House of Lords
Thursday, 26 April 2007.
The House met at eleven o’clock: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of St Albans.
Introduction: Lord Hameed
My Lords, eradicating fuel poverty is of key importance. Warm Front, with its equivalents in the devolved Administrations, is the Government's key programme to tackle the problem, providing free central heating and installation measures to qualifying households. The decent home standards and the energy efficiency commitment also help to improve the energy efficiency of vulnerable households. In addition, winter fuel payments, pension credit and tax credits have been introduced to improve the incomes of vulnerable households.
My Lords, the fact is that the number of vulnerable households suffering fuel poverty in 2004 remained the same as in 2003, down from 4 million in 1996 to about 1 million in 2004. The noble Lord is correct to say that there has been an increase in the number of those suffering fuel poverty in the past year or so, largely because of the increase in energy prices. The figures will be published this summer, but the Government are urgently tackling the issue and will be referring to it in the forthcoming White Paper on energy.
My Lords, will the Minister indicate what percentage has been added to the bills of people in low-income households by the Government’s requirement to cover the country in windmills? Would it not be a good idea if it was clearly stated on consumers’ bills how much has been added as a result of the renewables obligation, which the Government have imposed?
My Lords, the expansion of renewables, which has doubled under this Government, is primarily to tackle climate change, and will be of benefit to the entire country and will help to save the future of our planet. It is true that the renewables obligation, to which the noble Lord refers, will cost something like £1 billion by 2010, but it will also support the emergence of further renewables technology and the renewables industry, which will be of great benefit to the country.
My Lords, does the Minister agree that substantial amounts were added, and are still being added, to every bill as a result of the nuclear legacy? Will he also inform the House how long it will take under the current Warm Front policy to insulate the homes of all those—namely, 750,000 people in the most severe need—who qualify even for the British Gas essentials programme?
My Lords, there is a large job of work to be done, but the Warm Front scheme has already benefited 1.4 million households in the country since 2000. Obviously, more households require support, which they will get. The Government have put something like £800 million into the scheme, which will run until 2008. Energy suppliers, as the noble Baroness said, are making their own initiatives and introducing social tariffs to help vulnerable people, and those are to be welcomed.
My Lords, the noble Lord makes a valid point. We are working on sharing data, but we must bear in mind issues such as the Data Protection Act and the protection of individuals’ information. We are, however, working on sharing data between government departments to ensure that we target better those who need support. We are working actively to achieve that.
My Lords, is the Minister aware that there are other needy groups besides pensioners who are particularly hard hit by energy price rises? The disabled, for example, suffer disproportionately from fuel poverty. I have been made aware of young, disabled people who need to heat their home for as much as 20 hours a day. Does the Minister share my concern that the minimum age limit for the winter fuel allowance denies help to many who need it most, and will he undertake to look into this situation and consider what more could be done to help this particularly vulnerable group?
My Lords, the noble Lord is correct that disabled people are a vulnerable group to whom we wish to increase our support. Winter fuel payments, as he mentioned, are paid only to those aged 60 or over. We are, however, giving support to disabled people to assist with fuel poverty. That is why we have the disability living allowance and the attendance allowance, which are included in the eligibility criteria for the Warm Front scheme that I mentioned. The installation of central heating and insulation is available to disabled people under the scheme, which we want to expand.
My Lords, is the Minister aware of the deep concern of organisations such as Save the Children about the effect of fuel poverty on very low-income families? Is he considering consulting extensively Save the Children and other organisations to see exactly what their recommendation is?
My Lords, we consult non-governmental organisations all the time on these issues and specifically on tackling child poverty. The target is to eradicate child poverty by 2020. It is one of the most ambitious targets that any Government have set for themselves. We have already made the biggest improvement of any country in the European Union, and, since 1997, 600,000 fewer children have been living in poverty under this Government.
My Lords, the Chancellor of the Exchequer announced in his recent Budget an investment of £7.5 million to fund projects to identify households in fuel poverty and to give them “the right coordinated help”. He suggested that that would target 300,000 of the most vulnerable households and lift them out of fuel poverty. What is “the right coordinated help”, at £25 a house, to work this miracle?
My Lords, it is important, in addition to the national Warm Front scheme, to tackle deprivation in local communities, an idea which was behind a number of Warm Zone areas identified for special help. As the noble Lord said, the Chancellor announced in his 2006 Pre-Budget Statement a further £7.5 million to improve the effectiveness of Warm Front and the Energy Efficiency Commitment. It is a successful programme which is making a real achievement in improving fuel poverty issues in the areas identified.
My Lords, the Government intend to bring forward primary legislation to provide a clear requirement for electors in polling stations to sign for their ballot paper and for the ballot paper to be withheld should an elector refuse to sign. We will do this when parliamentary time allows.
My Lords, I thank the Minister for that half-helpful reply. Does he agree that the Government have created the most astonishing muddle over this matter, first, by introducing measures in the Electoral Administration Act to require voters to provide a signature in polling stations and, secondly, by having to rescind them because those measures were inadequately drafted? As the Official Opposition have made it clear that they will support short legislation to rectify this situation, can the Minister explain why there is not more urgency behind the statement he has made?
My Lords, we discussed this in Grand Committee. The noble Baroness described it as,
“a fiasco of the greatest order … I cannot overstate the fact that this is a monumental blunder”.—[Official Report, 20/3/07; col. GC 158.]
In Grand Committee, on behalf of the Government, I apologised three times for the fact that this had happened. It was an error, which we wish to rectify as soon as possible. It has to be done by primary legislation. I do not know when that will be because I cannot predict what will be in the Queen’s Speech in the next Session.
As the noble Baroness said, we tried to tag it on to a Bill which was going through, but that was not possible because the scope was different. We are aware of the problem, we recognise that we have made a mistake and we want to rectify it as soon as possible, which we will do. But I am afraid that I cannot give an absolute timetable at the moment.
My Lords, does my noble friend agree that the fast introduction of compulsory ID cards would make this legislation irrelevant? We would then be able to produce an ID card when we vote. As the ID card will be a smart card, it will allow for the safe introduction of electronic voting in a variety of places and thus increase the number of people taking part in democracy.
My Lords, I hear what my noble friend says, but I do not wish to reopen the issue of identity cards today. During next week’s local authority elections, the Electoral Commission will conduct several pilot schemes on electronic voting and will monitor the results carefully.
My Lords, I agree with the noble Baroness, but I gather that it is very difficult to get legislative time, whichever Government are in power. Everyone recognises the importance of this and we will get legislative time as soon as possible to rectify this error.
My Lords, when the primary legislation is introduced, will the Minister undertake to include provisions for tightening up postal voting? I ask this in view of the widespread fraud that already takes place and will no doubt again take place next week.
My Lords, I cannot give that undertaking at the moment because I do not accept that there is widespread fraud in postal voting. There are indications of some forms of fraud being monitored very carefully by the Electoral Commission, and obviously the matter we are talking about today would be an important factor in helping to prevent it. However, while the evidence we have indicates that fraud is an issue, it is not a serious one at the moment.
My Lords, will the system we intend to introduce be based on the collection of original signatures by canvassers in order to check off against signatures taken in polling stations? If that is the case, are we satisfied that the Electoral Commission is taking into account the fact that those canvassers who have to go into the more violent parts of our inner cities to collect those signatures will be undertaking very dangerous work?
My Lords, I am not able to comment on the attitude of the Electoral Commission to this. As I understand it, we are talking about signatures being collected at polling stations. If there is any suspicion—and there are various ways of checking whether something is wrong—a ballot paper is not given to the person who wishes to vote.
My Lords, the Electoral Commission has just produced a report saying that personation is in fact the most common way of committing electoral fraud. The Minister and others have referred to the elections taking place next week and the Minister also mentioned some experiments to be conducted in those elections. But what action is being taken to ensure that there is not much personation in polling stations during these elections?
My Lords, the evidence we have shows that during the period 2000-06, the Crown Prosecution Service looked at 91 files containing allegations of voting offences, and of those, 40 related to personation problems. So although it is a small problem, it is a problem. Even though voters will not be signing for their ballot papers next week, if the presiding officer has any suspicions, he may ask the elector two questions. If the presiding officer is not satisfied with the answers, he has the power to ensure that a ballot paper is not handed over. Protections are in place, but I think we would all agree that if signatures were necessary, that would be even more effective.
My Lords, does my noble friend recall that as well as local elections next week, there are also elections to the Scottish Parliament? Will he join me in encouraging the people of Scotland, particularly unionists of all colours, to come out and vote in those elections in the kind of numbers we have just seen in France so that we can avoid the break-up of Britain?
My Lords, every Member of this House would be very happy if our voting percentage rose to 84 per cent next week both in the local and the Scottish elections. I agree with my noble friend. Yesterday, an extraordinary full-page advertisement signed by some very distinguished people was taken out in the Scotsman saying that the union must stay intact. I have every hope that that will happen.
Railways: Saver Fares
My Lords, I thank the Minister for that reassurance, as we are most concerned about the affordable walk-up market. He says that newspaper reports that saver fares are under threat are false. Does he know of any proposals to reduce the period over, or change the day on, which they are available?
My Lords, I know of no firm propositions to do so, although there is of course some flexibility with saver fares. As the noble Lord rightly says, saver fares are incredibly popular and a commercially attractive product; they account for some 50 to 60 per cent of journeys on typical inter-city routes. We all recognise their value. I do not think any train operating company worth its salt would want to dispense with them.
My Lords, does the Minister agree that, in the interests of tackling climate change, there should be no financial encouragement to take internal flights or use a motor car? Does he agree that to try to get the cheapest train fare is a lottery in comparison with which gambling on the horses is a scientific activity?
My Lords, I agree with the noble Lord’s point about encouraging people to use the railways. We should all try to use rail as much as possible. I am sometimes disturbed that we get misleading reports, comparing rail fares with air fares. On most inter-city routes, rail is the cheaper option.
My Lords, I have already made it clear that we are completely at one there. I share the noble Lord’s desire to see that saver fares remain in place and operate well. They are an attractive option, ensuring that rail travel is within the scope of most people’s pockets. So yes, of course.
My Lords, much of our discussion runs contrary to what is happening. Rail fares are going up by much more than inflation each year. The Government’s policy of reducing overcrowding on trains seems to be pricing people off them. That runs contrary to our green policy debates encouraging people to take the train. Can the Minister say something about what we are going to do to keep fares at a reasonable level?
Nonsense, my Lords. The number of people on the rail network is 40 per cent higher than it was when Labour came to office. With Labour in Government, rail fares have fallen. Regulated fares have been limited to an average annual increase equal to inflation between 1995 and 1998; 1 per cent less than inflation between 1999 and 2003; and just 1 per cent more than inflation from 2004 onwards. In 2007, regulated fares are still, on average, 2 per cent lower in real terms than in 1996. Our Government can be proud of that record.
My Lords, is it not the case that the cheapest fares are unregulated, not the saver tickets? The only difficulty is that they must be bought ahead of travel, and people have difficulty finding out what is available for their journey. Does the Minister agree that much can be said for the train operators reinvigorating their publicity to make it clear that if passengers book ahead, either on the internet or by telephone, they can get some very cheap tickets? Examples on offer earlier this week for travel next week included £9.50 one way to Leeds or £12.50 to Crewe.
My Lords, the noble Lord is a veritable expert in train travel and rail fares; I would not pretend to compete with him. He makes an important point: if you book ahead—particularly using online facilities, as increasing numbers are—you can pick up some extremely good-value fare purchases. I encourage people to do exactly that.
My Lords, will the Minister be good enough to give a slightly more robust answer to the noble Lord, Lord Dubs, who asked whether the Government would encourage people to go by train rather than air or car? Does the Minister not agree that the Government interfere in our life sufficiently without doing that?
My Lords, I am delighted to hear that the noble Earl is going to become an even more regular rail traveller, and that the Benches opposite are now full of those wishing to travel by rail. I would almost invite them all to put their hands up if they have taken a rail journey this week.
My Lords, the real challenge in the medium term is capacity, as the Minister mentioned. The huge increase in rail and passenger traffic is good, but it will stretch the rail network, causing prices to increase in comparison with air travel and other forms of transport. Do the Government have an answer to capacity problems in the medium term?
My Lords, we have had a massive increase in rail investment. We have so far matched the challenge, and I see us matching the challenge of the future. We predict a 30 per cent increase in rail usage over the next 10 to 15 years. We are investing more in rolling stock, the quality of which has undoubtedly improved over the past few years. It is a challenge but one that we need to meet because of all the environmental benefits which many noble Lords recognise as a virtue of the rail network.
Palestine: Alan Johnston
My Lords, we are extremely concerned by the kidnap of Alan Johnston in Gaza on 12 March. We have called for Alan’s unconditional release, and continue to do so. We are working closely with the Palestinian Authority. The Prime Minister and Foreign Secretary have spoken to Palestinian President Abbas, and our consul-general in Jerusalem has met President Abbas and Prime Minister Haniya.
We remain actively engaged. We are in close touch with the BBC and Alan’s family. Our thoughts are with them at this difficult time.
My Lords, I thank the Minister for the efforts clearly being made. Does he agree that the situation is a triple tragedy—for the Johnston family, for the Palestinians, and for efforts to maintain balanced reporting in the Middle East, given the misplaced response of the National Union of Journalists to boycott Israeli goods?
My Lords, the abduction of Alan Johnston has done no favours whatever to the people of Gaza. He produced, reliably, and on the basis of staying in a very dangerous environment, extremely high-quality and objective reporting. That was what was needed. It is a tragedy for everybody concerned and I hope that people, whether in trade unions or not, will give the most careful consideration to whether they are helping others to move in a constructive direction.
My Lords, does the Minister agree that this abduction is totally unacceptable for such a distinguished and hard-working journalist? We thank the Government for the work they are doing in trying to secure his release. Gaza is a hotbed of turbulent rumours; is the Minister aware of the rumours that recur from time to time of some bizarre connection between this and the attempt by Palestinian militants and others to secure the release of a large number of Palestinian refugees held, mostly without trial, by the Israeli authorities? The number is about 8,000, which, pro-rated, is equal to twice the entire prison population of the United Kingdom.
My Lords, I hope the House will bear with me. In these very delicate circumstances, in which we are trying to ensure the safe release of a distinguished journalist, I really do not want to speculate on the issues. Almost anything said in this House will be read by those whom we believe may hold Alan Johnston. I do not want to forearm them at this difficult time.
My Lords, is it not the case that, even as we speak, Members of the European Parliament, from all parties and countries, are voting to support the urgent call for the release of Alan Johnston? That, surely, is a practical and tangible way of showing support. What opportunity do we have in this Chamber, where there is clearly enormous support, for sending a similar message of support to Alan Johnston and his family and of our hope for his speedy release?
My Lords, I thank my noble friend. I am quite sure that that is needed and desired on all sides of the House. I will ensure that the sentiments of the House are conveyed to the Palestinian Authority and all others in the region, if that is acceptable to your Lordships. I applaud all those in the international community, including those in the European Parliament today who are making their voices heard, and the journalists from all parts of the Middle East who, irrespective of their views about the peace process, have added their voices. That is constructive: speculation on the precise nature of any discussions is not.
My Lords, we join the Minister in the concerns that he expressed and the sympathies that he extended to both the family of Alan Johnston and all his colleagues in the BBC and elsewhere. Will he throw light on one aspect? A sinister report came from an obscure terrorist group—I think that it was the Brigades of Tawhid and Jihad—that Mr Johnston had been executed and that further evidence of it would be provided. No further evidence has appeared and the story seems to have vanished from the press. What is his assessment of that story?
My Lords, I will try to answer with the greatest circumspection, for all the reasons that I have given. We are all aware of the reports that Alan had been killed, and of President Abbas’s more recent suggestion that he is still alive. We are unable to verify this in either direction.
My Lords, I am sure that the Minister will agree that this is yet another terrible example of the deteriorating situation in the Occupied Territories. Has he had discussions or contact with the Israeli Government about the proposals recently put forward by 22 Arab nations, led by Jordan?
My Lords, I can confirm that the quartet has taken up those suggestions and they are being played into the discussions with the Israeli Government. It is essential that those discussions lead towards a two-state solution and to real security for each of the peoples involved. A new dynamic was added, and we need to capture it.
Ministry of Justice
My Lords, I beg leave to ask a Question of which I have given private notice, namely:
To ask Her Majesty's Government on what grounds they have concluded that transferring responsibilities for prisons to the Department for Constitutional Affairs under the Lord Chancellor’s direction and renaming it Ministry of Justice is consistent with the statutory responsibilities of the Lord Chancellor under the Constitutional Reform Act 2005.
My Lords, the Lord Chancellor has specific duties to defend the independence of the judiciary under the Constitutional Reform Act 2005. Section 20 of, and Schedule 7 to, that Act also provide that ministerial responsibility for the courts must remain with the Lord Chancellor so that independence can be protected. In addition, the Lord Chancellor has a duty properly to resource the court system under the Courts Act 2003. The Ministry of Justice was created on the specific basis, as the statutes require, that the Lord Chancellor would remain responsible for the courts and subject to those duties.
The Lord Chief Justice has made it clear that the senior judiciary have no objections in principle to the creation of a Ministry of Justice, subject to the provision of safeguards to protect the independent administration of justice. A working group, chaired by the DCA Permanent Secretary and on which senior members of the judiciary sit, reporting to me and the Lord Chief Justice, has been convened to address these issues and will report. I am confident that, through the working group and other discussions that I am holding with the judiciary, we will be able to agree what safeguards are necessary.
My Lords, bearing in mind that the noble and learned Lord, with his new responsibilities for prisons, will be subject to frequent judicial reviews, and that he is likely on occasions to be found to have failed to respect the rule of law, does he agree that that state of affairs is in conflict with his statutory duty, unique among Ministers, to protect our constitutional principle of the rule of law, with the result that the authority of his office will be undermined and its role weakened?
No, my Lords, I do not accept it. There is nobody in our estate who is not subject to judicial proceedings. The Lord Chancellor has always been subject to judicial proceedings. The fact that from time to time the Lord Chancellor has lost judicial proceedings has not for one moment meant that his position has been undermined because he, like everybody else in this country, respects the law, and that is how it should be. I do not think for one moment that the prospect of being brought to court means that you cannot have a Ministry of Justice, nor does it mean that you cannot have proper safeguards. That is why the senior judiciary agree that subject to those safeguards there can be an effective Ministry of Justice.
My Lords, the revised oath for the Lord Chancellor in the Constitutional Reform Act 2005 reads:
“I … do swear that in the office of Lord High Chancellor of Great Britain I will respect the rule of law, defend the independence of the judiciary and discharge my duty to ensure the provision of resources for the efficient and effective support of the courts for which I am responsible”.
The noble and learned Lord may not as yet have taken that oath because he was already in post. Is he prepared to give us an assurance that the resources for the courts will be ring-fenced and that the resources available to the judiciary and court system will not be reduced by the demands of the prison population, the building of more prisons and so on?
My Lords, I commit myself to the terms of the oath. In addition to the terms of the oath, I am rightly subject to a statutory duty properly to resource the courts. I do not agree that ring-fencing is right; for example, last year it was necessary for me to take some money from the court system properly to fund the legal aid system, because a Lord Chancellor has to make judgments whether delaying some maintenance in the courts may be the right thing to do to ensure proper access to justice. That is why ring-fencing is wrong.
My Lords, if something goes very badly wrong in the prisons, it would be normal for the Minister responsible to resign, so I presume that if there is a massive prison break because there is a failure in the Prison Service the Lord Chancellor will have to ignore his responsibility to the judiciary and resign as a responsible Minister.
My Lords, what is the rush on this? Why would it not have been possible to set up the working groups and have a proper consultation before deciding to break up the Home Office and set up this Ministry of Justice? When the noble and learned Lord says that Parliament was told, are the Government not accountable to Parliament and should Parliament not have had an opportunity to hear the views of outside interests before a conclusion was reached on this matter by the Executive?
My Lords, a balance has to be struck, and ensuring that the Prison Service, Probation Service and the courts know where the political leadership is. Time has been set aside to have the discussions; the working party was set up before the announcement was made to Parliament and the matters were discussed with the judiciary before the matter was raised in Parliament.
My Lords, is the noble and learned Lord aware—as I am sure that he is—of the concerns of the judge in charge of the Central London County Court as to the lack of resources? As I understood it, the statement that he made was certainly not only in relation to maintenance; he referred to a crisis in the civil justice system.
My Lords, I am aware of the concerns expressed by his honour Judge Collins, which, I should make it clear, have nothing whatever to do with the issue of the Ministry of Justice. The consequence of the reduction in resources in some areas of central London is that there has been some delay in dealing with civil cases. However, again, judgments have to be made as to where you have to spend your resources to ensure that there is a legitimate and fair justice system.
My Lords, I believe that bringing together responsibility for the courts, prisons, probation, criminal law and criminal justice means that there is much clearer co-ordination and a much greater sense of the consequences of what the courts do in driving much better outcomes in the penal system.
Business of the House: Debates Today
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of Lord James of Blackheath set down for today shall be limited to three hours and that in the name of Lord Bruce-Lockhart to two hours.
On Question, Motion agreed to.
rose to call attention to budgetary reporting and the use of resources in the National Health Service; and to move for Papers.
The noble Lord said: My Lords, the title of our debate today indicates a concern with how the resources of the National Health Service are allocated, used and are subject to budgetary reporting. The debates on the National Health Service that I have attended so far contained wish lists similar to those that children send to Santa Claus at Christmas, which is all very well if Mummy and Daddy have the money to pay for the things asked for. In this case I have never been certain that the NHS either has the resources or is quite aware where they are.
I start with my concerns based on the published quarterly accounts, as filed in the Library here. I shall then explain how they are confirmed by the overall expenditure figures and conclude with a plea to the Government to present NHS accounts in a manner that would better allow us to monitor its solvency and financial performance.
The previous two published quarterly filings of the Department of Health report on the National Health Service show what looks to be a very encouraging trend: there is a forecast improvement from a £683 million deficit to a £13 million surplus in just six months. However, we should be a little cautious before we start to celebrate.
