Tuesday 22 January 2019
[James Gray in the Chair]
I beg to move,
That this House has considered the future of the water industry in England and Wales.
Customers and employees should be helped to take back control of the companies providing our water and taking away our sewage. The people of England should once again be front and centre of their water industry. Democratic, publicly owned businesses operating in the private sector, regulated with vigour by a more effective Ofwat is the Co-operative party’s vision of the future of the water industry. I am proud to chair that political party. I am grateful to the Backbench Business Committee for the opportunity to explore that agenda through this debate.
Nationwide, John Lewis, the Co-operative Group, the Royal London insurance company and NFU Mutual are just five successful examples of people-run businesses—mutuals—where profit is sought not to line the profits of wealthy investors, but to reward customers and employees, and to invest in local communities. Such businesses are inspiration for reform of the water industry.
Margaret Thatcher’s decision 30 years ago to privatise our water industry has created an expensive, unaccountable and unfair system. No other country has a fully privatised system of water and sewage services with so little competition. The resulting monopoly businesses are overseen by a woefully weak water regulator. Unsurprisingly, the consumer voice in England carries little weight against the interests of distant investors, whose decisions have seen water bills rise by 40% above inflation since privatisation.
Does my hon. Friend agree that the rather poor practices of some water companies have led to widespread public disillusionment? When I worked for Unison a few years ago, an excellent report was published showing some remarkably creative accounting, which seemed to suggest that money was being diverted not to investment, but to shareholders.
My hon. Friend and the trade union movement in general have pointed that out on a number of occasions. I will come on to one of the trade union movement’s particular campaign issues.
Water companies have become a desirable global financial commodity, bought and sold by big banks, international infrastructure investors, pensions and sovereign wealth funds. Since privatisation, as my hon. Friend just pointed out, dividend payments have been very high, at an average of £200 million a year per company, and £2 billion a year in total. Over the past 30 years, at least £48 billion has gone directly to shareholders.
Analysis by Greenwich University suggests that the more than 40% increase in household bills in that time was driven mainly by the need to finance growing interest payments on debt—a point that the trade union movement in particular has highlighted. That analysis shows that accelerating debt levels are the result of the high dividend payments made by water companies to their shareholders, which exceeded the privatised companies’ cash balances in every year bar one since 1989. Indeed, it is striking that total payments to shareholders are very similar to the total outstanding debt burden of privatised water companies, with at least £48 billion in payments in the past 30 years and at least £51 billion in total debt.
The Leader of the Opposition and, in particular, the shadow Chancellor, deserve considerable credit for highlighting the lower cost of water bills in Scotland, where Scottish Water is publicly owned. While bills in Scotland are 2% less in real terms than they were 18 years ago, English water Bills increased by some 13% in real terms over the same period.
Privatisation has not meant more investment. Indeed, annual investment in water supply infrastructure was lower in 2018 than it was in 1990 and has fallen by about 10% in the past 10 years. All of the capital investment made since privatisation could have been covered using only the money generated by customer bills. Instead, much of the income generated by water bills appears to have been used to pay the interest on debt built up by the privately owned water companies, in turn to fund dividend payouts.
Despite similar levels of capital investment, we are now in a situation in which, according to research by the University of Greenwich, consumers in England are paying £2.3 billion a year more for their water and sewerage bills under the current privatised system than if the utility companies had remained in state ownership.
Does my hon. Friend agree that this is an excellent opportunity to bring consumers into the conversation with businesses, in a way that mutualisation allows, so that we can learn from customers as well as talk about the ownership of utilities?
My hon. Friend makes a good point. I will come on to how mutuals would allow customers to have a lot more say over—indeed, they would give them ownership of—the water services on which we all depend.
Turning to one specific company, Thames Water was owned for 11 years by a complicated string of holding companies and offshore businesses, all ultimately owned by Macquarie bank, receiving returns of between 15.5% and 19%. Research by the Financial Times suggests that between 2006 and 2016, Macquarie and its fellow investors paid themselves £1.6 billion in dividends, while Thames Water was loaded with £10.6 billion of debt and ran up a pension deficit of some £260 million.
Dividend, debt and pension deficit were not the only things to increase under Macquarie’s control of Thames Water; customer bills and complaints also soared. The only thing that went down during this period was customer satisfaction, which is now ranked 22nd out of 23 in the Consumer Council for Water league table.
I thank the hon. Gentleman for bringing this debate. Ofwat imposes no penalties on managers who break their commitments. Does he agree that legislation must be put in place to ensure that—after loading Thames Water with debt and flooding the Thames valley with excrement—the water body faces more than just a fine that is less than the amount it would take to dispose of the water in the appropriate way? In other words, the fines do not match the crime.
The hon. Gentleman makes an extremely good point. Given that we are in the middle of the latest pricing review, if Ministers had the gumption they could put pressure on Ofwat to use its existing powers to bear down on those exact issues. I agree with the hon. Gentleman’s general point that we need a full review of the powers available to Ofwat. I am sure that they need to be increased.
Thames Water’s credit rating is the worst in the industry, according to Standard & Poor’s. Thames Water’s tax bill also declined during the period in question, as it regularly paid no corporation tax on its £1.8 billion turnover. Thames Water is, by its own admission, failing to meet targets to reduce the number of properties experiencing chronic low water pressure; failing to reduce the number of complaints; and wasting almost 700 million litres of water annually through leakage. It is failing to meet basic standards in 17 out of 41 key areas. That dismal record also includes record fines for poor performance.
In comparison, Scottish Water, which is publicly owned, has debt levels 5% lower than 17 years ago; its interest payments have remained consistent; and, with no dividends having been paid out, all the profit has been reinvested. It is worth pointing out that, adjusted for leakage per kilometre of pipes, Scottish Water performs just as well as an average English company, with 10.2k litres of leakage per kilometre as opposed to 22.1k for Thames Water, 10.8k for United Utilities and 9.5k for Yorkshire Water.
Thames Water is not alone in poor performance. In truth, more than 20% of all water is currently lost through leakages from water pipes. In total, it is estimated that some 7.5 trillion litres of water has been lost through leakage, which is equivalent to the total volume of water currently in Loch Ness.
The hon. Gentleman is making a powerful case against the water companies. The issue of leakage seriously needs to be addressed. Something like 1,273 Olympic-size swimming pools-worth of water is leaked daily because water pipes have not been addressed. The Secretary of State for Environment, Food and Rural Affairs has rattled the cages of the water companies, to improve their performance, and they have set out in a new plan that they will reduce leakage by 16%. Does the hon. Gentleman agree that that should not be done voluntarily and that there should potentially be stronger regulation?
I find myself in the slightly unusual position of agreeing almost completely with the hon. Lady. Leakage is a huge problem. Much tougher regulation by Ofwat in particular, and ultimately an increase in the regulator’s powers, are required to bear down on the shocking levels of leakage, not least because the Environment Agency has said publicly that England and Wales could suffer major water shortages by 2030. The agency also noted that enough water to meet the needs of 20 million people is lost every day through leakage, which surely further supports her significant point.
To be frank, in the past Ofwat has not demanded enough investment from water companies, given the scale of the rise in customer bills. It appears to have been asleep at the wheel under various leadership teams. The Public Accounts Committee, which looked at regulation of the water industry as far back as 2015, criticised Ofwat for overestimating costs and poor benchmarking of efficiency, resulting in higher bills for customers.
The hon. Lady also made the point that even the Secretary of State for Environment, Food and Rural Affairs suggested in March last year that water companies have not been acting in the public interest. Granted, the Secretary of State’s criticism came a month after a detailed critique of the water industry by the shadow Chancellor; nevertheless, the Secretary of State’s criticism is welcome.
As I indicated earlier, the latest price review is under way and already the Consumer Council for Water is concerned that Ofwat’s grand promises are unlikely to be met, with
“companies bidding for significant rewards for performance levels that aren’t particularly stretching”.
In part, prices are decided by the cost of equity and the cost of debt, plus investors’ expected UK tax burden. In my view, Ofwat should reduce the cost of equity in its calculations while maintaining fair treatment on debt finance for genuine capital investment. In short, Ofwat should drive down the profit that the owners of water companies make. It should also scrutinise the tax behaviour of those owners, to crack down on tax avoidance, and demand that owners do not use tax havens to receive the profits from our water companies. Lastly, every English water customer should see their bills reduced after 30 years of being used as cash cows by the owners of water companies. It is time that consumers and their pockets were treated better.
In October last year, the Select Committee on Environment, Food and Rural Affairs suggested that an independent review to determine whether the water industry was fit for purpose was required. The Chartered Institution of Water and Environmental Management went further, suggesting that such a review needed to examine the ownership of water companies. The Select Committee also raised concerns about the powers available to Ministers and Ofwat to improve governance and prevent pollution. With climate change approaching and a creaking infrastructure, the Committee argued that the need for change was urgent.
For some of the reasons that I have set out, there is growing concern about the ownership model in the water industry, and there are alternatives to the current privatised system. Long-term alternatives that the Government should consider include, in particular, a mutual approach, with democratic public ownership by consumers and employees, modelled on the success of Welsh Water and inspired by other similar success stories. Welsh Water, or Glas Cymru, does not pay dividends to shareholders, and yet it operates in the private sector. It has an ownership model that forces it always to operate in the interest of its customers and it has changed the way in which it raises finance, in order to reduce the cost of credit.
Welsh Water now has the strongest credit ratings in the water industry, which reduces its financing costs and allows for even more future investment in its infrastructure and services. Customer bills have been reduced steadily in real terms and so far it has returned about £180 million to customers in the form of customer dividends. In addition, it has provided some £10 million of support for vulnerable and low-income customers, through social tariffs and an assistance fund.
The first step on that path for the water industry in England, so that it can match and then go further than Welsh Water, would be the formation of consumer and employee trusts. These trusts would have the power to appoint non-executive directors to water company boards, and they would have access to independent advice from management, so that they can make well-informed and independent decisions.
Ofwat should discourage investment in the water industry that requires a fast return to the owners of expensive equity. Instead, it should steer water companies towards the lower-cost debt market, with responsible investors such as public sector pension funds, whose interests are aligned with those of the water sector and whose investment could help to ensure that there is a modern, resilient water infrastructure.
Over the longer term, as equity investors seek to sell up because they recognise that they can no longer make a fast buck, consumer and employee trusts could use bond issues to buy those equity investors’ stakes in the business. These trusts would need to be underwritten by a buffer, or internal equity reserves, to borrow against. That could be achieved through a Government guarantee on loans or debt, to ensure that any large unexpected investment needs will be met, and to ensure that if anything should go awry, lenders are in a first loss position. Similar initiatives already take place in other areas of Government policy. Government guarantees could be replaced over time through the accumulation of non-distributed reserves, or of retained profit, by the trusts.
As the ownership of water companies changes, legislation should be passed to embed the not-for-profit principle. The new not-for-profit water companies would also require protection, with an asset lock to prevent demutualisation in the future. Consumer and employee trusts—like those at Nationwide, John Lewis and other mutuals—would enable customers and the workforce to have an active role in the key decisions taken by their organisation. The board would include employee and customer directors, and the trust membership would enable members—including consumers—to vote for board members, and to agree audit, remuneration and company governance decisions, as well as how profits are invested or distributed.
Ofwat should be given new powers to ensure that water companies encourage employee and customer participation in the democratic process. The new employee and consumer trusts should also have a role in the scrutiny and decision making of Ofwat, with a scrutiny panel that reviews the operations of the regulator, led by consumers, and also playing a role in Ofwat’s appointments to its board.
In conclusion, comparisons of public ownership and private ownership of the water industry do not come out favourably for England’s privatised water companies. They do not look like they are committed to environmental investment and the other challenges facing the water industry. The latest price review should herald the beginning of the transformation to new not-for-profit owners—the very consumers and employees who depend on the services of the water industry. Public ownership works in Scotland and the model for mutual transformation of the rest of the water industry works in Wales. It is time that there was new ownership of the water companies in England, and I commend the mutual model to the House.
If hon. Members check my entry in the Register of Members’ Financial Interests, they will see that I chair an organisation called the UK Water Partnership. As the Leader of the Opposition claimed that I was some sort of stooge for the water companies, I put on the record that the UK Water Partnership is a public-private partnership, and that I was asked to chair it by the Department for Environment, Food and Rural Affairs. It brings together industry, policy makers and the research community to try to provide the key to unlocking a $500 billion global marketplace, as well as tackling water security issues through a strategic approach to research innovation and global clients. It effectively works right across the water sector, helping British companies to do better in a global marketplace. I very much do not speak for water companies.
As the water Minister who introduced more competition, changed Ofwat’s prioritisation of environmental protection, introduced the catchment approach to upstream water management and oversaw the Thames tideway tunnel in its initial phase, I have a fair degree of insight into how private water companies work and what they deliver for customers.
I appreciate the hon. Member for Harrow West (Gareth Thomas) bringing this matter to the House. I suppose it all depends on which end of the telescope we look down. It is easy to pray in aid companies and organisations that fail, and so give a malign picture of the whole operation of our water sector. I will try to give a more balanced view, but I totally accept some of the points made, as there are good players and bad players in every sector.
As in any field that involves a number of organisations, we will of course come across ones that are good and others that are bad, but I am absolutely certain that we have benefited from privatisation. It is wrong to turn the clock back and pretend that there was some halcyon era of cheap water, exemplary customer service, massive investment and great environmental activity by companies in the days when they were publicly owned. To those who say, “Ah, but we would do it better this time”, I say that that is the Venezuela defence. Socialists say that Venezuela has not done socialism right and that they would do it differently here, that nationalisation would be different from in the past. Those years of bad service, under-investment and environmental degradation must not happen again.
I am enjoying the trip to Venezuela that the right hon. Gentleman is taking us on. May I draw him back to my remarks about the mutual model of democratic public ownership, which would see the water companies remaining in the private sector, albeit run by their customers and employees, a bit like at John Lewis and Nationwide?
I can come on to talk about suggestions that I think have some virtue, particularly employee share ownership schemes. As with everything, there is no perfect right or absolute wrong; there is a massive area of grey, and I will explore some of the nuances, on which I think we can perhaps find some agreement.
On the model of nationalisation I have heard certain individuals speak about at Momentum rallies, I think about the head of a nationalised utility company going to see the Chancellor to plead for more infrastructure investment funds, only to be told, “Get in the queue behind the NHS, welfare, policing and schools”—the long list of public spending priorities that come before something that is now funded privately and by institutional investors. Let us consider some facts. Since privatisation, water companies in England and Wales have spent about £150 billion on improvements to the water service. That is infrastructure that had been absolutely ignored by public expenditure before it was put into the private sector. The companies now spend about £8 billion a year continuing with those improvements.
When I was water Minister, I met institutional investors and saw that the regulated utility sector is an extremely popular place for people to invest, including for pension funds—the people who pay the pensions of people in the public sector. I welcome the fact that sovereign wealth funds and overseas investors want to invest in the United Kingdom. They do so because it is a stable and relatively low-yielding but relatively secure investment.
Does my right hon. Friend agree that water companies are already getting involved in good environmental projects, to clean the water, work with landowners and make it so that the water needs less treatment? With that interest in sustainability and many more people wanting to engage in green investment, does he foresee the opportunities expanding, particularly as under the Agriculture Bill, we will be paying for public services, the public good and the need to protect our land more?
As water Minister, I pushed the concept of payment for ecosystem services, which was against Ofwat’s institutional view at the time, though I am happy to say that it has moved on. It liked the idea of a regulated asset—of measuring the quality of the water coming in at one end and going out at the other, and judging whether the asset was working. I would say, “Try to let a thousand flowers bloom”. Some of them would fail, but building that relationship between a water company and land managers upstream, and paying them to help to produce better quality water, is the sort of thing I am glad to say is now becoming the welcome norm across the sector.
I meant to mention an excellent project I have visited. Upstream Thinking, run by South West Water, is a phenomenal example of exactly how that is working.
My hon. Friend is absolutely right to mention that project, which was initially developed around Dartmoor. It is an extraordinary scheme that is really working, and that I hope will become even more mainstream in the near future.
The right hon. Gentleman’s points are similar to those brought to my attention by Anglian Water, which services my region. I do not think that anyone disputes that good work is being done, but the unhappiness is with some of the extraordinarily labyrinthine financial arrangements that sit behind the companies. Does he agree that if that could be resolved, in many of the ways my hon. Friend the Member for Harrow West (Gareth Thomas) suggested, it would solve some of the dilemmas? No one is challenging the good work that is being done.
There has absolutely been bad practice. I have had my concerns about Thames Water in the past, but today the company has capped its dividend payments, is investing more in resilience and is doing a whole new range of different activities, and my concern is that we risk cutting off an enormous amount of infrastructure investment if we do not get this right. I think there is a way forward, and I will touch on it in a moment.
Compared with 30 years ago, customers are now five times less likely to suffer from supply interruptions, eight times less likely to suffer from sewer flooding and 100 times less likely to have low water pressure. The hon. Member for Harrow West talked about Welsh Water; he is right that people sometimes suggest that it is a mutualised organisation, when it is a private company. Welsh Water loses 121 litres per property in leakage, which is more than nearly every other water company. Its average combined water and sewage bill is £439, which is 8% higher than the average English and Welsh bill, at £405. It is higher than the bill in six English companies, and that is in a country where there is no shortage of water. I come from the Thames Water region and we are short of water there, but in Wales they are not so I cannot understand why the bills are so high. In Welsh Water, the average number of minutes lost due to supply interruptions is 43 minutes, which is about 400% higher than in most other companies, where fewer than 10 minutes are lost.
The picture is not universally wonderful, and there occasionally needs to be a bit of balance in the subject. Water companies have reduced leakage by a third since the 1990s. We are about to see an incredible increase in innovative methods of detecting leakage, and it is right that in the current price review round there is an enormous driver on those companies to crack down on it further.
On the environment, standards have dramatically risen, with the welcome return of wildlife to rivers that had been biologically dead since the industrial revolution. Otters rely on healthy rivers and were thought to be on the verge of being wiped out 30 years ago, yet they are now seen in every county in England.
The average domestic water bill is just over £1 a day—that is £1 a day to get all the water we need into the household, and all the sewage and waste water out. Although bills went up immediately after privatisation to help deal with decades of under-investment when the industry was owned and run by the Government, bills have stayed pretty much the same in real terms since 1994 after inflation, and are set to fall in real terms over the next few years. By 2025, bills will have fallen in real terms for a decade. The industry’s independent regulator Ofwat—which has just come in for some stick—has calculated that bills are £120 lower than they would have been if the combination of privatisation and tough independent regulation had not happened. Bills would have been £120 more per household if the industry had remained in public ownership.
On the subject of customer satisfaction, the hon. Member for Harrow West has said that people are terribly dissatisfied with their water companies. I went on the internet last night to look at what Ofwat, the Consumer Council for Water and individual water companies are saying, and customer satisfaction levels for water and sewerage services are around 90%. As politicians, would we not love to have a bit of that, particularly at the moment?
I wonder whether the right hon. Gentleman would comment on two things. The first is the National Audit Office’s calculations, which suggest that there has been a 43% increase in real terms in water bills since privatisation, and the second is the significant difference in water prices between publicly owned Scottish Water and the privatised water companies in England, which I mentioned.
I do not know the circumstances in Scotland, so I can only speculate, but that is another country that is not short of water, as many parts of this country are. I just think that we need to look at what the customers are saying, and my impression is that customers are not shrinking violets. When I came into this House in 2005, my inbox was overflowing with complaints about Thames Water’s customer service, which made me realise that water is an absolute necessity of life. It is the first thing that people will complain about; it is something that we perhaps rely on too much, and use too much of, in the area of the country in which I live. However, the idea that customers are somehow not involved in and concerned with raising these issues is wrong. When they are asked about them, they give quite interesting responses.
Will my right hon. Friend give way?
Let me just finish this point. A recent ComRes survey shows that 86% of customers trust their water company overall, with 89% trusting it to provide good-quality water and 87% trusting it to provide a reliable service. Those are levels of satisfaction that we as a political class can only dream of.
Will my hon. Friend the Member for Taunton Deane (Rebecca Pow) be very quick? I know that other Members want to speak.
Does my right hon. Friend think that there is still a role for customers in reducing their water consumption? Water is a precious resource, and we are probably using more than we ought to.
Yes, we need to do more. When compared with other European countries, we are absolute laggards: we use much too much water, wash our cars with potable, drinking-quality water, and do all kinds of things that we should not. We have to change our lives, and I hope the Minister will be able to inform us about what will be happening in that area in the future.
On the topic of dividends, which is a key point, Ofwat says that each company’s licence requires it to declare or pay dividends
“only in accordance with a dividend policy which has been approved by its Board and which complies with both of the following principles.
The dividends declared or paid will not impair the ability of the company to finance the regulated water and sewerage business.
Under a system of incentive regulation, dividends reward efficiency and the management of economic risk.”
In the past, some companies have certainly played a bit fast and loose with those principles, and have developed levels of gearing that I, as a manager of a small business when I entered DEFRA, found quite eye-watering. However, the hon. Member for Harrow West does tend to pick on the bad players, and in talking about Thames Water, he was perhaps not talking about the Thames Water of today. He might have been talking about a model that applied under previous ownership, and I urge him to look more closely at what Thames Water is trying to achieve today.
We should encourage companies to look at employee share ownership schemes. That whole concept of finding ways to democratise capital is a huge, rich seam that we could collectively work on. Water companies are good places to encourage not just employees, but customers, to develop a higher interest in the ownership of that company, which is a better way to get more people involved without damaging any investment potential. I worry about Labour’s proposals for nationalisation right across the sector. It recently published its plans in a publication called “Clear Water”, but stopped short of explaining how the big challenges faced by the water industry, such as climate change and an increasing population, would be addressed by its substantial re-organisation of structures and ownerships. That publication makes no attempt to acknowledge the many improvements made since privatisation in 1989, let alone the further benefits such as falling bills, improved services and increased investment that companies have set out for the future.
If water is nationalised, it could seriously damage the service and quality of water in England. It could create a future in which decisions are driven primarily by short-term political expediency rather than the needs of customers, and in which the high levels of investment needed to improve services are not sustained. The result would be bad for customers, bad for the environment, and bad for the economy.
It is a great pleasure to follow the right hon. Member for Newbury (Richard Benyon), who has displayed his knowledge of not just the water industry but Momentum rallies, Venezuela and so on. His remarks put our party and our Front Benchers on notice that we have to get the detail of this policy right. It is a very radical policy, and I support changes in the water industry, but we will hear many mentions of Venezuela and Momentum rallies in any election campaign in which this is an issue. It is also a great pleasure to follow my hon. Friend the Member for Harrow West (Gareth Thomas), who opened the debate in a typically urbane and knowledgeable way. He is a great loss to our Front Bench, and I hope that one day he will be a Minister again in a future Labour Government.
A £5 note is on its way.
I do not know whether that is a “thank you” or a bet.
