Wednesday 9 March 2016
[Mr David Nuttall in the Chair]
BT Service Standards
I beg to move,
That this House has considered BT service standards.
It is, as ever, a pleasure to serve under your chairmanship, Mr Nuttall, and I express my gratitude to Mr Speaker for having granted this debate. I am conscious that there are many colleagues here today and presumably, because of their attendance, they have experienced similar problems to those that I have in my constituency. Those issues centre on BT’s inability to deliver its service obligations to its customers—our constituents. I reassure hon. Members that I intend to be generous with my time and in taking interventions, because I know that this subject fills many of our postbags. Lucky constituents have the ability to send us emails, although some of my constituents in Romsey and Southampton North have resorted to quill pen and ink, such is their frustration with their poor service.
I make it clear from the outset that this is not about broadband, although I will mention it, and I am sure that will give colleagues an opportunity to vent. Instead, I plan to focus on the myriad problems my constituents have faced over the course of the last 12 months and, in some cases, BT’s inability even to seek to rectify faults. Its contractors have repeated errors that have caused mayhem in some villages in my constituency.
I congratulate my hon. Friend on securing this important debate. I was prompted to rise when she mentioned the limits of the service, in terms of faults not being rectified. In my constituency, a 99-year-old lady’s phone line was down, but BT refused to send an engineer. Thankfully, my office forced it to send one in. After the work was done, however, she had a stroke. Her son managed to make phone contact to discover that, but it could have been so very different if the line had not been fixed and her son had been unable to get through. She could have died without immediate assistance, and that shows the importance of phone lines.
I thank my hon. Friend for that contribution. He makes a really valid point: we rely on our telephones, and not simply to make social calls or to run businesses. They also enable a huge number of elderly people, through modern technology and particularly through their personal alarms, which are connected to the phone service, to live independently and safely in their own homes and to alert relatives to a problem simply at the push of a button.
Inevitably, I will conclude with some specific questions for the Minister and even some suggestions about what BT are doing well, but perhaps might do better. I welcome the publication by Ofcom last month of its review into digital communications, which came after I had applied for this debate, but before I heard that it had been granted. In many respects, the review addresses some of the significant criticisms that I will make today of BT. I was particularly pleased to see its headline point: that Ofcom intends to introduce tougher rules on faults, repairs and installations; transparent information on service quality; and automatic compensation for consumers when things go wrong.
I congratulate my hon. Friend on securing the debate. She is making a very good point, but in my constituency I had a case that was not about the system that was in being repaired, but about no system being put in at all. For six months, residents in a new housing development had no telephone and, to cap it all, they also had no mobile signal, so they were effectively cut off. Until I got involved, absolutely nothing happened.
My hon. Friend is absolutely right to point that out. Like me, she represents an area with enormous rural parts where the mobile signal is often patchy, shall we say, at best. It is absolutely true that in cities it can perhaps be less serious if there is no working telephone connection, because mobile coverage is better—not perfect, but better—but in villages there is often no mobile signal at all. I am sure that we all share the frustration that our constituents do not get the satisfaction that they are looking for from BT until they turn to us.
As I was saying, I welcome the intent expressed by Ofcom, but I ask the Minister to ensure that it is delivered promptly and with absolute rigour, and that Ofcom publicises widely the manner in which customers might communicate with it about faults, the length of time that it takes for repairs to be done and, importantly, transparency of information.
It would not be a debate in Westminster Hall if I did not have a quick trip around the geography of my constituency and the myriad faults and problems that have occurred.
I congratulate the hon. Lady on securing the debate. Does she agree that the trouble is that in 2015 BT reached all its targets as prescribed by Ofcom? Is there perhaps something wrong with the targets prescribed by Ofcom and not just with BT?
The hon. Gentleman’s point is very important, and actually we want the targets to be much higher. We live in a world where consumer demands are getting greater by the day. We expect incredibly high levels of customer service, and companies such as BT should be able to respond to that and have stretch targets to make sure that they are delivering the sort of communication services that we can reasonably expect in the 21st century.
I congratulate my hon. Friend on securing this very important debate. This is not just about targets, but about attitude and the way that people are dealt with. A constituent of mine paid a deposit for a phone line but the line never arrived, and she was sent several bills. In the end, BT refused to respond to any complaint from her and called in debt collectors. It was sorted out only when I intervened. This is a shocking state of affairs, as I am sure my hon. Friend would agree.
My hon. Friend makes a good point that when services are ordered, there is an expectation that they will be installed. I can think of a case in my constituency where a customer’s order was accepted, but they were told that they could not have it delivered because they were in such a remote location, yet the properties on either side of the customer both had phone services. It just required my input, yet again, to say to BT, “Come on, you can do this. This isn’t the middle of nowhere; there is a telephone network running down the road.”
I turn first to the village of Sherfield English, which is a settlement of about 400 houses, in a linear development, where there has been very little house building over the past 10 years. However, with the increase in people working from home, or perhaps running small businesses, which we would all seek to encourage, there has been growth in the demand for telephone lines. It appears that BT has struggled to keep up with that demand, but rather than telling potential customers that they cannot have a new line and acting transparently, it has accepted the orders. There have then been repeated incidents of contractors working on behalf of BT simply extracting an existing line’s connection to the cabinet and putting in a new one in its place.
I refer in particular to my constituent, Mr Ian Forfar, to whom that has happened four times. I assume that his connection must be at the top of a row of connections within the cabinet. He is now on first-name terms with many members of staff at BT and is in the habit of stopping at the local cabinet when passing if he sees someone working on it, just to check that his line is not about to be disconnected again. Mr Forfar is an extremely articulate, determined man—a man who is not to be messed with. He has provided me with a very clear timeline of all the events that have impacted on his telephone service over the last year or so. Each time he has gone home and found his line dead, it has been because a third-party contractor has taken out his connection in order to provide a new line for a new customer. Mr Forfar was promised a full investigation last year of what was going wrong in Sherfield English, but then the regional manager went on holiday and Mr Forfar heard no more. It comes to something when, earlier this year, Mr Forfar’s line went dead for a fifth time, and he was celebrating because it had been caused by a branch that had fallen across the line.
Lack of capacity seems to be a real problem, and it is not just limited to the rural parts of my constituency. Cabinet No. 7 in Bassett, which is right on the edge of Southampton, has suffered from a lack of availability of new lines, as well as many other faults. Again, one of my constituents—this time a local councillor, Alison Finlay—has provided a very detailed timeline of events, which dates back as far as 2011. In common with the constituents in the middle of Romsey, the cabinet seems to provide a variable service, especially when the weather is not good. I do not know why rain should be such a problem, but as Councillor Finlay puts it:
“I mentioned that care would need to be taken when dealing with Cabinet 7 as my constituents experienced variable levels of telephony…from it, especially during winter months.”
As we heard earlier, many elderly residents are dependent on the telephone line being in good working order for their personal safety alarms. Without a connection, if they push the button on their alarm in the case of a fall or other incident, help might not be just minutes away; in the worst cases, as my hon. Friend the Member for Solihull (Julian Knight) said, it could be many hours or even days away. None of us wants that for our more elderly residents. Independence and the ability to stay in their own home is wonderful and technology today can provide great peace of mind for elderly people and their relatives, but that is dependent on having the network to back up the technology.
Cabinet 7 in Bassett was long scheduled for an upgrade. Indeed, in 2011 Councillor Finlay first flagged up the problems, and the fact that care would be needed with any changes and that they would have to be done with extreme caution because they were known to be very delicate. In December 2015, the cabinet was finally upgraded, after many delays and false deadlines. Sadly, that is not the end of the story because, in January about 30 households were cut off for four weeks, lines were crossed and, according to Councillor Finlay, only a semblance of service was restored.
That is similar to the almost entertaining, interesting experience of the residents of Up Somborne. A few weeks ago, most of the village’s lines were crossed and neighbouring households were providing a message service to one another as lines were swapped and numbers were redistributed, apparently randomly. The spectacle of neighbours running up and down the road passing messages to one another may sound amusing, but in the 21st century it is not acceptable.
BT’s obligations are very clear. For telephony, it has a universal service obligation, meaning that basic telephone services should be available on request for a reasonable fee. For broadband, a universal service obligation is not yet in place but is on its way for 2020, and I warmly welcome that. However, I question how well BT is meeting its obligation to provide a basic telephony service when residents are cut off for four weeks, poor Mr Forfar is a repeat victim of being cut off and residents of Up Somborne are running round the village passing notes to one another.
I am sure that every hon. Member present this morning is here because they have experienced exactly the same sort of problem and their constituents have turned to them because they cannot get satisfaction on their own. That is why the Ofcom review, published two weeks ago, is so important. Ofcom intends to introduce tougher rules on faults, repairs and installations, and I welcome that, but an intention is all very well. I urge the Minister to ensure that there is a stringent timescale for when that will be achieved.
Customers—constituents—want and deserve transparency. They want to know when they can expect a repair to be effected. They also want an automatic right to compensation at a level that is published, clear and available for anyone to check. I am always at pains to point out to constituents that, when service has been interrupted or orders placed and not fulfilled, they are entitled to compensation, but people have to know that to ask for it. How much better an automatic refund will be.
It is interesting to note from Ofcom’s “Strategic Review of Digital Communications” that dissatisfaction with BT is at its highest in rural areas and that slow repairs and installations were the single biggest issue that consumers raised in the review. We all know about the automatic right to compensation for other services, such as electricity, gas and water. Customers left without a phone line often describe it as being akin to a power cut, so reliant are we now on telephone services. So it is good news that Ofcom
“intend to introduce automatic compensation”,
but my question to the Minister is: when?
The review rightly comments that the landscape of digital communications has changed beyond recognition in the 10 years since the last comprehensive review, and I suggest that the gap between large-scale reviews is too long. Perhaps the Minister will urge Ofcom to carry out such reviews more regularly. Given that the new universal service obligation for broadband was announced last November for implementation by 2020, five years would seem to be a reasonable interval. Technology, price and availability change so fast that a decade can seem a lifetime.
Expectations of quality and customer service are rising exponentially and rightly so. We have a technologically literate and demanding customer base whose requirements grow every time a new platform is released. I welcome the news that BT is seeking to bring the vast majority of call centres back to the UK by the end of the year and I congratulate it on that effort to address some customers’ genuine complaints in that respect.
Inevitably—this will not surprise the Minister—I cannot resist making a small reference to broadband because it would be remiss of me not to. There have been many debates in this place and in the House on broadband, its roll-out in rural areas and the great digital divide between the haves and the have-nots: those who are on more than 2 megabits and those who do not receive even that.
The week before last, I received a set of statistics that seemed to suggest that only 1.8% of households in my constituency were receiving less than 2 megabits and I worked that out to be in the region of 700 households. Given the number of complaints I have received, I think I must have been in correspondence with every last one of them. In fact, BT’s own figures show that the number is many times that. Around 20% of my constituents do not receive 2 megabits, and this is in Hampshire, not the Outer Hebrides—[Laughter.] I suspect we are about to hear from the Outer Hebrides. Barton Stacey in my constituency is less than 70 miles from Westminster, but my constituent, Mr De Cani, has been told that he can no longer expect to receive broadband at all. That is despite BT’s accepting his order, delivering a painfully slow and intermittent speed for a while, and now throwing in the towel and saying he is just too far from the cabinet to expect any service.
On cabinets and their location to customers, a number of small businesses in my constituency have told me that BT is refusing to connect them to cabinets outside their premises. Clearly, that is not good enough from BT and is beginning to have a negative impact on small businesses in Solihull and employers across the country. Does my hon. Friend agree that, when the infrastructure is in place, it is unacceptable for BT not to connect to a cabinet that can be seen from the premises?
My hon. Friend makes a good point. There are examples in Romsey of industrial estates with exceptionally low speeds where customers can see the cabinet on the other side of the road. They desperately want to be connected, but for business customers the regime is wholly different. I have specifically restricted my comments to residential customers, but my hon. Friend makes a valid point. A number of people running very small micro-businesses from home are hugely affected.
There are too many people like Mr De Cani, there are too many properties without access to the services we take for granted, and there are too few solutions coming forward. Mr Blake of East Wellow makes one plea to BT and it is a good one: the technology exists. He works for IBM and went on a tour of a BT facility in Ipswich where he saw the G.fast mini cabinet, which can be placed on a telegraph pole and has the potential dramatically to increase speeds.
Another constituent was here yesterday as part of the SET for BRITAIN student competition and was show- casing her work, which puts amplifiers on fibre optics to increase capacity dramatically. These changes are all coming but we need to make sure they can be trialled. Mr Blake would like to put in a plea to BT today for a G.fast cabinet in Gardeners Lane, East Wellow. It is a fantastic idea and he is very happy to be part of any trial. In places like West Tytherley, communities are coming together and seriously looking at how to arrange wayleaves, dig ditches, lay cable and bypass BT altogether. When that happens, we know that things have got pretty desperate.
My final comments relate to the Hampshire and Isle of Wight air ambulance service, which operates from Thruxton, just north of my constituency, and RAF Benson, but provides services across the whole county of Hampshire and the Isle of Wight. To put in place the required high speed broadband and the necessary telephony at its new, upgraded base at Thruxton, the air ambulance service must liaise with BT to get Openreach to do the installation. No direct contact with Openreach is possible and the air ambulance service tells me that its attempts to make sure South Central ambulance service, the Hampshire and Isle of Wight air ambulance service and the operators, Bond Air Services, all have their connection done at the same time to minimise costs have so far been fruitless. It just requires a bit of joined-up thinking and co-ordination to make sure that the trench digging and installation are all done together. I am sure BT will be listening today and will ensure that it happens. When considering the essential and life-saving services provided by the air ambulance service and the lack of coverage by mobile phones in that sort of rural area, a BT solution needs to be provided.
I want to ask the Minister three specific questions. We all welcome the Ofcom review into digital communications, but some timescales should be set for the introduction of automatic compensation for our constituents. I would like consideration to be given to more frequent reviews. As I said, the last Ofcom review was 10 years ago. The landscape changes so fast that every 10 years is not often enough. And I ask that BT be encouraged to continue making the changes that customers want. As I mentioned, 80% of its call centre handling will be done in the UK by the end of this year. That is certainly something that customers are seeking; they feel frustration at the current situation. However, it must be about providing a level of customer service and reliability that we all expect in the 21st century.
My constituency of Ayr, Carrick and Cumnock is predominantly rural, although it hosts a number of small towns, the biggest of which is Ayr, where my constituency office is located. Ayr is home to some 47,000 people—the eighth highest population of any town in Scotland—and is less than 40 miles from Scotland’s largest city, Glasgow. We have a lot to offer visitors and businesses alike, but unfortunately an adequate phone and broadband service is not one of them.
It is astonishing that a town such as Ayr should be unable to provide small businesses and households with a reliable telephone and internet service, but that is the case, and Ayr is not alone in this in my constituency. I receive many complaints from residents and businesses, from places ranging from Barr to Ballantrae, Coylton to New Cumnock and Dalrymple to Dailly. There are villages in my constituency with no mobile phone signal from any provider and no broadband capacity, either. Ofcom states that more than eight in 10 UK premises can now receive superfast broadband. That may be true in the rest of the UK, but it is certainly not the case in Ayr, Carrick and Cumnock.
My constituency office, for example, has not had a reliable working telephone line or a reliable internet connection for the past seven months. After working out of temporary premises since May, I wanted to retain the phone number and set up internet access—a simple request, one would think, but apparently not. I was advised by BT that the number would be transferred over without any disruption to the service. That smooth transfer did not happen. Both offices, old and new, were without a phone line and internet connection for well over a week. It turned out that there was no live line into the building, and thus there was a further delay while one was installed. During that entire period, almost every phone call to BT resulted in a new account being set up and a new hub being posted out. The number of accounts has reached double figures, and I am not sure what I am expected to do with the mountain of hubs in the office.
Next, the parliamentary IT team came in to set up the computers—and on that day, BT chose to disconnect me again. It seems that in an attempt to rectify the growing number of accounts, it tried shutting some down and left my team uncontactable for another few days.
All the while, I was receiving bills, both paper and online. Some days I would receive three or four bills, all for different accounts and different amounts. It seemed that the bills were multiplying faster than the accounts being opened. Although helpful and polite, the customer service staff were at a loss as to which bills were valid, which accounts were active and which hubs should be connected. Customer service even called us on a number that it claimed did not exist. We had the irony of BT leaving cloud voice messages, which I received via email, stating its frustration that it could not get through to my office.
We took BT at its word and bought into a package. The cloud phones are now plugged in—although not actually connected—to a further new line that BT had to install. All our IT equipment regularly drops out of service. In some cases, staff have even had to use their own broadband connections at home. Just yesterday, staff yet again arrived at work to find the whole system down and BT support again at a loss to explain what had gone wrong and how to fix it. This morning I have staff connected to two different hubs to access the internet. One of them is not even plugged into anything, so I do not know how that works. I have no idea how many accounts I currently have with BT, and neither does BT. Although customer service staff continue to be helpful, no one seems able to see the big picture, and we get moved from the broadband department to the cloud department to the telephone department to the maintenance department—and then we start all over again. My staff have wasted hundreds of man-hours on this issue, and that is not to mention the number of dissatisfied constituents who are unable to get through to my office for help.
If that is the level of service received by the MP for the area, it is little wonder that my constituents are at the end of their tether, too. My case load continues to grow with similar problems, and we have no sight of resolutions. As an MP, I have a job to do, but my ability to do it well is being hampered by BT’s inability to solve these issues. I feel powerless to help constituents with their BT issues when I cannot even resolve my own. It seems to me that BT has a long way to go to reach an acceptable level of service for the people and businesses in my constituency and, as this debate demonstrates, I am clearly not alone in that belief.
I intend to start calling the Front Benchers to sum up the debate at about 10.30 am. I do not want to impose a time limit, but I will have to if hon. Members speak at great length. If contributions are about five minutes long, we should be able to fit everyone in.
It is a pleasure to speak under your chairmanship, Mr Nuttall. I congratulate my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) on initiating this important debate on BT service standards.
I represent the rural constituency of Bexhill and Battle, which is 200 square miles of east Sussex. We badly need more business in order to get the business rates that will ultimately be required for the constituency to stand on its own two feet. Unlike parts of Kent and parts of west Sussex that neighbour us, we do not have large towns that boost our constituency with business rates, so we badly need to attract more business to the constituency, but not just because we have to stand on our own two feet. As 28% of the population of the constituency is over the age of 65—the national average is 17%—we also need more business rates to fund our ageing population, who are vulnerable and rightly need more care and more resources. As well as needing a dualled A21 and high-speed rail, we need to ensure that our phones, our internet and, indeed, all our infrastructure, for both home and business, are properly funded and properly working in order to attract business into the area.
In the constituency, we also do our best to attract key workers, and those with money to spend, through the work-from-home concept. The commute is long, as I know on a daily basis, but we can attract people on the basis that members of our community can work from home. However, for them to come down to the area and build up their business, it is essential to have these basic provisions in place.
I welcome the moves that East Sussex County Council has made with its eSussex programme, through which it provides funding for the harder to reach parts of my constituency. Its aim is to deliver 660 square miles of broadband provision for 66,500 premises. I also welcome the Broadband Delivery UK programme that the Government have rolled out. Ultimately, however, we need BT to perform, and to perform better.
I shall give a few examples of where things have failed for us and how that will have an impact on our business infrastructure. I was contacted yesterday by NFF, a fencing company on the border of my constituency that is doing incredibly well and is looking to expand into my constituency. It takes on apprentices through an apprenticeships programme and helps to support those who are just leaving school. However, it cannot expand if it does not have the ability to connect its sales hub to the main hub in the constituency, and as a result it is stymied in making progress. It was told two years ago that it would be connected, but still nothing has happened, and—this is also difficult when businesses are trying to plan—it does not have a timeline for when something will happen. I want BT to do something for such businesses. Surely BT should work on the basis of prioritising the businesses that are boosting our local economy, rather than just missing them out. There should be a way of prioritising those companies.
Difficulties are also experienced by constituents who are not using BT, but are using companies that use BT’s infrastructure. They are moved from pillar to post on whether the issue is the fault of BT or the service provider. Again, my constituents are experiencing a lack of clear communication that is driving them to despair.
There are rural areas within my big rural patch, Brightling, Dallington and Mountfield, which have little coverage. I met with my parish councillors to work out how we can do better, and they have some fantastic ideas of where innovation could deliver to the parts that BT cannot reach. To that extent, I note that many contracts are being supplied purely to BT, rather than to some of the more innovative solution providers. I would welcome the Government looking into how more competition could be created in the sector so that BT does not end up with every single rural fill-in contract.
My constituency includes the Rother levels, where the problem is not only broadband. Constituents have huge difficulties using any phone. As my hon. Friend the Member for Romsey and Southampton North mentioned, phones can be the lifeblood of many constituents. BT was good in the sense that it did an engineering project to try to work out what the problem was, but it found nothing, which perplexed many of my constituents.
As a Member of Parliament, I want to help BT to do better and to work in partnership with it. I am delighted to be setting up a parish council conference to which I will invite all my parish council heads to meet with BT, our county council and some of the more innovative service providers. We will try to match solutions needed by parishes with a provider that can deliver that at, perhaps, a better cost than BT. I welcome co-operation with BT to improve its service standards. It can do better and I urge it to do so.
It is a pleasure to speak in this debate. Thank you for calling me, Mr Nuttall. I thank the hon. Member for Romsey and Southampton North (Caroline Nokes) for clearly setting the scene. In my constituency, I have experienced all the issues that she and other hon. Members have described. In fact, my experience almost equals the points she made. We have to deal with BT’s service team, which is quite a challenge. When it comes to faults and repairs, we phone them and then we phone again. They tell us that they have been out so we phone the constituent, and he tells us, “No, they haven’t been out.” Then we have to phone BT again to ask, “When were they out and what did they do?” That goes on ad infinitum. It is a real problem.
BT is one of the nation’s most popular service providers. It has a competitive advantage as it was born out of the longest established communications provider in the country, yet in many ways it is just as bad as the rest of the pack when it comes to service standards.
BT uses its competitive edge to try to take Sky’s customers, particularly regarding televised football. Does my hon. Friend agree it would be better if instead of—or maybe as well as—doing that, some of those millions of pounds of expenditure were diverted into improving the infrastructure, about which we have heard so many complaints this morning?
As always, my hon. Friend’s pertinent point gets straight to the kernel of the issue. I agree with him wholeheartedly.
In the free market of communications, of course, consumers can vote with their feet, but that is not to say the Government have no role in ensuring proper service standards that customers of any business would expect. I always try to mention statistics because they reinforce the issues that I want to underline. Statistics published on 15 December 2015 show that in the third quarter of the year Ofcom received 22 complaints about BT per 100,000 customers for landline telephone services, compared with an average for 17 per 100,000 across all other operators. It also received 35 complaints about BT broadband services per 100,000 customers, compared with an average of 22 per 100,000 customers across all operators. As the hon. Member for Romsey and Southampton North said, that clearly indicates the level of complaints and the discredit to BT.
Clearly BT is not up to standard on its service standards and Ofcom, as the regulator, has to do something about that, as I will mention later. To help bring about the change that is needed and deliver real competition, BT Openreach will be required to open up telegraph poles and ducts that it uses for its fibre and telecom lines. Rival providers will now be able to use the ducts and poles for their own fibre networks to connect them to homes and offices. If and when that is in place, it will be positive and will be great for competition—and it might finally push BT to get its act together. The figures on BT’s poor customer service show that it has abused its dominance for too long and, despite being aware of its poor service, it has not done enough. Indeed, many of us would say that it has done almost nothing.
The hon. Member for Romsey and Southampton North referred to the call centres. I get many complaints about call centres—about their distance, communication and the time that people spend on the phone. The hon. Lady said that she spoke to three people and then went back around again. That is so often the case, and it is so frustrating.