I have had an exchange of Written Questions and Answers with the noble Lord, Lord Hunt, from December 2006, and he has been very patient and tolerant in answering seven of my eight Questions. I have asked the eighth Question three times and received three Answers from him, but they were never responses to the question that I asked, which is rather surprising because it was not a particularly swervy ball. All I asked was the value of the deferred cost of the redundancy programme and the lost value of income expected from that programme, which will now occur in the middle of this year, and which I needed for my modelling exercise. In one of his Answers, the noble Lord emphasised that the new forecast surplus of £13 million for the current year is after deferral of the previously announced redundancy programme but also after utilising the last available contingency for the NHS this year, amounting to £350 million.
The noble Lord, Lord Hunt, also told me in a Written Answer in January that the strategic health authorities had,
“created one contingency through their management of central budgets”.
He went on to explain that SHAs had,
“reported their ability to create an additional £100 million through their continued management of the central budget programme”.—[Official Report, 29/1/07; col. WA 17.]
Such creationism is of some concern, as it is surely normally to be found only in the Book of Genesis. Are we now to believe that the Government are looking for divine intervention to save their National Health Service figures?
Finally, the Minister told me that costs and benefits arising from the reorganisation of strategic health authorities and PCTs should be included in their forecast outturn for 2006-07; yet he told me in his Answer of 27 February that the latest additional £100 million was not related to redundancies. So I have two questions: where is the benefit previously offered by the head-count reduction, and where did the allegedly created new £100 million come from? What previously budgeted expenditure has been cut? Which patients are going untreated this financial year for the sake of filling the hole from last year’s deficit? What drugs have been withdrawn? Which doctors and nurses have been laid off?
Armed with that partial information, I set out to follow an audit trail to explain an overall turnaround of £697 million in just six months. Your Lordships may relax, safe in the knowledge that I am not going to recount the torturous calculation, but I find the National Health Service filing unreasonably complex, lacking in reasonable transparency and raising far more questions than it answers. Try as I might, I cannot achieve a reconciliation.
I have two examples. First, I tried to see how the £94 million deficit now forecast in the latest report arises, consistent with the previous report. The November report states that gross deficits now stand at £1,179 million compared to the previous forecast of £683 million a quarter earlier. When you are talking about an improvement, it is strange to start by recording a deterioration of £296 million. That is also after offsetting the gross surpluses, stated to be running at £736 million. Looking for my audit trail, I deduct the £736 million from the £1,179 million deficit, which gives me the net deficit position of £443 million before contingencies.
If I deduct the £350 million contingency, I am left with a balance of £93 million, only £1 million different from the net deficit then forecast. If that is indeed what I am supposed to do, I have got there completely by luck not by any mathematical process known in the accountancy world. It is also of concern that that still leaves £1 million short. It could be a rounding error or, I suppose, the ministerial tea and biscuit fund. Am I to assume that the calculative process that I have followed is correct? In that case, I submit that it is almost impenetrable to general review and useless as a guideline to the financial standard to which the NHS is actually performing to.
Next, I tried to do a counter-check on those figures by looking at them from a completely different direction. I add the £94 million deficit forecast in November to the figure of £100 million, which is the Minister’s claim of “new capital” created by the National Health Service. Those figures together should explain £194 million of the forecast improvement, so I then deduct that from the forecast performance improvement of £697 million, and I now have £603 million left to explain the improvement, and there is not one single word of help on the subject in the NHS filing report. Reasonably, I should now add to that my guess of about £100 million for the revenue deterioration from deferring the redundancy programme, for which the Minister has not given me a figure, despite my thrice-asked Question. I now have a figure of £703 million unexplained improvement in NHS performance over some 26 weeks. That is a turnaround sufficient to represent a performance that would be the envy of nearly any of the top 100 companies on the London Stock Exchange.
The report says that NHS policy is to eliminate the 175 outstanding cash deficits still predicted in February. So how can it be that the net difference between gross deficits and gross surpluses of those trusts appears to be £147 million, when the claimed deficit for the entire National Health Service was then stated to be only £94 million? Has anyone ever heard of a parent company that can trade at less net funds worth than the value of its subsidiary companies previously? The obvious inference is that some trusts are not only currently in deficit but intended to remain continuously in deficit, which would raise very serious questions as to whether they represent a dangerous solvency problem both for themselves and for the NHS as a whole.
Mr Richard Douglas, director-general for finance and investment at the NHS, seems to give away the game in his contribution to the February report, in which he tells us three pieces of information. First, without the reserve, the deficit would still be £437 million—no change. Forecast gross deficits still total £1,318 million, which is up by £6 million. Finally, 35 per cent of organisations are forecasting deficits, compared with 33 per cent at quarter two. He has told us three pieces of information, two of which are worse and one of which reflects a standstill, and he is trying to explain an improvement.
When the Government claim that the number of trusts in deficit has fallen, we further learn that 71 trusts reported a deficit in 2005-06, and mergers have reduced the number of those in deficit from four to two. Some 108 PCTs reported a deficit in 2005-06. Following PCT configuration, whatever that might be, 80 have been reconfigured, thereby creating 38 PCTs that still report 2005-06 deficits.
Is the magic formula of NHS accountants simply to merge trusts in deficit to reduce the numbers reported, with no benefit to the health of patients? Of the 57 organisations reporting a deficit in 2005-06 and which were still in deficit in 2006-07, 43 are said to be in a turnaround programme. What did they do with the other 14? Are they to become invisible by the year end through further deft accounting mergers? Anyone wondering what happened to Baldrick after the Blackadder series ended should now rest happy in the knowledge that he is in charge of the National Health Service and using his cunning plans to present the accounts so that they appear to be in balance.
The February report has another strange feature, which puts a question mark over the perceived opinion that the south of England is the affluent part of the land that is keeping afloat our friends in the north. What friends they are, given that our friends in the north are keeping the southern parts of the NHS afloat. We hear of the north-south divide, but rarely do the Government tell us how the north-east, north-west and Yorkshire and Humber regions are sacrificing patient care to subsidise every strategic health authority south of Manchester—every one. Noble Lords may check the figures themselves. The good people of Islington should be most grateful to the people of Hull, including, of course, the Deputy Prime Minister, for achieving a generous £3 million surplus, enough to wipe out the deficit allowed for the residents of Islington, which was recently home to the Prime Minister, where the trust is in deficit by almost that amount.
I know that the Minister will have an immediate answer to that criticism, because the figures for the distribution of funds to the northern strategic health authorities have been loaded with extra value to provide them with extra resource, and that has been taken away in the balancing exercise. Against that, the north needed the money because it had been underprivileged in distribution terms in the past, and the time when it can be restored is merely being put back. Yet the Prime Minister seeks 24-hour surgery, although perhaps he should have mentioned that before the PFI contracts that guarantee only daytime operations with huge penalty costs for service out of hours were entered into.
I now turn to the overall expenditure figures. The shadow Secretary of State for Health in another place recently said that the Department of Health’s original near-cash resource limit—a phrase that I shall explain later—was £71.5 billion. However, the Treasury has since revealed that the Department of Health spent £74.3 billion of near-cash; that is a £2.7 billion overspend, which is almost five times worse than the department’s published figure. A Minister in the department admitted that that was directly caused by the deficits arising in trusts, stating that the NHS deficit was the main reason for additional near-cash expenditure.
The shadow Secretary of State added that the only way that the Department of Health had reduced its overspend from £2.7 billion to £580 million, the figure that I mentioned earlier, was by underspending on its non-cash resources. It did that by writing down the value of the future claims on the NHS for clinical negligence. However, underspending on non-cash has no immediate impact on the actual resources available to the NHS and so cannot mitigate the effects of overspend on near-cash—or, in plain English, it cannot prevent the sick going untreated.
Perhaps I may explain the Government’s concept of near and non-cash. Suppose that I say to my wife, “I will give you £100,000 for a dress account next year”, but she does not need that £100,000 for the whole of this year. That £100,000 cash then continues to my benefit, so I will offer it to my mortgage company or back to my wife for the housekeeping this year. In this example, the dress-purchasing account represents the non-money which I seek to use as an asset as near-money in the current year. I can raise money with my bank or whatever. The Government would call the money they have to spend in the current year near-money; that is why I regret so much the absence of a consolidated balance sheet for the NHS. In this example I will effectively have used the £100,000 offer of a dress account for my wife as non-money, and that is what the Government are doing, which has reduced the overspend from £2.7 billion to £580 million. That is an outrage and a totally unacceptable method of government financial accounting. It would be unfair even to call it an “Enron technique”. Not even Enron ever did anything as bad as that, and I would not insult it with a similar accusation.
The famously prudent Chancellor has a much-abused golden rule requiring any near-cash overspend to be repaid within a year. So that is another £1.5 billion of health cuts that we can confidently expect to be inflicted on everyone next year or in the rest of this year. Expect plenty more closures and redundancies in clinical services. At the end of the day, the Chancellor and his Department of Health accountants will learn, as Enron, Barings and WorldCom did, that creative accounting cannot create cash.
I offer the Government suggestions for a six-point plan to deal with all this. Could they please consider a completely new accounting format that is transparent and allows us to see these things properly, without the invention of such phrases as “near cash” and “non-cash”, which have no place here? Could all the accounts please show a clear correlation between the NHS as an effective holding company and its structure of quasi-subsidiary trusts? May we have an urgent review of the budget process by which trusts have allocations, so that they are not required to carry huge concessions and contingencies into the year end to bail out the parent? May we please have a clear statement of what the audit committee procedure is through the whole structure?
As the Government will be aware, in any major commercial enterprise there may come a time when the shareholders—for whom, in this case, read taxpayers and electorate—force through and demand a change of management control from chairman down. A new board will be appointed and the first thing that it will need to do in any rescue strategy is to mount a full financial accounting investigation. Experience shows that this is far better done under the direction and control of the old board before it is ejected. This provides a better understanding to explain both in its own time and own words the account of its stewardship, while the incoming new board will have a better basis on which to start the task of putting everything together. The time for that investigative report from accountants is now. I beg to move for Papers.
My Lords, I have no interests to declare for speaking in this debate. I am not a doctor or an accountant, and, fortunately, at the moment I am not a patient. What I am is a supporter of the National Health Service. I am a supporter because the NHS makes for a fairer society, it makes our people healthier and, frankly, it makes Britain a better place to be. I congratulate the noble Lord, Lord James, on this debate, but I have some concerns about his approach to the NHS. He seems to be saying—or prescribing, if I may say so—that what the NHS needs is more accountancy.
So I must declare a prejudice, which has been confirmed by today’s debate. I am prejudiced against too much accountancy. That prejudice has been built up over many years working in business, where I learnt that too much accountancy kills enterprise and initiative, creates red tape and stands in the way of getting things done. Of course accountancy is important. It is important to give value for money, to spend money wisely, carefully and prudently and to stick to your budget. But that is the process; it is not the purpose. The purpose is to provide the nation with a National Health Service.
Quite rightly, the Government have moved away from the process towards the purpose, which is the health and well-being of the nation. They deserve our thanks for doing so. How have they done this? They have focused on the population and its healthcare needs and provided extra money to satisfy those needs. The extra money is certainly impressive. Allocations to the service increased by 6.7 per cent per annum in 1999 and 2000. In 2001 to 2004, there were even bigger increases: 9.4 per cent. Even this small increase of 2.7 percentage points provided an extra £13 billion over the three years to 2004.
It is a commonly held view that the NHS is in crisis because the money that was spent is not working and the funds have gone down a black hole with no perceptible improvements in patient care. Is this correct? A recent careful review by the corporate analytical team at the Department of Health, which was published in February of this year—the noble Lord, Lord James, mentioned it—looked at what happened to the extra money and its effect on patient care. It revealed a somewhat different picture.
What the money did not do was simply fund large salary increases for clinical staff—only 14 per cent of the extra money went that way—nor did it disappear down the route of more expensive drugs. In fact, the cost of pharmaceuticals was less than anticipated. Sixteen per cent of the money went on volume growth and the rest—70 per cent—went on extra nurses and doctors. Targets for extra nurses and doctors were not only met but exceeded by the enthusiasm of many trusts. The pre-existing rise in trend in clinical staff numbers was exceeded by 130,000 over a three-year period. By any standard, that rate of increase is large and impressive. It has not been seen previously and I doubt whether it will be seen again.
Has all this investment resulted in better care? That is always difficult to measure but, although some people regard indicators with suspicion, there is a hint that valuable gains have been made. Patients are undoubtedly being seen quicker. Waits for GP appointments are now very short. Time spent in A&E departments—the so-called trolley waits—have come down. In April 2004, 3,000 patients were waiting longer than three months for coronary artery bypass grafting or angioplasty. A year later—that is, by April 2005—no patient waited longer than three months, and this occurred despite the fact that the number of patients requiring these treatments had gone up considerably. So it seems that the extra staff have been doing something.
It is harder to measure the quality of care, but surveys of patients who have recently received some form of care show high levels of satisfaction. Of course, some people remain sceptical of these surveys but I think that they are pretty scientific. Perhaps the scepticism is fed by the media highlighting the failures of the health service and doctors, while ignoring the steady improvement in care that is obviously taking place. The fact is that the slope of life expectancy has remained steadily upward during the whole existence of the National Health Service and it shows no sign of levelling off. Some calculations estimate that at least 50 per cent of that life gain can be attributed to the advances in medical care.
There are problems facing the National Health Service—of course there are—but these are not problems that can be solved by better budgetary reporting and accounting of resources. Accountancy is an important tool in the process of resolving these problems, but it is not the purpose, because the problems have little to do with accountancy. In my opinion, the difficulties lie largely in the organisation of healthcare and the ways in which the system is operated, and they lie in the alienation of the medical and nursing staff who are charged with delivering care in the health service.
These problems have multiple causes, some of which are pretty well known; for example, the repeated reorganisation of the National Health Service that has occurred throughout its entire life. The cost to the service in the short and long term of these repeated reorganisations cannot be ignored. It certainly compromises any health service trust’s ability to implement a coherent financial strategy. Indeed, the overspending of the past two years has been attributed to this. These changes give rise to conflicting directives, which, in turn, provide considerable opportunities for confusion and conflict. According to an NHS Confederation publication, 56 regulatory and inspection bodies have been set up to check up on doctors and nurses. Yes, some of them do relate to accountancy but, as more changes, targets and directives descend on the National Health Service, surely the Minister will agree that inevitably there must be a general feeling of alienation.
However, these are not problems of accountancy; they are problems of management and problems of raised expectations. The solutions lie in local managers, doctors and nurses being empowered, taking power away from the centre and putting the patient into the driving seat. Then doctors, nurses and local managers will use their initiative. They will find ways of doing things better and cheaper. Leave it to them and not to accountants. I think that the noble Lord, Lord James, is looking in the wrong place and I hope the Minister agrees with me.
My Lords, I can see this will be a fun debate. I congratulate the noble Lord, Lord James of Blackheath, on initiating this debate. He is the most wonderful forensic pathologist of NHS accounting systems and very welcome for that. I find myself in agreement with much of his aspiration for NHS accounting systems—rather more than I do with my natural ally, the noble Lord, Lord Haskel.
I must declare an interest as a board member of Monitor, the independent regulator of NHS foundation trusts and I have had a long association with the NHS as an academic clinician and manager.
Let me start with the patients. Quality of care and value for money in healthcare depend crucially on the proper use of resources by clinicians. That means having devolved budgeting to clinical services and proper cash management, serious business planning across the multiple departments of an institution or service and the availability of timely and clinically relevant information, backed up by an effective board conducting a good business-like financial regime running the organisation as a going concern. That is the only way to engage clinicians in the task of improving healthcare. Without consultant clinical involvement and senior nurse management involvement we will never develop the continuously improving organisations that we, the public, want. We can tinker at the top, within the Department of Health, within the Government and within the structures to run it, but unless we get the local stuff right, it will not work.
We would all agree that historically the NHS financial regime has lacked transparency and accountability. It is not surprising that financial management has proved challenging. But I believe that the NHS foundation trust regime addresses these issues; that the foundation trusts are delivering better financial performance; that the Government are moving the NHS trust regime closer to that for foundation trusts, which is a good thing; and that achieving foundation trust status for all NHS providers is still the best way forward for existing NHS trusts.
The regime operated by Monitor incentivises NHS foundation trusts to be professionally managed and financially strong. The recent NHS Confederation report on what the NHS can learn from US not-for profit hospitals stresses the importance of running these organisations as proper businesses with an understanding of what is profitable and unprofitable and with the employment of a highly paid executive team with skills transferable to and from the independent business sector. We in the NHS should grasp this nettle and recognise that with increasing autonomy, finance director skills will need to be much more highly rewarded than they are in general in NHS organisations at present. Better financial acumen is needed in the NHS, which is why we at Monitor developed and launched a major finance director training programme with Cass Business School, at the heart of the City of London, to try to inculcate that culture.
We need clear incentives. Foundation trusts are required to operate as a going concern—after all, we, in Monitor, have no money to bail them out. Their income comes from legally binding contracts, with commissioners providing clear incentives to deliver the required services. Foundation trusts do not have access to brokerage or one-off payments from the department or from the SHAs, clarifying the responsibility of trusts to manage their own financial positions. As long as NHS trusts can be bailed out by raiding education budgets or diverting resources from community or mental health budgets, they will never learn to manage properly. As regards creating a break-even situation nationally, the constant moving of money around the system is so destructive on morale in local trusts.
Transparency is important. NHS foundation trusts use standard commercial accounting practice, making financial statements easier to understand and to analyse. They have clear accountability to their regulator based on a published compliance regime, and they know that intervention will follow if they breach their authorisation. This removes uncertainty and makes the regime more predictable.
Foundation trusts continue to deliver strong financial performance. In aggregate, 54 NHS FTs generated a £75 million surplus in the nine months to December 2007, which is £75 million more for investment in patient services. They are treating more patients than other NHS trusts and generating more income. Real autonomy and board accountability with an effective regulatory framework can deliver efficient and effective services.
We have demonstrated that it is possible to turn around poor performance in NHS foundation trusts. Only once, with Bradford Teaching Hospitals NHS Foundation Trust, has it been necessary to use formal powers of intervention to engineer a turnaround. However, Monitor’s compliance regime has identified and led to the resolution of poor financial or service performance on a further 10 occasions. The most significant was the fast and effective turnaround of UCLH, where a £36 million loss will became a small surplus in 2007-08. I pay tribute to the members of the board of that trust for the work they have done, but we did a good deal to support them.
I am very pleased to see the Government ending the practice of year-end brokerage and moving to a system of repayable loans; that is, ending the detested RAB regime—the system of resource accounting and budgeting imposed in 2001, a double-deficit programme that was so detested—and moving to a loans-based capital regime with access based on affordability. This is in line with the Audit Commission’s recommendations arising from its review last year. We support that. These changes should help to drive improved financial performance in NHS trusts. However, the full benefits will be delivered only as we move more trusts to foundation trust status.
I return to where I began; that is to patient care. Focus on finance does not come at the expense of quality. Indeed, organisations that have proved themselves competent in financial management are also competent at getting to grips with clinical governance issues within their trust. They are simply better managers and 68 per cent of NHS foundation trusts are rated excellent or good compared with only 50 per cent for NHS trusts.
I have gone banging on about the Monitor regime because the process of becoming an FT is very rigorous and only those fit for purpose get through. The process leads to better governance and financial management. We take corporate boards and their governance capacity very seriously through our board-to-board meetings. As a result of the process, East Somerset NHS Trust recently completely reshaped its capital plans and South Devon Healthcare NHS Foundation Trust dropped its over-ambitious PFI scheme to go for an incremental build approach; these two decisions have saved the taxpayer millions. I could quote many other examples.
The process has also led to NEDs with greater financial experience being recruited than was the case in 2004, which is crucial for support. So I am optimistic that if the Government stick with their intention to devolve care to autonomous providers, add the spice of competition generated by the independent sector and press on with their personal choice agenda for patients and their families, NHS finances will get healthier and healthier. That is the way forward, rather than carping on about the endless inadequacies of the NHS accounting regime.
My Lords, I congratulate my noble friend Lord James of Blackheath on so ably introducing this debate. The Minister will confirm the diligence and zeal with which he has pursued detailed information about the funding of the NHS. The fact that his researches have, finally, led him to describe the NHS accounting system as critically as he did today should be a matter of concern to all of us.
It is beyond doubt that more resources are going into the NHS. I am totally at one with the noble Lord, Lord Haskel, on that. The Government have, rightly, frequently been congratulated in this House on that fact and, indeed, on the number of initiatives they have introduced to improve patient care.
At least as important as the amount going into the NHS is the way in which the money is spent and the quality of ministerial decision-making. Even more important—and I really have to say this—is that without transparency in the use of resources there can be no democratic accountability. That is one of the really grave criticisms highlighted today by my noble friend. I hope, as do we all, that the Minister, who is rightly well respected and admired in this House, will be able to answer clearly my noble friend’s detailed questions—although possibly not all of them—when he concludes the debate.
The lack of financial transparency in some parts of the NHS causes the public to question whether the Government’s claims of increased funding are true. That is why transparency matters. Certainly, more money has gone into medical staffing. However, it seems also to be the case—and this is widely the public perception—that GPs and consultants are being paid a great deal more for doing less. It is also the perception that that has come as a surprise to Ministers. Of course there is public support for our doctors to be well paid, but there is this perception that there are cuts in GP services as a result of the pay and structural changes. That leads to, at least, puzzlement that taxes appear to have gone up to provide less service.
While we must accept, as it is the case, that more money is going into medical staffing, what should we make of the extraordinary saga of MMC; the Modernising Medical Careers initiative? That has been described by the Royal College of Physicians as:
“The worst episode in the history of medical training in the UK in living memory”.
