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General Committees

Debated on Tuesday 20 March 2018

Delegated Legislation Committee

Draft Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2018

The Committee consisted of the following Members:

Chair: Philip Davies

Ali, Rushanara (Bethnal Green and Bow) (Lab)

† Allin-Khan, Dr Rosena (Tooting) (Lab)

† Bowie, Andrew (West Aberdeenshire and Kincardine) (Con)

Burden, Richard (Birmingham, Northfield) (Lab)

† Cowan, Ronnie (Inverclyde) (SNP)

† Crouch, Tracey (Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport)

† Dunne, Mr Philip (Ludlow) (Con)

† Eagle, Ms Angela (Wallasey) (Lab)

† Evennett, David (Bexleyheath and Crayford) (Con)

Godsiff, Mr Roger (Birmingham, Hall Green) (Lab)

† Harper, Mr Mark (Forest of Dean) (Con)

† Hayes, Mr John (South Holland and The Deepings) (Con)

† Hughes, Eddie (Walsall North) (Con)

† Jones, Mr Marcus (Nuneaton) (Con)

† Smeeth, Ruth (Stoke-on-Trent North) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Stephenson, Andrew (Lord Commissioner of Her Majesty's Treasury)

Gail Bartlett, Committee Clerk

† attended the Committee

Fourth Delegated Legislation Committee

Tuesday 20 March 2018

[Philip Davies in the Chair]

Draft Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2018

I beg to move,

That the Committee has considered the draft Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Davies. The draft regulations impose a new mandatory condition on the holders of any betting operating licence issued under the Gambling Act 2005. The purpose of the new condition is to prevent such operators from accepting bets from British consumers on the outcome of the EuroMillions draw or of a EuroMillions game in a participating country outside the UK. Section 95 of the 2005 Act already prohibits the holder of a betting licence from offering a bet on the outcome of any lottery that forms part of the national lottery, including the lottery known in the UK as EuroMillions. The additional licence condition extends the existing prohibition on betting on the national lottery to the EuroMillions lottery games and applies to all general betting operating licences, pool betting licences and betting intermediary licences issued by the Gambling Commission, which will reduce the customer confusion that has arisen as a result of operators offering such bets and maintain the clear blue water between the national lottery and other forms of gambling, as set out in section 95 of the 2005 Act.

The national lottery was established in 1993 to support good-cause projects across the UK. It enjoys a unique status. It is not regulated as gambling, a distinction further protected by section 95 of the 2005 Act, which prohibits betting on the national lottery, including the UK EuroMillions game. However, EuroMillions is, in fact, a number of technically separate lotteries played in nine European countries, each licensed in accordance with that country’s regulatory framework and determined by a single draw held in Paris. A small number of gambling operators offer bets on the outcome of a non-UK EuroMillions lottery, for example, the Spanish EuroMillions. Our consultation showed that that has led to customer confusion, with some players unable to distinguish between placing such a bet and buying a national lottery EuroMillions ticket. Although small, the number of operators offering such bets has increased in recent years, and there is a risk that further growth will affect the national lottery, in particular its returns to good causes, as there is no requirement for operators to contribute to these.

Indeed, some operators even undercut the national lottery. When the price of a EuroMillions lottery ticket went up from £2 to £2.50, operators took advantage by advertising their products at a lower price. I cite just one example as an illustration:

“Why can Lottoland advertise tickets for tonight’s £112 million jackpot at £2.00 while everyone buying a ticket from a Camelot outlet or on-line via Camelot has to pay £2.50 per ticket? How do you explain this?”

Operators continue to offer bets for less than the price of buying a lottery ticket or offer two bets for the price of one, adding to customer confusion. The Gambling Commission has undertaken a number of non-legislative measures to reduce customer confusion about bets on EuroMillions and the EuroMillions lottery, which has resulted in changes to how some operators promote their products, but even where such proactive steps have been taken significant numbers of customers are still unable to distinguish between the two products. In fact, some of the operators themselves have provided evidence of customer confusion. Lottoland carried out a survey of customers in 2017, which revealed that 28% of them did not believe there was a difference between betting on EuroMillions and participating in national lottery EuroMillions. A further point of confusion is how players can arrive at the operators’ websites. It cannot be right that if someone wants to buy a EuroMillions lottery ticket from the national lottery online and they search for EuroMillions they get a proliferation of sites offering a range of betting services to choose from. Another operator,, tells us that it sees increased numbers of visitors to its site when there are big EuroMillions draw roll-overs

A Government consultation on prohibiting betting on EuroMillions ran between March and May 2017. Respondents included lottery operators, beneficiaries of lottery funding, betting operators and members of the public. Of the 52 responses, 32 strongly agreed with the proposal that non-UK EuroMillions bets should be prohibited. Their reasons included preventing customer confusion, closing the regulatory loophole, protecting the national lottery good-causes funding, protecting the integrity of the national lottery brand, and the potential loss of retailer commission. Only five respondents strongly disagreed, all of whom were operators currently offering the bets to British consumers. They argued the action was disproportionate in the light of the absence of evidence that these products had a negative impact on EuroMillions lottery sales, and that they would reduce customer choice and tax revenues. We concluded that there was broad support for introducing this action, which will remove any customer confusion. It will also preserve the distinction between betting and the national lottery, and by doing so help to protect against potential future losses to good-cause returns.

Betting on the outcome of lotteries is nothing new. It has been offered legally for many years, but not on the national lottery. For most operators offering bets on lotteries the product is one element of a wider portfolio. British customers will still be able to participate in the other products offered by these operators, which remain unaffected by this action.

Betting on EuroMillions is a growing market, and it is important that we maintain a clear distinction between the national lottery and other forms of gambling, as set out in section 95 of the Gambling Act 2005. The effect of the regulations will bring non-UK EuroMillions draws into line with UK draws and prevent gambling operators taking advantage of the technical way in which EuroMillions is structured as individual country draws. More urgently, this action will eliminate customer confusion. For those reasons, I commend the regulations to the Committee.

It is a pleasure to serve under your chairmanship, Mr Davies. Our national lottery funds over half a million projects across the UK. Since its inception, it has donated more than a staggering £37 million towards good causes supporting our local communities. It is and always has been our position that the national lottery should be the flagship lottery of the UK. From supporting our Olympic and Paralympic athletes to inspiring future generations to participate in local grassroots sports it promotes our arts, culture and heritage sector by funding local museums, preserving areas of natural beauty and historical places and parks. It backs our voluntary and community sector, which is the lifeblood of local communities everywhere. Its contribution cannot be understated. We have a duty to protect the fantastic work that it does.

Unfortunately, revenue generated from ticket sales has been decreasing in recent years and the Gambling Commission has expressed concerns about the increasingly popular practice of licensed gambling operators selling non-EuroMillions bets. It is illegal for licensed gambling operators to place bets on the outcome of a national lottery draw within the UK, and rightly so. It is our responsibility to ensure that the national lottery delivers the maximum benefit to charities and the other good causes that it supports. However, because of the unique set-up of the EuroMillions draw, which includes nine separate lotteries from each participant country, some gambling operators have found a way to exploit the current legislation. Betting firms are using this as an escape clause to capitalise on low-cost bets. We must close this loophole. The Gambling Commission is right to express concerns about this growing practice, which poses a substantial risk, both now and in the future, of diverting funds from the national lottery, placing it in direct competition with other gambling operators. Driven solely by profit, those operators have found a way to offer the same jackpot rewards while marketing tickets at a lower price. They can reap all the benefits without the added responsibility of having to contribute a single penny to any good cause. That practice has to stop.

Alongside the evidence gathered in the consultation conducted by the Department of Digital Culture Media and Sport, it is clear that consumers are more often than not unaware of exactly what they are purchasing. There is a clear difference between participating in a lottery and gambling on lottery odds, but that distinction has been deliberately obscured. It is easy to understand why. If non-UK betting slips are branded with a EuroMillions logo, for most people they are no different from a lottery ticket. We all associate the national lottery and the UK EuroMillions with the good causes that they represent. Players are attracted to that because it offers a fair way to contribute to local causes and projects as well as a chance of winning a life-changing amount of money. There should be no room for betting firms to capitalise on the positive branding that our national lottery offers. Camelot has expressed concern about the additional pressure that that generates, as money has to be allocated to defend key brand terms against being constructed by other market players—money that could otherwise be allocated to good causes.

We welcome and support the statutory instrument. The Gambling Act 2005 is intended to protect our national lottery. Some licensed gambling lottery operators have not been playing fairly. I would go as far as to suggest that, at times, they have acted without integrity. Their conduct has shown that it is time for this loophole to be closed. I would be grateful for clarification on a few points from the Minister. Some operators have threatened a judicial review. Should the SI not have been withdrawn? Operators such as Lottoland, which strongly opposes this change, have registered concerns that the measure breaches EU laws. What legal advice has the Department received on that? How much does the national lottery EuroMillions return to good causes? Does the Minister know how much money Camelot has spent trying to protect its branding as a result of the rising popularity of non-UK EuroMillions betting? Does the Minister know how many consumers have unknowingly participated in these betting channels, believing that they were playing the real lottery? Has the Minister held any conversations with the Department for Exiting the European Union on any implications that Brexit might have on the implementation of the measure? Finally, will the Government take any further steps to support the role of the national lottery in the UK?

