for drivers but for passengers, because there are sometimes instances of passengers attacking each other in the back of taxis. In my conversations with the Metropolitan police, I was interested to hear that they regard the provision of CCTV in taxis and private hire vehicles as helpful in cases of sexual assault or rape that occur after people have been taken by taxi to a place of residence.
Those are some general examples, but I have been moved to seek to bring in this Bill by specific examples in my constituency. A year ago one of my constituents, Mehar Dhariwal, was murdered. His murder brought into sharp relief the dangers that men and women in our taxis can be under when they are put in situations of risk. I met his widow, Mrs Dhariwal, last weekend. Although her loss can never be made up for, her encouragement to me was to say, “Richard, it’s important that we bring in this measure so that other people do not have to go through the suffering that I and my family have gone through.”
The dangers faced by taxi drivers were also brought into sharp relief when a friend of mine who works for 24-7 Cars was held at knife point between Bedford and Luton. He managed to escape only because he was smart enough to realise that there was a police car parked at a petrol station he was approaching. He rolled out of the taxi, sustaining injuries, and the taxi came to a halt. The two perpetrators of the crime got out and were chased by two police officers. One of those idiots threw a knife at the police officers and the other turned a gun on them, but the officers bravely dodged the knife and one of them knocked the gun away. I am pleased to say that our chief constable was prepared to take all necessary measures to ensure that those criminals faced the full force of justice.
This Bill proposes to provide for secure and encrypted CCTV in taxi cabs. It is important from the point of view of privacy that the information is secure and encrypted. It should also be accessible by the police only in circumstances in which a crime is reported to have been committed. The system should be mandatory, because then the citizen would know that it was being used when they got into a taxi cab. If the take-up were voluntary rather than mandatory, people would not know exactly what type of safety provision was in use. Councils around the country have seen the value of introducing a mandatory system over a voluntary one.
There is a question about whether CCTV should provide just video coverage or audio coverage as well. This issue was subject to an Information Commissioner review involving Southampton council earlier this year. The consequence was not to ban audio recording outright, but to say that it could be provided only in a panic situation—a short burst of audio at the particular point when a driver felt a crime was being committed. I believe that that is the correct approach.
There are also issues with costs. The last thing I would wish as a result of this Bill is to place additional costs on drivers. We do not ask bus drivers to pay for the CCTV that protects them, and nor should we ask taxi drivers to pay for their own personal safety while they ply their trade. Southampton has built on its work with the Information Commissioner and has a very good approach to covering costs: the council covers the cost of the camera and the taxi drivers are responsible for the maintenance and installation of the system. That also allows the driver to recoup their costs through insurance reductions, because CCTV is able to look outside as well as inside the vehicle and can therefore be used as evidence in claims when crashes or whiplash are caused. In such circumstances, I believe that the costs that would fall on the drivers would be negligible at best.
This Bill seeks to provide a level of security for our taxi drivers that is long overdue. Workers in other high-risk transport situations already benefit from it and I believe it would have a significant impact. A US study recently compared the effect of measures such as CCTV and barriers between the driver and passengers. It found that only one method contributed to a significant reduction in crimes against drivers, and that was CCTV.
This Bill has many benefits, but to my mind the most important is that it will start to give respect to our taxi drivers and stop people treating them as second-class citizens.
Question put and agreed to.
That Richard Fuller, Meg Hillier, Mr Adam Holloway, Siobhain McDonagh, Stephen McPartland and Priti Patel present the Bill.
Richard Fuller accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 8 November, and to be printed (Bill 121).
Point of Order
On a point of order, Mr Speaker. Has the Secretary of State for Transport indicated that he intends to make a statement to the House on the fourth revised version of the justification for High Speed 2? I heard him say on the television this morning that the £50 billion was perfectly justified and that he was producing a report for Parliament. However, as far as I can make out, there has been no report to Parliament.
I have received no indication that the Secretary of State intends to make a statement to the House on that matter. However, the House will be treating of these issues on Thursday. I expect that a significant number of Members will wish to contribute to that debate and I fancy that the right hon. Gentleman might be among them.
Further to that point of order, Mr Speaker.
I am not sure that there is anything further, but the right hon. Gentleman is an immensely senior Member and I must give him the benefit of the doubt.
The proceedings on Report are likely to be fairly specific to the amendments that are tabled, whereas what needs to be discussed is the new financial justification for the scheme. I suspect that it will be rather difficult to discuss that and to remain in order on Thursday.
I note the point that the right hon. Gentleman makes. I am advised that there is a written ministerial statement, although I readily recognise that that will not satisfy him because it does not afford an opportunity for oral questioning. I have got the point that he wishes to hear a spoken justification from a Minister, however senior, and to have the opportunity to question them on the matter. If the right hon. Gentleman is in his place and seeks to catch my eye, he might find favour. I hope that that satisfies him for now.
Pensions Bill (Programme) (No. 2)
That the Order of 17 June 2013 (Pensions Bill (Programme)) be varied as follows:
(1) Paragraphs (4) and (5) of the Order shall be omitted.
(2) Proceedings on Consideration shall be taken in the order shown in the first column of the following Table.
(3) The proceedings shall (so far as not previously concluded) be brought to a conclusion at today’s sitting at the times specified in the second column of the Table.
Time for conclusion of proceedings
New clauses and new Schedules relating to, and amendments to, Part 4.
New clauses and new Schedules relating to state pension credit; New clauses and new Schedules relating to, and amendments to, Part 1; new clauses and new Schedules relating to, and amendments to, Part 2; new clauses and new Schedules relating to, and amendments to, Part 3; remaining proceedings on Consideration.
(4) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at today’s sitting at 7.00pm.—(Steve Webb.)
Consideration of Bill, as amended in the Public Bill Committee
New Clause 1
Work-based schemes: power to restrict charges or impose requirements
‘Schedule [Work-based schemes: power to restrict charges or impose requirements] permits the Secretary of State to make regulations—
(a) restricting the charges that may be imposed on members of certain work-based pension schemes;
(b) imposing requirements relating to administration or governance that must be satisfied in relation to certain work-based pension schemes.’.—(Steve Webb.)
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
With this it will be convenient to discuss the following:
Amendment (a) to Government new clause 1, line 6 at end add—
‘(2) In this section—
(a) “charges”; and
(b) “transaction costs”
shall be defined in regulations by the Secretary of State.
(3) Before making regulations under subsection (2), the Secretary of State must undertake a public consultation, which must include the views of—
(a) the Financial Conduct Authority; and
(b) the Pensions Regulator.
(4) With reference to paragraph (2)(a), any public consultation must consider the different elements which comprise charges and not just the annual management charge.
(5) Such charges, together with any transaction costs incurred by the funds in which qualifying schemes are invested, shall be declared on an annual basis to the Pensions Regulator, which shall maintain a public register thereof.
(6) The Secretary of State shall by regulations set the standards by which pension schemes must declare charges and transaction costs for the purposes of the register and for declaration to their members and their members’ employers.
(7) The standards set out in regulations under subsection (6) shall be reviewed every three years.
(8) The Secretary of State shall have power to make regulations ordering other disclosure arrangements on administration charges.
(9) Regulations under this section may not be made unless a draft has been laid before and approved by resolution of both Houses of Parliament.’.
New clause 7—Railways pension scheme—
‘(1) The Railways Act 1993 is amended as follows.
(2) In Schedule 11 (Pensions), after paragraph 11 there is inserted—
11A (1) This paragraph applies if an insolvency event occurs in relation to the employer or former employer of a protected person.
(2) Where this paragraph applies the Secretary of State shall become liable to discharge any liabilities in respect of relevant pension rights, to the extent that they are not discharged by the trustees of a new scheme in which the employer was a participating employer.
(3) For the purposes of this paragraph—
(a) “insolvency event” has the meaning set out in section 121 of the Pensions Act 2004;
(b) “relevant pension rights” means the relevant pension rights referred to in paragraph 6(3) above.
11B The duty referred to in paragraph 11A also applies if an insolvency event has occurred in relation to the employer or former employer of a protected person on or after 1 October 1994.”.’.
New clause 9—Fiduciary duty of independent trustees—
‘(1) The Secretary of State may by regulations—
(a) require any pension scheme, which is not already overseen by independent trustees, to appoint a board of independent trustees; and
(b) set out the powers and duties of a board appointed under paragraph (1)(a).
(2) Regulations under this section—
(a) shall be made by statutory instrument; and
(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.
(3) The board of independent trustees shall have a fiduciary duty towards members of the scheme overseen by them.
(4) The fiduciary duty set out in subsection (3) shall take precedence over any duty to—
(a) the shareholders in, or
(b) other owners of,
the operators of the scheme.