How could the Government have created a situation where, as Michael Jack pointed out last week in another place, there is a misfit between the 30,000 junior doctors aspiring to reach higher posts—in other words, people who have been trained—and the 22,000 job opportunities that exist for them? Are the Government now attempting to reallocate the surplus of doctors to Voluntary Service Overseas? Are our precious resources being devoted to this attempt? It is hard to believe that that could be so. It is certainly true that you could not overstate the effect the situation has had on doctors’ morale, not to mention their respect for ministerial planning.
However, I assume that there was also some sort of financial effect. What has it cost? What services may have to suffer as a result? I am sure that the noble Lord will be able to tell us something about that in his concluding remarks today. Perhaps he will give us a bit of comfort because everybody is concerned.
I have at least twice in this House raised the contrast between the reality of people’s experience of the NHS at local level and claims sometimes made by the Government. I make no excuse for doing so again today since we are debating the use of resources in the NHS. As I said earlier, what matters to people is not only the amount of money going into the NHS, but also how it is spent. Indeed, in the light of the points made by my noble friend, I raise the clarity or otherwise of the accounts—in other words; where is the money going?
I again raise an example from Norfolk where people, as elsewhere in the country, know that more money is going into the NHS. The people in Norfolk have been told that the Norfolk PCT is in debt to the tune of £50 million. For that reason, cuts in services have to be made across the board. I need hardly add that the people of Norfolk do not feel responsible for this debt of £50 million. We cannot establish who ran up the debt or who should be held responsible—we apparently cannot be told. There is no accountability. Of course, in the light of what my noble friend said, I wonder whether there is a debt; could it be an accounting devise? We do not know. But whether or not the debt is real, the effects of meeting it most certainly are. They are causing universal fury across the whole community. Because of the real or imagined debt, all nine of Norfolk's community hospitals are being considered for closure or cuts in services.
The Minister will know how unpopular such proposals are, not least because his ministerial colleague, Ivan Lewis, has been demonstrating against them in his constituency. Ivan Lewis has been joined by a clutch of other Ministers, not least Jacqui Smith, the Government Chief Whip in another place, and Hazel Blears, the chairman of the Labour Party, in demonstrating against the changes in their constituencies. Part of the reason for people’s fury and resentment at such changes is that they are being implemented and local services reduced while they are being told that the NHS is improving. People find it hard to equate their experience with what they are being told. Opaque funding mechanisms, highlighted today by my noble friend, do not help.
I accept that the structures described by the noble Baroness, Lady Murphy, may help, because there will seem to be more local accountability and, perhaps, more local flexibility. If that is the way that things are to go, there will be a greater feeling of ownership locally. That will certainly help.
It has not gone unnoticed in Norfolk that the PCT has spent thousands of pounds on consultation. Local people have themselves organised huge public meetings. There have been petitions to Downing Street, delegations to Ministers, and so on. The current proposals have resulted in universal ironic hilarity. They suggest that the whole of the western half of the county of Norfolk—the half which, according to government definitions, has the largest number of deprived wards—is to be left with no community beds at all. It has not been possible to explain to the PCT that such a proposal will not do and that it sits ill with assertions from the centre that community-based services are to be developed and brought closer to the people. It has been received with consternation by the county council, which is hard pressed to provide even exiguous domiciliary services already and knows that it will bear the brunt of the cuts.
That seems to be curiously divorced from the announcement a year ago that £750 million of extra funding was to be devoted to community hospitals. The Minister kindly answered me when I last raised this in the House. What is a puzzle is that the Norfolk PCT, which is in deficit, possibly to the tune of £50 million, made no application to the fund of £750 million. Why not? Did it not know about the deficit at the time? Perhaps it did not. More sinisterly, perhaps it had already made up its mind on the future of those community hospitals—in which case the consultation is a sham and the money devoted to it a waste of resources. Who can say?
I am sad today to appear to be attacking the Minister. I greatly respect him, his knowledge and the way that he tackles his job—which, in all conscience, is enormously difficult. Complexity in NHS funding certainly did not start with him. All of us know that and we admire what he tries to do, but I cannot believe that he can be happy about what is being presented locally as government policy—that these cuts have to be made and these hospitals closed because the Government say so. We understand that the finances are complex, but I feel that the Minister will understand our concern that that complexity may be denying the Government legitimate credit for what they are attempting to do. I hope that he will be able to reassure us later.
My Lords, I also congratulate the noble Lord, Lord James, on his opening speech. I tried very carefully to follow his audit trail through accounting in the National Health Service—not totally successfully, but I certainly heard the word Manchester used. I shall concentrate my short remarks on the city of Manchester and on what has been achieved in the past 10 years.
Although I entirely agree that there needs to be transparent accountability for expenditure in the National Health Service, the improvements in the quality of care in the city and city region of Manchester have been dramatic during the past 10 years. Those dramatic improvements have been based on the considerable investment, both capital and revenue, achieved under this Government. In the city, we now have a much clearer pathway, as a result of that investment, to high-quality primary and community care; clear routes into secondary care with significant investment in our district general hospitals; and further massive investment in tertiary services, which enable the highest quality specialist care to be provided in central Manchester and other specialist hospitals.
That is against the background of huge health problems in urban centres such as Manchester, huge inequalities in health and huge problems with late referral, because people in urban centres do not always recognise their health problems. That means that investment is needed not only in hospital services but in primary community services to ensure that health problems are detected at the earliest opportunity.
I should declare an interest both as a non-executive director of a hospital trust, now a foundation hospital, Christie Hospital, a subject to which I shall return, and as non-executive chair of a local improvement finance trust—LIFT—company, which is responsible for the development of health centres, clinics and service centres for Manchester, Salford and Trafford. I start there because where we are dealing with areas of high deprivation and poor health, investment in primary services is crucial.
During the past two or three years, at least 13 new health centres have been developed and built through the LIFT company, not only to provide high-quality GP practices in those centres but to enable a much wider range of screening and community services to be developed to ensure that we start to tackle inequalities of health. That is in partnership with local authorities. Although we may need clear accountability within the National Health Service, we must work in partnership with other providers, especially local authorities. With the reconfiguration of primary care trusts and consultation with local authorities, it will be crucial to have a strategic plan that drills down to the real needs of local communities.
In south Manchester, for example, there has been huge investment in the South Manchester University Hospital and performance has been dramatically improved in recent years. Although statistics and targets are not everyone’s preferred method of assessing the success of the National Health Service, they give clear indicators of progress. They also enable the organisation to see its direction of travel. To pick out one or two statistics in south Manchester, 97 per cent of all elective patients were able to book their appointments at a time convenient to them. That could not happen without the investment in our hospitals. Also, 97.8 per cent of patients were seen, treated and discharged from accident and emergency within four hours of arrival. That is a huge improvement on how accident and emergency units operated in the past.
Turning to central Manchester, there has again been huge investment: a £600 million investment in a new hospital, with a new children’s hospital under way as we speak and a £1 billion investment along the Oxford Road corridor linking the hospital more closely to the university—I should obviously declare an interest as an employee of the university. At the end of March 2006, no patient in central Manchester waited longer than 13 weeks for a GP out-patient appointment. Thirteen weeks is too long but is still a significant improvement on previous waiting times. No patient waited longer than six months for in-patient or day-case treatment—again, a huge improvement and, again, 98 per cent of all A&E attendees were seen within four hours. This must be seen against a backdrop of a continuing year-on-year increase in the demand for these services; they cannot be seen in isolation from the healthcare needs of the local population.
In central Manchester, the trust performed outstandingly well in cancer treatment. At the financial year-end in March 2006, 100 per cent of patients received their treatment in 31 days after a diagnosis of cancer, against a national target of 98 per cent. In addition, 97 per cent of patients received their first treatment within 62 days of a first referral from a GP, against a national target of 95 per cent.
I am proud that this Government have highlighted cancer as a key area for investment, because one in three people in this country is diagnosed with cancer, and one in four people actually dies from it. Unless we look at the investment in that area, we will not tackle one of the real killers in this country. Christie Hospital, of which I am a non-executive director, as I said, achieved foundation status on 1 April. I strongly agree with the noble Baroness, Lady Murphy, about the role of monitoring in that process. The process by which the hospital trust had to comply with the requirements, particularly the accounting and other financial requirements, which the noble Lord, Lord James, identified, was extremely hard and rigorous.
The way in which the hospital’s executive team moved the hospital forward so that it could comply with foundation-trust status should be a model for all hospitals. That status would be achieved at different speeds, but the model ensures the rigorous analysis of resources, accounting and governance in those hospitals to achieve real improvements, not to make profit but to make surpluses that can be reinvested in patient care in such hospitals. That is the crucial point.
In the past financial year, Christie Hospital managed to create a surplus of £3.6 million, all of which will go back into improving clinical care in the hospital for the benefit of patients. The monitoring process should be commended for that. The surplus will enable Christie Hospital to expand its services in radiotherapy and chemotherapy, and to move services away from one site into the local community so that they are much more accessible to patients. It will also enable the hospital to develop its surgical expertise further and, crucially, its clinical trials expertise, which needs to be expanded for the benefit of all patients. The hospital will work closely to develop the Manchester Cancer Research Centre.
I hope that the Minister will be able comment on the 62-day target for cancer treatment from first point through to referral and treatment in a specialist centre such as Christie Hospital. Ninety-six per cent of patients are treated within 31 days of referral. The problem arises downstream in the 31 days that it should take from initial GP referral to the patient’s arrival at Christie Hospital.
The hospital does not receive patients directly from GPs; it receives them from district general hospitals. There is a difficulty if those district hospitals do not identify the cancer needs of that patient in a timely way to enable Christie to comply with the 62-day target. I know that work is being done with the Healthcare Commission to look at this issue, but I hope that the Minister will recognise the complicated pathways from first referral by the GP to treatment in a specialist centre, and that this will be carefully monitored to analyse whether hospitals such as Christie are performing to the high standards to which we clearly believe we are.
All these improvements in healthcare in a city such as Manchester could not have been achieved without the huge investment that has been made or without the continuing dedication of the staff and management of those hospitals to use those resources with rigour. I believe, as I have stated, that that rigour is now being applied to the National Health Service through the monitoring process for the benefit of patients. Such investment must continue year on year, otherwise those improvements will not be maintained. The direction of travel that has been achieved in recent years, together with the investment—both revenue and capital—has enabled a higher quality of healthcare service to be created in this country, and patients appreciate those improvements.
My Lords, it is a great pleasure to follow the noble Lord, with his Sutton Coldfield roots, although he spoke almost exclusively about Manchester on this occasion. I congratulate my noble friend Lord James on leading the debate and on his speech. We look forward with delight to hearing the detailed reply that we know the Minister will give.
I shall deal with the issue a little more generally. My noble friend reminds us that resources in the health service are rationed. However much you spend, you will never have enough instantly to meet public need. As Enoch Powell once put it, you have infinite demand meeting finite resources. That is why my noble friend is so right that the use of resources is of the essence. That is why every pound must be made to count. Doubtless, the Minister will remind us, as we have been reminded already, of the increased resources that are being devoted to health. I am glad that, in the past 25 years, the economy has strengthened so that that can happen. The Government are on much less firm ground on the use of resources. The negotiations with the general practitioners and the consultants do not inspire confidence that the Government have made every pound count in providing extra healthcare. The National Audit Office found that only 19 per cent of trusts and 12 per cent of consultants agreed that patient care had improved due to the consultants’ new contract.
I want to pursue another aspect of resource management. If the Government decide that a particular service in the National Health Service is a priority and deserves extra resources, clearly those resources should follow that decision, otherwise it is an entirely pointless exercise involving the kind of funny money about which my noble friend Lord James has been speaking. The Government said, with good reason, that sexual health services and HIV were a priority for 2006. Here, I declare an interest as a trustee of the Terrence Higgins Trust. Sadly, there is no doubt that the position has deteriorated over the lifetime of the Government. Some 70,000 people are now living with HIV and, on present trends, that number will go through the 100,000 mark in three or perhaps four years’ time. We have seen a threefold increase in the number of people accessing HIV treatment and care services, and new diagnoses have increased by 165 per cent over the same period. Where our position was once the best in western Europe, it is now one of the worst.
The Health Protection Agency identifies HIV as one of the most serious infectious diseases facing the UK. However, we are not only dealing with HIV but are confronted by the danger, the risk and the suffering caused by increases in other sexual diseases. The latest figures show that there were 110,000 new diagnoses of chlamydia in 2005—an increase of 125 per cent since 1998. Using the same 1998 base, there have also been big increases in both gonorrhoea and syphilis. So the story continues. The result is that the sexual health clinics and GUM clinics are under severe pressure. The premises are often outdated and crowded, and we know from a recent report that the consultants on the ground are often frustrated by the lack of priority that is being given to this area.
The report in an annual survey of primary care trusts and sexual health/HIV clinicians was appropriately called Disturbing Symptoms. Its most disturbing finding was that, although sexual health was intended to be the national priority that we had been told about, two-thirds of clinicians reported that it was not sufficiently prioritised at the local level. The service was deficient not because of a lack of commitment on the ground but because resources intended to reach the front line simply did not do that.
When the Government published their White Paper, Choosing Health, they said that an extra £300 million would be put into the services. Following that, in July 2005, Caroline Flint, the Minister with responsibility for public health, said that,
“we remain committed to improving the sexual health of the nation and continue to make it a government priority. We have already invested £300m as part of our Public Health Paper—the largest amount ever for this area”.
Of course, the trouble was that they had not already invested £300 million: they had said that they would invest it. They said that they would allocate £130 million for modernising the clinics, £80 million for accelerated implementation of chlamydia screening and £40 million for contraceptive services, and that they would spend £50 million on a new national advertising campaign. How welcome those steps would have been.
Let us take just the £50 million national advertising campaign. A campaign was launched at the end of last year. It did not cost £50 million—or even £20 million or £10 million. It cost £3.6 million. So far there has been no guarantee of any kind that the remaining £46 million will be spent, although we know—I stress this—that advertising can work very effectively. Incidentally—I say this to the Minister directly—I am not arguing, as he seems to believe in responding to a question of mine, for a simple replica of the campaign I ran 21 years ago. The conditions for campaigns and the threats change. Today, there may be a need for a national, general campaign aimed at sexual health generally and not just at HIV. But I do argue that there is absolutely no point whatever in having a high-profile campaign and then going off the air for the next 21 years.
What of the other money intended for front-line services, much of which was not spent either? Surveys carried out by a range of bodies showed that primary care trusts diverted the money to meet the financial deficits in the health service. The Disturbing Symptoms report stated:
“Just under two thirds of responding PCTs indicated that all or part of their Choosing Health money had been diverted away from sexual health services”.
Of course, the irony and tragedy of this is that it is simply not possible to argue that the financial problems of the National Health Service have been caused by extravagance in sexual health services. The prospect is laughable as consultants and staff struggle on meeting an ever increasing demand in all too often inadequate clinics. My noble friend Lady Shephard made a similar point about the position on the ground that she was talking about in different circumstances.
However, I fear that one of the problems is that HIV, sexual health and preventing disease does not and never has rated very highly in opinion polls on health spending. A focus group would not make HIV the first priority. If you have to make economies, it is therefore safer to cut spending in this area. It will not produce the same public outcry as cutting some of the more popular medical services. There will be no demonstrations of patients. But we should be under no illusion because greater pressure will result on already overstretched services, infection will spread as patients remain untreated and the eventual cost to the health service will be much greater.
Nor do I think that the position will simply bounce back and that 2006 was an exception to the rule. The Minister knows as well as I do that HIV/sexual health is not likely to get local priority throughout the country, which is why when I was Secretary of State I ring-fenced and secured the money being devoted to AIDS. I accept that this is a dilemma for the health service. Like every Health Secretary over the past 20 years, I am in favour of the maximum of devolution. The Department of Health cannot run everything even if it wanted to. Many decisions are best taken locally. Equally, it would be foolish to say that everything should be devolved, just as it would be foolish to say that everything should be centralised. A balance is needed.
Public health provides a particular and an urgent challenge. The position is that we need urgently to reduce the demands on the National Health Service by tackling the root causes of some of the illnesses that can be prevented—not just sexual disease or HIV, but also alcohol, drugs and obesity. We do not need just clinics, but we need to find ways to influence behaviour. Unless we can change behaviour the burdens on the health service will continue to grow. That is a central task for the Government. Of course, they should work with the local trusts, but responsibility should rest with the Department of Health, advised by the excellent professional advisers in the department, including Chief Medical Officers who, in my experience, have been first class.
One result of such a change would be independent ring-fenced budgets. A major benefit of that would be that at last we could make progress in tackling the ever-increasing incidence of HIV and sexual disease. Frankly, the present position does this country no credit. Reform is overdue.
My Lords, I, too, congratulate the noble Lord, Lord James, on his illuminating introduction to NHS budgetary reporting systems. But, speaking as a non-accountant, I have to say that the noble Lord’s analysis of the accounts has left me better informed but perhaps none the wiser. However, the debate is also about the use of resources in the National Health Service, so I shall limit my comments to that and to my experience as a user of the NHS.
The evidence from every conceivable source shows that the NHS has improved immensely since 1997. I think that there is a consensus, not just in your Lordships’ House, but in the nation, if we look at the picture in its macro-dimensions. The pledge to fund the National Health Service to the level of the European average has been met. Spending in cash terms has nearly doubled over the past 10 years. It is also a fact that since 1997, the NHS has received the longest sustainable period of increased spending since its creation in 1948. In plain terms, that adds up to more resources being provided; that is, more nurses and doctors delivering more, faster and better care. Today, the NHS is seeing the biggest building programme in its history. If there are doubts about the quantitative value of the input, I suspect that we can address them to, for example, the Public Accounts Committee or the Audit Commission.
Funding the NHS is also about choice. I want to say, strictly within the spirit of this debate, that the funding arrangements which have just been outlined in most parts of this House could never be achieved by sharing out the proceeds of economic growth. That funding formula begs the question of what happens in the years when growth is neutral, or indeed negative. What sort of budgetary reporting systems, ones providing democratic and managerial accountability, would be used in those circumstances? Taken in the objective round, when British people are called on to make a choice between tax cuts and adequate funding for the NHS, I have little doubt about the choice they will make. I believe that they will continue to support the NHS being adequately funded.
We already have a clear indication of the thoughts of British people on the National Health Service. Some interesting facts have emerged from a recent YouGov poll commissioned by the Royal College of Nursing. The poll revealed that nine out of 10 members of the public value the NHS as an essential and free public service. More than three-quarters believe that the Government were right to increase NHS spending since 1997. Almost 60 per cent want Ministers to increase spending even further, while 72 per cent believe that patient care will suffer if NHS spending is cut. What conclusions can be drawn from this survey? I take the view that the public believe in and value the National Health Service, and that they want politicians to do the same.
In this debate about budgetary systems, let us not forget the experience of patients. After all, that is what it is all about. As a user, I value the change regime. I value the fact that at long last the NHS, as a public service, has woken up to the recognition that the customer must come first. I acknowledge reduced waiting times and walk-in centres. I have the unique privilege—not unique to me, but unique in the experience of many people—of being able to telephone my GP practice at eight o’clock in the morning to book a return call before nine so that my consultation can be conducted over the telephone. That is a truly responsive service. In short, it is customer service at its very best. I like the focus on local community health care, so that patients can be seen and treated closer to home. Health services are not just about patients, but their families, employers and all the other obligations we must meet in the social environment. We have one-stop shops where health and social services providers work closely as integrated disciplines. All these developments are of immeasurable value, and they are all about the use of resources. None of them would find any intelligible expression in the kind of budgetary accounting proposals that have been outlined today, but for the patient at the receiving end, they are as important as any concept of macro-economic accounting.
In my view, there is a new bond of confidence between patients and NHS professionals, and we must never forget that health service staff are playing their part. They have delivered on the change programme, Agenda for Change. Therefore, as we take the debate forward, we must endeavour not to demoralise staff by indicating that NHS resources are shrouded in mystique and could never be understood, thus casting doubts on those in the front line with responsibility for managing people and resources, and for delivering a good service. I hope that the debate can move us away from a consideration of who has the deepest wallet towards tackling the root causes of health inequality and poverty.
It is a fact that you are likely to suffer poor health if you live in a damp and draughty house, and if you cannot afford a decent diet. It is a fact that you are likely to suffer ill health if you are among the long-term unemployed. I look to the Government to continue with their robust programme of health education around diet, exercise and a new regime to introduce nationally changes in our lifestyle. All that will impact positively on the National Health Service and should be encouraged. As a non-smoker, I welcome the soon to be implemented ban on smoking in public places. It may be only a minute contribution, but nevertheless it should be said that nothing is at the margins when it comes to health.
While our healthcare professionals must deal with the effects of the causes of ill health, I say that the Government have a responsibility to make a difference and deal with those underlying causes.
My Lords, I join other noble Lords in congratulating my noble friend Lord James of Blackheath on securing this important debate. My noble friend’s knowledge and attention to detail is substantial and very difficult to match. It is incredible that after 10 years of a Labour Government and billions of pounds spent on the NHS, it is facing a financial crisis on an unprecedented scale. How on Earth are medical practitioners supposed to work with uncertainty, cutbacks and ward closures? It is clear that the Government, steered by the Chancellor, have concentrated on processes such as the length of time patients wait for their first treatment rather than on outcomes such as cancer survival rates, whether they are improving and if patients are happy with their treatment.
Year on year since 2002, the NHS has finished each financial year in a worse state than the previous one. PCTs have fared equally badly, and it would appear that the combined deficits of all the NHS organisations are forecast to reach £1,318 million. Twinned with that is the fact that since 1997, productivity has fallen by 1.3 per cent each year. As has already been said, the Chancellor’s decision that public sector organisations should adopt a system of financial accounting known as RAB—resource accounting and budgeting—but which he has now reversed, has led NHS trusts which are in deficit in one financial year having not only to face budget reductions in the next financial year but also to repay the deficit of the previous one. That is a ridiculous situation for any trust to find itself in. It has become something of a trademark for this Chancellor and a rod for the back of any incoming one.