In reply to a supplementary question on superfast broadband last Thursday, the Minister mentioned that my constituency has an 85% connection to superfast broadband. Many of the employees of small and medium-sized businesses in my constituency who work from home would like better than that, and I would like the Minister to respond to that.
Openreach is part of BT Group, but it has obligations to treat all its customers equally. Ofcom introduced that structure in 2005, and it has delivered benefits such as stronger competition. However, the evidence from Ofcom’s review shows that Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems. Perhaps the Minister could respond to that point because it is important. Ofcom’s duty is to look after the customer, but we are not sure whether Openreach is doing that in a very balanced way.
To achieve better customer service, Ofcom has outlined the ways in which it will regulate Openreach and BT to ensure better service standards. It says:
“First, Openreach will be subject to tougher, minimum requirements to repair faults and install new lines more quickly.”
Well, we need that today; if Openreach did nothing else but that, it would be a step forward. Ofcom continues:
“These will build on measures introduced by Ofcom in 2014, but will set…minimum standards and extend to other aspects of performance, such as how often faults occur. Second, Ofcom will introduce performance tables on quality of service, identifying the best and worst operators on a range of performance measures so that customers can shop around with confidence.”
In the background information we received, Ofcom said that it wants customers to be automatically compensated for service failures, that it is setting tough minimum standards for network performance, and that it will report on which are the best and worse phone and internet providers. It is good to do all those things, but I would like a response to all those points.
Ofcom intends to introduce “automatic compensation” when things go wrong. It says:
“Broadband, landline and mobile customers will no longer have to seek redress themselves, but will instead receive refunds automatically for any loss or reduction of service.”
That is good news.
Ofcom is to come back later this year with the finalised plans of how to implement the proposals and, although it is long overdue, constituents across the whole of Strangford, the whole of Northern Ireland, the whole United Kingdom of Great Britain and Northern Ireland and, indeed, my own office—we regularly phone BT about problems—will take comfort in this after having issues with BT for some years now.
I await this issue coming back before us with Ofcom’s proposals on how to implement its recommendations. It is good to have such recommendations but we need an implementation procedure. I remain encouraged to see greater consideration given to the largest communications provider in the country, and I look forward to building on today’s positives.
It is a pleasure to serve under your chairmanship, Mr Nuttall. I thank my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) for securing the debate. My constituents will be extremely interested to hear about some of the challenges that she faces in her constituency, which she summarised well.
Rochester and Strood is very close to London—only 26 miles away. My constituency has very highly urbanised areas and quite a lot of rural areas. In some parts, such as Allhallows, it is very touch and go as to whether people can get any kind of mobile signal so, although the area is geographically quite close to urban areas, it is remote within my constituency.
I am pleased to hear that I am not the only MP struggling with the live issue of getting telephone communications sorted in their constituency office. I am expecting—hopefully tomorrow—to have a telephone line installed in my constituency office. However, on previous visits the engineers have been unable to find the connection in the building, which apparently had a line connected previously. I very much hope that tomorrow I will be up and live with a telephone line in my constituency office. At the moment I have a number but not the mechanics.
Not so long ago, just prior to becoming an MP, my business was planning to move offices within the same site—perhaps only a couple hundred metres—in my constituency. We thought, “Well, we won’t do it ourselves. We’ll get BT in to do the move for us.” We thought that would be quite easy and that BT would just move the line from one building to another a few hundred metres away. Sadly, BT decided to cut off the existing line, resulting in our having a very poor service and no internet connection for up to six weeks, which was a difficult situation to resolve. So I have experienced some challenges in the delivery of telephone services.
Broadband has become a significant issue in my constituency. Some 74% of businesses in my constituency employ fewer than four people, so we are very much a small business economy. Like my hon. Friend the Member for Bexhill and Battle (Huw Merriman), we have to consider how our businesses are growing in the services that are provided. We are told that we are getting high speeds, but in reality, when I talk to businesses and residents, I find that at some of those properties we are not getting the speeds that BT says we should be getting.
A bigger issue is that large swathes of my town centres cannot get access to fibre broadband because BT tells us that it is commercially unviable to upgrade the cabinets. My constituents and I cannot understand why we can be in places such as Rochester town centre or the historical dockyard, where we have had new development —we have many microbusinesses and other growing businesses—and struggle to access the cabinets. I could understand the situation more if the rural parts of my constituency were struggling, because we all appreciate that such areas can have problems, but I would like to understand why some of the cabinets are not being upgraded and why BT has a clear view that the cabinets are commercially unviable. I would appreciate more information on that.
Medway City industrial estate employs more than 6,000 people and makes a real economic contribution to my constituency. The industrial estate is growing and successful, but I am getting complaints from businesses about the large fees required to get any kind of connection at Medway City. We have a growing proportion of digital economy businesses in my constituency, and such businesses need good service and good access. I want to keep those businesses, because I want to grow such commerce in my constituency. Bearing in mind that we are 26 miles from London and that we are an urbanised area—we are not a rural constituency—we should be getting a better deal from BT.
My office has taken on some issues for my residents and businesses over the past 10 months, and my phone calls have always been answered by courteous and pleasant members of BT staff. They always seem to try their absolute best to resolve the issues that we have raised but, obviously, someone nice on the end of the phone does not always satisfy a constituent or business with an issue. How does the Minister intend to hold BT further to account on some of the questions raised today? I welcome this opportunity to touch on a few things that have happened in my constituency in recent months.
It is a pleasure to serve under your chairmanship, Mr Nuttall. I thank the hon. Member for Romsey and Southampton North (Caroline Nokes) for securing this timely debate. The issue of BT service standards is wide-ranging, but my interest is specific to one local area in my constituency, namely the village of Westfield in west Lothian.
The village is at the centre of the constituency and lies almost midway between Edinburgh and Glasgow in Scotland’s central belt, yet electronically it is almost cut off from society. There is huge investment in the roll-out of superfast broadband throughout Scotland, and through work with BT, Scotland is well on the way to becoming a world-class digital nation by 2020. Despite that ambitious programme, however, there remain a number of communities that the digital revolution is passing by. That was an issue some 16 years ago, when I first represented the village as a local councillor. Sadly, it is still an issue today, despite the efforts of local councillors, parliamentarians and the local community.
The heart of the problem appears to be the distance from the exchange and the supporting BT cabinet equipment. Cabinet 31, relatively nearby, will be upgraded to fibre within the next six weeks. Welcome though that is, its distance from the village, being more than 1 km away, is expected to negate any benefit for most residents. For that village in the heart of Scotland, the issue is one of access to basic broadband, never mind superfast broadband.
I note with interest one of the conclusions in Ofcom’s recent strategic review of digital communications, published last month:
“Better broadband and mobile coverage. Ofcom will work with the Government to deliver a new universal right to fast, affordable broadband for every household and business in the UK.”
I welcome that recommendation, as will my constituents. However, the question remains, when will it become a reality for residents in villages such as Westfield? Ofcom has basically said that communications must work in the interests of UK citizens. As the regulatory powers to address market failure are reserved to Westminster, the UK Government need to do more to ensure that Scotland’s rural communities are not left behind.
Last month, the report of the Select Committee on Environment, Food and Rural Affairs on rural broadband urged the Government to set clear target dates for when the last 5% of properties will obtain access to superfast broadband. That is a sensible recommendation, and I urge the Government to take it on board. The experience in my constituency is a mixed bag. On the one hand we are in the top 20 constituencies for the highest fixed broadband speeds, but we are also in the bottom 20% of constituencies for access to superfast broadband. As I have said, some communities do not even get basic broadband. More must be done to ensure good basic services for all households in relation to broadband and phone coverage.
I congratulate the hon. Member for Romsey and Southampton North (Caroline Nokes) on securing this important debate. As the Member of Parliament for Argyll and Bute, an area covering 7,000 sq km of west Scotland, including 26 islands, I know only too well how much rural Scotland depends on BT for both landline infrastructure and the delivery and roll-out of broadband. Sadly—indeed, it is a sad thing to report—BT is all too often letting down its customers in my constituency.
We all have horror stories of constituents who have been promised everything but received very little or nothing. On the wild west coast of Scotland, where storms are commonplace and power shortages are a regular occurrence, other utilities act as an emergency service, but BT all too often acts as it always does: rather slowly and too inefficiently. Sometimes it takes weeks, or even months, to get a landline reconnected in my constituency—in an area where connectivity ranges between patchy and non-existent—leaving people entirely cut off. I know I am not alone in saying that my inbox is bulging with complaints from constituents about BT. My fear is that, particularly among the elderly, once my constituents do not have a landline, they cannot get to me quickly enough to seek my help. What is happening elsewhere in the United Kingdom is magnified many times over in rural Scotland, particularly in Argyll and Bute. My biggest concern is on the roll-out of broadband. Although I fully support the fantastic Scottish Government initiative to roll out broadband across rural Scotland, BT is all too often a stumbling block to that progress.
As the Member for Argyll and Bute, people would expect me to talk up my constituency, but anyone who has ever visited Argyll and Bute will know that that is a very easy thing to do. The scenery is stunning; we have wild open spaces, there are the lochs and the islands, and our locally produced food and whisky are the envy of the world. However, the reality is that we face a crisis in Argyll and Bute, and it is a crisis of depopulation. Our population is ageing and in decline, and we have to do something before it is too late. I am firmly of the opinion that the lack of connectivity is the single biggest barrier to our reversing that decline and beginning a recovery. At the moment, we cannot keep our young people and we cannot attract other people to move from other parts of these islands to Argyll and Bute.
My hon. Friend will know, of course, that more and more of the school curriculum depends on reliable internet access. People do not even need broadband for that, but need at least slow speeds. Does he agree that without a reliable connection, schoolchildren across rural areas in Scotland could be put at an educational disadvantage?
I absolutely agree, and I will come on to that in a moment. My hon. Friend is absolutely correct, and my postbag is full of letters from parents of school pupils who are deeply concerned that their children cannot access the internet in the way that 90% of the country’s children can. I also constantly receive letters from businesspeople saying, “We were promised the roll-out would be here six or eight months ago, and it’s still not here. It is continually being put back.”
If broadband were rolled out in our constituencies in the way that we would like to see it, we would soon see small businesses that operate from people’s homes creating more jobs. Back in my constituency, people tell me, “We could get more jobs if we had superfast broadband across 100% of the area.” Does the hon. Gentleman have the same concern about his area?
The hon. Gentleman is absolutely correct, and we share many of the same problems and frustrations in attracting businesses to our communities. There are people who want to come and live and work in our constituencies but simply cannot, because we do not have the connectivity and the infrastructure to allow them to do it.
I do not want to appear melodramatic, but there is a crisis looming in Argyll and Bute, and we have to act now to avert it. All too often, when our young people leave for college or university—be it in Glasgow, Edinburgh or London—we simply cannot attract them back. Once they leave and go to an area where broadband and mobile connectivity are quite rightly treated as a utility, asking them to come home is like asking them to return to a place without running water or electricity. We would not ask someone to return to a place without running water or electricity, so why should we ask them to return to a place without basic levels of connectivity?
Similarly to the situation that the hon. Member for Strangford rightly points out, we are struggling to attract families and businesses into Argyll and Bute. Everything that a family would want is there—we have a clean environment, fresh air, wide open spaces, wonderfully welcoming communities and a safe place in which to raise a family—but we do not have connectivity. We do not have sufficient broadband or mobile phone coverage, and what aspiring and ambitious entrepreneur would bring his or her family to an area where they may have to rely on very expensive and not particularly efficient satellite broadband, with the limited usage that that would provide for a business? They simply would not do it.
As my hon. Friend the Member for Glasgow North West (Carol Monaghan) pointed out, parents who want the very best education for their children know that whereas 90% or 95% of children in the UK can access the internet freely through their smartphones, children in my constituency are once again disadvantaged because of the lack of connectivity.
Last month, the Argyll and Bute economic forum, chaired by Nicholas Ferguson, who is the chairman of BskyB, produced an excellent, detailed and wide-ranging report. It concluded that the single biggest barrier to the development of Argyll and Bute is connectivity and pointed out that Argyll and Bute does not even have 4G coverage at a time that the Government are discussing how to roll out 5G. That emphasises how deprived we are.
My postbag is bulging with complaints about BT, and I am sure the same is true for many other hon. Members. This issue is far more than inconvenient for my constituents; I believe that it is a matter of our survival. BT has a responsibility to my constituents and to people in other rural constituencies to make sure it gets this right. This is a once-in-a-lifetime opportunity, and it cannot be allowed to pass. As I say, our survival depends on it.
Thank you, Mr Nuttall, for calling me to speak, and I once again congratulate the hon. Member for Romsey and Southampton North on securing this very important debate.
It is a pleasure to serve under your chairmanship, Mr Nuttall.
The importance of the internet is hard to overstate. Its availability has an impact on small businesses, children who want to do their homework and people who want to engage in social media. If someone does not have superfast broadband, they do not just feel disconnected; it is almost as if they feel disfranchised.
The position in Cheltenham, which of course is not a rural constituency—it is the home of GCHQ, for goodness’ sake—is that in this day and age we still have pockets of real broadband blight. In Old Bath Road, Grace Gardens, Tommy Taylors Lane, Tivoli and Pittville, people are living in what I have described as e-poverty.
I am the first to accept that BT has connected up a huge number of people, but the real concern is that the e-rich are getting richer but the e-poor are being left behind. There are people on 24 megabits per second, for example, who are now being offered ultra-fast broadband. They have extraordinarily good internet connectivity, but there are significant pockets of people who are being left without any decent broadband at all. That, fundamentally, is the problem.
When we liaise with BT about the issue, it effectively says, “Well, look, it’s very difficult for us to go and deal with these ‘not spots’.” However, through Broadband Delivery UK and our local equivalent in Cheltenham, which is Fastershire, taxpayers have the money to step in and say to BT, “Right, go and fill in these ‘not spots’”, but that is not taking place. So this is not an issue of funding—the money is there, as is the will and the political backing—yet the logjam is not being broken. Consequently, we have this strange stand-off, with politicians saying to BT, “Look, there’s the public funding, these are the areas; we can explain to you which parts have not been connected, so please go ahead and do it”, yet it simply does not happen.
Meanwhile, MPs who have bulging postbags on the issue are given mixed messages. I was told in an email from BT this morning, “Don’t you worry. There are zero areas in Cheltenham that have less than 2 megabits per second.” That is simply not correct. I recognise that a huge amount of work has been done, but that kind of messaging from BT causes a great deal of irritation. As I have said, this is not simply about people being inconvenienced. It is about people in my constituency saying that they will have to move, or that they will not be able to employ people, or that their children cannot do their homework. That kind of breezy disdain from BT is inflammatory and causes real difficulties.
I end with a plea. Given that the funding from the taxpayer is there and given that BT has the wherewithal to step in, I really hope that heads can be knocked together so that the remaining areas in my constituency can be covered. As I have said, Cheltenham is the home of GCHQ, and consequently somewhere that people might expect a decent broadband service. The time for action is now.
Before I call Calum Kerr to begin the Front-Bench speeches, I remind Members that I would like the mover of the motion to have a couple of minutes to sum up at the end. I ask the Front-Bench spokesmen to bear that in mind when making their remarks.
I am happy to get the opportunity to respond to the debate for the Scottish National party. I do so in a couple of capacities. First, I am the SNP’s Environment, Food and Rural Affairs spokesperson, and nowhere is the digital divide felt more acutely than in rural areas. Secondly—I have to declare an interest—before I came to this place with my slender 328 majority, I worked in the telecoms sector for 20 years, starting off with a Dutch company but working mostly with Canadian and American companies. The subject is therefore close to my heart for many reasons.
I am pleasantly surprised by and happy with the way the debate has gone. If Members read the Library briefing and the SNP briefing—most Members will not have seen that—those documents had nothing to do with BT service levels. The debate has stuck to the subject, so I congratulate the hon. Member for Romsey and Southampton North (Caroline Nokes) on setting the right tone and everyone else on following it.
There are real challenges out there, and sometimes in Parliament we are guilty of just making a lot of noise and not putting forward proactive suggestions on how to make things better. Complaining about that to my party leadership got me the traditional response of, “Well, Calum, if you are not happy about it and you worked in telecoms for 20 years, why don’t you set up a group to go and look at it?” So we have an SNP MP group involving a number of people with a range of experience in the industry, and we are proactively trying to understand the issues at a deeper level so that we can come forward with constructive suggestions.
I congratulate the hon. Lady on securing the debate. I thought she set us off well with her tone and by talking about the importance with which this issue should be treated. A number of Members have spoken about the Ofcom report, which is important. It sets an intent and expresses the importance of that intent, but as she rightly identified, tougher rules, transparency and compensation need to be delivered. Her constituent Mr Forfar and his connection saga are, I am afraid, not unusual. I think we all have experiences of things like that. I sometimes wonder whether the ever-so-helpful BT engineers getting one job done means someone else unfortunately being dropped off the other end. As someone who worked for six years as a channel manager with BT—not for BT, but with BT—I understand only too well the nature of its people. It has some fantastic people, but some challenging systems and approaches.
The hon. Lady said, “This is Hampshire, not the Outer Hebrides”. My hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) would say “Amen to that!” I will have to pass on to him what she said, and I am sure he will have some choice words for her. I would turn what she said on its head: if broadband truly is a utility, it should not matter where someone is in these isles; they should be able to expect a proper level of service.
My hon. Friend the Member for Ayr, Carrick and Cumnock (Corri Wilson) wins the prize for the biggest tale of woe from a constituency office. I point out that it is not only BT that faces this challenge, because the circuit to my office in Galashiels, which was supplied by Virgin through parliamentary authorities, did not appear, so we got in touch and said, “Where’s our circuit?” Virgin said, “It has been installed.” “No it hasn’t.” “Yes it has.” “No, it hasn’t.” It was installed to the empty property next door. My hon. Friend deserves a prize, though, and I will work up a certificate later.
I commend the proactive approach of the hon. Member for Bexhill and Battle (Huw Merriman)—talking in Westminster Hall is very useful for learning the names of everyone’s constituencies; I hope I remember at least half of them—in seeking solutions. A lot of us have done that at local level. We know there are challenges and that the system that has been put in place can be moved forward. The Minister will make a justifiable case for the system being successful, but where it fails is now being flushed out, and that is where we must go next. I thank him and his team for their positive engagement as we seek solutions. I can say with some confidence that they at least understand the problem, which is the first step towards finding a solution. I look forward to supporting them further on that.
Members may have noticed that the hon. Member for Strangford (Jim Shannon) is thankfully better at articulating his case than he is at providing me with a glass of water. A member of my staff sent me a text message saying, “I hope that wasn’t coffee.” If they are watching, no, it was not. The hon. Gentleman made some fantastic points. The sector has a challenge with customer service, and part of my background is in contact centres and customer service. Bigger organisations have that challenge, but I have severe and real concerns that our looking for more structural separation may just lead to more finger-pointing between BT and BT Openreach about who is to blame for something not being done. A joined-up approach to customer service and the ability to hold BT to account are important. He also highlighted the lack of competition, which is a real issue in rural areas. I will come back to that point.
The hon. Member for Rochester and Strood (Kelly Tolhurst) used a word that we have probably all used today: “hopefully”. In my old job, if an area or regional leader said the word “hope” to me, I would say, “Hope is not a strategy”, but when it comes to BT, sometimes it feels like that is all we have. If we are reliant on hope, that is not enough. We should be able to rely on levels of service on which we can hold organisations to account, whether they are BT or others.
My hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) highlighted the challenge of simply getting broadband—he went very local, and I congratulate him on that. He brought up the universal service obligation. We are all interested in that, but we must ensure that it does not paralyse us, as the BT broadband roll-out has, with communities waiting and waiting because they think they might get BT broadband and so not pursuing other schemes. It is also critical that the USO covers not only download speeds but upload speeds, levels of service and cost. I encourage the Minister and Ofcom to consider such things as voucher schemes. It does not necessarily need to be a case of, “Here’s the satellite solution”, or whatever it may be. If there were a voucher scheme, communities might choose to use it in a different way to provide local solutions.
My hon. Friend the Member for Argyll and Bute (Brendan O'Hara) has a stunning constituency, and I look forward to talking with him later in the debate on whisky. That will be a more uplifting experience, I feel. Depopulation is a massive issue, and we must match the policy reality to the rhetoric about communications being a utility.
I suggest to the hon. Member for Cheltenham (Alex Chalk) that perhaps GCHQ has made a conscious decision that it does not want any connectivity around it. I suggest that GCHQ be moved to Argyll and Bute, where that can be done more successfully.
Within the Union.
The hon. Member for Strangford has to whisper “Union” repeatedly in my ear every time I speak. It is a skill he has.
BT’s position is key. I am a big supporter of it, and it gets kicked about too much on its broadband roll-out scheme. It is a commercial entity that acts in a commercial way, but we also need to remember that it was a public carrier, and it has market dominance. The role of MPs, the Government and regulators is critical. We must and should hold BT to account, and we should hold it to high standards. Ofcom’s report states that it wants:
“A step change in quality of service”.
We must define that, measure it and hold BT to account as soon as possible, and I think BT would welcome that. Clarity and transparency of message are key. Two of Ofcom’s aims are:
“Empowering consumers to make informed choices”,
“Deregulate and simplify whilst protecting consumers”.
We must accept that the market does not function in rural areas. We need different solutions. We need Government interventions and more flexibility of mind about what the solutions look like. In a lot of scenarios that probably does not mean BT, because BT has established ways of working.
I thank the Minister for the way in which he has engaged with me and my colleagues on this topic so far. I urge him to act on the Ofcom report in relation to services and to work with us to ensure that the rhetoric of digital comms as a utility is backed up by substance and policy.
It is a pleasure to serve under your chairmanship, Mr Nuttall. I congratulate the hon. Member for Romsey and Southampton North (Caroline Nokes) on securing this important debate. I too must declare an interest: I worked as a chartered electrical engineer in telecommunications for 20 years before coming into Parliament, although I never worked for BT. I always wanted digital connectivity—broadband and mobile telecoms—to be higher up the parliamentary agenda. However, I am disappointed that it has moved higher up because of service failure rather than because of the social and economic potential that digital and telecommunications connectivity offers. The notoriety of certain cabinets—was it cabinet number 7?
Such notoriety is not to be welcomed, but I believe we will see more and more cabinets getting a national profile.
The economic benefits of communications infrastructure —or, as we have heard in some contributions, any kind of infrastructure that does not involve running up and down the street—are well known. We have heard detailed contributions about the limitations of that infrastructure from the hon. Members for Ayr, Carrick and Cumnock (Corri Wilson), for Strangford (Jim Shannon), for Rochester and Strood (Kelly Tolhurst), for Linlithgow and East Falkirk (Martyn Day), for Argyll and Bute (Brendan O'Hara) and for Berwickshire, Roxburgh and Selkirk (Calum Kerr), and we have heard some heart-rending stories about the impact on their constituents. We also heard from the hon. Members for Cheltenham (Alex Chalk) and for Bexhill and Battle (Huw Merriman).
As the hon. Member for Berwickshire, Roxburgh and Selkirk said, we should have connectivity from Hampshire to the Outer Hebrides and everywhere in between. The economic benefits of better communications have been accepted by the Government. Their own broadband impact study states:
“It is now widely accepted that the availability and adoption of affordable broadband plays an important role in increasing productivity.”
The UK has one of the worst productivity records in Europe.
As well as economic benefits, there are social benefits to connectivity, which we have heard about in detail in today’s debate, from online shopping, which is often cheaper, to access to more public and private services and remote healthcare. It is not right that some people cannot access those essential benefits of modern living because of the lack of a digital infrastructure. As has been said, the internet opens up a world of free education; indeed, it is a window on the globe. However, many people are missing out.