I will speak briefly, but perhaps a little explicitly. I think that part of my hon. Friend’s speech was directed at our party’s own Front Benchers. At the moment, we are consulting on our plans for the water industry, and I hope nothing is set in stone. In developing our policy, we need to learn as much from Scotland, Wales and—if I may say so—Northern Ireland as we do from experts who reside in the north of London. My hon. Friend referred to the Secretary of State for Environment, Food and Rural Affairs and the shadow Chancellor competing, about a year ago. It was last spring—spring was in the air—and one of those gentlemen said:
“Far too often, there is evidence that water companies—your water companies—have not been acting sufficiently in the public interest.”
It could have been either of them; in this instance, it was the Secretary of State. On that occasion, he was as cruel and as vehement in his speech about the water industry as he was about the Opposition last week, so this is an open goal for the Opposition.
I will not repeat the statistics that my hon. Friend referred to when opening the debate, except for the basic statistic that the privatised water industry has taken out about as much in dividends as it has put in as investment, so the idea that the privatised water industry has brought new investment into the industry that would not have been made otherwise is wrong. However, what should be a Labour Opposition’s policy on changing ownership? I hope that the shadow Minister, my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard), can confirm that the submissions that my hon. Friend the Member for Harrow West has made will be considered very carefully in our current review of policy in this area.
I share with the right hon. Member for Newbury a love of employee share ownership schemes, particularly if they involve the whole of the company. I chaired such a scheme, which ran Hatfield, one of the last two deep mines in our industry. It has a different feel from any other form of capitalism. I hope we will consider that. I hope we will also consider the role of regulation, because any reference to external regulators seems to have gone from our paper. I do not want civil servants making all the decisions on the regulation of the water industry. It is a specialist role.
In Scotland, there is a publicly owned industry, but there is also an independent regulator. Incidentally, there is also competition in the business retail market in Scotland, which exists alongside public ownership of the industry. We have had some debate already about the precise form of ownership, but as I understand it, in Wales it is not employee-owned, but a not-for-profit model. I understand that the cost of debt for the Welsh industry is less than for any other industry in the public or private sector in the whole United Kingdom. I hope we learn from Wales, too.
If we are to take some of the water industry at least into the nationalised sector, why not let a thousand flowers bloom? I hope our Front Benchers will consider that. Why not have some on the model that my hon. Friend the Member for Harrow West mentioned and some where there is demand in the public sector? That would be one way of doing it, but it will be more costly to have all the water industry in the nationalised sector, as compared with my hon. Friend’s suggestion. We have to face up to the question of compensation. It is not good enough for an academic in north London to refer to how the banks were taken in distress into the public sector. Certainly they were, but they had virtually no value in their assets, and that would not be the case with the water industry.
Some of the water industry shares are owned by the workers of the water industry, and some are owned by the pensioners. I have had an interesting dialogue with an organisation called We Own it, which is contributing to the field. When I asked it about this question, it said—I paraphrase—that it did not really believe in compensation, but that it recognised that workers and pensioners somehow have to be looked after. We have to do better than that if we are to stand up with a general election campaign.
The hon. Gentleman makes a very good point. Polls are often cited to say that an enormous percentage of people want to take the companies back into national ownership. Of course, it depends on which way the question is asked. When it is phrased, “In order to do that, the Government would have to spend £90 billion of taxpayers’ money. Do you not think that could be better spent on other areas of the public sector?”, they nearly always agree. It depends on the question.
It does, but obviously if a Labour Government went down that road, they would then have assets on the public sector books to match that spend, as the right hon. Gentleman is well aware. The arguments are not black and white, as he admitted in his speech. We do have to think out the policy very carefully. I am a great believer in radical policies. I voted from the Back Benches in favour of some of them under the last Labour Government when those were perhaps not the flavour of the month. We have to get it right.
I will mention one other issue and then finish. The Environment, Food and Rural Affairs Committee, of which I am a member, did a report on the water industry. I commend some of the detail of that, and one detail in particular. The overflows from combined sewers owned by the water industry are a national disgrace. We have cleaned up our beaches in the past two or three decades, largely, dare I say it, because of European regulation.
We now need to clean up our rivers. Ilkley in my constituency is a great tourist destination, with swimmers in the Wharfe all the time. It connects downstream with the constituency of my hon. Friend the Member for Leeds North West (Alex Sobel) at Otley. We should not have sewage being discharged on a very regular basis. While I understand that various other things are going on in Parliament next Tuesday, I will be concentrating on the afternoon drop-in session of the chief executive of Ofwat and the Environment Agency. I hope they will address the issue of sewage and commit to cleaning up our rivers, just as we have cleaned up our beaches.
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Harrow West (Gareth Thomas) on securing this important debate and on making the important distinction between co-operatives and mutualisation, and industries nationalised via the state. That distinction is often missed in these debates.
I will talk about the future of the water industry from the perspective of the fourth industrial revolution and the digitisation of our networks. On that basis, I declare my interests in relation to the various works I do in the technology sector, as set out in the Register of Members’ Financial Interests.
Last Friday, I met with the team at Bristol Water, which supplies drinking water to more than a million customers, including all of my constituents in Bristol North West. I had expected the meeting to be run of the mill, but I was somewhat surprised, because Bristol Water turned out to be far more advanced in its digitisation of the water network than many other water utility companies.
Many Members will know that British industry is lagging behind in the digitisation of our businesses, which is a priority if we are to unlock the productivity challenge in the British economy and help meet our climate change objectives. At Bristol Water, sensors have been installed across the entire network and big data analytics have been deployed. Those are new words for many sections of the water industry. In Bristol, we get our water from lakes and reservoirs around the Mendip hills and from the River Severn via the Gloucester and Sharpness canal. Water from the River Severn needs to be pumped into Bristol, which requires large amounts of energy. Water from the Mendips requires less energy due to gravity. Bringing together data on real-time energy prices with real-time water consumption requirements has allowed Bristol Water to build algorithms that decide when to pump water from where to where and at what time, helping to reduce over-pumping and generating significant savings on its electricity bill.
Those efficiency savings will allow Bristol Water, subject to Ofwat’s agreement, to pass on price reductions to Bristol Water customers, which I know many of my constituents will welcome. As we have heard from my hon. Friends, that is an unusual thing from a utility company in the past few years. I am sure Bristol Water itself would say that it is a new positive turn, as it was in something of a bother with Ofwat a few years ago for not being able to agree price rises. I welcome that positive U-turn from Bristol Water for my constituents.
In a very Bristol way, Bristol Water brought in sensors, big data analytics and algorithms through collaboration. It set up a start-up incubator in Bristol where, for example, a big data entrepreneur, Hackett Consulting, has been able to go from being a Bristol start-up of one to a scale-up business from the things it has learned at Bristol Water. It is now able to sell that as a service to other industries across the country.
Beyond the algorithms, sensors have been installed across the network, meaning that leakages can be dealt with more efficiently and accurately. Instead of waiting for someone to call up and say, “There has been a leak of water at the end of the street”, field engineers’ iPads bleep at them when there are leaks, and they know exactly where to go to try to fix them. That reduces the number of customers affected by the closing off of pipes and decreases the time it takes to fix the leak.
Reduced energy consumption and better management of leaks, alongside helping customers to reduce their water consumption, all make extremely valuable contributions to our climate change objectives. As a member of the Science and Technology Committee, I have been troubled to hear from Lord Deben, the chairman of the Climate Change Committee, about how far we are falling behind as a country in meeting our climate change objectives.
The Government must take the easy wins to ensure we get back on track to decarbonising our economy. Bristol Water’s approach seems to be an important and useful way to do that. I was therefore thrilled to hear about the work being undertaken in my constituency. I encourage the Government, Ofwat and other water companies to look at how we have digitised the network to improve efficiency and to contribute to decarbonising the economy in Bristol. I hope the Minister will tell the House how she is helping regulators and water companies to move in that important direction.
It is a pleasure to serve under your chairship, Mr Gray. First, I thank my hon. Friend from my namesake constituency, the Member for Bristol North West (Darren Jones). He gave a great technical speech and we all learned a lot about how we can improve the data analytics and dynamics of the water industry.
I also thank my hon. Friend the Member for Keighley (John Grogan), who made a number of important points on which I will elaborate. Most informatively, he said that we should not rely on expert academics and opinions from north London. Perhaps in this debate we will hear some expert advice from west Yorkshire that the Labour Front-Bench spokesman and the Minister can act on. Lastly, I thank my hon. Friend the Member for Harrow West (Gareth Thomas) for securing this debate. He chairs the Co-operative Party with some panache. We have been waiting for this debate for some time, and I declare an interest as a Co-operative Member of Parliament.
I want to commend the publicly-owned Scottish Water, which, over the past 16 years, has managed to save consumers an average £42 a year when compared with English consumers, and is ranked as one of the UK’s most trusted companies. I also want to highlight the success of Welsh Water, as many others have. Glas Cymru, established under the then Labour Government, has managed to return £180 million to customers in the form of customer dividends, while providing £10 million to assist low-income families and individuals by offering them lower tariffs.
An increasing body of support shows that the Tories’ ideological obsession with privatisation, which the right hon. Member for Newbury (Richard Benyon) is a great exponent of, has done nothing to improve services and has only raised the cost to consumers. Water is water, whether you are English, Welsh, Scottish or Irish. But under the English privatised system it is more costly, even though both Scotland and Wales have very difficult topography and are sparsely populated in large areas.
When English people turn on their taps, they pour money down the drain—except that it is not down the drain, but into the pockets of the wealthy and into the wealth funds of foreign investors in countries such as Canada, Australia and Singapore. That makes up the £6.5 billion of dividends paid out to shareholders in the past five years: the same amount of money that goes into the pockets of the people of Wales. Do we really think that is good enough? Do we really agree that in our Union there should be a two-tier system for our most fundamental services? And do we think that an individual or family should pay more for water because they live in one part of the Union and not another?
The ideological mindset of those obsessed with the privatisation agenda is such that this Government cannot see the evidence in front of their eyes. Privatisation does not necessarily, as promised—
Will the hon. Gentleman give way?
I give way to the right hon. Gentleman, who I am sure will defend privatisation.
I am very fond of the hon. Gentleman. He and I agree on other things, but I cannot resist responding to being attacked for being ideological when I feel I am combating an ideology here. We have a system that works and it is being attacked by ideology.
On another point, of course 380 or 400 quid a year is a lot of money to people on low incomes and we have systems to support them, but for people on average incomes, compared with other costs in their lives, getting water that is 99% drinkable and of good quality and getting sewage away for about £1 a day is quite a good deal for most people, particularly if we protect the poor.
I was not completely embodying all the faults in the right hon. Gentleman’s arguments. To repeat his point, it is good value, but why is it better value in Scotland and Wales than it is in England? We should surely aim for best value.
At this crucial time, when living standards across the UK are being decimated and individuals and families are struggling to stay afloat, we need to reassert both sense and our fundamental obligation to the people we represent. We need to assert that the market has limits, that not everything in this world should be up for grabs, and that privatisation does not necessarily equal value for money. The market has its place as a means of exchange for goods and services, but a basic selling principle of marketisation is the offer of genuine choice, lower costs and better services. I am a customer of Yorkshire Water. The only way I can get Harrogate water is to buy it in a bottle. I cannot get it through the tap and cannot change provider as I can in other utility markets. None of those things apply to the case of England’s regional water companies, so I suggest it is time to look at the example of our Welsh and Scottish compatriots and to change our—literally—leaking system.
With no competition and no realistic prospect of withdrawing consumption, water bills can be best conceptualised as a tax, because everybody needs to have water through the tap. Indeed, other systems, such as that in Scotland, account for water within council tax. It is not a matter of theory, but of practice in Scotland. Under our system, however, there is no differentiation between households. Our flat, regressive tax hits those on low and medium incomes hardest, particularly those on medium incomes who have no redress. Shareholders skim a dividend from UK taxpayers who have no choice but to purchase water from monopolistic regional providers.
We have only to look to Welsh Water, which operates on a not-for-profit basis within the private system, to see how well a mutual approach can work. The company serves 3 million people every day and has the strongest credit rating in the industry, as we have heard from my hon. Friends, as well as sector-leading levels of customer satisfaction. Its success does not benefit a few wealthy shareholders. As I have said, £180 million has been returned to customers.
The idea that a select few own and profit from something that falls literally from the sky—something that makes up 70% of our bodies—is absurd. The arguments for privatisation of our most basic assets and infrastructure have been lost. It is not about competition, which implies choice. No, it is the same faith in the market that means people in this country pay through the nose for their gas, electricity and train travel, often receiving a worse service where it is privatised than where it is in the public sector.
Last summer, as my hon. Friend the Member for Keighley mentioned, Yorkshire Water allowed sewage to flow through the River Wharfe, which starts in his constituency and flows right through mine in Otley and Pool. As was said, swimmers in the River Wharfe had to swim through the sewage. Private companies do not face the level of accountability that the system demands.
For mutualisation to happen, the water companies must first be taken into state ownership and the shareholders compensated, and then the companies can be put into the hands of consumers. Our basic infrastructure can be truly owned by the public without the need for direct state ownership, which MPs of all parties should support. Then we come to the question of governance. Wales has a company limited by guarantee. It has no shareholders, so its corporate governance functions are the responsibility of its board, which has a majority of independent non- executive directors, and its members, around 70 individuals, are appointed following a process undertaken by an independent membership selection panel. Those 70 people are the customers: the people of Wales.
There are alternative forms of governance, with a water company in a defined geography, as we have in England, being a good fit for a consumers’ co-operative model. Consumers’ co-operatives utilise the co-operative principle of democratic member control—or, as we call it in the Labour party, one member, one vote. Most consumers’ co-operatives have a board of directors elected directly by and from the membership. Unfortunately, water in England drips with right-wing ideology, draining the public purse and rinsing out our most valuable resources, while drowning customers in debt. That money-making monopoly and the two-tier UK system must end. We must instead look west to Wales and replicate a model that brings water—the most basic of human needs—back into the hands of the public.
It is a pleasure to serve under your chairship, Mr Gray. I do not have long, so I cannot dwell too much on some of the valuable contributions made by hon. Members, but I commend the hon. Member for Harrow West (Gareth Thomas) for securing this debate. He raised very important points, and I am delighted that they are being addressed in this forum. There was quite a contrast between some of his comments and those of the right hon. Member for Newbury (Richard Benyon), who painted a glowing picture of water privatisation that I find it difficult to recognise.
The right hon. Member for Newbury admitted that he knew little of what was happening in Scotland, which is a surprising admission for a former water Minister, who should surely be prepared to learn best practice from wherever it can be found. After all, we are only up the road, geographically speaking. I hope he will be interested to hear some details in my speech. He also spoke of water being a necessity of life, and I wholeheartedly agree. It is far too important to be subject to a privatised system that gives, as we have heard, a worse service, and that seems to be largely driven by right-wing ideology, rather than what is best for customers.
There has been a lot of enthusiastic talk in this place about taking back control. That sounds strange coming from people who are, by and large, wholehearted supporters of stripping democratically elected Governments of control over the delivery of public resources, instead preferring essential services to be fractured and put into the hands of the private sector. Taking back control of England’s water supplies is an argument that makes a lot of sense to me. People are rightly scunnered by a system that services debt and pays disproportionate dividends through increasing bills for customers. There should be an outcry over the findings of the recent Greenwich University research, which suggested that a staggering £56 billion in dividends was funded through £51 billion, or potentially more, in debts.
Supporters of the privatisation cannot even claim real competition benefits, with most of the water companies operating as regional monopolies. The leakiest pipe in England’s domestic water supply is seemingly one that drains money away to a private stream. A public company, run for the public good, is the best way to end that scandalous rip-off. I welcome the contribution of the campaign led by We Own It to make that happen.
Luckily, as has been mentioned, there is a model close to hand that is working very well—I appreciate the hon. Member for Harrow West mentioning it often—which the UK Government would be very welcome to emulate. As with so many other public services being delivered under devolved Government control, such as the running of prisons or the procurement of NHS contracts, Scotland has chosen a more sensible path wherever it has the powers to do so.
We did not privatise domestic supplies of water, and Scottish Water was established in 2002 as a publicly owned company answerable to Scottish Ministers. Under the Scottish Government’s watch, there has been a focus on driving up standards and keeping charges affordable. We are now reaping the benefits in drinking water quality, environmental performance and customer service.
One thing I know about Scottish Water is that its leakage level is way above that of the rest of the United Kingdom—I think just shy of 40% of water is lost, compared with about a fifth in England. I wonder whether the hon. Lady would like to comment on that.
It is interesting. We are, of course, spending considerable amounts of money on addressing that. As I understand it, and I will speak about this later, our service performance is now comparable to the leading UK water companies; on some measures, we outperform them. As we continue to invest, water loss will be driven down. English water companies are having to resort to debt; that is what their investment in infrastructure is largely based on.
Far be it from me to help the Scottish National party out, but as I understand it, from analysis done by Greenwich University, the levels of leakage per kilometre in Scotland are better than for many English water companies, and are certainly in line with the average at worst.
I was quite surprised by the contribution made by the right hon. Member for Newbury, as that is not my understanding. Perhaps I should quote the Scottish Water Commission, which noted in 2013:
“It is now more than a decade since Scottish Water was established. In that time the company has transformed itself as an organisation. It has caught up with the top performing companies in England and Wales on cost efficiency and levels of service and has regularly reached—and outperformed—its targets.”
I expect more of that in the future.
As Greenwich University research found,
“the public-owned sector in Scotland delivers the service just as efficiently, albeit at a lower cost to consumers.”
In Scotland, bills are 2% lower in real terms than they were 18 years ago, while over the equivalent period in England they increased by 13%. Drinking water continues to be at record levels of compliance, and there were no failing waste water treatment works in 2017, compared with more than 70 in 2002.
Scottish Water has reduced energy consumption and increased renewable power generation. It has cut carbon emissions by more than 30% since it first reported in 2006-07. Driven by the Scottish Government’s ambitious renewable heat and carbon reduction targets, the amount of renewable energy the company generates is now more than double its electricity consumption. Ageing facilities are being replaced through major investment in projects such as Glencorse water treatment works outside Edinburgh. That energy-efficient plant was delivered on schedule and under budget, and now supplies cleaner, safer water to around half a million people in the capital, while having sustainability at the core of its operations. A hydro-turbine provides almost half the facility’s own energy needs, helping to keep water charges low for customers.
Scottish Water’s service performance, as I mentioned, is now comparable with that of the leading UK water companies; on some measures, it outperforms them, while still keeping the bills down. Even where it can be said that the leading English companies perform better, at the current pace of investment by Scottish Water, and without the spend on dividends, that position is set to change over the next decade.
The myth that private profiteers are required to deliver things better has been dispelled. Indeed, the We Own It campaign points to the move towards public ownership internationally, with 235 cities in 37 countries taking water into public ownership in the last 15 years. Public ownership of public water supplies is already working in Scotland. That may seem clear, but it is worth reminding the Labour party of that fact, given that the Scottish leader, Richard Leonard, argued recently that they should be taken back into public hands. There was a wee bit of confusion there, but I will certainly draw his attention to helpful comments made by his colleagues down here today.
Scotland is rightly famous for its water. It is a reliable natural asset that serves our health, our wellbeing, our environment and our economy well. It is right that public supplies of domestic water have remained a public asset, delivered in the public interest. It should be so in England too.
I congratulate my hon. Friend the Member for Harrow West (Gareth Thomas). As a Labour and Co-operative Member of Parliament, I listened intently to what he had to say with great interest and much nodding. He has been a real champion of the Co-operative movement over many years. My hon. Friend the Member for Leeds North West (Alex Sobel) and I, as young Co-operative MPs in this place, have a lot to learn about the championing of the Co-operative cause from the Obi-Wan Kenobi of the Co-op party— my hon. Friend the Member for Harrow West.
This debate has long been due. As someone who has worked for a water company, I believe we do not talk enough about water policy in this place; we need to talk more about it if we are to meet our Paris climate change commitments to create a fundamentally sustainable water industry, in terms of water usage, the chemicals used in it, and the contribution to the natural world.
Clearly, some serious and genuine concerns are being raised by members of the public and Opposition Members about the way that our privatised water system is run. The privatisation of water has not worked to deliver the benefits that it should in 2019. Too much money is being paid out in dividends and not enough investment is being made in fixing leaks and reducing water usage. Not enough is being spent on climate change mitigation or fundamentally fixing the broken system. We need better water resilience and better value for money for our customers.
The water companies are only part of that. My hon. Friend the Member for Keighley (John Grogan) was right when he talked about the need to look at regulation as well. I am certain that he and the right hon. Member for Newbury (Richard Benyon) will read carefully the water policies that I hope to publish, as Labour’s shadow water Minister, in the next couple of months. They will describe how we should deal with the fact that we need a better, reformed system, and additional policy levers to address climate change.
Can the hon. Gentleman give us a taster of those policies by saying whether he will compensate shareholders for the £90 billion that they own, and where he will find the money?
I thank the right hon. Gentleman for that. As his intervention came only on page 1 of my 12-page speech, perhaps he is pre-empting some of it. I suggest that he looks at the proposals that the shadow Chancellor, my right hon. Friend the Member for Hayes and Harlington (John McDonnell), and the shadow Business Secretary, my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey), have published that talk about replacing the share capital ownership with bonds. There are already details of that available.
It is important to consider the debate in context, because large parts of the UK, as well as the rest of world, are experiencing a water crisis. We like to think of England as a notoriously damp place where water is plentiful, but that is not the case for large parts of the country. We need to recognise that England is in fact in the lower quartile globally of available water resource per capita. More people are living in areas of water stress, and more population growth and house building is planned in areas of water stress—especially in the east of England, London and the south-east of England; we will need to not only reduce water use but transfer more water there. That suggests that we need a different system to handle some of those challenges.
As my hon. Friend the Member for Keighley hinted, droughts cause hundreds of millions of pounds of damage, and have led to hundreds of thousands of fish dying from over-abstraction and to serious decline in our wetland species. Sewage has also been pumped into our rivers. It is worth saying that thankfully that is less common than it was. Indeed, when I was a boy growing up in the west country, at one of our glorious beaches, swimming past floating turds was commonplace. It is not anymore, thanks to the investment that has been made, but more needs to be done on that with regard to our rivers. [Interruption.] The right hon. Member for Newbury throws his hands in the air, but bill payers in the far south-west know about that investment, because we paid for it with what for many years were the highest bills in the entire country—not just a wee bit higher, but double the nearest amount. We have paid for what has gone out in dividends, as well as for what has gone into the system.
We need better water resilience, because there is simply more demand. The latest statistics show that there will be 4.1 million more people in the south-east by 2045, and by 2080 there could be an extra 10 million. We need to think about how to deal with the amount of water used, where it comes from and how it is treated, to ensure that we minimise the effect on our climate. We are also facing increased flooding. That context is really important; it is why we need more debates about the structure and operation of our water industry, and why today’s debate is so important.