The Government have top-sliced allocations to PCTs in order to create a central reserve. This has left trusts with £1.1 billion less for their budgets. It is therefore hardly surprising that many members of the Government are openly campaigning against government policies—for example, Labour Party chairman Hazel Blears in her Salford constituency and Tessa Jowell in her south London constituency.
The NHS has been reorganised nine times under Labour. Each reorganisation has cost millions of pounds. The Department of Health’s own chief economist has recommended that workforce targets now be abandoned. The more one digs, the more incredible the figures appear. The NHS has 175,646 beds and decreasing, while it has 264,012 administrators. Just imagine the cost to the service of these extra people. If that is not bad enough, look at the Government's use of the private sector through the independent sector treatment centre programme. The Government have committed to paying for treatments at prices well over 11 per cent above the NHS cost.
I live in the city of Leicester, where the Secretary of State for Health is our constituency MP. I assure your Lordships that feelings are running high among both NHS staff and the public, who see budget deficits and ward closures as a direct cut to their services. Hundreds of staff at the three Leicester hospitals have signed petitions to halt cuts in jobs at the hospitals, where 900 jobs are under threat with wider implications of more job cuts each year over the next 10 years. The Secretary of State’s response was to say that the cuts were not for financial reasons but a result of listening to staff and patients. Can the Minister ask the Secretary of State which staff and what patients she spoke to? If it was a proper consultation, are the papers available for public reading?
In Leicester, we have seen closures of mental health wards, and two hospital wards are also being closed. The closure of the mental health wards, which operated at almost 100 per cent occupancy, is a worrying sign to patients, particularly the elderly—who suffer from dementia and other age-related mental health issues—that they will now have to seek treatment elsewhere. While hospital wards are closed and bed numbers reduced in cities such as Leicester where there is an ageing population, can the Minister give the House proper assurances that social care budgets will be fully funded to meet the demands of patient care in the community? It is really worrying. As someone with a business in the healthcare sector—for which I declare an interest—my experience has been that social care budgets are unacceptably under-funded, especially with increasing demands of social and primary care taking place in the community.
In Leicester, we have seen huge changes in how people needing health and social care provision have been recategorised. With an increasing rate of reduction in the number of beds and hospital staff, how can patient care be met with the confidence for which the NHS used to be known? Does the Minister agree with me that all those working in the health service are right to feel unsure about their future? They feel demoralised, and are absolutely right to feel angry at the Health Secretary’s arrogance in ignoring their concerns. Can the Minister assure the House that, before further cuts take place in Leicester’s pathway programme—which is vigorously supported by the Leicester East MP, Keith Vaz—the £200 million cuts will be further and properly reviewed before taking place, so that all services for the people of Leicester are properly resourced?
My Lords, I am grateful to the noble Lord, Lord James of Blackheath, for securing this debate and giving us an opportunity to discuss a subject very close to my heart. From what we know of the noble Lord from his previous contributions to your Lordships’ House, we would not have expected a paean of praise for the NHS, but he has exceeded my wildest expectations.
It is customary at the start of a debate to declare relevant interests. My first is that I am not an accountant and scarcely understand a balance sheet. I am concerned about the performance of the NHS in responding to patient need, about which I shall speak today. I declare an interest as chair of the Specialised Healthcare Alliance and interim chair of the National Voices working group. My chief interest, however, is as a huge admirer of the NHS and, much more than that, someone who literally owes her life to it. That I am here today in good health, having made a miraculous recovery from almost certain death, is due partly to the devotion of my family and friends, who simply would not let me go, partly to my own determination to survive but overwhelmingly to the skill of the best surgeons, the best equipped intensive care units, the most able nurses and most committed ancillary staff that any gravely ill person could wish for. So your Lordships will not be surprised to know that I am a passionate supporter of the NHS and proud to serve in a Government who are similarly passionate about it and who have shown their commitment by the resources they have put in and by constantly improving their performance.
Some among us remember the National Health Service under the previous Government, and were unfortunate enough to be patients under it. We remember the crumbling hospitals, the puddles of water in the corridors, the curtains that did not meet around the bed, people waiting well over 18 months—although that was the pledge—for surgery, and that there was almost no connection between social, primary and secondary care.
NHS budgets have doubled since 1997 and will almost have tripled by 2008. The money has, as we have heard, employed more doctors and nurses, built new hospitals and primary care services, and totally transformed patient care. Of course, we have heard a great deal about deficits but let us remember that the net deficit was in fact only 1 per cent of the total income, and we are now returning it to balance with the latest figures predicting a surplus—although I know that the noble Lord, Lord James, would cast doubt on that.
This has not been easy. Like any long-standing institution, the most difficult thing to change is the culture, especially when it involves getting to grips with long-standing and deep-rooted financial challenges and addressing the fact that, though we are one NHS and support all the different parts, we cannot reward inefficiency or allow high performing areas to subsidise those whose performance must be improved. Moreover, we should remember that there is more openness and transparency about the publication of NHS accounts at all levels under this Government than we have ever known. Meanwhile, patient care continues to improve.
As noble Lords will remember, waiting lists are at a record low. In 1997, there were 1.1 million people waiting for treatment—some, as I have said, for well over 18 months. In November 2006 the figure was 769,000, the lowest number ever, with most treated in an average of seven weeks. The NHS is on track to deliver a reduction in deaths from cardiovascular disease, having saved almost 150,000 lives since 1996. Deaths from cancer in those under 75 fell by 16 per cent between 1996 and 2004, saving an estimated 50,000 lives. More people diagnosed with cancer begin their treatment within one month of diagnosis than ever before. Premature deaths from coronary heart disease have fallen by almost 36 per cent, and the estimated number of lives saved through the use of statins has tripled: 9,700 in 2005. The latest accident and emergency statistics show that patients are continuing to be seen and treated in line with targets. All of that is without the peripheral strides made in things like introducing the five-a-day regime, the fruit in schools regime and, as my noble friend Lord Morris has mentioned, the ban on smoking.
We must also remember the context in which these huge improvements are being made. We have an ageing population, whose illnesses are increasingly complex; treatments which were once pioneering have become commonplace; new drugs are constantly being developed; access to technology has transformed all our lives; above all, patients are no longer content to be passive recipients of whatever the NHS is prepared to provide but are increasingly well informed and demanding.
It is quite possible that, of the countless improvements the Government have made and can be proud of, one of the most important is the recognition that the most important resource available to the NHS is its patients, as my noble friend Lord Morris mentioned. Welcome as the NHS was in 1948, no one could pretend that it put the needs of patients first. That continued until a Labour Government were willing to say boldly and firmly, against a lot of opposition, that the interests of patients must come before those of others—consultants, doctors, nurses or administrators. Their commitment to patient and public involvement, to shaping services around the individual patient, his or her family and carers, will in the end bring about more cultural change than anything else. That is encapsulated for me in my different experiences of the NHS, 14 years apart. I make no apology for sharing this personal experience with your Lordships.
In the mid-1980s I was diagnosed, suddenly and shockingly, with a malignant tumour, for which I needed emergency surgery. Shortly after coming around from the anaesthetic, I was visited by a consultant who said that I was not to worry because 40 per cent of his patients made a complete recovery. I tried to keep calm and asked what I could do to ensure that I was not among the 60 per cent of patients who died. The consultant leaned towards me and said, “There’s nothing you can do, my dear. Just leave it all to us”. I felt that I got better despite him.
Let me compare that with my treatment during a seven-month stay in hospital, five years into a Labour Government. I can honestly say that no treatment or procedure was carried out and no drug given to me without someone consulting me about how I felt about it and telling me how I could contribute. It could be said that that was because of my position—they do not get many baronesses on a public ward—but it happened to every other patient on the ward, including those for whom English was a second language and who were much less articulate than I. When I was not conscious, the consultation took place with my family. That is a huge turnaround in the culture and attitudes of the NHS.
When you aim to provide a universal service, free at the point of use, you will never be able to get it totally right. Massive investment, even of the scale we have seen, cannot rectify decades of underfunding; professional attitudes may take a generation, or even longer, to change completely. There will always be more to do, but a huge amount has been done, and the result is an improved, more efficient and, most importantly, more patient-centred health service, in which the whole population, like me, can have confidence and trust.
My Lords, I, too, am grateful to my noble friend Lord James of Blackheath for initiating this debate. Although I was once a Whip for the Department of Health and Social Security when my noble friend Lord Fowler was Secretary of State, this is not a subject on which I usually speak, thus I venture forth a little more gingerly than usual.
I wish to draw your Lordships’ attention to pathology, in particular the cost of pathology testing and the savings that could be made in this field of medicine. My information comes from the Durham and Bishop Auckland hospitals, where considerable research has been undertaken, including in the Prime Minister’s constituency. Although the problems of demand control are acknowledged by the Department of Health and the Pathology Modernisation Steering Group, there is no organised structure to address the problem and no evidence that the department is grasping the nettle.
Large inequalities exist in testing activity between general practices and between hospital laboratories. These are not explained by patient or practice factors such as the number of practitioners, age or sex distribution of the patient list or deprivation index. It is a failing in the healthcare system due to repetition of tests by GPs and hospitals. This is due to IT limitations and poor technology; uncertainty about best practice for repeating monitoring tests in chronic illness; the absence of any best practice standards or evidence of test levels; the increase in the complexity of tests; and increased patient expectation from tests, a point made by the noble Baroness, Lady Pitkeathley.
The inappropriate use of tests leads to unnecessary expenditure and opportunity costs, avoidable further investigation and referrals. Conversely, the underuse of certain tests leaves patients with suboptimal management and potentially missed diagnosis. The noble Lord, Lord Bradley, referred to this with regard to his hospital, particularly the cancer patients referred there who did not have the right information with them. That is a very good example of how what I am recommending could change people’s lives and save money.
The expenditure on pathology in the NHS was estimated by Bandolier in 1998 at £1.6 billion; this year the figure is more like £1.8 billion. While demand for pathology tests has been rising at about 10 per cent per annum, the NHS has been lucky that some of the marginal costs, such as that of reagents and tubes, has fallen, thus masking the potential problem. However, recent tendering experience indicates that this fall is slowing significantly and could even be reversing. Marginal costs make up about 80 per cent of non-staff costs, which make up about 50 per cent of the budget, so they are a very important component, at roughly 40 per cent. Thus, with demand continuing to rise and costs stable, let alone rising, there is going to be a marked increase in the cost of pathology testing in the immediate future. Under the present haphazard system, this increase can be paid for only by a substantial rise in the budget, which is unlikely, or by reducing clinical activity.
Equally important are fixed costs such as capital and staff/opportunity costs, which, if released through better management, can be used for alternative purposes. Most labs now operate on tight staffing numbers, with the result that little capacity remains to increase output without incurring step-up staff costs. To release some of those hard-pressed people to quality aspects of laboratory practice would enable work to be done that is not undertaken at present or that requires extra staff.
The Royal College of Pathologists has highlighted the problem of pathology services struggling under the current workload. There is no doubt that a co-ordinated plan for better management and education will lead to superior clinical practice and improved application of appropriate treatment.
The Government are considering encouraging the private sector to become involved in the simpler clinical cases or routine pathology tests, leaving the NHS units with the more complicated case mix. Although that will lead to some savings, they will be limited as the acute service facility must be maintained. This will raise unit costs and make the NHS appear more costly. The private sector provides little or no acute services so it will be saved those costs. Furthermore, it is not in the private sector’s interests, however well meaning it might be, to reduce the number of tests, so the route the Government are considering is probably the worst way in which to use the private sector. Another cost the Government need to consider is training. This needs to be maintained and increased to meet the rising demand, but the NHS is the only facility providing it.
All these arguments lead to one conclusion: there is not only a good reason but also an urgency to take action now. Estimates of inappropriate pathology testing range from more than 15 per cent to more than 50 per cent of tests depending on the study. What does the Minister think the figure is and why? If one takes a median of, let us say, 30 per cent, which is acknowledged by both Bandolier and Health Trends, will he agree with me that this figure not only exceeds that of unnecessary medical procedures elsewhere in the NHS, prescribing or surgery, but also varies enormously between general practices?
Without question, there is a prima facie case for a system of demand control of pathology tests. A lot of work has been undertaken in the past seven years to analyse this and estimate the savings. Of course, in any case such as this, much depends on the data used and assumptions made, but after five years of development work it is estimated that, with a web-based management system of demand control as introduced in Bishop Auckland and Durham hospitals, savings of £30 million to £180 million could easily be achieved. That is equivalent to between 1.7 per cent and 10 per cent of this year’s health expenditure. The best example that I have been given, which allows for a rigorous demand control regime, is £540 million, which could reduce costs by one third. This would save more than 1 per cent of the NHS budget. Whatever way one looks at it, there is huge potential here, and it is an area in which the Government should take action.
Is the Minister aware that local primary healthcare trusts are extremely keen to obtain support from the Government in implementing on a wider scale the improved practices that have been pioneered? There is the added advantage that any savings made by a PCT can be kept and reused by that trust. Following the publication of the Carter report, what action are the Government proposing in this area? What proportion of inappropriate testing does the Minister think can be abolished? Most importantly, when will the Government start to grip this problem and opportunity?
My Lords, I am most grateful to my noble friend Lord James. I found it very difficult to understand his objectives. He reminded me of one of those surgeons that you see on television, scalpel in hand going to the gut of the matter, but one is not sure whether he is a pathologist or trying to perform some elective surgery.
If we are talking about money, I am competent to some extent to speak about these things. For some strange reason, the health sector has become more and more interesting to me during the past few years, because I knew so little about it. It is extraordinarily valuable to meet someone who assumes that you know something about a subject, when you know nothing—I have no knowledge of medical terms.
I shall approach today’s subject differently. The National Health Service is an asset. Healthcare accounts for 10 per cent of GDP worldwide. We are beginning to see a shift in the political balance whereby one side does not believe that healthcare should be public and the other is not sure whether other people should be allowed in from the outside. My own experience is unfortunately rather strange. I have just passed the average age of your Lordships' House; I have outlived every male member of my family for 750 years; I have never been in hospital; and I have not spent a day in bed. However, your Lordships could not count the number of people whom I have taken to hospitals and the number of ways in which I have been told to cure particular diseases and respond to disasters. I warn your Lordships that, next year, there will be 13 moons in the month—I had always thought that it was called l’année bisexuelle, but it is l’année bisextielle—so they must be careful.
There are cures for almost everything. My favourite for this month is: if you step on a sea urchin, do not go to doctor but pee in a bucket and put your foot in it. The ammonia in your pee will dissolve it, and then you can eat it. Cures and medicine are strange things.
I shall talk about death, because death is the end and we are working backwards. We are of course living longer. The average age of death for a man is 76 and, for a woman, 81—it could be higher. The average age in your Lordships’ House is 84.5 and rising. Within the age ranges, the older group is perhaps the most important in the health sector. There are approximately 14.2 million people in this country over the age of 60. After the age of 60, the life expectancy for a man is 20.6 years and, for a woman, 23.6 years. Why do men marry younger women? Surely we should all work backwards and marry someone three years older or three years younger—it does not make any difference. Age becomes important, because at age 60 a man has a life expectancy of 20 years and a woman a life expectancy of 23 years, and you are entering a period of your life when, as a man, you will have nine years of ill health and, as a woman, 10.3 years. Moreover, as a man you will have disabilities for 15 years and, as a woman, it will be for 17 years. Therefore, the biggest single market for healthcare in almost any country is the elderly. By chance, because of inflation worldwide and investment, they tend to be the richest members of the nation in terms of assets but some of the poorest in terms of income.
In the National Health Service or any health service, savings can be made and issues tackled if you can to some extent work backwards. In most of my interventions, I have asked about and concentrated on waiting times. The noble Lord, Lord Hunt of Kings Heath, was kind enough to answer my previous Written Question very quickly, but he did not give a proper and full Answer because he was unable so to do. Naturally, therefore, I spoke only yesterday with his good friend John Appleby of the King’s Fund, who is meant to be the best expert on waiting lists. He and I, coming from different points of view, agreed that the mean waiting time from start to finish—when one reaches hospital—is probably six months. It has of course dropped. Noble Lords opposite will take 1997 as the beginning of their calculation period, whereas health service papers usually start at 1971. Some fantastic improvements have been made since 1971. Waiting lists have shortened, but 733,000 people are still waiting. Waiting times for cancer, which, according to 2005 figures, kills 228,000 people a year, have come down quite dramatically, and the ability to fast-track is amazing. Death rates for cancer, other than for prostate cancer, have fallen steadily over time, but diagnosis is difficult. Rates for the bigger killer, known as circulatory diseases, have come down pretty dramatically—I will not give noble Lords the number in thousands—and everybody can take credit for that, because hardly anyone was working full time in the health service in 1971.
One of the key factors in this area is time. Time is money; the longer the delay in seeing and treating a patient, the more costly it will be for the health service. If there is an inherent disease therein, it will be worse, and more hospitalisation and time will be needed. I have from time to time declared my interest in health. At the moment, I am interested in absolutely anything new in the health service and terribly keen to find the money or investors for it.
I shall compare this country, as I have done in the past, with Germany and France. Perhaps the noble Lord, Lord Hunt of Kings Heath, will answer the question with which I shall end: why? We have 192,000 hospital beds in this country and 60 million people. Germany and France together have 142 million people and 900,000 beds. However, for our 192,000 beds, we employ 1.2 million people and they employ fewer people than that. Is it that we are overemployed or underactive, or does the system that we have introduced require so much bureaucracy and delay that it takes six months to get to the point?
In most other countries, it is the GP or doctor who sends someone off for screening, a scan or a diagnosis straightaway, and probably within 24 hours an MRI scan, a CT scan, a blood test and everything else will be done by the GP. If the radiologist has found something wrong, the patient will be sent off to the relevant specialist and operations or work will happen very quickly. Could diagnosis and screening not be in the hands of a GP in England and consultants allowed more time to operate? The delay between seeing a senior consultant, after seeing a GP, getting an appointment for a scan and getting the results back can be 10 to 12 weeks. I should like to talk separately with the noble Lord, Lord Hunt of Kings Heath, about this, because it is particularly important.
Within the asset that we have, what is the value of the real estate? I have never approved of PFI because the investor has a very sound reliable covenant from a very sound reliable body over a period, and I still regard it as a mortgage for the future. With the capital cost of funding those assets comes the problem of where the revenue stream is that is sufficient to permit the hospitals to undertake operations. Here I have another thought. If 23 per cent of the population are over 60 and they have wealth, when they reach 75 their pension is converted into an annuity. Why cannot we look at the taxation methods by which some people at a certain age may well be able to make a contribution to buy future health protection and care for themselves, even if it comes out of their estate duty?
The Government seem to take money away from people when they get older and older and their income gets lower and lower, although I do not think that they are doing that intentionally. I have the highest regard possible for medical professionals in this country, but every consultant I know works far fewer hours on operations in hospitals than do his continental rivals. And why do we need to keep importing people? When I was president of the British Exporters’ Association and on the British Overseas Trade Board one of the main areas that we concentrated on was the invisible export of our health services and the export of our equipment, when we were at the forefront of providing most modern equipment.
I have a few seconds in which to say that other things are possible now. In ophthalmic surgery, now that everyone can have laser surgery on their eyes, ophthalmists are probably trying to get more business by saying that people need it earlier. Previously, eye tests were complicated; now people try to sell you them. You wonder whether, with the cost of hearing aids, opticians might be able to do ear tests.
So many thoughts have come out of all this, and I am very happy about the NHS’s prospects now that we have got rid of the idea that there are two sides of the fence. The NHS is a national asset and it could have a higher value than it has today.
My Lords, the noble Lord, Lord Selsdon, always makes extremely interesting speeches, and I am sure that we are grateful to him, not least for those international comparisons that he made in showing how well resourced and run are the health service equivalents in France and Germany. Because of the contributions of other noble Lords today, it has been an interesting debate, loaded with a lot of information, statistics and ideas from extremely talented and well informed speakers. I, too, add my thanks to the noble Lord, Lord James, for initiating it.
I am very glad of this opportunity to take part from these Benches, not least because of our traditional staunch support for the National Health Service over the years. Should one live too much in the past? No, but if we have long enough memories it is worth recalling that back in 1948 the Tories, in contrast to now, were traditionally bitterly opposed to the creation of the National Health Service and anxious to ensure that the doctors at that stage had rather too favourable a deal for the commencement of the service. I exempt the noble Lord, Lord Fowler, from any connection with those long historical and distant events, and pay tribute to him as having been an outstanding Secretary of State for Health. He concentrated on a particular theme, which was one of his great and outstanding campaigns, and we thank him for that. I agreed with him in his exhortation that we should be balanced on these matters and speak in a more equilibrated way about the National Health Service, its pluses and minuses.
The noble Baroness, Lady Thatcher, then Mrs Thatcher, as Prime Minister famously claimed that the National Health Service would be safe in Tory hands. However, even as that was uttered as an assertion that reassured many members of the public, the Tories had already started to undermine the basic stability and strength of our unique National Health Service with a foolish internal market system that looked as if it had been designed by eccentric right-wing economists and perhaps accountants lurking in caves in the hills. What they really liked deep down was a sinkhole service with a luxurious private sector alongside chipping away at its reputation as an amazing universal service of high quality. So let us keep these matters in perspective.
We are told that there is severe cash crisis in the service at present, which has been much discussed today. However, that does not detract from the basic reality, even if one accepts that description. The vast majority of transactions in the health service are carried out effectively and well for the patients and the vast majority of those “customers”—to use the trendy modern word—are very satisfied with the service levels. That is, they are satisfied as far as we know, because most people who receive a good service do not then ring the press and tell them all about it; that is understandable. However, from time to time at the margin the service goes wrong, and there are now deficits in too many of the trust entities. But those are tiny amounts of money, even if they are important as deficits and even if they seem large in newspaper headlines. They are trivial, for example, in comparison with the huge amounts of money wasted foolishly and illegally in military adventures in Iraq by this Government and the colossal waste of human and financial resources in this shaming continuing war in Iraq. We opposed it right from the beginning, I am proud to say, and we urge the withdrawal of British forces by October this year.