(5) In relation to any matters of member interest, decisions of the board of independent trustees shall be binding on the board of directors or other analogous management board of any undertaking operating a pension scheme.’.
New clause 10—Promotion of good value in scheme size—
‘(1) The fiduciary duty of pension scheme trustees shall include a duty to consider whether the scheme has sufficient scale to deliver good value for members.
(2) Where trustees take the view that the scheme has insufficient scale, they must consider whether merger with another scheme would be in the members’ interests.
(3) The Pensions Regulator shall have power to direct merger of pensions schemes where it would be in the interests of the members of each of the relevant schemes for merger to take place.
(4) The Pensions Regulator shall exercise this power in accordance with a methodology on which it has publicly consulted and which has been agreed with the Secretary of State.
(5) The methodology set out in subsection (4) shall be kept under regular review and revised when necessary, subject to further consultation and agreement from the Secretary of State.’.
New clause 11—Decumulation—
‘(1) Any qualifying money purchase scheme must direct its savers to an independent annuity brokerage service or offer such a brokerage service itself.
(2) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—
(a) an assisted path through the annuity process;
(b) ensuring access to most annuity providers; and
(c) minimising costs.
(3) The standards meeting best practice on decumulation shall be defined by the Pensions Regulator after public consultation.
(4) The standards set out in subsection (3) shall be reviewed every three years and, if required, updated.’.
New clause 12—Sustainability of private pensions: review of implications of climate change and natural resource constraints—
‘(1) The Secretary of State shall commission an independent review of the implications of climate change and natural resource constraints for the sustainability of private pensions.
(2) In particular, the review must consider the implications for long-term investment outcomes for members of work-based pension schemes of potential—
(a) systemic risks posed by high levels of exposure to fossil fuels and other carbon-intensive assets;
(b) economic and physical impacts of climate change under various climate mitigation scenarios; and
(c) constraints on the availability of non-renewable resources.
(3) In subsection (2)(c), “non-renewable resources” includes food, water, land and energy resources.
(4) A report of the review’s findings, including recommendations to government, must be laid before Parliament no later than 30 October 2014.
(5) The government must lay before Parliament its response to the review’s recommendations no later than 30 January 2015.’.
Government new schedule 1—‘Work-based schemes: power to restrict charges or impose requirements.
Amendment 38, in clause 29, page 15, line 24, leave out from ‘scheme’ to end of line.
Government amendments 5 to 10.
Amendment 53, in clause 34, page 18, line 22, at end insert—
‘(5) Regulations under this section shall not exempt entire classes of business or businesses, such as small and medium-sized businesses, from automatic enrolment.’.
Government amendment 11.
Amendment 54, in clause 42, page 23, line 7, at end add—
‘“(czb) to promote, and to improve understanding of long-term and sustainable investment amongst work-based pension schemes,”.’.
Amendment 39, in schedule 16, page 84, line 37, leave out from ‘of’ to ‘transfer’ in line 1 on page 85, and insert
‘a transferable benefits scheme, the cash equivalent of the transferable benefits—
‘(a) is transferred to a nominated’.
Amendment 40, page 85, line 3, leave out ‘automatic transfer’ and insert ‘transferable benefits’.
Amendment 41, page 85, line 8, leave out from ‘an’ to end of line 9, and insert
‘a transferable benefits scheme, means a member of the scheme who is no longer having contributions made to their benefits.’.
Amendment 42, page 85, line 22, leave out sub-paragraph (5) and insert—
‘(5) In this Schedule “nominated transfer scheme” means—
(a) a work-based pension scheme which is registered under Chapter 2 of Part 4 of the Finance Act 2004 and is a money purchase scheme;
(b) a scheme in which the qualifying member is a member, or that has been nominated by the member or the transferable benefits scheme for the purposes of transferring pots;
(c) a pension scheme which meets quality standards as set out by the Secretary of State;
(d) a pension scheme that meets any other requirements set out in regulations.’.
Amendment 43, page 85, line 38, leave out from beginning to end of line 29 on page 87, and insert—
‘Transferable benefits scheme to transfer to nominated transfer scheme
2 (1) The regulations must require the trustees or managers of a transferable benefits scheme to establish an agreement with a nominated transfer scheme to make provision—
(a) for the transfer of qualifying members’ benefits to the nominated transfer scheme; and
(b) describing how and when steps are to be taken in order to effect the transfer.
(2) The regulations may make provision for a protocol through which a transferable benefits scheme may establish an agreement with a nominated transfer scheme.
(3) The regulations must ensure that where the duty to transfer qualifying members’ benefits to a nominated transfer scheme, has arisen, the member may opt out of the transfer or identify an alternative nominated transfer scheme to which the members’ benefits will be transferred.’.
Amendment 44, page 88, line 25, at end insert—
‘Nominated transfer schemes: quality requirements and administration charges
10A (1) The regulations may impose requirements that must be satisfied by any nominated transfer scheme.
(2) The requirements may in particular relate to—
(a) the governance of the scheme;
(b) the administration of the scheme; and
(c) the certification of the scheme by the Regulator.
(3) The regulations may make provision limiting or prohibiting any administration charge that may otherwise be imposed on a member of an automatic transfer scheme.
(4) Regulations made because of sub-paragraph (3)—
(a) may make provision for the manner of, and criteria for, determining whether an administration charge exceeds any limit or is prohibited; and
(b) may provide for the determination to be made in accordance with guidance issued from time to time by the Secretary of State.
(5) The requirements that may be imposed, and the charges that may be limited or prohibited, because of this paragraph need not relate to things done under the regulations.’.
Amendment 45, page 88, line 27, leave out paragraphs 11 and 12.
Government amendment 28.
Amendment 55, page 88, line 38, at end insert—
‘(c) the ability of the scheme to generate sustainable investment returns.’.
Amendment 46, page 89, line 39, leave out ‘an automatic’ and insert ‘a nominated’.
Amendment 47, page 90, line 1, leave out ‘current’.
Amendment 48, page 90, line 2, after ‘member’, insert ‘in a nominated transfer scheme’.
Amendment 49, page 90, line 3, leave out sub-paragraph (2).
Government amendment 29.
Amendment 50, page 91, leave out line 11.
Amendment 51, page 91, line 21, at end insert
‘“nominated transfer scheme” has the meaning given by sub-paragraph 1(5);’.
Amendment 52, page 91, leave out lines 36 and 37.
Government amendments 30, 31 and 12.
This group of amendments contains a long list of disparate topics. To give the House a feel for what we are discussing, it includes an attempt to limit the scope of automatic enrolment, the transfer of small pension pots, short service refunds, the vexed issue of pension scheme charges, issues with governance and administration, the decumulation of pension pots, the specific issue of rail pensions and the pension protection fund compensation cap. I shall do my best to whizz through all those issues to minimise or obviate as far as is possible the need for me to return to the Dispatch Box on this group.
I should start on a note of consensus. This part of the Bill deals with private pensions and I think that the House would agree that the process of automatic enrolment into workplace pensions is going exceptionally well. The process started a year ago. British industry has automatically enrolled about 1.7 million employees into workplace pensions. The rate of not opting out, or of staying in, has been far better than anybody predicted. Our survey evidence suggests that of the order of nine in 10 workers have chosen to remain in their workplace pensions. That is something that we should all welcome.
The Bill is designed to improve that situation further and to deal with some unfinished business. Although the principle of automatic enrolment was legislated for in the previous Parliament, many issues were not dealt with. If those are not dealt with, it will undermine the success of automatic enrolment.
Amendment 53 relates to the scope of automatic enrolment. Clause 34 gives the Government the power to exclude some people from the employer duty for automatic enrolment. I will give the House a flavour of the sorts of people that we might be talking about. In automatic enrolment, we have sought to strike a balance between setting out the rules at the start and giving employers and the industry certainty, and learning and listening and then changing the rules when we have got something wrong or when something needs to be refined or streamlined. We could have changed the rules and constantly tweaked things, or we could have said at the start, “These are the rules for the next five or six years until everybody’s in. Go and deal with it”, but we tried to strike a balance.
As we have learned, the rules require employers to put a certain set of people into workplace pensions who may immediately opt out. For example, people with what is called enhanced or fixed tax protection status—high net wealth individuals—could face a tax surcharge if their pension pot exceeds the lifetime allowance. In general, such individuals will want to opt straight back out of the scheme, and their employers have said, “Why are you making us put these people into pension schemes? We all know they are going to opt out, and indeed they will be cross with us if they fail to opt out and later face a tax penalty.” At the moment, the Government do not have the power to enable firms not to enrol those people, so clause 34 provides the power to exempt them from enrolment.