I have to say that we have seen moves in the right direction under this Government, but they frequently come from DEFRA press office announcements rather than from policies being fully implemented. I do not think that Ministers are cranking the handle sufficiently to achieve the change that could be delivered to our water industry if we showed greater concern about pricing and about investment in climate change, flood and drought mitigation. We know that more can be done, because in the latest round of price reviews and business plans, companies have published proposals that hint at a slow move in the right direction. One such proposal, which I am sure my hon. Friend the Member for Harrow West will have seen, is in the south-west: South West Water has proposed an element of mutual shareholding as part of its wider ownership base. If it can be done in the west country, it can be done elsewhere, so that could be encouraged as part of the wider debate.
Labour’s water proposals are pretty clear—and pretty popular, as it happens. Some companies have engaged in good practice, but not enough; as the right hon. Member for Newbury says, there are bad players and bad behaviour in our industry. Thames Water is the poster child for such bad behaviour, but sadly it is not the only one. We need better regulation and better ownership, so Labour has set out plans to take our water companies back into public ownership.
I pay tribute to my right hon. Friend the Member for Hayes and Harlington and my hon. Friend the Member for Salford and Eccles for putting together Labour’s clear water proposals, which set out our plan for public ownership of water companies. As our September 2018 booklet “The Green Transformation” states,
“Labour will…bring water back into democratic public ownership, lowering bills and providing levels of investment needed to drastically reduce leakage and tackle major sewage pollution incidents, which are still rising.”
I absolutely agree with the right hon. Member for Newbury that we need to guarantee the investment stream. There is a role for investment in our water companies, but our proposal is that the role of private ownership should come to an end.
Our “Clear Water” plan states:
“To ensure maximum openness, transparency and scrutiny, RWA boards will have a statutory duty to make information widely available and hold monthly public meetings in different locations each month. Meetings will also be broadcast live on the internet and all papers will be made public.”
Many good lessons can be learned from the operation of mutuals about how customers and employees can be brought into running better businesses. My hon. Friend the Member for Leeds North West said it well: we need better value from our water industry. We also need to look at regulatory responsibility. Our plan further states:
“Regulatory responsibility…will be absorbed into Defra, which will form a new public regulatory system in the form of a National Water Agency responsible for economic and performance standards and capacity-building.”
As we get closer to publishing further details, more information will become available.
Labour is suggesting that our new water system needs to consider sustainability and the public interest, not just private profit. The shadow DEFRA team is exploring what other water policies should accompany our proposal, so that we can tackle climate change, flooding, water scarcity, water usage, water pollution from plastics and microplastics, lead pipes—an issue of particular interest in some parts of England—and water affordability. When the next election comes—many suspect that that will be very soon—our manifesto will offer a full suite of policies not only on public ownership, but on a better system.
I am aware that the Minister needs to sum up soon. This has been a good debate, and I hope there will be many more to come as we make our case. The hon. Member for Taunton Deane (Rebecca Pow), who is no longer in her place, spoke very well about the need to address personal water consumption—one of the reasons I carry around my own water bottle, rather than using the House of Commons’s supply of bottled water. Indeed, it seems ironic that in a debate about the water industry, we are still using bottled water in this place, so perhaps the House authorities could look at that. We can all do things to address the challenge in our water industry. Ownership, management and our own consumption are all part of the mix.
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Harrow West (Gareth Thomas) on securing this debate through the Backbench Business Committee, and I thank Mr Deputy Speaker for selecting it.
The hon. Gentleman and many others raised a huge number of points, which I intend to address. However, I think I will have to edit my reply to add a few facts about dividend payments, leakage and other matters, because there seems to be a complete lack of understanding and an attempt to use averages everywhere. I appreciate that that may be beneficial at times, but we need to get into the granularity of these points as well.
Water is key to life, which is why it features so prominently in our 25-year environment plan. The long-term view for the industry is clear, including on matters of supply, leakage, demand, consumption, environment and the necessary investment in infrastructure. Those matters are well set out, and companies have to consider the 25-year environment plan when producing their own future plans.
The Government support a private water sector model, underpinned by strong, independent economic regulation. It has been 30 years since the privatisation of the water industry in England and Wales, but the industry has continued to evolve and has always been underpinned by regulation through Ofwat—particularly as the provision of water, unlike that of other utilities, was not opened up to the market for consumers. We have introduced competition for business customers, but all the evidence that I have seen as water Minister predicts that opening up the market causes bills to go up rather than down, at least initially. One of the reasons we support the model as it is—which is not to say that policy may not change in future—is to ensure that Ofwat continues to effectively challenge water companies. Back in 2009, Welsh Water was challenged by the regulator to reduce its bills, and indeed it did—it reduced its operating costs by 20% to make that happen.
Since privatisation, approximately £140 billion has been invested in infrastructure. That is equivalent to £5 billion per year—almost double the level prior to privatisation. Customer satisfaction levels have risen to about 90% and customers are now five times less likely to suffer interruptions to their supply, eight times less likely to suffer from sewer flooding, and 100 times less likely to experience low flow pressure than in the days when water was a nationalised industry. As my right hon. Friend the Member for Newbury (Richard Benyon) points out, they pay just over £1 a day on average for water to be delivered, treated and returned to the environment in a good state.
I recognise that bills increased significantly, especially in the first 10 years after privatisation. A lot of that was to gather the necessary investment. Average bills have remained flat over the past two decades, however, and are planned to fall by 4% in England by 2025. Some companies, such as Yorkshire Water, are keen to increase prices because they want to invest considerably more from an environmental angle, but that is a decision for Ofwat to agree or disagree to.
We are not complacent. I am very conscious that too much water still leaks out from our system. Significant investment is needed to improve the resilience of our water supply, and corporate and financial behaviours need reform. We have therefore challenged and will keep challenging the industry to continue to improve for customers and for the environment, as well as for shareholder returns.
People talk about dividends, but I am very conscious that the average dividend paid out has fallen: in 2008-09, under a Labour Government, I think it was £2.5 billion, whereas in the past year it was less than £1 billion. We are often accused of being ideological, but—dare I say it—when Labour was in charge, returns to shareholders were a lot more. We have taken action against that.
The hon. Member for Harrow West focused in particular on changing the ownership model of water companies. Although he did not seek to suggest that we nationalise the water industry, he is clearly a supporter of social enterprise and mutual organisations. I am very conscious of the experience he has had with Thames Water, particularly on dividends paid out and with the former owners. The owners have changed and I believe there has been a significant step change in approach, which is most welcome.
A lot has been said about what is happening in Wales. Following the original privatisation, the company covering Wales, which was called Hyder, had expanded into other sectors. After the new Labour Government’s windfall tax in the late 1990s—and other economic challenges—the company effectively collapsed and was acquired by Western Power Distribution. That focused the business and it sold the water division to the two founders of Glas Cymru for £1, with £1.85 billion of debt, and that resulted in Welsh Water.
As has been pointed out, the key difference for that company was that it was created by a small number of people. It does not have shareholders but is limited by guarantee and funded by the bond market, so it still has external financing. One of the ways in which it has adjusted its gearing is to hold very high cash reserves, which helps reduce borrowing. However, I do not think that we necessarily get better value for customers just through every provider having a not-for-profit system. I think it was the hon. Member for Islwyn (Chris Evans) who complained to Ofwat a few years ago that customers across the border in Herefordshire, who were supplied by Severn Trent, were paying a lot less for their water bills than people in Wales. While I am conscious that there is not the same pressure on water supply, I am aware that there are particular challenges in the network when it comes to sewerage. It is important to recognise the different catchments, river basins and sources of water on which different water companies rely. Some rely more on water that is gifted from the clouds; others, such as those in the east of England, extract more water. Getting that balance on what is needed right will vary around the country.
As the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) was correct to point out, traditionally South West Water has had the largest bills, which is a reflection of the amount of ongoing investment that that area still needs.
The Minister is making an extremely good point. People in the south-west had been pleading for years about the cost of cleaning up beaches and other infrastructure problems, but of course the Labour Government ignored those pleas. It was the coalition Government who got a £50 reduction for every single bill in the west country, which was extremely valued by water customers in the south-west.
My right hon. Friend is correct, and that has been considered. The balance is very important. However, we need to continue to challenge South West Water to make sure its investment is effective. The hon. Member for Keighley (John Grogan) talked about the challenges on sewage, and there are particular challenges in the south-west on aspects of combined overflows. We continue to press the company to make sure that it is maximising the investment on improvements.
Will the Minister comment on two points? I mentioned in an earlier intervention that, since Scottish Water was set up in its current form, the price of water is 2% lower in real terms, while water bills in England have gone up by an average of 13% in real terms. Secondly, in the current price review, does the Minister intend to require Ofwat to significantly lower the cost of capital, which is included in the amount that Ofwat allows water companies to charge?
I am not aware that I have the power to direct Ofwat on exactly how it comes up with its cost of capital. My understanding is that it has reduced what it assumes to be appropriate for the weighted average cost of capital, but I expect the price review to be published shortly. I am due a briefing from Ofwat within the next week on that particular issue.
On prices, Severn Trent’s average bill is still lower than that of Scottish Water. I want to bring some facts into the debate. The need for ongoing investment in the water industry will vary around the country, as will what water companies put forward as necessary for the changes we require.
Ofwat has highlighted the benefit of modernising licence modification powers, after the Secretary of State asked it to look into what further powers it felt it needed. We are currently consulting publicly on that proposal and will make a final decision after the consultation. If we decide to proceed, we hope to bring that forward in a legislative vehicle in the next Session.
The Government’s strategic policy statement in 2017 set out the need to improve protections for vulnerable customers. To help water companies achieve that, the Government introduced data-sharing provisions in the Digital Economy Act 2017 to better identify those who may need help with their bills. Companies have responded positively to that challenge in their draft business plans. Between 2020 and 2025, they have pledged to reduce dividends and bills, increase investment to £50 billion, improve transparency on executive pay and increase the uptake of social tariffs by nearly 90%. Welsh Water’s level of investment is nowhere near as high as that of the average water company in England.
I am pleased that many water companies have set out how they will share profits with customers either directly or through community benefit schemes. They have set challenging targets to extend their support to vulnerable customers, including a commitment from Northumbrian Water and South West Water to eradicate water poverty in their regions.
The industry plans to reduce leakage by 16% by 2025 and has set the ambitious target of a 50% reduction by 2050. Companies also plan to reduce individual water use by 2045, targeting 83% metering penetration and a per capita consumption of 123 litres, which would be a significant improvement on today’s average of 141 litres in England. We will hold them to account on those plans and we will take action ourselves. In our water conservation report, which was published just before Christmas, I said that we would carry out a call for evidence and a consultation on the measures we can take to reduce demand.
Even though we expect that leakage will fall and demand will drop, water supply still needs to be increased. To ensure key infrastructure can be delivered on time, we are consulting on a draft national policy statement for water resources infrastructure, which will streamline the planning process for new large water infrastructure projects, such as reservoirs, desalination plants and water transfers. We expect companies to collaborate with one another on regional water resource plans that transcend company boundaries, to identify the most cost-effective solutions for each region and for the nation. That includes water companies considering other water users in their plans and working together where appropriate. The Environment Agency’s national framework for water resources will support that work.
It is important to recognise the regulators of the water industry, namely the Drinking Water Inspectorate, the Environment Agency and DEFRA, which itself continues to regulate on a small number of matters. They all have good powers to protect consumers and the environment.
The work of the Consumer Council for Water has been referred to. As the consumer body, its role is to hold the water companies to account on behalf of customers. It acts for both residential and business customers. We want to see a water industry that puts customers at the heart of the business, contributes to society and protects our precious natural environment. We will continue to push the sector and to hold it to account, to ensure that it achieves those objectives.
I am grateful to the Backbench Business Committee, to you, Mr Gray, for chairing the debate, and to my hon. Friends and other hon. Members for taking the time to take part. I think the mutual route to democratic public ownership offers significant advantages over the current privatised system. Customers and employees would be in charge of the very services they depend on. There would be no cost to the taxpayer involved in the change of ownership. Profits would be reinvested in the business and continued borrowing for investment would be feasible. On that basis, this has been a very useful debate.
Question put and agreed to.
That this House has considered the future of the water industry in England and Wales.
I beg to move,
That this House has considered cashless transactions.
It is a pleasure to serve under your chairmanship in a debate that is already better attended than I had suspected it might be, Mr Gray. It used to be said that cash is king, but in reality that is no longer the case. Politicians used to talk of the pound in your pocket, but today just three out of 10 transactions use cash, whether coins or notes; in 2008, it was six out of 10. The Access to Cash report sponsored by, but independent of, LINK, estimates that just one in 10 transactions will use cash by 2033. I do not intend to call for that to be slowed down, but rather to be sped up. Although 98% of adults in the UK have a debit card and the opportunity to use a cashless or digital transaction, some 46% of them still do not like the idea of a cashless economy, even though there is clear evidence that the vast majority of people would be better off in a cashless world.
The so-called poverty premium costs each of our constituents hundreds of pounds a year. Those hit hardest by using cash and sticking to the tried-and-tested methods are disabled people who live in medium-size market towns, where it is estimated to cost over £500 a year not to take advantage of the better tariffs and so forth available online. There is a huge premium on people who are not taking full advantage of the latest digital technology and contactless cards.
There are 2.2 million people who say that they rely day to day on cash. Only 2.5% of those in higher income groups say they do, compared with 15% of those earning under £10,000 a year. There is a clear sense that the greater number of people relying on cash in their everyday life would benefit most from not using it so much. That is why I am calling on the Minister to speed up the Government’s bid to increase the use of the cashless economy, which has not yet yielded the results that we might want to see.
I thank the hon. Gentleman for bringing this issue to Westminster Hall; I am very aware of it in my rural constituency. Does he agree that it is essential that we ensure the viability of cash transactions due to continuing cyber-security issues? This is especially true in the case of rural areas such as my constituency of Strangford, where people cannot rely on the availability of digital means at all times. In other words, cash is king in my constituency and it cannot be ignored.
The hon. Gentleman is currently right, but we will all be better off if we hasten the transition, so that people do not have to rely on cash and all of our constituents can use more secure and efficient digital means, whether they live in rural areas such as my constituency and his, or in big cities.
I declare my interest in this issue. Does the hon. Gentleman agree that the increasing amount of online fraudware—for example, one of my constituents was defrauded of £40,000 by telephone fraud using her online banking—and the use of crypto-assets for online cashless transactions means that we need more regulation from the Government, so that consumers can trust the system to enforce the rules? Do we not need to give police more powers to tackle those who use cashless transactions for criminal purposes?
I completely agree. Much of this is about trust. It is true, as I said, that 46% of people do not trust a cashless society, whether that involves crypto-currencies—although I suspect most of those 46% are not wholly familiar with every detail of that—or simply contactless cards. Part of this is about regulation; much of it is about trust.
It is worth examining in a small amount of detail why people want to continue to use cash. About 20% say it makes them feel more in control, 16% say it helps them with budgeting, and 3% want to hide their guilty pleasures—perhaps we had best not dwell on those. Some 5% do not trust online transactions at all, and 3% just do not trust the banks. That is a real issue if this trend is to be mitigated for vulnerable groups where needed and if the broader society is to take advantage of cashless transactions.
Countries such as Sweden already have twice the level of cashless transactions as we have in the UK, and their authorities have taken conscious action to slow down the pace of cashless-ising, to ensure that vulnerable groups are not left behind. It is also reported that 4,000 people in Sweden have had chips inserted under their skin, so that they do not even have to use cards—I am not sure that I would quite that far, although I know the Minister might want to consider it as a personal experiment.
We are at risk of ending up with two cultures: those who embrace a wholly digital way of living, and those who do not. There has been an 8.5% decline in the use of ATMs in London, but just a 2% decline in Northern Ireland and a 2.9% decline in my area of the east midlands. There are very different views on what is important for people and on the pace of change.
It is instructive to look at what people use cash for. Figures from the LINK report show that just 13% of people pay their rent in cash—disproportionately those on lower incomes. Some 85% said that they use cash to pay for taxis, which is a particularly instructive example. That is obviously a nationwide figure rather than a conversation about London taxis, on which we could perhaps spend many hours. Taxis are a particularly interesting example because the giving of cash to a driver makes them more vulnerable to theft and to being a target for crime. It also means that they are responsible for ensuring that they have change, so they have to carry a float even before they have taken any cash. It is of course true to say that it would be naive in today’s society to get into a cab outside London and expect the driver to take a card transaction. This is a complex landscape.
Some four out of five people say that they pay their gardener—if they have one—in cash. I am sure that neither the Minister nor I wish to cast aspersions on gardeners, but there is a suspicion that there are parts of the economy where cash is used to avoid the taxation that I know he is very eager to collect at every possible opportunity. There are a whole host of reasons to promote cashless transactions, whether it is ensuring that people are at less risk of the crime that goes with cash or that businesses are at less risk of the increasingly expensive costs of handling cash.
I am mindful that in my constituency of Strangford, where we have a fishing sector, there is a tradition of boat owners paying their crewmen in cash. There has been a reduction in the number of banks across the whole of the Irish peninsula. Seasonal workers are also paid in cash. I put forward to the hon. Gentleman that one size does not fit all and that there are exceptions. We need to be aware of that, as does the Minister.
I agree. In a sense, I make the same point that I made before, which is that currently there are a large number of exceptions and it would actually be in the interests of the many seasonal, low-paid and often zero-hours contract workers in my constituency to be paid digitally, because they would be less at risk of crime and the businesses that they work for would have less of the handling costs associated with cash. We are already at the point where the declining ATM network that those people rely on is struggling to make a viable business case to those who use it with such diminishing enthusiasm.
The case study of First Bus in Bristol—I would not speak accurately on behalf of my constituents if I said it was a cheap network—demonstrates that the use of digital payments has allowed a reduction in the cost of tickets because cash is no longer handled on the bus network. Does the hon. Gentleman recognise that that must be a positive for consumers, whether or not they use cash?
I agree. That is an example of where digital payments are in the interests of both the business and the consumer—not simply in terms of convenience, but, in the case the hon. Gentleman mentioned, in terms of the viability of the bus route. Companies such as Square have tried to encourage marketplaces to embrace digital technology in such a way that businesses that often operate at the very limit of viability are able to find new and innovative ways of changing their business models slightly. Of course, it is no good for a business to accept cards only when people wish to show up and pay in cash. The London bus network experienced some controversy when it moved to using a card-only payment mechanism, and I suspect that the hon. Gentleman may have experienced the same in his constituency.
As the hon. Member for Strangford said, it comes back to ensuring that a one-size-fits-all force is not exerted either by Government or by business, but that a number of things are done to encourage businesses to understand that there are huge advantages, and to encourage consumers to understand that there are very limited opportunities for fraud when it comes to contactless cards or, indeed, chip and pin. We should be careful not to stoke those sorts of fears unnecessarily.
There are costs associated with handling cash and there are associated costs for consumers—socioeconomic risks for those who are often most reliant on cash but would benefit most from digital payments, for example. We therefore need to ask the Minister for a number of things from the perspective of Government. The first would be to consider whether action should be taken to encourage shops and businesses to go cashless and whether there should be safety net to ban them from becoming entirely cashless, as has happened in some states in America. I would argue that in most circumstances, a retailer of any kind is perfectly entitled to make that decision for itself. We should not sleepwalk into a cashless society, however; we should understand the risks and the benefits.
With that in mind, my single largest request to the Minister is not that we try to invent some system in which, as someone proposed, a business rates scheme encourages cashless-ising in town centres, to encourage businesses to become more viable and eliminate costs to which they might be sentimentally attached, but simply to build on the success that Britain has already shown both in FinTech and in technology more generally. That means putting the governmental shoulder to the wheel and recognising that ultimately, the cost of taking cash is already very close—if not over the line—to outweighing the benefits. We are certainly already at the point where many businesses looking at that in detail would think very hard about whether taking cash was in their interests at all. Clearly, the moment when far more businesses go over that line is fast approaching.
We need to do two things. The first is to consider much more carefully the impact that eliminating cash can have on vulnerable groups in certain circumstances. Then, we must say what we can do to help those groups to embrace a cashless economy with much greater enthusiasm. Some of that means reassuring people about their concerns on the risks of fraud, while another part means defining—as the hon. Member for Strangford mentioned—what can always paid in cash, at least for a long time into the future.
Would the Minister consider setting out a roadmap for the future proportion of cash in the economy, to reassure us that it has been entirely considered and that its impact has been thought through? If I had my way, I would set a target for the elimination of cash from the economy, in much the same way that—in an ideal world—I would think carefully about when cheques might be eliminated entirely from the economy. I appreciate that setting any type of target in that regard is probably down to the market as much as it is to Government, but whether or not there is a target, the trajectory is ultimately very clear: there will be less and less cash in the economy and that will mean certain things for vulnerable groups. Our job as politicians is to provide some leadership and tell people and businesses that it is economically advantageous for there to be less cash in the economy, however sentimental some people might feel about where we are in today’s society.
I will leave that gentle request there, rather than demand anything more of the Minister, but I would say that the direction of travel is clear: cash was king, but it is now coming towards the end of its reign.
It is a pleasure to serve under your chairmanship, Mr Gray, and to respond to the debate secured by my hon. Friend the Member for Boston and Skegness (Matt Warman). I thank him for his suggestion that I get a chip implanted in my arm—I have only just started paying with my Apple watch, so that might be some way off. I will suggest it to the Chancellor as something that he might like to do.
As my hon. Friend laid out, all the evidence suggests that people are increasingly turning to digital payment methods. In 2017, debit cards overtook cash as the most frequently used payment method in the UK. The Government support digital payments, which, as we have heard in the debate, can offer consumers and businesses convenient, tailored, and flexible ways of purchasing goods and services. Increasingly, they can also offer additional services, such as ways to help budget, keep a record of transactions and manage financial affairs, which can play an important role for those who, traditionally, would be considered more vulnerable and harder to serve.
As my hon. Friend also mentioned, the public support and trust our historic currency in cash and notes—perhaps to a surprising extent. We have seen that over the course of the past 12 months, with campaigns to save the penny and for a Brexit coin, and the Royal Mint sees it every day with the demand for it collector’s coins, both on its website and at its south Wales shop. The pace of technological change has never been faster and it will never seem so slow again as it continues to accelerate. Like my hon. Friend, we want the UK to be at the forefront of technological change, to embrace the opportunities and, as we have heard from the tenor of the debate, to ensure that that change works for as many people in society as possible. That includes taking a lead in supporting the Competition and Markets Authority’s open banking initiative, which aims to make it cheaper and easier for innovative new firms to provide financial products.
Building on that, the Government have tried to lead on FinTech with our FinTech sector strategy, which was published last year and sets out our plans for ensuring that the UK remains the best place in the world to start and grow a FinTech firm. Nearly 100,000 people in the UK now work in the FinTech sector; almost none of those jobs existed just 10 years ago. The UK genuinely is a market leader in this field. We have already heard examples of those firms, which are transforming the financial services sector. TransferWise, which set up in London eight years ago, is another. It now serves more than 4 million customers and transfers more than £3 billion of funds every month.
The wider payments industry is also embracing new technology. For example, as a result of legislation brought in by this Government, UK banks and building societies have been able to introduce cheque imaging. That innovation offers people the additional option of paying in a cheque through their smartphone rather than having to go to a bank. That benefits people who are harder to serve, such as those my hon. Friend mentioned—people in rural areas and those with limited mobility.