Many hon. Members focused on basic telephony; others emphasised mobile and broadband. The Minister recently admitted that his mobile infrastructure project was a failure, but he still claims that the broadband roll-out has been a success. Only last week, he was once again rubbishing Labour’s pledge to have fully funded 2 megabits per second universal broadband for all by 2012. We have heard today that far too many people—more than official figures admit—still do not have even that service. The Minister trumpets the universal service obligation of 10 megabits per second by 2020, but he should note that within eight years the broadband universal service that he proposes will have increased by only 1 megabit per year, and his commitment is entirely unfunded.
The importance of broadband for the rural economy has also been emphasised. A third of small and medium-sized enterprises do not have access to superfast broadband, so we have tabled amendments to the Enterprise Bill, which we will be debating in the House today, to improve the broadband available to SMEs, which, as is often said, are a driver of the economy.
Broadband is the fourth utility. That has been the consensus of today’s contributions. The Government have a responsibility to deliver it, and they have failed. I, too, do not wish to focus the blame entirely on BT—it is not BT’s responsibility, because it was the Government who did not ensure that there was competition so that we have the standards we need.
Ofcom’s recent consultation on the strategic review of communications found:
“The single biggest issue attracting comment”
was “quality of service”. It went on to say:
“Openreach’s performance is a particular source of concern.”
“These problems can only be addressed through more effective network competition or through regulation.”
It also stated:
“Over time we have found it necessary to apply more prescriptive regulation in order to address concerns about Openreach’s performance.”
That is a clear admission that competition cannot now be relied on to improve service standards, because the Government have failed to foster a competitive market-led roll-out.
I do not know whether betting is in order, but may I ask the Minister to forecast how many times he will be called to the House in the next Session to try to explain his failure on broadband and digital infrastructure? We have a related debate on this subject tomorrow.
The Ofcom review focused on two things: service standards, as we have heard, and opening up duct and pole access to support competition. How will the Minister determine that we have finally achieved a competitive environment in broadband and digital connectivity? What will he do if that is not achieved? In the absence of competition, how will he ensure that the service standards set out by Ofcom are met? What will he do to ensure that the targets are not gamed by BT and others, and that there is appropriate action if they are not met? How long does he think it will take for BT’s service standards to meet the expectations set out in today’s debate? An important point made today was that expectations are rising. As broadband and digital connectivity become more and more essential, what measures will he take to ensure that such expectations are met in this country?
All the measures set out in the Ofcom report are subject to further consultation and debate, and no doubt many lawyers will be present. Ofcom will need the right kind of political support to ensure that those measures are put in place. Our digital infrastructure is critical and strategic, and we have wasted five years in the policy wilderness not improving our digital infrastructure. The Minister will need to focus minds on that rather than on the exit from Europe that his Secretary of State is focused upon.
It is a pleasure to serve under your chairmanship, Mr Nuttall. I congratulate my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) on securing this excellent debate. She has unleashed tales of woe from colleagues in England, Scotland and Northern Ireland, and no doubt there are similar tales of woe in Wales, so the question is: what are we going to do about this? Before I move on, I should thank the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr) for his judicious response to the debate on behalf of the Scottish National party—he took a better approach than his party’s approach to Sunday trading, I must say. He has vast experience in the sector and made a very balanced case about the issues.
Of course, that contrasted with the traditional speech given by Labour’s shadow Minister, the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who is clearly launching Labour’s long march to power by promising 2 megabits to the country. Labour remains entirely silent on which policies will deliver the superfast speeds that people now want.
Will the Minister give way?
No. The hon. Lady has just had 10 minutes to set out her position and there was absolutely nothing in it. What is Labour’s position on the digital communications review? How would Labour get superfast broadband to the entire country?
How are they going to pay for the fibre that she is shouting about from a sedentary position? Of course, there is nothing. There has been only one failure in the superfast broadband roll-out programme that I have supervised and that was in south Yorkshire, where we inherited a useless Labour contract and had to write off £50 million of taxpayers’ money. Everything else has been an unadulterated success. We now have 93% of the country able to receive fibre, 90% of the country able to get superfast speeds of 24 megabits and above, and 50% of the country able to get ultrafast broadband speeds of 100 megabits and above.
I should say, though, that I have no truck with Openreach and its customer service levels. This morning I read an article in The Times by Danny Finkelstein, who is a remain campaigner. He is so depressed about the woeful leave campaign that he set out some measures that he thought the leave campaign should concentrate on. So, I shall give a speech on behalf of Her Majesty’s loyal Opposition.
Let me begin, as a member of the Opposition, by regretting the low levels of satisfaction with BT Openreach under the last Labour Government. There were low levels of satisfaction for pretty much everything under the last Labour Government, but they were woefully low for BT Openreach. They have improved under this Government, but they remain very much behind other providers. TalkTalk runs Openreach close in levels of customer satisfaction, but Virgin and Sky are way ahead. Perhaps BT should spend less money on sports rights and hire Sky’s customer services director instead.
As the Minister responsible for telecoms, I find myself a bit like a person who has been forced to adopt an unruly teenager. I go around telling my colleagues that he means well and is doing his best, but they simply tell me about the latest outrage they have suffered at his hands. That is the unfortunate position in which I find myself when it comes to Openreach customer service. I hold regional surgeries for MPs so that colleagues can tell me about the mess that Openreach has made of one or another connection, and I try to sort things out as best as possible. I also write to MPs every quarter to update them on the roll-out.
In defence of Openreach I should say briefly that, rather like the BBC compared with ITV, it suffers because it is the national provider and we all feel that we have a stake in it. There will inevitably be more complaints about BT. For example, I noticed that my hon. Friend the Member for Cheltenham (Alex Chalk) decried the fact that BT has not rolled out to the whole of Cheltenham in a way that he perhaps would not decry Virgin, because he does not expect Virgin to deliver a 100% roll-out in Cheltenham. Yet, when he thinks about it, BT and Virgin are in exactly the same position: they are both private telecoms providers rolling out a network.
Nevertheless, BT has a universal service obligation and is seen as the national provider. I acknowledge the fact that it has put in £10 billion of investment, that it has hired 3,000 engineers, that it is bringing its call centres back to the UK and that it continues to innovate with new technologies such as G.fast. Indeed, when I dealt with BT over Christmas and new year in relation to the floods in the north, it pulled its finger out and did a good job for many people who had suffered outages because of the flooding. There was a particularly important issue with emergency resilience. Still, there is absolutely no question but that BT must do better. I have spent five years in this job being inundated with tales of woe.
One other point in BT’s defence is that, because of functional separation and the fact that Openreach’s network is used by other providers, it can often be the case that the customer is contracting with, say, TalkTalk, or another provider, and the network is being provided by Openreach, and something falls between the two stools. Sometimes the provider with which the customer has contracted has simply put its order in wrong to Openreach, but it is very convenient for that provider to blame Openreach for its own failure.
As I say, Openreach must do better. As the Minister responsible, I find it particularly frustrating that I have to step in to sort out these problems. Why has Openreach not put in place a hit squad to deal with some of the more prominent complaints that come from MPs? We represent our constituents, and most of us are fairly judicious people; we do not raise complaints to Openreach unless we think they are serious. My hon. Friend the Member for Solihull (Julian Knight) mentioned a 99-year-old lady who suffered a stroke. On behalf of a Labour colleague, I dealt with a factory that had been built to be ready to open specifically on the basis of when Openreach was going to connect it, but Openreach was already a year behind schedule. That cost that factory many tens of thousands of pounds. It continues to baffle me why it cannot get its act together and sort out these prominent problems.
I had to intervene on new builds. When a housing development is being put together, one would have thought it was the most obvious thing in the world that the people buying the houses are likely to be relatively young and likely to have children, and therefore likely to want, in this day and age, fast broadband connections. However, it took me a year to 18 months to bang together the heads of BT and the house builders to get an agreement. Thankfully it was put in place at the beginning of the year and now new housing developments will have superfast broadband. One would have thought it was the most obvious thing in the world that there would be lots of customers on a new housing estate of, say, a thousand homes, selling for possibly £250,000 each.
I am really pleased with the Ofcom digital communications review. On the timing, I have said on the record that by the end of the year I want to see not necessarily a full and final agreement but clarity on where we are in relation to what Ofcom is calling for in its review. There are three parts to it. First is opening up BT’s network, which really needs to be done. BT has to look at what Ofcom is proposing and come to the table with credible answers. Secondly, BT has to make concessions to what Ofcom is saying about the governance of Openreach. Thirdly, there are consumer issues, one of which is automatic compensation. We might need to consider legislation, but my current understanding is that we will not need it. We need automatic compensation for consumers and small businesses that have suffered problems with service quality. That is another thing on which I want us to be close to agreement by the end of the year.
Ofcom will start publishing its quality of service reports in early 2017, and I want to ensure that that happens. We need much clearer information from providers. I, for one, would love them to get rid of this landline rental charge that they put on our bills. They put on their adverts a nice, big, juicy low price for broadband, and then an asterisk and a line saying, “By the way, you’ll have to pay £25 a month for landline rental.” All providers, whether it is Virgin, BT, Sky or whatever, should get rid of landline rental and just charge people for what they are buying: broadband, TV and a telephone service.
I hope that the Advertising Standards Authority will crack down on how providers advertise their speeds. At the moment, if only 10% of customers are receiving the advertised speed, in the eyes of the ASA that is supposed to be okay. I totally accept that the ASA does a good job—it is a great example of self-regulation—but it really needs to go further on that. In my humble opinion, at least 75% of people should be getting the speeds that the broadband providers are advertising.
As I think you have probably worked out, Mr Nuttall, I am completely at the end of my tether. I agree with all the complaints made by all my colleagues in this debate and am going to ensure that action is taken. I hope that if we debate this subject again in a year’s time we will have seen some action. Members may see a different Minister if I do not succeed, but we will do our best to make some progress.
Question put and agreed to.
That this House has considered BT service standards.
Clinical Negligence Claims
I beg to move,
That this House has considered the Government’s proposals on fixed recoverable costs in clinical negligence claims.
Thank you, Mr Nuttall, for presiding over this very short debate. I thank Mr Speaker for granting it and my hon. Friend the Minister for being here to respond on behalf of the Government.
I should make it clear at the outset that, although I am a barrister in private practice, my work does not include clinical negligence cases, so I have no personal interest in this subject. I have, however, been approached by a number of solicitors from Leicestershire, the Leicestershire Law Society and the Law Society of England and Wales. They are concerned that the Government’s consultation on the fixed fee regime, which is being conducted by the Department of Health, has been delayed, although I understand that the Government intend to introduce a fixed recoverable cost regime in October. Those concerns are shared by a number of other solicitors’ firms, including Irwin Mitchell and Slater and Gordon, and organisations such as the Association of Personal Injury Lawyers, the Society of Clinical Injury Lawyers and the Bar Council. I am grateful to all of them for the assistance they have given me in preparing for this short debate.
Let me begin by placing my concerns in context. On the face of it, the Secretary of State’s statement, which has been trailed in the press—apparently, he is going to make a statement in the House of Commons this afternoon—confuses punishment, which is dealt with under criminal law, and civil law remedies, but no doubt he will make himself clearer this afternoon. Perhaps my hon. Friend the Minister can clarify that issue briefly this morning.
I accept that the Government do not have a bottomless purse. Taxpayers’ money is needed to pay for a huge range of public services, all of which compete for scarce resources at a time when the Chancellor is trying to balance the books and decrease public expenditure.
Will the right hon. and learned Gentleman give way?
I will not give way.
That this debate takes place only a week before the Budget underlies that point. I further accept that the vast majority of patients who visit a GP, an NHS surgery or a hospital leave satisfied with their treatment and the outcome, but very occasionally something goes wrong. In just over 3% of those cases an error caused by a negligent decision or act of omission by a clinician leads to a claim being made by the injured person against the NHS. Such cases can include, for example, birth injuries or misdiagnosed or mistreated illnesses. Of course, those are not deliberate actions by ill-motivated doctors or nurses, but negligent ones that lead to adverse consequences for the patient.
What does 3% mean numerically? In 2011-12, the NHS reported just under 420,000 so-called “adverse incidents causing harm”, of which 13,500, or just over 3.2%, resulted in a clinical negligence claim. In the following year, there were just over 458,000 such incidents and 16,000 claims, or about 3.5%. In 2013-14, there were just over 470,000 incidents and just under 18,500 claims, or 3.9%. In the great scheme of things, those numbers are small, but they represent permanently damaged or shortened lives, pain, suffering, heartache and anguish.
Of course, they also represent monetary expense to the claimant and the NHS. We should therefore aim to ensure justice and proper compensation for the claimant who has been injured, and protect the taxpayer from excessive and unnecessary expense in legal and medical experts’ fees.
Will the right hon. and learned Gentleman give way?
I regret that I cannot; this is a half-hour debate, and I am afraid we are rather pushed for time.
It is uncontroversial to state—and the common law expects this—that damages should, as far as they can, put the injured party back where they were before the incident. We need a system that does not prevent the bringing of justified claims and encourages excellence and proportionality in the conduct of each claim, as well as in the conduct of the defence. An efficiently and expertly brought claim saves money, as it leads to the real issues being considered within a suitable timeframe. It allows the defendant to focus more quickly on what they need to do to satisfy the claim and not waste time and money on irrelevant or hopeless points.
Any changes that the Government intend to impose should not be retrospective—that is a basic rule of fairness —and must be even-handed. The Treasury must be an umpire and not a partisan ally of the Department of Health, because in the long run a poor set of reforms will lead to greater expense, not less, and a lessening of public trust in the NHS and the Department. Given that the Department of Health is managing the consultation and is the most common defendant in clinical negligence claims, it is difficult—despite, I hope, the construction of very high Chinese walls—to think of this as a wholly disinterested exercise.
It is easy to say—although it is not so easy to accomplish this—that the best way to reduce the number of clinical negligence claims against the NHS is to reduce the incidence of medical negligence. That is no doubt a statement of the blindingly obvious, but it may occasionally get forgotten as the Government look for ways to cut expenditure. Let us start by improving the training and decision making of those in the NHS who are statistically most likely to do things that lead to clinical negligence claims.
Let us also remember that the Legal Aid, Sentencing and Punishment of Offenders Act 2012 automatically cut the costs and expenses paid out by the NHS Litigation Authority by about a third, and that for claims worth less than £25,000 those savings come to 39% of the costs budget, or £71 million a year. In the NHSLA’s annual report of 2014-15, the chairman asserts that more than a third of the NHSLA’s spending was received by the legal profession, and most was paid to claimant lawyers. In fact, the report shows that the NHSLA’s operating costs amounted to £2.64 billion, of which £291.9 million, or 11%, was paid to claimant lawyers and £103.2 million, or 4%, to defence lawyers.
The report’s figures suggest that 15% of the LA’s spending is paid to lawyers, but there is no breakdown of what that number includes. The report indicates the LA’s net operating costs reduced from £3.373 billion to £2.641 billion between 2013-14 and 2014-15—a reduction of £732 million. It also says that claims reported to the LA reduced from 11,945 in 2013-14 to 11,497 in 2014-15—a reduction of 3.7%. The amounts paid out in damages reduced from £840.7 million in 2013-14 to £774.4 million in 2014-15—a reduction of 7.9%.The NHS has therefore achieved significant reductions in expenditure. The NHSLA also reports an increase in sums paid to claimant lawyers for costs and disbursements from £259 million to £292 million between 2013-14 and 2014-15. The average cost per case increased from £16,852 to £17,735—an increase of 5.2%.
There is inadequate analysis of those figures, and the report is, to that extent, misleading. The NHSLA claims to have
“saved over £1.2 billion…in rejecting claims which had no merit.”
However, as claims without merit always fail, those savings are illusory. It cannot claim to have saved money it would never have spent. The authority also claims that £38.6 million was saved by taking a significant number of cases to trial, but it does not say how much was spent unsuccessfully contesting cases at trial or settling cases soon before trial.
The NHSLA refers to the levels of costs recovered by claimant lawyers without distinguishing between costs and expenses. It compares the level of costs incurred by different sides without noting that the burden of proof requires claimants to undertake much more work than defendants. APIL says that nearly half of what the NHSLA says it pays out in legal costs to claimants’ lawyers are accounted for by success fees on conditional fee agreements, after the event insurance premiums, court fees and expert witnesses’ fees. Much of that could be saved if the NHSLA were better at its job of settling the claims it ought to realise it will lose on liability from or close to the outset.
That said, not all medical negligence claims are straightforward, but proving what went wrong is not made easier for a claimant’s lawyer when the NHS holds all the information and is reluctant to disclose it. On far too many occasions, cases that could have been settled more quickly, cheaply and satisfactorily are not, because the NHSLA withholds information, does not respond in good time to requests for information, or simply fails to apply its collective mind to the best way of dealing with the complaint. I have lost count of the number of times that I, as a constituency Member of Parliament, have corresponded with a hospital, insurance company or some large institution, private or public, that, when faced with a complaint, has buried its head in the sand and hoped that it will go away.
Most complainants just want someone to take responsibility and say sorry, and are not after money or revenge. That applies to the bereaved parents of stillborn babies as much as it does to the adult children of an elderly patient who died after a fall from a hospital bed, or who lay for days in agony because of untreated bed sores. The defensive failure to apologise often causes more heartache than the negligence itself and causes claimants to believe that they have to sue to get justice.
In addition, the NHSLA too often engages in unproductive trench warfare: it must not be seen to be giving ground, so the order goes out: “Deny, defend, delay!” Cases that could have been resolved months and sometimes years earlier end up being settled at the door of the court, or lost after a trial, by which time advocates’ brief fees have to be added to all the other costs that have piled up unnecessarily since the complaint was first raised. If ever there was a need for a patient to heal himself, it is the NHSLA in its refusal to free itself from the indefensible, or to see the wood for the trees. Rather than too often denying, defending and delaying in the wrong cases, it should assess, admit and apologise in the right cases.
An example of that is in the failure to look for and to release medical records. Requests for records should be met under the Data Protection Act 1998 within 40 days, and under Government guidelines for healthcare organisations within 21 days. Far too often both deadlines are missed, and not by a whisker, but by a country mile. It can often take more than six months for claimant lawyers to get patients’ records from GPs and hospitals and, with a limitation period of three years to bring a claim, pressure mounts to issue proceedings to protect the claim. It is not unheard of for long-delayed medical records to show that the claim is unwinnable, so it is dropped—but why not send out the records within a month and save the time, the expense and the anguish?
The NHS is a hydra-headed organisation and, when dealing with medical negligence claims, that can lead not to the proper use of decision-making powers at the most local level, but to procrastination, duplication and more expense. Some NHS trusts have in-house legal departments and when they receive a claim pass it directly to the NHSLA; some hold on to them and pass them on much later. My informants from the legal profession tell me that trusts’ legal teams are far less settlement-minded and tend to use every point, good, bad and indifferent, to string the claimant along. If a case gets towards trial, the NHSLA instructs outside lawyers. Why not make it a matter of policy for all claims to be handed straight over to the NHSLA, and thus minimise, even if not abolish, delay and unnecessary costs?
Finally, I want to urge the Government to reconsider their proposal that all clinical negligence cases up to a value of £250,000 should be low-value claims. First, in any view, £0.25 million is not a low-value claim either to the claimant or to the taxpayer, not least when one considers how many there are every year.
Secondly, to take just one example, hundreds of babies are left brain-damaged every year because the NHS has treated them negligently either before or after birth and, sadly, some of them die soon after birth. A claim brought by the parents of a child who has died aged a few hours, days or weeks will not of itself lead to a large award of damages, but the evidential route to determining where liability lies for the acts or omissions that led to that premature death can be highly complex in investigation and assessment. The same legal costs may be incurred in proving a claim, whether it is of low or of high value.
For instance, in a case of delayed cancer diagnosis, the same expert evidence may be required where a patient’s life expectancy has been reduced by two years and the award is £30,000, or where life expectancy is reduced by 50 years and the case is worth £500,000. Those worst affected will be the most vulnerable—the elderly, those on low income and people with disabilities.
On 13 January, in answer to my written questions Nos 21040 and 21037, the Minister accepted, unsurprisingly, that there is no exact correlation between the value and complexity of clinical negligence claims, and it must therefore follow that to impose an artificial limit on the amount of costs recoverable by the claimant based only on the quantum of damages could lead to injustice, especially when the NHSLA will not be equally constrained.
Already claimant law firms reject 90% of inquiries in this field and the proposed fixed-fee regime for cases of up to £250,000 will simply dissuade firms from assisting even more claimants. As one experienced Queen’s bench master who specialises in such cases recently said, further research is
“essential in order properly to understand the impact on access to justice of the existing system of funding before implementing any further changes.”
A fixed-costs system for claims under £250,000 would affect 95% of cases and make many meritorious claims unviable for patients, undermining the legal and the medical systems. That would not be in the interests of justice, of medicine, of the economy or of the country, and we need to think again. The Minister is a thoughtful man, and I am sure he will want to give a thoughtful response, today and subsequently.
This is a fascinating matter, which deserves a great deal of debate. We could discuss this interesting subject for many hours. I am grateful to my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) for condensing a complicated issue into a 15-minute, eloquent explanation of the problems that face us.
In addition to the reading that my right hon. and learned Friend has already done, I point him in the direction of the MBRRACE-UK—Mothers and Babies: Reducing Risk through Audits and Confidential Enquiries across the UK—report into the quality of investigations into stillbirths and neonatal injuries and deaths in the NHS, which was published at the end of last year. Although it charts a significant improvement in the reduction of stillbirths and neonatal deaths over the past 20 years due to the advancement of science, it draws one very depressing conclusion, which is that the quality of investigations has not improved since the 1990s.
I admit immediately that there is not yet any clear, scientifically proved correlation between that and the fact that litigation costs have increased, but I hope that my right hon. and learned Friend will accept my initial submission, which is that there is not the evidence for one of his claims, that somehow the increase in litigation automatically leads to an improvement in investigation and, therefore, to an improvement in patient safety. I therefore suggest that one of the statements that he made in his very careful speech is not a full reflection of the truth that we are seeking to uncover.
My right hon. and learned Friend said that we should aim to achieve proper justice and proper compensation for the claimant, and that that is the endpoint of litigation —but it is only a partial endpoint. The first thing that we are trying to achieve is an understanding of what went wrong to ensure that that is immediately transmitted back into the service, so that we prevent such a clinical catastrophe from happening to another individual or family. That is exactly where the existing system does not work, because it militates against learning early in the litigation process. In many instances, it provides a definitive account only at the point of judgment. That is what we are seeking to change through our proposed reform.
I am grateful to the Minister for giving way, and I congratulate the right hon. and learned Member for Harborough (Sir Edward Garnier) on securing the debate. I also declare that I am a non-practising door tenant at Civitas Law in Cardiff.
I accept the Minister’s point about the quality of investigation. Will he also agree that access to justice is itself crucial, particularly given that the Lord Chief Justice, Lord Thomas of Cwmgiedd, recently said that access to justice is now “unaffordable to most” and available only to the very richest?
I will turn to access to justice. I do not entirely accept the hon. Gentleman’s interpretation of the judge’s words.
In our proposed reforms, I intend to change the balance for the NHS Litigation Authority and for claimant lawyers to ensure that we get to a single version of the truth as early in the process as possible. I accept in its entirety my right hon. and learned Friend’s interpretation of the NHSLA’s performance in past years. I do so on the basis that many claimants have been immensely frustrated—as have the clinicians involved—by the length of time that trusts and the LA have had to respond to claims, the length of time it often takes to reach a resolution and the fact that there is often too much defence, delay and prevarication. At the same time, I have full confidence in the NHSLA’s current management, because I have seen a real determination to get to grips with the problems it inherited and change the authority into something far more fit for purpose.