On the deficit, I believe that the most recent figure quoted in the Select Committee report and by Ministers was around 0.7 per cent of the total budget figures, which is hardly a huge enough figure for us to get into a frenzied hysteria over accounting correctness. Furthermore, the aim is to return to a financial balance in 2006-07 and to a surplus of £250 million subsequently—which is an even smaller percentage, but it would at least be a surplus if it could be achieved, and I wish the Government well in trying to do that.
No organisation either public or private should be exempt from the need for strict financial discipline and efficient management as well as full accountability and visibility both to its stakeholders in the direct and wider sense and to Parliament and the Department of Health. The criteria for a giant public behemoth such as the NHS should be the same as for other entities, not more severe because of latent prejudice against the National Health Service officials or staff, most of whom are hard-working, conscientious and bewildered by some of the Government’s suggestion about reform and modernisation.
The report at the end of February from the Public Accounts Committee in the other place did an excellent job in highlighting some of the salient problems. With the rigorousness of that committee, I think that I prefer its conclusions to those of the noble Lord, Lord James. We on these Benches emphasise the need to study all the recommendations and suggestions clearly. We are grateful for the work put in by two of our own colleagues on the committee and the other members, aided and abetted as they were by the high-quality input of the Comptroller and Auditor-General. The committee concluded that the reasons for operating deficits in different NHS trusts were varied.
Our preference on these Benches has been to avoid hasty and, perhaps, ill thought-out cuts if there is a good prospect of a return to balance and more over a reasonable period. I hope that the Minister will assure us that that is the Government’s view. Over a longer time frame, measures to produce greater financial stability as well as efficiency measures on a greater scale are still required in this unique and special service. There has been constant tinkering by the department to get centrally mandated and often gimmicky reforms in place to assuage the tabloid comics that masquerade as newspapers, with their lurid stories, just as there has been endless tinkering with schools. The same mistakes have been made by Ministers in the Labour Government. Meddling by politicians and officials who do not know much about it should be resisted.
Long-term strategic planning is often inadequate, especially in terms of work for specification changes and new building programmes. We also favour creating smaller blocks or units within the monolith so that local people participate in deciding where the money goes in a much more scientific and measured way. This party says to the Government: “Stop meddling so much in a way that causes morale either to fall sharply or even collapse in some trusts. Let the trusts themselves devise more efficient accountability and oversight steps within the regular management activity based on their own experiences, plus access to new capital expenditure funds”.
The department surely needs to stop meddling in the sense of chucking valuable and scarce money at silly experimental wheezes which otherwise can go into front-line care. Everybody in this wicked world needs sharp accountants; don’t we all? The more desiccated, the better. Did I hear someone say, “What a pity”? We accept that as a logical proposition but they have to be part of the picture, not the total exclusion zone on these matters that they sometimes want to be. It is necessary for them to focus on these matters if they have the right sense of proportion in making suggestions. It would not be right for them to advise against the background of reducing the silly and superficial mania for market forces and balance-sheet obsessiveness for its own sake, just because Ministers have perhaps recently attended a trendy seminar on so-called NHS reform. The private medical lobbies that organise those really want greater financial manipulation for shareholders with more and more private inputs into the health service.
Letting hospitals go bust is not a good approach—I deliberately put that mildly—and I hope that is not the Government’s intention. Nor is large scale redundancies in what is inevitably a people business. It is bound to be so in future, too. We have to accept this labour-intensive background as a reality.
I ask the Government to stop this horrendous nagging of front-line staff which deters quality people from even applying, although nowadays, as we know, the recruitment opportunities are sadly much more limited. We certainly need also to develop community hospitals and the widening of the service and clinical care range they can provide. We believe that modernisation of the financial and accounting procedures can definitely go hand in hand with the reality that the National Health Service, a unique one-off jewel in the crown of this country—we need to remember that; frequently the envy of the world, particularly of other large-population countries of 60 million people and more—is a public sector socio-humanitarian medical service paid directly from taxpayers’ resources for the most part, with a significant stake in third-party contract returns becoming a more important factor at the margin in the future. I am not referring to PFI per se.
I strongly support the recommendations in the Public Accounts Committee report, especially Nos. 1 and 3. If I had time, I would quote at length from paragraphs 4 and 5 of its conclusions and recommendations, which make serious and important reading for accountants and others. The report reminded us starkly that the department was able to provide information on closures, layoffs, redundancies and stalled financial investment programmes only after—I stress “after”—the evidence-taking hearing. That is bizarre when one thinks about it. I should be grateful if the Minister could refer to it, if he has time. Perhaps the Department of Health needs more reform than the National Health Service. Some people consider that is the case. However, it should not be split into two like the Home Office.
We need therefore to keep these dramas in severe perspective and not worry too much about the frenzied battle of circulation between the tabloids producing lurid stories when things often go badly wrong, with patients genuinely suffering and being frustrated, and sometimes much worse. That probably occurs in a small minority of cases so far as we can estimate.
Most of the deficits occur more than once in the same trusts, which offers interesting lessons. It is perverse and ominous and needs special attention, which I hope the Government will give. As has been said several times in this debate, the figures are worse because of the pay deals that the department had not costed properly. Those constitute very large amounts of money. Both Houses need to be reassured that the individual financial recovery plans are realistic, allowing time if necessary for them to be fulfilled completely. The present day accounting rules seem out of date and excessively punishing and severe.
Let us also all decide once and for all to abandon the foolish culture of permanent revolution in the National Health Service—a great device for appeasing ignorant right-wing journalists and their political pals who have often never even been inside an NHS hospital. As one of my colleagues in the mid-March debate in the Commons said, the way things are going we shall have three-week budgets in an already demoralised service just because some self-important special adviser in No. 10 or among the ministerial departmental advisers wants some policy spin at short notice.
In that same debate, Steve Webb gave some good examples of the many functional disutilities that now harass National Health Service managers and staffers on the spot because of this childish hyperbolic reform frenzy, instead of a steady long-term modernisation and improvement programme which helps patients and enables staff and ancillaries to enjoy their work more. What a sinful suggestion I am making—to say that that would be a good thing. I hope that the Daily Mail and the Sun do not hear what I am saying.
Mr David Nicholson, the chief executive of the NHS, in his complex evidence to Mr. Edward Leigh’s important committee, conceded finally that 0.5 per cent might be all right and a good figure to aim for as a surplus over all. These figures are very much at the margin. I hope that the Government will keep that in perspective.
My Lords, in his comparatively short time in your Lordships’ House my noble friend Lord James has revealed himself to be a man of exceptional forensic and analytical skills, which, combined with his terrier-like qualities, make him a formidable man with whom to deal across the Chamber. I congratulate him on the remarkable filleting job which he has performed on the NHS accounts and cannot say that I envy the Minister having to reply to him. However, a reply will, I trust, be forthcoming.
Like my noble friend Lady Shephard, I am struck by the ironies permeating the NHS today. Unprecedented sums of money are going in, yet there are extraordinary financial constraints at almost every level of the organisation, leading to cuts in services to patients. The pay of doctors and nurses is at an all-time high, yet morale among the professional workforce is at rock bottom. It is something approaching a political tragedy, because nobody doubts the Government’s good intentions for the NHS. What we find ourselves doubting is their competence, which is the point at which, sadly for them, the sympathy of the average voter tends to dwindle with remarkable rapidity. I shall highlight several areas of the Government’s record which I believe show why those doubts are well founded.
In recent months, the Health Select Committee and the department’s own chief economic adviser have attempted to answer the question why NHS deficits are occurring at trust level. Over the past six years, we have seen a steadily worsening financial position in an increasing number of NHS organisations. The deficits have not just suddenly happened. Many of us have felt instinctively that the degree to which individual PCTs around the country find themselves struggling to make ends meet is not so much a function of weak local management as of forces largely beyond their control.
We should consider the funding formula. The chief economic adviser appeared to be at pains to absolve the funding formula of any major blame for the difficulties experienced by PCTs but his arguments for doing so are threadbare. The Select Committee was quite clear that the funding formula has a great deal to do with the problem of deficits. It is quite extraordinary that Islington PCT should receive a per capita allocation of £1,824, yet Melton, Rutland and Harborough PCT should receive half that amount, or just over. How can a trust possibly survive on half the funding of another trust? I have said before, and will say again, that the Government need to look afresh at the funding formula to give greater emphasis to the burden of disease. In that way, older populations in particular, where the burden of disease is higher, will receive a fairer share of resources. I say to my noble friend Lady Shephard that the Government also need to look afresh at the extent to which the rural nature of a PCT imposes unavoidable costs which do not arise in urban areas.
The Select Committee also pointed to poor central management. The Government are great ones for loading the blame for inadequate financial control on to local managers, but we know that organisational change in the NHS has led to massive disruption. When local managers find the goalposts being changed by Richmond House midway through a year, when at short notice they are told to meet new targets, and when money is suddenly removed from one trust to feed another, financial control becomes exceedingly difficult.
That difficulty is compounded by uncosted or badly costed centrally driven initiatives. Only in the past week, we have seen the report from the NAO about the impact of the new consultants’ contract. The report makes heavy criticism of the department, and by implication Ministers, for the way in which the deal was negotiated in 2002. At the time, we were told by Alan Milburn that it was,
“a something for something deal, where consultants earn more, but only if they do more for NHS patients”.
Trusts were encouraged to roll it out, but the NAO found that there was no emphasis on productivity in the contract at all. In fact, the Government made completely wrong assumptions about what consultants were already doing in the NHS and based the contract on those false premises. The purpose of the contract was not properly explained to trusts, and finance managers were not in the driving seat. As a result, consultants are now being paid more for doing the same or less work. The conclusion of the NAO is that the contract is not yet delivering value for money or a better level of services for patients.
Some commentators have pointed to wasteful expenditure in the NHS as a part cause of its troubles. I am not going to get into the weeds of that debate, but I will mention one rather wonderful comment on waste made by the department’s chief economic adviser. He does not dispute that it exists, but he discounts it. He says, about wasteful expenditure:
“Had this expenditure not been undertaken, some other expenditure, hopefully less wasteful would have replaced it, and with identical consequences for the budget”.
That is pure sophistry. What organisation that is losing money and that manages to eliminate wasteful expenditure would continue to spend money that it does not have? What loss-making business that had succeeded in becoming more efficient by cutting out cost would deliberately impose different costs on itself elsewhere? The argument is most extraordinary.
To be more generous to the chief economic adviser, he makes some very cogent comments on workforce planning. The trouble with workforce planning is that it turns into targets. Centrally imposed workforce targets, he finds, prejudice the optimal mix of inputs at local level and, as a result, contribute to,
“the disappointingly flat trend in NHS productivity over recent years”.
It would be useful to hear from the Minister whether the Government are now considering abandoning workforce input targets, particularly since the department’s own pay and workforce strategy predicts an oversupply of consultants, therapists and scientists from this year onwards.
Hearing the chief economic adviser describe the productivity changes in the NHS as “disappointingly flat” implies one thing. It implies that the extra resources being poured into the health service have been used increasingly unproductively relative to the previous trend of financial growth. That is quite a severe indictment. It is all the more sobering to read his conclusion that, alongside the low improvement in productivity, no less than 85 per cent of the extra resources have been absorbed in staffing costs. It is perhaps no surprise that the Select Committee in another place concluded last month that the Government’s handling of the NHS workforce has been a “disastrous failure” and the expansion of the NHS workforce “reckless and uncontrolled”.
Any business knows that success and delivering on objectives depend on having good financial control. The PAC reported last month on NHS financial management. Some of the recommendations that it makes cast a pretty dismal light on the ability of the DoH to performance manage the health service. Agenda for Change, the GP contract and the consultants’ contract between them cost £560 million more than was anticipated. The department says that the committee needs to analyse precisely why that happened. How can lessons be learnt for the future?
The department does not routinely collect information on local structuring and staffing, which renders it unable to take an informed and rounded view of how the NHS as a whole is performing against its objectives. The accounts of NHS bodies are not sufficiently transparent. They do not show clearly where their income comes from, which is one of the main themes of my noble friend Lord James. Many trusts do not produce management accounts and cashflows at sufficiently regular intervals, nor do they interpret properly the figures that they do produce. Why does not the department insist that the trusts do so?
How can financial balance in the health service be brought about? It is not by sending in turnaround teams; it is by following the advice of the noble Baroness, Lady Murphy. The PAC recommends that to bring about financial balance, there needs to be a partnership between financial managers and clinicians, because only by doing that can resources be allocated efficiently and effectively. To me, that makes complete sense. However, one wonders how such a cultural shift is achievable when, according to a recent poll, 69 per cent of doctors would not personally recommend a career in medicine. That echoes another poll of doctors in February, in which half the respondents said that they were planning early retirement or emigration. Those are depressing and indeed tragic figures. If so many doctors feel demoralised and disengaged from the service in which they work, there is clearly an awful lot to do before a constructive partnership of the sort envisaged by the PAC is going to be possible. The lessons for putting things right are there to be learnt; I very much hope that the Government and the department are ready and able to learn them.
My Lords, I am sure that we are all indebted to the noble Lord, Lord James of Blackheath, for his very interesting speech in introducing this debate. I look forward to responding to some of the points that he raised, although I suspect that I may have to write to him on a number of others and share that with noble Lords.
Clearly, the financial deficit that the health service faced in the past financial year has been a matter of great interest and concern to the Government. The good news is that we are on course to deliver a balanced financial position at the end of 2006-07. Although I noted the comments of the noble Lord, Lord Dykes, in relation to what he described as overly decisive action leading to instability, it was essential to get the health service back on an even keel in relation to its resources so that it can start the new financial year in a robust position. I say to the noble Lord, Lord James, that while I do not recognise the substance of his criticisms, I accept that the need for rigour and transparency in relation to the money used by the health service is absolutely essential. I agree with the comments made by many noble Lords on that area. I also agree with the noble Lord, Lord Fowler, that we must ensure that we spend wisely; every pound must count.
The noble Earl, Lord Howe, was rather pessimistic about that and about the Government’s stewardship. It is a legitimate question as to how well the additional resources being used in the NHS are being spent. My noble friends Lord Haskel, Lady Pitkeathley and Lord Morris were absolutely right to list some of the many achievements that have occurred in the health service in the past few years. We have more than 30,000 more doctors and about 80,000 more nurses. Those represent substantial gains in the quality of service that can be given. Waiting times are at their lowest ever levels.
In 1997, there was a patients’ charter that had a target. Yes, the previous Government had a target of 18 months’ maximum wait for in-patient treatment. Yet thousands of people were not being treated within that time. Now the vast majority of patients are seen within six months. Our aim is that, by the end of 2008, all patients will be treated within 18 weeks of referral by their GPs. When one thinks of the history of the NHS, it is an extraordinary achievement to have virtually eradicated waiting.
On cancer services, the noble Baroness, Lady Verma, doubted the impact and benefit of reducing waiting times. More than 99 per cent of patients with a suspected cancer are seen by a specialist within two weeks of being referred by their GP. We have increased the number of cancer specialists by 45.6 per cent since 1997. My noble friend Lord Morris mentioned the more responsive service and the fact that he can call his GP surgery at 8 am and have a call back from a GP within the hour and a consultation over the telephone. We are seeing a transformation in our National Health Service and we must be confident that the programme that the Government have put into place will produce even more improvements.
The noble Lord, Lord Dykes, was absolutely right to say that the noble Baroness, Lady Verma, passed over the inheritance that her Government left behind—crumbling hospitals, long waiting lists and drastically reduced training places. In 1993 the number of nurse training places was reduced to 13,000. No wonder we had an acute shortage of staff when we came into office in 1997. The noble Baroness said that the number of beds has been drastically reduced. Yes, the bed numbers have come down, but the statistics show that bed numbers have been reducing since 1948 because we are treating patients differently; there is now much faster treatment, which is better for patients, and it is often carried out in day-case environments. That is why the number of beds is being reduced. The annual staff census, published this morning, shows that there has been a reduction in the number of managers, while the whole-time equivalent commitment of doctors and nurses has increased.
The noble Baroness, Lady Shephard, and the noble Earl, Lord Howe, raised the issue of consultant and GP contracts. There have been criticisms and some teething issues regarding the introduction of those contracts, but it is essential to point out that they are unique in any healthcare system in that they relate money paid to actual clinical services performed. Yes, we are learning lessons, but the targets for QAF payments for GPs have been raised, they are open to negotiation on a regular basis and they are about incentivising GPs to improve access and to spend more time with their patients. It is the same for consultants, and their contracts ensure that an annual work plan is agreed with the local employer. There may be issues regarding the preparedness of some employers when the contracts were introduced, but this is the foundation on which to work in the future and the employers are much more able to influence what their consultants do. I would say to the noble Lord, Lord Selsdon, that that enables those clinicians to spend more time with their patients.
On the position of Norfolk, I am happy to write to the noble Baroness, Lady Shephard, with details. These are matters to be determined locally rather than by Ministers, but my understanding is that the PCT did not apply to the fund because, as the noble Baroness said, the future of those community hospitals was subject to consultation; but I understand that they plan to apply in the second wave.
My Lords, I am most grateful to the Minister for replying in some detail on that matter. I just hope that the second wave will not be too late. I hope that he does not think that that is churlish, and perhaps he might address that point in the letter that he kindly offered to send me.
My Lords, I am happy to do that. I should stress that, in the end, the future of those hospitals is a matter for local determination. It is up to the PCT to take that into account when applying in the second wave, but I am happy to respond with further details.
On resource allocation, both in relation to rurality issues and the more general issues raised by the noble Earl, Lord Howe, he and the noble Baroness will know that resource allocation formulae are always subjected to intensive debate and it often depends on where you live as to whether you think that they are right or not. The issue is subject to regular review. It is being reviewed at the moment and I will ensure that the comments of both noble Lords are passed to the team that is undertaking the review.
The noble Earl, Lord Caithness, made some interesting points on pathology services. I note his comments. An independent review was carried out by the noble Lord, Lord Carter. We will take forward that work. I understand what the noble Earl said about marginal costs and I shall ensure that officials consider that point. I understand also his point about demand control. The pathology modernisation programme involved projects that were designed to facilitate improved pathology testing. I very much take to heart the noble Earl’s points.
The noble Lord, Lord Selsdon, made some interesting comments. I agree with him on the demographic challenge and that longer delays make it more costly for patients; speedy treatment is better for them in all sorts of ways in terms of outcomes. It is better, too, for the health service for it to be organised in the way that he suggested.
On Germany and France, we must be careful that we compare like with like. Those countries have more doctors than us, although there may be contrasts as regards general staffing. The NHS is an extraordinarily comprehensive service and that may account for some differences. However, it is an interesting issue. We have not yet reached the GDP spend of Germany and France, but as we approach it, it will be interesting to see whether we can learn lessons from each other on improving our performance.
My noble friend Lord Bradley made an important speech on the experience of Manchester. I visited the Manchester Royal Infirmary on Monday and I echo his thoughts. He is right on the LIFT programmes and on cancer treatment. I understand the issue of the 62-day target, which is being looked at by our cancer tsar at this very moment.
The noble Lord, Lord Fowler, is assiduous in raising the issue of investment in sexual health and he has raised it again. We debated it recently and I acknowledge his outstanding work of 21 years ago and the impact of that campaign. I know that there is an argument regarding general national campaigns versus targeted campaigns. What is not in doubt is that there should be campaigns. I know that there is an issue of funding. There is no question that PCTs had to make some difficult decisions in the past financial year. I do not agree with the noble Lord on ring-fencing. I understand why he proposes it, but we must trust the local primary care trusts. It is, however, important that strategic health authorities monitor what PCTs are doing in the area of sexual health and I do not doubt that it is an important matter to prioritise at a local level.
On finance and financial deficits, which is what the debate was billed to be about, action had to be taken. I say to the noble Lord, Lord Dykes, that, at the end of 2004-05, we were facing a net deficit of £221 million. That increased to £547 million by the time of the 2005-06 final accounts. If that trend had continued on a straight line, we could have expected a net deficit of around £750 million. As I said, action had to be taken. There have been no large-scale redundancies. The current compulsory redundancy figure is 1,446.
When the noble Lord, Lord James, talked about the difficulty of finding one’s way through NHS finances, I sympathised. When I was director of the NHS Confederation, I found it very difficult to find my way through the annual financial announcements by the previous Government, although I usually found that the Government were not providing enough money to the health service, even under the stewardship of the noble Lord, Lord Fowler. I accept that we have to improve reporting, which must be transparent and understandable. My reaction to the speech of the noble Lord, Lord James, was, “My goodness, we have to help people to understand healthcare finance”. We have introduced quarterly financial reporting and we constantly review the reporting of our accountancy information in order to improve transparency. However, we believe that the financial position as reported properly reflects the finances of the NHS.
The north/south question was raised in relation to SHAs. Underspendings generated in one part of the country are not being transferred to SHAs in other parts of the country where there may be overspendings. Indeed, where there were any underspendings in 2006-07 in the north, that funding will be returned to those PCTs and SHAs in 2007-08. So it is not true to say that money will be moving from north to south. We have abolished the practice of revenue support and cash brokerage, the system by which NHS funding moved round the system in the past. The problem was that that could mask deficits. Locally, SHAs have agreed reserves with their PCTs to achieve financial balance within their area, but not by physically moving money around, as these reserves have to be repaid over a reasonable period by the PCT to the SHA that has provided the additional resource. We think that that is a much more sensible approach.
The £450 million contingency fund was not new money for the NHS. It was created locally by strategic health authorities, which identified savings against NHS central programme budget funding. The additional £100 million identified by SHAs between the quarter 2 and quarter 3 reports was the result of ongoing prudent management of expenditure. That was essentially a local matter led by the SHAs.
The noble Lord, Lord James, asked about the cost of the redundancy programme. We estimate that the total redundancy cost arising from the Commissioning a Patient-led NHS initiative is £325 million. These figures are difficult to estimate and will become firmer as new structures are put in place in SHAs, PCTs and ambulance trusts. However, the reconfiguration of PCTs and SHAs allows us to make savings, which can then be used for better patient care. The noble Lord was absolutely right that the £1 million shortfall is due to roundings. I will write to him on some of the other matters that he raised.