As my hon. Friend said, digital payment technologies offer considerable opportunities for everyone, including vulnerable people. Ensuring that the UK leads in this area offers opportunities for new FinTech businesses and jobs, and exports, which I just mentioned. It also provides extra flexibility and convenience for businesses and consumers, such as those who travel by bus or taxi in London or, as we heard, by bus in Bristol. If we get the technology right and ensure it is sufficiently competitive, it may provide lower transaction costs for consumers and small businesses. As we heard, it also offers us the opportunity to lower the tax gap, which would mean lower taxes for all the rest of us who pay our fair share of taxes, and there will be public safety benefits if we can ensure correct enforcement and increased public trust. A number of shops and music festivals have suggested they may go cash free to reduce criminality.
I referred to my constituent who was defrauded via an online method. She contacted the police, Action Fraud and the bank, but no one was able to help her and she lost her money. Will the Minister set out what his Department is doing with the Home Office to ensure that the police are properly equipped and resourced to tackle these issues?
We work closely with the Home Office on economic crime. In fact, last week, the Chancellor and the Home Secretary launched a new taskforce on economic crimes, which will include cyber-security and digital payments. Of course, we work across the full range of financial institutions and authorities to ensure that they take this issue seriously. The Government’s cyber-security strategy, in which we have invested almost £2 billion, is designed to increase capability and awareness among financial institutions and police forces across the country. Police forces need to take this issue very seriously as crime changes.
It is also worth mentioning the societal benefits of developments in other parts of the world, particularly in Africa and the developing world, where organisations and companies that have taken the lead on mobile payment services, such as M-Pesa, have been truly transformational in opening up new opportunities for entrepreneurship and person-to-person payments. We have seen that happen in those parts of the world, and we want it to happen in this country, too.
We heard about some of the challenges associated with the increase in digital payments and the falling use of cash. It is worth noting that cash payments fell from 61% of all payments in 2007 to 34% in 2017. However, 34% is still a significant proportion, and about 2.7 million people in the UK remain entirely reliant on cash. We must ensure that those who rely on cash are not excluded as digital payments become more prevalent. We can of course play a role in guiding them to see some of the benefits and opportunities of digital payments. My hon. Friend the Member for Boston and Skegness mentioned examples of people for whom digital payments may be very useful indeed, such as those on lower incomes and migrant workers.
We launched a call for evidence last year to better understand the role of cash and digital payments in the new economy, to explore questions such as how we can maintain access to cash for those who need it, and to better understand the trajectory of cash use. We concluded that although we are probably heading towards a cashless society, we should seek to facilitate and encourage that. Cash—our coins and notes—will be with us for a long time to come, so its continued availability in all parts of the country for all groups needs to be planned carefully by the Government, financial institutions such as the Royal Mint and the Bank of England, and the payments industry.
We are working closely with the industry, which recognises the challenges. Last year, LINK, the UK’s ATM network, announced an independent review of access to cash, chaired by Natalie Ceeney, in response to some of the concerns and criticisms raised over the course of 2018 about the decline in the number of ATMs, particularly in rural areas. It is true that there are probably too many ATMs in some of our urban areas, but there is real concern about the number of ATMs in smaller market towns, on the smaller high streets of larger cities such as Bristol, and particularly in villages. The review is exploring the risks of leaving people behind as we increasingly utilise digital payments. As we heard, its interim report found that many consumers still value having cash.
The wholesale cash industry is also considering the infrastructure required to continue to service cash use as it declines. That will be a serious challenge in the years to come, and we want to be prepared for it. How can we ensure that every shop, restaurant, post office and community in every part of the country, including rural areas, continues to be able to obtain the cash it needs? How can that business model be either profitable or supported by the rest of the economy? In addition, the payments industry is progressing initiatives such as Request to Pay, which can help increase and promote financial inclusion. The Request to Pay service aims to give payers more control over outgoing payments and to help people avoid the cliff edges that can be created by irregular incomes or unexpected bills.
The rise in digital payments has been remarkable. It is not unique to this country; it is happening in all parts of the world, including in perhaps unexpected places such as Africa and the developing world. Contactless payments in this country grew by 99% in 2017, and we expect that trajectory to continue. We welcome proposals to enable the UK to embrace that change. There are no simple solutions, but we look at international examples, such as Singapore, Hong Kong and other parts of the world that are particularly engaged with this question. Hon. Members from across the House with proposals and ideas are very welcome to come to see me or other Treasury Ministers as we consider how we can continue to engage with this issue and drive the sector forward.
We need to consider the impact of the increasingly digital world on society and our economy and find ways to overcome the challenges it presents. Cash use remains important, with more than one third of payments in the UK made in cash. However, like my hon. Friend the Member for Boston and Skegness, we want to guide the economy and the public through the undoubted and probably irreversible journey to a cashless society, and we want to ensure that the UK is at the forefront of new technology while protecting the most vulnerable in our society.
Question put and agreed to.
Mental Health: Assessment
[Joan Ryan in the Chair]
I beg to move,
That this House has considered mental health and the benefits assessment process.
It is a pleasure to serve under your chairship, Ms Ryan. I thank the hundreds of people who wrote to me via the call for evidence on the House of Commons Facebook page, as well as the digital support team at Parliament.
Many of the stories shared by people from across the country were harrowing and difficult to read, simply because of how badly they felt they had been treated. I cannot do justice to the subject without reading out some of the words that they used. The main themes that came out of the online contributions were that the process seemed to be making mental health issues worse; that people did not think that the assessors were qualified; that the amount of money awarded was simply not enough to live on; that the process was inappropriate and poorly conceived; and that people were often declared ineligible despite having mental health diagnoses, as well as support and evidence from their doctor.
One woman specifically said that she thought the process was “confrontational, intimidating and unsupportive”, and that
“frankly it is outright cruelty and very distressing.”
Another said that it was “degrading, embarrassing and exhausting”. She said:
“My assessment left me in tears and feeling suicidal because I’d spent all week getting ready, and not a single questions was asked about my mental health.”
Another person said that they did not have enough to live on and were
“trying to have one meal every two days.”
They could not afford a new suit to go to a job interview and the money that they were receiving was only enough to pay the rent, the electricity and their phone bill.
Another person said that as someone who had suffered from suicidal ideation, they did not know why the assessors thought that asking them about that would somehow transform or change the experience. They said it was “barbaric, pointless and unnecessary.” Many people said that charities helped them the most, not the jobcentre or even the NHS. It was local charities, which in many cases were funded by the EU, that were able to give them the support they needed. That is just some of the feedback from the online contributions.
A young man from Ashfield—it is relevant that he is young—had severe anxiety and his doctor wrote to support his case. On the day that he was supposed to have his face-to-face interview at his house, the assessor did not turn up. The young man was so anxious about it that he suffered a heart attack. Is this not a disgraceful and sick way of treating people who are in need?
Absolutely, and I am sorry to hear about that constituent’s experience. It is harrowing. The assessment process has a detrimental impact on the lives of people who are already vulnerable and already not in control of their circumstances in many regards. For them to be put through a harrowing process and feel that way is simply unacceptable.
Does the hon. Lady agree that the number of forms that people suffering with mental health conditions have to complete is a real problem? It can cause unnecessary stress during difficult times, especially when many of the forms are duplicated.
I could not agree more. During last week’s debate on fibromyalgia, she explained how the process and the application forms simply do not pay respect to mental health conditions. I champion her calls to the Government to change that process.
I urge the Minister to look through the comments, to get an idea of how the policies really impact people and to understand what they have gone through. Standing here and reading out the comments does them no justice; it is only by reading them that she will get an understanding of their point of view.
The hon. Lady’s stories are a perfect depiction of the fact that the process is not adequately designed to assess mental health and wellbeing. Instead, it is a functionality test that lacks understanding of the nuances and fluctuation of mental health. If anything, the process actually exacerbates mental illness, meaning that people drop out of the cruel system to avoid and end acute worry. Let us hope that the Minister will not try to individualise the problems by saying, “Come and see us about these cases,” and that she will acknowledge the systemic failure of the assessment process.
I completely agree. I know that the Minister is always receptive and keen to understand and learn more. I am not going to harp on and give her a hard time about this. I am simply trying to change a process that I think we all want to see improved.
Will the hon. Lady give way?
Will the hon. Lady give way?
I would like to make some progress first.
I am grateful to everyone who contacted me and took the time to comment, both on Facebook and through email, especially those who were brave enough to come forward and share their story. It is vital, given the needs of people with mental health issues, that the Government take time to listen to them.
Over the past few years there have been a great many public understanding and national awareness campaigns on mental health. Where mental health was once kept a secret from family, friends and colleagues, more and more people feel able to come forward and openly discuss their experiences of mental illness and get the necessary help. That recognition is largely due to the tireless work of national campaigns such as the Scottish Association for Mental Health, Mind and many others.
On 10 October last year, the Prime Minister held a reception to celebrate World Mental Health Day and to make a policy announcement, which included the creation of a Minister for suicide prevention. The Prime Minister said,
“we are not looking after our health if we are not looking after our mental health...we need that true parity between physical and mental health, not just in our health systems but elsewhere as well—in our classrooms, our workplaces, in our communities too.”
I agree with all of those points, but I would add that one of biggest and most positive changes would be parity of esteem between mental and physical health in Government Departments themselves. That would be the place to start.
The highest number of people who seek my support are those who have been denied access or assistance by the Department for Work and Pensions. A common theme of the complaints I hear is that the constituent’s mental health needs have been ignored during work capability assessments for universal credit, employment support allowance and the personal independence payment. Most of those people have a genuine claim and have been incorrectly assessed. That is because the majority of decisions brought to me are ultimately overturned at the mandatory reconsideration and appeals stage.
I congratulate the hon. Lady on securing this important debate. On Friday night I met a number of people with mental health problems. Their issue is that the doctor says that they are not fit to work, but the benefits assessor says that they are, which leaves them in limbo. It is also a problem that employers do not always recognise mental illness. Does the hon. Lady agree that the Minister should do something about that?
I thank the hon. Gentleman for his intervention and I am sorry that I did not take it earlier. Each and every day, our constituency offices deal with situations where there has been an issue with the Department for Work and Pensions. It is our staff who work day in, day out to get those decisions overturned. If we have to do that, and if decisions are being repeatedly overturned, there is obviously a flaw in the system.
I will let the hon. Member for Sheffield Central (Paul Blomfield), who tried to intervene earlier, speak first.
I thank the hon. Lady for giving way. Clearly, there is competition for interventions because this is such an important issue. On the question of process, a constituent of mine scored zero on an employment and support allowance assessment despite having numerous and well-documented physical and mental health problems. The decision was overturned on appeal. The appeal was a gruelling process to go through but the decision was readily overturned, because there was a basic factual error in the first stage. Does the hon. Lady agree that the process would be much more effective if claimants had the option of their assessments being recorded, as recommended by Paul Gray, the independent reviewer? Does she share my hope that the Minister will update us on the pilot announced last June and confirm that her Department will go ahead with the recording of interviews?
I agree that there are issues with the service and the process.
I congratulate the hon. Lady on securing this debate. She will have seen, as I have, the number of people who visit constituency surgeries after having had an initial assessment for a physical health problem but then ending up with a mental health issue as a result of how they were treated and having their support incorrectly withdrawn. Does she agree that that needs to be looked at very seriously?
I wholeheartedly agree, and hat is the point of this debate. If the system worked well and we did not have any complaints about it, we would not be here today, but the fact is that the system is not working as it should, nor as it was probably intended to work in its initial design or concept. It is simply not working in practice. If we were to amend that system and make it work better, we would probably spend less time going through administrative appeals and mandatory reconsiderations, which should incentivise the Government to get it right the first time.
Returning to my earlier point, it is my staff who deal with constituents’ cases every day, and I would like to say thank you to each and every one of them. Rhona, Josh, David, John, Mary-Jane, Carmen and, of course, Georgia—I have quite a few staff and think I have covered them all—work hard every day to have those cases overturned, because they can see the constituent before them and can see that person who is crying out for help and needs support.
Perhaps the assessors are just not getting that full picture of someone, and perhaps we are being unfair to all the staff who work at DWP, but there is a flaw in the process, which I will turn to now. The assessments are carried out by contractors of Maximus and Atos according to guidelines set by the Department for Work and Pensions. I know there have been changes and adaptations, but ultimately they are still not working. Turning to the administrative process administered by DWP, those assessment reports are then filtered into descriptors set by the policies of this Government. I do not believe that the assessors are given the correct level of training or resources to deal with mental health issues. I have written to the Department about that on a number of occasions and I have been assured that assessors are getting adequate training, but if that is not the experience on the ground, there is obviously a flaw or an issue there.
I do not believe that the criteria for assessments give enough credence to the crippling effects that mental ill health can have on people’s lives. As the hon. Member for Rutherglen and Hamilton West (Ged Killen) has outlined, that turns into a detrimental effect on people’s mental health, even if it did not start out that way. Indeed, many of my constituents complained that their mental health problems do not fit neatly into the assessment forms because the form is not designed to assess disability resulting from mental ill health, a point that the hon. Member for Morley and Outwood (Andrea Jenkyns) also covered.
One of my constituents from Hamilton, whose daughter has bipolar disorder and was denied personal independence payments, said,
“we see mental health brought up everywhere—in adverts, in TV soaps—and the advice is to speak out. But if you tell the DWP, they ignore you and do nothing to help, they have fallen behind the times and are not keeping up to the standard.”
In the assessment reports, indicators of mental ill health bear little relation to the advice of mental health charities and are at best unhelpful for diagnosis. The assessors will make wide-reaching assertions based on outdated ideas of mental health and often irrelevant judgments on the person’s appearance: “Was the person rocking in a chair? Were they trembling? Were they sweating? What was the person wearing? Had they washed or were they wearing make-up?” That is institutional stereotyping of people suffering from poor mental health. The fact that someone turned out that day and made the effort, even if it perhaps took them hours and days to prepare themselves for that experience, only to then have it marked against them, seems arbitrary and frankly ridiculous.
I am sympathetic to a number of the points the hon. Lady makes, although, for an experienced medical professional, one component of assessing somebody who is unwell is looking at how they appear, because that may be a symptom of distress, self-neglect or other issues, notwithstanding the points she has made. One of the challenges she raised is that of those patients with fluctuating conditions such as bipolar disorder, who can be well for periods and then become quite unwell. Does she agree that the system does not have adequate assessments in place to allow for patients who can become very rapidly unwell, and that those patients in particular can become distressed by the system and how it is put into practice by assessors?
I agree with the second part of the hon. Gentleman’s intervention, but I return to my original point, which is that we are talking about a tick-box exercise that does not recognise the fluctuating nature of mental ill health—I think that is the point he is trying to make. Why should someone have the fact that they put make-up on that day, or made the effort to turn up and be there for the assessment, marked against them? It seems completely arbitrary and unnecessary.
The constituent I mentioned earlier has a nervous compulsion and, as a result, she picks at her nails. She has chosen to wear acrylic nails so that she will not unconsciously pick at her hands due to her nervous disposition. That was taken by the healthcare professional as an indicator that she was well kept and therefore mentally stable. It did not seem to matter that it was a form of self-harming and that she had had suicidal thoughts, which she outlined to the person. Those are Victorian and antiquated measures through which to identify someone with mental ill health, and they come up time and again. My constituent Donna from Carluke recently had a personal independence assessment. She acknowledged that she had two options: she could present as someone who had a mental illness and
“Present as they expect someone who has a mental illness to i.e and I quote here from your own assessment documentation ‘rock, shake, sweat, unkempt, poor eye contact and look unwell and troubled’”,
or she could present as she was on the day,
“which was apparently none of the above.”
That does not negate the fact that she has a mental health condition; it simply does not tick the markers on that sheet. The DWP tick-box system does not seem to account for that at all, nor for people who live with long-term chronic health conditions that fluctuate between good days, bad days and unimaginable days.
Donna has faced an extremely difficult few years trying to cope with severe depression. She has outlined that on one day she can be great and on another she is simply not. I take the point that the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) made; I know it comes from a position of experience, and I greatly appreciate his expertise, but the fact is that Donna has been working in the mental health sector, so she has huge insight into her condition. She knew the only way she would get better would be by taking time and allowing herself to heal, which has taken longer than she had hoped, but now that she has returned to work, she has to fight to keep her personal independence payment, which has allowed her to stabilise her life.
I mentioned this case in a debate last week. Donna recently went back to work on very reduced hours, and through the personal independence payment, she was able to effectively self-manage her condition, meaning that she can lead a meaningful and purposeful life, return to work and provide for her family. Given the presence of her symptoms, that is only possible through the personal independence payment, which she is now being denied because the fact that she returned to work has been held against her. She exactly fits the purpose of those benefits and the criteria set out, but her claim was reassessed and, as a direct result of returning to work, she is no longer entitled to them.
It seems that all the valuable support Donna received over the last three years, combined with her self-determination, is now in jeopardy because, on the day of her PIP assessment, she was:
“well kempt, behaved normally, maintained eye contact and had good insight into my illness”.
Those are the assessor’s marks. They have decided against the criteria that she is no longer eligible for a personal independence payment, despite the fact that, as I am outlining, she relies on it and it has helped her to get back to work, which I believe is ultimately what the Government want. It is counter-intuitive. Healthcare professionals appear to be carrying out assessments without prior knowledge of how mental ill health works.
My hon. Friend is making some extremely valid and excellent points, and I thank her for securing the debate. Does she agree that there is a real issue for people whose mental ill health, and perhaps some of the symptoms of it, such as paranoia or severe depression, mean that it is extremely difficult for them to even go to an assessment, because they feel the system might be against them, or they are just not well enough to get there? They are then penalised, and have their benefits taken away when they are very much in need of them, and have been very ill for a long time.
I could not agree more with my hon. Friend, and with the comments from the hon. Member for Ashfield (Gloria De Piero) about the individual who prepared themselves for an assessment, only for the assessor to not turn up. These assessments are really distressing, and they do not take into account the condition that the person being assessed has, or the impact that the assessment might have. Another of my constituents, Denise from Hamilton, was denied assistance for bipolar disorder because, as the report repeatedly stated, she is not manic all the time or on most days. How does one assessor even know that?
The idea of requiring assistance during periods of mania completely misses the point about the problems that Denise faces. The report ignores the depressive cycles that follow, and her struggles to find a measure of stability. That is a reckless approach, as she would be sent into a manic state if she were not supported, or if she tried to live the way many of us without a disability take for granted. Some of the things that have triggered a manic state in my constituent over the years would wash over most of us without her condition, but that is why the condition is extremely harrowing and distressing for those who have it. Simple things such as preparing for Christmas or a family wedding, stressful news events such as the Grenfell Tower incident, wider health issues such as the menopause, and changes to Denise’s medication for bipolar disorder are all things that have exacerbated her condition. Additionally, she has sometimes entered into mania for no apparent reason. In other words, the condition is out of her control.
I have heard many reports of assessors using very inappropriate language during assessments for people with mental health problems. Several people, including constituents I have mentioned, have told me that when discussing suicidal thoughts, they have been asked bluntly, “Why didn’t you kill yourself?” I do not know what that adds to the assessment, or what it does to a person to be asked that, but this point has been repeated by many of my constituents. When they have discussed suicidal ideation, they have been asked by the assessor, “Well, why didn’t you kill yourself?” I cannot say why they have been asked that.
Will the hon. Lady give way?
I will if the hon. Gentleman is going to say something useful.
I thank the hon. Lady for giving way; she is being very kind. In relation to getting a full picture of suicidality, there are sometimes protective factors that stop people wanting to take their own life. For example, they may have children. There may be other factors in their life that mean that they would not want to go through with the act of ending their life, even though they are having fleeting suicidal thoughts. It is relevant to a clinical examination or history of a person to work out what protective factors there may be, and why it was that, even though they were feeling very bad, very low, and having those thoughts, they did not want to follow them through. I just wanted to make that clinical point to the hon. Lady; it may be helpful for her constituents.
That would be absolutely fine if the assessor had that level of medical qualification and experience. The point is that they do not. It is fine for a doctor to say that they would ask those questions, and of course any doctor reasonably would, but that is not how this has been delivered. It has not been asked by a trusted medical professional such as a doctor, psychologist, psychiatrist or other professional with the correct experience and understanding of how to handle the situation, the follow-up aftercare or anything that comes with it. The assessor is an individual sitting with a form; it is not the same experience, so I appreciate the hon. Gentleman’s point, but that is just not how it works in reality.
The hon. Lady is making a very powerful speech. Are not DLA and its successor, PIP, meant to be about supporting disabled people with the extra costs that they face, which are about £560 a month? This system fails to recognise the real injustice that disabled people are experiencing, and unfortunately the Government are just not addressing that.
I completely agree. The point is that mental illness is a disability—that is what we have argued in previous debates—and should be recognised as such and handled appropriately. I am grateful for the point made by the hon. Member for Central Suffolk and North Ipswich, but we are not having this debate because there is an issue with the healthcare system; I am arguing that there is an issue with the practitioners in the Department for Work and Pensions.
The question to which I have referred has been asked without any follow-up, without any understanding and without the qualification and experience to handle it appropriately. I just cannot understand how it is appropriate or why it is necessary for the assessor to ask that. The ultimate fact is that it can be devastating for people with suicidal depression to have to justify such a dark thought; it can shake the foundations of their wellbeing and make them question their worth. It is not uncommon to hear from people that their personal independence payment or work capability assessments have made them feel worthless. It is not uncommon to hear that from my constituents; indeed, it is all too regular. That is why I am raising this matter with the Minister.
Since 2011, assessors are meant to have had, as part of the assessment process, access to a mental function champion or mental health champion for support and training. I am not sure whether that is working in practice, which is why I urge the Minister to look at it. In not one of the cases that I have dealt with regarding mental health problems has a mental function champion been used. That prompts the question: if the training and capacity are there, why is that not being used by the local DWP jobcentre staff? Why is it not being used to assess people appropriately? Why are assessors not using the support that is available to them if it is in fact there, provided by the Department for Work and Pensions?
I have made challenges in a number of cases in which some support for the assessor on mental health issues would have been appropriate, yet such an intervention has never been used. I have had trouble trying to find concrete figures for how many mental function champions there are across the service and what their role is. I would be grateful if the Minister could enlighten us on exactly what the mental function champions are supposed to do, what role they are supposed to play in the assessments, and how their effectiveness is being measured, because ultimately I was unable to get relevant or accurate statistics from the Department outlining how well that function is being used. If it is there and not being used, it seems that assessors are doing a disservice to the individuals who come face to face with them every day.
When someone is found fit for work but in fact is not, they need to go through the arduous process of appeals. For people with a depressive or other mental illness, that process is extremely difficult and can exacerbate their symptoms. For some, the process is too daunting and they will simply go without the support that they need. I can only imagine the number, because we will not have accurate statistics for how many people go without as they are unwilling to go through that process. I do not believe that that is the right approach to mental illness—or to public expenditure; it would save the Government time and money if assessments were correct, and the correct benefits were awarded at the first stage, in the first instance. The fact that people are having to go through the appeals process and decisions are being overturned at the mandatory reconsideration stage tells us that there is something wrong with the system that could be fixed.