The second example concerns those who have already given notice. Someone may have given a month’s notice, but in the middle of that period the Government require the employer to put them in a pension scheme. As Members will understand, that is silly, because that person will probably opt out immediately. In any case, asking firms to enrol people who have already given notice does not do much for our relations with the CBI. Those are examples of where we have given employers a comprehensive, rigid legal duty that creates perverse outcomes. Clause 34 therefore allows employers to exempt certain categories of workers, and I have mentioned the sorts of examples it would cover.
Amendment 53 says, “That’s all very well, but we don’t want you using the power to exempt categories of business such as small and medium-sized firms.” Leaving aside the fact that the amendment does not define an SME and it is not clear who would be covered, and that any amendment with “such as” suggests it is a bit vague to begin with, in responding to the spirit of the amendment I assure the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and the House that the Government have no intention of using the power to exclude small and medium-sixed firms. That is not what this is about.
Amendment 53 is otiose, because if we were the evil Government that the hon. Gentleman thinks we are and wanted to exclude small and medium-sized firms, we could do that anyway. The staging schedule is set in statutory instrument, subject to negative procedure. Therefore, if we wanted to exclude Britain’s small firms, we would have only to produce a statutory instrument that would say that small firms will be required to stage in 2099. That would not even be subject to a vote in the House. If the amendment seeks to stop the Government doing something that, in any case, we do not want to do, it would not work; we could still do it even if the amendment were successful. I hope I have reassured the House that amendment 53 is unnecessary, because we do not plan to do such a thing. Secondly, the amendment is not well drafted because it is not clear who it means. Thirdly, even if passed, it would not achieve the desired objective. An unnecessary, poorly drafted amendment that does not work should probably not be approved by the House.
Amendments 38 to 52 concern what happens to small pension pots—an issue that was not addressed when the original legislation for automatic enrolment was drawn up. People change jobs perhaps 10 or 11 times in their working life, and they leave behind small pension pots. From the Australian experience, we know that can mean lots of people losing track of their pension pots and not engaging with pension saving because they have large numbers of small, silly pension pots all over the place.
Australia is often mentioned as having one of the world’s best pension systems, and the Australians say that the one thing they wish they had addressed at the start was small dormant pension pots. The Australian Government have been going at this for longer than we have, and they estimate that they have 5 million lost pension accounts containing 20 billion Australian dollars. It is a serious issue. Clause 29 in schedule 16 sets out the Government’s response to the issue, which is what we call pot follows member. When someone moves from an auto-enrolment defined contribution pot to another one, their pot—as long as it is below a £10,000 threshold—automatically follows them unless they opt for that not to be the case.
Interestingly, Nick Sherry, former Australian superannuation Minister and highly regarded in the field, said of pot follows member:
“It’s the only practical way. It’s better off”—
because the money is in the worker’s last account—
“which is why I think it’s the only practical solution”.
We are delighted to have Nick Sherry’s support for our approach, as well as that of the Association of British Insurers. In the briefing sent to hon. Members the ABI welcomes the fact that the Bill includes provisions for the automatic transfer of small pension pots, which will lead to greater engagement and help people make savings decisions that are right for them and should lead to greater income in retirement. That is a welcome level of support for the proposition.
The Opposition amendments suggest a different route and would mean that when someone changes job, the dormant pension pot is automatically transferred to a third-party pension scheme called an aggregator. As I understand it, there would not be just one aggregator but multiple aggregators, and I have multiple concerns about that. First, such a policy would clearly lead to greater fragmentation of pension saving—it must do. Let us imagine the simplest example in which someone moves from firm A to firm B, and works only for two firms in their working life. In our model, the small dormant pension pot follows them from firm A to firm B—or scheme A to scheme B—and they end up with a single pension pot. In the model suggested by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, the dormant pension pot gets shunted off to some third-party provider with whom the employee has never engaged. They therefore have a pot with the current employer and with the third-party provider.
We are trying not just to hoover up small pension pots but to get people engaged in pension saving. The problem with someone shunting their money off to a third-party provider, perhaps one they did not choose—there is not much detail in the hon. Gentleman’s model, but I do not think it involves a person choosing a third-party provider, although perhaps it does—is that they get a letter from a pension company they have never heard of saying, “Guess what, we’ve got your dormant pension pot.” It is not exactly a ransom note, but it might be the first that someone knows about it, and that will not lead them to becoming engaged.
Under our model, someone’s pension savings are with their current employer. That is what they are interested in and where workplace pension engagement takes place. We therefore believe that our model provides better consolidation of pension saving and better engagement. Our model also saves on the cost of running pension schemes, compared with the model set out in the amendments. With a pot size limit of £10,000—obviously our published research relates to the £2,000 pot size limit on the aggregator model—which is the same across the two systems, we still estimate that the aggregate approach will achieve only half the cumulative administrative savings by 2050 of our pot follows member system. While aggregators are worth a look—we considered that option—it is clear that pot follows member is the best solution.
There is an issue of what happens if money is automatically transferred from a “good” scheme to a “bad” scheme, and I accept that point. That is why we are regulating for scheme quality. It should not just be a worry that someone’s small pension pot gets auto-transferred to a bad scheme; it should be a worry that an entire work force have been auto-enrolled into a bad scheme. We should not have bad schemes and must deal with that. That is why we are tackling pension scheme quality, which includes a range of issues such as governance, investment, costs and charges. In a few moments I will have news for my hon. Friends and the House about what action we are taking on charges. For those reasons, we are not convinced by the multiple aggregator model, as it is catchily known. We believe that the someone changing job and their money following them is a simple, attractive notion that I commend to the House. I therefore ask the House to reject amendments 38 to 52.
Amendments 5 to 10 are largely technical and deal with short service refunds. There is a category of money purchase pension schemes through which someone who has worked for a firm for under two years can have their money back when they leave. That is not in the spirit of what we are trying to achieve through our pension reforms. We want people, even those who put in relatively small amounts of pension savings, to accumulate that, build up what I call a big fat pot, and have a decent retirement. Short service refunds fly in the face of the view that even modest pension savings are worth having, and we therefore propose to eliminate them. The danger with the current legislation is that although someone joined to a pension scheme through a contract has 30 days to opt out, under the Bill they would be in the scheme on day one, and a day’s or month’s worth of pension contribution would be lodged. On purely pragmatic grounds we took that view that we ought to apply the same 30-day rule to short service refunds. Clause 32 abolishes short service refunds, and technical amendments 5 to 10 deliver a 30-day breathing space so that someone who is a member of a scheme for fewer than 30 days can receive a refund of what are essentially nominal contributions. I hope that amendments 5 to 10 will be welcomed across the House.
One central issue in the debate on this group of amendments is pension scheme charges. The charge quoted on a pension scheme might be 1%, which sounds pretty innocent, because if 99p in the pound of a person’s money goes into their pension, the chances are that they will believe they are getting a good deal. However, pension scheme charges are compounded, so 1% of the fund is taken out in the first year, 1% of what is there is taken out in the second year, and so on. The Government estimate that the cumulative impact of charges can be very substantial, despite apparently innocuous, low-sounding charges.
Some attempts have been made to tackle charges. The previous Government set a charge cap on stakeholder pensions at what now looks like an astonishingly high level. To remind the House, someone who takes out a stakeholder pension can be within the previous Government’s caps if they pay a charge of 1.5% for 10 years followed by 1% thereafter. That is acceptable and regarded as qualifying for the stakeholder stamp. The then Government said, “That’s great. As long as your pension scheme is charging you less than 1.5% for the first 10 years and 1% thereafter, the box is ticked and it is a good pension scheme.” I do not regard charges of 1.5% for 10 years and 1% for the rest as good value for money. This Government can and will do better.
Why is 1% significant? Suppose you save, through your working life, £100 a month into a pension—I am not posing this question to you directly, Mr Speaker, but rhetorically—how much of your pension pot will have gone compared with the situation for a pension that has no charges? If the charge is 1% of £100 a month, the total charge for a year will be £12 or something, which does not sound like very much. However, it accumulates to more than £160,000—the difference between no charges and a 1% charge on savings of £100 a month is £160,000, which comes out of the pension pot. That is why I regard the charge caps that the previous Government sought to apply to stakeholder pensions—they applied no charge cap whatever for automatic enrolment—as alarmingly high and alarmingly gentle on the pensions industry.
I believe this Government can do better than that. I am therefore pleased to say that tomorrow we will publish a consultation document on charges in automatic enrolment pension schemes. We have waited to do that because we wanted to see the Office of Fair Trading report, which was published in September. It looked at the market and found that the demand side of the workplace pensions market was one of the worst it had ever encountered—that is almost verbatim what it said.