It is a pleasure, Mr Davies, to see you siting in the Chair for today’s proceedings. I welcome this statutory instrument, which does an important job. I am interested to see whether the Minister will tell us a bit more about the customer confusion caused by the marketing of foreign lotteries and bets on the outcome of foreign lotteries. What she has said today sets an interesting and good precedent regarding customer confusion about advertising leading to more regulation of lotteries and much wider measures. Would she say more about that?

There are some anecdotes in the impact assessment about people who confuse betting on the outcome of the EuroMillions lottery with the buying of tickets for our lottery. Such marketing—along with the operation of websites that send people to dubious places when they search, tempting them to buy dubious things that are not what they think they are—happens far more widely than lotteries, although in gambling it is clearly a difficult issue and could lead to problem gambling. Would the Minister say more about the good precedent set by her and her Department in taking this draconian but welcome legislative action, tipped off by evidence that customers are confused?

I am grateful for support across the Committee for these measures, which are the right ones to introduce. They close a loophole and they will ensure that customers have greater clarity about what they are getting involved with.

I would like to address some of the additional points made by the hon. Member for Tooting: operators have logged a judicial review, but we have set out a robust defence of the legality of the issues and we believe that we are acting well within our powers in doing so. She asked about EuroMillions and the return to good causes. EuroMillions returns approximately 27% of its sales to good causes through the retail sector, and 33% through online sales. In contrast, betting operators can advertise the same jackpots—a key sales driver—at lower prices without any obligation to return a percentage to good causes, perhaps increasing some of the confusion to which the hon. Member for Wallasey referred.

The ban aims to eliminate customer confusion by protecting those who wish to buy a EuroMillions lottery ticket online from ending up on a betting site. We do not intend to prevent operators from offering bets on lotteries that do not form part of the national lottery to consumers who genuinely wish to place a legitimate bet on such a lottery. Betting on the national lottery is illegal, and this ban will bring betting on all EuroMillions products in line with the rest of the national lottery portfolio. We believe that that is a way of supporting customers to ensure they make the right decisions about what they are betting on, and for the right reasons. People are not aware that by betting on a lottery they are not returning any money to good causes—good causes that, as the hon. Member for Tooting pointed out, have returned billions of pounds to support a variety of projects.

The explanatory notes make the point that the number of non-UK EuroMillions bets is increasing. Indeed, the Gambling Commission has said that it has grown, endangering the pot of money that goes to good causes. I do not expect the Minister to be able to give details of the extent of that issue today, but will she let members of the Committee and others know how she sees that going, and at what point will it become a real problem for the amount of money that is distributed to the good causes that we all support?

We face many challenges at the moment regarding the national lottery and the return to good causes. We are seeing some stabilisation of lottery sales, which is a good sign, and we have regular discussions via the Gambling Commission with Camelot about lottery sales. Today, we are specifically looking at EuroMillions, which gives 27% of its retail sales and 33% of its online sales to good causes. We want to ensure that we eradicate any threat to that by looking at closing the loophole that allows people to bet on EuroMillions. That is something that has been discussed over time, and we feel strongly that it is a way of supporting the good causes that people who play the national lottery believe they are getting involved in.

I am interested in the level of confusion caused by advertising the presence of gambling websites—the way in which one goes through a search engine on to a gambling website, which gives confusing information— and what assessment the Government have made of the standards that are acceptable on those websites and those that are unacceptable because they are actively misleading. Can the Minister give us more information about the way in which she and her Department have reached decisions on that? We support the decisions, but there is a much bigger issue about confusion and sales issues on all kinds of websites, for which she may be setting a good precedent. That is what I am interested in.

I refer the hon. Lady to the gambling review, in which we look at issues around advertising and gambling, full stop. That includes advertising online and we will continue to work on that. There is a whole system of algorithms that are in place, which we are trying to unpick to see whether we can seek to develop a much more responsible way of advertising gambling products in response to particular search items.

As I said, we are aware that if people search for EuroMillions, the first thing that comes up is not necessarily the national lottery site but gambling sites. That is one of the things we are trying to unpick, but on a much wider scale, not just related to this issue. We have to ensure that customers have a choice. We must recognise that there are legitimate betting operations and practices out there, but we want to ensure that we have the right choices for the consumer.

Is the Minister saying that the Government might be mandating changes to algorithms so that there is a proper choice when one uses a search engine?

We are reviewing all of this as part of the gambling review and the outcome of the review will be published soon, in the spring, although the hon. Lady knows as well as I do that in Government parlance that can vary.

It is the first day of spring today. I urge the hon. Lady to engage with the outcomes of the gambling review, which looks at the much wider issue of advertising in gambling: not just in broadcast, but how we can reduce customer confusion and protect vulnerable people from harm online.

To conclude, in introducing regulations imposing a new licence condition, we are doing no more than extending the existing protection against betting on the national lottery and taking action to remove consumer confusion relating to bets on EuroMillions games. I further commend these regulations to the Committee.

Question put and agreed to.

Committee rose.

Draft Armed Forces Act (Continuation) Order 2018

The Committee consisted of the following Members:

Chair: Mr Laurence Robertson

† Bridgen, Andrew (North West Leicestershire) (Con)

† Cadbury, Ruth (Brentford and Isleworth) (Lab)

† David, Wayne (Caerphilly) (Lab)

† Debbonaire, Thangam (Bristol West) (Lab)

† Dhesi, Mr Tanmanjeet Singh (Slough) (Lab)

Elliott, Julie (Sunderland Central) (Lab)

† Ellwood, Mr Tobias (Parliamentary Under-Secretary of State for Defence)

† Fysh, Mr Marcus (Yeovil) (Con)

† Goldsmith, Zac (Richmond Park) (Con)

† Hart, Simon (Carmarthen West and South Pembrokeshire) (Con)

† Heald, Sir Oliver (North East Hertfordshire) (Con)

† Lopresti, Jack (Filton and Bradley Stoke) (Con)

† McGovern, Alison (Wirral South) (Lab)

† Morton, Wendy (Aldridge-Brownhills) (Con)

Spellar, John (Warley) (Lab)

† Trevelyan, Mrs Anne-Marie (Berwick-upon-Tweed) (Con)

† Western, Matt (Warwick and Leamington) (Lab)

Jack Dent, Committee Clerk

† attended the Committee

Fifth Delegated Legislation Committee

Tuesday 20 March 2018

[Mr Laurence Robertson in the Chair]

Draft Armed Forces Act (Continuation) Order 2018

I beg to move,

That the Committee has considered the draft Armed Forces Act (Continuation) Order 2018.

It is a pleasure to serve under your chairmanship, Mr Robertson. It is important that we debate this order, and I am delighted that we have a full 90 minutes in which to do justice to this important subject. I hope that all hon. Members have got their own copies of the Armed Forces Act 2006, to which I will make regular reference.

The draft order we are considering today is to continue in force the Armed Forces Act 2006 for a further period of one year, until 11 May 2019. The legislation which governs the armed forces is renewed by Parliament every year. This reflects the constitutional requirement under the Bill of Rights 1688—

It declared:

“That the raising or keeping a standing Army within the Kingdome in time of Peace unlesse it be with Consent of Parlyament is against law”.

As we hear from my right hon. and learned Friend in his support for the Bill of Rights, it is an important and iconic document that set the tone for the advancement of democracy in our country. It sits alongside the Magna Carta and the Act of Settlement as being important landmarks as we established the balance of power between the monarchy; the state—the people; Parliament; and, indeed, the armed forces. It is right that we reflect on the background to this, because it is from here that we enjoy the privilege and right of maintaining a standing army within the context of the law, going all the way back to 1688.

Of course, that was some time ago. Today’s Committee might be interested to know how we got here today. A Defence Select Committee report, published on 8 December 2005, said:

“Since 1689 the House of Commons has passed an annual vote setting limits on Army numbers. The passing of this vote became an established part of the work of the Committee of Supply.

Prior to 1955, that vote, when reported from the Committee of Supply and agreed to by the House, gave rise to an annual Act authorising the system of Army Discipline and the preamble to such Acts referred to the limits on numbers.

The same practices were adopted in respect of the Royal Air Force following its creation”—

100 years ago. The report continued:

“In 1955 the direct relationship between discipline for land forces and parliamentary control over their numbers was severed by new provision for Armed Forces Discipline Acts subject to annual renewal by secondary legislation and quinquennial review and renewal through primary legislation.”

That practice continues. However, a change was proposed by the Ministry of Defence in the Armed Forces Bill of 2005. That Bill did not make any provision for annual renewal but that was resisted by the Defence Committee and the Committee that considered the 2005 Bill. The Ministry of Defence amended the Bill accordingly; that Bill became the Armed Forces Act 2006. The 2006 Act provides nearly all the provisions for the existence of a system for the armed forces of command, discipline and justice, which applies at all times wherever in the world members of the armed forces are serving.

As I have said, the legislation that governs the armed forces is renewed by Parliament every year. Every five years there is an Armed Forces Act. The most recent is the Armed Forces Act 2016; the next will be in 2021. The primary purpose of these five-yearly Acts is to renew the legislation which provides for the armed forces to exist as disciplined bodies—currently the Armed Forces Act 2006.

Between the five-yearly Acts, the legislation is renewed by an annual Order in Council. That is what we are considering in draft today: we call it the continuation order.