Not only is this a waste of resources for the Department for Work and Pensions and our courts system, but it depletes the mental resources of people who do not have the energy to spare to go through the process. I believe that, ultimately, discrimination against mentally ill people is built into the whole culture of this system. If people disagree with that, they can just ask the High Court. The Government were found in 2018 to have discriminated against mentally ill people in the High Court ruling on regulations that meant that people who were unable to travel for reasons of psychological distress were debarred from the enhanced rate of the mobility component of personal independence payment.
I do not even know where to start with that. If someone has identified under the previous, legacy system that they are unable to travel or have limitations, and then that is undermined in the new system, that seems counter-intuitive. There is surely a better way of operating. The transition from DLA to personal independence payment has been anything but smooth; in fact, there are still flaws and errors in the system. That is all that I am trying to get to here. I really want the system to work better for people, because ultimately I would rather not have to deal with individuals having this horrible experience every day. They should not have to come to me to get things improved; the system should just work better.
The regulation to which I referred was introduced in March 2017 without any stakeholder consultation. I urge the Minister to reconsider that. There are mental health charities and experts outside the House who would be able to provide the relevant and necessary information to the Minister, if she were willing to hear it. That civic engagement would get things correct for those who have used the service and had an adverse experience; it could only enhance and improve the experience.
The High Court ruling represents just a small part of the benefits system, but I think that it represents well the Government’s approach to people with mental health problems. The personal independence payment system, contrary to the Government rhetoric, was designed so that fewer people would be eligible for it than were for the legacy benefit of DLA. If the entire concept and design of a system is to get more people out of the system, it is not really doing what it was designed for, which was to help people. It just seems ridiculous that we are working to these arbitrary targets; that is the only way I can understand this. If we are trying to reduce the number of people on the benefit, even if there is no reduction in the number of people who need the support, ultimately we are just letting people fall through the net. That is a dereliction of our duty of care to the people we serve.
One quarter of people claiming DLA for mental health conditions do not qualify for PIP when reassessed, so they lose the support that they need.
I welcome a lot of the comments that the hon. Lady has made. I do feel that, as a society and as a Government, we still have a long way to go. However, does she acknowledge that mental health funding has reached record levels? We are talking about £12 billion of funding. Does she at least welcome the fact that the Government have now made big commitments to mental health funding?
On the one hand, I wholeheartedly agree that any additional funding for mental health will always be welcomed, because we are more aware of the condition and its lifelong effects, but ultimately why are we throwing money against the wall, when at the other end of the process people have to undergo a horrible and unnecessary experience? Join the dots: to improve the health service, improve the service in another Department that gives people the financial support they need. If improvements can be made through one Department, that should be done for another. I have spoken for longer than I intended, and a lot of other hon. Members want to speak, so I will press on.
The Government need to rethink their approach to the needs of people making benefit claims. They must be cognisant of the effect of mental health. Assessments must be more in line with best practice on mental health, so I ask the Minister to meet charities and organisations calling for reform of the benefits system.
I do not know how else to convey to the Government how much I just want to make the system better. I am not trying to make political points for the sake of it. There are flaws in the system, and I would like to improve it. I would like to give as many hon. Members a chance to speak as possible, so I end by quoting from the film “I, Daniel Blake”, because I think it captures this issue perfectly.
“I am not a client, a customer, nor a service user… I demand my rights. I demand you treat me with respect… I…am a citizen, nothing more, nothing less.”
In this day and age, and in this process, it is easy to refer to people as constituents, clients, service users or customers, but we forget that they are just people who ultimately rely on our support. Most people would not chose to rely on that support, especially under the arbitrary measures of the system, which are completely off-putting and attempt to reduce their reliance. People do not tend to want to rely on the state. Every day, my constituents are left feeling demoralised, degraded and ignored. These people elected us to represent them, and we must do more and do better, because at the moment it is simply not good enough. I want to do the best I can for my constituents, and I would not be doing that if I did not call on the Minister to improve this service.
I am grateful for the chance to contribute to this debate. I commend my hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) on securing this debate, on her excellent speech, and on the tireless work she is doing on behalf of her constituents and many others.
In my constituency office, we have the equivalent of a full-time employee doing nothing but fixing mistakes made by the DWP in assessments. I have no reason to believe it is any better in other constituencies. We could be talking about an army of people funded by the taxpayer just to sort out the mess created by a Government Department. During my three and a half years in this place, one significant area that has generated a lot of work has been the appalling treatment of constituents if they have assessments based on mental problems or a combination of physical disability and mental health problems.
In theory and in principle, I agree with what the Government claim to be trying to do through the benefits system. In practice, what they are really doing is completely wrong and I cannot support it at all. Having said that, I will not hear one word of criticism against the people who work in my local jobcentres, because they are fantastic. They do everything possible to help people, but they are trammelled by the regulations that they have to work under. They are clearly restricted as civil servants, in that sometimes they cannot say publicly what they appear to feel privately. The support they tried to give to every constituent we have contacted them about has been outstanding, so I want to place on record the fact that the people in our local jobcentres are doing a great job, but they cannot do the job they want to do, because the rules will not let them.
The hon. Gentleman is addressing the nature and complexity of the changes. Many of us support the long-term objective. However, the number of times issues have been delayed and roll-outs have been put back, and the number of changes, amendments and adjustments all indicate a fundamental flaw at the heart of the concept. Does he agree that we need to address that, rather than tinker at the edges?
My view is that the fundamental flaw was built into the system from day one, when the entire review started from the bottom line of financial saving and everything else was built on top of that. A benefits system cannot be built on a price tag, especially a price tag significantly lower than the current cost of the benefits system. That will guarantee that a significant number of people will be left a lot worse off than they were. A system has never been invented that ensures that the tiny minority of people who play the system are called to account and those who need to benefit are protected. Far too often, the system hits the easy targets rather than the ones who should be stopped from abusing the system.
What are the assessments for people with mental health problems in the benefits system supposed to do? They are supposed to give additional support to anyone living with a disability that makes it dearer for them to have the basic essentials of life. They are supposed to provide financial support for people who cannot get into work and help those who will be able to get into work to get there. We must recognise that some people will never be able to carry out enough work to support themselves financially. For those facing that reality, the system is supposed to help.
Instead, our system makes the situation worse for somebody with mental health problems that prevent them from working. We are talking about things that on their own might not seem that severe, such as anxiety, which can be made worse if they keep getting knocked back or psychologically beaten about. These people struggle just to carry on the usual social contact that some of us take for granted and lack the simple social skills that are essential to survive in the workplace.
For people struggling with those problems due to mental illness, which can be exacerbated by the way they are being treated, the worst thing we can do is force them through a system that makes them feel even less worthwhile than before they went in, even worse about themselves and even more anxious about their next assessment.
We would not assess a blind person with a paper form and we would not assess a deaf person over the phone, unless there was somebody at the other end to interpret for them. Why should it be any different when assessing somebody whose difficulties are related to severe anxiety and the inability to cope with going out the door and taking a bus on their own? They are told to go to an address they have never heard of, in a place they have never been to, to find their way there by a bus that they do not know exists, by a time set by the assessors, and to pay their own way there. By the time they get there, if they are lucky, an assessor will carry out the interview, but if the assessor does not turn up, that is okay. However, if the claimant does not turn up, they get their benefit stopped. Then we wonder why people think the system is rigged against them.
The whole work capability assessment is lengthy and demeaning. It treats people as numbers—as statistics. Sometimes it treats people as problems, instead of as human beings who need the support of a caring and civilised society. For example, most of my constituents are quite surprised, if not astonished, when they discover that it is not routine for the DWP to ask for a report from their GP or community psychiatric nurse, if they have been getting support from a nurse. They will sometimes ask for it, if the claimant themselves insists on them asking for it, but why do they not do it routinely? Surely the person’s own GP and the health professionals—those with qualifications in psychology or psychiatry—who have worked with this person, sometimes for years, have something important to say about their ability to work now and the realistic prospects of them getting back into work in the future.
Tomorrow, it will be exactly a year since I asked an urgent question in the Chamber about changes to personal independence payment assessment criteria. That followed a Government defeat in a case in the High Court where, in essence, the court ruled that the assessment process the Government had put in place was illegal, because it discriminated between people with mental health problems and people with physical disabilities. On 23 November last year we received an update on that case: 140,000 cases had had to be reviewed and £4.5 million in benefits had been paid back to 1,000 people. I know that the succession of Ministers we have had in the DWP like to quote statistics about the percentage of people who like the result and the percentage of people who do not. In that case, 1,000 people were owed the money, which they needed just to have a decent standard of life. This Government had unlawfully withheld that money from them. We still do not know how many more people are due to get money back once the full review has been carried out. These are not the actions of a caring society.
Some of my constituents have turned up at assessments that were difficult and stressful to get to and found that the assessment had been cancelled. They had paid the cost of getting there, sometimes borrowing money to pay the bus fare, and the assessment was cancelled. At other times they have turned up and the paperwork had been lost or the person who had read the paperwork had phoned in sick. A different assessor had no idea who the person coming in to be assessed was. It is no wonder it creates the impression that, “The system really does not care about me. It does not see me as a human being. It sees me as a problem instead of as a human being with intrinsic value and the same rights to be treated properly as anyone else in our society.”
The hon. Gentleman is making a powerful speech. Is he as concerned as I am about the York University report that came out today, which states that people with mental health conditions are two and a half to three and a half times more likely to have their PIP claim reduced or stopped than people with physical health conditions? Does he share the view of the Royal College of Psychiatrists that if there is parity of esteem for mental health and physical health conditions in the health service, there should also be parity of esteem in social security?
I am grateful for the hon. Lady’s comments. I have not seen the report, but my impression has been that people with significant mental health problems do not always help themselves and act in their own best interest. As a society, we have not got a balance about how far we allow someone to be who they want to be and live their own life. At what point do we step in and say, “You are not doing yourself any favours”? I have met far too many people whose initial problem started with a letter saying they had to go for an assessment, but, because they were scared of an assessment, they did not go, and from then on the problems multiplied.
I had one recent case of a constituent whose behaviour admittedly sometimes was completely unacceptable. One of the ways that he responds to the fact that he cannot cope is by getting aggressive. In at least one instance, he caused damage in a DWP office. I cannot condone that, but it turned out that one of things he was annoyed about was the fact that his benefit had been substantially reduced. He did not think he had seen a letter telling him why it had been reduced, and we could not find anything, either. It turned out the DWP had decided that because he might react badly to being told that, it cut his benefit, but decided not to tell him what it had done. So that information was kept in a part of the system that assessors could see, but he could not. The assessor was supposed to try to help him get back into the workplace. The DWP thinks he is capable of doing some work, so it thinks he is capable of all the stresses and strains and upsets that go with going out to work in the morning, or in the afternoon, but he cannot be trusted with information about his own claim in case he reacts to it in the wrong way.
I do not think anybody here would like to sit down and design the perfect benefits system from scratch. I do not suggest that I have all the answers, and there will always be difficult judgments to be made. There will always be cases when someone has to decide, “Is this somebody who knows how to work the system and is chancing it, or is this somebody who really needs help?” I would much rather the system was biased a little more towards accepting that a tiny minority of people can play the system in order to make sure that nobody who needs the support of the system is left behind, but the experience of my constituents is that it is very much loaded in the opposite direction. In numerous cases that I have raised with various Secretaries of State for Work and Pensions—more than six since I was elected—after a few months, the answer has come back that the person has abandoned their appeal and is not going through with the latest stage in the process. Some in the DWP see it as a success every time someone does not carry through an appeal, because that means they have accepted the result. They do not think it means they have given up because they simply cannot win against a system that they feel, and sometimes I feel, is designed to stop people getting what they are entitled to get.
If we look at what has been happening since some of the benefits system was devolved to the Scottish Government, they were criticised for not moving quicker, but the first thing they did was to embark on a major consultation and engagement process not only with the usual suspects, but with people who had been through previous processes. They went out and actively looked for people who had either got successful claims or had lost out under the previous system to find out from them what they thought the system should be like.
The Scottish Government have given an assurance that any benefits assessments they are responsible for will not be carried out by private companies, so any suspicion that there is something in it for the private assessor who says no instead of yes is immediately taken out. The DWP will always say that that is not the case, but if a private company hopes to get the contract in a few years’ time, there will always be that suspicion, especially in the minds of those who do not get the result that they want.
We need to go back to the basics of what people are entitled to get either from the benefits system or from any other part of the state. The Scottish Government have said from day one that their system will be based on fairness, dignity and respect. Every one of our citizens deserves that, whether they are dealing with a benefits application to the DWP or in any other interaction with the Government. At the moment, far too many of my constituents do not feel they are being treated fairly. They do not feel they are being respected as human beings and they definitely do not feel that they come out of the process with the dignity that each and every one of us is entitled to. Until that changes, I cannot support the system. I want to see it fundamentally changed or scrapped altogether so that we go back and start again.
We have two more Back-Bench speeches. I intend to move to the Front Bench at 1530, so I suggest the two Members wishing to speak help each other and take about seven minutes each.
It is a great pleasure to serve under your chairmanship, Ms Ryan. I warmly congratulate my hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) on securing the debate. It is also good to see the Minister in her place. She knows how much I respect and value the close working relationship that we have, particularly given my constituency caseload. I therefore hope that my remarks today, based on that constituency casework experience, are reflected upon in the Department for Work and Pensions and that action can be taken to build a social security system that is truly underpinned by respect, dignity and human rights.
At the weekend, and in anticipation of today’s debate, I asked constituents to share their thoughts with me. Indra from Tollcross said:
“I asked if they”—
“knew anything about my genetic condition—they didn’t but said it didn’t matter. I asked if they had worked in mental health treatment and again was dismissed.”
Indra went on to say:
“I left feeling worse off, and totally demoralised instead of supported.”
I guess that brings me to the first concern that I have about the assessment process, which was something I highlighted during my own debate on work capability assessments back in December 2017. It is a source of great regret that we are back today discussing the same issue a year or so on.
There is a concern, which is echoed by the Rethink Mental Illness report, that staff who perform assessments have an incredibly poor understanding of mental health. To illustrate the point, during the December 2017 debate I told the House how my constituent was asked if her son still had autism. That was an absolutely shocking thing to learn. The fact that that is something we can hear from a constituent should send an alarm signal to us. We have also seen examples where assessments have been carried out by physiotherapists for those with a mental health condition. That is like asking a chef to do the work of a car mechanic.
The second issue relates to vulnerable constituents who might have anxiety. Too often we ask people who struggle with the most basic tasks to complete long, convoluted forms riddled with jargon and difficult questions, a point made eloquently by the hon. Member for Morley and Outwood (Andrea Jenkyns). Just yesterday morning, while meeting the manager of Easterhouse CAB, I heard the story of a man who had started filling out his universal credit application over Christmas but found it so overwhelming that he did not complete it. The mess that that has caused the citizens advice bureau, which is now having to clear it up, is considerable.
We also know from experience that constituents who perhaps fail at the initial assessment and submit their mandatory reconsideration are left for weeks on end, worrying about the outcome of the appeal. That is simply not helpful for people with poor mental health.
Does the hon. Gentleman feel, as I do, that some of those people are being tested and tried before being given their benefits? That brings on anxiety. Last week’s Demos report is important in reviewing the issue. People should not be tested to get some money.
I agree. The hon. Gentleman will have seen that in his constituency caseload and in surgeries. I am sure that all Members see it in surgeries.
I want to mention fibromyalgia. I attended the recent debate on the subject, as did my hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) and the hon. Member for Morley and Outwood (Andrea Jenkyns). Fibro campaigners raise the legitimate concern that the DWP does not recognise the significance of mental health in fibromyalgia, which spans anxiety and depression. What work is under way in the Minister’s Department to explore what further training and support can be given in that area, including to work coaches?
There is much more to be done to ensure that the most vulnerable people can go about their lives in the knowledge that the process of assessing them for benefits will be underpinned by dignity, respect and human rights. The current system does not get that right, with the result that the British Government are failing the most vulnerable in society. I think we would all agree that we can and must do better.
Because of the respect I have for the Minister, I believe she is the Minister who can take the matter forward. We look to her for encouragement when she replies. There is strong cross-party consensus that we want to work together to protect our most vulnerable constituents. I look forward to supporting the Minister as she takes the matter forward.
It is a pleasure to speak in the debate, and to follow those who set the scene. The hon. Member for Lanark and Hamilton East (Angela Crawley) made a significant contribution, as did my colleagues and friends left and right. We may not agree on the constitutional position of Northern Ireland or the United Kingdom, or Scotland and Wales, but we agree on the important issue we are debating.
The Minister attending this debate is one who responds. Her comments to me in the Chamber, and whenever we meet, are soft-spoken words, which are always taken in the light in which they are meant. I thank her for her help and the interest she shows in the issues I bring to her attention. My comments today are not meant to be aggressive or harsh, but they are factual. Before I go on with those comments, I want to say how much I appreciate the Minister’s compassion and her interest in a job that she does extremely well.
We set up this social state to enable those in genuine difficulty to live, and not simply survive in poorhouses and the like. We determined that it was fair to ask those who could to help others, through tax and national insurance contributions. That has set us apart from many countries. I believe we are here to help the ill and the most vulnerable in society. Those suffering from mental health issues are more in need of our help today than ever before. The hon. Member for Glenrothes (Peter Grant) mentioned staff, and I have staff in my office who work on nothing but benefits—reviews, appeals, applications and advice. They work on those issues full time, to give the correct advice and assistance that it is our job to give as elected representatives. All my other staff are trained and, in fairness, the Government have set up training classes for our staff so that they can be versed in universal credit issues. I thank the Minister for that. We take advantage of it, and make sure our staff are trained.
In the UK, 20.3 million families receive a form of benefit, and 8.7 million of those are pensioners, which is about 30% of the population. For some families, the benefits they receive make up more than half their income. If an individual suffers with a mental health condition that has a long-term effect on their normal day-to-day life, it is considered a disability as defined under the Equality Act 2010. People with mental health conditions are less likely to receive any form of universal credit.
Between October 2013 and October 2016, 193,000 people with mental health conditions were reassessed, and of those 39% were awarded more money. However, 14% were given the same amount, 22% were awarded less money and 25% no longer received the benefits they once had. I say it very gently, but the benefits assessment process needs to be amended, as it is clearly not fitting for those who suffer with serious mental health problems that result in an inability to work. There was a debate in the Chamber on Thursday about mental health first aid in the workplace, with a good level of participation. In Northern Ireland, the legacy of the troubles is a considerably higher frequency of mental health problems than here on the mainland. The figures are extreme: 25% higher than on the mainland. That is the legacy of a 30-year terrorist campaign that affects not just those involved but the families—wives, daughters, sons, mums and dads.
The hon. Gentleman is making an excellent speech. Will he join me in commending the excellent work of psychologists in Northern Ireland who hosted a successful international trauma conference last year that is putting Northern Ireland on the map as a leader in international expertise on trauma?
I thank the hon. Lady for that intervention, and congratulate her on all she does, and on her interest in the issue.
Mental health issues have caused 300,000 people to lose their jobs because they cannot cope with the stress of their career. In Northern Ireland, one in five adults show signs of mental illnesses in their lifetime. We can see clearly that more funding needs to go towards helping those who cannot work because of mental health problems. People who cannot hold down a job owing to such problems must be treated with compassion and understanding. I have had several meetings with Capita. As the hon. Member for Glenrothes said, the staff are excellent and work hard. Frances, the manageress of the social security office in Newtownards, is extremely supportive and helpful, as are all the staff when anyone phones about an issue. However, that does not stop the problems that we are having. In my meeting with Capita, I outlined some cases where benefits were withdrawn, but in conjunction with its staff, we were able to overturn the decisions. I was glad that those constituents had come to see me and my staff, and that we could use medical evidence, supplied by doctors, to persuade Capita of the adverse effect on their mental health, wellbeing and, at times, physical safety. Things must change.
The point that my hon. Friend is making relates to the fact that some people are so depressed that they do not want to contact anyone who could help them. They fall through the gaps. When people are willing to go forward, we have a high success rate for overturning decisions on appeal, but unfortunately some of the neediest bury their heads in the sand, as they do not have the will or drive to go ahead, or the support behind them.
I agree wholeheartedly. What my hon. Friend described is the reason why we are charged, as elected representatives, with delivering our views, in debates such as this and in offices.
People suffering long-term mental health issues should be supported financially because of the challenges that they bring in their career. Those with severe and enduring mental illnesses are exposed to premature mortality of up to 15 to 20 years; the situation affects their health, wellbeing and the length of time they will be in this world. Those people need support. We should not assume their health will improve over time, as it will improve only with rest and coping mechanisms, and the ability to work in a place where there is understanding of the needs of people with mental health issues, and a preparedness to work with them. Such jobs are few and far between. The question is how to achieve that, which is why the debate has been brought forward today.
Changes are needed in society, and I do not think anyone in the House would deny that. However, they must begin with a recognition that mental health issues are not an excuse not to work. They are a tunnel of darkness. What my hon. Friend the Member for South Antrim (Paul Girvan) and the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) said about this is very relevant, for each and every one of us here. We are here because we have a passion for our people and want to put that over in the debate.
That tunnel of darkness is brightened only by the light of love and compassion, and I believe that governmental dealings with those in need of help must change in a compassionate way. We ask the Minister to do that, first because we know that she appreciates, understands and has an interest in these issues, and also on behalf of our people, who beseech her to make those changes.
Order. If Front-Bench speakers could limit themselves to nine minutes, that will allow the hon. Member for Lanark and Hamilton East (Angela Crawley) to wind-up the debate.
It is a pleasure to see you in the Chair, Ms Ryan, and I join others in paying tribute to the tour de force that we heard at the beginning of the debate from my hon. Friend the Member for Lanark and Hamilton East (Angela Crawley). She was right to start by mentioning staff members, because one of her staff members—Mary Jane Douglas—is also one of mine, and she contacted me to make sure that I mentioned her name. I also wish to mention other members of the casework team: Dominique Ucbas, Tony McCue, and my office manager, the great Roza Salih. They all deal with the benefits and assessment system and have delivered some success. Interestingly, when I interviewed recently for a caseworker, one of the successful candidates I mentioned today, and other candidates, explained how they had helped family members, and others acting on behalf of relatives, who were trying to navigate their way through the benefits process.
The UK Government’s tick-box exercises for disability assessment are woefully inadequate when it comes to mental health conditions. The Work and Pensions Committee, on which I sit, considered a report from last year that contained a damning indictment of the Government’s assessments for the personal independence payment and employment and support allowance. It highlighted that assessments can be emotionally draining for people, and that is doubly awful for those who have mental health conditions. Indeed, such conditions can sometimes be exacerbated by the process and the stress of undergoing an assessment, or by a feeling that the health professional making the assessment is not accurately recording the impact of a condition.