We do not regulate the price of baked beans because the market works. People shop around and buy a product they want, and they can choose a different one if they do not like it. The market for workplace pensions is not like that. The demand side of the model is very weak, because the people who pay the charges, the scheme members, are not the same as the people who choose the pension—the employer chooses the pension, but the member pays the charges. Even though the employee has an incentive to want a low-charge pension scheme, they are not the consumer. The employer is the consumer. Employers might be oblivious to charges, they might not care, or they might want to get rid of the hassle of choosing a pension scheme and therefore choose what they are offered. In that situation, the employee has a binary choice: stay in or get out. They cannot shop around or negotiate the charges down. It is a take-it-or-leave-it situation.
It is worse. Not only are employees automatically enrolled, and therefore in by default, but their money is invested by default into a default fund. Overwhelmingly, the money of the people I am talking about ends up in default funds. They are double-defaulted—they are defaulted into pension saving and the money is defaulted into default investment funds. We absolutely must protect the consumer interests of those individuals. Therefore, the consultation that opens tomorrow will consider how far we can get with disclosure.
Some of the amendments tabled by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East suggest that we need tens of thousands of pension funds telling the pension regulator what their charges are. That would not be great. If I am a scheme member who has just been auto-enrolled or who has fairly passively remained in my scheme, I will be passively put into a default pension fund, but somebody somewhere—Brighton, for example—has a website with a charge figure on it. That is not great and does not really help. We need something better and tougher than that.
We are therefore proposing a range of options on how far we can get with better disclosure and transparency, and on an absolute charge cap. I can tell the House that we will include in our consultation the option of a 0.75% charge cap on workplace pension schemes. That is a tougher charge cap than the Opposition have called for—they chose 1%. Their suggestion of a 1% cap was either based on an exhaustive investigation of the evidence and the data, or chosen because it was a nice round number. It was one or the other. The Government believe we should consider going further. We know that not enough people are saving for their retirement, and therefore that every penny they get into their pension has to turn into as much pension as possible. That is why we will consult on tough action on charges.
I thank the Minister very much for the announcement that he will consider a 0.75% cap in the consultation. Will he ensure that, in the consultation, there is clarity about what the 0.75% includes? As he is aware, there are an awful lot of different interpretations of costs by different people. That is part of the problem.
My hon. Friend is right. The consultation document discusses what should be included in the charge cap. My instinct is to prefer a comprehensive definition of charges. Clearly, we do not want to cap annual management charges and find out that the industry has cunningly managed to get its money back by some other route or a disguised charge. We therefore discuss what should be included.
My instinct is to go for a broad measure. There is an issue with transaction costs—we clearly want to know about them. Including transaction costs in the cap could lead to a slightly odd situation. Towards the end of the financial year, the fund and the trustees might believe that conducting a transaction is the right thing to do for the benefit of the pension fund. However, they might be unable to do that because the transaction costs would take them over the annual limit. We would be grateful for feedback on that and need to address those issues. One reason why we are having a consultation rather than laying down a definite answer is that we want insight on the fine detail, as my hon. Friend says. The basic principle is that we are looking at ensuring that 99p-plus of every £1 put into a pension goes into a pension. I am grateful for his comments.
I should add that there has been a suite of activity on charges. To remind the House, we announced a ban on consultancy charges earlier in the year. Government new schedule 1 and Government new clause 1 give us the power to put a set of powers to cap and regulate charges and quality all in one place. That includes automatic enrolment schemes, qualifying schemes and closed schemes. Lots of people have lots of money tied up in closed schemes. Without those measures, we would not necessarily have the powers we need to regulate the charges they pay. In some ways, the charges that people in closed schemes are paying—they are often old, high-charge schemes—are worrying, because people are often not engaged with their pension saving in a closed pension scheme.
Prompted by the OFT and working with the ABI, we are looking at legacy schemes—schemes introduced before 2001. The average charges in legacy schemes are 26% higher than charges in schemes sold after 2001. This is a full-frontal assault on pension scheme charges. We have banned consultancy charges; we are taking powers in the Bill to go further for auto-enrolment schemes; and we are looking at legacy schemes, charges and charge caps. We are taking effective action on issues that previous Governments have only dabbled with. That is why I urge my hon. Friends to support our new clause and our other proposals. They deliver, whereas the Opposition’s proposals mess about around the edges.
On governance and administration—in the context of new clauses 9, 10, 11 and 12, and amendments 54 and 55—quality in pension saving is not only about charges. How well schemes are governed and administered is important. Interesting issues are raised by the Opposition’s proposals—obviously, they are flawed, but I acknowledge that they raise important issues. New clause 9 would impose a trust-based structure for all pension schemes, with independent trustees across the board. But interestingly, the Office of Fair Trading’s project leader on the workplace pensions report that has just been published was recently quoted as saying that although trusts feel like an intuitively better way of looking after people’s pensions, that
“is largely dependent on the quality of the trustees.”
Given the many pension schemes we have at the moment, including many defined-benefit schemes, a requirement for every scheme to have a particular sort of trustee could be a real challenge, especially for smaller DB schemes.
Some of the Opposition’s suggestions may not be in the interests of members of schemes. I think the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was at the recent conference of the National Association of Pension Funds, where he would have heard Fiona Reynolds, the chief of the Australian Institute of Superannuation Trustees—our friends the Australians again—commenting on his suggestion. She said:
“Looking at the Australian system, we conducted a lot of research into whether there should be more independent trustees but in actual fact we found there was a greater alignment of interest within trust based schemes, and these schemes outperformed other schemes where independent directors were present.”
In other words, these are interesting ideas, but they have been tried elsewhere and they are not a panacea or golden bullet.
If that is the case for Australia—and I looked very closely at Ms Reynolds’s comments—why are the Australian Government giving the regulator and trustees a duty to consider how to improve the Australian pension system in the future?
I do not see any incompatibility. The specific finding in Australia that independent trustees are not a magic bullet is not inconsistent with requiring schemes to ensure they are doing a good job. We will require schemes to meet quality standards that we will set out shortly.
Our call for evidence earlier this year sought views on provider-level governance structures, and the OFT has announced that the Association of British Insurers will work on independent governance committees for the big insurance-based schemes. We welcome that development and will consider our own proposals in detail in our response to the call for evidence.
The second set of governance issues relates to fiduciary duty and sustainability, addressed in new clause 12, tabled by the hon. Member for Brighton, Pavilion (Caroline Lucas) and amendments 54 and 55. By happy coincidence, I took part in a conference this morning organised by ShareAction. The hon. Lady was on the attendance list—perhaps she was sitting at the back heckling, but I did not see her there. The conference was to launch ShareAction’s green light project, which aims to get pension funds to take sustainability and climate change seriously. I was delighted to take part in that conference and I am very supportive of that agenda.
Clearly, the duty of trustees to their members is a cornerstone of trust-based governance, but we are looking at whether we have got the definition of fiduciary duty right. I welcome the fact that the Law Commission has consulted on this. Its interim conclusion is that fiduciaries should look at longer-term issues, and it is legitimate for them to look at environmental, social and governance—ESG—issues. The Government are therefore considering what the fiduciary duty on trustees means and how far we can deal with it through a better understanding of that work.
One of the issues that came out of the conference this morning—I shall try not to deviate too much from the new clauses, Mr Speaker—was that the trustee toolkit that the Pensions Regulator provides could be amended to take account of some of these concerns. One of the challenges is to try to ensure that the trustees do their job properly and have a broad understanding of what it entails. As I say, the Law Commission’s interim conclusion was that trustees should—note “should”, not just “may”—consider
“in general terms, whether their policy will be to take account of ESG factors in their decision-making”.
I do not have any problem with the spirit of the new clause and amendments, but we are trying to consider this issue across Government. One of the funny things about being the pensions Minister is that if I go to a conference on pension funds and climate change, I have to get briefed by the Department for Business, Innovation and Skills because it does fiduciary stuff, and by the Department of Energy and Climate Change because it does climate change. Rather than amend pension legislation to deal with this little bit of the picture, we are trying to take an holistic view. As the hon. Member for Brighton, Pavilion knows, we have had the Kay review of fiduciary duty and long-termism, and we have the Law Commission review. We are trying to be as careful and as cross-departmental as we can, so we want to look at the whole investment chain and at how corporate governance, the law of the land and pensions will be affected, to make change in an integrated and connected way.
I am grateful to the Minister for his positive comments. I take the point that the pension aspect is not the full picture, but it is a big part of it. If we want to make quicker progress on this issue, can he advise where we should best table our next amendments?