The Armed Forces Act 2016 provides for the continuation in force of the Armed Forces Act 2006 until 11 May 2018 and for further renewal thereafter by Order in Council for up to a year at a time, but not beyond 2021.

If the Armed Forces Act 2006 is not renewed by Order in Council before the end of 11 May 2018, it will automatically expire. The central effect would be that the provisions necessary for the maintenance of the armed forces as disciplined bodies would cease to exist.

The 2006 Act creates offences and provides for the investigation of alleged offences and the arrest, holding in custody and charging of individuals accused of committing an offence, and for them to be dealt with summarily by their commanding officer or tried in the court martial. It provides so that members of the armed forces can be investigated, tried and punished for any criminal offence under the law of England and Wales, wherever in the world the offence might be committed. It also provides for offences that are peculiar to service in the armed forces, mainly relating to discipline, such as misconduct towards a superior officer and disobedience to lawful commands.

Perhaps the clearest example of the effect of expiry of the 2006 Act would be that the duty of members of the armed forces to obey lawful commands, and the powers and procedures under which this duty is enforced, would no longer have effect. Commanding officers and the court martial would have no powers of punishment for failure to obey a lawful command or other disciplinary or criminal misconduct. It is true that members of the armed forces would still owe allegiance to Her Majesty the Queen, but Parliament would have removed the power of enforcement, which comes from the Bill of Rights itself.

The obligation of members of the armed forces is essentially a duty to obey to lawful commands; they have no contracts of employment and so no duties as employees.

The 2006 Act also provides for several other important matters for the armed forces, such as for their enlistment, pay and redress of complaints. With that explanation, I hope that hon. Members will be satisfied and will be inclined to support the draft continuation order.

It is a pleasure to serve under your chairmanship, Mr Robertson.

I was a history teacher a number of years ago, and I used to teach my pupils about the Glorious Revolution of 1688 and the Bill of Rights. I explained to them—accurately, I think—that the revolution and the Bill that followed saved England from the power-seeking of James II and secured the development of our constitutional monarchy and freedom of religion and of civil liberty and established the course of the development of the rule of law.

I did not fully appreciate at that time the true significance of the weighty tome that the Minister has in front of him. I did not fully realise then—I do now—that Parliament has to decide annually, and every five years by an Act of Parliament, that the armed forces should continue and that discipline should be maintained, as the Minister outlined. Given the significance of the draft order, there is absolutely no doubt in my mind that all Members from all parts of the House will give it their full and rapturous support, realising how necessary it is.

The 2017 continuation order prompted a five-hour debate in the other House last year. It seems that peers took the opportunity to debate a whole raft of issues related to the defence of our country. I understand that the draft order has not yet been debated in the other place this year, but I suspect that, when it is, there will be more quite long speeches. Indeed, I am tempted to make a long speech myself, but I realise that, at five to nine on a Tuesday morning, when Members are not overly enthusiastic, it would not go down too well. [Interruption.] There is dissent. I will confine myself to simply asking a straightforward question of the Minister about the nature of the armed forces and the development of discipline therein.

As we know, the armed forces constantly evolve to meet the new threats that this country faces. Indeed, the nature of the armed forces, with the increase of technology, requires a different kind of person to be in the armed forces and a different kind of commitment, which also implies that a different kind of discipline is required. Will the Minister will take this opportunity to explain to Members how he sees the nature of discipline in our armed forces being maintained in a modern context? With that question and those few words, the Opposition give our full support to the draft order.

I was expecting other hon. Members to seek your attention, Mr Robertson, but in the absence of that I am delighted to respond to the hon. Member for Caerphilly. I would be delighted to continue this debate for a further five hours, but I suspect others may have plans.

While we all appreciate the eloquence of the Minister and my hon. Friend the Member for Caerphilly, this is not the time for long speeches. We all wholeheartedly support this motion.

I absolutely concur with that. The hon. Member for Caerphilly asked about two aspects, the first of which is the importance of discipline in the armed forces. That is the reason why this must come to the fore. We do change the rules on a five-year term. The requirements we expect from those wearing a uniform is different from those in civilian street. A captain on a ship away from UK shores has to know that he or she has the powers to maintain discipline on that ship, indeed, to imprison people if necessary, and to ensure that the crew and personnel are able to work as coherently and effectively as possible.

The element of trust in the armed forces—I say this from my own experience—is at a different level than is found in civilian street. I do not want to judge: others might feel differently. Companionship and comradeship comes of individuals having to rely on each other. They need to know that they can impeccably trust each other, they can leave their kit out, they can leave documents out and they can support each other. When these things go awry or are tested in some way—I have seen instances of this—a court martial will come down harshly on something that seemed quite trivial, simply because it is the integrity of individuals, who need to lean on each other in extreme circumstances, that binds a unit to be able to function as effectively as possible.

Discipline in every sense of the word is fundamental to the existence of our armed forces and to their success. More than that, it also reflects who we are as a nation. When we speak in this House about our hard and soft power, about standing up as a force for good across the world, we should ask who it is that we actually put in harm’s way. It is those in uniform. The standards and professionalism that they express and illustrate is a reflection of our standards. Their commitment, duty and reputation means that they are respected by our allies and feared by our foes. It is because of that high standard of rule of law that we can speak with authority at the United Nations Security Council, in NATO and on other senior platforms across the world. If those standards were to drop and ill-discipline were to creep in, we would not have that reputation that allows us to speak with such gravitas and professionalism across the world.

While I appreciate that this is a statutory instrument and it is a continuation order that we come together to agree every year, what we are actually doing is confirming an important bond, that sense of duty that our armed forces actually have, and the place it holds within Parliament and Government. I hope I have answered the hon. Gentleman’s questions. He talked about his time as a history teacher and the Glorious Revolution. That was absolutely a fundamental document in spelling out the direction of travel for our nation. The Bill of Rights, the Act of Settlement and other changes that came in avoided further revolutions. It is for another day, but it was interesting to read that the Bill of Rights also included the right to bear arms, something that we have managed well—in this country at least—through longevity, unlike other countries around the world. On that controversial note, I had better sit down.

Question put and agreed to.

Committee rose.

Draft Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018

The Committee consisted of the following Members:

Chair: Joan Ryan

† Allan, Lucy (Telford) (Con)

† Bacon, Mr Richard (South Norfolk) (Con)

Bradshaw, Mr Ben (Exeter) (Lab)

† Charalambous, Bambos (Enfield, Southgate) (Lab)

Cooper, Rosie (West Lancashire) (Lab)

† Day, Martyn (Linlithgow and East Falkirk) (SNP)

George, Ruth (High Peak) (Lab)

† Gyimah, Mr Sam (Minister for Universities, Science, Research and Innovation)

† Harris, Rebecca (Lord Commissioner of Her Majesty's Treasury)

† Harrison, Trudy (Copeland) (Con)

Jarvis, Dan (Barnsley Central) (Lab)

† Kawczynski, Daniel (Shrewsbury and Atcham) (Con)

† Robinson, Mary (Cheadle) (Con)

† Smith, Nick (Blaenau Gwent) (Lab)

† Tredinnick, David (Bosworth) (Con)

† Villiers, Theresa (Chipping Barnet) (Con)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

Gail Bartlett, Committee Clerk

† attended the Committee

Sixth Delegated Legislation Committee

Tuesday 20 March 2018

[Joan Ryan in the Chair]

Draft Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018

I beg to move,

That the Committee has considered the draft Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018.

It is a pleasure to serve under your chairmanship, Ms Ryan. The UK wholesale energy markets are of great significance to the UK economy. The large sums involved and the importance of the wholesale energy market for financial services, industry and consumers make integrity of the market a matter of national and international importance. Insider trading and price manipulation in wholesale energy markets harms hard-working consumers and businesses. It drives up prices and distorts markets, which should be fair and transparent. The Government believe it is therefore vital that the energy regulator in Great Britain, Ofgem, has strong powers to investigate and punish those behaving in this way. Strong powers also have a deterrent effect, making those considering cheating the system think twice.

Insider trading and market manipulation in wholesale energy markets is prohibited by the EU regulation on energy market integrity and transparency, or REMIT, which has been in force since December 2011. In June 2013, the Government made civil enforcement regulations for REMIT, the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013. The 2013 regulations give Ofgem powers to impose unlimited financial penalties, access information and enter premises of a regulated person under warrant. In March 2015, the Government strengthened that regime by making further regulations to create criminal offences of intentionally or recklessly breaching the prohibitions on insider trading and market manipulation.

The 2013 regulations gave the regulator power to search for and seize information and documents which appear to be relevant under warrant. There are, however, cases where Ofgem may have difficulty exercising this power of seizure. For example, investigating officers may be presented with a large volume of documents. Identifying documents relating to suspicious transactions among many documents of a similar nature can be difficult and time-consuming. Ofgem currently has no power to take away an entire body of documents in order to sift them for relevance off premises and evidence relevant to Ofgem’s investigation could therefore be missed.

Section 50 of the Criminal Justice and Police Act 2001 enables a person exercising such a power of seizure to remove material from the premises being searched. This information can then be adequately sifted to determine whether it is something which the person is entitled to seize, if it would not be reasonably practical to determine that on the premises. The power in section 50 applies where a person is exercising the power of seizure listed in schedule 1 to the Criminal Justice and Police Act. Over 60 such powers are already listed in the schedule. The effect of this order is to extend this power to Ofgem when it is searching premises to investigate breaches of REMIT. The Government believe that this will be a proportionate and reasonable extension of Ofgem’s powers, which will help to ensure it can take effective enforcement action.