I accept my right hon. and learned Friend’s contention that we need to change what happens with the NHSLA, but I posit that the existing costs regime encourages some claimant lawyers to stack costs in the early stage of a claim process rather than get to what we need to do: to establish a version of the truth agreed between all parties. I am not arguing that that is a deliberate and malicious intention, but that is how the system is constructed at the moment. Therefore, in attempting to reform how costs are settled between the NHSLA and claimants, we want to incentivise learning right at the beginning of the process, to ensure that it is as rapid as possible and that, if claimants have a fair claim, they receive justice and compensation as quickly as possible. Our interests are therefore entirely aligned.
That is why I say to claimant lawyers—I have said this privately to them on several occasions—that this is a genuine consultation. We are seeking to find out how best to reform a system that we all accept is not right. I therefore warn them against peremptory lobbying of Members of Parliament about a scheme that has not yet been determined. This is a genuine consultation, in which we will accept all their views, but they cannot—I hope they will not—proceed on a basis that could lay them open to accusations of pleading for special interests rather than trying to contribute to the consultation.
The right hon. and learned Member for Harborough (Sir Edward Garnier) said that law firms currently reject 90% of cases brought to them because the burden of proof is high. I therefore do not think that we should portray this as a field of many frivolous claims. With that degree of rejection by law firms as background, will the Minister tell the House how the Government came to their figure for estimated savings for the new regime of £80 million? Where will those savings come from?
I hope that I in no way suggested that any of the claims brought forward were frivolous. I am saying that the way in which the current system is constructed loads costs at the beginning, and that does not help get us to a fair and equitable solution as quickly as possible. I am merely positing, but I believe there is fault on both sides. It is not necessarily the fault of either organisation; it is the fault of the system as a whole, which does not encourage good behaviours. The result is that we are not extracting learning as quickly as possible from litigation; we are not using claims, when unfortunately they are brought, to ensure that we improve medical practice; and, frankly, we are not using the early stage of complaints sufficiently well to ensure that claims are not brought.
I entirely agree with my right hon. and learned Friend that almost all complainants are not after a financial reward; they just want someone to say sorry and to accept responsibility for what happened. If we can achieve that far quicker in a learning culture, we will do something remarkable, not just for them, but for the many people who will follow. In answer to the right hon. Member for Wolverhampton South East (Mr McFadden), the estimate of savings proposed in the initial consultation document was part of the spending review round, and it was done through the usual modelling processes employed by the Treasury and the NHSLA, which understands the value of claims coming through.
My right hon. and learned Friend asked about the £250,000 limit. That limit was not arbitrary, but drawn from the original intentions of Lord Justice Jackson’s review on civil litigation costs in 2010, with which I know he is well acquainted. In that review, Lord Justice Jackson pressed for fixed recoverable costs in the lower reaches of the multi-track up to £250,000. That was in relation to personal injury claims, but, in trying to draw a line somewhere, we felt that that was an appropriate place, given his recommendation to do so. That is, however, subject to consultation. We want to hear the full range of views about where the limit should be placed. My right hon. and learned Friend’s contribution will be an important part of that consultation, and I and officials will take note of it.
My right hon. and learned Friend spoke of the Chinese walls and why the Department of Health is bringing forward this review. He is well aware of the usual practice that Departments bring forward proposals that relate to their areas of responsibility. The Ministry of Justice did so in previous reforms in which it had a financial interest, just as the Department of Health is doing here. I hope that, in our open approach, we will be able to explain that our primary concern is around changing the culture of the NHS and making sure that we are driving down claims for good reasons—that there are fewer of them because we are improving clinical practice—rather than just trying to deny people access to justice, which is the opposite of one of the intentions of the review.
The hon. Member for Torfaen (Nick Thomas-Symonds) is entirely right to say that we should ensure that we make justice as open as possible. The litmus test of the reform will be that, if people feel that, despite everything we are doing to make the NHS a better organisation—listening to complaints, learning from mistakes and providing restitution early—they still wish to bring forward a claim, it will be easy to do and no unreasonable barriers will be placed in their way.
If a person has a claim as a result of a serious injury, but they cannot get legal representation, that person is still severely injured and the costs will still fall back on the state.
I am well aware of that, and that is why we need to ensure that, at the end, the reform produces good effects rather than deleterious ones. I am aware of the concerns of the hon. Lady and many hon. Members, but I ask her to be open to what the Government are trying to do and to feed in her suggestions for how we can make the system better, because clearly at the moment, as I have tried to explain, it is not working in the interests of patients in the NHS. That is why we so badly need reform of the clinical negligence system.
Finally, my right hon. and learned Friend spoke about the speech that the Secretary of State is due to give—he will brief the House in due course—and wondered whether punishment was being confused with civil law remedies. We must all understand—many in the clinical negligence community have not quite grasped this—that a revolution is going on in medicine at the moment, learning from other sectors such as air accident investigation, that appreciates that one can have learning and lessons learnt in an organisation only if one provides safety for clinicians, for example, to speak openly when something has gone wrong. Sometimes we need to provide context around such discussions to make them feel safe. That has been achieved for air accident investigations and we want to do something similar for the NHS, so the Secretary of State will make more of that plain to the House in due course.
None of that is to change the basic freedom of people to find remedies in law. As we develop this exciting area of medicine in the next few years, I hope that the interplay between those two will mean reductions in deaths, accidents and patient safety problems in the NHS by tens of thousands and then hundreds of thousands in the years to come. That will possibly be one of the biggest factors in reducing mortality in the NHS since its foundation more than half a century ago.
Question put and agreed to.
Scotch Whisky Industry
[Mrs Madeleine Moon in the Chair]
I beg to move,
That this House has considered the contribution of the Scotch whisky industry to the UK economy.
It is a pleasure to serve under your chairmanship this afternoon, Mrs Moon. I am delighted to have secured this debate and to see so many of my colleagues present, particularly as they were all made aware that this is most definitely not a tasting event. I sincerely thank them for their attendance.
I understand that several hon. Members want to take part in this debate. If I have learned one thing since coming to this place last May, it is that no one loses points for repetition. However, in order to let colleagues develop their own arguments, I shall endeavour to speak in fairly broad terms about the remarkable economic success that is the Scotch whisky industry. I shall highlight the industry’s success before touching on what measures I believe that the Government must take to build on the achievements that we are currently enjoying and to ensure investor confidence for many years to come. I shall also look at the importance of the industry for rural communities throughout Scotland.
Thereafter, I shall shamelessly indulge myself in promoting the beauty of my Argyll and Bute constituency, which, regardless of what some of my green-eyed colleagues may claim later this afternoon, is without doubt the world’s whisky centre of excellence. As the home to the world-renowned whisky coast, Argyll and Bute can boast no fewer than 14 distilleries, which are working round the clock to produce the finest whisky in the world, consumed in ever greater numbers both at home and abroad. That said, I am inclined to agree with Raymond Chandler, the great American novelist, when he said:
“There is no bad whiskey. There are only some whiskeys that aren’t as good as others.”
I have a theory that all Scots children are born knowing certain incontrovertible truths—the kind of thing that you just know and do not have to learn, such as the fact that everything good in the modern world was invented by a Scot, that that ball never actually crossed the line in the 1966 World cup final and that Scotch whisky is, as George Bernard Shaw so wonderfully described it, “liquid sunshine”.
That liquid sunshine provides a silver lining for the UK Exchequer, as sales of Scotch whisky both at home and abroad contributed more than £5 billion to the UK economy last year. Last year alone, almost 100 million cases of Scotch whisky were exported to every part of the world. That is 40 bottles every second of every day leaving Scotland, bound for Spain, Brazil, America, Canada, China and just about everywhere else in between. Those exports earned this Exchequer £4 billion—or, to put it another way, £135 every second of every day for the UK balance of payments. Indeed, Scotch whisky is liquid sunshine for the Chancellor.
To be fair to the Chancellor—please take note, as this is probably a once-in-a-career event—he had the foresight last year to cut spirit duty by 2%. Indeed, it was only the fourth time in 100 years that that had been done. Although that cut was very welcome, many of us feel there is much more we can do, as taxation still accounts for 76% of the price of a bottle of whisky.
It is worth remembering that last year’s cut in spirit duty was, by the Treasury’s own Red Book calculation, believed to result in a shortfall of £185 million to the Treasury. The reality, however, was very different: the 2% cut in 2015 actually increased the tax take to the Treasury by more than £100 million. I am not saying that every 2% cut in spirit duty will recoup £100 million for the Treasury, but I think we can argue with a great deal of justification that a cut in spirit duty helped to increase sales in the domestic market for the first time in several years. It also sent out a very important signal to potential investors in the Scotch whisky industry.
Investor confidence is vital. The initial duty freeze, followed by a duty cut, gave confidence to investors, who saw that, for the first time in decades, there was a Government who did not view the Scotch whisky industry simply as a cash cow. As we know, spirit can only become whisky after it has been laid down for three years; only then can it be classified as Scotch whisky. For at least three years, investors can therefore have little or no return on their money. The fact that nine new distilleries have opened across Scotland in the past two years, with no fewer than 40 in various stages of planning and construction and hoping to come on stream over the next two decades, is in no small part due to the change in policy of not hiking spirit duty at every possible opportunity.
In fact, such is the confidence in the industry that there are advance plans to open a new distillery in the Scottish borders. To put that into context, the last distillery in the Scottish borders closed its doors in 1837—the year Queen Victoria ascended to the throne, and shortly after the birth of the great Mark Twain, whose love of whisky was such that he was moved to say:
“Too much of anything is bad, but too much good whiskey is barely enough.”
I have heard several people question how we can call for a further cut in spirit duty while at the same time campaigning in Scotland for a minimum unit price on alcohol. Let me say immediately that those are not contradictory positions. The adoption of a minimum unit price was never intended to affect sensible, moderate drinkers, and it would have no impact whatever on the production, consumption or export of Scotch whisky. Minimum unit pricing is designed to impact on the most harmful drinkers and is targeted at own-brand spirits and ciders that are high in alcohol but usually very cheap at the point of sale.
In the past few years, we have seen a signal to investors that Scotch whisky is a solid and sound investment. It is an investment that creates jobs and prosperity. The industry already supports directly and indirectly more than 40,000 jobs, many of which are highly skilled, across the United Kingdom. Included in that figure are 7,500 jobs in rural communities, where it is often very difficult to find alternative employment. A classic example of that is the new Isle of Harris distillery, which opened last year with the aim of producing 300,000 bottles of single malt a year. That one distillery has created 25 new jobs in the town of Tarbert, which has a population of barely 1,000 souls. That is an oft-repeated story across the highlands and islands of Scotland, where whisky distillation and high-skilled local employment have gone hand in hand for centuries.
As I said at the outset, in my opinion—and as chair of the all-party group on Scotch whisky, I suggest that that opinion is not to be taken lightly—the finest whiskies in the world come from Argyll and Bute, although I fear that my right hon. Friend the Member for Moray (Angus Robertson) and my hon. Friends the Members for Ross, Skye and Lochaber (Ian Blackford) and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) may be of a different opinion. On our whisky coast in Argyll, we have 14 distilleries producing some of the most famous brands in the world. We have Bowmore, Ardbeg, Bruichladdich, Bunnahabhain, Caol Ila, Lagavulin, Laphroaig, Kilchoman, Isle of Jura, Glengyle, Springbank, Glen Scotia, Tobermory and Oban—and if you can still reel those names off after a good night, perhaps the night was not as good as you thought it was. As well as producing great whisky and creating employment, those distilleries attract tourists to the area in their tens of thousands. Indeed, visits to distilleries have rocketed in recent years; I saw a figure suggesting that one in every five visitors to Scotland visits a distillery.
I thank my hon. Friend very much for securing this debate. Will he join me in welcoming the fact that Royal Lochnagar distillery in my constituency —the home of the first distillery tour, for Prince Albert and Queen Victoria—has almost doubled its visitor numbers since 2008, with 16,384 visitors visiting in 2015?
I absolutely join my hon. Friend in welcoming that, and that statistic is replicated across the country. Islay, for example, which has a population of just 3,000, has eight working distilleries with two more currently under construction. In 2014, Islay had 125,000 visitors to its distilleries—that is 41 visitors for every permanent resident on the island. The importance of tourism, and whisky tourism, cannot be overstated, and if hon. Members have not holidayed in Argyll and Bute, I suggest that they put it on their bucket list immediately.
I used to think the sky was the limit for our Scotch whisky industry, but it appears that I was wrong. It seems that there are absolutely no limits on what our industry can achieve, as I recently discovered, when I was told that a quantity of Ardbeg was sent into outer space to the international space station—for research purposes, I believe. Who would have believed that Argyll and Bute would be exporting liquid sunshine into outer space? Indeed, if that is not an argument for awarding the UK space station to Machrihanish, I do not know what is.
My intervention is not specifically on that point. Sadly, I say as a Welshman that there is no whisky industry in my constituency, but there is one not very far away, and it produces wonderful Welsh whisky—one day perhaps there will be competition. My point, however, is that not only is Scotch whisky tremendously important to Members’ constituencies and Scotland as a whole, but to the United Kingdom. Given that the Scotch whisky industry is worth some £3.3 billion directly and £1.7 billion indirectly to the UK economy, does the hon. Gentleman agree that it is important not only locally in Scotland, but to Wales and the United Kingdom?
I could not agree more with the hon. Gentleman—my honourable Welsh friend—about the importance of the Scotch whisky industry. For all these islands, it is absolutely vital and I am delighted that the Government have shown a commitment to creating a more level playing field than there has been in the past.
The Scotch whisky industry is not just one of Scotland’s oldest, most iconic and most culturally significant industries, but one of our largest and most successful. As I said, it contributes massively to the UK balance of payments, supports 40,000-plus jobs and pays out £1.5 billion in salaries. Exports are up, domestic sales are up and investor confidence is at an all-time high. There is a golden future for Scotch whisky, and I urge the Government to keep faith with that industry and allow it to build on recent successes by applying a further cut to spirit duty in next week’s Budget. Together, we can boost the industry and the wider economy for the benefit of us all.
Before I call Andrew Percy, I will just say that there is a lot of interest in this debate; I have eight people down to speak and I can see a lot of people who will want to make interventions. I suggest that speakers take five minutes maximum each, if all are to get in, which will include the time that hon. Members give for interventions.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate the hon. Member for Argyll and Bute (Brendan O'Hara) on securing this important debate in support of the whisky industry, which is important not only to Scotland, but to the whole of the United Kingdom.
I declare an interest as an avid Scotch drinker. In fact, I drink all sorts of whisky, whether it is Arkansas rye whiskey or my particular tipple of Highland Park. Or there is even the whisky produced by the English Whisky Co., which is very good, or Penderyn, which is very lemony, very citrusy, very nice. I have named enough now in the hope that somebody sends me a free crate; we will see. I will not talk about my evening on Kintyre with a full bottle of Laphroaig—we will leave that one, but the photos are still out there.
This is an important debate for all the reasons that the hon. Gentleman gave. Scotch whisky is a huge part of the UK economy. I want to talk in particular about its impact on the whole of the United Kingdom and my constituency, the duty rate, and the potential for growth in the market through trade agreements such as the Canada-EU comprehensive economic and trade agreement.
I have just accepted a small role as the Prime Minister’s trade envoy to Canada, and one of my mandates from him is to market and push CETA and its benefits. I am not the first politician to hold two diametrically opposing views at the same time, but while promoting CETA, I am, of course, also campaigning for us to leave the European Union. Leaving that small inconsistency aside, CETA will obviously be of great importance to the Scotch whisky industry. I would argue, of course, that outside the European Union we would still have the same access, blah blah blah, but Canada is the 15th biggest market for Scotch whisky, with about £66 million-worth of exports—about 20% of all Scottish exports to Canada. Unfortunately, however, due to the liquor board system in Canada and some of the burdens placed on imports, Scotch whisky is unfairly discriminated against at the moment. We have to make sure, through the final stages of CETA, that those barriers are removed so that we have full access for Scotch whisky to the Canadian market.
That is a reminder of just how important trade treaties can be to jobs. There is a lot of opposition to the Transatlantic Trade and Investment Partnership, and some of that is unfortunately filtering through to CETA, but we have to make it very clear not only to people in this place but to the wider public that it is a good deal that will support jobs across the United Kingdom.
Scotch is doubtless a Scottish product, and Scottish people should be very proud of it, but it is also a great British product. IG Industries in my constituency provides a lot of the packaging, and Muntons, also in east Yorkshire, provides some of the cereal. I like to think that when people have their tipple of Scotch whisky, the taste comes not just from the fine Scottish water but from the even better east Yorkshire grain.
The Scotch whisky industry creates prosperity and jobs right along the supply chain, be it in cereal, ceramics, glass or haulage. Does the hon. Gentleman agree that we should do all that we can to support the industry and to protect the many jobs that depend upon it, and that we should listen to its calls for a small drop in duty?
I do have sympathy with that. It was nice to hear the hon. Member for Argyll and Bute pay tribute to the Chancellor, which is not something I often do either. He was correct to do so on this issue, because the calls that were made last year were successful. We have all seen the incredibly positive impact that has had on the supply chain and jobs, and if there could be movement again, that would be appreciated. I need not reiterate the number of jobs that the hon. Gentleman quoted, but they are a huge part of this country’s economy and employment profile. As we heard, our trade deficit would be 11% higher without Scotch whisky. It is a great product, and a British product in so many ways, including the fine Yorkshire grain and the packaging from my constituency. It supports jobs at the Immingham port complex through exports, so it is important to the whole UK market.
I am conscious of your instruction on time, Mrs Moon, so I will end with a simple request to the Minister, which he will hear many times today. If there is an opportunity ahead of next week’s Budget for some movement on the 67% duty rate, I will entirely support it, not least because of the arguments we have heard so far today.
It is a pleasure to serve under your chairmanship, Mrs Moon. I thank my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) for initiating this important debate today.
Whisky is Scotland’s gift to the world, a gift that brings enormous benefit to the Exchequer. It has a substantial impact on our trade statistics and generates substantial employment in Scotland. The success of the whisky industry is rooted in rural Scotland, where the addition of well-paid employment puts substantial income into many local economies.
There has been a renaissance in Scotch whisky with so many iconic brands being marketed and sold throughout the world. Its brand identity is unparalleled and has been hard won, although it needs to be protected and invested in. There is a competitive threat from other products, but none have the right to call their product Scotch whisky. The rich diversity of successful Scotch whisky global brands has helped to create the circumstances for an explosion of investment in new distilleries, often small community-based operations that add to the rich tapestry of unique product offerings and the breadth of those offerings to the discerning palate. Each whisky is unique and is shaped by the environment and character of each distillery with the barley, the local source of water and the peculiarities of the still among other things affecting the character of each whisky.
We have several distilleries in my constituency, including some in the planning and development phase. In Skye, we have the iconic Talisker whisky, which was the favourite of writer Robert Louis Stevenson. In his poem, “The Scotsman’s Return from Abroad”, he said:
“The king o’ drinks, as I conceive it, Talisker, Islay, or Glenlivet.”
Will my hon. Friend give way?
Because of lack of time I want to press on, but before my hon. Friend the Member for Argyll and Bute gets excited about Islay being mentioned in the same sentence as Talisker, I should point out to him that the king of whisky, Talisker, is the first and foremost whisky to be mentioned in the poem.
Moreover, in the film “Charlie Wilson’s War”, CIA agent Gust Avrakotos presents Congressman Wilson with a bottle of Talisker. The agent explains to Charlie that Scotch is mentioned in a Robert Louis Stevenson poem, but the bottle is bugged and allows him to listen to the congressman’s conversations. One would hope that in this House Talisker may be enjoyed by all and certainly never used for more subversive activity, although with this Government you never know.
One website on whisky stated the following of Talisker:
“This alluring, sweet, full-bodied single malt is so easy to enjoy, and like Skye itself, so hard to leave.”
What must be kept in mind is that Talisker distillery and so many of our distilleries are located not just in the most beautiful parts of our country but in areas of varying degrees of fragility of economic activity. Talisker is located on the western side of Sky where the potential for full-time, year-round employment is limited. The distillery employs 45 staff members, a significant number for an island with a population of just over 10,000. It is of note that only nine of those jobs are in production, with the vast bulk of employment being around the visitor centre. Last year, it welcomed a grand total of 67,000 visitors. The distillery is the second highest visitor attraction in footfall on the island of Skye.
Clearly many people come to Skye to visit Talisker, among other places, helping to grow and develop our tourist offering and tourist spend, not just at Talisker but throughout the island. The motion today refers to the economic value of whisky to our country. That economic benefit is based on the direct value of the whisky industry to many rural communities in my constituency and elsewhere. Talisker is a well-established, successful brand, but the story does not end there.
Torabhaig distillery is under construction on the Sleat peninsula on Skye. This distillery is expected to employ a staff of eight when it enters production. There are also plans for a new distillery on the island of Raasay. There is a birth of a new spirit in the Hebrides, a spirit that will excite the whisky world with these new ventures adding to the appeal of Skye and Raasay as the premium whisky region of the entire industry.
I have many distilleries in my constituency. The Glen Ord distillery in Muir of Ord is a contrast with Talisker. It employs just shy of 60 workers and as well as production of the Singleton of Glen Ord brand and a successful visitor centre, there is also a maltings at Glen Ord as well as an engineering base for the parent company, Diageo.
I am glad to say that not far from Glen Ord, just outside Dingwall, is another new distillery, GlenWyvis, based on a long-held tradition of distilling in this area, under the name of the previous Ferintosh distillery. Our national bard, Rabbie Burns, famously lamented the previous loss of this distillery when he said in 1759:
“Thee, Ferintosh! O sadly lost!”
Well, it is lost no more.
Because of lack of time, I will wrap up. We celebrate the success of the whisky industry, but let me quote Douglas Fraser of the BBC, who stated in 2013:
“Scotch whisky is a national brand worth toasting. It is a drink that can only be distilled and matured in one country—Scotland—but which sells in to 200 markets around the world. How did Scotch go from cottage industry to global phenomenon and how does it benefit its country of origin?”
That question requires more time for debate than we have today, but let me reflect briefly on employment.
As has been mentioned, 40,000 jobs are connected with the industry, 7,000 of which are in rural Scotland. My challenge to the industry is that, as well as the very welcome investment in distilleries, more can be done to make sure a greater part of the supply chain is secured in the area of production. Let us increase the dividend available for those in whisky-producing areas and let us toast the success of the industry, but let us have the ambition to grow this fantastic industry on a sustainable basis. To encourage this to happen, the Chancellor must play his part next week by reducing duty and introducing greater equity for the Scotch whisky industry.
Everyone here today understands that Scotch whisky is a huge player in the UK economy and overseas markets, and without the success of this industry Britain’s trade deficit of around £35 billion would be around 11% larger. This wonderfully popular product is the biggest net contributor to UK trade in goods. Exports are worth almost £4 billion and imports in the supply chain, such as packaging for products and casks for maturing the spirit, add value to our economy. The industry’s trade balance is £3.8 billion, supporting almost 40,000 jobs, 10,800 of which are worth £1.4 billion to UK workers.
As my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) pointed out, more than 7,000 workers in the Scotch whisky industry are employed in rural communities such as Arran in my constituency, leading to considerable added value in both direct and indirect incomes. Further, it accounts for 21% of the food and drink exports of the whole of the UK.
I am here today to applaud the success of this industry and its huge contribution to the UK economy. I am delighted that my constituency can boast some of the finest whisky distilleries in the UK with the Arran distillery being one of the few remaining independent distilleries in Scotland and the only malt whisky distillery on Arran, home to an award-winning dram. It opened in 1995 at Lochranza, which is the perfect location for producing the perfect malt. It is home to the purest water in all Scotland, water that has been cleansed by granite and softened by peat as it slowly meanders from the mountain tops into nearby Loch na Davie. Arran also enjoys a warm microclimate. The atmosphere of sea breezes and clear mountain air with the warm flow of the gulf stream is ideal for the speedy maturation of single malts.