The Government’s follow-up on the report’s criticisms were described by the Committee as “regrettably slow”. One example of their attitude was the contempt that they showed towards people with psychological conditions who require additional support under PIP. As has been said, in 2016 the Government introduced regulations that specifically excluded people with psychological conditions from receiving higher points in their disability assessment for PIP, until the Department was defeated in the courts for what was described as “blatantly discriminatory” legislation. That shows that the Government have absolutely no regard for the impact of psychological conditions, and it completely flies in the face of the commitment made by the Prime Minister on the steps of No.10 to create parity between physical and mental health conditions. We urgently need a complete overhaul of the PIP and ESA assessment process, to ensure that individuals with mental health conditions are treated with respect and dignity.
A huge amount of evidence from both claimants and stakeholder groups suggests that the system of disability assessment is failing people with mental health conditions. The Committee pointed out that there was an “unprecedented response” from claimants to its inquiry into PIP and ESA assessments. Rethink Mental Illness has said that many assessors do not have the necessary expertise in mental health conditions to carry out assessments, and that is exacerbated by the fact that ESA and PIP assessments are not designed to take account of the full impact of someone’s condition on their day-to-day life.
“concerned that assessors often do not have a full understanding of learning disability as exemplified in the stories we hear from individuals and their families.”
Mind and the Scottish Association for Mental Health have said that they hear
“frequently from people with mental health problems who have been assessed by healthcare professionals who lack a basic understanding of mental health. Often in these cases the problem is not that assessors lack specific clinical knowledge, but that they do not have good understanding of what it’s like to have a mental health problem or do not ask sensitive questions about how someone’s mental health affects them.”
That point came across clearly in the inquiry. We asked the contractors Atos and Capita how many qualified doctors they had in their organisations to carry out assessments. Atos said that it had two, as did Capita, and they described the rest of their assessors as “occupational health practitioners”.
I remember specifically asking a senior figure from Atos—this became one of those videos that are widely shared within minutes on social media—who someone with multiple sclerosis and depression would see in their organisation, and I was advised that they would see an occupational health practitioner. When I asked that senior figure whether he understood why people are cynical about the process, he nodded his head.
One recommendation in the Committee’s report was for audio and visual recording, because around 80% of successful appeals are based on verbal information that was provided at the original assessment. Will the Minister update Members on that recommendation?
My hon. Friend is spot on. Does he, like me, believe that this issue is such a problem partly because it has been contracted out to private companies that cut corners in all ways, meaning that our constituents get such a bad service? It comes down to the issue of privatisation; that is why the service is so poor.
My hon. Friend makes an excellent point. My next question to the Minister is about acceptable reports. The contractors have never hit Government targets for acceptable reports. If any other contractor were to conduct its business in such a way and failed to meet Government targets, it would no longer have its contract. How are the contractors now performing with regards to acceptable reports?
Will the Minister explain the mandatory reconsideration process, and confirm the rule that eight out of 10 mandatory reconsiderations—80% of them—should result in failure? That instruction was given to staff. I think the Government said it was guidance, but some of us believe it was an instruction. Will the Minister say whether it has been rescinded, so that mandatory reconsiderations can be dealt with in a fairer way? Will she provide statistics on the number of successful appeals made by those with mental health conditions? I recently wrote to her about people who are blind or have a visual impairment, as that issue has had some press scrutiny in Scotland, but can she provide similar figures for individuals with mental health conditions?
The removal of implied consent under universal credit will have a particularly detrimental impact on those with psychological disorders or learning difficulties. Under the legacy system, implied consent allowed family members, support services and benefits advisers easily to represent claimants when making claims to the DWP. That seems to be changing under universal credit, because a claimant now has to give explicit consent for such representation. For claimants who are severely sick or disabled, and especially those with mental health conditions or learning difficulties, the ability to rely on implied consent was important. The stress and pressure of having to interact with the benefits system and provide explicit consent is a real concern, as it may force claimants to jump through new hoops to get support in making their claim or resolving any problems with it.
I will conclude with the Scottish Government’s approach to the social security system. The Scottish Government will have some devolved power over the PIP process, and they are building the necessary infrastructure to deliver that. Disability benefit assessments will be carried out not by the private sector, but by Scotland’s public sector healthcare professionals. The approach taken by the Scottish Government will mean that the system is evidence-based and uses healthcare professionals, and that important step has been welcomed by many third-sector organisations in Scotland. It is vital to put the needs of the individual at the centre of the social security system by providing choice, flexibility and control. I thank you, Ms Ryan, and I look forward to the Minister’s response.
It is a pleasure to serve under your chairmanship, Ms Ryan.
I start by congratulating the hon. Member for Lanark and Hamilton East (Angela Crawley) on securing this debate and on making a truly powerful speech, in which she shared some of the evidence that she has received as a result of the call she put out for accounts of people’s harrowing experiences of their mental distress and of accessing the social security system. She highlighted that it was actually down to a number of voluntary sector organisations—charities and other bodies—to help those individuals through the claim process, and many of those organisations rely on funding they receive from the European Union.
The hon. Lady said that what is lacking in the whole process is adequate training of the healthcare professionals involved. It is vital that they be trained adequately. We know that there are meant to be mental distress champions, but ultimately their influence is not being felt by those going through the assessment.
Many Members, in speeches or interventions, spoke about the appeals process. It is recognised that there is concern about it, as there is such a high success rate for appeals, which I will come to later.
The hon. Lady absolutely hit the nail on the head when she talked about the change from the disability living allowance to the personal independent payment, and the impact that change has had on so many claimants. My hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) highlighted in an intervention the report published today by York University, which shows that people with psychological conditions were 2.4 times more likely than claimants without such a condition to have their DLA award stopped when they were being assessed for PIP, so there is clearly a problem. Many people assume that the policy intention behind PIP was to reduce the number of people in receipt of such support. There should be parity of esteem for those with physical conditions and those with mental health conditions, because PIP is there to contribute towards the extra costs of living with such an illness or condition.
We know that disabled people, particularly those who experience mental distress, have been let down by the assessment framework. Many people would say that the framework is innately flawed. As of May 2017, half of those claiming ESA and a third of those claiming PIP were described as having “mental or behavioural disorders”.
The Department for Work and Pensions has spent more than £1 billion on outsourcing the assessments for these benefits to providers such as Capita and Atos. However, those providers are falling woefully short of the DWP’s own performance standards. More than half of the assessment reports by Capita have been graded as unacceptable, so we know that there are clear problems with the way that the assessment framework is being used by these providers, which has obviously had a great impact on those experiencing mental distress.
Many Members have today shared—as Members have done constantly throughout their time in Parliament—the heart-wrenching accounts of constituents whose assessment left them in deep despair and distress. If anyone has not heard such accounts, they should think back to February last year, when the Work and Pensions Committee received an unprecedented amount of evidence from individuals sharing their experiences of the PIP and ESA assessment and framework, and of the distress that they caused them.
There have even been reports of people who have admitted being suicidal being asked why they had not killed themselves yet. Like the hon. Member for Lanark and Hamilton, I do not know how an assessor could ask somebody that. I would like to think that the Minister will ensure that that does not happen again; it really should not.
There have been reports of assessors overlooking someone’s mental distress, and asking inappropriate and offensive questions. I will give just one example. An individual diagnosed with borderline personality disorder, depression and anxiety lost his job and had a mental-health breakdown, so he applied for PIP twice, but was turned down twice. Obviously, the process began with his filling out the claim form, collecting all the medical evidence requested of him, and finally having to endure the humiliating face-to-face assessment. The process of trying to claim PIP caused that individual—David—great anxiety. He spiralled out of control into self-harm, and eventually overdosed on drugs.
No assessment for essential social security support should lead to anyone spiralling toward self-harm. The Minister will agree that we have to consider whether it is right for the burden of providing medical evidence to fall on the claimant. Will she commit to removing the burden of collecting medical evidence from the person claiming PIP and ESA?
When David went to a tribunal, he was awarded PIP, based on the same evidence that the DWP had previously deemed insufficient. However, we know that David’s story is not a one-off; it is all too common. Since 2013, 71% of PIP decisions have been overturned on appeal, which is a clear indication that there is inaccuracy and poor decision-making in the assessment process. Denying more than 100,000 disabled people PIP will obviously have a negative impact on whether people can go on and live independently. The DWP spent over £100 million in administering reviews and appeals between 2016 and 2018. Much of the evidence would have been “inadmissible” in a normal court of law; that was said by a senior judge.
The Minister must consider all recommendations, particularly those of the Social Security Advisory Committee around mandatory reconsiderations, decision making, and ensuring that assessments are recorded. The High Court last year ruled that the negative changes regarding those who experience psychological distress were unlawfully discriminatory. Obviously, that has led to the review of 1.6 million PIP awards.
When does the Minister anticipate that the reviews of the system will be completed, and has a timetable for them been published, so we can see that they are completed? It will be important to know that all those people have got their back payment in a timely fashion.
The DWP is undergoing seven reviews of disabled people who are wrongly being deprived of social security. Five of those reviews are of flawed PIP and ESA assessments. So it is really important that the DWP gets this right. The failings of the assessment framework go way beyond discrimination; they contribute to, or even cause, individuals’ mental distress. In the words of one person,
“Going through the WCA process is the biggest source of worry in my life”.
That is how we are treating some of our most vulnerable people in society.
Labour recognises that there needs to be a radical overhaul of the assessment framework. It was labelled “superficial” and “dismissive” by the UN special rapporteur on extreme poverty. It should be replaced by a holistic, personalised and tailored single assessment, which would treat all disabled people, whether they have a physical or mental health condition, with the dignity and respect that they so desperately deserve.
It is a pleasure to serve under your chairmanship, Ms Ryan.
I begin by my adding my praise to that of other Members for the hon. Member for Lanark and Hamilton East (Angela Crawley), both for securing this debate and for the way in which she addressed the House. She and others are absolutely right: I am utterly determined to make sure that we improve the system by which we assess people for employment and support allowance, the personal independence payment and of course universal credit. I am just as ambitious as everybody else in the room to ensure that we treat everyone in society with respect and dignity, and really promote their human rights.
On independent assessments, people who go on this journey—I do not want to call them claimants or customers; that was a good point well made by the hon. Lady—through the system give the approach that we have taken to both ESA and PIP a satisfaction rating in the high 80s. That is the vast majority of people applying for these benefits. This is not something we measure internally; it is properly independent research that we publish and is open to scrutiny. One poor experience is one too many. We are utterly determined to improve the experience at every stage of the journey, and really put the person at the centre.
PIP was introduced to ensure that mental and physical health conditions have parity of esteem. Many more people are benefiting from it than ever did from disability living allowance, and are getting the higher rates of support, for both their daily living and their mobility. Broadly, therefore, it is working, but as we have heard, there are some absolutely horrendous and terrible cases of unacceptable behaviour, where things are going wrong. I thank all hon. Members who have come along today. It is clear that everyone here wants to do the best they can for their people and to work with me to absolutely get this right, and I welcome that.
I want to answer questions, but I have been given very little time to respond; that is the nature of these debates. As always, I will write to hon. Members on any questions that I do not have time to address. I start with the invaluable work of the Work and Pensions Committee. It is great to have one of its members here speaking up for that. The Committee gathered a huge amount of evidence, and I looked through all the research findings and the Committee’s recommendations thoroughly. We have agreed to implement all those recommendations, and we are carefully working our way through every single one of them. I want to reassure hon. Members that I work very closely with SSAC. It is an invaluable body. Everyone in the Department always thoroughly considers its reports and recommendations, and whenever possible we seek to implement them.
A few hon. Members mentioned video recording, which, when I came from the Home Office to take up this position, I thought was a really good idea. One of the fundamental problems we face with people claiming benefits is a lack of trust. Unfortunately, too many people are worried. We have today heard eloquent contributions about people being really worried about having to go through the process. In spite of the fact that most people have a really good experience, most of them are worried before they enter the process. I obviously want to eliminate that, as does everyone in the Department.
I want people to fill in the forms confidently, and pick up the phone or go into their jobcentre thinking, “There will be compassionate people who will help me”. That is what we are all striving to achieve. I believe that video recording the assessments will play an incredibly important role in regaining people’s trust in the whole process. Hon. Members will know that audio recordings are already available, but they are not done with the most up-to-date equipment. It can be a clunky and difficult experience, and I want to make it as easy as possible.
Throughout the summer we did a lot of work both with people who are claiming benefits and with healthcare professionals. All assessments are undertaken by fully qualified healthcare professionals. They are mostly nurses, but they all have experience and they have additional training in how to undertake the functional assessments. They are highly motivated and trained individuals, and it was important to consider how they felt about the video recording, just as much as how people coming in to be assessed felt about it. Having taken all that into consideration, we have started a pilot, which is going well. It is voluntary, because we wanted to ensure that people felt really confident about having their assessments videoed.
The strength of the pilot will be that lots of people take up the opportunity. There is no point coming up with a videoing possibility if people are not prepared to say, “Yes, I would like my assessment to be videoed”. We have been working carefully on the pilot and will review the findings to see how and when we can roll the initiative out. There is an absolute determination and commitment to doing that, because it will build the trust and confidence in the system that we want.
We also been looking at every single stage of the process. I really want to assure hon. Members that I regularly meet our stakeholders—the large charities and disability rights organisations. We have a PIP forum and a stakeholder team working with us on improvements to the work capability assessment, and disabled people are really getting alongside us and working with us on improving the process. I have already commissioned an independent review of the PIP application process. We have been looking carefully and in detail at every single part of the claimant journey—the person’s journey—through the system to see what more we can do, right through to how we can improve our mandatory reconsideration process. At the same time, as I said, we have been implementing the very helpful findings of the Work and Pensions Committee.
Going back to comments about what happens in the assessment, we will make a decision based just on the application, without sending someone to a face-to-face assessment, if we can gather enough information from the person applying for the benefit, and if they provide information from healthcare professionals, whether they be consultants, GPs or community mental health nurses. We will use that information whenever possible. A lot of our work over the summer was engaging with healthcare professionals to try to understand the barriers to their providing us with information. Relatively small numbers of people go to appeal, and relatively small numbers have decisions overturned. Most often, decisions are overturned because more information has become available by the time of the appeal. I am determined to see what we can do to have the information provided up front by healthcare professionals, so that we can make more paper-based assessments, without the need for face-to-face ones.
Hon. Members will know that we have introduced a set of new criteria called the severe conditions criteria, for employment and support allowance and now for PIP. If people have severe mental or physical health conditions that, sadly, are not going to improve, we put them into a category where they do not have to be reassessed, apart from a very light-touch reassessment after 10 years, just to ensure that their circumstances have not changed. That means that fewer people will be reassessed, and I hope that everyone here can commend that.
On some of the other observations on face-to-face assessments, we have had quite a discussion about the mental health questions. The questions that the assessors use and the training they receive is all approved by the National Institute for Health and Care Excellence. I think hon. Members were referring to the mental state examination questions. As my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter), who has left the room and is a doctor, said, this is the best practice of the medical profession. It is really important that the Department takes its duty of care very seriously—and we do. Right through from our job coaches in the Jobcentres Plus to people in our telephony services, we have a really good process to ensure that anyone expressing suicidal thoughts is supported. For example, everyone in our jobcentres is going through mental health training to ensure that they feel able to chat to someone with suicidal ideation and keep them safe and in front of them while their colleagues secure additional support from the NHS. We take that extremely seriously and are led by the best evidence—
Will the Minister give way?
I have so few minutes and so many questions to answer.
I want to reassure hon. Members that our work in this area is led by the best possible clinical input. The deputy chief medical officer, Professor Doctor Gina Radford, oversees all this work, because keeping people safe is just as important as treating everyone with respect and dignity and ensuring that their human rights are upheld.
I will conclude, so that I can give the hon. Member for Lanark and Hamilton East a few moments to wind up. I am absolutely determined to carry on our work on fibromyalgia and on all the issues she has mentioned. I have invited people into the Department for weekly meetings, so that together we can make the changes we want to see.
I thank the Minister for her kind and compassionate words. It always comes across as if she genuinely cares, and I believe she does, but what I say to her is this: do not be another Minister who passes through the Department and does not address these problems. They need to be dealt with. It is fine saying that on paper the stats look good and people are fine with them, but if one person goes through the process and does not get the support they need, it can be life-changing or life-ending for them and I want to see that it is life-changing, not life-ending.
Question put and agreed to.
That this House has considered mental health and the benefits assessment process.
Grassroots Football Funding: Wembley Stadium
[Mr Philip Hollobone in the Chair]
Order. Would those who are inexplicably not staying for the next debate about Wembley Stadium please be courteous enough to leave quickly and quietly?
I beg to move,
That this House has considered the future of Wembley Stadium and the funding of grass roots football.
It is a pleasure to serve under your chairmanship, Mr Hollobone. Football, as we know, is our national sport. We invented the modern game and have the most popular league in the world, viewed by millions around the globe. I grew up playing and watching the game, and while I still play and watch when I can, I also have an interest in ensuring that our national sport can be enjoyed and participated in by as many people as possible at all levels.
Members will recall last year’s controversial proposals to sell Wembley Stadium to the American businessman, Shahid Khan. At the time, the Prime Minister rather dismissively told me that the proposed sale was a private matter. I have to say that I consider the sale of the national football team’s stadium—the home of the FA cup final and countless other important matches—to be a matter of some considerable public interest.
The deal did not go through in the end, but we need to talk about the consequences. The sale falling through has left a hole where the grassroots strategy was. The main justification put forward by the Football Association for the deal was that it would have enabled the release of hundreds of millions of pounds to fund grassroots football. Although I was a little bit sceptical about the deal and what it would mean in the long term, because sale and lease-back agreements often do not work well in the long run, it was beyond doubt that it would have enabled significant investment in grassroots football. It is important for us to discuss how to replace that funding.
One of the greatest footballers who ever graced the football field in this world, certainly in my lifetime, was Georgie Best. Pelé, another of the greatest footballers in the world, said that his favourite footballer was George Best. Georgie Best was a product of local academies, played his football in the back streets of Belfast and became a world star. Does the hon. Gentleman agree that those are the sort of people we want to encourage?
As a Manchester United fan, I would say that, if we can encourage more George Bests, I will certainly be very pleased to see that. I will talk a little more about how we can encourage more youngsters to participate a little later.
Football in this country is in a very strong position. The premier league is the envy of the world. Most of the world’s top players come here, and England’s youth teams have enjoyed unprecedented levels of success in recent years. Whether those kids who have enjoyed great success with the national team recently get to play at the highest level remains to be seen. We should be concerned about the declining number of home-grown players, such as George Best, coming through the leagues, although I am sure someone with that talent would still make it today.
About 35% of players who started games in the premier league last season were English, on average. That represented a huge reduction on the 69% of English players who started games in the inaugural season of the premier league in 1992-93. There are huge questions about how professional clubs operate and about how our younger players can hope to get a chance against the huge influx of imported superstars, and I also sometimes wonder about the effect of giving a 17-year-old who has never played for the first team 10 grand a week—what does that do to their chances?—but that is probably outside the scope of today’s debate.
What we can do today is discuss how to improve the game below elite level. One in six grassroots matches were cancelled last year, and I recall my own kid’s games getting repeatedly cancelled over the winter period, although I do not think it was a particularly extraordinarily bad winter. Cancellations have a detrimental effect on both an individual’s and a team’s development, and we need to encourage that development. There are of course plenty of distractions and reasons why kids may find something else to do rather than play football, but we should do what we can to support it by encouraging a little bit more of the wealth that flows through the game to trickle down to the grassroots. We cannot expect the superstars of tomorrow to emerge if we are not prepared to invest in them.
One thing we can and, in my view, must do is improve the standard of facilities for younger players of all abilities, and for everyone involved in grassroots football. We should not tolerate second-rate facilities in our national sport. We know the pressure local authorities are under to balance the books and how there is little left for discretionary spending on improving sporting facilities. Pitches are often in poor condition, with poor drainage and areas of the pitch that are more mud than grass. Many pitches have little or no changing facilities connected with them.
My hon. Friend is making a wonderful case for grassroots football. A club in my constituency, Otley Town, wrote to me to outline its concerns about facilities. It said:
“The key issue that we have is the quality of training facilities in winter. Most junior and senior clubs need access to all weather pitches so they have good environments to train in.”
They went on to talk about the need for funding for girls football, veterans football and disability football, to ensure that everyone can enjoy the game. Should we not ensure that the money trickles down from the billionaire owners to the grassroots?
My hon. Friend is absolutely right. A whole range of groups are participating in football that possibly traditionally did not, and we need to encourage them as well.
I am not saying that there is no investment. Since 2000, the Football Foundation, funded by the FA, the Premier League and Sport England, has invested more than £600 million in projects. My constituency has recently benefited from such investment, with fantastic facilities at the Vauxhall Sports and Social Club, where two new fourth generation pitches, which I occasionally grace, have been opened alongside a fantastic new clubhouse. About half the money for that came from the Premier League and the FA facilities fund, but the other half had to be raised locally, and I pay tribute to the incredible work done by Dave Edmunds and Tony Woodley, in particular, who really fought to get those facilities off the ground.
We see hundreds of grass pitches close each year because of cuts. Although the football world does its bit to invest in the grassroots, more could always be done, especially given the billion-pound TV deals. Does my hon. Friend agree that we need the Government to get tough if we are to see any action?
My hon. Friend is right. As the shadow Sports Minister, she will know far more about the challenges than I do. When we compare our facilities with other countries, we are lagging behind. We have half the number of third generation pitches that Germany has and, shockingly, only one in three grass pitches are of adequate quality. Some 5 million playing opportunities were lost last year because of inadequate facilities. With the NHS struggling, schools facing a funding crisis, and the challenge of affordable housing, it is fair to say that we cannot expect the taxpayer to find the resources for this. However, as my hon. Friend said, there are huge opportunities for the grassroots in terms of the cash that is washing around the game.
There are some really good examples. The Sheffield junior football league is the largest junior football league in Europe. The Isobel Bowler Sports Ground in my constituency is part of the Parklife project, funded by the FA and the Football Foundation. It has a great artificial pitch and a wonderful gym, where Disability Awareness with Sport runs facilities for disabled people. That is all wonderful and very positive—as is Mosborough rugby football club, where the Rugby Football Union has come in with support—but let us contrast the £300 million that local authorities spend on pitches in parks with the more than £200 million that the premier league’s clubs spent on agents’ fees alone in the last financial year. Is that not a contrast that we simply should not accept?
I thank my hon. Friend for his contribution and for his excellent work with the parliamentary football club and with the Football Foundation. He is absolutely right about the cost: £200 million on agents’ fees, more than £1 billion in transfer fees every year now, and the direction of travel is only upwards. I know a levy operates at the moment on transfer fees, but a significant amount of that goes to players’ pensions and academies. There is nothing wrong with that, but that is for the professional side of the game and we are talking about the grassroots. I believe a small levy or a redistribution of existing funds could do an awful lot more for grassroots football.