My noble friend Lord Haskel said that there were too many accountants. The official view of my department is that there are not too many accountants in the NHS. Of course, I accept what he says: the question is not how many accountants you have, but the quality of financial management. I pay tribute to the profession in the health service, but we know that the NHS has found it difficult to get enough people of the right calibre to be financial managers rather than—I do not say this in a pejorative sense—to take on the traditional bookkeeping role, as some NHS financial people have done in the past. I accept that we have to strengthen financial management. The appointment of the NHS financial controller in 2006-07 has greatly strengthened our strategy to improve the financial management and performance function of the NHS. We are committed to developing those skills so that NHS trusts, PCTs and SHAs have the highest-calibre advice on financial management. I say also to my noble friend Lord Haskel that, although there are issues around the impact of restructuring on staff and staff morale, the current structure of regions in the framework of SHAs and larger PCTs is the best way of getting the kind of expertise that we so much require.
The noble Baroness, Lady Murphy, put the argument very well when she said that, to get the right financial system, we have to ensure that clinicians are engaged and have much more ownership. I agree with her and I fully agree that the foundation trust regime is the right model. We want many more trusts to go through the rigorous process to become foundation trusts. I take this opportunity, as my noble friend Lord Bradley did, to praise Monitor for its rigorous approach. I have two brilliant foundation trusts in Birmingham, but they found the process of going through Monitor’s scrutiny very tough. That is hugely beneficial. For the first time, NHS organisations have been subject to the kind of scrutiny that the noble Lord, Lord James, argued should apply in general in the NHS. I am convinced that that is the right approach. Alongside payment by results, regulation, choice and competition, that is the way to get the most out of the money that we are putting into the health service.
I say to the noble Lord, Lord Dykes, and to the noble Earl, Lord Howe, that we have read and taken on board the PAC and Health Select Committee reports, which looked into these important areas. We have set out some key principles underlying the new financial regime: improved transparency; more consistency; greater independence for NHS organisations; and fairness, ensuring that all organisations carry the financial consequences and enjoy the financial benefits of the management decisions that they make.
This has been an excellent debate, which has raised some substantive points on financial management and the NHS as a whole. I will respond in more detail to the specific points raised by the noble Lord, but I am confident that, with the resources that we are putting into the health service, with the expertise, with the changes in the management structure and with payment by results, we will have an excellent foundation for achieving the kind of service in the NHS that my noble friend experienced and described so well and which we want all patients to receive.
My Lords, I am hugely grateful to everyone who has participated in this debate, especially for their close focus on the debate’s subject—resources and how they are deployed and, in particular, reported. I am especially grateful to the Minister for the good humour with which he confronted an oncoming steamroller and dealt with the points raised. I greatly appreciate his offer of a letter and further information, particularly because I have not yet heard him say that I was wrong on a single figure. I shall certainly look forward to his response.
I am also grateful to the Minister for indicating that he may now look towards amending the process of reporting. He has sympathised with those who have to understand what the present reporting package is meant to imply. I look forward to seeing that change and I hope that the debate has achieved its purpose.
I have two small personal points on which to conclude. First, I was extraordinarily grateful that only two of the 13 speakers said that they did not understand what I was talking about. That is only 15 per cent; I am used to a far higher percentage. Secondly, because people from the tabloids may be listening, I should say one other thing. I have not said today that I believe that the National Health Service is either insolvent or in financial difficulties. I have said that I cannot say that the National Health Service is not in financial difficulties and is solvent because the information that we get does not tell me that. I hope that any revision of the package will help us in that regard in the future.
I understand that the convention of these debates is that one moves to withdraw the Motion. I am happy and pleased to do that, although I recognise that I am to have a continuing dialogue with the Minister arising out of the data that have been forthcoming. On that basis, I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.
Local Government: Lyons Inquiry
rose to call attention to the recommendations of the Lyons inquiry into local government, and the future of local government funding; and to move for Papers.
The noble Lord said: My Lords, your Lordships’ House has many times advocated a renaissance in local democracy and has called for a stronger and wider role for local government. Therefore, I am grateful to have the opportunity of this debate, and I declare my interest as chairman of the Local Government Association.
The Michael Lyons report, which involved valuable work on the role, function and funding of local government, has taken five years to complete. It started in March 2002, evolving into the Lyons inquiry and was finally published last month. Despite five years of professional and valuable work, on the day of publication the Government dismissed out of hand, in a press statement only, many of Sir Michael’s recommendations. That was most unfortunate, as there are very important issues here. I shall attempt to draw out eight questions on which I trust the Minister will clarify the Government’s position.
The report starts by dealing with the role of local government. It rightly emphasises a council’s unique role in the democratic representation and leadership of the area that it represents; in what Sir Michael calls “place-shaping”; in securing high-quality, value-for-money services; and in its wider responsibility for the social, economic and environmental well-being of the area that it represents.
However, Lyons goes on to conclude that the improvement in public services, the prosperity of our cities, towns and villages, and the public’s trust in governance are being held back by one single fact: over-centralisation by the state. Indeed, of all the major democracies and economies of the world, the United Kingdom Government exert a unique degree of central control over public services and local government. This stifling burden of control has simply wasted the public’s money; it has sapped the initiative, enterprise and commitment to public service of many front-line staff; and it has denied the ability of local people to make local decisions. In doing so, the Government have eroded local democracy itself.
There is now widespread recognition that radical devolution in England must take place. Last summer, the Secretary of State and the Chancellor made clear commitments to what they called “an era of devolution”. The Local Government and Public Involvement in Health Bill is an ideal opportunity to turn this rhetoric into reality. The Local Government Association has welcomed the democratic and deregulatory steps set out in the Bill. However, I must make it clear that we are deeply concerned about the Government’s commitment to devolution and the lack of steps set out in the Bill on the devolutionary front.
Devolution has taken place in Scotland and Wales, but to whom will the Government devolve in England and what will they devolve? Sir Michael Lyons’s report rightly focuses on economic prosperity, and the Treasury’s own report, the sub-national review, seeks to ask what the natural economic areas are. The Local Government Association produced a report on this. Our consultants analysed the market areas, the labour, retail and housing markets and the travel-to-work areas, and it looked at the clustering of businesses in high-tech sectors. It saw that the natural economies are not regional—not the nine regions as now—but sub-regions, very often matching the great cities and shire areas of England. Sir Michael Lyons supported this and said that devolution should be to sub-regions and to their cities and shires.
Nowhere is the evidence for that clearer than in the great cities of England. The Treasury's Devolved Decision-Making Review Report of March 2006 drew attention to this. It looked at the prosperity of our great cities of England—Manchester, Birmingham, Sheffield, Liverpool and Newcastle—and it saw that they have only half the GDP prosperity of the major cities of Europe. The report went on to say that part of the reason for the success of European cities is that they enjoy far stronger devolved political autonomy over the economic levers of transport, planning and economic development, while English cities remain largely dependent on central government decision-making. So the first question is: to whom will the Government devolve? Will they continue to shuffle and add to regional quangos or will they devolve, as the economic evidence and analysis indicate, to the sub-regions, the cities and the shires?
I wish to make a final point on powers, economic prosperity, our cities and social justice. We must strike the right balance between the role of the state and the issue of community and social responsibility. It is a tragedy that, after a decade with the luxury of a strong economy, the social divisions in our country are now wider. Certainly, the super-rich are richer, and the affluent are more affluent, but the 20 per cent or so who are least well off, are less well off today. Many people in our cities are living in very hard-pressed communities with areas of high crime, high welfare dependency, high drug use, low education aspirations and low expectations.
It is therefore immensely important that both central and local government recognise their limits and that we understand that, ultimately, it is community capacity and the human spirit that provide a self-generating force for social and physical renewal. Indeed, I believe that the Leader of Her Majesty’s Opposition is right to focus on social and community responsibility.
In addition, there is a question not only of powers and roles but also of funding. First, to help local economies, the return of the business rate with the same RPI cap as at present would incentivise local authorities to drive forward house building, commercial development and regeneration. It would create a buoyant tax revenue stream and, at the same time, build a stronger relationship and partnership between the public and private sectors. Business would pay no more than it does at present because of the RPI cap. Therefore, will the Minister say whether the Government support Sir Michael Lyons’s view and analysis about the advantages of the return of the business rate with an RPI cap? If not, can she say whether there is a problem of indecision or what the arguments against it are?
The proposals on the supplementary business rate are a small step in the right direction but they are not the core issue. We need to remember that, if business rate still paid the same proportion of local government funding today as it did in 1997, every household’s council tax would be £250 lower. We also need to remember that, with the business rate this year at RPI, set at a higher rate than the increase in grant to local authorities, the Treasury has kept a significant profit itself.
We also need to consider why council tax has increased in unpopularity. Part of the reason is that over the past decade the increase in government grant to local authorities has been lower than the demand and cost imposed on local government by the centre. Whereas NHS real-terms spending has increased by 90 per cent, the real-terms increase for local authorities has been just 14 per cent. In 2002, the Audit Commission found that council tax had been forced up as a direct result of a shortfall in government grant. Therefore, we need to consider other existing buoyant tax streams.
Michael Lyons has rightly—apart from the business rate—pointed us to a shift to an assigned income tax. That means the first one or so pence of existing income tax goes straight through to the local authority. According to the Treasury, over the past five years income tax has grown by 27.2 per cent, which is about 5.25 per cent a year, far ahead of the growth in grant to local authorities. Will the Government consider the option of an assigned income tax?
At the same time, Michael Lyons has talked about specific grants. To make the Government's commitment to devolution real, local authorities must have the ability to spend on what local people and local authorities regard as local priorities. At present, some 21 per cent of local government funding comes in specific grants, tied by the Government to national not local priorities. As the Lyons report says, the Government must make a commitment to reduce drastically the specific grant. Will they give that commitment?
I think we would all agree on council tax benefit. Michael Lyons reports that £1.8 billion of council tax benefit goes unclaimed each year. The take-up has fallen by 11 per cent since 1996-97. We believe that council tax benefit should be changed to an entitlement and become automatic. Indeed, if council tax benefit were a 100 per cent entitlement, people in the lowest decile of income would pay 2 per cent of their income on council tax rather than 8 per cent as they do now.
The Local Government Association believes that the savings limit on council tax eligibility should rise to £50,000. Michael Lyons supports that, so the question is: when will the Government move to an automatic entitlement to council tax benefit? I understand from the DWP that that is possible. Do the Government also support the rise in savings limits?
Other urgent funding issues remain unresolved because we have not moved to reform. Today, despite our pressing government for more than two years, there is still a considerable shortfall from the European legislation on waste and rising landfill taxes imposed on councils. At the same time, we have continually sought clarity and a resolution from the Chancellor about who is to pay for the ever-increasing cost of social care from the increasing demographic change in the number of elderly people. We simply must have a straightforward answer from the Chancellor. Is government grant to be matched to demographic change and population change, or is the Chancellor expecting council tax payers to pick up the bill, or expecting councils to impose stealth taxes on elderly people and acquire the money through increasing charging systems, as we have seen in other spheres?
One of the most important issues is to restore confidence in funding local government to ensure that its allocation and distribution and the balance of funding between the council tax payer and central government is seen to be fair and transparent, and that there is absolute clarity about responsibility and accountability for council tax increases. We have had too many arguments from local and central government about whose fault it is. The Local Government Association has, therefore, proposed to Michael Lyons, as he in turn proposed in his report, that the Government should consider an Independent Grants Commission like in Australia and Denmark.
Such a commission could start by allocating a base inflation increase to every council. On top of that, an independent commission would have responsibility for overseeing distribution and equalisation and bringing that up to date with the latest reliable population and demographic change statistics. In Australia, on top of that, the independent commission has what it calls a “new burdens regime”, which it oversees, and ensures that any new legislation and government policy that have a cost impact on local authorities are paid for by the sponsoring government department not by council tax payers. A good example of that is that advanced corporation tax, which came so suddenly on pension funds, has cost my own county council and council tax payers in Kent £80 million.
I believe that an independent commission would be seen to be impartial and fair. It would make the Government's role transparent and clarify who is responsible for council tax increases, which would thus strengthen accountability and local democracy. Will the Government consider an independent grants commission?
There is much of value in Sir Michael Lyons’s report. I am very grateful for his professional work and that of his officers and everyone across the country who made a contribution. I look forward to hearing the Minister’s response. I beg to move for Papers.
My Lords, I am sure we are all most grateful to the noble Lord for introducing today’s debate and for doing so in such a thoughtful and generous-spirited way.
Most people, most of the time, cannot choose to go elsewhere for local authority services—roads, refuse collection and the like—unless they are very rich, very rural or very misogynistic. Local authorities’ relations with their citizens, therefore, need to be based on trust: a belief that city halls fairly—a word I want to emphasise today—assess finances and deliver services and that their judgments are underpinned by democratic accountability.
On fairness, I led for the Opposition in this House in the 1990s, when we replaced the highly regressive poll tax with a council tax levied on property, with a 90 per cent fit of income to tax band, abated by personal discounts. Now, more than 90 per cent of all households are in tax bands D and below, but about 5 per cent of the 20 per cent or so of households in bands E, F and G—I estimate about 1 to 2 per cent overall—are low-income pensioners. So, in its turn, council tax is now regarded by many as unfair because it falls on poorer pensioners and because it funds services which seem to be a postcode lottery.
However, fairness is a slippery concept. When I served on the Plant commission on voting systems, we could not agree whether Parliament represented communities, parties, minorities or individuals. Therefore, we could not agree on a fair voting system. Similarly, I suggest that the same is true for local government. There is no objectively fair system of local government finance. There simply is not. It depends on what criteria one values. The pensioner in the large house who is asset-rich but cash-poor believes that it is unfair that the house next door, with several earners, pays the same levy. As only 16 per cent of local authority spend, including on schools, comes from council tax and as much of local government finance comes from general taxation, because earners pay taxes, and from business rates, because workers also contribute to business rates, it is more than likely that the earners are subsidising that pensioner through their general taxation and subsidising the services which that pensioner probably uses more than they do.
There is a real problem. Council tax benefit ensures that, on average, each income decile pays about 5 per cent of income in council tax—that is, if they claim—but about 200,000 households, who are naturally reluctant to leave the family home, pay 10 per cent or more and they struggle. That is why I welcome the Lyons proposal and the Government’s sympathy for reviewing the workings of council tax benefit and making it a rebate—which had a 90 per cent take-up among pensioners, unlike today’s 55 per cent take-up of CTB. Lyons estimates that removing capital limits would help 1 million pensioners reduce their average D-band of £25 by £10 at a cost of £260 million. His alternative suggestion interests me. It is that we would have a “circuit breaker”: a percentage of income at which council tax was capped for the individual. That would require means-testing for pensioners to be extended, unless we could introduce a degree of automaticity, but I do not see how we could that.
Would local income tax be fairer? Local income tax would help pensioners, who already have more generous tax treatment than workers, while leaving their assets and savings untouched. However, Lyons points out that LIT would hurt low-paid workers with families, mortgages and minimal savings who, although they are paying tax, are already more likely to be below the poverty line than pensioners. I suspect that we would have to extend tax credits to pay for it. I am pleased that my noble friend shows no inclination to go down that path.
Fairness also requires that we ask whether local authority finance should be based on where one lives or where one works. After all, 40 per cent of workers cross at least one local authority boundary when going to work and put pressure on services without contributing to their cost. Norwich provides 40 per cent of Norfolk’s jobs. In 2005-06, Norwich businesses paid £57 million into the national Exchequer, but through its district, county and police moneys Norwich received back only £37 million. In effect, £20 million went to support low-spending, low-service adjacent districts. That is their democratic choice, but their residents got free services from the city.
There is little financial incentive for local authorities to invest in the local economy when it adds nothing to their financial receipts. As the noble Lord, Lord Bruce-Lockhart, said, the right response is to relocalise as far as possible the business rate, which was nationalised in 1990, which would fund such services and encourage local authorities to invest in their local economies, as well as abate gearing, which makes it so difficult for local authorities to manage their spending pressures. That is why I strongly support the Government’s local authority business growth incentives—LABGI—and the Chancellor’s welcome for Lyons’s proposal for a new supplementary business rate for economic development.
Should local authority finance reflect usage of service and extend charging? For swimming pools, yes, it should, but is it fair to charge heavy users of unavoidable local authority services—the young and the old—who have the least capacity to pay? What about refuse collection? Should large or disabled families, who may generate more waste in the same way that they use more water, be charged more? In other words, is it the job of local authorities to be a local welfare state, redistributing from those of working age to those younger, older or poorer or is that the job of the new 4-block grant?
We agree that the so-called postcode lottery is unacceptable in health, but Lyons emphasises the place-shaping function of local government. To what extent should the council reflect community preferences and priorities? We should probably have national standards on education, classroom size and the national curriculum, but is it fair that local authorities should have different criteria of eligibility for social care, different charging patterns and different support packages? Is that postcode lottery unfair or does it reflect different but equally valid assessments of local need and local resources? What may appear fair in the eyes of the local community, as reflected in the ballot box—for Worthing is different from Wigan and may want to support its elderly in different ways—may still appear unfair to the individual user, the frail pensioner who compares her lot with that of her sister in a different borough. The combination of minimum standards and inspection, with additional headspace for local distinctiveness and decision-making—the route that the Government follow—is probably the balanced approach.
For that to work, not only must local authorities earn the trust of their voters, but central government must in its turn learn to trust local government. Nye Bevan once said that the purpose of power is to give it away. I hope that Lyons will move us step by step towards the path of double devolution from central government to local government and from local government to its citizens. However, unless we can get a concept of funding for local authority services with as broad a consent as possible, we will not have buy-in to a concept of fairness. That concept of fairness is essentially in the eye of each of us, and there is almost certainly no meeting of minds thereon.
My Lords, I, too, thank the noble Lord, Lord Bruce-Lockhart, for introducing this important topic. Sir Michael Lyons’s inquiry was into local government—eventually—with a focus on funding. It is right to look at funding in the broader context of the role of local government. What is that role, especially in relation to other spheres of government? The inquiry was a serious piece of work and was treated seriously by those who contributed to it. It raised expectations among stakeholders—although everyone is a stakeholder in this issue. It is no wonder that it is now regarded as an opportunity that the Government missed.
Echoing more bluntly something that the noble Lord, Lord Bruce-Lockhart, said, I cannot help but begin to get the impression that the Government too often commission reports and then seem to skim over them at breakfast and rush out a response. We saw that in a different context with Stephen Crow’s report on casinos, which the Government almost immediately accepted, thereby giving the impression that they had not thought about the content.
As has been said, rather a lot of the Lyons report has already been put to one side. I understand that the Government have already rejected or deferred a decision on all the key recommendations—I recognise that I am being a little illogical in criticising deferment. I shall run through the key recommendations. On the reform of council tax benefit, the Government are considering the proposals at a time when £1.8 billion goes unclaimed; on capping, they are keeping that power; on the reform of council tax to make it fairer, they have ruled out the revaluation that would be necessary to introduce the additional council tax bands proposed—I shall not comment on revaluation at this point; and on local supplementary business rates, the Government are considering the proposals. We have heard about an independent grants commission. The only proposal that I understand the Government have accepted is that they will take action on empty property rate relief, but I think that what was recommended was a consultation.
Sir Michael Lyons rather heroically welcomed both the White Paper and the Local Government and Public Involvement in Health Bill, but the work has been out of sync. I am sorry that we are going ahead with the Local Government and Public Involvement in Health Bill without the opportunity to take on board an 800-page report. I remarked to my noble friend Lady Scott of Needham Market—who is sorry not to be able to be here—that no one seemed to have asked about the cost of Sir Michael Lyons’s work. She said that she had and that it cost £1.76 million plus well over £400,000 for additional research. These are not negligible amounts, especially when one considers how little the Government seem prepared to make use of the report. I hope that the Minister will disabuse me of that idea at the end of this debate.
My starting point is that tax has the potential to be a good thing. It is the price of a civilised society, but it must be connected with the product. For example, one thinks of national insurance, which is now very divorced from what it was originally intended to pay for. It is not just a matter of hypothecation of the tax, or ring-fencing of the grants made out of taxation, but the connection, which in this case is particularly important, with local government, or, rather, with the particular local authority.
No one who has been a councillor can be unfamiliar with the difficulty of explaining to local residents what decisions are within the discretion of the local authority and where that discretion is fettered. Public focus is almost always on council tax, but it seems to me that that is almost the least of it. Such a large proportion of a local authority’s income is in grant from central government. That is unhealthy because of the lack of effective transparency and the difficulty that the voter/taxpayer/citizen has in understanding it; and it is unhealthy because of the control from central government that runs along with it, both in relation to the amount and because of the ring-fencing which so often applies.
My noble friend Lord Tope, in making use of modern technology, “BlackBerryed” me on his way back from Bilbao at the beginning of this week. He said that the Basque Government had just told his meeting that they collect 100 per cent of all taxes and pay a fixed percentage—just over 6 per cent was his understanding—to the Madrid Government for services which they, Madrid, provide for Bilbao, such as defence. He said:
“Just imagine the different dynamic if UK regional government collected all the taxes and gave grants to central government! The massive regeneration in Bilbao over the last 10 years is very impressive”.
All the representatives from a number of EU countries at the meeting he attended agreed,
“that one contributory factor was their financial ‘freedom’”,
which had allowed them to provide,
“visionary and dynamic leadership at local/regional level”.
That first-time visitor there was hugely impressed by the fact that,
“a city the size of Croydon”
had a metro designed by Norman Foster and a new tram system. This sounds more like devolution from the city to the centre rather than the other way around.
The report by Sir Michael rightly emphasises the trust in the relationship between the taxpayer and the local authority. I am not sure that I go along with him on his comments about charges for specific services because of the difficult issue of trust. Many people—not correctly in my view—say that they get nothing out of their payment of council tax, but certainly it is right that people should understand what they are entitled to get by way of services.