I have painted a rather poetic picture. As for my hon. Friends the Members for Argyll and Bute and for Ross, Skye and Lochaber (Ian Blackford), I will put their gas at a peep because the Arran distillery, despite what they have said about their own neck of the woods, is a patron of the Robert Burns World Federation and, as such, has created a Robert Burns single malt and Robert Burns blended whisky in honour of Scotland’s national poet. It is the only whisky distillery able to use the image and signature of Robert Burns on its packaging—a true accolade indeed. [Interruption.] Not for nothing does the island of Arran have a reputation for producing the highest-quality whisky, although I am sure that the whisky from the constituency of my hon. Friend the Member for Ross, Skye and Lochaber is quite nice, too.
I join my hon. Friends in urging the Government to make a cut in excise duty on spirits at the Budget next week to boost the Scotch whisky industry. The Government must make it clear that the whisky industry will not be viewed as a cash cow, as the oil industry has been for too many years. Failing to cut the excise duty in the Budget will risk holding back this vital industry and the revenues, jobs and tax receipts from which the whole of the UK benefits. We need to help to create the conditions for the growth of this industry in our home market and stimulate long-term investment. If we cut excise duty, the revenues will go up, not down. The current staggering and eye-watering 76% tax on a bottle of Scotch whisky is far too high. Consumers hand over almost £10 on each bottle of whisky that they buy. That is 51% more duty than beer drinkers and 27% more duty than wine drinkers. That is clearly unfair and unsustainable. The 76% duty is the fourth highest rate in Europe. A cut would at a stroke support not only the whisky industry, but farmers, local pubs, rural and island economies, responsible consumers, manufacturers, exporters and supply chains across the UK.
There is no denying that distilleries are a source of jobs in areas that, as has been pointed out, might otherwise find it hard to sustain them and they are strongly aligned with wider tourism activities in rural economies. In my own constituency, a visit to Isle of Arran Distillers Ltd is all part of the experience of visiting the island of Arran.
The Scotch whisky industry is, rightly, a source of pride to all Scots, and no wonder, but it is also a huge success story that needs to be told more often. The question is not whether the UK Government can afford to cut excise duty on whisky. The question is whether the UK Government can afford not to make that cut? This is an iconic industry for both Scotland and the entire UK. It has a crucial role to play in the economic health of the UK, and that must be recognised. I urge the Minister today to support a cut in excise duty on whisky and recognise this jewel in the crown of Scotland’s —and the UK’s—industrial strength.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) on securing the debate and providing us with an opportunity to discuss the significant contribution that the whisky industry makes to the national economy. I am well aware of the contribution that the industry makes to his constituency of Argyll and Bute, an area that I regularly visit for family trips, and my office manager, an Ileach, speaks often about the importance of the distilleries to the Islay economy. With eight distilleries on an island of 3,000 people, and another two being planned, soon there will be one distillery for every 300 residents. My office manager tells me that, from hazy memory, the Islay festival of malt and music is a very good time to be on the island.
Like Argyll and Bute, my constituency of Paisley and Renfrewshire North benefits greatly from having an active and successful whisky sector in the area. We have heard much, rightly, about areas of production, but there are equally important parts of the industry. Indeed, I recently visited the Chivas Regal bottling plant in my constituency and spoke with staff about the work that they do. The facility employs more than 500 staff, and it is where the company bottles most of its whisky portfolio, including brands such as Chivas Regal, the Glenlivet and Aberlour and the super-premium products such as Royal Salute. Chivas Regal is famous the world over—
Does my hon. Friend agree that in the aspect that he has mentioned—bottling—the whisky industry has led fantastic growth in productivity and innovation? The growth has been such that in Fife, the bottling plant in Leven now bottles not only malt whisky, but most of the company’s London gin.
Indeed. I thank my hon. Friend for that intervention. The productivity leads to further investment, which I will come on to later.
The staff at the Paisley site are proud to distribute whisky to all corners of the world, including China, India and the United States. During my visit, I was grateful to be shown around the new north bottling hall, which was opened last year as part of a wider £40 million investment by Chivas Brothers and helps to highlight the positive future that the whisky industry has in Renfrewshire and across the UK.
However, it is not only Chivas that operates in my constituency. Diageo is also well represented, with facilities near Braehead and at Blythswood. Both are long-standing providers of many jobs in the constituency, and I look forward to visiting them in the near future—that was a plug. Chivas and Diageo are extremely important to the Renfrewshire economy and help to support more than 1,000 local jobs. The Scotch Whisky Association estimates that the Scotch whisky sector directly employs 10,800 people. I am very proud to say that about 10% of those jobs are based in my constituency. Back home in Renfrewshire, we probably do not realise or appreciate how important our constituency is to the wider success of whisky. The three plants based in my constituency are extremely important, both locally and nationally, and I would like to record my thanks to all those workers who contribute to the success of the “water of life”.
We cannot stress enough the importance of the whisky industry to Scotland. It is part of our DNA, and we are famous all over the world for being the home of whisky. According to the SWA, the whisky industry’s contribution to the UK’s GDP amounts to £5 billion and it helps to support 43,000 jobs across the UK. In 2013, more than 1.1 million visits were made to whisky distilleries, with many of the visitors coming from all over the world to sample some Scotch whisky and see how it is distilled. Scotch whisky can be and has been described as the star performer of the UK economy. When we look at the activity of the industry in overseas markets, it becomes clear why it is so important to our national economy. Last year, Scotland exported 99 million barrels of whisky, which, according to the Library, were worth almost £4 billion, with imports amounting to £200 million. Without the success of whisky, the UK’s trade deficit would be 11% higher than it is today.
Given the success and significance of whisky in the national economy, our call for a further reduction in spirit duty by 2%, which is supported by the SWA, is entirely legitimate. A 76% tax burden is entirely excessive and ultimately unsustainable. What is more, with less than 9% of the EU population, UK consumers pay 25% of all EU spirit duties. Indeed, revenue raised by spirit duty has gone up by more than £100 million in the last year, following the Chancellor’s 2% cut in last year’s Budget, so he does not have to look too far for the evidence.
The future is bright for the Scotch whisky sector. I see that at first hand in my own constituency with the investment that has been made in the plants in Renfrewshire. We should be proud that our whisky is famous the world over and attracts tourists all year round. Scottish whisky is one of the star performers of our national economy. It is vital to our local communities and vital to supporting local jobs, and we should do as much as we can to encourage its growth in any way we can. Slàinte!
There are four speakers left. At 3.30 pm, I need to start calling the three Front Benchers, so please keep your eye on the time. I call Chris Law.
It is a pleasure to serve under your chairmanship, Mrs Moon. I commend my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) for securing this important debate. Scotch whisky, as we know, is one of Scotland’s most recognisable, ubiquitous exports. We have heard a lot today about its valuable contribution, including to the Exchequer, to which I will turn at the end of my speech. It is also enshrined in our history, art, culture and science. In fact, the late Alexander Fleming, who discovered penicillin, gave the very scientific advice:
“A good gulp of hot whisky at bedtime—it’s not very scientific, but it helps.”
I want to turn my attention to the innovation, research and development that are vital to ensure that Scotland’s journey in the industry is a continuing success story. I will do that by sharing with hon. Members the stories of two local companies close to my constituency of Dundee, one of which is not known for producing whisky. They are indicative of the wider needs and aspirations of our industry, and they assist in leading the way to future progress.
One of the companies is just over the water from Dundee, in the county of Fife. The Eden Mill brewery and distillery is a small craft company that faces the same almost insurmountable challenges as many others starting out in whisky distillation. Eden Mill is the first of its kind in Scotland. In a few years, it has gone from one employee to 40 employees. It has a turnover of between £3.5 million and £4.5 million this year, and more than 15,000 people from more than 30 countries have visited it. Those are all the hallmarks of having great success ahead.
What makes the company unique, however, is its approach to making whisky. It is estimated that the average cost of starting up an independent craft whisky distillery is £10 million. In order to begin laying down casks for whisky production, it began with the production of beer and now has its beers stocked nationally by Tesco, Sainsbury’s, Whole Foods Market and Aldi. In addition, it produces more than a dozen gins with a range of flavours. As we know, gin takes a much shorter time to produce than whisky and can generate much-needed cash flow while whisky, which takes more than three years to mature at a minimum, comes slowly to fruition. A little-known fact is that 70% of the gin produced in the UK is from Scotland, and the UK is the world’s largest gin exporter.
Eden Mill’s innovate business model has helped to at least stem the loss-making years of whisky production to some degree and has allowed affordable investment in whisky being laid down for future sale upon maturation. Small distilleries such as Eden Mill also add enormous value to local economies as tourist destinations, and they bring local sourcing of ingredients and high employment per litre of whisky produced compared with big distilleries.
I asked Paul Miller, one of the co-founders of Eden Mill, what more could be done to help grow our industry and whether there was value to his company in a duty reduction, for example. He said that in simple terms, duty and VAT were expected to be between £390,000 and £500,000 in the current year. A 2% reduction, for example, which I fully support, would allow Paul to create another job for a trainee distiller.
However, Paul added that the real opportunity could come from creating an environment for small, growing businesses to mirror the benefits that stimulated craft brewing back in 2001-02, when the sliding-scale tax on small breweries was introduced. That encouraged authentic small breweries to grow and was the catalyst for an entire industry. Paul pointed out that the US bourbon trail was a great example of such a move. The UK Government should focus their efforts on the impact of the limiting volume written into the EU derogated power. Changing that would be a major prize, a point not lost on those of us who point out the valuable contribution that Scotland and the rest of the UK make by being part of the European Union and not sitting on the sidelines, as we would in the event of an EU exit. The UK should focus on that now, while it is seeking a better position within Europe. If that happened, Eden Mill could reinvest more than £175,000 per annum in better infrastructure and a retail experience for visitors, and could ultimately create a better global brand. Imagine what that could do for the other 111 distilleries.
At the other end of production, but no less important, is my other neighbour, the James Hutton Institute, a world-leading scientific research organisation that is working to provide solutions to global challenges in food, energy and water security. As I speak, the James Hutton Institute and Dundee University have launched a campaign to set up the international barley hub, which will be the world’s leading centre for research into barley and its potential in a future where demands are ever increasing owing to production, reduced chemical use and climate change. Without vital support there are dangers ahead for our Scotch whisky industry.
The cost of developing and building the hub is £36 million, and it will create 3,400 highly skilled jobs and add £700 million in economic value. It will be financially sustainable by year seven. Let us not forget that 20% of our food and drink exports depend on that research. Increased exports of our precious whisky and greater consistency of barley for the whisky industry will be just two key benefits. Doing nothing, however, would mean the UK no longer leading in barley research. As researchers naturally follow investment, that would lead to a downward spiral in capability and viability. To return to the point that my hon. Friend the Member for Argyll and Bute made about £135 being generated per second, the Treasury could have the future of our research into barley, the essential ingredient in our dram, bought and paid for in less than three days.
There is no doubt that innovation, investment and a careful eye on the future of our industry have to be paramount. I make this simple plea to the UK Government: if the Chancellor is serious about expanding exports threefold by 2020, investment and a large pinch of serious industry advice from companies such as I have mentioned will go some way towards that. Doing nothing is simply not acceptable or desirable, especially given the world’s desire for our liquid gold. To reiterate the point that my hon. Friend made, the American writer Mark Twain was undoubtedly correct when he said:
“Too much of anything is bad, but too much good whiskey is barely enough.”
It is always a pleasure to serve under your chairship, Mrs Moon. I thank my very close hon. Friend the Member for Argyll and Bute (Brendan O'Hara), who has a neighbouring constituency, for securing this debate.
I have a long association with whisky, and not just as a drinker. In 1992, I was elected to the then Clydebank District Council for ward 3, Mountblow. The district of Mountblow is home to one of Scotland’s most lowland malts and the only triple distilled whisky; it has been producing the uisge beatha for nearly 200 years. The Auchentoshan distillery is found in the foothills of the Kilpatricks, in the old Auchentoshan estate. I was honoured to represent the area in 1992, and I am delighted and honoured to do so in this House as we debate the impact of whisky on the economy. For the record, that is “whisky”, without an e—that is just a note for Hansard.
In recent times my constituency has mourned the passing of Littlemill, which was dismantled in 1997, although thankfully its production was taken up by the vibrant Loch Lomond distillery, which produces Captain Haddock’s favourite tipple in Hergé’s “Tintin”—a truly European product. Whisky is a global product that will not be assisted by Members who favour Brexit. Loch Lomond marks the boundary between the lowlands and highlands of Scotland and has been at the heart of whisky production for centuries. Sadly, at least nine distilleries around the loch have been lost over the years, leaving Loch Lomond distillery to maintain the proud local tradition at that end of my constituency.
Auchentoshan is a true urban whisky, with an economic and social reach across my entire constituency and beyond. As hon. Members have said, that reach includes bottling, marketing, tourism, sales, printing, malt production and glass production. Each year the distillery of Auchentoshan alone uses 2,500 tonnes of malt, 12.7 tonnes of yeast and 12 million gallons of Scotland’s finest water drawn from the Kilpatricks, with more than 1 million litres of pure alcohol. That is bottled as five expressions of Auchentoshan, including my personal favourite, American Wood. In addition, it has produced its exceptional eight limited editions.
Auchentoshan and Loch Lomond distilleries play their part in supporting national production with 40,000 jobs, of which 10,800 are directly in the industry, and supplying salaries worth £1.4 billion to UK workers. I call on the Minister and the Government to play their part in supporting them. The average-priced bottle of Scotch whisky is subject to 76% tax, and there is no doubt that that is bad for business, bad for the industry and bad for consumers. I am sure the Minister will at least agree that a 2% cut in duty on whisky in this year’s Budget would be a welcome relief to the economy and a win-win for everyone.
The case for that is self-evident. From 2015 to January 2016, following the 2% cut in last year’s Budget, duty receipts from spirits went up by £102 million compared with the same period the previous year. Spirits were the driver behind a £190 million increase in alcohol revenue, which was of huge benefit to the economy. The evidence is clear. The UK Government’s rate of 76% on Scotch whisky is the fourth highest rate in Europe, and UK consumers currently pay 25% of all European Union spirit duties—more than consumers in Spain, Italy and Poland combined. It seems that at least in this case, the only drawback to being part of the European Union is the UK Government’s self-made taxation rates on spirits. Although Scotch whisky enjoys widespread popularity, a further cut in duty would be a welcome move for a product that remains one of the most highly taxed in the world.
Investment in new distilleries and production at established sites is unprecedented. Those new distilleries need a home market that encourages growth and long-term investment. Support for the industry through a further cut in excise duty would help and support that.
One last challenge remains. Some whisky producers have a local GDP equal to that of small nations. That could and should be challenged through our Community Empowerment (Scotland) Bill. It is my hope that one day whisky production will act as a catalyst for local community ownership, with broader local production being in the hands of the communities of Scotland.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Argyll and Bute (Brendan O'Hara) on securing this important debate.
I confess that uisge beatha, the water of life, would not have been my drink of choice in the past, but I have joined the all-party group on Scotch whisky. When I asked at one of the first meetings whether whisky was still mainly drunk by men, I was informed that some of the world’s most renowned tasters are in fact women, so I decided to do my bit for the industry and embark on some personal research. Since then, I have been practising. Hon. Members will be pleased to know that my taste for whisky is developing quite well, although it will no doubt cause a stramash among my colleagues to hear that I enjoy it quite a lot with Coke.
We have heard about the producers and the supply chain. A major employer in Drumchapel in my constituency is the Edrington whisky bottling plant, which bottles Macallan, Highland Park and the Famous Grouse, among others. The origins of the company stretch back to its 19th-century foundation by William Robertson in Glasgow. In the 1960s, Sir William Robertson’s sisters transferred their ownership of Edrington to the newly formed Robertson Trust and insisted that a percentage of the profits should go to good causes—a practice that continues to this day. Many worthy causes throughout the UK have benefited from grants from the trust.
I had the pleasure of visiting the Edrington bottling plant last summer, where the chief executive, Ian Curle, voiced some of the industry’s concerns regarding levels of duty. Although the debate is about whisky, other small producers would benefit from a reduction in duty. Along with my recent work on whisky, I had the pleasure of tasting a new local product, the Makar Glasgow gin, which is only two years old and would really be able to increase its outreach with a change in duty.
New whisky producers have come to the market, but how many more would there be if there were a more realistic taxation level? When we call for a reduction in the ridiculously high duty of 76%, it is about more than just finance. It is about our ambition for this key Scottish industry. Although I was told recently that to dilute my whisky with a mixer was an affront, I would argue that the real affront is the level of duty placed on whisky, which is stunting the growth of the industry in Scotland.
It is a pleasure to serve under your chairship, Mrs Moon. Hon. Members might wonder what on earth my link with whisky is, as the Member for Edinburgh West. Well, here you go. BenRiach Distillery Company, which is in fact based in Speyside, was built by John Duff in 1898. The hon. Member for Argyll and Bute (Brendan O’Hara) will note that that was 10 years after the formation of Celtic football club. The distillery features a traditional floor and pagoda-style chimneys. It was a global whisky distiller of the year in 2015 and, more importantly, its head office is located in Edinburgh West.
Few people consider the wider picture around the supply chain. Bottlers, glass makers, ceramics, cereals, transport, energy suppliers, tourism and retailers all add value. There are spin-off businesses, such as Celtic Renewables, which makes biofuel capable of fuelling cars with the by-products of whisky production.
We have talked about the value of the industry to the economy of Scotland and the UK, and about the increase in the tax take with the tax cut in March 2015. I agree with what I suspect the Minister will say, which is that it is difficult to prove the so-called causality. However, from a business perspective, I believe that the tax cut gave businesses the confidence to invest. We cannot assume that a year-on-year tax cut will always result in this outcome, but we can reflect on the fundamental fairness of how the industry is treated compared with others, such as beer. The tax cut is also to be welcomed as we have seen a reverse in the trend of declining home figures.
There are new distilleries in Annandale, Arbikie, Ardnamurchan, Ballindalloch, Dalmunach, Eden Mill, Glasgow, Isle of Harris, and Kingsbarns—now, I would like the Minister to repeat those backwards, if he can. In fact, the finance director of the Glasgow Distillery is an old colleague of mine from the independence referendum. The new distilleries will initially focus on gin but, critically, we must emphasise the point about capital investments. It is about the creation of jobs and infrastructure. As I mentioned, the supply chain is of value to the wider economy, particularly to rural economies.
I am a member of the Select Committee on Business, Innovation and Skills, in which I recently questioned Ian Wright of the Food and Drink Federation. If the contribution of Scotch whisky to UK exports was underappreciated, he highlighted that the UK Government fail to appreciate the value of consumer goods in general and said that there needs to be a change of mindset on the issue. I agree with that.
Significant value is to be derived from increasing exports, especially looking at the massive potential of the emerging middle classes in the likes of India. The Scotch Whisky Association argues that taxing until the pips squeak sets a precedent for overseas markets. Indeed, Scotch faces a tariff of 150% in India. In reality, the economic picture is considerably more complex, with individual economies making decisions based on support for their own producers, not just on their perception of the high quality of Scotch, but the point is worthy of reflection.
I am concerned about a potential British withdrawal from Europe because barriers to trade are considered unhelpful by industry. We should go for a trade agreement in India and stay in Europe; we can have both.
On a more serious note, my last point is about Scotland the brand, which whisky most encapsulates. There have been a number of attempts today to bottle the essence of Scotland the brand. The brand is shaped by authenticity and personality, and that cannot be truer than of Scotch whisky. Brand has equity, and we mentioned that when we talked about the small gin distilleries. Brand is the recognition and embodiment of key values, pleasures, value and perception, but it faces competition and we must ensure that the industry can compete.
I leave hon. Members with two brief thoughts about whisky. The first is from my personal favourite, Tommy Cooper:
“I’m on a whisky diet. I’ve lost three days already.”
And, finally, “Alcohol is your trouble,” said the judge to the drunk. “Alcohol alone is responsible for your present predicament.” The drunk looked pleased as he said, “Thank you, judge. Everyone else says it’s my fault!”
It is a pleasure to serve under your chairmanship, Mrs Moon, and it is a pleasure, as always, to debate opposite the Exchequer Secretary to the Treasury. I congratulate the hon. Member for Argyll and Bute (Brendan O’Hara) on securing the debate. In his opening speech, he eloquently explained why the Scotch whisky industry is so important to the Scottish and UK economies and why his constituency is the centre of the whisky universe.
I thank hon. Members for taking part in the debate, which I have really enjoyed. I feel as if I have had a bit of a history lesson. A few points that I was not aware of before include: that Talisker was Robert Louis Stevenson’s favourite drink; that Arran has the purest water in Scotland; and that Alexander Fleming’s advice was to drink whisky, which I now take as medical advice. Other fantastic things have been mentioned but I will not go into detail because we are pushed for time.
There was a consensus across all contributions that, beyond doubt, the Scottish whisky industry contributes significantly to the UK economy. A number of hon. Members raised points about excise duty. Of course, we all look forward to hearing what the Chancellor has to say about that next week and whether the Minister is willing to leak any information on that.
The Scotch Whisky Association, which supplied a very useful briefing in preparation for the debate, estimates that the industry added more than £3.3 billion directly to the UK economy and more than £5 billion indirectly in 2014. That makes the Scotch whisky industry arguably larger than the UK’s iron, steel, shipbuilding and computer industries, and about half the size of the UK’s pharmaceutical and aerospace industries in terms of gross value added. It is important to note that the industry just keeps growing. The 2014 figures mark an increase of 1.6% on the previous year’s estimates of GVA.
The contribution of the industry is equally impressive when one considers the number of people it employs. In Scotland, 10,800 people are directly employed in the industry, with salaries totalling almost £530 million. Across the whole of the UK, both directly and indirectly, the association estimates that 40,000 jobs are supported. Any industry that provides employment to so many should indeed be recognised as an important UK industry.
Nor is that significant only in Scotland. The impact on the wider UK supply chain is also important, as we have heard in many of the speeches today. Of the nearly £2 billion spent by the industry, 90% remains within the UK. The latest input-output data published by the Scottish Government, and industry estimates, show that about three quarters of the goods and services purchased outside Scotland are sourced from the rest of the UK, and that they are worth about £330 million to the suppliers. That is particularly significant in relation to capital expenditure worth about £140 million, much of it on items such as machinery and vehicles that support the wider industry.
Constituencies such as mine, with its history of manufacturing and other traditional industry, stand to benefit from the Scotch whisky trade, despite our distance from Scotland. We have heard Yorkshire’s point of view in the debate, and I think there is agreement on that point. Greater Manchester has a longstanding and proud brewing and distilling sector of its own—not to mention a blossoming boutique sector, in which I am becoming an expert. Whisky distilling, along with much of the drinks sector, is effectively a manufacturing industry itself, and the debate should be set within the wider one about the need for an industrial strategy.
One of Scotch whisky’s distinctions is that it is famous the world over, and is one of the largest contributors to UK exports. Scotch whisky exports were worth £3.9 billion in 2014—1.4% of total UK exports. That represents 80% of Scotland’s and 25% of the UK’s total food and drink exports. Scotch whisky’s trade surplus is the second highest for any goods exported from the UK, and it has been estimated that the UK’s overall trade deficit would be 16% higher without Scotch whisky exports. I think that that fact has also been alluded to today. However, it must be noted that, while the £3.9 billion is significant, that figure marked a decline of 7%—the largest since 1998.
It has been suggested by commentators that that fall in exports might be due to the political and economic situation in export markets. For example, David Frost, the Scotch Whisky Association’s chief executive, suggested that
“economic and political factors in some important markets held back exports in 2014 after a decade of strong growth”.