In someone else’s legislation—[Laughter.] Just between ourselves, I encourage the hon. Lady to keep up the pressure across Government, including at Business, Innovation and Skills questions, Energy and Climate Change questions and Work and Pensions questions. To be frank, this issue is not always at the top of the pension agenda, so I welcome the amendments for that reason. I am reluctant, however, to amend the Bill in a piecemeal fashion, when I hope that we can have a more overarching framework affecting company law, business regulation and the duties of trustees not only in pensions but beyond. I am sympathetic to what she is trying to achieve, but we want to do it in a systematic, cross-Government way rather than dealing with just a bit of the issue. I look forward to hearing what she has to say, but I hope that she will withdraw new clause 12.
Scale is important. I do not think anyone doubts that, on average, bigger schemes produce better outcomes than smaller schemes, in the sense that, typically, bigger schemes have lower costs; they have the potential to diversify and pool risk; they have access to investment vehicles that smaller schemes perhaps do not; they have access to better quality investment advice; and they have more experienced trustees. We can see why, on average, a big scheme will probably do better than a small scheme. Just as the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is searching for golden bullets on independent trustees—
Apparently he is searching for silver bullets. In any case, we are already seeing consolidation. To give the House a sense of scale, let us consider small and medium occupational defined-contribution schemes for between 12 and 1,000 members. The number of such schemes fell by more than a third in three years—a dramatic fall—from 3,300 to 2,110. The number of micro-schemes, with between two and 11 members, fell by a fifth over the same period, from some 45,000 to 36,000. In a sense, the Opposition amendments seek to force the pace on scale, but it is already happening quite quickly. That is a welcome development, and once we implement our measures on scheme quality—which, subject to consultation, may include tough action on charges—there will be a seismic effect on the pensions industry.
If a scheme cannot be used for auto-enrolment unless it delivers seriously low charges, many small, sub-scale schemes will fall by the wayside. The trends are already in that direction, and the measures we shall implement will substantively accelerate that. Rather than presume that scale is the right answer, we have to regulate the quality. If a small scheme can demonstrate that it is, for example, tailored to the characteristics of its membership and is delivering for them, great.
We do not want to kill good-quality small pension schemes, which is what the Opposition’s slightly bureaucratic amendment could do. Instead, we will say, “This is what we think good looks like. If you, as a big or small scheme, can deliver that, we will not tell you what to do. We will set parameters for what good looks like and you have to deliver.” Consolidation is already happening, and the quality requirements we are putting in place will deliver the outcomes that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East wants.
Moving on—I apologise for the jargon—to decumulation, or “turning pension pots into retirement income,” as I think I am required to call it, new clause 11 suggests that it should be a requirement on schemes to feed in an annuity broker at the end. The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East touches on an important issue, albeit again in an overly rigid way. Getting pension pots into a good profile of retirement income is crucial, which is why we at the Department for Work and Pensions are working with our colleagues at the Treasury on annuities and decumulation. Decumulation is about more than annuities. That is not a snappy soundbite, but in other words, turning a pension pot into a retirement income has to be about the whole process of retirement, not just a single event on a single day that fixes one’s retirement income for perhaps 30 years.
The danger with the rigidity of new clause 11 is that it presumes a backward-looking annuity model. Annuities in their current form were designed for a world where people lived for 10 years with pensions and then died. We now have a world where people might annuitise in their early 60s, or want to stop contributing to their pension pot in their early 60s, and live into their 90s. There are serious questions about the suitability of annuities for everybody. For example, people with big pension pots might want to look at a mixture of draw-down. They might want to look at alternatives, deferral or a range of options. It would be a backward step to hardwire into primary legislation that the only good thing that can be done with a pension is to annuitise through this particular model. We should give people new options at decumulation, not hardwire them into the annuity model. Of course, even an annuity broker may not necessarily guarantee that someone will get, for example, an impaired life annuity or enhanced annuity for disability or low life expectancy.
There is a lot that needs looking at in this section of the market. The initiatives that the industry has already taken—for example, the ABI code that came into practice earlier this year—are welcome, but we need to go further. We need a creative approach to turning pension pots into pension income, not a single product hardwired into a primary legislation model. I understand where the hon. Gentleman is coming from and I believe that the annuity market is in need of further reform, but hardwiring into primary legislation does not seem to us to be the way to go.
The House will be pleased to know that there are two final sections left, both of which are brief. The hon. Member for Hayes and Harlington (John McDonnell), who does not appear to be in his place, tabled new clause 7, on rail pensions. The new clause relates to whether the Government should underwrite the shortfalls in the pension funds of employees who worked for the nationalised rail industry, which was then privatised, and where some companies, such as Jarvis Facilities, Relayfast and Fastline, went to the wall. We sympathise with any worker whose firm goes to the wall, but I say to the hon. Gentleman in absentia that the notion of protected persons in this case was simply that the terms of the pension scheme of the private employer would be as good as in the public sector. It was never a guarantee against the insolvency of the sponsoring employer. All private sector employees are covered by the Pension Protection Fund, provided that their firm pays the PPF levy. That is how these workers will get all or most, depending on their circumstances, of the pensions they were expecting. It would be wrong to give special treatment to that group when many other people work for firms that went to the wall and will not get that treatment.
Does the hon. Gentleman not accept that to enable privatisations to go ahead—we are not just talking about the railways; the electricity sector and the miners were affected in similar ways—promises were made that people’s pensions would not suffer any detriment as a result of privatisation? Our experience is that privatised companies go bust more often than others. Surely we are reneging on those promises.
Just to be clear, new clause 7 makes a specific suggestion regarding a private sector employer going to the wall. The promise was never, “You’ll get absolutely everything, even if your firm goes bankrupt”; it was that the terms of the pension would be as good as in the public sector. Clearly, in this case people are working for a private sector firm and could, if they wish, transfer their pension rights to somewhere else. They chose to keep them with the sponsoring employer.
Bear in mind that the money to pay for any shortfall in those pensions will come from the general taxpayer. Somebody is paying for that shortfall and many general taxpayers have no pension provision at all. If a private company knows that the pension fund is completely insured by the Government, that may influence its behaviour in a way we would not want. If feels unfair to say, “If your private employer used to be nationalised not only do you still have access to a very good pension scheme, but it is absolutely protected, whereas if you worked for any other private firm you are not protected.” I can understand why the hon. Member for Hayes and Harlington, given his trade union links, supports the railway workers—that is fair enough—but it seems like special pleading for that industry and I think there are many others who might make the same argument.
I am sorry to take my hon. Friend back to annuities, but I have been reflecting on his remarks. I agree with the need for us to be more creative in that interface as annuities are taken out, and he is right to say that the annuity broker is overly prescriptive. However, it is also true, as I think he said, that there are market abuses in the annuity system. Is there any more we can do in the consultation to look at the transition from pension fund to annuity and ensure that, for example, the Association of British Insurers code of conduct is more rigorously applied than it has been? It has not been very successful up till now.
Although the ABI code, for example, no longer requires the providers to send the application form with the wake-up letter, I gather the early evidence is that it has not substantially changed the proportion of people who shop around and then move to a new provider. I agree with my hon. Friend that there is a big agenda on decumulation—I apologise again for the word. It is not just about annuities. The new clause is too narrow and too prescriptive, but I assure my hon. Friend that we do not regard decumulation as a job done—on the contrary.
I have been contacted by a number of constituents who are in difficulties because of the current regime. The Minister clearly accepts that there is a need for change. When will he come forward with proposals? He has been in post for a number of years and is clearly on top of his brief. We need the Government to act. When will they do so?
My particular responsibility is automatic enrolment. We are about to put 10 million people into mainly defined-contribution pensions, the vast majority of whom, all things being equal, will then buy an annuity at the end. For understandable reasons, our focus in the past few years has been to get the infrastructure in place to get those 10 million people into pension saving and building up pension pots. Then, when they have a pension pot, we will ensure that they receive good value at the other end. There will be a set of people who will be auto-enrolled today and will retire tomorrow, but they are a minority. We need to get to grips with this issue. Annuity policy is led by our colleagues in the Treasury, which is why we are working closely with them. We hope to make further announcements soon.
Government amendment 31 relates to the Pension Protection Fund compensation cap. In Committee, we amended the Bill so that workers entering the PPF would have a more generous cap if they had been long-serving employees. The amendment applies the same provisions to people who are already in the PPF. We will not go back years and increase pensions retrospectively, but once the Bill and secondary legislation are passed we will increase their pensions going forward in line with the provisions we have already made for new employees going into the PPF.
Will the Minister explain what the position will be with regard to the cap for those who are in the financial assistance scheme and are not yet in the PPF?