The Government sought views in December 2015 through consultation on whether Ofgem powers should be strengthened to bring them in line with this provision. This measure was consulted on as part of a wider package of reforms to Ofgem regulatory powers. It received relatively few comments, as would be expected for a specialised issue. It is perhaps not surprising that most industry stakeholders who responded to the consultation argued that the powers were disproportionate. One industry stakeholder supported the powers being given to Ofgem with sufficient oversight. Other stakeholders were neutral.

We have considered stakeholder views carefully. We must weigh up the importance of giving Ofgem sufficient powers to tackle anti-competitive behaviour versus the need to respect stakeholder views. With that in mind, the Government concluded that sufficient safeguards will be in place to meet stakeholder concerns and that it will be proportionate to proceed with this instrument. The first such safeguard is that the power will apply only where a court has granted Ofgem a warrant to search premises. Secondly, when Ofgem exercises this power, it will be under a statutory duty to sift information as soon as reasonably practicable after seizing it, and return anything that it was not entitled by the warrant to seize. Thirdly, a person who is the owner of a document can apply to the court for the return of such material. Finally, magistrates may of course refuse warrant applications, preventing a potential investigation where it is not seen to be justified. Ofgem will have to provide extensive evidence to support an application, and therefore we expect it to do so only when it is absolutely necessary to support an investigation.

Further, ensuring that the relevant evidence is identified more quickly should lead to less disruption to those businesses being investigated, with more efficient investigations overall. Co-operation with Ofgem will also ensure that investigations run quickly and smoothly. The Government would certainly encourage those under investigation to help Ofgem in whatever way they can.

In conclusion, this additional power will aid Ofgem in its investigation of market abuse, but with safeguards that should ensure that it is used proportionately. I commend this order to the House.

It is a pleasure to serve under your chairmanship, Mrs Ryan. As the Minister has already set out in detail, the order gives Ofgem additional powers concerning the seizure and examination of documents—I note that those are both paper and electronic—in respect of an inquiry about possible market abuse. We support the idea that Ofgem should have sufficient powers to do these investigations. It is important that Ofgem is able to conduct investigations effectively and properly. We know that on occasions there have been suggestions of market abuse and it is important that the market is as clean as it can be—for example, in relation to energy trading or the relationship between trading and distribution—and that everything is on the table and transparent. In terms of what we are doing over the next period with the price cap, for example, it is particularly important that there are no manipulations of the market to get round regulations. This is a timely addition to the powers that Ofgem has and a timely putting right of the restrictions that it previously had, under the EU REMIT legislation, to search and seize documents. The issue is that Ofgem has the power of search and seizure at the moment, but not the power to take away and look at the documents it has come across, and the order puts that right.

I welcomed the Minister’s setting out of the safeguards that might be in place as far as those seizures are concerned. However, given the wide range of powers that Ofgem has in different areas of the energy markets, it is important that any action by Ofgem is not seen as a fishing expedition. It is important to have confidence that Ofgem, as an even-handed and fair regulator, would not undertake seizures and examinations of material that might then be used for purposes other than the investigation that Ofgem is engaged in. It is important that there are safeguards, particularly on the extent to which Ofgem would need an application to undertake the seizure of the documents, but it is also important that we are absolutely clear that any suggestion that Ofgem has attempted, or will attempt, to remove documents at any point for purposes other than the one that it is centrally engaged in not only should be frowned upon, but would not be countenanced. I would welcome it if the Minister clarified that that is behind what his proposals this afternoon.

The Opposition do not want to delay the introduction of the new powers; I am afraid it is the Government that have done so. The power was first mooted in a consultation, as the Minister mentioned, launched on 18 December 2015. Its urgency meant that responses to the consultation were required by the end of January 2016—a pretty short window. As a result of that rapid turnaround, those people in industry responding to the consultation would have expected action to be taken subsequently. However, 2016 and 2017 came and went, with no response. Eventually, a response to the consultation came on 1 February 2018—more than two years after the original proposals were mooted in consultation. Frankly, that gives no confidence to people who take part in such consultations that what is intended to be done as a result of a consultation actually will be done. Indeed, in this instance, that proved to be the case; nothing was done for two years.

It seems to me quite important that Ofgem has these powers. It was therefore incumbent on the Government at the time to make some progress in translating the consultation into the reality of an order. On this occasion, that has not happened. I do not know whether the Minister has any observations he wishes to make on why that process was so unbelievably slow. Were there good reasons why the process between consultation and the introduction of an order was so slow, or was it just forgotten about, and has only just come back to the surface of the pile, and been acted on? I hope that there is a good reason for the lengthy delay, but I fear that that may not be the case. In any event, I would be grateful for the Minister’s observations on that.

As always, it is a pleasure to serve under your chairmanship, Ms Ryan. I have a few quick points to put to my hon. Friend the Minister, although I broadly welcome the additional powers for the gas and electricity market authority commonly known as Ofgem. First, he mentioned the problem of a large volume of documents. What exactly is a “large volume”? Does that mean that any documents of any kind can be taken? Are there any limits to that provision?

Secondly, the Minister mentioned the responses. There were only 20 responses altogether, albeit they may have come from important and large organisations. Were there any notable exceptions? I could not hear all of his speech, so he may have mentioned that, in which case he will no doubt make that point. Thirdly, and most importantly, the order addresses the issue of documents stored electronically. We have had a lot of problems with electronic media in the news recently. Is this a blanket power? Does it mean that people could access Facebook accounts? Could they seize mobile phones? Are those electronic documents? What if documents that are relevant to an investigation have been photographed and stored on an iPhone? How would that work? If my hon. Friend is not able to address those issues today, perhaps he would write to me.

I thank hon. Members for their valuable and relevant comments on the order. The first point made by the Opposition spokesperson was about whether this power would encourage fishing expeditions on the part of Ofgem. To assuage his concerns and those of the Committee, the terms of the warrant to conduct seize and sift will be clear and well defined. Ofgem will only seize and retain information that is relevant to the investigation at hand and specified in the warrant.

There was also concern about the timing and the sense of urgency regarding the consultation and the path to where we are now. The Government have been considering priorities against a very restricted legislative timetable, as the hon. Member for Southampton, Test, will be aware. A decision was taken in July 2017 to take forward the proposals on REMIT separately from the other proposals in the consultation. The timeline was driven by the non-REMIT part of the consultation, which included proposals for new primary legislation, on which decisions were due to be taken in early 2016. The opportunity for that decision to be taken was then delayed. I hope that that gives some background on the timing.

The other piece of secondary legislation to which the Minister has referred comes under another area of law and, as far as we understand, that has been laid before Parliament as a negative statutory instrument and will come into force on 9 April, I think. That appears to suggest that the two bits of legislation that were set out in the consultation ran in parallel and not separately, as he appears to be suggesting.

The basic point is getting the time. The hon. Gentleman is aware of the restrictions on the legislative timetable. As he rightly recognises, this is a timely addition to the powers of Ofgem that provides safeguards as far as seizure is concerned. As a relatively new Minister in the Department, I welcome the fact that we are able to get on with it. I refer to what the hon. Gentleman said: it is important that action is taken, and is taken swiftly. That is why we are here.

I turn to the comments made by my hon. Friend the Member for Bosworth. I am happy to write to him to give some detail on the definition and how many documents constitute too many documents. To give the Committee an idea, there may be many documents of a similar nature—for example, buy and sell orders—that may appear relevant to an investigation. Rather than going through someone’s social media accounts, if we think about the number of trades that are conducted in any given day or any given period, it might not be possible to sift all of them on site. I am happy to write to Committee members to illuminate in more detail the definition and limits of what counts as far as documentation is concerned.

On electronic media, will the Minister look at whether iPhones and other types of equipment are covered?

Documents that are stored electronically are definitely included. I do not think that extends to social media accounts. I will write and set that all out in detail.

I have to say to my hon. Friend that it should. He needs to look at this, because we now have such a wide range of communication systems at our disposal that it is pointless coming forward with an order that does not cover all the possibilities. I think that should be addressed.

As I have said, I will write to my hon. Friend to set out in full detail all the electronic media that are covered. That will be the best way to proceed so that he has a comprehensive answer to his questions.

The order provides Ofgem with the necessary tools to aid its enforcement efforts in this area. That is self-evident. The proposed seize-and-sift power will enable Ofgem to scrutinise information thoroughly and to identify what is relevant. It will do so under the scrutiny of the magistrate’s warrant, which is an important safeguard. It will contribute to Ofgem’s ability to effectively investigate and prosecute market manipulation and insider trading offences. I commend the order to the Committee.

Question put and agreed to.

Committee rose.