Similarly, the drinks analyst at the market intelligence firm Euromonitor has highlighted the fact that the
“fall in exports to Singapore was linked to Beijing’s clampdown on gift-giving”,
noting that direct exports to China fell by 23% to £39 million. He also said that Scotch was losing out to types of whisky like US bourbon, which are targeted at a younger market. Political volatility in Russia and Ukraine is also reported to be having an effect on exports of Scotch
“with the value of direct sales there down 95% from £25 million to £2 million in a single year”.
In that context, we would be interested to hear from the Minister what steps the Government are taking to ensure that our key export industries are able to cope with volatilities in the global market. What help are they giving the industry in its ambassadorial role abroad? For example, DEFRA’s Great British food unit was created to promote British food and drink—such as Yorkshire Tea, the hon. Member for Brigg and Goole (Andrew Percy) will be pleased to hear—across the world. Could the Minister confirm whether Scotch whisky is currently included in the Great British food unit and, if so, how the initiative has helped the industry?
It is important to highlight the wider context of UK manufacturing. Frankly, I am concerned that this Government’s industrial strategy is inadequate across the board, as the problems with the steel industry have illustrated all too starkly. That is why we have been calling for a proper industrial strategy, in the context of a wider economic policy focused on investment, not cuts. Scotch whisky is one industry that by its nature cannot be outsourced abroad but, in other ways, it will face many of the same challenges as we see across the UK in other manufacturing sectors.
The last time the Scotch whisky industry was discussed in Westminster Hall, the then Economic Secretary to the Treasury, now the Education Secretary, stated that Her Majesty’s Revenue and Customs would
“shortly be launching its spirit drinks verification scheme.”—[Official Report, 8 January 2014; Vol. 573, c. 138WH.]
The scheme was designed to preserve the industry’s reputation by requiring every business involved in the production of Scotch whisky to be verified as producing a genuine product. The introduction of the scheme was broadly welcomed at the time, but it might be useful for the Government to provide an update on its operation to date. Is the Minister satisfied that it has been implemented in full?
The UK should be proud of the Scotch whisky industry, which contributes enormously to employment and boosts UK exports at a time when the trade deficit remains large. I therefore hope that the Minister can respond to the issues that I and other hon. Members have raised, so that we can continue to back this important global industry.
I am delighted to get to sum up last. I know that my party likes to claim that we are the official Opposition—but I like this new order in Westminster Hall.
It is rare to have the opportunity to sum up with such a good-looking group of MPs. I do not know whether it is to do with the balance in the Chamber. The hon. Members for Salford and Eccles (Rebecca Long Bailey) and for Brigg and Goole (Andrew Percy) are very welcome to join the Celtic brotherhood—and the Minister too. [Interruption.] He has Celtic connections.
We have heard the benefit of an upbringing and affinity with the product we have been talking about, in the amazing lyrical literary references throughout the speeches.
I have another one. Does my hon. Friend agree with the great Norman MacCaig? I was sitting one time in Sandy Bell’s and said “Norman, would you like another dram?” and he said, “Roger, my family motto is ‘Excess is not enough.’”
I thank my hon. Friend for that wonderful intervention. He is here all night, ladies and gentlemen.
It feels slightly superfluous to sum up in this debate; I do not know if anyone has not figured out by now, whether in the Public Gallery or anywhere in the Chamber, that Scotch whisky adds £5 billion to the UK economy. They should do a test, just to see. It has been repeated so much.
I look forward to hearing what is clearly going to be an excellent summation of the debate from my hon. Friend.
On the point about investment, will my hon. Friend join me in welcoming the massive investment by Diageo in Scotland, particularly in my constituency, where there has been an investment of £10 million in a state-of-the-art cooperage, and £80 million in a new filling store, at Cambus; £30 million in a new warehouse at Blackgrange Bond; and £1.5 million to expand and upgrade the Diageo global archive? I encourage all Members to come and visit if they have not already done so.
I thank my hon. Friend for that wonderful intervention—and Diageo thanks her too. I agree that it plays a huge role in our industry—but a positive and constructive one—and is part of the success story.
As well as the £5 billion value that I mentioned, the trade deficit would be 11% higher without Scotch whisky; and there are 40,000 jobs. Every job supports a further 2.7 jobs in the broader economy. One point of particular importance, which has come up in a number of debates—not least in contributions by my hon. Friend the Member for Argyll and Bute (Brendan O'Hara)—is the importance of the industry to the rural economy, where there are fragile economies that people are leaving and where depopulation is a challenge. The industry is a success story in the rural economy.
Turnover in the industry has increased by 27% since 2008, and employment is up 6%. Salaries have risen too. Another challenge in the rural economy is low pay, but salaries in the Scotch whisky industry have risen by 12% and now average £47,000 a year. That is a great track record, and it demonstrates how important the industry is to our economy and country.
Whisky may be our national drink, but it is not a homogenous product, and as my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) outlined—when he used the words “alluring” and “full-bodied” I thought he was talking about himself, but it turned out he was talking about one of the whiskies in his region—our malts are highly regional and wonderfully varied. Each area produces its own highly distinctive variations. It is sacrilegious to put Coca-Cola in them, though, and I fear that my hon. Friend the Member for Glasgow North West (Carol Monaghan) has done herself immense damage by what she said. Clearly, she is but a novice, and there is time yet. Perhaps the hon. Member for Brigg and Goole can help there, because he does frequent the bars, I am told. I think the different characteristics are what make Scotch whisky such a wonderful success story. I am with my hon. Friend the Member for Argyll and Bute in that Islay malts are my favourite. Their peaty, smoky nature is just fantastic.
One region of Scotland does not have a distillery at present. As my hon. Friend said, the last time whisky was produced in the borders, legally at least, was in 1837, but times are changing. It shows the success that can be harnessed in all the regions of our country that no fewer than three distilleries are currently planned in the Scottish borders, most of which I represent. R&B Distillers is looking at a site in Peebles, and the Three Stills Company has a £10 million project for a fantastic distillery in the centre of the wonderful town of Hawick. Last week, I visited a new site just outside Jedburgh operated by Mossburn Distillers, which has fantastic and ambitious plans for new distilleries on the site. I witnessed the full scale of its ambition and how significant the operations could be. Taken together, the companies could invest £50 million in the borders economy and create more than 100 jobs. In the borders, the distilleries will of course reflect the history and landscape of the region, as well as making use of our fantastic borders barley and pure water. Indeed, Mossburn is considering names such as “the Borderer” and “the Teviot” for its whiskies. [Interruption.] It is a river.
It is not the Humber.
Thankfully not. Those wonderful titles pay tribute to the region’s rich heritage and will help to promote us as the whiskies are sold across the world. Of course, I am sure the distilleries will produce lighter, lowland-style whiskies, and I am sure I am not the only one looking forward to tasting them—they cannot come soon enough, but we will have to wait.
The companies behind the new borders distilleries are certainly entrepreneurial, and they have plans, beyond traditional distilleries, to produce other spirits, including gin. The sites have the potential to be highly popular attractions in their own right, and the visitor centres look fantastic. If I had £1 for every person who has offered to be a taster, particularly at the Hawick distillery’s gin lab, where people can make their own gin, I would be a rich man. I am taking names if anyone here wants to sign up. The sites will be fantastic tourist operations.
I visited Springbank in Campbelltown with a number of friends, and I was struck by the number of people who were there because of the distillery. I met one group from Sweden who had matching blazers, and another group from America had whisky-tasting ties. I am not suggesting that we all had to get into uniform, but it reinforced the huge way in which a distillery puts a town on the map, raises its profile globally, brings more investment and creates more jobs than just those directly involved in the distillery.
I congratulate Speyside Distillers in my constituency. Founded in 1770, it has just secured a £2.3 million funding package to help it grow its market in the far east. Does my hon. Friend agree that the Chancellor should seriously consider duty reduction in next week’s Budget so that all distillers can expand, grow and contribute to the UK economy?
I agree with my hon. Friend. If the Minister has missed that point, why not reinforce it? I am sure he agrees with us. I notice a lot of nodding, and I am sure it is in agreement that the reduction should be at least 2%.
This is a hugely exciting situation, as is reflected in the energy and enthusiasm of the Members gathered here. Our export market is strong, and the hon. Member for Edinburgh West (Michelle Thomson) mentioned something that I wanted to highlight, too. The planned distillery in Hawick mentioned the duty in India. If we raise 76% in our own country, it puts us in a difficult position to argue for reduced duty elsewhere. Clearly, the Indian situation of 150% is unacceptable. I will be interested to hear the Minister’s comments on what we are doing about that.
We should also remember that the UK domestic market is the third biggest market by volume, with only France and the USA selling more. It still accounts for seven times more sales than China, so its importance to our producers is clear. We have already heard the case, so I will not reiterate how reducing duty is a win-win situation. By reducing duty, although there is not necessarily causality—good word—we might raise more money in total.
People often use the word “iconic” about whisky. I prefer to describe it another way. Whisky is literally the spirit of Scotland. It embraces all the very best aspects of our history and culture, and it is both romantic and emblematic. It uses our finest national ingredients and has strong green credentials. Of course, it is a product of very high quality and reputation. Just as the money it earns helps to bind together the UK economy, so its character and the joys of its depth and warmth bind Scots together as people. Whisky is one of Scotland’s great products and great successes. Now we need the Government to celebrate that success, to build on it and to work with the industry to grow this fantastic drink’s reach and prosperity. I urge the Minister to take that message away today. If he can secure the backing of his colleagues in Government, I am sure that is something to which we would all raise a glass.
It is a great pleasure to see you in the Chair, Mrs Moon. I congratulate the hon. Member for Argyll and Bute (Brendan O'Hara) on securing this important debate. I have sometimes wondered what it is like to be at the Scottish National party conference, and I need wonder no longer. I commend all colleagues, from the SNP and from the Conservative and Labour parties, for being here for this debate. I welcome all the contributions, including from the SNP spokesman, the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr), fresh from his unexpected starring role at today’s Prime Minister’s questions—he was “Callum”. [Interruption.] I recall all his colleagues pointing at him. I also welcome the contribution of the hon. Member for Salford and Eccles (Rebecca Long Bailey), who as always made a thoughtful speech and some good points. During my remarks I will return to the points that have been raised.
This has been a good debate, which made me thirsty more than once, particularly when the hon. Member for North Ayrshire and Arran (Patricia Gibson) was speaking—and that was just when she was describing the water. Even the most enthusiastic champions of the spirits industry would stop short of calling whisky a daily necessity. [Interruption.] I may stand corrected but, according to the Wine and Spirit Trade Association, just over half of UK adults, the equivalent of 26 million people, drink spirits. Aside from that, the whisky industry makes a hard and important economic contribution to the UK economy. Every second, whisky exports earn this country £125—we will not quibble over £125 or £135. Scotch is solely responsible for a quarter of all UK food and drink exports. With Scotch present in some 200 markets worldwide, there is a good case to be made for calling it our most widely consumed export. Leading markets for Scotch whisky exports include France, the US and Spain. In Spain, exports increased by nearly 8% in volume between January and June 2015.
On sales, France is the largest consumer of Scotch whisky by volume. Does the Minister agree with SNP Members that a Brexit would be both fundamentally difficult for the Scotch Whisky Association and would limit its ability because further trade agreements would be required for that volume of sales to continue?
The hon. Gentleman anticipates some of my later points. If he will forgive me, I will delay my response until then.
One of my favourite whisky-related export stats comes from Japan. It will be a matter of equal sadness and joy to the hon. Member for Argyll and Bute that, scandalously, the best whisky of 2015 award was won by a Japanese brand but that Japan increased the volume of its imports of Scotch whisky by 23% between January and June 2015. Clearly the consumers of Japan have very good taste. We should also acknowledge the wider British spirits industry. I am pleased to say that the main trade association reported that 140 million bottles of British gin are exported to foreign markets, which works out as a 37% increase in five years.
It is also important to bear in mind the very positive effects that the Scotch whisky industry has on employment; many hon. Members have already alluded to those effects. The Scotch Whisky Association estimates that the industry already supports over 40,000 jobs, including—importantly—7,000 in the rural economy. Of course, distilleries remain a key source of jobs in the Scottish rural economy, and are strongly aligned with wider tourism activities. Also, as we have already heard this afternoon, every job in the Scotch whisky industry supports 2.7 further jobs in the broader economy, and some of that benefit is spread throughout the UK.
In the constituency of the hon. Member for Argyll and Bute, Scotch whisky is definitely a traditional industry that remains a critical part of its heritage. A total of 14 distilleries are in operation in the constituency, including Bowmore, Ardbeg, Kilchoman, Glengyle, Springbank, Glen Scotia, Tobermory and Oban, and a few others that are less obviously uni-phonetical, so I hope that he will forgive me if I stop there. It goes without saying that we want to continue and wholeheartedly support this Great British success story.
Over recent weeks, I have had the opportunity to meet the hon. Gentleman and some of his colleagues who are sitting with him today in the all-party group on Scotch whisky, as well as representatives from the SWA, and the Wine and Spirit Trade Association, among others. I have taken on board the confidence that they have about the continued success of their industry, and I assure the hon. Gentleman that we are united in wanting to help the industry go from strength to strength.
Of course, it was precisely for that reason that my right hon. Friend the Chancellor announced in the Budget of March 2015 only the fourth duty cut in spirits history, the previous one having been in 1996. I strongly supported that decision. Since then, the trend in whisky production has been notable. Between 2014 and 2015, the volume of whisky cleared for sale in the UK increased by 2%. Increasing confidence from the Budget 2014 duty freeze, combined with demand for exports, has contributed to this significant turnaround from the decline in production that the industry had experienced between 2010 and 2014.
The encouraging news continues with the developing trend in small distilleries entering the market. From 2014, seven new whisky distilleries have opened, taking the total number of Scotch whisky distillers to 117. In addition, it is planned that a further 30 to 40 distilleries will enter the market in the coming years, which is a good thing for investment and jobs in Scotland.
I am pleased that the Scotch whisky industry remains dynamic. As has been mentioned, the £1.7 billion investment in its supply chain has helped to meet the demand from overseas markets, and supported jobs over the long term, which is particularly significant for our rural economies.
How can we as a Government continue to support the industry over the coming years? Hon. Members know that next week my right hon. Friend the Chancellor will deliver his Budget in the Chamber, and the hon. Member for Argyll and Bute and his colleagues know that it would clearly be wrong for me to anticipate that in any way whatsoever.
However, it is important to maintain our efforts in two particular areas. The first is the export market. Nine out of every 10 bottles of Scotch whisky sold are sold overseas, and I must remind hon. Members that, on that volume, no UK duty is paid. The hon. Member for Salford and Eccles rightly asked what export support could be given to continue the growth of this important industry. Through the efforts of UK Trade & Investment, we have seen some very strong success stories, all contributing to the 90% growth in exports that the Scotch whisky industry enjoyed between 2004 and 2014. Each second, 40 bottles of whisky are shipped overseas.
We have increased the budget and the remit of UKTI so that it can continue and even extend its promotion of British products worldwide and, importantly, negotiate with export markets for the right regulatory regime, to help people enjoy their dram wherever they may be in the world.
Distillers can now supply their product in countries including India, which can further open the door to other countries. Although Scotch whisky’s share of total spirits volume in India is only around 1%, the SWA expects that that would increase to 5% if there was full and fair market access. The UK supports a broad and ambitious free trade agreement with India. However, there are outstanding issues, including on spirits, that need to be addressed.
The Government are keen to restart negotiations on the free trade agreement and have made the case for that to the European Commission and in bilateral engagement with India. I am sure that most hon. Members here will agree that, as was mentioned earlier, in this endeavour we are better equipped as part of the world’s largest single market than we would be alone, even if my hon. Friend the Member for Brigg and Goole—and Saskatchewan—(Andrew Percy) may only agree with that comment for half the debate. He also reminded us of the importance and the number of other potential export growth markets around the world, including Canada.
Opening up more export markets is just one part of the Scotch whisky success story, and I hope that we see much more success in the coming years, as our expanded UKTI teams continue to make the case for Scotch whisky.
The second area that the Government can support is a little more nebulous, and the hon. Member for Edinburgh West (Michelle Thomson) referred to it. I think of it as protecting and enhancing the quality mark of genuine Scotch provenance. Scotch whisky is clearly an iconic product for Scotland and the UK, but with iconic products comes the risk of poor-quality imitations. To protect the integrity and the high reputation of the brand of Scotch whisky worldwide, we launched the spirits verification scheme, which the hon. Member for Salford and Eccles mentioned. This scheme sets standards on production and labelling for producers to sign up to, helping to identify non-compliant products and counterfeits, and making sure that people who buy Scotch whisky get exactly that.
The geographical indication for Scotch whisky is now recognised in the laws of nearly 100 countries, including the whole of the European Union, which is another reason for there to be continued optimism in the industry and continued worldwide recognition for Scotch. But why limit consumers to what they recognise as Scotch whisky from the front of a bottle? The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned the tourism opportunities, and that point was echoed by a number of other colleagues.
Producers are offering tours of their distilleries, opening up a whole new way to connect with thirsty tourists who are keen to understand the traditional side of their whisky—the pride and the passion that go into every bottle of Scotch. According to the SWA, collaborative efforts by the industry and VisitScotland have contributed to more than 1.5 million visits over the last year, with visitors spending more than £50 million at distilleries.
The other aspect of protecting and enhancing the brand of Scotch whisky is, of course, the health issue. Let me be clear about this—Scotch whisky, like all drinks, is perfectly capable of being enjoyed responsibly, and of course it is also capable of being misused. However, this Government firmly believe that the irresponsible actions of some should not be a barrier to the vast majority of people who enjoy a drink responsibly. That is why we will continue to combine efforts with the industry to raise awareness of the need for responsible drinking.
The Scotch Whisky Action Fund is an excellent example of what the industry can do. It is entering its third year of a five-year programme and is delivering £500,000 of funding to support community-based projects that are aimed at reducing alcohol-related harm in Scotland. I am confident that we will continue to strike the right balance between enabling responsible enjoyment of a traditional product, and dissuading irresponsible and harmful behaviour.
Let me turn very briefly to a couple of the other points that were made in the debate. It is not a new development that different countries choose to tax alcoholic beverages differently. Of course, countries choose their tax system, including the balance between direct and indirect taxes, to reflect their needs. When setting duty rates, the Government have to consider the wider fiscal picture. Total revenue from alcohol duty in 2015 was £10.7 billion, with revenue from spirits contributing around 30% of that. Just to give some perspective, £10.7 billion is the same as the entire budget for the Home Office.
I do not know of any EU country that has full duty equivalence among alcoholic drinks. In this country, of course, a typical serving of 25 ml of spirits has lower duty than other typical servings of drinks, for example a pint of beer or 175 ml of wine. As I have already said, the majority of Scotch does not have duty applied to it as it is for export. As I am sure hon. Members appreciate, any and all announcements on duty rates are made in the Budget.
The contribution of Scotch whisky to the UK economy is not least due to the tireless work of distillers who put in the hours and, in this case, the years to produce such a high-quality product. We want the industry to continue to succeed, both domestically and in ever widening markets overseas, promoting Scotland and the UK, and creating jobs and growth. Our programme for Government is based on creating long-term growth and security, and a successful and strong Scotch whisky industry is an integral part of that.
I thank the hon. Member for Argyll and Bute once again for bringing this important subject to Westminster Hall for debate today.
I call Brendan O’Hara to speak again. I am afraid that you have only seconds left.
Thank you, Mrs Moon, for your excellent chairing.
In the moments that are left to me, I thank the Minister for his reply. Without putting any pressure on him, I hope and feel that we have in him a real champion for the Scotch whisky industry, which does so much for the economy.
As I said earlier, Scotch whisky is liquid sunshine, so let us not put a cloud unnecessarily in front of that sun, and let us also push the Chancellor for a cut in duty on whisky in next week’s Budget.
Question put and agreed to.
That this House has considered the contribution of the Scotch whisky industry to the UK economy.
Health and Safety Executive
[Andrew Percy in the Chair]
I beg to move,
That this House has considered the management of the Health and Safety Executive.
It is a pleasure to serve under your chairmanship, Mr Percy, in this debate, which aims to highlight serious concerns about the management, culture and practices of the Health and Safety Executive. The debate is built on the case of my constituent in West Lancashire, Linda Murray. She is a former Health and Safety Executive employee whose successful employment tribunal case highlights several issues, including a culture of bullying and the use of human resources practices to pursue personal vendettas; a culture of protection among senior managers; Health and Safety Executive staff providing misleading, disingenuous and even false information; reward instead of disciplinary action for inappropriate actions; the wasting of public resources without accountability; and the non-disclosure of information, amounting to secrecy, to hide failings.
It is not the first case in which I have been involved of senior executives in a public sector organisation creating a culture of bullying and fear using HR practices and disciplinary action to pursue individuals who would not bend to their will. It is not acceptable that those individuals can act in that manner as public servants. They are not running a family business with their own money: they operate in our name using taxpayers’ hard-earned money, and there should be greater scrutiny of their behaviour and consequences for inappropriate action.
On Wednesday 5 June 2013, Judge Reed, sitting at the Liverpool employment tribunal, confirmed that Linda Murray had been unfairly dismissed by the Health and Safety Executive on 18 July 2012. The hearing lasted only several hours before giving a verdict in favour of the former employee. Linda Murray was awarded the maximum statutory compensation of £85,000. That was in addition to the Health and Safety Executive’s legal fees, which were paid from the public purse. The bill ran into hundreds of thousands of pounds at a time when the organisation faced budget cuts and staff redundancies. It is unacceptable.
It is not only the monetary cost of the case that needs to be considered, but the personal and emotional cost paid by Linda Murray. Throughout the entire period she suffered stress-related ill health, requiring medication. She lost her financial security and her family suffered great distress. She had given 33 years’ service to the Health and Safety Executive. She was held in the highest regard by the HSE staff who worked for her, much as she was by the chemicals industry when she managed an operational inspection team in the north-west.
I appreciate that there is insufficient time in the debate to outline every detail of the case and the events leading to Linda Murray’s unfair dismissal, but I suggest that the Minister begins with the 200-page report compiled by Ian Travers and the findings of the employment tribunal for more details. Needless to say, if the whole situation had been handled differently it would not have been a major incident. Instead, it escalated out of control.
To allow time for a post to be found for her, Linda approached HR about returning to her substantive grade 7 post six months prior to the conclusion of her temporary promotion as an interim grade 5 inspector. Mr Peter Baker was the senior manager tasked with finding that post. There was considerable uncertainty as people took voluntary redundancy—an option that Linda Murray did not want and could not afford. Time passed with no post being offered. Linda found the process upsetting. The general uncertainty was allied to her senior manager’s indifferent and sometimes hostile attitude towards her. In the end, she was given a position that amounted to a demotion, although she was told that it was a grade 7 post.
The whole episode led to a tense meeting between her and Mr Baker. Previously, Mrs Murray had provided challenge to and constructive criticism of Mr Baker. She expressed concerns about how decisions were being taken and the negative impact on her staff and the job they were employed to do. Following the meeting, Mrs Murray received notification of disciplinary action being taken against her. That resulted in a written warning, which was successfully appealed. The main grounds for the success of that appeal were that Peter Baker could not investigate the alleged misconduct when he was the sole person against whom the misconduct had allegedly been perpetrated.
Despite the appeal, Health and Safety Executive senior managers decided to run the disciplinary action again, and a senior crony then reinstated the written warning. A second separate investigation into Linda Murray was then pursued by senior managers, and that can be traced back to the period of her interim promotion. An underperforming staff member was put on her team, but no one told her about the performance issues. It reached a point where Mrs Murray and the staff member agreed that they could not work together. He was transferred to Mr Ian Travers’ team. Despite the transfer, the staff member continued to treat Mrs Murray with a great deal of contempt and disrespect. She requested that the staff member’s line manager, Mr Williams, speak to the person about their conduct, which he failed to do.