I am grateful to the Chair of the Select Committee. As she knows, the PPF scheme is funded by the PPF levy, and the financial assistance scheme is funded directly by the taxpayer. I think the FAS will be moving next year to the Department’s annually managed expenditure budget, so we will then have to find taxpayers’ money to make a parallel change to the FAS. We are continuing to reflect on whether we should do so. No final decision has been made, but I understand the case for some matching change.
To conclude, the change to the compensation cap will mean that relatively small numbers of people—who, having worked for their firm all their life, should have got a good pension, but on whom the cap was biting particularly harshly—will now get a fairer pension, which has been widely welcomed by those affected.
In summary, this section of the Bill deals with making automatic enrolment and private pensions work. Automatic enrolment has been a great success so far, but there have always been a lot more aspects to sort out, small pension pots being one in particular, scheme quality another. I am delighted to say, therefore, that this is the week we finally tackle the scourge of excessive pension charges, and I commend the Government amendments to the House.
I have listened closely to the Minister. When one listens to him, particularly on pension charges, one has to listen very closely, because—how shall I put this politely?—there is a gap between the rhetoric and the reality. I will analyse the extent to which there remains a gap. In one sense, he has caught up with the questions that need to be asked about pension charges, but from the detail—or lack of detail—in his announcements, it seems we are still a long way from getting answers.
On other matters first, however, the Minister says that auto-enrolment is going “exceptionally well”. I think that that is accurate, but I am sure he would agree that we have to be cautious, given that it is very large employers that have enrolled and that the percentage of savers’ income going into the new pension schemes is very small—in many cases, it is hard to notice. We welcome the developments, however, and pay tribute to him for taking forward the previous Labour Government’s auto-enrolment scheme; there is consensus, I think, on both sides of the House that auto-enrolment has to work effectively. It is crucial that every single one of the 10 million people being auto-enrolled between 2012 and 2017 can be sure of getting value for money from that pension scheme. The necessity of value for money for all auto-enrolment schemes is what drives my amendments.
I wish to say a little about why that matters so much and how the Minister’s wind-up of the state pension interacts crucially with auto-enrolment. Essentially, he has gone for a hard and fast wind-up of the second state pension. No doubt, he will justify that move, and there are reasons to think it is sensible, but if we are to have a quick wind-up of the second state pension and a fast move to a flat-rate state pension, the biggest losers from that switch—this might be defensible, because there are always winners and losers—are likely to be lower-paid workers in the private sector who did well out of the redistribution accrual mechanism in the second state pension. If someone was low paid in the private sector, they accrued in a way that brought them closer to those on higher incomes. In many cases, therefore, the same people now being auto-enrolled will be the same people losing out from the hard and fast wind-up of the second state pension, or losing out in the longer term. That makes getting auto-enrolment right all the more important. The first thing he should have done when he took office—I know he will have an enormous in-tray—was work out how to ensure that every one of the 10 million people enrolled got value for money. That is the context of this debate.
The Minister says that the Bill will further improve the situation, so let me pursue some of his comments and then turn to Labour’s vision for private pensions. Amendments 5 to 10 to clause 32, on short service refunds, are more or less uncontroversial. On clause 34 and exemptions from auto-enrolment, he referred to our amendment 53 and said that I saw this as an “evil Government”.
That is a lesson in not posing a rhetorical question. Whatever my hon. Friend believes, I do not see this as an evil Government—in particular, no one doubts the Minister’s good intentions—but our amendment must be understood in the context of the Beecroft report.
As you will remember, Mr Speaker, Adrian Beecroft is a Tory donor who has produced a report in the last 18 months arguing that red tape and bureaucracy on small businesses are far too heavy and that micro-employers should be removed from auto-enrolment. I know the Minister does not support that and said the Government had no intention of doing it—no one is suggesting he would do such an awful thing—but he will not be there for eternity. Given his recent comments about God being a liberal, perhaps he does intend to be around for eternity, but for those of us of a more sceptical temper, I think we can say he will not be around for ever, so it would be sensible to constrain a future Government, or even this Government—anything could happen—who might be under pressure from the Beecrofts of this world, in a way that is consonant with the best objectives of public policy.
The Minister said that amendment 53 did not even define a small and medium-sized enterprise, but he will know that the Companies Act 2006 clearly defines an SME as an enterprise with 50 or fewer employees. That is a common definition of an SME. The broader point, however, is exactly the one I have already expressed: we are trying to do him a favour by protecting him from those within the coalition Government who take a less enlightened view of the benefits of auto-enrolment. We tabled the amendment in that spirit.
On clause 29 and the debate around schedule 16, the Minister mentioned the Australian example. I was at the National Association of Pension Funds last week, and I have even watched him in the video—I was hoping he would entertain us with the song from “Les Misérables”, but I will come to that when I deal with costs and charges. He said that Australia is doing pot follows member—the inference is that I often point to the benefits of the Australian system—but that is not surprising, because Australia has several hundred schemes, whereas we have 200,000, and that is not including personal private pensions. To compare a system so scaled with our system is to let one’s a priori views of the world get in advance of the evidence, or to put it more simply: he is comparing apples and pears. Australia has several hundred pension schemes; we have 200,000, and that is a fundamental problem with comparing our system. Australia is in a much better place in terms of scale.
The Minister says that pot follows member will be simple and effective and that we will regulate for quality, by which he means there will be minimum standards—or at least he tells us there will be minimum standards, but, guess what, that is also currently part of a consultation. There is a broader theme to which I shall return; when the Minister feels under pressure from the Labour agenda on private pensions, he calls for consultation. He says that this and that will happen but when we study the detail, we see that what he has called for is a consultation. That is not the same as decisive action.
On pot follows member, the problem is that the UK has a fragmented pensions system; we have 200,000 pension schemes. We have—to put it in a simple fashion—great variations in quality. The Minister is being asked repeatedly by the pensions world how pot follows member will work in those circumstances. It is again worth listening closely to what he says, because he has not yet explained how it will work. He has set out his plan and objective to get to pot follows member but not how the mechanism will work. One of the reasons for that is that it is very difficult to do. To go back to the Australian point, pot follows member would be a sensible approach if we started from a very different place, but we do not. We start from a very fragmented private pensions system with a massive variation in quality.
On costs and charges, the Minister does not actually know what is going on in the pensions world. We had a very interesting conversation, or debate on this in Committee. In arguing a point with me, he pointed to DWP evidence. It turned out that the way in which he quoted that evidence was not appropriate, but my point is not to criticise him for making a mistake, which does happen; it is much broader. The DWP is forced to take surveys of employers to try to find out what pension providers are charging them. The Minister talks about evidence. Would not a much more effective way to approach things to have the costs and charges laid out for everyone to see in the first place? Why has he not got on with ensuring that costs and charges are disclosed? Instead, the DWP has to take surveys of employers who, in many cases—as his own survey evidenced—are not aware of what they are buying in terms of a pension scheme.
That brings us to the broader issue of who buys pensions. The Minister wants to move to pot follows member and says that there will be quality criteria; these will be minimum quality criteria. But, as things stand, he could not explain to the House all the costs and charges that exist in a pension scheme. Neither the Government nor the regulator gather that evidence. That is a fundamental point about the pensions market today.
Similarities are often drawn between energy and pensions. One way in which they are similar is that the vertical integration of pension providers—the same as with energy companies—means that it is very hard to crack where the costs and charges lie. I put that point on the table. The Minister wants to move to pot follows member but has not set out in detail the mechanism and the IT by which he would do this. More widely, he is not able to say at this stage what the costs and charges are in pension schemes. So how can he be sure that no one will move from a superior to an inferior scheme? He will say, and has said, that he will ensure that this happens. Again, I do not doubt his good intentions, but he has not so far delivered on costs and charges. More widely, if he does deliver—as I am sure he has every intention of doing—the amount of regulation that it will take to make a pot follows member pension automatic transfer system work is enormous. That is why so many stakeholders in pensions do not think it is a feasible way to proceed. The Minister said that the Association of British Insurers supports it. That is hardly surprising, because this is a system that will have the least detriment to the ABI’s members.
The Minister feels that he is now catching up with the pension charges debate; that is evident from his language and from the extent to which he talks about the Labour agenda, which is quite striking for the Report stage of a Bill. But he is still caught in the mindset of “If only I can get the industry round the table, it will deliver.” There is no evidence of delivery so far and no evidence therefore that that will happen. The reason that there is no evidence relates to a point made by my right hon. Friend the Leader of the Opposition in his powerful 2013 conference speech, which still reverberates around British politics. He asked, rightly, why one would expect an industry to take the decisions necessary to reform a market when it is not in its interests to do so. Why, indeed? I say to the Minister that, on pot follows member, he has to look beyond the ABI’s interests and look to the interests of the wider pensions community and of the most important people, savers.