Draft Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018

The Committee consisted of the following Members:

Chair: Albert Owen

† Badenoch, Mrs Kemi (Saffron Walden) (Con)

† Davies, Mims (Eastleigh) (Con)

† Debbonaire, Thangam (Bristol West) (Lab)

† Eustice, George (Minister for Agriculture, Fisheries and Food)

† George, Ruth (High Peak) (Lab)

† Henderson, Gordon (Sittingbourne and Sheppey) (Con)

† Keegan, Gillian (Chichester) (Con)

† Latham, Mrs Pauline (Mid Derbyshire) (Con)

† Lynch, Holly (Halifax) (Lab)

McCarthy, Kerry (Bristol East) (Lab)

† McMorrin, Anna (Cardiff North) (Lab)

† Menzies, Mark (Fylde) (Con)

† Morris, James (Halesowen and Rowley Regis) (Con)

† Pollard, Luke (Plymouth, Sutton and Devonport) (Lab/Co-op)

† Pow, Rebecca (Taunton Deane) (Con)

Sheerman, Mr Barry (Huddersfield) (Lab/Co-op)

† Turley, Anna (Redcar) (Lab/Co-op)

Sarah Rees, Committee Clerk

† attended the Committee

Seventh Delegated Legislation Committee

Tuesday 20 March 2018


[Albert Owen in the Chair]

Draft Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018

I beg to move,

That the Committee has considered the draft Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018.

I am pleased to open this debate on an important set of regulations introducing an updated system of local authority licensing of activities involving animals in England. These regulations meet the Government’s manifesto commitment to continuing its review and reform of the pet licensing controls and, specifically, to updating the licensing system for dog breeding, pet sales, riding establishments and animal boarding establishments. They also modernise a system for animal exhibits.

The licensing and registration system that covers these five animal activities is outdated and complex. The activities are regulated under a number of different pieces of legislation: the Performing Animals (Regulation) Act 1925, the Pet Animals Act 1951, the Animal Boarding Establishments Act 1963, the Riding Establishments Act 1964, the Breeding of Dogs Acts 1973 and 1991 and the Breeding and Sale of Dogs (Welfare) Act 1999. They will be repealed and replaced with new regulations that consolidate and update the requirements set out in each of the Acts in one consistent licensing scheme. This new licensing will have more streamlined processes of application, inspection and enforcement, reducing the burden on local authorities and businesses while improving consistency of application across the country.

One of the key issues with the licensing system is that the animal welfare standards with which businesses are required to comply have not been updated for many years. The schedules to the new regulations include detailed animal welfare standards for each activity. We have worked closely with stakeholders from the industry, animal welfare organisations, local authorities and veterinary bodies in drafting these standards and we are grateful for their support—in particular the Canine and Feline Sector Group and the Equine Sector Council for helping to co-ordinate this work. These new standards will ensure that anyone who receives a licence for dog breeding, selling pets, boarding dogs and cats, hiring out horses or keeping or training animals for exhibit will need to meet these new minimum welfare standards. This should help drive up animal welfare standards across all of these sectors.

Many people and organisations have been calling for more restrictions to be placed on the breeding and selling of dogs in particular, where it is felt there are unscrupulous businesses that breed dogs in poor conditions for maximum profit. The regulations address this in a number of ways. First, we are making changes to the definition of dog breeding, to ensure the regulations capture both large-scale dog breeders as well as smaller-scale dog breeding businesses. Under the new regulations, anyone who is in the business of breeding and selling dogs will need a licence. In addition, breeders who are not classed as a business will also need a licence if they breed three or more litters a year and sell any of them. Overall, this will ensure that more breeders are captured under the regulations and will need to comply with the high animal welfare requirements set out within them, while also ensuring that we crack down on unregulated backstreet breeding.

Secondly, it is important to acknowledge the sad fact that many unsuspecting potential buyers are providing a lucrative market for rogue dog breeders and animal dealers who work illegally, outside the licensing system. Therefore, the regulations include a number of measures that will help consumers identify these rogue traders and make more informed decisions when purchasing an animal.

On that point, can the Minister confirm whether unlicensed breeders, specifically those falling below the threshold for licensing, will still be able to sell puppies to pet shops and dealers if they are under eight weeks of age?

The situation described by the hon. Lady, as I outlined, would be captured. Under HMRC’s badges of trade, which define what trade is, anyone breeding for the purpose of selling to pet shops would be covered by these regulations, even if they were breeding fewer than three litters a year.

The regulations include a number of measures that will help consumers identify these rogue traders and make more informed decisions when purchasing an animal. Licence holders are required to publish their licence number on all adverts, including online adverts, so that consumers can check with the relevant local authority that it is a legitimate business. All licensed businesses will also receive a risk rating—from one to five stars—based on their welfare standards and compliance record. That is a similar system to the one used in food hygiene rating schemes. For puppies, there is an additional requirement that any sale be completed at the premises where the puppy was bred to make sure that the purchaser sees the puppy and the conditions in which it has been kept before making the final purchase. All licensed pet sellers are also required to provide purchasers with information about how to care for the animal they are buying.

These measures will ensure that consumers can make more informed decisions when buying an animal, and are better able to care for it once they have taken it home. This is particularly important for some of the more exotic species, such as reptiles, which are becoming more common as pets these days.

Many people are concerned about the increase in the online sale of pets. Dating as it does from 1951, the current legislation is not clear on whether these businesses require a licence. The legal position is that they already do. However, as a result of the lack of clarity, enforcement is inconsistent across the country. Under the new regulations, the issue is put beyond doubt: all commercial sales require a licence, including those that take place online. All these businesses will have to comply with the minimum welfare standards set out in the regulations. These measures will ensure that the licensing system is consistent and fit for purpose in this modern age.

The Minister is outlining an excellent procedure for the star rating and the licensing of online, as well as other, sales, but that will require considerable enforcement and monitoring by local authorities. What resources are being given to local authorities to perform all these tasks?

Local authorities can recover the full cost of their licensing regime through the price of the licence that they issue. Resourcing is not a problem; they can go for full cost recovery and the regulations provide for that.

I should point out that the licensing system is run by local authorities and, as I said, funded by full cost recovery—the hon. Lady got there just before I reached that point— so there is no financial burden on local authorities. Licences can also be issued at any point in the calendar year, which will help to spread the workload across the year. The maximum licence length that can be issued is increased from the current one to three years, with longer licences going to businesses with earned recognition.

This earned recognition will be based on a combination of past history of compliance and the animal welfare standards adopted by the business. Businesses with high animal welfare standards and high historical levels of compliance, or those associated with a body accredited by the United Kingdom Accreditation Service—such as the Kennel Club’s assured breeder scheme—will be able to achieve the maximum three-year licence, leading to less frequent inspections and a lower fee. They will also achieve a five-star rating to demonstrate their high quality to consumers.

The risk-based system should reduce the workload for local authorities, allowing them to spend more time on enforcement of unlicensed and less compliant businesses. That will also reduce the burden on good businesses and therefore provide an incentive for businesses to improve welfare standards.

We recognise that the implementation of these regulations will be crucial to their success and so local authority inspectors will be required to undertake specific training on licensing and inspection. That will ensure that they are suitably qualified to undertake inspections for all the animal activities covered by the regulations. The regulations have been drafted in consultation with stakeholders from industry, animal welfare organisations, local authorities and veterinary bodies, and we are grateful for all the assistance they have offered. The regulations are proportionate and targeted and will help improve animal welfare across a number of sectors. I therefore commend them to the Committee.

May I join the Minister in saying what a pleasure it is to serve under your chairmanship, Mr Owen? I am grateful to him for his opening explanation. We are in agreement that the statutory instrument is a step in the right direction, but we will take this opportunity to seek clarification on certain areas and outline reservations that this is a missed opportunity to go further in certain other directions.

There are 2,300 licensed pet shops, 650 licensed dog breeders, 1,800 licensed riding establishments and 6,300 licensed animal boarding establishments in England alone. That is why guaranteeing the welfare of the animals within the system presents such a big challenge for local authorities. Collectively, these businesses make up the fourth largest group of establishments requiring licences issued by local authorities after premises, taxis and gambling establishments. We welcome the opportunity to update the existing legislation, which is contained predominantly within five Acts, as the Minister said, that date back as far as 1925. They are therefore certainly in need of an update.

It is important to account for changes within the sector, new and varied routes to market, updated guidance on animal welfare and changing social attitudes but, perhaps most importantly, it is important to clamp down on those who go beyond poor animal welfare and seek to exploit animals for the purposes of criminal activity and gain. With that in mind, we are pleased to see that under the regulations puppy sales are required to be completed in the presence of the new owner and with the puppy shown with its mother. That is to prevent online sales, which have increased dramatically in recent years and have prevented the buyer from seeing the animal first.

However, the regulations do not prevent the third-party sale of puppies, which is a massive missed opportunity. I heard the Minister’s comments earlier, but the Labour party outlined the pledge in our 2017 manifesto, and we reiterated it in our recent animal welfare plan, which has been endorsed by the League Against Cruel Sports, Compassion in World Farming and the World Wide Fund for Nature. Battersea Dogs and Cats Home and the Royal Society for the Prevention of Cruelty to Animals support calls for a ban on the third-party sale of puppies, so why stop short of delivering on that? It would address the issues much more comprehensively than the proposals before us today.

We also want to stress in the strongest possible terms that with the best will in the world, the fewer numbers of staff at cash-strapped local authorities cannot perpetually become experts in the increasing number of fields for which we are asking them to take responsibility. Whether it is environmental health inspectors or licensing officers, when I follow up on casework I am increasingly being told, “The person who knew about that topic does not work here anymore, and I am afraid we haven’t got anyone else.”

Minimum standards are already outlined in guidance, but the Government’s own findings suggest that fewer than one in three local authorities use the guidance when carrying out inspections, and I would imagine that that is a resourcing and time issue as much as anything else.