The acrimonious nature of a meeting between Mr Williams and Linda led to Linda being asked to meet with Ian Travers. Instead of dealing with the behaviour and conduct of the underperforming staff member, the two managers sought to deal with Linda Murray, claiming that she was bullying that member of staff. That led to Linda being forced off work with stress, and that situation was compounded by the hostility with which she was met by Ian Travers at her return to work interview. A suspension for 10 and a half weeks for insubordination was the outcome of that meeting. An example of that insubordination was asking for HR to attend the meeting with her. A 200-page report was produced and a dismissal for gross misconduct was the outcome.
From the outset of her dismissal, Mrs Murray was denied any measure of fairness or justice. Prior to her disciplinary meeting, she was not provided with the 60 questions that she would be asked. Those questions were overly long and loaded. She was refused the opportunity to interview some of the key witnesses in the case and staff were told that they did not have to provide written statements to her. Lies were told within the organisation to justify the disciplinary action. It was reported to Mrs Murray by a former colleague that a rumour was circulating that she had assaulted Ian Travers. She was never afforded the opportunity to put her side of the story. Such a culture of fear existed within the organisation that people were not prepared to speak out for fear of losing their jobs. It seems coincidental that the only senior officer to stand up for Linda Murray, her ex-husband, was subsequently investigated and subjected to disciplinary proceedings.
Mrs Murray pursued her case to a tribunal, knowing that she had been hounded out of the Health and Safety Executive for personal, not performance reasons. She understood the grounds of her dismissal were erroneous and a complete fabrication. She is a well-educated woman with a law degree. She had one successful career and has gone on to build a second one, but she admits that going through the tribunal process nearly broke her. She was unable to afford a lawyer to represent her as she was on jobseeker’s allowance, she had no access to legal aid, and her trade union, Prospect, refused to support her case, siding instead with the management. Linda Murray had to defend herself against the HSE’s legal team, which was publicly funded. We paid for it.
In the end, an independent arbiter, Judge Reed, was the person who finally listened to Mrs Murray. Although she paid a very heavy price, no action has ever been taken against the individuals who pursued a personal vendetta, including Ian Travers, who initiated the investigation and who reacted in a fit of personal pique having had his management capabilities questioned; Alf Williams, who I understand is a personal friend as well as a colleague of Ian Travers, and whose evidence provided a major contribution to the investigation; Philip White, who led the deeply flawed and oppressive investigation and who was heavily criticised by the employment tribunal judge; Eddie Morland, who rubber-stamped the outcome of the investigation; David Snowball, the senior operations manager who oversaw the investigation in conjunction with Peter Baker, and who took the decision to elevate the issue to the head of human resources, who I understand is now deceased; and Gordon MacDonald, a very senior official in the HSE who was asked personally by Linda Murray to intervene, which he had the authority to do, but who failed to act, allowing Mrs Murray to endure a tortuous experience.
As an organisation, the HSE does not seem to have learned from the experience either. It has refused to acknowledge the outcome of the case and has failed to take any action to restore Linda Murray’s reputation. Specifically, it has failed to address the rumour of assault being the grounds for her dismissal. Will the Minister give a commitment that the permanent secretary for the Department for Work and Pensions will personally ensure that this matter is investigated? Can he assure me that a conclusion will be reached within six months and a report produced that Mrs Murray and I can access?
The record should be set straight and Mrs Murray should get an apology, but for the Minister there are much wider questions. How does this happen in the Government’s name—or any Government’s name? Why is no action taken to investigate malpractice when a tribunal judge finds so heavily against an organisation or Government Department? What can he do to limit and, indeed, stop bullying in the workplace? Should fit and proper person tests be applied to the misuse of power? Then there is the cry from the taxpayer: how much have these failures across public services cost the taxpayer? How much of that money would have been better directed into public services?
I have presented the case of a single person. In a couple of weeks there will be an even bigger report from the health service along similar lines. We cannot allow this behaviour to continue and I look to the Minister for assurances that it will be rooted out.
It is a pleasure to serve under your chairmanship, Mr Percy. I thank the hon. Member for West Lancashire (Rosie Cooper) for raising this serious issue and giving me the opportunity to provide a response as the Minister responsible for the Health and Safety Executive. Neither I nor the board or senior management of the HSE are happy to hear of any distress felt by any member of staff working at the HSE. It strives to be a good employer and knows that its highly skilled staff are its most important asset.
I hope that the hon. Lady appreciates that it would not be appropriate for me to discuss matters relating to the individual case she outlined. However, I acknowledge the strength of the points she put forward and what she asked of me as a Minister. I am meeting with the HSE’s senior team next week and shall bring this matter up. I want to investigate the case further, and I will also ask the senior team to meet the hon. Lady to discuss it. The hon. Lady has put a case on the record very powerfully and I have listened to it, and I give an absolute commitment to look into it further. I will try to do that as quickly as possible. I thank her for putting the case; it is a credit to her work on such matters. It is particularly important that she is asking whether this is just a specific case or a wider issue. We will certainly want to look into that.
It is always a pleasure to serve under your chairmanship, Mr Percy. I congratulate my hon. Friend the Member for West Lancashire (Rosie Cooper) on securing this debate and on the way she made her case. On the broader management of the HSE, can the Minister reassure me that while of course it has its advisory role, its enforcement role is equally important?
I absolutely agree with that point.
Because I cannot discuss specific cases here, I shall set out the wider issues relating to the work that the HSE is doing. Nevertheless, I have made a firm commitment to look at that serious case, and it should be investigated further.
Before the Minister deals with the generalities, may I say that there is a huge irony in the HSE being the subject of the comments I have made? Will he look at the overall picture, in which employees are bullied, but even when a case goes as far as a tribunal that finds in the employee’s favour, the system does not learn? The people who promulgate that behaviour are not held properly to account. The NHS has fit and proper person tests; what happens in other public services?
The hon. Lady’s point is absolutely understood, and we will take that forward.
The HSE lies at the heart of a globally respected regulatory system and has been a catalyst for positive change in organisations ranging from the smallest micro-businesses right up to global players that manage major hazard facilities. It has helped Great Britain develop one of the best health and safety records in the world, and fatalities, injuries and ill health have all substantially reduced since it was formed in 1975. The 2014 review reflected the high esteem in which the HSE is held. There was widespread support from stakeholders for the organisation and for the professionalism and technical expertise of its staff. I have genuinely seen that at first hand when I have spoken to businesses at events. The previous Government accepted the review’s recommendation of confirming the HSE’s operating model and its status as an arm’s length body.
Last week, the HSE launched a new strategy for the health and safety system in Great Britain, aimed at helping the country to work well. Almost a thousand people from hundreds of organisations attended seven roadshows in seven cities to develop the new strategy, with 7 million more being reached through social media. The six themes outlined during the engagement with stakeholders attracted strong support, and now the strategy is setting a positive new direction for health and safety across England, Scotland and Wales. It will help each nation to work well, protecting lives and livelihoods and helping Great Britain become more prosperous.
The strategy will help to ensure that we maintain our world-class health and safety record while maximising the wider benefits that the system can bring. Such achievements and the future ambition are made possible by the dedication, professionalism and specialist expertise of the HSE’s staff and management. I have personally visited the HSE laboratory in Buxton and seen for myself the energy and innovation of the people there. Their work is directly helping industry to improve health and safety, both here in the UK and abroad, where a number of international contracts have been secured to provide advice and support.
The HSE is part of the wider civil service and, as such, offers modern employment terms that compare favourably with other large organisations. In line with the rest of the civil service, it is aligning its human resources policies with new, modernised terms and conditions. Its HR policies reflect good practice and are consistent with what is expected of a well managed modern employer. It has excellent retention rates and turnover is low compared with similar organisations. Excluding retirement, only 3% of staff leave each year. There is a high degree of loyalty, pride and commitment, which I genuinely saw on that visit to Buxton. Many staff enjoy long careers with the HSE, giving the organisation an impressive corporate memory. The civil service people survey results show that the majority of its staff say they are proud to work for the executive and regard it as a great place to work where staff are treated fairly and with respect.
Like any ambitious organisation, it has identified areas for improvement. Over the past year, under the leadership of the new chief executive, Dr Richard Judge, and with the active support of the internal management board, the HSE has set itself a challenging agenda to invest in its people and capability. I will raise the subject of the debate with those people and ask for further work to be done.
As a result of the actions I have described, the HSE’s overall engagement score is improving. It rose by 10% on the previous survey. Although it is currently just below the civil service average, the HSE’s goal is to ensure sustained improvement and performance above the civil service average. The programme of action is designed to get the HSE into the best shape to deliver its responsibilities, not only to continue to improve an already effective health and safety system but to anticipate the future and embrace new ways of working. The programme will respond to feedback from staff, including through the annual people survey.
We are not complacent, and it is important that there is ongoing improvement. The senior leadership team’s priority is to improve staff engagement and address leadership and management at all levels. In line with the rest of the civil service, a clear statement of values and expectations for those in leadership roles has been launched, against which all managers will be measured as part of their appraisals. A key element of that ongoing work is a structured leadership and management development programme, with an initial focus on new managers. That programme will eventually be targeted at all managers, equipping them to lead the HSE through change and to manage group and individual performance confidently.
In the most recent people survey, the rating for inclusion and fair treatment stood at 71%. That figure is increasing. However, about 11% of staff reported that they had experienced bullying and harassment in the previous 12 months—slightly above the civil service average of 10%. The HSE has a robust bullying, harassment and discrimination policy, which has recently been revised with its trade unions. It takes seriously any reports of bullying, harassment or discrimination, and any such cases are investigated independently of the line management involved.
My experience of the HSE is that it is a modern, effective regulator with a diverse workforce. It has a well deserved reputation for professionalism, expertise and dedication. I have seen at first hand the energy and commitment of its people, including its leadership team, and I am confident that it recognises the importance of engaging and managing its workforce effectively and has clear plans for driving further improvement.
The HSE has helped Great Britain to develop one of the best health and safety records in the world. It has done so as a result of the expertise, professionalism and dedication of its staff, and its future success will depend on their ongoing support and commitment. Its leadership and management team recognise that and are committed to ongoing improvement. I am confident that they have a clear plan of action to make the HSE an even better organisation.
The matter that has been raised will be taken seriously, and we will investigate it further. Once again, I thank the hon. Member for West Lancashire for taking the time to highlight it to me and the senior management team. We will endeavour to do what we can.
Question put and agreed to.
UK Energy Market
I beg to move,
That this House has considered competition in the UK energy market.
It is a pleasure to serve under your chairmanship for the first time, Mr Percy. Energy prices and the challenges facing the energy market—perhaps the failure of the energy market—are issues that have vexed consecutive Governments for many years. The challenges we face in tackling the behaviour of the big six energy companies were most recently illustrated by the debacle of the Age UK-E.ON energy tariff. Age UK offered its customers a tariff with E.ON—one of the big six companies—which was not the best deal on the market and cost them many hundreds of pounds more than they needed to pay. That is an example of the big six energy companies’ behaviour. I have a good impression of Age UK from my engagement with both the local organisation in Suffolk and the national charity, which campaigns for the needs of older people. That tariff is an example of one of the big six energy companies behaving poorly and not offering good value for money for customers.
An important review of the energy market will be published tomorrow, so this debate is timely. It gives us an opportunity to talk about the challenges we face in developing a sustainable energy market that serves customers and looks after the most vulnerable—people on fixed incomes, people in social housing, older people and people who are in fuel poverty.
The energy sector faces three sometimes conflicting pressures, which we often call the “energy trilemma”. First, since the liberalisation of the domestic gas and electricity markets at about the turn of the century, energy customers have grown accustomed to relatively cheap energy. More recently—particularly since the recession —many households have struggled with energy bills and the cost of heating their homes due to increases in energy prices.
Secondly, the UK’s future energy requirements are an increasingly pressing challenge. The Department of Energy and Climate Change—the Minister may talk about this later—estimates that electricity capacity in the UK will need to grow in the long term, as demand is likely to increase by between 30% and 100% by 2050.
Thirdly, and rightly, the UK committed to reducing its greenhouse gas emissions by at least 80% by 2050 under the Climate Change Act 2008. That Act, which set out steps towards the decarbonisation of the British economy, was underpinned by cross-party support. When it was enacted in 2008, the right hon. Member for Doncaster North (Edward Miliband) was the Energy Secretary, and the Prime Minister, who was then the leader of the Opposition, gave the support of Her Majesty’s Opposition to that important measure.
In short, energy must become low carbon while remaining affordable to consumers and attractive to investment and investors. That is the energy trilemma. It has perhaps been made slightly less challenging in recent months by the fall in the global oil price and the lower fuel costs for many customers. Certainly, the cost of kerosene—the fuel that many of my constituents use for home heating—is at a record low level.
Since 2008, Governments and the energy regulator, Ofgem, have sought to reduce the barriers to effective competitiveness in the gas and electricity markets, particularly for supplies to domestic customers. Up until now, the main aims of the regulatory interventions have been to ensure that the wholesale and retail gas and electricity markets are competitive. For retail consumers, the aim has been to make tariffs simpler, clearer and fairer and to reduce the complexity that previously dogged pricing in the energy market. The various interventions culminated in 2014 when Ofgem requested that the Competition and Markets Authority conduct an energy market investigation. Referring the matter to the CMA was intended to secure a once-and-for-all investigation as to whether there were further barriers to competition in the energy market, because the CMA had the more extensive powers with which to address the issue of big, long-term structural barriers.
In the course of the CMA investigation to date, the authority has published a large volume of evidence on its website, including more than 100 submissions from interested parties and transcripts of 30 hearings with industry participants and other important groups. In the provisional findings, which were published on 7 July 2015, the CMA suggested a range of adverse effects on competition in the energy market, as well as areas that did not give rise to such effects. The key provisional CMA findings were that a range of problems is hindering competition in the market, including the extent to which consumers are engaged in it and the shortcomings of the regulatory framework to support active consumer engagement.
The CMA also found that customers are not taking advantage of switching suppliers. Dual-fuel customers could save an average of £160 a year by switching to a cheaper deal, again highlighting behaviour of the big six of which we are too well aware. Furthermore, about 70% of customers are on the default standard variable tariff, despite the presence of generally cheaper fixed-rate deals.
The CMA outlined that regulatory interventions designed to simplify prices, such as the four-tariff rule, are not having the desired effect. A lack of transparency is hampering trust in the sector and, as I am sure that Members in the Chamber today know, a good example of that is the scandal exposed by the Select Committee on Energy and Climate Change in the previous Parliament, under its then Chair, Tim Yeo. The price comparison websites were only advertising deals that they were sponsored to advertise, so some of the very best deals were not available to the people using the websites. Every step of the way, there has been a lack of pricing transparency, even on the part of the price comparison websites. The history of the big six energy companies is far from one of benefiting the consumer.
Competition in the wholesale gas and electricity generation markets can work well—according to the CMA provisional report—but the presence of vertically integrated firms does not necessarily have a detrimental impact on competition.
My hon. Friend is making an important contribution and I congratulate him on securing the debate. I understand about the failings in the aggregator and price comparison sites sector, which we need to be aware of, but competition in the energy market has made some progress. In 2010, 99% of the domestic market was shared by the big six, but we now have more than 30 providers and independent suppliers having 30% of households. Does he recognise that there has been progress, and that we just need more and at a quicker pace?
There has been progress, but it has been among empowered consumers. The most vulnerable consumers—such as people on fixed incomes, pensioners and those who live in the poorest housing, are unemployed, have mental illness and people who are sometimes the least able to advocate for themselves—might not even have engaged with the internet, which plays an important part in supporting consumer choice. Such lack of engagement is not true of all older people, but it is of some. Such consumers have not been engaged in the energy market and we have a duty to look after them, in particular those who live in fuel poverty. In that respect, there is ongoing market failure, and that needs to change.
May I develop my earlier point, which is key? As I am sure my hon. Friend is aware, this was picked up in the recent Which? report. Despite the CMA investigation and its provisional findings of last year, the behaviour of the big six energy companies seems to remain unchanged, profoundly uncompetitive and certainly not in the best interests of vulnerable consumers. Ahead of the final conclusions of the CMA’s investigation into the energy market, which I hope and understand will be published tomorrow, the latest Which? research has revealed that the recent price cuts announced by the big six energy companies are dwarfed by the savings that customers could be making by switching to an alternative provider.
Customers on the standard tariffs of the big six providers save only £30 a year from the recently announced cuts, which is a 5% reduction for those on a standard single-fuel gas tariff and only a 2.6% reduction for those on a standard dual-fuel deal—the cuts applied only to gas, not to electricity. The same customers, however, would save a massive £400 a year if they were to switch to the cheapest dual-fuel deal on the market, or £260 a year for the cheapest gas-only tariff. Clearly, there are still problems with and concerns about the behaviour of the big six energy companies, in spite of the provisional CMA report.
That is why a number of not-for-profit energy collectives such as the Big Deal have sprung up to support consumers to get better energy deals. According to Government estimates—I am sure the Minister will correct me if I am wrong—only 12% of customers switch their gas provider, with seven in 10, or 71% of gas customers stuck on standard tariffs and nine in 10, or 88% of households still with the big six. The forthcoming energy inquiry must therefore make it easier for customers to engage with the energy market and to switch to a better deal.
Consumers include the most vulnerable people who live in our constituencies, in particular the elderly, pensioners and people who live in social housing and private rented accommodation—frequently in some of the worst and least energy-efficient accommodation. They are the poorest consumers, often living in fuel poverty, and they are paying the biggest price for the failure of the energy market.
I do not want to be an apologist for the big six, but there is something about the subject that I always find intriguing. We have heard mention of “market failure”—another term for a cartel, frankly—but why have the big six not been able to turn their cartel into profits? Yesterday, npower announced the laying off of some 2,500 people and a loss of £100 million. Other members of the big six, according to the numbers, do not appear to be making massive profits either. Where does the money go?
I assume that the inflated energy tariffs are benefiting the shareholders in a number of those companies, because the companies are certainly not passing the reductions in their costs on to the consumer. If we want to restore trust in the energy market, they need to do so. Some of the most vulnerable consumers, the people least likely to switch, are losing out. Clearly there is exploitation in the big six market position, at the expense of vulnerable consumers.
My hon. Friend is of course right: we must have more switching—we are all behind that—and we must make the market work better. My point, however, is that shareholders do not appear to be benefiting. Npower lost £100 million in the UK, and others have not made a great deal of money out of the market. It would be useful for us to reconcile that—perhaps the three Front Benchers will help us later.
The Front Benchers can speculate why the benefits of the reductions in costs for the energy suppliers are not being passed on to consumers, because they are clearly not being. The money is going somewhere, but not to consumers’ pockets. If we genuinely want to have an energy market that has the trust of the public and protects those people who are perhaps not engaged with it effectively, something different needs to happen. The money is going somewhere, but not to the people to whom we want to see it going, and that is what a market mechanism is designed to do—to benefit the consumer.
I was in conversation with Npower today, because it is a major employer in my constituency and I had concerns about the job losses that were announced. Npower told me that, in effect, the industry is running on a profit margin of about 4% to 5%; by comparison, Tesco and Sainsbury’s normally look at about double that figure. So a huge profit margin is not in place and perhaps where the disconnect—excuse the pun—comes in is in areas such as prepayment meters, where vulnerable groups are paying over the odds for their energy, compared with more everyday and active consumers.
My hon. Friend is right. Indeed, I have raised that point. You quite rightly kicked off the debate a little earlier than we had anticipated, Mr Percy, because the previous debate came to an early end, and in my opening remarks I alluded to exactly that point in relation to E.ON’s recent Age UK tariff, which was an uncompetitive deal compared with some provided by other big six energy providers—I give some of them credit in that respect. It was about £140 more expensive than the best big six deal at the time. That exploited the good will of Age UK and of its customers, who would have expected that Age UK would provide them with the best deal available, which it clearly was not. That has further damaged the reputation of the big six and how they can use their market position to the detriment of the customers they purport to serve.
My point related more to prepayment meters, which are topped up at shops or other retailers, but people find that they go into emergency credit and end up paying far more for their energy. My hon. Friend is making some valuable points, but I wonder whether there is an acute difficulty only in small areas of the market, with overall profit margins being relatively low.
My hon. Friend is right to make that point about pre-payment meters. In that situation we are often dealing with some of the poorest energy consumers who can least afford to pay, but who pay a lot more for their energy as a result of those meters. I am sure the Minister will want to comment on that. Citizens Advice gave evidence to the Energy and Climate Change Committee on the importance of protecting vulnerable consumers and ensuring that they are not left behind by an energy market that benefits more informed, internet-savvy consumers. We need to protect those who by dint of social circumstance—they may not be very well off, or they may be in difficult circumstances—may not have the same opportunities as others to choose where they live. They may have to deal with pre-payment meters, which I am sure none of us would choose for ourselves. There is clearly a role for the Government in looking at how to protect vulnerable consumer groups.
The hon. Gentleman is making a fantastic speech. People on prepayment meters are the disguised self-disconnectors, which is a bad news story for those individuals but also for the country and for companies. That must be addressed, as the hon. Member for Solihull (Julian Knight) said.
I completely agree with the Chair of the Energy and Climate Change Committee; that is a good point well made. I hope we will have the opportunity to do that either through legislation or through cross-departmental work. This is an issue not just for the Department of Energy and Climate Change but for the Department for Communities and Local Government, which can implement much energy legislation that affects homes in the private rented sector. I am sure the Minister will want to take the issues forward with Ministers from that Department in some cross-Government working, because it is important that the energy market benefits the most vulnerable people in our constituencies.
Despite the CMA’s investigation and its provisional findings last year, the behaviour of the big six energy companies seems to remain broadly unchanged, profoundly uncompetitive and, as I outlined, certainly not in the interests of some of our most vulnerable constituents. Ahead of the conclusion of the CMA’s investigation into the energy market, numerous measures have been put in place that have not been in consumers’ best interests. I am aware that other Members wish to speak, so I will try to bring my remarks to a conclusion fairly soon, but it is worth highlighting where that review is and where it may lead us.
The CMA’s provisional findings were a clear indictment of a market that in my view—this is not without a good amount of evidence—is failing consumers. They showed that energy suppliers were exploiting their unilateral market power to price tariffs above a level that could be justified by the costs at which they were buying energy. In the Which? annual energy supplier satisfaction survey, three of the big six suppliers failed to meet the overall average customer satisfaction score of 53%, and npower had the lowest score for the sixth year running, at 41%. I am sorry to highlight that to my hon. Friend the Member for Solihull (Julian Knight), given the point he made.
Ofgem’s latest complaints figures show that the big six received an eye-watering 5 million customer complaints last year. I am sure hon. Members agree that such flaws in the energy market demonstrate the need for radical reform and change. There is also concern about the level of detail that the CMA has provided to date on its potential remedies, which is seen as lacking. I hope that we will get clarity on that tomorrow when its final report is published. There may be merit in the safeguard tariff proposal, but not enough thought has been given to how it will interact with proposals to get more people switching.
Crucially, the CMA appears to have given little or no thought to the steps that will engage people in the energy market, particularly after the failure of Ofgem’s retail market review. At a time when people should be saving as much as £400 by switching from a big six standard tariff to one of the smaller suppliers’ cheapest tariffs, a rise in switching of just 15% is a drop in the ocean. That raises big questions about what can be done to get people to switch and save, and the CMA needs to deliver clear answers.
My hon. Friend mentioned npower, which got a very low customer satisfaction score, has lost 200,000 customers, I believe, and is having to make something like 2,000 to 2,500 people redundant. In that respect at least, there is an argument that the market is working.
The market may be reflecting the damage to npower’s reputation, with some loss of jobs. None of us would like to see job losses in our constituencies, but clearly there are lessons for npower to learn. However, it is only one of the big six energy companies. As a group, their behaviour has consistently been not customer-focused, as the Which? survey bears out, and they have not made improved energy tariffs available to customers, particularly vulnerable customers. I do not believe that that is a good or healthy market, which is why Ofgem referred the issue to the CMA in the first place.