Over many years opinion polls have shown that people rank their local services much more highly than the local authority which provides them. There is a suspicion of charging. You see that in the context of parking fees. I find fascinating the work which the Local Government Association has just published on waste collection, but it is an area that needs huge care. Trust is also a substantial element in the issue of the business rate. I look forward to hearing what the noble Baroness, Lady Valentine, has to say about that. Business has much to gain from investment in its area, but I am not as optimistic as perhaps others are about the acceptability of some sort of super-bid.
I have deliberately not concentrated on local income tax, although naturally I am pleased to see what Sir Michael said about it. The fact that one has to keep on referring to fairness—and I do not believe it is such a difficult issue; perhaps it is objective as the noble Baroness said—does not diminish the importance of fairness and the fact that local income tax would be fairer and more progressive.
The Rowntree Foundation recently published a report on Struggling to pay council tax. It looked at who was struggling to pay it and gave its perspectives on it. One gentleman questioned explained why he had received a council tax summons. He said:
“My problem is my wages ... I just don’t earn enough”.
In 2005, the Labour Party manifesto committed what is now the Government in the longer term to reforming council tax. I end by asking the Minister: does that still apply? In this House we often ask what is meant by “shortly”; in this case I will ask what is the “long term” in which they will reform council tax?
My Lords, I, too, should like to thank my noble friend Lord Bruce-Lockhart for introducing this debate today. His contribution reflects his great knowledge and expertise gained over many years of service to local government. I would like at this stage to thank him and all those councillors who serve on a regular basis and have done so for many years. We should formally acknowledge their contribution to the betterment of their communities. While I have never been a councillor myself, both my brothers were county councillors and one of them is standing for council elections this time.
I should like to reinforce three things particularly which my noble friend stressed: first, the release of central control over local government affairs; secondly, the release of local government to decide on its own local priorities; and, thirdly, to bear in mind the demographic changes. These are three very big challenges that we face.
All of us are concerned about the ever-increasing council tax demands that fall through our letter boxes and which constitute an overwhelming burden for many recipients. Pensioners particularly on fixed, or even declining, incomes are particularly vulnerable as the rapid rise in house prices has made, as indeed the noble Baroness, Lady Hollis, mentioned, many “capital rich” but “income poor”.
The Lyons inquiry concluded that there is a need to reform council tax through the proposed revaluation of domestic property. That carries with it the possibility of intrusive and expensive inspections of family homes and a consequent major injustice. The Government have just begun to stress the need for householders to waste less energy and to maintain their properties in a fashion that will reduce the carbon footprint. They now propose to reward those who comply with an even higher council tax bill. That surely cannot be right.
My honourable friend Caroline Spelman has recently confirmed that the Conservatives will scrap these particular proposals and abolish the inspectors’ right of entry.
On the subject of council taxes, I wish to draw to your Lordships’ attention the anomaly that could become a disaster. Many councils are moving to a general waste collection on a fortnightly basis, interspersed with the collection of recyclable waste. The Local Government Association has, this week, produced an analysis that shows that many councils already using the new timetable are achieving higher recycling totals. I welcome that. We really do want to recycle and reuse what we can. My concern comes with the risk of the increasing numbers of fly-tipping incidents that we see both within our cities and counties where local authorities have to pay to clear it up.
I understand that last year there were some 2.5 million fly-tipping incidents. The Countryside Alliance, in its fly-tipping campaign this week, costed their clearance at roughly £100 million to local authorities and some £47 million to the farming community. The danger is that a reduction in refuse collection, coupled with a requirement for householders to split their waste into different categories, could result in even larger increases in these costs. That is clearly not desirable.
The Minister will not be surprised that I want to turn to the financing of rural local authorities. Research undertaken for the SPARSE groups—that is the groups of local authorities with the smallest populations—last year showed that the treatment of sparsity within the new relative needs formulae is similar to that for the previous resource allocation systems. Only about 3.9 per cent of the RNF for the three RNF blocs studied is allocated through sparsity indicators. But research undertaken two years ago for the Countryside Agency revealed substantial additional costs caused by sparsity, distance, additional time and the lower economies of scale. One local councillor in south Shropshire will tell you that to collect bins from a little hamlet where there are only a few people obviously costs much more than it does even in a large village, which in turn costs even more than it does in urban areas.
Research shows that the average value of the standard of costs for many services provided by local authorities and other public service providers was, for the main urban areas, only 0.73 of standard cost; for the intermediate mixed urban and rural areas, 1.28 of the standard cost; and, for the mainly rural areas up to 1.85 of the standard cost. That is more than twice the standard cost of the provision in urban areas. I hope that the Minister will reflect on that when she comes to reply.
My second major concern is that the various council tax reliefs are not equitable. For instance, many rural businesses are micro or small to medium-sized. Research demonstrates that their business rates remove a significantly higher proportion of profit than they do from large or very large companies. The CLA, which briefed us, stresses the necessity of relief for small businesses and social providers in rural areas, such as village and farm shops and rural post offices. I know that some currently get some form of relief.
The most recent Sunday Telegraph revealed the £300 million tax raid planned for rural communities in the shape of a reclassification of agricultural land and buildings that would remove the current exemption from business rates. It is true that Sir Michael emphasises that,
“marginal agricultural land should continue to receive full relief from business rates”,
but from that I gather that anything that smacks of commercial use will lose that indemnity.
Lyons suggests the review of all forms of relief and exemptions. In my time allocation, I cannot go into detail today because that is a full and complex issue, but I hope that we will be able to debate that fully in future.
I turn quickly to empty properties. The proposal to remove empty property relief has not been rural-proofed. I must here declare a farming interest. It is a problem for some farmers when they have redundant buildings, because sometimes they cannot convert them to be put back into use because local planning will not allow them to do so. How can you tax a technically redundant building, the use of which cannot be altered? Again, I should be grateful for some comments.
I shall talk briefly about the cost of regulation and legislation that central government introduces but that local government must pick up. I shall give two examples. The first is where the DfES has cited as good practice the granting of extra funds by local authorities to schools taking hard-to-place pupils. The figures recommended are £1,500 per pupil placed in the autumn term, £1,000 in the spring and £500 in the summer, but I understand that the Government will not pay for that. It is most likely that it will have to come from local government reserves.
My second example is the question of transport to and from school. The home-to-school and home-to-college transport scheme especially affects local authorities with considerable rural responsibilities. Many of them do not own their own buses and have to hire them. The services are provided under contract and many authorities will have built in an escalator to cover contract cost increases. Those have recently included fuel price rises and revised specifications for new coaches.
Those are but two brief examples; I suspect that many other noble Lords will give others. My plea is that whenever central government comes in with new ideas and passes them to local government, there must be adequate funding in the equation.
My Lords, I have two interests in this debate. The first is that I believe that London should have more devolved powers and funding and should be able to tackle its own challenges and make its own decisions about prioritising resources. The second is that I believe that business and local authorities should be encouraged to work better together. On the subject of devolution, this slot was originally allocated to consider the Greater London Authority Bill. It seems that we have been temporarily spared the GLA but instead fed to the Lyons.
As chief executive of the business organisation London First, I was fortunate to work with Sir Michael and his team in facilitating his discussion with the London business community. The business view was clear. Businesses value the stability and certainty following the introduction of the uniform business rate in 1990. There was no support for relocalisation of the business rate. But it was recognised that the UBR has weakened the relationship between business and local government to the point where businesses feel that local authorities are not responsive to their concerns. Local authorities and business should have a joint interest in promoting economic prosperity. There has been wide debate about the shortcomings of the planning system in the context of the Barker report.
In London, one cannot help but feel that there is not much incentive for boroughs to contribute to coping with the huge economic and population growth. New development, whether offices or housing, often just means more pressure on local infrastructure and local opposition with little financial benefit. So it is hardly surprising if councils fall prey to nimbyism and parochial interests with no balancing influence from business.
What is the solution? I shall make two recommendations, which are evolutionary rather than revolutionary. One is to do with the local authority business growth incentive, which was referred to earlier; the second is to do with the supplementary business rate. The local authority business growth incentive enables councils to keep some of the business rate from new business development but, as Lyons says, it is complex. There is a mysterious formula which seems to be somewhat random. Sir Michael has recommended simplifying it. I suggest that one goes further and allows local authorities to keep all the extra revenue from new development, which they could then securitise through prudential borrowing to invest in the vital infrastructure that they need to support growth.
Secondly, Lyons recommends the use of supplementary business rates. Local communities need more power to raise new local revenues to invest in themselves. Of all the local communities, the argument for London to raise more local revenue is the strongest, as it has a higher population than an increasingly fiscally autonomous Scotland and a GDP that is higher than that of all but 17 of the world’s biggest national economies. I agree with Lyons that local authorities should have the power to levy a supplementary rate that is, as the report says,
“designed in a way which can gain confidence with business and the wider community”.
However, I cannot stress too strongly the importance of gaining the confidence of the business community. There remains great mistrust between business and local authorities, and taxing businesses for something that local authorities think that they might want is not a recipe for improving trust. The issue of accountability is fundamental to business.
What should the right form of accountability to business taxpayers be? Lyons suggests consultation, but the best existing model is that of the business improvement district, in which businesses that would be required to pay are allowed a vote. This has meant that pet projects which authorities have long had in their bottom drawers will stay there, while well designed schemes that address the real concerns of businesses and their communities have earned support. I should mention that I have long been involved in the New West End Company business improvement district, which covers Oxford Street, Regent Street and Bond Street. I recommend this as a model. Just one statistic is that street crime has reduced by 15 per cent per annum in the past two years as a result of introducing red caps on to the streets. I hold firmly that this model is the right one for supplementary business rates, although I do not underestimate the challenge of securing a supportive vote over a wider area. Incidentally, when business improvement district legislation was originally being prepared, the British Property Federation made the unusual move of asking that property owners be required to contribute. The Government turned it down. For London and other two-tier areas, Lyons recommends a single rate, to be set through agreement between the relevant authorities. In the case of London, this looks like a recipe for a lengthy stand-off between the Mayor and the boroughs, and there is a strong likelihood that they will again come up with a proposal that business ought to want rather than one achieved in full discussion with business.
This brings me finally to Crossrail. Lyons cites the debate in London on Crossrail. Indeed, the Government insisted that we wait for the Lyons report in order to discuss the funding of this vital project, but Crossrail cannot continue to wait while details of business contributions, as recommended by Lyons, are agreed. The worst case scenario would be for the Crossrail debate to drag on while every one of the 33 local authorities in London discusses its wish list with the Mayor, resulting in several years’ time in a rate demand to business for a set of projects which it did not ask for in the first place. Crossrail is so important to the London and UK economies that it must be treated as a one-off. The funding for Crossrail needs to be resolved in the next Session so that work can start in 2009. It is entirely feasible to take this funding commitment through the Finance Bill in 2008. On behalf of London’s business community, we are ready to talk.
My Lords, I thank the noble Lord, Lord Bruce-Lockhart, for introducing this important and interesting debate. I declare an interest as a councillor for the Borough Council of King’s Lynn and West Norfolk, which, under the able leadership of John Dobson—who unfortunately has to retire because of ill health—backed up by good officers, was the only local authority to reduce tax last year. Moreover, taxes for the current year are not being increased; they will stay the same. This has been achieved by increasing efficiency, not by reducing services. Indeed, we maintain weekly rubbish collections, even though the Minister in another place claimed in a Written Answer that this was not so.
The major issue that the Lyons report does not mention is that there is too much government. There is an underlying assumption and confidence in government’s ability to cure ills, when one only has to look around to see that, except in limited circumstances, government creates as many problems as it solves. As there is more and more government—the explosion of the nanny state—so the ability to govern efficiently is reduced. The stage at which benefits outweigh costs has long been passed. In a bid for efficiency, targets are introduced, with the result that achieving targets has become more important than delivering the underlying services.
Over the past 10 years, central government have made ever increasing demands on local authorities, as was commented on by the noble Baroness, Lady Hollis. These demands have not been matched by funding. My council estimates that only half the increased costs it has to meet have been funded. Where local taxes have to be increased as a consequence, the blame for the tax increases shifts from central to local government. For example, the levy on landfill sites will increase each year for the next three years. This will have a huge impact on councils, but on historic criteria it is extremely doubtful that the tax taken will be returned to councils to assist them in waste recycling. The poor, old council tax payer will be forced to cough up while the revenue collected goes elsewhere.
The several recommendations in the Lyons report that there should be greater disclosure of information on central versus local funding is to be welcomed. It would help to expose the problem of costs being loaded on to councils. In addition to the problem of increasing expense not being matched by income, councils now have to cope with the late delivery of the Comprehensive Spending Review. That prevents councils doing proper forward planning as they have no idea what their resources will be.
I hope that the Minister will take note of the concerns expressed by your Lordships today and endeavour to take steps that will assist rather than impede local authorities in managing their affairs sensibly and efficiently.
My Lords, I, too, thank my noble friend Lord Bruce-Lockhart for introducing this valuable and timely debate, although it is disappointing that not many more people are participating. I am not speaking from the Front Bench, so I might be a little more determined in some of my comments. The Lyons inquiry is, above all, a missed opportunity for a long-anticipated radical reform of financing local government. It is too tame in its recommendation, too tame in its response to the excessively centralised structure of our country and, most of all, too tame in its approach to the principle of the shortfall in local government resouces and the way in which this sector is financed. I declare an interest as leader of Essex County Council.
Lyons has produced a report that is notably lacking in substantially radical ideas. However, some valuable reflections and sensible suggestions are proposed, which should be debated because much of the report’s content could underpin the devolution agenda. I can understand its timidity; to a certain extent Sir Michael Lyons faced an almighty task and anyone would have found it almost impossible to satisfy all the stakeholders. Some people may say that his recommendations reflect a balanced and considered standpoint, but it is a shame that a number of his grander proposals have been diluted by the response of a rather sceptical, centralist Government. As I have said, the Lyons inquiry is a missed opportunity, and what an opportunity it could have been.
The local government financial framework is excessively centralised. As my noble friend Lord Bruce-Lockhart has said, it is one of the most centralised anywhere. It is inflexible and its accountability is totally confused. It is an antiquated system—I shall go into that later—which is riddled with inequity and is now widely condemned by the public. The noble Baroness, Lady Hollis, might have defended council tax, but certainly the public do not like it any more. It has outlived its life and is harming the sector. Local government, of which I am a leader of a part of it, is unpopular because of council tax, not because of the services provided. It is time to develop a new system which must be more buoyant, transparent and accountable to local people. I propose a more fragmented system that makes use of a wider range of funding opportunities to generate income.
It seems logical and just to eradicate council tax as we know it and to replace this revenue mechanism with a property tax, which could be used to pay for services directly related to the policies of property, such as waste collection and holes in the road outside people’s houses. That would be understood. Such a tax would be clearly visible but its transparency and direct link with relevant services would hold resonance with what is becoming an increasingly alienated electorate.
To supplement this income, it would be essential to find a more equitable method of funding the remaining local government services, such as adult social care, children’s services and so forth. Lyons proposes a number of strategies, but I suggest that we have to be much more radical. We should look at a potential sales tax, and even possibly, speaking from these Benches, a local income tax. I would not rule out any of those options any more, and I shall return to them in due course.
Lyons spent two and a half years producing a weighty, 400-page dossier. It delves in great depth into the data to develop solid, well-evidenced proposals. Much of its import is familiar. The recent local government White Paper, Strong and Prosperous Communities, and the LGA’s Closer to People and Places set out many of the key arguments and advocate the same approach. Lyons’s major contribution to the White Paper is the idea of place-shaping. One could argue that it is the key component of the devolution agenda. The concept has been widely praised in the local government press and much time has been devoted to discussing the best way of capturing its potential. In essence, it represents a shift away from the fear of a postcode lottery towards the embrace of a postcode democracy. Lyons maintains that variability in services and delivery is not always a bad thing. Do services need to be exactly the same in Cornwall as they are in Essex? This embodies the central purpose of local government: to deliver to local people what they want at the local level. In fact, most local government politicians in all parties advocate a devolutionary agenda, minimising reliance on and control by central government. Lyons supports this and suggests that place-shaping powers can stimulate innovation, thus reducing pressures on the tax base.
The excessive centralisation of British politics, which has been carried out by all recent governments, is embodied in a bewildering array of targets, impeding local authorities in delivering local priorities. As the leader of a council that is involved in a highly successful local area agreement, I commend the whole principle of such agreements and, as Lyons said, think that they are part of the future direction.
As I said earlier, the council tax has outlived its usefulness. MORI has identified council tax as the most visible and widely known of all UK taxes, which surprises me. How many people are aware that local government bodies are among the strongest performers in the public sector? I suspect only a very few. Most associate these excellent organisations with large, unseemly and unjustified tax rises. Local government bodies are unpopular purely because of council tax, not because of the good services they provide. I have criticised the current local government financial structure for being excessively centralised, but Lyons has put forward a number of proposals to overcome the problem. One of his main recommendations is the abolition of council tax capping, and I am disappointed to see that the Government have dismissed the proposal, demonstrating their centralist attitude and contradicting their wish for improved accountability expressed in their own White Paper.
I mentioned earlier my contention that council tax should be eradicated and replaced with an alternative, a property tax that would account for perhaps half the current rates. Someone now paying £1,500 a year would pay £750 a year, which they would see was associated with the cost of the services being provided for their house. The rest of the money would have to come from another source of income. I repeat, it could be from VAT or a local income tax. Lyons cites flexibility of funding and expenditure as being of paramount importance to the devolutionary agenda. Ring fencing should be eradicated wherever possible in order to allow councils to have the ultimate say over how to spend local money. The combined effects of increased flexibility over local spending, the depleted financial burden of council tax and an increased ability to innovate could, over the medium to long term, facilitate greater local engagement with the place-shaping agenda. But these measures alone would be insufficient to raise the required revenue, and therefore we would have to look at other forms of tax.
I also commend Lyons on suggesting the possibility of the added business rate. In Essex, an addition of 4p to the business rate could raise enough money to fund £320 million-worth of infrastructure projects. When speaking with local businessmen recently, the first thing they said they wanted was increased infrastructure. I hope that the Government will give this proposal much more serious consideration. Even if it is not as much as I would like to see in the future, it would be a start, and therefore I will be interested in the comments of the noble Baroness on the proposal.
I finish by saying that it is time all of us looked across the whole agenda of local government finance. Enough is enough. If we are going to make local accountability work, we need to find new ways of financing local government.
My Lords, this report is the ultimate long-grass job from the Government. It was set up in July 2004, had its remit extended twice and then was barely mentioned in Gordon Brown’s Budget speech; indeed, it was buried on Budget day. When I was vice-chairman of the finance committee of Oxford City Council in the mid-1970s—I was a Labour councillor and we had got control—I remember that we were in favour of a local income tax. We were promoting it strongly in those days. I follow up, and back up, my noble friend Lady Hamwee’s remarks regarding the longer term: how much longer does the longer term have to be before we get some statement of government policy?
The key theme that has run through our debate today has been fairness. I was struck by the remarks of the noble Lord, Lord Bruce-Lockhart, about social divisions being wider in this country and the super-rich being more affluent; indeed, I propose to give one or two examples of that a little later on. The noble Baroness, Lady Hollis, with her great experience, both in this place and on Norwich Council, also talked about fairness, but I must say to her that the really fair way for pensioners or anyone else to pay for local services is with local income tax. That is based squarely on people’s ability to pay.
The two dramatic tables on pages 228-29 of the Lyons report clearly show the burden of council tax as a proportion of income, whereby it is falling all the way from a heavy proportion of poorer people’s income right down to a negligible proportion of that of the rich. Council tax is the classic unfair tax. I thought Lyons did a good and thorough job. I felt he became a little political in some cases, but none the less the basic analysis is all there to look at. We on these Benches welcome his confirmation that local income tax is feasible in this country. He explored the fairness issues very well too; his analysis of the council tax bands, and the support for higher bands if we keep council tax, was right.
I turn to two specific areas that are a particular source of concern. First, there are the empty property rates, an issue raised by Lyons and then—because it raises a lot of money, for one thing—taken up vigorously by the Chancellor. Here I declare an interest as a pension fund investment manager on commercial property. What research was done by Lyons as a basis for his calculations, and indeed by the Treasury, in arriving at the estimated figure of £950 million a year that will be raised from this tax? I am bound to say I think it will be considerably more. I was speaking at a property conference yesterday in Cardiff with pension fund members, advisers and experts from the property industry, who were raising serious concerns with me, particularly about south Wales where a large amount of property has been developed over the years, industrial property in particular, which they believe will suffer a serious hit in terms of these empty rates.
Specifically, in the estimates made by Lyons or by the Treasury, what proportion of the empty property that is going to be paying these rates is owned by owner-occupiers, and what proportion is owned by Britain’s pension funds and insurance companies? This will seriously affect the net yield that British pension funds get from their property. Typically, about 6 per cent or 7 per cent of their properties are empty; it is not difficult to calculate that that will cut pension funds’ income from property by about 2 per cent to 3 per cent, with a consequent effect on capital values. I do not expect the Minister to give the answer today, but I would like to see a considered reply from her, because I believe that that could hit British pension funds for anything up to £5 billion on the capital value of their holdings. Given the effect of the dividend tax credit withdrawals and many other problems, that is the last thing pension funds need. This has not been thought through properly.
Let me further explore the unfairness of the fact that council tax banding is effectively so narrow, in particular the very small proportion of capital value that the super-rich pay on their properties—their mansions, if you like. I have a couple of examples from Kensington and Chelsea where Mr Lakshmi Mittal owns property estimated publicly to be worth about £60 million. Sir Ronald Cohen is the Chancellor’s adviser on social inclusion and is actively involved in various government projects. The Evening Standard said last week that,
“he lives in one of the biggest residences in London—three houses knocked together in Kensington—with an enormous basement swimming pool”.