Regarding the resourcing of local authorities, obviously they have to provide the personnel to start with. To monitor the licensing and enforcement, they have to provide up-front training. If they are doing the enforcement side of it, that does not pay as well as the licences themselves. Does my hon. Friend share my concern that if there is a lot of enforcement, that could raise the level of licence fees to a disproportionate level for breeders who are prepared to pay for them?

My hon. Friend made a couple of key points there. I will come on to talk in detail about the issues she raised, and I hope we will hear the Minister respond to those points, which she made powerfully.

Thinking about resourcing, how do the Government propose to overcome some of the challenges through the new regulations? The impact assessment admits that local authorities may struggle to deliver the new regulations—that was my hon. Friend’s concern—that will be brought into force by 1 October this year. The impact assessment accepts that under this Government, authorities are

“unlikely to acquire additional resource”.

Instead it suggests that to meet demand, authorities may have to reprioritise existing activities. Will the Minister be clear about what local authorities should reprioritise? Is it licences for selling alcohol, taxis, gambling, houses in multiple occupation or tattoo parlours? We all appreciate that that is incredibly important work.

To get down to the detail, the impact assessment assumes a one-off familiarisation cost of two hours’ work per local authority. That is one hour for a staff member to understand the new guidance and a further hour to disseminate that information to other staff members, with a combined national cost to 356 local authorities of just under £11,500. I can only take from that information that one licensing officer will get the training and then is expected to educate the other members of the team. However, the impact assessment specifically says “disseminate” the information. The impact assessment accounts for two hours for one person, which does not allocate a time or cost for the rest of the team to even read the information disseminated, or take part in any internal training, during working hours. With that in mind I will give the Government the benefit of the doubt, and suggest that this impact assessment is just lazy, and provides an inadequate assessment of what the cost would be to get this right in the way that I am sure the Minister intended—because the alternative is that it exposes a fundamental lack of commitment to the training that will be intrinsic to delivering the regulations, and improving animal welfare. I am sure that that is not the case.

We are also keen to better understand how breaches of licence conditions will be penalised—which comes back to the point made by my hon. Friend the Member for High Peak—and what the consequences would be for those seeking to obstruct a licensing officer. Three years is a significant period of time for those establishments that have a good inspection and are rewarded with a lengthy inspection-free period, based on the assessment of risk. However, if a member of the public or an employee, for example, raised concerns with the local authority that changes had occurred and animal welfare had declined in that period, would that mean that further inspections could be brought forward, as we hope would be the case? I would be grateful if the Minister can confirm that today.

We would also like to put on record our regret that the threshold for these new regulations is three litters per annum, which is still an intensive breeding regime for a dog. Why did the Minister draw the line at three litters and not reduce the number to two per year, or even one, as called for by organisations such as the Dogs Trust?

We firmly believe that these measures are a step in the right direction, but I hope that the Minister will offer us some clarity on the issues that I have raised. In particular, can he revisit the training element of these new regulations, as that will be absolutely key if the measures are to be effective? I would be grateful for his assurances that the impact assessment will be reconsidered and that the training will be delivered properly.

It is a pleasure to serve under your chairmanship, Mr Owen. I am sure that all Members here share my desire to see the highest possible standards of animal welfare in the UK. Indeed, as a dog owner myself, and someone who has pushed recently for changes in legislation on animal cruelty, this policy area is close to my heart, and I am glad of the opportunity to speak briefly on this topic today.

Every week, I receive letters and emails from constituents concerned about the welfare of animals. We are a country of animal lovers and the strength of feeling on this issue is huge. When cases of the mistreatment or abuse of defenceless animals come to light, they are emotive and shocking, and people are right to ask what can be done to prevent similar cases occurring in the future. These cases remind us that Parliament has a key role in keeping animals safe in England, and that will be true regardless of the outcomes of negotiations on leaving the European Union.

We must stay one step ahead of these abusive practices by looking at ways that we can raise standards. There is no room for complacency, and where there is evidence of wrongdoing occurring within the system, and there is scope to tighten legislation, then it must be addressed. Our understanding of the behaviour and needs of animals is constantly changing too, and it is good to see this instrument attempt to update regulations to reflect that. It shows that we must always have this issue on our minds, and we can always do better. I am pleased to see that this instrument has been brought forward after a successful public consultation and has taken into account quality, evidence-based submissions on how the current licensing arrangements can be improved. We have some of the best animal welfare charities in the world, and I am very proud of the work that Dogs Trust, the RSPCA, Battersea Dogs and Cats Home, and others have done to feed into this work.

I am satisfied that there are a number of sensible and timely reforms to the system within this instrument, and many measures that are non-controversial, and ought to be non-partisan. There are however some concerns. This instrument brings welcome new standards of good practice and addresses concerns around problem areas. I will wait to see the results before cheerleading, but it is welcome that the Government have made specific reference to the rise of online sales of pets, where there is a danger, as with all online activity, that regulation cannot keep up with fast-moving trends. There has been much work by animal welfare organisations and others through the Pet Advertising Advisory Group to improve the standards of animals advertised for sale via online websites. It is a positive step forward that this instrument will now enshrine that work in law, making it applicable to all licensed individuals wishing to sell their pets in this way, regardless of the platform that they use.

I would like to highlight a point mentioned by my hon. Friends the Members for Halifax and for High Peak, which is that these regulations must not lead to overworked local authorities. The impact on public confidence in the licensing process and on the ability to deliver licensing will be severe. The current application process for licensing puts pressure on businesses and local authorities by limiting licences to a calendar-year framework. Therefore the introduction of licences issued for a fixed term, set at any point in the year, is an eminently sensible measure that will prevent a backlog of inspections and paperwork at the end of the year. Local authorities are already under strained financial pressure to deliver services as it is, and working to ease this pressure is an important part of making the system work.

I believe that the inclusion of an earned recognition principle into the licensing system is a good step to incentivising good behaviour, and can potentially alleviate burdens on local authority time. However, we must be careful that this is a measure to drive up standards, and is not used to circumvent proper inspections when local authorities are under particularly difficult time and financial constraints.

I will support this instrument, but I want to finish by asking the Government questions, some of which I know my hon. Friend the Member for Halifax has mentioned before. How can we be sure that local authorities are sufficiently ready for the implementation of these regulations before the 1 October deadline? What steps will the Government take to support local authorities struggling with the implementation? Has there been any consideration of setting up a national unit of inspectors that could alleviate the burden on local authorities, and also help to provide much-needed animal welfare standards expertise for inspections?

I am grateful for the supportive comments from both hon. Ladies who have made a contribution to the general approach we are taking. They have raised some specific issues that I will try to address.

The shadow Minister raised the point of third party sales. I hope that she is aware that on 8 February 2018 we issued a call for evidence on this matter. It has been discussed a little bit in the last few years as we have progressed these issues. The general view that we have taken is that if we can tighten up on internet sales and make it clear that people selling online are registered pet shops and pet dealers and therefore require a licence, it will go some way to addressing these challenges, but we are aware that a number of organisations have made and continue to make representations on third party sales, and that is why we have a call for evidence out on this at the moment. We will have many representations on that so we are addressing and dealing with that point through that approach.

The hon. Member for Halifax also mentioned resourcing. As I explained at the start, local authorities can recover the cost of both the enforcement and the licensing regime through the cost of the licence that they issue. We are now working closely with local authorities to put together guidance to help to inform people of the length and scale of the charges that would probably be imposed for licences of different lengths, and they will be able to recover all of their costs through the licence cost.

Does the Minister agree that deciding to set the licensing threshold for dog breeders at one or two litters would bring more breeders on to the radar in terms of licensing?

If it is okay with the hon. Lady, I will return to the issue of the threshold set on the number of puppies. Even as a backbencher from 2011, I looked closely at this issue over a number of years, and I think we have arrived at the right place, but I will return to that.

I will say a little bit more about resourcing. As the hon. Member for Redcar correctly pointed out, by making sure that the licence can start in any month of the year—so it is a 12-month licence, not a calendar year licence—we spread the workload for local authorities. With the ability to have earned recognition for the best performing establishments of up to three years, we will also therefore reduce the workload in that regard. The combination of the ability to recover the cost of the licence—the regulation provides for that—and the evening out of the workload will help local authorities.

The shadow Minister raised the point about the consistency of application. We recognise that this has been a bit patchy in the past. It varies from local authority to local authority. That is why we will address that by requiring, for the first time, training of those carrying out the licensing. That will address that particular concern.

I am grateful for the opportunity to make an intervention. Returning to the impact assessment, that training is for just one member of staff. While there is a responsibility on that member of staff to then disseminate information within the team, there is no accounting of time or cost for people to be involved in that training, to listen to and digest it, and to be informed when they are then going about their business. Is that an error within the impact assessment or is that intentional?

I was going to move on to that. The hon. Lady raises the issue of familiarisation. These regulations consolidate a number of other existing licensing regimes. So it is not as though we are starting from scratch. All local authorities will have people who have some familiarity with the existing regulations. We are changing, improving and consolidating it, but the starting point is that they are familiar with the regulations that exist today. The second point is that when I was handling this part of the portfolio—it is now with my noble Friend Lord Gardiner—in 2015, we were actively engaged in discussing this issue with local authorities and we have been ever since. To get to the stage we are at today there has been an enormous amount of dialogue with local authorities on these regulations and the approach we are taking. It is an approach that they have supported and, in effect, co-designed with us.