My constituency benefited recently from half a million pounds from the Football Foundation for new training facilities at Mansfield Town, which will be a huge benefit for the constituency. The hon. Gentleman is talking about the money involved in football. Obviously, the success of the premier league drives up wages and prices in that market, but premier league clubs and players pay something in the region of £3.5 billion a year in tax to the Chancellor, and there is even more tax revenue as we filter down through the Football League. I am interested in whether the hon. Gentleman thinks there is an opportunity there to ring-fence some of that money to be reinvested back in the grassroots of the game.
That is an interesting point. Of course, we can debate ring-fenced taxes all day—there have been discussions about that in the context of the NHS, for example—but I think we can divert some of the other money, particularly agents’ fees. I go back to what my hon. Friend the Member for Sheffield South East (Mr Betts) said about that, because I believe that people in that arena, particularly agents, are getting an awful lot of money from football for very little effort.
I do not want to turn this speech into a tirade against agents, but Mino Raiola is reported to have earned—using the word “earned” in the loosest possible sense—about £20 million when Paul Pogba transferred to Manchester United. That is £20 million for advising on one transfer; that is money that is going out of the game, and we need to look at getting some of it back in. I am not saying that we need to get rid of agents’ fees altogether, but that case demonstrates that these sums are going through the game and do not benefit the players, do not benefit the clubs, and certainly do not benefit the wider game in this country. A small levy on fees could generate significant funds and would not distort the transfer market. That idea was highlighted by Gary Neville in his excellent evidence to the Select Committee on Digital, Culture, Media and Sport, when he proposed a 25% levy on agents’ fees. On that note, I will give way to a member of said Committee.
I am grateful; my hon. Friend is very prescient and ahead of the game. One of the issues that has come up again and again is the difficulty posed by the multiplicity of agencies involved in football: we have the Premier League, the Football Association, the Football League and others. Does my hon. Friend agree that a levy is a tool to get those organisations to work together and come up with results, encouraging our young people to play more football on decent surfaces?
I thank my hon. Friend for his intervention; that is what I was trying to convey. There are lots of agencies involved, there is lots of money there, and Government need to guide, advise and maybe even compel those organisations to do more to help the grassroots. There is also the issue of prize money, which totals £2.5 billion; even a fraction of that amount could be put into grassroots football. I passionately believe that a modest level of redistribution would not destroy the premier league’s allure, but it might just enable the millions of people who enjoy playing our national sport to do so in slightly better conditions.
Does my hon. Friend accept that there is lots of money in the game of football, with footballers on as much as £500,000 a week? Should we not be tapping deeper into the billions of pounds that come in as a result of television deals before football clubs get hold of that money?
I thank my hon. Friend for his intervention. That is one of a number of ways in which we can harness the wealth that is in the game to better effect, and as I say, that is something I encourage Government to look at closely.
While we are here, I will say a few words about the future of Wembley. Obviously, the proposed sale split public opinion, and I, like many others, had concerns. I do not know whether another offer will come along, but I understand that the Government will have a say over whether any sale goes ahead, so if that does come to pass, I ask the Government first to consider what we have discussed today about harnessing that money. Secondly, I ask the Government to consider whether safeguards could be put in place so that important domestic and international games always take precedence at that stadium; what measures we could put in place to meet the needs of fans, in terms of kick-off times and the availability and price of tickets; and what assurance there would be that any future purchaser beyond the initial one could be held to any agreements that were made on initial sale with the FA. As I say, we are not in that place now, but I would be interested to hear the Minister’s thoughts on that.
Finally, I will take this opportunity to say a few words of thanks to the thousands of people who give up their time to voluntarily run the teams, organise the fixtures, paint the lines, mow the pitches, put up the nets, and all the other jobs. Without those people, grassroots football would not exist. Their love of the game means that millions of people up and down the country get to participate, and their dedication gives youngsters opportunities to emulate their heroes. They often have to do so while getting changed in car parks in the freezing cold, facing frequent cancellations and bobbly pitches that are mud baths, so it is not surprising that kids sometimes prefer to spend their time playing football on the Xbox, rather than in real life. We all know about the need to encourage healthy living and exercise, and we all know about the many distractions kids have that do not involve them getting off their couches, so we need to make the playing experience as genuinely enjoyable as possible. There are probably not many pastimes that bring as much pleasure as scoring the winning goal in the last minute of an important game, but we know those occasions are few and far between, so we need to make sure that when kids play, they are encouraged; they are comfortable; and most of all, they enjoy themselves.
Football is more than just a game, and certainly more than just a business. It is an integral part of our culture, something that needs nurturing and protecting, and I firmly believe that the fruits of this golden age in the professional sport should be used to help secure its future so that everyone can enjoy it.
The debate can last until 4.30. The hon. Member is standing.
Sorry, I had understood that it was a 60-minute debate. I will sit down.
Thank you. We now move on to the very sporty Sports Minister for her to respond.
It is an honour to serve under your chairmanship, Mr Hollobone. I am grateful to the hon. Member for Ellesmere Port and Neston (Justin Madders) for securing this debate and for his insightful contributions, and to other Members for the points they have made.
I am happy to be interrupted by my hon. Friend if he has something equally as insightful to say, which I am sure he does.
I thank the Minister for giving way. I would not claim to be particularly insightful, but I know how much Ministers enjoy being urged to enter into negotiations with Treasury colleagues. Will she urge them to look at the UK guarantee scheme and how it relates to educational facilities, and whether that could be used to provide financial guarantees for bodies wishing to invest in community sports facilities?
I thank my hon. Friend for that point. As we head towards the spending review, our Department is consistently urged to hold conversations with the Treasury.
The hon. Member for Ellesmere Port and Neston raised issues relating to volunteers. I echo his love for the game. People in our communities give so much to the grassroots, and that should be encouraged because of what it gives to our children and to the game as a whole. My father-in-law did exactly that as a football ref in Wales for many years, and he also organised games for homeless youngsters. It is important that we recognise the volunteering that takes place up and down the country. It is absolutely vital. Football is not just a business; it has a responsibility to the grassroots, as we all do.
I absolutely hear the message regarding the safeguards for Wembley ticket pricing, future purchase and controls. I will come on to some of those issues further into my speech, but as we heard earlier Wembley is iconic in terms of what it means to football and to us as the public. It is important that we have a national stadium that is able to host the biggest sporting events; Wembley has delivered that over many years, and we want it to continue to do so. UEFA’s decision to hold seven matches, including the semi-finals and finals of next year’s European championship, is proof that Wembley remains a top-class venue, hosting some of the world’s biggest and most important sporting events. If we are to bid for any future major sporting tournaments—Members might know what I am alluding to—we will need to make sure that we have the right stadium for World cup finals, one that resonates with the rest of the world. That is essential.
Last year, when the FA said that it was considering selling Wembley Stadium as a means of generating extra funds to re-invest in the grassroots, the Government were, naturally and rightly, keen to listen. Nobody would argue that a sport with more than 2 million regular participants could fail to be further helped by the promise of such additional funding. However, at the same time, we recognised that Wembley has a special place in the heart of football fans. When listening to the proposal, the Government’s prime consideration as a public funder of the stadium was to protect the public interest, as is absolutely right. Going back to the hon. Gentleman’s point, custodianship of it would be absolutely important in any future new arrangement, no matter who owned Wembley stadium. The stadium should always be protected for future needs. The fact that the FA executive was considering the sale of its most prized asset raised more than a few eyebrows. In its response, the executive was clear in its view that the sale would free up funds to help provide greater financial support, which it felt was needed to help the sport from the bottom up.
I thank the Minister for her response to the debate secured by the hon. Member for Ellesmere Port and Neston (Justin Madders). Does she not feel, as some of us do, that we should not sell our national stadium and that it should be retained because of its importance? What we could do—I believe the hon. Gentleman referred to this—is take a revenue from transfer fees. That would create some money that could then be used for the grassroots football we want to see. There are ways of achieving things without having to sell the national jewels.
I absolutely see the point that the hon. Gentleman is making. Ultimately, we have a stake in the matter and we will very much be keeping it on the radar. We are not in the place he suggests at the moment, but I will continue to make the case I have made so far in my speech. Whatever the FA does, we have a stake in ensuring that it is absolutely right for football as a whole.
We have heard some of the headline statistics. Only one in three grass pitches is of adequate quality and one in six matches is, sadly, called off due to pitch quality. England has only half as many 3G pitches as Germany. Where there is an opportunity to see more coming into the game, it is absolutely right to take it. We should look at the active lives survey and recognise that what has been cancelled this season may impact on the opportunities our youngsters have to participate. The statistics are a harsh reminder that despite the unrivalled success of our domestic football at the elite level—we cannot forget the premier league, which is the wealthiest and most globally popular league—there is still a way to go in ensuring that we replicate that consistent success in what we provide at the grassroots level. We must and will provide playing opportunities across our towns and cities so that current and future generations can enjoy football.
I am sorry to interrupt the Minister. I recognise that the job of Sports Minister often tends to be to drag different Departments together to manage things more effectively and to find funding. Can more be done within her brief to bring together such bodies as Sport England with governing bodies? Sport England’s remit these days is more focused on grassroots activity and the community. Are there opportunities not only to invest in football, but to work with Sport England to invest in brilliant community facilities, too?
I thank my hon. Friend for that point. In asking me to do this role, the Prime Minister—[Interruption.]
Order. I am so sorry to interrupt the Minister, but a Division has been called in the House. I understand that there may be more than one. If there is one, we will return in 15 minutes. If there is more than one, we will return 10 minutes after the last Division is called.
Sitting suspended for Divisions in the House.
The sitting is resumed. The finish time will be 5.41 pm and the Minister has eight minutes left.
As I was saying, before we were interrupted to do our absolute duty, we must and we will provide playing opportunities, to be enjoyed by people now and by future generations, across our towns and cities. I want clarity for grassroots football and balanced provision of local assets, as well as a good pathway for our next generation of stars.
The figures appear to suggest that the grassroots are somewhat underfunded compared with the investment going into professional clubs, but the professional game rightly cares about the grassroots, as demonstrated by the funding it provides. As the Minister for Sport, however, I will always champion the grassroots and focus on them, examining the commitment given to them and providing challenge.
The Premier League is investing £100 million each year into football participation programmes and local facilities. That is a significant amount and is in addition to the other areas that it funds and supports in football, at all levels of the game, including vital payments to the English Football League and national league clubs.
I am grateful to the Minister for picking up so well from where she left off, all that time ago. The central thrust of what I was saying, which I think most Members agree with, is that we do not dispute that professional game puts money into the grassroots, but we think there ought to be a little more. Does the Minister agree with that analysis?
I thank the hon. Gentleman for raising that important point: we must absolutely keep a focus on the grassroots. In Parliament today there has been constituency-wide MP engagement with the Premier League. He mentioned the existing levy of 4% on Premier League clubs and the fact that the money goes to all tiers of the game, supporting welfare and pensions.
Grassroots will always be an absolute focus for my Department and me, so those partnerships with clubs and that commitment to all the broader activities that address health, education, crime and other difficult social issues that football, alongside Government Departments, can reach, are vital. Those programmes add value and must be seen in conjunction with the grassroots opportunities, to ensure that we continue to champion the sport and that we consider the facilities and the wider community value of football.
The league funds also provide a voice for fans and help to fund new stadiums, which we enjoy visiting from time to time—or, hopefully, regularly—and which, as I mentioned, will perhaps help to bring back the World cup to these shores. The FA is not far behind in investing in the way that we would hope, with £70 million going into the grassroots cause, and I will continue to work closely with it, engaging with the new FA management in a time of change but also, I think, of opportunity. The Government will not be shy, either. We recognise the need to continue to support the national game. We are currently investing £25 million each year, including £18 million for facilities, £2 million for grassroots coaches and £5 million for the FA’s participation programmes, which provide vital support for the women’s game and disability football.
This Government, in partnership with the FA and the Premier League, are investing more money than ever before into the grassroots football programme and facilities. From this year, we will contribute a combined £70 million to provide new and improved facilities through the Football Foundation charity, which we heard about earlier. Since 2000, the partnership has invested about £615 million through the foundation, which has resulted in 700 new and improved 3G pitches, 3,500 grass pitches and 1,000 new and improved changing rooms. I acknowledge that we must continue that work—there is more to be done—but simply throwing money at a problem is not always the answer. We must ensure that investment continues to go into the right areas and that we are having the right local and necessary impacts.
How are we doing that? We are working with our partner, Sport England, which is working on behalf of the Government to create new local football facility plans for every local authority in England. Over the next 12 months, we will know exactly the best places to invest in football on a supply and demand basis. That will include further artificial and grass pitches, school mini pitches and Parklife hubs—a new programme aimed at developing a sustainable model for supporting local football facilities. Some hon. Members may have visited the hub sites in Sheffield and London, with state-of-the-art artificial grass pitches available to people of all ages and abilities. We hope to deliver increases in football participation in every city. New hubs are on the horizon: hubs in Liverpool and, close to my constituency, in Southampton will open this year, with further cities in the pipeline.
The new local football plans will align with the new national football strategy, working together to ensure that we take stock of the facilities over the next 10 years and get closer to the number of facilities that I think we would all like to see. We must ensure that the Football Foundation is the right delivery model, that we have the right mechanisms and that there is sufficient capacity in place to deliver the increase in local investment. We must recognise that there is ongoing and increased demand for local facilities, so we need those local football plans.
Although the proceeds from a Wembley sale would have no doubt accelerated investment into facilities, we are not simply standing still on this issue, despite the changes to that potential deal. Shortly, I will shortly meet the EFL, the FA and the Premier League, looking to them to reaffirm their commitment to working with Government to significantly improve the provision and quality of football facilities, and focusing on participation levels across all demographics. I will also discuss with them whether the levels of investment are sufficient to meet the expected demand, and to address some of those statistics I mentioned earlier. I will ask key questions about what needs to be done and where it will be done. I will be there to champion the grassroots.
I am alive to the fact that there are other issues of concern in football, and I fully intend to work with the sport to address them. Only last week, I responded to a debate about the alarming problems with the ownership of Coventry City. We need to address the other side of football, and I will work with the authorities to do that. The so-called fans who cause discrimination incidents continue to make the headlines. We do not want football to return to its worst days. I will discuss that and ensure that the football authorities and all relevant stakeholders know that further decisive action can and must be taken.
Time is against me, so let me summarise. This has been a very useful debate. I reaffirm the Government’s commitment to strengthening grassroots football. It is absolutely right that the continued commercial success of elite football is reflected in the support it gives all levels of football, and I will champion that. I do not want grassroots football to continue to be seen as a poor relation, and I will work with the football authorities and all stakeholders in the coming weeks.
Motion lapsed (Standing Order No. 10(6)).
Freehold Estate Fees
I beg to move,
That this House has considered freehold estate fees.
It is a pleasure to see you in the Chair, Mr Hollobone. The residents of Hazelbank in Canney Hill in my constituency first brought this issue to my attention. I am grateful to them and to homeowners in the Burton Woods, Durham Gate, Grangefields, Merrington Park, Middridge Vale and Moorcroft developments who have shared their experiences with me. I also thank Cathy Priestley and Halima Ali from the national Homeowners Rights Network—HorNet—campaign group.
I congratulate my hon. Friend and north-east colleague on securing this important debate and on her Freehold Properties (Management Charges and Shared Facilities) Bill, which I am pleased to co-sponsor. I am also pleased to add my thanks for the work of my Great Park constituent Cathy Priestley, whom my hon. Friend rightly mentions. I commend Cathy, who has worked tirelessly to raise awareness of these issues. Does my hon. Friend agree with me and Cathy that one of the key concerns for private homeowners in such developments is the sheer lack of transparency about what they are paying for?
My hon. Friend is absolutely right. The lack of transparency is a significant problem across the country. I did a survey, which I thought would be for people in Bishop Auckland, but I got responses from Ulster to Plymouth, which shows what a massive problem this is.
If offered the choice between a leasehold property and a freehold property, most prospective homebuyers would opt for freehold. Who would not want the permanent and absolute tenure of their property, with all the freedom and security that promises? However, the large property developers—Barratt, Bellway, Persimmon and Taylor Wimpey—sell properties that are not free from hold but come with financial obligations and restrictive covenants administered by property management companies such as Greenbelt, Gateway, FirstPort and Trinity Estates, which take ownership of communal spaces once the developer has moved off the site.
I congratulate my hon. Friend on securing the debate. She mentioned Greenbelt. I have a problem in my constituency that goes back 16 years, when a group of people purchased houses from Bellway. The adjoining land is administered by Greenbelt. Since then, those people have paid fees every year for the very basic administration of that land, but the company has failed to take the remedial measures necessary to prevent the area from becoming a centre for antisocial behaviour. The residents have complained; one went to court but lost their case. Does my hon. Friend agree that there needs to be more transparency when freeholders buy their property from developers? Secondly, does there need to be a cheap adjudication system to ensure that the balance of interest between the freeholders and the companies is far more even than it is at the moment?
Yes, of course. There needs to be more transparency and a system of redress, as my hon. Friend says. There also need to be some rules of the game about the standard to which the estates are built in the first instance. The management companies charge residents an inflated annual fee—in exchange, apparently, for tending to grassy areas, shrubs and other facilities on the estate. That is on top of their council tax.
This is a scandal. There has clearly been mis-selling. The public perception of freehold is deliberately exploited by the property companies in their sales materials. Many homebuyers are not made aware of the arrangements for the management of open spaces until the completion of the sale. One of my constituents reported that the first they had heard of their management company, which was Greenbelt, was a threatening late payment letter. They had not received a bill, let alone a welcome pack.
There is no room in the glossy brochure for an outline of the legal arrangements, but there always seems to be plenty of space for images of parks, playgrounds and woodland areas, backed up by verbal assurances from the sales rep that they are planned for the estate. Those promises are then broken and the land is passed or sold on to the maintenance company.
For example, at DurhamGate, a large housing development in Spennymoor in my constituency, the plans promised a “green spine” running through the centre of the site. Several years in, and with the site still under construction, residents are being hit with a full-price fee of £120 a year. Another of my constituents reported receiving a maintenance bill for a parking area that did not exist. The fees charged to residents for the maintenance of their estates are high, rising, uncapped and completely unregulated.
In Bishop Auckland, the annual fee for each household is somewhere between £100 and £200 a year, depending on the site. At first that does not sound too onerous, but when we consider that 278 neighbours on the estate are also paying the fee, it is obviously a grossly excessive £30,000 just for mowing some grass. In other parts of the country, in line with higher house prices, fees can be up to £400 or £600; I have even heard of fees of £800 a year. There is no limit to price increases and residents frequently report an annual leap in the fee. As my hon. Friends have said, there is no transparency and little accountability.
I thank my hon. Friend for securing the debate. I draw a comparison between the fees that councils ordinarily charge for communal services and the kind of fees she is talking about. Does she agree that if councils were so opaque and unreasonable, they would rightly be held to task by their electorate?
My hon. Friend makes a very good point. We need more transparency and greater accountability, and I will come on to how we might secure those things. One of the things that homeowners have noted is their frustration that they do not have any control over who the managing agent is. The relationship between the big builders and their favourite management companies and the processes for acquiring these communal spaces are shrouded in mystery. The fees appear to be plucked from thin air. In some cases, a vague “administration” category accounts for up to 70% of the total bill.
What do homeowners get in exchange for their fee? Of the 200 people who completed my survey, only one indicated a very good standard of maintenance. That was perhaps an optimistic assessment. The person went on to explain that
“the grass is cut regularly, but…we were promised a play park and village green with a pond. None have materialised.”
Others complained of dead or dying trees, poorly maintained shrubberies, wastelands, fly-tipping, broken or absent street lighting, playgrounds awaiting repair and a general absence of the management company, aside from requests for payment. Specific complaints included how Greenbelt was using a strimmer within a dedicated nature park set up to protect newts; in another case, a community hedgerow project was destroyed.
Homeowners in freehold properties currently have no way to challenge unfair fees or poor service; the power is almost entirely in the hands of the management company. My constituents have faced threats to block the on-sale of their properties, and they have been threatened with bailiffs and court action if they do not adhere to the demands of the management company.
I congratulate my hon. Friend, as everyone else has, on securing this really important debate. Something that really frightened me about the case of one of my constituents was that she did not realise that if she defaults on her rent charge, the rent charge owner can repossess her property and enjoy the same rights as if she had never had the transfer of the freehold in the first place. I am sure my hon. Friend will agree that that is petrifying.
What my hon. Friend says is absolutely right. That is a misuse of the Law of Property Act 1925. That is why we are looking to the Government to make some legal changes. This is not just bad behaviour; this is clearly a deliberate strategy and the company has obviously taken very expensive legal advice in order to develop that strategy. To stop them, we will need some legal change.
I heard from somebody who lives in the west midlands—I do not know whether it was a constituent of my hon. Friend the Member for West Bromwich West (Mr Bailey)—who said that he had had a 17-year battle with Greenbelt and that he was charged legal fees of £25,000. Obviously, the ordinary homeowner cannot afford to shell out on legal fees like that.
Despite their name, property management companies appear to have no interest in actively managing the land they acquire. On the website of London and Economic Properties Ltd, a Wiltshire-based firm that manages the Middridge Vale development in Shildon in my constituency, property is listed under its “investments” section. The company boasts of its
“enviable track record, investing across the property spectrum to deliver profits for shareholders.”
There is no mention of homeowners. It says of the land at Shildon that it
“benefits from grant income from the Forestry Commission as well as a housing levy from the adjacent housing development which…will provide an annual payment in perpetuity of £100 from each of the 278 houses”.
There is no mention of the company’s obligations as the caretaker for the site. Ultimately, that is the problem: these extortionate fees and poor service are the result of a culture that sees housing as an abstract investment, rather than the foundations of our families and communities.
This is a massive scam. The House of Commons Library gave me figures that suggest that perhaps half a million people have been affected by this problem in the last 10 years. That means that somebody or some people are coining in about £100 million a year.
What change is needed? The Government have outlined their commitment to reform the process for those buying a new build home to obtain redress. They intend to bring forward legislation to require all developers to belong to a new homes ombudsman. They have also said that they hope to offer freeholders the same rights as leaseholders to challenge the reasonableness of charges at a property tribunal. Can the Minister say when that will be done? When will he bring forward these measures?
Legislation to improve access to dispute resolution is helpful, but it does not tackle the root problem. The Freehold Properties (Management Charges and Shared Facilities) Bill, which I introduced in November, recommended three changes for homeowners who are already caught in this trap. First, it would cap and regulate estate maintenance fees, to give homeowners financial stability and allow them to buy and sell their homes knowing that costs cannot increase indefinitely. Secondly, it would introduce measures to ensure that shared spaces are maintained to a proper standard, perhaps through something similar to the new homes ombudsman. Thirdly, it would contain provisions for residents if they chose to opt out of their management company and to self-manage, if that was what they wanted to do.
For estates yet to be built, the planning regulations need to be tightened, to require them to be built to an adoptable standard. Local authorities are currently often willing to adopt spaces in exchange for an agreed sum from the developer to cover upkeep for a fixed period. For example, Durham County Council asked for 15 years’ worth. That is a reasonable ask of an industry that can afford to pay its chief executive officer bonuses of £75 million.