The Minister mentioned the National Association of Pension Funds conference, where he mentioned pot follows member. I am sure that he got a very warm reception, because the national association is very clear not only that pot follows member is not the best way to proceed, but that there is a serious possibility of significant consumer detriment, which, in everyday language, means rip-offs. The national association, which the Minister so eloquently addressed the other week, is very clear on that. Not only is the association clear that we should have no truck with pot follows member, but it supports—the House will be surprised to learn—aggregators.
The Minister sets out my approach to aggregators as being, “Labour wants several aggregators, but how would they work?” He said that aggregators stop individuals engaging with their pension, or make that engagement impossible. He knows very well that the whole logic of auto-enrolment, which Labour began and which he has followed through, is that we have to use the power of inertia in pensions, because all the evidence is that many people will find it difficult to engage with pensions whatever the circumstances, given their complexity. Also, as he must be all too aware, auto-enrolment involves employers buying pensions, not the saver.
A criticism that I would make more widely of the Minister is that he approaches the pensions market as if it were a functioning market; functioning in the sense that we can and do have a consumer who is engaged, informed and sovereign, and a seller. The Minister knows that that is not the basis on which auto-enrolment proceeds because it is the employer who buys the pension. In other spheres, he has shown that he is fully aware that there is a big problem in the pensions market, which develops from the fact that the saver in many cases cannot be the sovereign—the person who makes the decisions—first, because the employer buys the pension and, secondly, because the pensions are so complex and their annual statements so opaque.
In those circumstances and with the Minister being aware of that, to claim that the aggregators should be excluded and rejected on the basis that they do not allow consumer engagement is a bit of a straw man. Let me say a little about why I think aggregators are so important. This relates to my other new clauses and I should iterate at this stage that these new clauses must, if we are to develop a serious policy to improve auto-enrolment outcomes, go together. For example, the Minister talked about trustees and said that the OFT says that the key is the quality of the trustees. He is of course right. My view, and that of the Labour party, is that trustees, in scaling up the pensions system, and aggregators go together to try to make a significant difference to the 10 million people being automatically enrolled in pensions.
My hon. Friend is making an excellent speech. I recognise that the Minister is sincere in his intention to improve pensions but, in relation to costs and charges, does my hon. Friend think that the inertia might be a result of the Government not wanting to challenge the vested interests of the big pension providers in order to stand up for ordinary, hard-working people?
I thank my hon. Friend for her shrewd intervention.
The Minister has been slow to understand the depth of the problems in the pensions market, and the House does not have to take my word for that. Earlier this week, I wrote to the Conservative MPs in the 40 most marginal Conservative seats, who have recently published a manifesto-cum-policy document. The language therein is—how shall I put this?—tougher on the private pensions market even than mine. The document, “40 Policy Ideas from the 40”, describes it as a failed market. It also states:
“Pension providers still refuse to clearly identify hidden charges such as churn and related fees…91% of retirees buy their pension annuity from their fund manager without checking other market options…the problem is that the private pensions market in the UK is a failed industry with higher charges than in any other country.”
That was not written by the Labour party. It was written by the Conservative MPs in the 40 most marginal constituencies. It seems a bit odd that they should take a tougher line on the pensions market than the Liberal Democrat Pensions Minister.
The way to explain that conundrum—I will not call it a paradox—is to say that anyone who believes in markets and thinks that they should work properly will support Labour’s proposals on reforming the private pensions industry. We want to reform it to ensure that the 10 million new savers going into automatically enrolled pensions get a fair deal. This pertains in particular to clause 29 and schedule 16, and the amendments thereto. It comes down to whether we believe that the pensions market is ready and able to proceed with pot follows member, given its fragmentation. The evidence shows that it clearly is not. Again, Members need not take my word for that. The National Association of Pension Funds has made it clear that we need to move to an aggregator system.
Given that the Minister was kind enough to spend a considerable period of time talking about the Labour amendments, I will do the same. I want to say a little about why aggregators are important. When the Minister addressed the NAPF, he gave a lucid, walk-around-the-stage performance that I enjoyed very much. He referred to two songs from “Les Misérables”. It would be unfair of me to sing either of those songs to him now. I have to confess that I am not a musicals man, although I suspect that the Minister might be a man for musicals—
It seems that he is, and that is fair enough. I myself am not. Musicals are not my thing. He quoted from the innkeeper’s song, which I am certainly not going to sing. For one thing, I do not know the words. He used the song as a basis to talk about 2% here, 3% there and charges everywhere, and presented that as the problem in the UK pensions market. That is very different from what he was saying not long ago. It is just over a year since he accused Labour of scaremongering about pension charges, but he has moved a long way since then—rhetorically, if not perhaps substantially. He talked about that ditty and made it clear that there was a problem, but he still does not grasp the fact that pot follows member is impossible because of the fragmentation in the pensions market.
Labour’s new clauses would enable the restructuring of the UK pensions market so that savers’ interests would be appropriately represented. The Minister referred to our new clause 9, which deals with trustees, and he quoted the OFT’s view that the trustees would have to be good ones. He also quoted someone from Australia who is over here at the moment, who had said that in some cases trustees were not the answer.
Our proposals involve having trustees in every scheme, the scaling up of the UK pensions industry to reduce the fragmentation born of 200,000 different schemes—it is the most fragmented private pension system in the world—and the reform of the annuities market. Our amendment (a) to new clause 1 proposes that all costs and charges should be disclosed. Those measures need to be taken together as a package, as a Labour Government would do, and they would provide a starting point for tackling the fundamental problem in the UK pensions industry.
Our proposals would deal with the first problem, the system’s fragmentation. Secondly, they would deal with the problem that, as history tells us, pension savers are not the same engaged, informed consumers as those who buy tins of beans. The Minister seems to have undergone a damascene conversion on the merits and demerits of comparing the pensions market to the tin of beans market, and I will come back to that point. Savers are not informed and engaged in that way.
Buying a pension is not like buying a tin of beans. The consumer does not exert the same pressure. Someone buying a tin of beans might be given a choice of five different kinds. With pensions, such a choice would not be available to the saver anyway, because the employer buys the product. But let us use the Minister’s metaphor and compare the pensions market with the tin of beans market. First, if there were a pensions market in a supermarket, the saver would not choose the pension themselves; their employer would do so. That would be an odd arrangement in the tin of beans market. Secondly, the buyer of beans can taste the various kinds, from the cheaper ones to the more expensive, and come to a judgment based on taste relative to cost. It would be difficult for them to make a similar comparison with pensions; historically, it has never happened. Thirdly, I return to the point that it is the employer who makes the purchase of a pension.
The Minister has done something significant in the state pension sphere. He and I have been exchanging views across the Dispatch Box for almost two years now, and I say to him gently that he is still approaching the private pensions market on the basis that it has the ability to function like other markets, including the market for beans, even though, as he looks at it more closely, he can see that there are big problems. It cannot function like that. If we are to make it work properly, we have to ensure that the people acting in the pension saver’s interests are muscled, scaled and resourced.
That is what our new clauses would achieve. They would enable the scaling up of the pensions system, so that schemes would be able to get an effective deal from providers. Let us be clear: the providers in the pensions market have scale. In that sense, it is a bit like the energy market. They are large-scale, efficient organisations. It is the people saving into pensions who do not have scale, and that is because there are 200,000 pension schemes. They do not have the necessary representation because the smaller employers, in particular, who are auto-enrolling their employees are not pension experts. I know that the Minister is aware of those facts—we have discussed them a number of times—and I urge him to think about how all that relates to restructuring the private pensions system so that it takes cognisance of that reality. It is in that area that he is not taking on what the Opposition are saying.
We are clear that we need to move to an aggregator system, because otherwise pot follows member will not work and because if we enable the creation of aggregators, we have a chance to bring down charges in the auto-enrolment market. We know that there are millions of stranded pension pots, and the Minister rightly and repeatedly talks about them. How do we use the stranded pots issue to generate some change in the interests of pension savers, particularly the 10 million new savers automatically being enrolled in pensions for the first time? How do we do that? That is what our new clauses wink towards.
One way of doing that is to use the power of the stranded pots as a lure and say to providers, “If you want access to the new market and to the billions of pounds locked in stranded pots, you can do so as long as you meet quality, costs and charges standards as set down by the Government and the regulator.” We could say to pension providers in the AE market, “Yes, you can be approved as an automatic transfer scheme aggregator, but only if you charge 50 basis points, and fully disclose your transaction costs,” thus meeting the criteria of the Labour new clauses dealing with independent trustees and other requirements. That shows how to use the stranded pots in the interests of the 10 million people who are being enrolled into these pensions for the first time. The ABI does not agree with that, and it is faithful to its position as an important industry interest, but it represents big pension companies, whereas I think the job of this House is to represent pension savers. That sets out the rationale for our amendments and new clauses.