Local authorities are already under enormous pressure enforcing the existing regulations. In my area of High Peak, we have not seen a single prosecution for raptor death in the last year and raptors have been reduced from 15 pairs down to one. This is going on, but the law is not being enforced, because enforcement and prosecution in particular take up a vast amount of time and resources that local authorities simply do not have.

The hon. Lady is taking us into a slightly different area, which is wildlife crime and persecution of raptors, but she will be aware that we have the national wildlife crime unit, which also addresses this particular issue. It is a challenge. However, as I have said a number of times, local authorities can recover the costs of running this licensing regime and the regulations have provided for that.

The shadow Minister raised an important point, particularly given that there could be a longer licence, what are the remedies if there is a breach of the licence? That is an important point because, somewhat astonishingly, the existing regulations—with the exception of the Performing Animals (Regulation) Act 1925—have no provision at all to revoke the licence. It is an annual licence and the remedy effectively was that it would not be renewed if there was a breach. We do not think that is sufficient or acceptable. In a new addition we have brought in, these regulations enable local authorities to revoke and suspend licences where a breach has occurred. The establishments affected will have the ability to appeal, if they wish, to a first-tier tribunal, so we would make provision for an appeals process. This is the first time that local authorities will have the power to revoke or suspend licences. That is new. It gives us the confidence to grant those longer-term licences where operators have demonstrated a high degree of compliance and a commitment to high-level animal welfare.

May I just query, in those circumstances where a licence is revoked, for example for a dog breeder, what would happen to the animals within their care?

In a situation such as that, the animal welfare officers at local authorities already have the power to intervene, to take those animals away and find a way to re-home them, probably with rescue charities, other breeders or other establishments that retain a licence. They have the powers to facilitate that already. On the issue of the threshold of the number of puppies, as I said earlier, I looked at this in depth as a Back Bencher and it might be worth dwelling briefly on the history. Until, I think, 1999, if someone bred more than two litters—that is, three litters or more, the same as we are proposing now—they required a licence. As a result of a debate that took place in the House of Commons regarding concerns over commercial, large-scale puppy farms, a direction was given that resources should be focused on large-scale puppy farms rather than smaller breeders.

As a result, a Home Office circular was sent out, in effect giving guidance to local authorities that they should follow a threshold of five litters or more. I am not going to make a political point; that took place under the last Labour Government, but it was done with good intentions, to try to target resources where the greatest concern lay, as Parliament saw it in those days, which was large-scale puppy farms.

What we have subsequently found, particularly in the last decade, is a worrying growth in what I would term backstreet breeders, particularly people breeding status dogs. Those are people who are not really fit to raise dogs or to look after puppies. To make it worse, they often raise them, and try to train them, to be aggressive. There has been a worrying trend of status dogs, which started in around 2005 and has run for the last decade. The change we are making will capture those people again, by effectively reinstating the position as it was until 1999.

There is always an argument that we could go further, but we can review this. The regulations will be reviewed every five years, and if the feeling of the House at that time is that there is a reason to change the threshold again—maybe putting it up or down; it tends to move quite often—there will be an opportunity to do so at that point. Having looked at this, to put the position back as it was and to put it back in line with legislation introduced by the Welsh Government, which also has a threshold of three litters or more, is right.

The final thing I would say is that, notwithstanding the second criterion of three litters or more as a threshold, if somebody were breeding fewer than that but were doing so commercially and regularly selling those puppies, they would still be captured by the need to have a licence under the badges of trade criterion, which is included in the legislation.

It would test my skills to find the correct location. I am not sure that there is a specific staff-to-dog ratio, but if the hon. Lady looks in the schedules of the statutory instrument, she will see that when it comes to both pet shop and dog breeding establishments there are detailed statutory codes that people must follow. It sets out things about the amount of social contact there must be with dogs, the feeding regime, the availability of water and bedding, and socialisation of the dogs. That is all set out in some detail through the new statutory code that we have worked up with the industry.

I thank the Minister for giving way again. I will just state that in the Welsh Government’s legislation there is a minimum staff-to-dog ratio of 1:20. I see he has a piece of paper.

My officials have very helpfully helped me out. The specific issue of a ratio is not in the regulations. Lots of other things are, and I commend them to hon. Members, because we have worked them up with the industry. The ratio of staff to dogs will be contained in and addressed through the guidance that goes to local authorities alongside the regulations.

I will briefly conclude by addressing some of the points raised by the hon. Member for Redcar; I know she has introduced legislation, through a private Member’s Bill, to address some of these issues. I welcome what she said about earned recognition, which was something I was always keen to support because we know there has been quite patchy application of the regulations by local authorities. My view was always that if we had a way of recognising those who are signed up to UKAS-accredited schemes or who demonstrate strong compliance, it frees up the time of local authorities to target the people we really want to hit—those who are trying to avoid or evade the licensing regime, and about whom we have concerns.

The hon. Lady asked whether local authorities are ready for this. The commencement date is 1 October. I believe they are ready, because, as I said earlier, we have been talking about this for quite some time. We first started engaging with local authorities on the emerging regulations in 2015 and they have been involved in their co-design. They will welcome the changes, because they will enable them to issue longer licences and to spread their workload across the year. They are ready for it and they have had lots of time to prepare. We will also issue guidance and work with them over the next six months to ensure that they are ready.

Finally, the hon. Lady asked whether there should be a national unit dedicated to enforcement. We looked at that, but we concluded that it would be the wrong way to go. Licensing regimes have traditionally been run by local authorities. We want to improve the way they are run and the consistency of enforcement, which is why we will have training. We want to enable them to take a risk-based approach to their licensing regime. We want them to be able to recover their costs so that they can do the job effectively. It is right, however, that local authorities, with local people on the ground, run this kind of licensing regime.

You have missed the opportunity, unless the Minister is feeling over-generous and has not quite finished. Does he wish to take an intervention?

I am grateful to the Minister for taking a final intervention. Could he clarify how the public will be able to validate a seller’s licence? Will there be a publicly accessible list of all licensed breeders and sellers?

There will not be a publicly available list as such, but, as I said, those who are selling animals will be required to display their licence number on their websites. Our view is that it should be a risk-based approach. If someone has concerns about the validity of a particular licence and believes that fraudulent behaviour is happening, they should be able to raise that with their local authority.

I was always supportive of requiring licence numbers to be stated on websites and on online adverts because it gives local authorities an easy surveillance tool to check whether people who claim to be in Sheffield and to have a licence in Sheffield actually have such a licence. It is an easy way for people to self-volunteer, and it makes enforcement by local authorities very easy. On that final point, we have had a constructive and useful debate, and I commend these regulations to the Committee.

Question put and agreed to.


That the Committee has considered the draft Animal Welfare (Licensing of Activities involving Animals) (England) Regulations 2018.

Committee rose.

Draft Non-Domestic Rating (Rates Retention and Levy and Safety Net) (Amendment) Regulations 2018

The Committee consisted of the following Members:

Chair: Stewart Hosie

† Brokenshire, James (Old Bexley and Sidcup) (Con)

† Davies, Chris (Brecon and Radnorshire) (Con)

Hepburn, Mr Stephen (Jarrow) (Lab)

† Leslie, Mr Chris (Nottingham East) (Lab/Co-op)

† Lewer, Andrew (Northampton South) (Con)

† Lucas, Ian C. (Wrexham) (Lab)

McFadden, Mr Pat (Wolverhampton South East) (Lab)

† McMahon, Jim (Oldham West and Royton) (Lab/Co-op)

† Mercer, Johnny (Plymouth, Moor View) (Con)

† Morden, Jessica (Newport East) (Lab)

Morgan, Stephen (Portsmouth South) (Lab)

† Morris, Anne Marie (Newton Abbot) (Con)

† Pawsey, Mark (Rugby) (Con)

† Perkins, Toby (Chesterfield) (Lab)

† Philp, Chris (Croydon South) (Con)

† Sunak, Rishi (Parliamentary Under-Secretary of State for Housing, Communities and Local Government)

† Tolhurst, Kelly (Rochester and Strood) (Con)

Nehal Bradley-Depani, Committee Clerk

† attended the Committee

Eighth Delegated Legislation Committee

Tuesday 20 March 2018

[Stewart Hosie in the Chair]

Draft Non-Domestic Rating (Rates Retention and Levy and Safety Net) (Amendment) Regulations 2018

I beg to move,

That the Committee has considered the draft Non-Domestic Rating (Rates Retention and Levy and Safety Net) (Amendment) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Hosie, and to be in these grand surroundings, as befits this grand topic. The regulations make amendments to the administration of the business rates retention system. The scheme, which was introduced with effect from 1 April 2013, allows local government to keep a percentage of the business rates they collect from local ratepayers. Initially, local government’s share was set at 50%, but in 2017-18, 27 local authorities in five areas—Cornwall, Greater Manchester, Liverpool City region, West Midlands and the West of England—were allowed to keep all the business rates they raised. In addition, the Greater London Authority’s share of business rates was increased from 20% to 37%.

In June of last year, the Government gave every other local authority in England the opportunity to become a 100% business-rates pilot. So popular did that invitation prove that 212 authorities in 26 different areas applied to become 100% pilots in 2018-19, which reflected the desire of local authorities to take more control of the local tax base and to potentially secure additional income by keeping all the benefits of local growth. In the event, we were able to extend 100% rates retention to a further 122 authorities in 11 areas—Berkshire, Derbyshire, Devon, Gloucestershire, Kent, Leeds, Lincolnshire, London, Solent, Suffolk and Surrey. Taken together with the original pilots and based on their own estimates, authorities might have as much as £700 million more income in 2018-19 as a result of keeping 100% of their business rates growth.