Many of these estates were built with support from the Government’s Help to Buy scheme, financed by taxpayers. I would like the Minister to tell us this afternoon that the Government are going to stop providing support to any development using that model. Will the Minister also refer the mis-selling aspect of this to the Financial Conduct Authority to investigate, and to the Law Society, to strike off lawyers who have worked unethically in the interests of property dealers while taking fees and purporting to work for homebuyers?
A situation has arisen whereby the private estates model is rapidly becoming the norm for new developments, with those who have saved hard for their homes bearing an unfair burden and builders treating them as a cash cow. Homeowners do not want sympathy and understanding. They want action, and they would like to see action now. I hope the Minister will be able to make a clear, timetabled commitment this afternoon. I am looking forward to hearing his response.
Order. The debate lasts one hour and the finish time is 6.41 pm. I am obliged to call the Front-Bench spokesman for the Opposition no later than 6.19 pm, but until then it is Back-Bench time. Four Members are seeking to contribute, but I will need to impose a time limit on speeches of five minutes. The first speaker will be Preet Kaur Gill.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Bishop Auckland (Helen Goodman) for securing this debate and for the work she is doing with her Bill to regulate freeholders and to ensure that freeholders have sufficient rights.
Under section 19 of the Leasehold Reform Act 1967, the creation of schemes of management allows landlords or scheme managers to receive and require fees from management charges. I welcome the work to support new builds, but the Government should go further than that—I wonder whether my hon. Friend agrees—and strengthen the legal position of all freeholders so that they have access to information about where the money they are being forced to pay is going and what it is being spent on.
As it stands, the balance of power is not appropriate or fair. Freeholders are not able to ask for details of where the money they are charged as part of estate management schemes goes. However, management companies are able, by law, to use enforcement agents to collect the money. Does that seem like a reciprocal relationship?
I have residents in my constituency who are freeholders but who are still obligated to pay management fees, separate and additional to service charges. Residents are concerned about the lack of transparency, and they have a feeling of helplessness when trying to find out where the money is being spent, or how much money is left in the pot. Despite paying into this opaque fund, the freehold residents are entirely powerless to compel enforcement of the management scheme.
Freehold residents are unable to ensure enforcement of the scheme that they pay into and cannot hold anyone to account over expenditure. We need transparency, for them to be able to hold it to account. I understand that the Government are legislating to give freeholders the equivalent rights to leaseholders when it comes to challenging service charges. Will the Minister extend that to management charges as well? If not, will he explain what the difference is?
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Bishop Auckland (Helen Goodman) on securing this debate.
I am old enough to remember when developers would build estates that were brought up to adoptable standards, a bond was put down and the council would adopt and take responsibility for generally doing what we all expect to be done around our homes. A lot has changed. Councils now do not have much money and are probably keen to pass that responsibility on. As my hon. Friend the Member for Bishop Auckland said, developers have found another money-making exercise—a bit like leasehold, really—to squeeze even more money out of their sales.
In my own area, companies such as Persimmon in Buckley, Taylor Wimpey in Penyffordd and Bloor Homes in Broughton have passed that maintenance requirement on to maintenance companies: my hon. Friend has mentioned Greenbelt, and Trinity is another one of the big players. A person needs only to look on the internet and Google those companies to see what the average resident thinks of the service they are providing.
When people move in, perhaps the charge is only £100 a year at first; it does not seem too much and people are not that bothered about it. The lawyers have perhaps not pointed it out because, as my hon. Friend the Member for Bishop Auckland has said, they may well be close to the people selling the properties.
By year two, that charge may have risen to £200, and by year three, it may be £300 and so on. There is very little explanation of exactly what the charge is for, or indeed what the tendering process is for the people supposedly doing the work, when the work is actually done in the first place. These are not luxury London developments that have a swimming pool, a gym, and perhaps someone sitting on the front desk. The charge is for cutting the grass and, in some cases, maintaining a play area and maybe a nature area as well.
On top of the standard charge, there are things that are not covered—a very vague category. Greenbelt, in its nice, glossy little brochure showing happy, smiling people who are no doubt delighted to be paying the fees that the company charges, has a list of services. One of those is fencing, and under “What is covered?” it says “Fences will be checked as part of the routine supervisory inspections. The condition of the fence will be monitored and any repairs instructed as and when required.”
If we move on to things that are not covered but are chargeable, we find “fencing works”, which “will be identified as part of the routine supervisory inspections. The conditions of the fence will be monitored and any works instructed as and when required.” Now, to the ordinary person, those sound very similar, yet people are being charged extra for the work that is not covered.
Indeed, the list of things that can be charged for in these circumstances is a very open one; as I have said, residents in many cases are not aware of what they are being charged for. When people move in, certainly in their first year, there does not appear to be any breakdown of the charges. As my hon. Friend the Member for Bishop Auckland said, when a breakdown is provided, it appears that half of that charge—if not more—is the management fee. In my experience, that management fee is never broken down, and it is never explained exactly how that large sum of money comes about.
I see a lot of similarities in the speech that my hon. Friend is making. Does he agree that there is frustration not only about the charges being levied, but about the fact that the standards being maintained are often not as good as they would be had those estates been adopted? I know of some cases in which children have practically lived in a home, left that home and gone to university before they have the basics, such as pavements, on their estates.
My hon. Friend is right. The issue of how estates are left is a broader one: quite often, the moment the last house is sold, the developer does not want to know. As for the standard of work that is being carried out by the maintenance companies, I have heard from loads of people who say that they go out themselves and cut the grass in the communal areas, because those are left in such a terrible state.
Many people have described the charges as like a second council tax. They are now reaching a level that is not the £100 that people started off with; it is a much higher figure, particularly for something that most people thought was covered by the council tax that they pay in the first place. Freeholders who face those charges are now coming to me and saying they are increasingly worried that they could affect the saleability of their property in the future, just as leaseholders are telling me that sales are falling through because people look at a property and say, “I am not going to buy that.” That is just not acceptable.
At the moment, there are effectively no legal protections for people. Leaseholders have some, but they are very weak. My constituency has a lot of mixed estates where, between two houses next to one another—often both exactly the same—one is leasehold and one is freehold. What they have in common is that they both have to pay management charges.
I will summarise because I know other hon. Members wish to speak. People feel abandoned. They feel that the law does not actually protect them and that they do not have any redress. I welcome what the Government have said about leaseholds. My concern is that that relates only to people building houses, selling them and moving on. What about the people already affected by the arrangements, just as leaseholders are? We need to look after them and ensure that they have fair redress against unfair charges. Residents should have the ability—where they want to—to form their own management companies, run their own maintenance and put out tenders. The council might want to tender for some of that work and could provide it at a considerably cheaper cost. The charges are unfair. We really need to get to grips with the issue because otherwise we will store up huge problems for people in the future.
It is a pleasure to serve under your chairmanship once again, Mr Hollobone. I am delighted to follow my constituency neighbour, my hon. Friend the Member for Alyn and Deeside (Mark Tami). We may be on separate sides of national boundaries, but our constituents clearly have many issues in common, not least the terrible way that exploitation has seeped into what should be a well-regulated and secure investment.
I congratulate my hon. Friend the Member for Bishop Auckland (Helen Goodman) on securing the debate and on her work to address these issues through her private Member’s Bill. Hon. Members will be aware that I have also introduced my own Bill, to usher in a fairer, more streamlined and transparent system to enable the purchase of freeholds by leaseholders. On many occasions, both in this Chamber and the main Chamber, I have listed the abuses perpetrated by freeholders in the current feudal system. My hon. Friend the Member for Bishop Auckland gave an excellent explanation of the issues in the management of such properties, and after listening to it, I believe that there are many parallels between the two measures.
Regulation is long overdue. Homeowners have been subjected to unjustified extra costs and there is a distinct lack of transparency. It is clearly another example of homeowners falling foul of greedy developers and the more insidious practices that they have adopted in recent years. We have seen that happen with ground rents and consent fees for leasehold properties, whether flats or houses, where developers have become ever more adept at squeezing cash out of homeowners for the provision of grounds maintenance and other communal services.
As my hon. Friend the Member for Bishop Auckland highlighted, we now see “fleecehold” estate fees. Freeholders and residents on private housing developments find themselves facing escalating costs when the developers from which they purchased their homes in good faith sell off the grounds maintenance to private providers. In blocks of flats, the practice of spurious service charges has developed. In my constituency, a management company that managed only four flats in a block suddenly increased the service charge from around £50 a year to £911 a year. Many of those charges were questionable and the insurance charge in particular stood out, because the insurer seemed to be very well connected and had the same name as the management company. That would simply not be allowed for any other consumer purchase, so why it is allowed in this instance?
As hon. Members have said, the idea of the developer paying the local authority a commuted sum to cut the grass and maintain the common parts has had its day. I am unclear whether the blame for that lies with cash-strapped local authorities asking for too much or with developers being unprepared to cough up more funds in advance. The net effect of that is that more and more homeowners are being asked to pay twice for the maintenance of open spaces: once through a management fee and once through their council tax.
Council tax pays for lots of things, but something as visible and obvious as grounds maintenance leads people to ask a pertinent question: why are they facing a double whammy? My suspicion is that developers will always be tempted to save themselves the expense of paying an upfront sum to the local authority by instead letting their customers pay further down the line, long after they have fled the scene. Of course, someone buying their first home—probably with Help to Buy—will, in reality, have nowhere else to go and will have to accept those arrangements whether or not they genuinely consent to them.
What is wrong with just building and selling family homes? Why are buyers being subjected to covert efforts to squirrel in extra income? Is the sector so avaricious that it has to squeeze every last penny out of young families who have to scrimp and save just to get on the housing ladder? As with ground rent, consent fees and leaseholds, our plc house builders have had £8 billion of help through the Help to Buy scheme. They have trousered that assistance to rip off customers in their own schemes. Developers simply cannot be trusted to play fair with their customers, or with us, as wider taxpayers.
We have a huge shortage of housing. There are significant barriers to buyers getting on to the housing ladder, and a handful of huge companies is responsible for the vast majority of housing delivery. That reliance on a small group of developers has been a very poor deal for the taxpayer, and was the backdrop against which the leasehold scandal emerged.
It cannot be right that the companies that are guilty of the industrial-scale rip-offs that we have heard about regarding both leaseholds and the issue being discussed today are the same ones that we end up relying on to get out of our very real and damaging housing crisis. There is an over-reliance on the market—a market that, to me, is broken—to deliver the new homes that we desperately need.
The net effect is that there is little protection for homeowners. People deserve far more protection than they currently get. Sadly, I have seen very little evidence to suggest that developers will act responsibly and adopt fair and reasonable practices on a voluntary basis. The whole system needs a shake-up, and it needs it now.
As ever, it is a pleasure to serve under your chairmanship, Mr Hollobone. I, too, thank my hon. Friend the Member for Bishop Auckland (Helen Goodman), who is a close neighbour, for securing this debate on such an important issue, which affects every constituency in the country, and certainly many of my constituents in Sunderland Central.
In my years as an MP, numerous constituents have come to me about the subject of freehold properties and management costs. They come with real issues regarding the environment around their properties and the lack of care by companies. They often pay large sums of money that increase without much notice or any relation to cost. They are paying the money—often hundreds of pounds a year—that they agreed to and not getting the services or the maintenance that they are paying for. In an area such as Sunderland, which is a low-wage area, it is often a large proportion of the money coming into people’s homes every week. They are keeping their side of the contract, but the companies are not keeping theirs.
I would like to highlight a couple of things that have happened to my constituents. A light in a communal area took six months to get fixed, and when it was fixed the light was unsuitable for the job it had to do, and was not to the standard of the one before. That led to all sorts of issues to do with safety and all the other problems, including antisocial behaviour, that come when areas are not lighted.
Another example was people coming to do a grounds maintenance job sitting in the van all day because there was nobody to direct them or instruct them about what to do. Not only is paying people to sit in a van not knowing what to do an absolute waste of the company’s resources, it wastes the hard-earned money of my constituents, who pay fees for a job that should be done.
I endorse the points that have been made by my colleagues, and I will not repeat them. Sadly in the current climate, many people would like local authorities to take over maintenance issues, but in Sunderland we have had cuts to our local authority budgets of some £250 million since 2010, so financially it is simply not an option. Councils are struggling to maintain their frontline services, and they do not have the funds to put aside to take over that responsibility.
Effective and intelligent regulation can ensure that this does not happen again. Transparency needs to be brought into the system, and the Government need to act. It is not good enough simply to act in future on new properties; we have had many years of problems building up. In some cases, it is making houses unsellable, which needs to be addressed. The Government need to look very carefully at what they can do to mitigate the problems of people who already live in and own their own properties, and are paying these very unscrupulous, completely not transparent fees.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Bishop Auckland (Helen Goodman) for securing the debate and for her substantial work on the topic.
As we have heard, homeowners on private estates across the country are being fleeced through a system of spiralling fees, shoddy service, lack of choice and zero accountability. We know it is an issue that affects up to 1.3 million households and it is a problem that mirrors the exorbitant service charges and draconian standards facing leaseholders. It is a problem that the Government have had years to fix, but they have yet to do so.
We heard in colleagues’ eloquent speeches just how obscure some of the charges are. My right hon. Friend the Member for Alyn and Deeside (Mark Tami) told us about the fence that would be looked at but not actually fixed. My hon. Friend the Member for Sunderland Central (Julie Elliott) told us about the light that took six months to replace, but which was not replaced correctly. My hon. Friend the Member for Birmingham, Edgbaston (Preet Kaur Gill) spoke powerfully about people’s sense of feeling helpless and powerless. We heard from my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) about how developers are finding additional ways to fleece people and charge more and more. The Government have failed on a number of levels. I hope that today we can take a positive approach to the issues and take action on them.
My hon. Friend the Member for Bishop Auckland made some very good suggestions. Homeowners have been raising the issue for a while. In 2016, the HomeOwners Alliance said that
“this new model has crept in without democratic scrutiny or discussion and over the past 10 years or so has become the industry standard.”
Back in 2017, the Government said that this was a problem and that they would introduce changes to the law. It is not enough to accept that there is a problem—we need to act.
The second problem is that, as discussed, when the Government published proposals to fix the problem, they did not go far enough. The Government say that they will give freeholders the right to challenge the reasonableness of charges or appoint a new manager, via tribunal, in the same way as leaseholders currently can. We know from the Government’s own repeated consultations on fixing the leasehold sector that the system currently in place for leaseholders is not working. People are not going to trial because they fear the complexity and potential cost of the process. Property companies turning up with teams of lawyers make an imbalance and a mockery of the system.
My hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) has previously calculated that the overcharging of leaseholders through extortionate service charges is up to £1.4 billion per year. Why are the Government presenting access to tribunals as the solution when that has abjectly failed to stop abuses in the leasehold sector? The Government admit that failure and in April last year they accepted that managing agents needed independent regulations. I understand that a working group under Lord Best is designing the new regulatory regime to cover aspects such as leaseholder service charges. Will the Minister confirm whether freehold estate management will be covered by the new independent regulator, and if not, why not?
The proposals set out by my hon. Friend the Member for Bishop Auckland are much more likely to tackle the abuse of homeowners, with caps on estate charges, minimum standards and powers for residents to take over management of communal areas. That last proposal would mirror the system of commonhold for shared residential property. I hope the working group currently designing the regulatory system will consider those proposals.
The third failure of Government is that they have let a system develop whereby roads, green spaces and other public spaces are effectively privatised. Even those who are not being ripped off are effectively paying twice, as has been pointed out. They pay council tax, which contributes to maintaining communal areas under council control, and then they pay again for the private maintenance of their own areas. The Government could stop that all together—they should act. We have discussed who is at fault; I do not think we can blame councils, because of the 50% cuts in local authority funding under this Government and the £7.8 billion predicted black hole in local services by 2024-25.
Overall, the Government have been too slow, too weak and lacking in ambition. Today’s debate shows that the Opposition could do better across the board. The Government talk a lot about their credentials on home ownership, but today’s debate is just another example of their failing people who have worked hard to buy their own home. Eight years of Conservative failure on home ownership is exacerbated by this very contentious issue, which affects many people and on which the Government could act.
I want to end by quoting the hon. Member for Bishop Auckland, who said that housing is being seen as an abstract investment rather than as the foundation of our families and communities. Homeowners want action and they want it now, and I very much agree with them.
It is a great pleasure to serve under your wise and sanguine chairmanship once again, Mr Hollobone. The hon. Member for Bishop Auckland (Helen Goodman) and I shared many thrilling meetings of the Select Committee on the Treasury, and I congratulate her on securing this debate. I know that she is promoting a ten-minute rule Bill, and I thank her for the opportunity to debate an issue that affects not only her constituents but mine.
This Government are committed to making the housing market work. We aim to increase house building to an average of 300,000 net new homes a year by the mid-2020s. It is vital that as housing supply increases, the quality of new developments continues to improve. We expect all housing developers to deliver good quality housing and estate facilities, to deliver it on time, and to treat house buyers fairly. Fairness includes making house buyers aware of arrangements for the upkeep of communal facilities and any fees for which they may liable.
As hon. Members have pointed out, many freeholders must pay charges towards the maintenance or upkeep of communal areas on an estate. The obligation to pay these charges might be provided by a deed of covenant or through an estate rent charge that forms part of the purchase contract. These charges can include contributions towards the upkeep of open spaces on an estate, or for the maintenance of roads and other infrastructure that is not adopted by the relevant authorities. Hon. Members have quite rightly raised concerns about the lack of redress should a freeholder disagree with these charges, and there have been disputes about who should be responsible for, and control, the maintenance of communal areas. In many cases, contracts do not specify, limit or cap those freeholder charges. This lack of transparency leaves homeowners in a vulnerable position.
Leaseholders have a whole suite of protections and rights that enable them to hold management companies to account. Freeholders have no such equivalent, even though they might be paying for the same or similar services. The current situation is unfair to freeholders, and we are committed to introducing legislation to plug that gap. We set out our proposed approach to implementing these measures in the recent leasehold reform consultation, which closed on 26 November. We intend to create a new statutory regime for freeholders that is based on the rights enjoyed by leaseholders. This would ensure that maintenance charges must be reasonably incurred and that services provided are of an acceptable standard, and it includes a right to challenge the reasonableness of charges at the property tribunal.
As with leaseholders, it should be relatively easy to sort out the problem. The issue is that people are already in these arrangements. We should ensure that they can do something about it, so that they do not feel that they are not covered or that no one cares about them.
The right hon. Gentleman raises a valid point. We are also considering whether freeholders should have a right to change the provider of maintenance services by applying to the tribunal for the appointment of a new manager, which might be useful for existing freeholders if they are dissatisfied with the service they receive. The Government intend to introduce legislation to implement the changes as soon as parliamentary time allows. The hon. Member for Croydon Central (Sarah Jones) quite rightly challenged us on when that might be; she will know that we have an exciting and packed legislative timetable at the moment, but our aspiration is that the legislation will be introduced within the next 12 months. I realise that there are many impatient freeholders out there, but we have to deal with the small matter of national destiny before we get on to equally pressing matters on the domestic agenda. I assure her that we will give it our attention as soon as we can.
It is absolutely right that consumers should have fair, quick and easy ways to get things put right when they have problems. In October we announced our intention to introduce legislation to require all developers to belong to a new homes ombudsman. Last year, we consulted on how we could improve redress for residents across all housing sectors, and we will publish our response to that consultation shortly.
It has been argued that local authorities should be compelled to adopt all communal facilities on a new estate. At this point it is worth pausing to consider planning arrangements and how they support new developments. When a new development is granted planning permission, local authorities can use conditions, or a section 106 planning obligation, to secure a commitment from developers to provide and maintain open and communal space. This means that the local authority does not have to adopt or maintain the land at its own expense.
It is up to developers and the local planning authority to agree appropriate funding arrangements as part of those commitments. Conditions and planning obligations cannot, however, currently be used to compel local authorities to do something. The local authority has powers to ensure that developers build and maintain communal facilities to the standards and quality set out in the planning permission. In terms of roads, local highways authorities are responsible for the maintenance of local public roads in England. A decision on whether to adopt a road is a matter for the local highway authority and the Government have no direct role in that process.
It has been suggested that freeholders who pay these charges should receive a rebate in their council tax. We think that argument is misplaced. The amount of council tax due from each of us is not adjusted to reflect the specific level of services we receive as residents of the area. Instead, the level of council tax helps the authority to deliver a broad range of services to the wider community in its area. It is open to local authorities to offer council tax discounts to individuals or groups of taxpayers. This is an entirely local decision.
In the end, all these matters have to be paid for. There is only so much money that can be extracted from a particular housing development. It is therefore at the discretion of local authorities to decide the balance of 106, the cost to them of adopting measures, and where and when maintenance should fall on residents rather than on the local authority.
It should always be clear to potential purchasers what the arrangements are for the upkeep of open space and the maintenance of roads. However, we do not think that requiring local authorities to adopt all communal facilities on new developments is the right approach. It removes local flexibility and, in our view, sends the wrong message to developers about their responsibilities.
I do agree with the hon. Member for Bishop Auckland regarding respect of redress. Consumers must have effective ways to get things put right when they have a problem with their housing. That is why we are committed to legislate, so that freeholders have a right to challenge the reasonableness of any maintenance charges for which they are liable. That is why we will establish a new homes ombudsman to protect the interests of homebuyers and hold developers to account when things go wrong.
The hon. Member for Croydon Central asked four specific questions. First, I am certainly willing to consider the suggestion to use Help to Buy as a lever to improve standards. Secondly, on mis-selling, it is open to any hon. Member to make a reference to the regulatory authorities, whether that be the FCA or the Senior Salaries Review Body. Is the hon. Member for Bishop Auckland still on the Treasury Committee?
Well, the hon. Lady knows the FCA well, so if she wants to make a reference, then by all means she should. She asked me about the legislative timetable. Our aspiration is for some time in the next 12 months. The terms of reference have not been decided for Lord Best’s review of leasehold and whether those lessons could be transferred across the field. We will certainly consider that suggestion as part of the process.
In conclusion, it is certainly the case that as a constituency MP I have experience of exactly the issues that have been raised, and I have been in discussion, shall we say, with the developers concerned in my own constituency, so I am well aware of the issues that have been aired this afternoon. I am grateful to the hon. Lady for bringing such focus to the matter. I assure her that we will take action as soon as we can.
We have had an important and worthwhile debate. I am grateful to all my colleagues for their contributions. I was overwhelmed with offers for sponsorship from across the House when I introduced the ten-minute rule Bill.
I think we are creeping forward—or, rather, the Minister is. There will be legislation—perhaps in 2019, perhaps not. He has accepted that we need a new right of redress. He has not, however, agreed to any system for regulating the fees or ensuring transparency. I think that will be a disappointment to many of my constituents. However, I shall do as he suggests and take it up with the Financial Conduct Authority. That will be the next act in my campaign, to make some progress. It is clear that the issue affects hundreds of thousands of people and we need change fast.
Question put and agreed to.
That this House has considered freehold estate fees.