Crucially, the CMA appears to have given little or no thought to how we can engage people in the energy market. There are sticky customers—vulnerable customers, older people and those in the private rented sector—who do not engage, and we need to see that change.
In their draft legislation, the Government are looking at developing greater price visibility, compelling offers and quicker switching. Those ideas have a lot of merit and will encourage greater engagement in the market by some, but I am not sure all, customers. There is a compelling case for the CMA inquiry ensuring that the presentation of pricing is more engaging for customers. In particular, the switching process needs to be improved— both the time limit and how it works. The Government are looking at that in the draft legislation, which is welcome. We know that customers will switch, but the challenge is getting them more engaged in the market.
Today’s energy market is failing customers. Millions of people, many of whom are vulnerable and living on fixed incomes, are being punished for loyalty to their energy supplier, paying hundreds of pounds more for their energy than they should. The big six are using that money to hook in new customers with loss-leading tariffs, which is a cynical and poor way to treat customers that destroys market competition at customers’ expense. That is one of the key reasons why the big six retain their market position. The situation is worsened by too many complex rules and regulations and a lack of pricing transparency.
The CMA has a unique opportunity to deliver a new regulatory model based on simplicity and common sense, underpinned by clear, strong and practical principles that protect vulnerable customers and those on fixed incomes. In a refreshed energy market, with the energy companies showing genuine corporate responsibility, there is an opportunity to put customers at the centre of a market that is meant to serve them. Those who profit from exploiting their customers should have no choice but to change or face much more stringent financial and other penalties from regulators.
I would like to see three changes to the energy market coming from the CMA review, and I would be grateful for the Minister’s comments on them. We need to see fair pricing—energy suppliers’ prices should reflect underlying costs, and suppliers should be stopped from overcharging loyal customers or running loss-leading tariffs that damage competition and drive smaller suppliers out of the market. Regulations should be based on clear principles, with the priority being to avoid customer harm and to protect vulnerable customers and those on fixed and lower incomes, particularly those in fuel poverty. That leads to the key third principle of energy market reform: we must protect the vulnerable. We need a regulated, annually set social tariff that stops the most vulnerable customers and those in fuel poverty being exploited by the big six.
If we do not achieve those things, the energy market will become a contradiction in terms. Consumers, particularly the most vulnerable, deserve better. I look forward to hearing from my hon. Friend the Minister.
It is a pleasure to serve under your chairmanship, Mr Percy. I have a sore throat, so you will be pleased to hear that I will not be shouting.
I want to touch briefly on the effects of the energy market in Glasgow. As the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) said, it is easy to fall into the trap of assuming that everyone is online and knows which price comparison site is which. For the savvy and connected, it can be relatively easy to shop around, but in Glasgow, where half our residents have a home internet connection, the continued focus on online opportunities excludes hundreds of thousands of citizens.
Poverty prevents many people from getting online, which in turn prevents them from shopping around and deepens the fuel poverty that they might seek to address. That block on the capacity of the financially and socially excluded reduces incentives for the big six to compete. Why compete for business from those customers when they are heavily handicapped in their choices, due to both the information available to them and the means by which they are able to choose?
There is no incentive for the energy companies to compete in the prepayment market; there is no market to speak of. Hundreds of thousands of customers who have moved into properties with prepayment meters are left with a choice of paying through the nose for their card meter or paying through the nose to get the meter replaced if they pass a credit check.
One constituent of mine was chased by one of the big six for an energy debt accrued on the prepayment meter in his flat. Given that he had moved in while the meter was in situ, there was no possible way for him to have run up a debt. Nevertheless, it was only when my office intervened that sense prevailed. How many other cases like that are out there, with debt recovery agencies chasing innocent victims for non-existent debts run up on a non-existent meter using non-existent energy?
Another constituent—a pensioner on a fixed income—attended my surgery to talk about his electricity costs. His last quarterly bill showed that three quarters of his spending was on standing charges. Although I understand that energy companies need to ensure that the maintenance of infrastructure is funded properly, it surely cannot be beyond their ken to ensure that vulnerable and poor customers such as my constituent do not find themselves afraid to turn the heating on for fear that their next bill will be unpayable.
Comparing costs per unit, per day and per month is just part of the problem. Qualification for the warm home discount scheme, for example, varies from company to company, with some enrolling only those mandated by the scheme and others extending entitlement to recipients of qualifying benefits. Navigating that minefield and finding the company that offers the best terms requires time, patience and, again, an internet connection. One hundred and forty pounds off the electricity bill may not seem a huge amount, but to someone on a means-tested benefit it is invaluable.
Competition in the energy market is not simply about who sells the cheapest kilowatt-hours or who gives the biggest discount on direct debit. A proper market serving the wider population requires that population to have equal access to information, so that they can make informed decisions. Sadly, the number of people still falling into fuel poverty means that far from the situation improving, it has in fact worsened over recent years.
It is a pleasure to speak under your chairmanship, Mr Percy. I would first like to thank the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) for securing this debate on such an important issue. His excellent speech covered all the key issues—the dominance of the big six, the lack of trust and transparency, loyalty to and by customers, fuel poverty and, of course, competition. I am delighted to see the general alignment across all parties on this subject, and I look to the Minister and the Government to address the serious issues raised.
The UK energy market is, without question, dominated by the big six suppliers. That market structure is detrimental to energy customers because companies within such structures are, by nature, subject to far less competition than those in competitive markets, and competition is key to keeping prices down. Ofgem itself has acknowledged that while there was no evidence that the big six were operating as a cartel—something that the hon. Member for Warrington South (David Mowat) spoke of—there was a possibility of tacit co-ordination between them.
Last summer, the Competition and Markets Authority found a range of problems hindering competition in the market. Two key factors were a lack of transparency and trust in the energy sector, as well as the fact that customers were not switching suppliers, which many Members have touched on. It is easy to see why many do not trust the energy sector. While energy companies have seen record profits, customers have seen their energy bills become even more expensive.
Between 2009 and 2012, during a global recession that saw millions struggle to find a stable income and keep food on the table and a roof over their families’ heads, retail profits of energy companies increased from £233 million to £1.1 billion. Ofgem has found no clear evidence that that increase in profits was due to increased efficiency by suppliers, meaning that the unprecedented growth in profits during a global recession could only be a result of charging customers more. Let us be clear: profit in itself is not a dirty word—it is vital to business and the economy. It is, however, the levels of profit that raise concern in this decade of austerity.
The CMA found last year that energy consumers were being collectively overcharged by £1.2 billion per year. Meanwhile, ScottishPower quadrupled its profits from £27 million to £114 million, and British Gas saw its profits rise 99% between 2014 and 2015—notably, at the same time as its parent company Centrica planned to cut 4,000 jobs. Just this week, npower announced it would cut 2,400 jobs, as has been well covered in this debate.
Even after the most recent overcharging scandal, energy suppliers are still overcharging customers. In January, Ofgem found that despite wholesale costs—costs that make up half of a customer’s energy bill—falling by nearly one third over the past year, that decrease in cost has not been passed along to customers. How can we possibly expect consumers to trust these energy companies when they so regularly take advantage of customers to bolster their own profits?
Coupled with that lack of trust is a lack of transparency by energy companies in terms of the tariffs they are selling to customers. A huge number of tariffs are available, the abundance of which makes switching suppliers and choosing a new tariff complex and confusing. Moreover, the related benefits and charges of the tariffs available, such as introductory offers and exit fees, are presented in a variety of ways, making the options available even more difficult to understand.
While online comparison websites are a welcome tool for consumers to help navigate the complexity of the various tariffs available to them, the variety of tariff structures available means that even using those websites does not guarantee that a customer will select the cheapest tariff or instil confidence in the customer in their decision to switch suppliers. Moreover, as my hon. Friend the Member for Glasgow South West (Chris Stephens) said, the most vulnerable in society are often unable to utilise those online resources. That combined lack of trust and lack of transparency makes customers hesitant to switch. In turn, it gives incumbency advantages to suppliers, which is a politically correct way of saying that suppliers systematically overcharge and exploit their existing long-term customers.
Turning to fuel poverty, in any debate on the energy market, it would be remiss of me to fail to acknowledge the real-life impact on consumers of the fact that the energy market, at present, does not work in their best interests. That impact is most evident in the prevalence of fuel poverty among the most vulnerable in society. My hon. Friend spoke articulately—if somewhat quietly—about the very serious issues of high tariffs for those in fuel poverty and the lack of opportunity to switch, telling us distressing real-life stories of how vulnerable and not well-off customers suffer most under the present system.
In the last 10 years, under energy market regulation dictated from Westminster by successive new Labour and Tory Governments, the number of households living in fuel poverty in Scotland has risen by 10% to 40% of households—let me say that again: 40% of households in Scotland are living in fuel poverty. Fuel poverty means more than simply not being able to keep the heating on. Fuel poverty has been found to cause mental health problems in adolescents, as well as respiratory problems in children. It affects the educational attainment and the emotional wellbeing of children and means that household income, which could otherwise be used to purchase healthy, nutritious food, goes on paying energy bills.
The combination of mental and physical health problems, poor diet, emotional turmoil and diminished educational attainment caused by fuel poverty is a recipe for condemning people to the cycle of poverty. To me, and clearly to most Members speaking today, that is completely unacceptable. Why should so many suffer while energy companies systematically continue to overcharge customers and take advantage of the market failures in the energy market that this Tory Government continue to fail to address?
After considering the many contributions made by hon. Members, it is clear to me what needs to be done to address the critical issue of the UK energy market’s failure to benefit consumers. First and foremost, the systematic overcharging of customers must end, and the cost of energy bills must be reduced. The fact that this overcharging is so common is a clear indicator that the regulatory structure is not working at present.
More needs to be done to make switching suppliers easier. If customers had the confidence to switch suppliers, competition in the market would increase and, in turn, hopefully help to push down prices. That means addressing the two underlying reasons why customers are not switching suppliers—the lack of trust in the industry and the lack of clarity and transparency surrounding the different tariffs available to customers.
Finally, the growth of green energy provides a potential competitor to the big six energy providers, creating huge scope to help to push down prices for customers. However, barriers to entry and expansion remain for energy providers. Proactive steps must be taken to ensure that this growing sector, which provides energy that is both renewable and potentially cheaper than traditional sources, is able to compete against the dominance of the big six.
I congratulate the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) on securing the debate, which is so timely, given that it is within 14 hours of the Competition and Markets Authority’s report on its findings coming out. Unfortunately, it is taking place 14 hours before the findings come out, but it is pretty closely targeted on the important development that we are about to witness. For this afternoon’s debate, we have the CMA’s provisional findings, which I guess will inform the report that will come out shortly. The hon. Gentleman directed his very thoughtful points about the whole question of competition in the energy market to a number of those.
This is a conundrum with many layers—exactly how competition works, how it can best work, how it can be better enhanced and how it can work for those customers who could benefit most from better competitive arrangements in the energy market. In many instances, those customers appear at present to be stuck in a non-competitive mode with energy companies. Energy companies almost regard those sticky customers as assets that they can use to make additional resources, as the hon. Gentleman mentioned, with which they can finance special offers and various other things, which, to some extent, rely on the knowledge that those sticky customers will remain with the company—perhaps that is part of the conundrum—apparently very much against their better economic interests and despite longer term concerns. I will perhaps return to that thought in a moment.
The hon. Gentleman also made the very important point that we are discussing one part of that energy trilemma, in that we have embarked on—and I hope we will continue to be solidly embarked on—a process of decarbonisation of our energy system. Clearly, that has to be achieved, but under the circumstances of two additional imperatives: first, that there should be security of supply, among other things to make sure that the lights stay on, which is perhaps a rather important part of the customer experience of electricity prices and the market; and secondly, that prices should be fair, reasonable and equitable, as far as customers are concerned.
I am not sure that it would too far outside this debate just to reflect on the first part of that energy trilemma. I gently ask whether the Minister has any sort of plan B in the light of the difficulties that we are having with capacity, the recent reports concerning the possible development of Hinkley Point C power station and the apparent inability of the capacity market as it stands to develop any contracts for new long-term building, particularly of gas-fired power stations. Does she wish to share any thoughts with us on how that particular leg of the trilemma might best be supported over the next period? That seems relevant to the other two legs, and particularly to the leg that we are discussing this afternoon.
As for the question of how prices can be as fair and competitive as possible to customers, we need perhaps refer to what is happening with the CMA. It was interesting last summer to see the CMA’s report on provisional remedies. As the hon. Member for Central Suffolk and North Ipswich outlined, it concluded that a number of features of the market gave rise to the finding of an AEC—an “adverse effect on competition”. The report stated that that arose through
“weak customer response, which, in turn, gives suppliers a position of unilateral market power concerning their inactive customer base”,
which they are able to exploit through their pricing policies or otherwise. That refers particularly to sticky customers, but I was slightly surprised at the brief consideration that the CMA’s interim report gave to a number of other factors that seemed to contribute to that, such as vertical integration in energy companies. That may not have a direct impact on competition, but it may have an indirect impact for a variety of complex reasons that may have a hand in the process.
Perhaps part of the answer to the conundrum that has been presented in this Chamber this afternoon about where the money goes when energy companies are apparently posting substantial losses is a better understanding of how vertical integration works. It is not just within the UK power generation and retail market. It has been suggested that companies that buy and sell to themselves create an opportunity to shift sums around considerably.
There is increasing vertical integration outside the UK. Some companies are reporting what is happening in the UK, but also in the context of what is happening outside the UK, such as company structures. The extent to which those companies are able to post profits or losses in particular countries in which they are working does not necessarily reflect entirely what is going on across the board in other countries of operation. That should be examined at least.
I am interested in the hon. Gentleman’s comments about vertical integration, because the interim report looked at that and theory of harm 3a and 3b. My reading of it was that the CMA did not regard vertical integration as a major issue. I looked at it quite carefully.
On the point about moving profits around, which is the issue regarding vertical integration, the share price of Centrica, the owners of British Gas and the biggest player in all this, has gone down by around 40% in the last five or six years. I have no truck with these oil companies and big players, but if they are running a cartel, it is one of the worst I have ever seen.
The hon. Gentleman makes an important point. This issue is like an onion. It has many layers that must be unpeeled before anyone can get anywhere need the essence of it. Part of the process is that some companies are losing customers with insurgent companies coming into the market, and some are setting up good companies and bad companies to bifurcate the process of where their investments go and where their profit centres are. That clouds the picture. Obviously, there is the effect of energy prices, particularly who has bought what, where and when, and what those prices now mean in terms of strategies that took place two, three or four years down the line.
People can move profits around and have good companies and bad companies. What I am saying is that Centrica, which owns British Gas, has somehow turned the cartel that it is apparently operating —we will find out tomorrow so we are speculating—into a 40% reduction in its share price in the last five years. That is not a good performance in running a cartel.
Indeed. As the hon. Gentleman underlines, that may be a factor of other processes at work in those companies and what investors think is their long-term security and future in the light of rapidly changing energy conditions. A whole series of factors is at work, and I hope that, in the report that the CMA will publish tomorrow, it has paid due attention to the complexity of those factors. I fear that some of that complexity was not fully reflected in its initial proposals.
A second complexity is transparency: who is buying what at what point round the curve, how companies are hedging their trading processes and whether they are trading with themselves and hedging advantageously compared with other companies down the line. One might argue that that is good practice or bad practice, but we do not know that because the market is not transparent at the moment.
Order. The hon. Gentleman should have had five minutes, although he is within his rights to take more as we have more time, but he will shortly have been speaking for 13 minutes, which will leave a similar time for the Minister. It would be courteous if he concluded shortly so that the Minister may have the appropriate time.
I thank you for your guidance, Mr Percy. I fear I was somewhat swayed by expert fellow Members in the Chamber into going down paths that took me longer to explain and which I might otherwise not have been involved in. I, too, want to hear what the Minister has to say and I will conclude as soon as possible.
All I want to say further concerns the central issue that the hon. Member for Central Suffolk and North Ipswich raised. Why is it that 70% of the big six energy companies’ customers stick with those companies through thick and thin, regardless of what opportunities are thrown at them to switch? Some of the remedies that are likely to arise tomorrow may not address that issue as closely as they should. The idea of putting people on a temporary safeguard tariff while continuing to bombard them with suggestions that they switch works only when the latter process also works. If it continues not to work, those people move further from the market rather than closer to it.
Remedies that look at what people do—
Order. The hon. Gentleman has had substantially longer than the Minister will have, which is a discourtesy to her. Although it is in order for him to speak for longer than the allotted time, will he draw to a close within seconds and give the Minister the courtesy of responding?
Indeed, Mr Percy.
What those people do should be a matter for considerable further examination and possible additional remedies. I hope that at the very least the CMA has provided in its report some additional arrangements that will work.
I congratulate my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) on securing this debate within such a short time of the CMA report coming out.
I want to reiterate that my Department puts consumers at the heart of everything we do. We are determined to be genuine consumer champions. Hon. Members will know that our priorities are to ensure that we have secure supply of energy and that we decarbonise at the very lowest cost to consumers. I remind hon. Members that we are determined to focus available support on the fuel-poor.
My hon. Friend was right to mention the appalling story of E.ON and Age UK selling poor deals to pensioners and it is right that Ofgem is looking carefully at that. He also mentioned the scandal during the last Parliament of price comparison websites not giving the best prices. That has been addressed in amendments to the voluntary code, but he was right to highlight that some of these issues are extremely serious and that we must always take steps to prevent them. I want to use this opportunity to reiterate to any energy companies listening to the debate that when wholesale prices go down, the Government expect them to pass those reductions directly to their customers.
The CMA, as hon. Members know, published its provisional findings last July. It is very clear that it found that retail competition is not working. It found that a lack of competition means that about 70% of households remain on their supplier’s most expensive energy tariff, despite the savings that they could make by moving to someone else. In fact, by switching from a standard tariff to the best fixed direct debit deal on the market, many people could save about £200 and some could save more, so again I will take this opportunity to say to anyone listening out there: please do shop around; it is really worth doing.
However, there is some good news to report. We have been working hard with Ofgem to improve competition, and the work is beginning to bear fruit. We now have 31 independent suppliers competing with the big six in the domestic retail market. That is up from just seven small suppliers in 2010. The independent suppliers are making inroads into the market share of the big six. They now have almost 15% of the dual fuel market; that is up from less than 1% in 2010. The Government have worked with the industry and Ofgem to halve the time that switching supplier takes from five weeks to 17 days. An increasing number of households are switching supplier. Ofgem recently reported a four-year high in the number of energy account switches; 6.1 million energy account switches took place last year. That is increasing competitive pressure on the big six, and prices are falling. We saw the price of the cheapest one-year fixed tariffs fall by more than £100 during 2015, and prices are continuing to fall. That is good news for consumers who shop around and switch tariffs and supplier.
Will the Minister give way?
I will not give way at the moment. I want to get through part of my speech, as it has already been severely curtailed.
It is a massive challenge to inject the sort of competition that we are seeing for fixed tariffs into the standard variable tariff segment of the market. That is the default tariff that most people are on. Despite the good news that all of the big six have announced price cuts to their standard variable tariffs this year, we want to see much more effort.
The Government, too, must do more, so we are working with Ofgem and the industry to move to 24-hour switching and we are continuing with our Power to Switch campaign. In just one month of the Government-funded Power to Switch campaign last year, more than £38 million was saved by 130,000 households switching energy supplier. Of course, we have already committed to acting urgently on the CMA recommendations that we expect to see tomorrow.
Does the Minister think that there is any merit in looking at what more Ofgem can do to help new entrants better to understand the regulatory environment, as Ofcom does, I think, with the telecommunications sector?
Yes, the hon. Gentleman makes a good point. It is something that Ofgem is very aware of, but I will certainly take that point away and look at it again.
I want to address the point made by the hon. Member for Glasgow South West (Chris Stephens). He is absolutely right to say that prepayment meter customers are particularly ill served by competition. That has been picked up by the CMA. It is true to say that those customers have far less choice of tariffs. We had a very good debate about that quite recently in the main Chamber. However, we are beginning to see some improvement in competition, with some suppliers offering smart prepay tariffs. We are working with Ofgem to remove the barriers that those customers face in switching supplier. For example, Ofgem is working with suppliers to help customers who are on prepayment meters and in debt to switch supplier for a better tariff. The hon. Gentleman raised a very important point.
We are also starting to see some improvement in customer service. The latest Ofgem data showed that the six major suppliers received 1.5 million fewer customer complaints in 2015 compared with 2014, but with a total of just under 5 million complaints, they still have a long way to go. We are therefore working with Ofgem and the energy ombudsman to identify and then fix systemic issues to stamp out poor customer service. Ofgem carried out a review of the role of the ombudsman last year and recommended that it should carefully analyse the specific complaints and use that information to reduce the underlying causes of complaints. That work is ongoing and will be very important.
As well as working to improve competition, the Government have a range of programmes to help vulnerable and low-income consumers with their energy bills. We are supporting 2 million customers a year with the warm home discount. We have increased the level of the discount, and in 2014-15 more than 1.4 million of the poorest pensioners received £140 off their electricity bill, with more than 1.3 million of them receiving the discount automatically. We have confirmed that the warm home discount will be extended until 2020-21 at the current level of £320 million a year, and we will be consulting on proposals for 2016-17 shortly. It is the case that 600,000 low-income and vulnerable households, including families, also benefit from £140 off their bill. Altogether, a total of £1.1 billion of direct assistance has been provided to low-income and fuel-poor households since the scheme began.
The winter fuel payment, which went to about 12.5 million older people in 9 million households last winter, is a significant amount of help towards higher fuel bills in the winter, with households getting between £200 and £300.
Also, and vitally, the cold weather payment, which is paid to vulnerable people during periods of very cold weather, has been permanently increased to £25. Last winter, more than 400,000 payments were made, during the very coldest weeks of the year, at an estimated cost of £10.6 million.
A reformed domestic supplier obligation from April 2017 will improve the energy efficiency of well over 200,000 homes a year to deliver on our commitment to help 1 million more homes in this Parliament.
In response to the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) on fuel-poor households in Scotland, he will know that fuel poverty is a devolved issue. However, some of our schemes to help tackle fuel poverty are GB-wide. That includes the energy company obligation. The hon. Gentleman will be aware that with 35.3 households per 1,000 homes treated, Scotland receives the greatest share of ECO, followed by England, with 25.4 households per 1,000 homes and Wales with 21.9.
As well as supporting low-income and vulnerable consumers directly with their energy bills, we fund the big energy saving network. Again, I think that this addresses the point made by the hon. Member for Glasgow South West about the need particularly to help the extra vulnerable and the fuel-poor. Face-to-face help and advice through trusted organisations is one of the most effective ways to help vulnerable consumers to engage with the energy market. The big energy saving network reached more than 90,000 people in 2013-14 and about 130,000 in 2014-15, and we are well on track to reach a further 100,000 this winter. The programme has helped some of the hardest consumers to reach, with above average percentages of those with a disability, off the gas grid or without internet access—issues that a number of hon. Members pointed out—and about half of participants, 51%, have reported that they now spend less on heating their home as a direct result of being helped through the network.
My hon. Friend the Member for Central Suffolk and North Ipswich has made very good points, as have other hon. Members. This has been a lively and thoughtful debate, and we have covered a lot of ground. We already have work in train: rolling out smart meters, moving to next-day switching and continuing to help vulnerable and low-income households with their energy bills. We are committed to acting on the CMA’s recommendations. I therefore hope that my hon. Friend and others will leave the debate reassured that the Government are determined to make the energy market work in the interests of all consumers.
I thank the Minister, both other Front Benchers and all other hon. Members for their contributions. This has been a very productive debate, and we look forward to hearing tomorrow about the CMA’s findings, which I hope will benefit consumers.
Question put and agreed to.
That this House has considered competition in the UK energy market.