The hon. Gentleman is making a thoughtful contribution, but what he seems to be saying is that if I have a small amount of money, I can have a 50 basis points pension fund, but his proposal for the charge cap for active members is 100 basis points or 1%. If I have a lot of money in pensions, I have to pay 1%, but if I go off to an aggregator, it is 0.5%. Why is that a good deal?
I thank the Minister for that thoughtful intervention. I am coming on to the issue of the charge cap and the rate at which it will be set, so I shall take up the point when I discuss our amendment (a) to new clause 1. He refers to small pots, but that takes us into territory we have previously discussed about getting aggregators to take them on. Why does he believe that only small pots that are stranded should automatically be transferred? My view is that all stranded pots should be liable for automatic transfer. I am grateful for his intervention, because it reminds me of something I intended to say. The Government’s position on the pot follows member system appears to be supported only by the Government, the Minister and the ABI. First, the only pots liable for automatic transfer will be those for less than £10,000, and secondly no pots that are stranded before the date on which the legislation takes effect will count as stranded pots. [Interruption.] The Minister shakes his head. I will give way to him if I am wrong on that point. He does not want to intervene, so I shall continue on the basis that what I am saying is correct.
This is an important issue, because I am building a case that the Minister does not realise how substantial the problems in the private pensions market are. He continues to think it can be treated like better-functioning or well-functioning dynamic markets. Actually, the market is more like the one in energy. I say that because when, under the Minister’s leadership, the Department for Work and Pensions looked at how to consolidate pots, it gave as a reason against aggregators the fact that they would disrupt the current market structure.
The Minister talks about new clause 1 and the need to take very strong action. Implicit but also explicit in what he says is that there are really serious problems with this market. If that was not explicit in what he said today, it was certainly explicit in his “Les Misérables” ditty at the NAPF. He knows about these problems, and he knows that we need significant change. We are going to be in a position, however, whereby all currently stranded pots will continue to be stranded. The Minister is shaking his head again. Does he want to tell me that I am wrong? I am happy to accept it if I am wrong, but on the basis of our Committee debates, I do not think that I am. Am I wrong? The Minister will not stand up to say so, so I shall assume that I am not and that he wants to keep the currently stranded pots still stranded and will not take action to deal with the problem. He also sets a £10,000 limit. Why? The answer is that he continues to be unprepared to stand up to the vested interests in the pensions market.
The Minister said several times that the ABI is doing this, and the ABI is doing that. That is welcome; we like to see the industry engaged. However, a time must come—and it is now—when the Government must get on and make the changes necessary to reform the pensions system. I put that on the record, and if he wishes to correct me, he can. As I say, currently stranded pots will not be encompassed by clause 29 and schedule 16, and no pot above £10,000 will be considered to be a pot eligible for automatic transfer. I think that says something significant—that he does not understand the necessity for significant change in this market.
It is not just me referring to private pensions as a failed industry. As I said, the group of 40 Tory MPs in the most marginal constituencies have done so too. They do so because they understand that if 10 million people are to be automatically enrolled into the new workplace pensions, every scheme must provide value for money. The Minister needs to take the necessary action and accept that.
I have just come back into the Chamber, but since the hon. Gentleman mentions the 40 Tory Members, I want to put on record the fact that as one of those 40, I was extremely happy to hear what the Minister said about the consultation, the 0.75% cap and his cognisance of the issues surrounding it. I shall therefore support the Government in any Divisions on these new clauses and amendments. [Interruption.]
My letter has not had the desired effect. I thought that Madam Deputy Speaker called me “Greg Mulholland” there. I was processing that, rather than being shocked at the fact that the Treasury Parliamentary Private Secretary is going to vote with the Government. Believe it or not, that did not come as much of a surprise to me.
I beg the hon. Gentleman’s pardon. That was my mistake. Perhaps the hon. Member for Leeds North West (Greg Mulholland) will speak later. I call Greg McClymont.
Thank you, Madam Deputy Speaker. I was not sure whether I had misheard or whether the hon. Member for Leeds North West (Greg Mulholland) was trying to intervene.
I want to pay tribute to the hon. Member for Warrington South (David Mowat), one of the group of 40, as a doughty campaigner on behalf of those who wish to see radical reform of the pensions market. I do not know whether he had left his place when I quoted from the “40 Policy Ideas from the 40” and the description of the private pensions market as “failed”. I noted that the language used by those 40 MPs was stronger than anything I had used about the private pension market, and suggested that it is a little odd that Conservative MPs take a tougher line on the industry than the Liberal Democrat Minister. Perhaps it is not odd, however, because those who believe in free markets will want the pensions market to work effectively. [Interruption.] I did not catch what was said by the hon. Member for Gloucester (Richard Graham), but I invite him to intervene if he wishes to do so.
Mr Speaker—[Laughter]—I am sorry, Madam Deputy Speaker. You are not the only one who can make a verbal slip!
I was struck by what the Minister said about decumulation. It proved my point about his ability to talk but not necessarily to take any action, or enough action. New clause 11 calls for an independent brokerage service to guide those who annuitise on retirement through the process. Its aim is to deal with the lack of competition which, according to the NAPF and others, causes people to receive an average of 20% less in their annuities than they would have received had they shopped around. That returns me to a point with which I have been trying to persuade the Minister to engage. Buying an annuity involves a huge decision which a person will make only once in a lifetime, and which will affect the rest of that person’s life. However, the process is complicated, and because they find it hard to understand what they are being told, most people currently default to the annuities that they are being offered by their existing pension providers.
I am glad that my hon. Friend is speaking up for savers. He is raising issues that have already been raised with me by a number of my constituents. When I told the Minister that we were waiting to hear proposals from the Government, he said that we would hear something very soon. Has my hon. Friend been given any indication of when that might happen?
Thank you, Madam Deputy Speaker. That was beautifully pronounced, which is what I would expect from a Member from Kilmacolm. I look forward to your pronunciation of my constituency.
My hon. Friend made a very good point. I think she, and indeed everyone who listened to the Minister’s response to new clause 11, will be wondering what he proposes in lieu of the new clause. “Nothing” is an honest and fair assessment—or, at least, “Nothing concrete or substantive.” Referring to decumulation, the Minister said, “An awful lot needs to be looked at. We need to go further, but we need a creative approach rather than merely focusing on annuities.” I understand what he meant, because there is an ongoing debate about annuities as a product, but people out there, including our constituents, are annuitising every day. I do not think that saying to those people, “We are going to think about some creative solutions, we cannot tell you what they are, and because we are going to do something creative, we should not at this stage do something specific and concrete in order to improve outcomes,” stands the test. How long will it be before the Minister deals with this problem?
We know that annuities are a huge issue and that plenty of ideas are flying around, but ours is a concrete, practical proposal to improve annuity outcomes as things stand. I do not deny that the Minister has done something pretty significant in respect of state pensions, and I know that he must maintain a balance between pension schemes, but is it really good enough for him to respond to us by saying, “We need to do something—we need to go further—but we need a creative approach rather than your approach, which is focused on annuities”?
Annuities are the product that most people have to buy, and I think it unfair of the Minister to reject our new clause on the grounds that he prefers a more creative approach without explaining what that creative approach will be. I know that he has a great deal on his plate with state pension reform—winding up the state second pension as quickly as he intends to wind it up constitutes an incredibly big reform—but I ask him to reflect on whether it is good enough to say to people who have saved throughout their lives, and who are now receiving much less than they could have received had they shopped around, “We cannot support the Opposition’s new clause because although an awful lot needs to be done and we need to go further, we need a more creative approach.” I do not believe that anyone will be convinced by that.
The fact that people do not shop around for annuities is not the industry’s problem. Where there are shareholders, the industry exists to deliver shareholder value. If individuals choose to remain with their existing provider, the industry can encourage them to shop around—as it is currently doing by means of the open market option—but at some stage the industry will rightly say, “We have made efforts, but people are still not shopping around.” The Government must take action to ensure that people are given independent advice that will enable them to secure the best possible deal. That is in all our interests, because the more retirement income our constituents have, the more decent, enjoyable and, hopefully, long retirement they will experience.
New clause 11 eliminates the gap between the Minister’s rhetoric about the tough action that he will take to deal with problems in the pension market and the reality. At present, he is saying, “We will not do what you suggest, but I have nothing to propose myself.” This is, after all, the Pensions Bill. If reform is not proposed in the Pensions Bill, where will it be proposed?