The regulations give administrative effect to the new 100% pilots and make two other principal changes. First, they make changes to each authority’s tariff or top-up as a consequence of the 2017 revaluation. Tariffs and top-ups are the means by which we redistribute business rates income between richer and poorer authorities under the local government finance system. They were originally set in 2013-14 and since then have only been uprated by inflation. However, in 2017-18, local authorities’ income from business rates changed, not because of any growth in the underlying rates base, but as a result of the business rates revaluation. In last year’s settlement, we adjusted the tariffs and top-ups to strip out the impact of the revaluation, but we said at the time that we would revisit and revise the adjustments in the 2018-19 settlement to reflect updated data.

Revised tariffs and top-ups based on the updated data were approved by the House as part of this year’s local government finance settlement and in 2018-19, authorities will pay or receive the tariffs and top-ups set out in the local government finance report for 2018-19. Those tariffs and top-ups also need to be used in the administration of other parts of the rates retention system, principally in the calculation of the levy and safety net payments. The regulations therefore ensure that levy and safety net calculations are made using the revised values for tariffs and top-ups for last year and the forthcoming year.

Finally, the regulations make changes to the time period for which local authorities will be compensated by the Government for the relief they give businesses in enterprise zones. I am sure Members of the Committee know that, under the rates retention system, authorities are entitled to keep all of the growth in business rates in enterprise zones. There are more than 200 separate zones in more than 100 local authorities. As part of their efforts to regenerate zones, authorities are able to give business rates relief to new businesses relocating there. The Government then compensate local authorities for the relief they give, by allowing them to deduct the cost of the relief from the payments they make to central Government under the rates retention scheme.

The first enterprise zones created in 2013 were entitled to compensation for the relief they gave for up to five years, until 31 March 2018. That period, set out in the rates retention regulations, has not changed since, despite the fact that that we have set up new enterprise zones in 2014, 2015, 2016 and 2017. In order to ensure that all of these later enterprise zones can also receive compensation from Government for relief for up to five years, the regulations now tie the period for which authorities can receive compensation to the specific date on which the enterprise zone came into being. This puts all enterprise zones in the same position, regardless of when they were created.

Before concluding, I would like to bring to the Committee’s attention a written ministerial statement made earlier today that relates to a historic error identified in the methodology used to calculate the sums due to 100% business rates retention pilots. The written ministerial statement details the steps taken to address this error. Given that this is not the direct subject of today’s debate I will not go into further detail as it would not be appropriate, but I wanted to flag this up to the Committee and I am happy to answer any questions.

The regulations before the Committee make technical changes to the regulations governing the administration of the business rates retention system to ensure that the scheme works properly following the revaluation to allow new 100% rates retention pilots to operate from 1 April 2018, and to ensure parity of treatment between all enterprise zones. I commend the regulations to the Committee.

It is a pleasure to serve under your chairmanship, Mr Hosie. In line with the Local Government Association— the cross-party organisation representing local government —we are keen to see more progress being made on giving local authorities more sustainable forms of income. Where they play an active role in growing their local economic base, they should see the value in doing that. We have not yet seen a real assessment made of the implications of the 100% retention scheme through the initial pilots with the first wave of local authorities. We know that the Government hold limited data on what that means, and we know that there are significant capacity issues within the Department itself. Between 2011 and 2017, there has been a 39% reduction in full-time equivalent staff working on the 100% retention scheme, so we are not convinced that the Department has the proper capacity to see this through and to monitor, evaluate and importantly to ensure that any risks are mitigated in then allowing a new wave of applications to come forward.

Local authorities are also concerned that London was given the option of no detriment but the same offer was not made available to new authorities applying to the scheme. Authorities outside London will quite rightly ask why we have one rule in place for London, while authorities outside London are being asked to apply to a different scheme with different rules and safety nets in place. I would be grateful for clarification on that.

As to the scheme’s risks, we know that local authorities have had to prepare for the eventuality of ratings appeals. Businesses that do not agree with their ratings position make the appeal in the right way, but under this scheme the risk of that falls partly to the local authorities. In cash terms £2.8 billion has been put aside by local authorities as part of a first tranche of rate retention to prepare for the eventuality that those appeals might be successful. That is £2.8 billion that could be used for public services at a time when local government services are under significant pressure.

We have not yet seen evidence that the Government have had a thorough piece of research done to understand what this would mean if it were rolled out for the whole of England. We know that the Government have approached local authorities who would be in a net position, so they have taken away the equivalent grant that the local authorities are getting in cash terms for the rates that they are able to retain. However, we are unable to say what that means for the country. Cherry-picking a local authority that has no cash difference to the Treasury is okay, but some local authorities will always require more in grant funding than they can generate in business rates in the local authority area. We have not seen what the Government’s approach would be for that.

We have also not understood why we have pilots running on the one hand with a number of local authorities, while on the other hand we have the promise of a fair funding review to be carried out, but we have not had much detail on how the two will talk to each other. The Government need to be clearer on this. What lessons will be learned from the pilots that have been undertaken so far? What mechanisms will be put in place to ensure lessons are learned from the next wave of local authorities? How will that be hard-wired into the fair funding review to ensure the total amount of money that is available to local government to deliver local public services is sustainable in a 100% retention model? If the Government provide that information, we would be happy to sit down and scrutinise it.

What assessment have the Government made of the benefits and risks of the growth and decline of business rate bases at a local level? At the moment, the business rate bases that local authorities are in receipt of are generally historical. They have developed over many years—50 years, 100 years, and for some towns and cities many hundreds of years. The Government have provided very little evidence of how individual local authorities have by their own actions fundamentally changed the business rate bases in their areas. The Government are saying to local authorities, “If you are responsible for a geographical area and an economy that has done well historically, you will be able to capture that growth,” without any evidence that the local authority has actively contributed to the growth. The local authority of another town or city may be working hard to try to grow the local economy, but due to its historically low tax base and its weak economy at a local level, it may struggle to make ends meet and keep afloat. Some towns and cities have to work twice as hard to stay still, while others have accelerated growth just because of their local circumstances. It would be good to hear what the Government’s approach is to ensuring that a genuine rebalancing takes place across England as part of that strategy.

I thank the hon. Member for Oldham West and Royton. He made some thoughtful comments, as is his wont, which I appreciate. I will try to address his points quickly.

The hon. Gentleman talked about the future for local government, with regard to rates retention, and local government’s desire for more of the income that is generated locally to be kept locally, and to be more in control of its own destiny. As he knows, the Government are committed to introducing 75% rates retention for the entire country by 2021. As part of that process, many of the questions he asked are being addressed.

The hon. Gentleman asked about redistribution among authorities. Of course, some local authorities will have a greater capacity to generate business rates income. That is true today and it will be true in the future, so the new system will ensure some redistribution. The Government are clear that that will remain a feature of the system. What the best way of doing that is needs to be worked out within the sector.

The hon. Gentleman said that local authorities that are trying hard but are not able to generate growth should not be penalised. The new system will have a reset period. A balance needs to be struck: the period should give local authorities enough of an incentive to drive growth and enjoy the benefits of it, but the gap between the various authorities should not grow too wide. The reset period and the mechanism for redistribution are important features of the new system about which Government are currently consulting with the sector and stakeholders. I welcome the hon. Gentleman’s thoughts on those issues.

The hon. Gentleman asked about the assessment of the first wave of pilots. That is a very fair question. He will be pleased to know that the Department has been conducting extensive questionnaires and meetings with the first wave of pilots from last year. From memory, I think those surveys were completed in November last year—it possibly stretched into December. The early results of the surveys have already been shared with the LGA, and some elements of that will be brought into the public domain shortly.

The hon. Gentleman asked about the no detriment clause. For the benefit of other Committee Members, let me explain that the no detriment clause ensures that becoming a pilot makes no one worse off. I assure him that it applies to each and every pilot, not just to those in London.

The hon. Gentleman talked about appeals. As he knows, the Government recently introduced a new appeals process, which we discussed in a similar Committee last week. The new “check, challenge and appeal” process is designed to improve the system to the benefit of local authorities, reducing the burden of speculative appeals and the provisions they need to make. I acknowledge his point that provisioning for such appeals has an impact on local authorities, which is why appeals and provisioning are the subject of a technical working paper, which is being worked on as we speak by a technical working group run by the Department and the LGA. It will figure out how, in the new business rates retention system, some element of socialisation of those appeals can perhaps happen within industry. The sector is keen to see that, and the hon. Gentleman is right to highlight it.

Finally, the hon. Gentleman asked about timing. He made a good point about the fact that the fair funding review and the business rates retention processes are both fundamental reforms of the local government finance system. It is good that they are now on the same timeline and will come in at the same time in 2021. A spending review will happen at the beginning of next year, while these conversations are live. That is helpful, because it enables us to consider funding for local government finance and these two new systems in the round. We will bring those twin-track processes together to ensure that we are all on the same page, and that the systems work properly together.

I hope I have answered all the Committee’s questions. I commend these technical but important regulations to the Committee.

Question put and agreed to.

Committee rose.