That is quite effective from a council tax point of view, because you pay for only one. The band H council tax in Kensington and Chelsea is £2,062.30 a year, just under £40 a week. That does not seem an awful lot to pay on a property of that size. It would also be interesting to make comparisons with other countries so that we can see how lightly taxed these very large properties are in Britain. We could make comparisons with his,
“large, sumptuously decorated villa in the South of France, near Cannes”—
“one of the best views of any home in Europe”.
He has another place in Manhattan and, I believe, Israel.
The fact that the mega-rich in our country are paying such a negligible proportion of their property value compared with somebody in a modest bungalow in a rich area or a semi-detached house identifies the gross unfairness of our existing property tax and council tax systems.
I support the noble Baroness, Lady Valentine, on her demand for an urgent decision on Crossrail. I do not agree with her on commercial rates, which should be set locally. You cannot, by setting up committees, reverse the inevitable drifting apart of the relationship between business and local councils. It would encourage business to be more involved if the commercial business rate was no longer nationalised; Lyons says that he sees an argument for that in principle. That is one form of localisation that makes sense.
I listened with interest and sympathy to the noble Lord, Lord Hanningfield. I look forward to the speech of the noble Baroness, Lady Hanham, but so far, I rather wish that the noble Lord was speaking from the Front Bench. He gave an imaginative speech and I welcomed his interest in local income tax. However, I did not get much sense of what alternatives the other speakers on the Conservative Benches were putting forward if, as they say, the council tax is so wrong. All I heard about was devolution.
I do not think it honest to oppose revaluations of the council tax as long as we have it. The valuations are based on April 1991 property values which are very out of date. We strongly oppose the council tax, but if we are to have it, we cannot let the valuations become further and further out of date, year after year. That is unfair to people in deprived areas whose properties have not gone up in value.
We look forward to hearing from the noble Baroness, Lady Hanham, and hope that the Conservatives do not regard this as a commitment-free zone.
My Lords, like everybody else, I thank the noble Lord, Lord Bruce-Lockhart, for introducing this debate so ably. As the former leader of Kent County Council and current chairman of the Local Government Association, he has a wealth of experience and is a welcome addition to our Benches.
I am an elected member of the Royal Borough of Kensington and Chelsea. I do not live in a house with three conversions across; I pay one council tax, which seems to be quite enough.
It is amazing that the report on the inquiry carried out by Sir Michael Lyons—which runs to 394 pages, contains well over 100 recommendations and took, depending on who we listen to today, anywhere between two and a half and four years to complete—was apparently about to be put on the top shelf at the Department for Communities and Local Government to gather dust. Apart from some comments on what they were not prepared to consider, there has been almost total silence from the Government on this report. If these debates had not been generated here and in the other place, the report would have passed without notice in Parliament. Some of the proposals would no doubt have been cherry-picked and credited to the Chancellor or the DCLG Ministers, remaining otherwise unattributed.
Anybody who has given the report even the most cursory glance would recognise that this work has been undertaken with the greatest care and authority. The report reads well—for once, it is not impenetrable—and it produces cogent recommendations. We do not agree with all of them by any means—in fact, we would quarrel with many—but that does not stop us recognising that a prodigious effort has been made to understand the nature of local government and its rather hit-and-miss relationship with the centre, or recognising that the issues raised in it need to be considered. I felt in reading it that Sir Michael understood the frustrations caused by micromanagement from the top and its stultifying impact on local government. A number of his proposals address that.
How refreshing it was to find Sir Michael suggesting that the Government should leave the model of leadership of a local authority to that authority and its community. That is not the way of the local government Bill. I hope that his words will help us when we discuss that legislation later this Session.
Sensibly, Sir Michael tells the Government that they should stop defining lead councillor and officer roles; in other words, to leave the governance of local government to local councils. It must be left to them to decide what they want to do and how they want to do it. That is the burden of his comments. He has trenchant things to say about local authorities having a greater say in housing policies, and draws attention to the current nonsensical situation of social care for older people, which we debated not so long ago. We recognise that this problem is gaining in significance rather than diminishing.
The report raises issues of common sense and devolution which we would want to consider in more depth, if given the opportunity, and which would unplug the local from the centre. However, it is on finance, which everybody has discussed today, that we are likely to stop feeling much warmth towards the report’s recommendations. While we agree that council tax is likely to remain the bedrock of the contribution by local residents to financing services, this report raises again—I shall again disappoint the noble Lord, Lord Oakeshott—the revaluation of property and increases in the number of bands. The Minister will know that we object to both of them. They have been canvassed by the Government previously; indeed, the revaluation proposed for 2005 was put on hold by the Government and is unlikely even to be considered again before the next election. Why? Because it was clear that it was likely to be so unpopular that they would not risk undertaking it.
Preparations for revaluation are well in hand, a significant database of house values is being built up, and there is a manual for valuation officers for assessing properties for each band. Home improvements, views from the bedroom window, gardens, patios and new bathrooms will all come into the assessment. Digital cameras have been provided to confirm that people have had the temerity to improve their homes. One has to ask whether the Government prefer that homes should be left in a deteriorating state just because of a tax valuation.
At least Sir Michael recognises that revaluation and rebanding are likely to have a considerable impact, particularly on those in the higher bands, and recommends a transitional system. However, I recall the controversy caused by such a system when the new business rate was introduced; it was far from welcome, even several years later.
Lyons has the answer to part of the problem of property value increases. Older people who have lived in their family homes for years while their property has increased in value should be able to defer payment by having the cost of the tax placed as a charge on their home, to be released on sale or death. The elderly are being charged for their social care, if they need it; they are already being encouraged to take the equity out of their property to boost the pensions that the Government have decimated. Now it is being suggested that they can offset their council tax on the property as well. As I creep nearer to old age, I fear that it is not going to be much fun.
The one aspect on which we might all be able to agree is that raised by my noble friend Lord Bruce-Lockhart: that the uptake of council tax benefit is clearly lamentable. Impossibly complicated forms and ridiculously low allowances for capital make this a benefit in breach. Sir Michael has sensible suggestions for making this easier to access and for increasing the capital allowance, from the current paltry £16,000 to at least £50,000—I should have thought that there was an argument for it to be more. We hope that the Government at least consider that aspect urgently.
My noble friend Lady Byford has drawn attention to the effects on the rural economy. We are jolly lucky to have her, because we do not have many voices speaking up for rural interests. It is always good to have her behind me on these Benches. She referred to the effects of a possible taxation on agricultural buildings. We should also note the idea of taxing derelict property and brownfield sites. These, together with the possibility of a planning gain supplement, would bring the development of property firmly into a tax regime but not one which would necessarily benefit the local economy. My noble friend Lord Bruce-Lockhart drew attention to and was very encouraging about the prospect of an independent commission. This is the sort of thing that would arrive on his desk and on which he or the commission would have to comment. I hope that it is a concept that the Minister will at least be able to say is being considered. It would be the buffer necessary—and I am afraid that it is necessary—between central and local government.
I am grateful to all those from my side of the House and indeed other noble Lords who have spoken. I have a sense that the Lyons report is seen as the proverbial curate’s egg—some good and some rotten—but at least we have had an opportunity to talk about it, and we will have to watch in the future, as legislation comes along, whether Sir Michael Lyons and the author of the other undiscussed report, from Kate Barker, are influencing our future.
My Lords, like all noble Lords who have spoken in this debate, I am extremely grateful to the noble Lord, Lord Bruce-Lockhart, for this opportunity to discuss this very important matter. It is an opportunity for the Government to make their own comments on the Lyons report in a thoughtful way. I congratulate everyone who spoke and raised such pertinent and difficult questions, which I shall try to answer, although I may also have to write to noble Lords.
I was pleased that the noble Lord expanded the canvas of our conversation this afternoon. That was reflected in the wide range of comments and issues that were raised in depth. My noble friend Lady Hollis discussed the nature of the values that we hold in relation to local taxation and spoke of fairness linked to trust. That underpins our perceptions and creates a framework in which to address many of the serious questions raised.
I predicted that we would certainly come across the terms “long grass”, “top shelf” and “missed opportunity”, and they are all in my notes, although I do not agree with them. It was interesting that we had two rather different responses from the noble Lord, Lord Hanningfield, on the Conservative Back Benches, and the noble Baroness, Lady Hanham, on the Conservative Front Bench.
I put on record our thanks to Sir Michael for the scrupulous way in which he carried out his remit and took forward his inquiry. It is a very serious report and we are grateful to him for it. I have absolutely no doubt that it will be referred to for many years to come, given the clarity of its vision, language and thinking on these very profound issues—the relationships between form, function and funding. Those are very sharp and difficult questions.
It is nonsense to read anything sinister into the fact that we have not produced an instant response, although we tried to clarify in our immediate response some of the things that we would not pursue, in the interests of certainty. The report’s recommendations must be reflected in policy. Far from shelving the Lyons report, we are implementing much of its recommendations as quickly as possible. As I believe the noble Baroness, Lady Hanham, suggested, its influence can be seen in the local government White Paper and the local government Bill. As the noble Lord, Lord Bruce-Lockhart, said in his very thoughtful and typically reasonable introduction to the topic, the concept of place-shaping—I think that the noble Lord, Lord Hanningfield, picked up on this—is crucial to the way we look at the contribution that local authorities make to making places better. Our approach to the local government White Paper was much influenced by that.
The Lyons report is substantial, and noble Lords are right to look for the implementation of its recommendations in the local government White Paper, the Bill and the spending review. It was intended to be the start of a major debate. We sometimes wonder what the Liberal Democrats’ view is on local income tax. It was clear that both the noble Lord, Lord Oakeshott, and the noble Baroness, Lady Hamwee, welcomed the Lyons report’s provisions on that point. However, they should read it very carefully, because Lyons did not recommend a local income tax. He concluded that, while it might be feasible, it was important to recognise its limitations, including the risk of substantial increases for the working population. That is a very serious caveat. We shall be very interested to hear how the Liberal Democrat Party would address that.
We must also look at the landscape against which Lyons reviewed his task, and address some of the issues raised. Not to put too fine a point on it, local government was in a pretty threadbare and demoralised state 10 years ago. If noble Lords read the debate that took place on Tuesday in another place, they will see that position described in rather more robust language than I shall use. Underperformance and underinvestment posed enormous challenges. There was an urgent need for greater transparency, a greater awareness of success and failure and clearer goals and incentives. We have kept faith with the need for more investment. In each year of that decade local government received an increase in funding above inflation—a real terms increase of 39 per cent. The noble Lord, Lord Bruce-Lockhart, quoted the figure of 14 per cent, on which we are in dialogue with the LGA, but that figure excludes the dedicated schools funding and includes the £15 billion available through specific grants for social services alone, for example. I take the argument raised by noble Lords, not least the noble Baroness, Lady Byford, about the pressures of social care in an ageing population, and they were right to raise it. It is clearly an area of serious consideration in making CSR07 and in our partnership dialogue with the Local Government Association.
In 2007-08, we provided £3 billion extra, which is a 5 per cent increase for local government. So whatever noble Lords say about the impact of centralism—I was glad that the noble Lord, Lord Hanningfield, recognised that it has deep roots in other Governments—it was necessary to have a performance regime that represented that, and it has worked. This week’s Local Government Chronicle, which is not an uncritical friend of this Government, acknowledges, when asked about the key achievements of this Government, that the performance improvement culture espoused by Ministers has resulted in a turnaround in councils’ fortunes. The performance regime is seen as playing a key role in that.
Councils are therefore reflecting that benefit. I was very impressed by what the noble Lord, Lord Howard of Rising, said about the efficiency savings that his council has achieved. Some 70 per cent of councils are improving strongly or improving well, and there are no councils in the bottom category. Local government has kept faith too with the challenges that we created, and they are now well placed to face those new challenges, whether it is climate change or the demographics of ageing. I will have to write to the noble Baroness, Lady Byford, about the rural contribution, because I do not have those figures with me.
What I take away from this is that there is only one route forward, which we all understand and share—more devolution, more local flexibility, responsiveness, creativity and innovation. That is the thrust of the local government White Paper. We agree entirely with the noble Lord, Lord Bruce-Lockhart, that there are parts of the country—sub-regions—where improvement has been slower. Our work on cities and city regions in the DCLG has exemplified some of that, and the Government’s sub-national review is very much in tune with what he is saying. It is exploring how we further release the economic potential of the regions, cities and localities. The Budget this year provided an update by expressing what is being considered in terms of potential reforms and how to strengthen incentives across what Michael Lyons described as the wider spatial set of relationships. I can tell the noble Lord that the review will report to Ministers in advance of the CSR.
All that provides the background. What are we responding to in Lyons? What do we intend to do? First, there are some key areas on which we are all at one on how to make local government function more effectively. We are reducing the number of targets, for the reasons that I have begun to explain, and moving away from pressures for centralism, to enable local authorities to take far more charge of their own destiny by determining their own local priorities and local targets. Sir Michael, and this afternoon the noble Lord, Lord Bruce-Lockhart, identified that large number of targets as introducing some sclerosis into the system. We are committed to reducing that and, through the task force that Michael Frater is running, to looking at how we reduce complex and burdensome data and reporting requirements.
A second theme is the need for clarity on what central government and local government are going to do together. I am grateful for the welcome given to local area agreements and the potential that they hold, because that outcome is a deal that hands over responsibility and frees up funding for local government and local partners to decide what is best for their area. It takes us into the sub-regional agenda through the potential that multi-area agreements offer. That has been picked up by Lyons in the examples of Manchester and Kent, and the work that the noble Lord’s authority is doing, working proactively together to help to improve service delivery. There are some very exciting possibilities there.
The heart of the report and of this challenging debate essentially concerned council tax. It is important to reiterate what Sir Michael Lyons said: there is no magic bullet, the Government need to take a developmental approach to reform, and the simple, important message is that council tax is not broken. The Lyons report emphasised that a strong case in relation to transparency and accountability could be made for a property tax, and it went on to identify the benefits. Those attributes are transparency, an easily collectable tax and a stable financial environment. We would throw those attributes away at our peril.
The evidence produced by the inquiry showed that revaluation would not in itself have a significant impact on the fairness of council tax relative to income. We have said many times that revaluation would cause significant disruption for families and individuals. It would not bring greater fairness. Given that, we have made it clear, as the noble Baroness, Lady Hanham, re-iterated, that we will not revalue during the lifetime of this Parliament, particularly because it could significantly disrupt local government itself. The forthcoming three-year settlement for local government will conclude in 2010-11 and we would not expect to consider revaluation before that date.
I shall now address what the noble Baronesses, Lady Hanham and Lady Byford, said on the implication of valuation by stealth. Nothing has changed in the way that the Valuation Office has conducted its work since it was established when council tax was introduced. It has no extra powers, there are no extra requirements and the implication that somehow new factors come into its calculations is seriously disturbing to people who might think that something has changed. It simply has not and we must be very careful indeed about the language we use in addressing these issues. Trained Valuation Office staff have possessed exactly the same powers of inspection since 1993 and any changes or improvements to a property that have increased its value cannot result in a higher council tax band until the property is sold.
We have said that we would not abolish the capping regime. We understand that council tax is very much a matter for local authorities, but council tax capping powers have served us well as a discipline in deterring irresponsible increases. We first used the power in 2003-04 when council tax increases reached nearly 13 per cent, but since then it has been below 5 per cent for three years in succession. We need that additional discipline. It is not a question of trust, because we have shown trust in local authorities throughout the tone and content of the White Paper.
I turn now to the critical question of how we make council tax fairer. The noble Baroness, Lady Hanham, was absolutely right—we share a commitment that people on low income must access the benefits to which they are entitled. My noble friend Lady Hollis, who has much experience in this matter, made a tremendous case for that. We are deeply concerned to ensure that take-up is increased. One way is to make the benefits simpler to access; we are reducing bureaucracy and DWP is taking steps to simplify benefit claims. Pensioners can now access council tax benefit and housing benefit at the same time that they apply for pension credit and state pensions—four benefits, one phone call. All that the claimant has to do is to sign the shortened council tax benefit claim form and forward that to the council.
We are simplifying the process in other ways. We are working with the Pension Service on passing the council tax information directly to the local authority—doing away with the need for a claim form at all. That will help older people, in particular. We can transfer the lessons from that into how we deal with non-pensioners—younger people who also have difficulty accessing the benefit. However, as Lyons recognised, the Department for Work and Pensions is already looking at the possibility of delivering CTB more proactively. The Government will certainly consider his recommendation on increasing and subsequently abolishing the savings capital limit for pensioners in the light of practicability and affordability across priorities for the tax and benefits system as a whole. They will continue to work hard with local authorities to reduce the numbers who miss out, which includes looking at the suggestion that council tax benefit could be renamed as a council tax rebate in the wider context of improving delivery.
The idea of an independent commission raises a third set of issues around trust and transparency. The noble Lord reflected the dialogue between the LGA and Lyons on the recommendation for an independent commission. I can see the superficial attraction, but essentially we do not agree that an independent commission would be either right or effective, as it would remove political accountability. Issues of funding must stay with politicians, who can answer the questions, “Where is the money going?”, “What am I getting for it?”, and, “How is this service improving?”. Making an independent commission responsible for that would be unfortunate.
But we are doing something. We are building on the existing work of the Audit Commission to examine the possibility of developing and using toolkits to provide greater clarity and transparency to local people about levels of public funding. That is work in progress, and I am sure that, like me, the noble Lord will be interested to see how it goes.
In my final minutes, I turn to the business community. It is important to be clear about what Sir Michael was saying about business rates. I know that the LGA was disappointed that he did not simply recommend the relocalisation of business rates. He said:
“I do not think that the time is right for such a substantial change to be introduced. Local authorities and the business community still have to work on developing trust and shared objectives”.
The noble Baroness, Lady Valentine, picked up on that when she spoke of the need to develop greater trust and confidence between those two partners. We agree that business rates are a successful and stable property tax, but we do not think that there is a case at this time for changing the current RPI cap on annual increases. Relocalisation raises another question. As much as for anything else, business rates are needed as part of formula grant for equalisation. That is a fair element in the system. I was pleased that so much welcome was given to the idea of the local supplementary business rate. Obviously, that has to be subject to credible accountability, but we will certainly look at the case with the closest attention to ensure that business has a strong and clear means of holding authorities to account. Again, that is a positive response to what the noble Baroness, Lady Valentine, said. We will hold extensive discussions with key stakeholders.
I welcome the discussion on LABGI. The noble Baronesses, Lady Hollis and Lady Valentine, both talked about the great benefits that that additional money brings. In 2006-07, 328 local authorities received £316 million. We expect the figure to go up to £1 billion by 2007-08. We have confirmed in the Budget that we will bring forward proposals to reform the scheme before the summer to continue to provide strong incentives. So there is movement on that.
The noble Lord, Lord Oakeshott, asked about empty property relief. There are aspects of business rates on which we agree, and he will understand that we have to tackle the problems that inhibit regeneration. One of those problems is high rents. I will write in more detail about the assumptions that we have made on the figures, but essentially this is a net scorecard yield, reflecting a combination of additional rates revenue and changes to other related taxes. I think that it would be more satisfactory if I were to write to the noble Lord about that, as he asked for a detailed response. However, I make it clear that we will certainly exempt from a business rates charge empty property held by charities—it is important that they know that—and community and amateur sports clubs.
The noble Baroness, Lady Byford, asked about the agricultural exemption. Sir Michael recognised that any change to exemption from business rates for agricultural land would have major implications, well beyond specific business rates policies. As we consider developing proposals for a review of business rates reliefs as a whole, that will be one of the things in the frame.
We recognise the potential contribution that might be made by assignment. It will be a long-term option as we look at long-term funding.
I shall conclude there. The context for this subject is the very challenging spending round. I understand the implications of delay. Although the timetable is tight, we are working hard to deliver our commitments to local authorities. For example, we are reviewing the implementation timetable for local area agreements, which now will not have to be signed off until June 2008.
This has been an excellent debate and it has been important in elucidating positions and policies. I very much look forward to a situation where we can all sit down together and debate how to create a system which is not just perceived to be fair but is fair in reality.
My Lords, I am very grateful, as I am sure are all noble Lords, to have had the opportunity to hold this debate. It has moved us on from the simple press release response on the day of the Budget. The contributions have been immensely valuable, ranging across Bilbao, Crossrail and the rural areas. Many contributions were based simply on the principles of fairness, transparency, accountability and, above all, of strengthening the locality and local government, and that has been very useful.
I want to make one small point of clarification to the noble Lord, Lord Oakeshott. I did not say that I supported a local income tax; I said that I supported an assigned income tax. There is a difference and I would not want to be misquoted by anyone.
I am grateful for the Minister’s response, and I think that the debate has moved us on. I know that the Minister has tried to be as helpful as possible and I am grateful for a number of the points of clarification that she made and for her understanding, but I also appreciate that she answered as fully as she could within the constraints of the long arm and long reach of the Treasury. I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.
Transport for London (Supplemental Toll Provisions) Bill [HL]
My Lords, I beg to move that this Bill be now read a second time.
I declare my remote interest in TfL. As a former London Transport employee, I am in receipt of a TfL pension and associated non-cash benefits.
This is a private Bill promoted by Transport for London. It was deposited on 27 November 2006 and ordered to commence in this House. It was subsequently introduced and read a first time on 22 January 2007. The petitioning period expired on 6 February, and I can confirm that no petitions were deposited against it in this House. I am pleased to introduce the Bill to your Lordships’ House for a Second Reading.
The purpose of the Bill is not to provide new powers for TfL to impose tolls on roads but to enable it to make additional provision for the collection and enforcement of tolls pursuant to toll orders made under the New Roads and Street Works Act 1991. At present, TfL is able to seek authority to charge tolls under a toll order but, although the existing legislation allows for the collection and enforcement of tolls, it does not provide TfL with the most efficient and effective means of doing so. The Bill enables TfL to make provision by order for the collection and enforcement of tolls where it has already been authorised to charge tolls under a toll order made under the New Roads and Street Works Act.
TfL, like any other highway authority, may seek authorisation to charge tolls by making a toll order under the New Roads and Street Works Act 1991. Such a toll order is subject to confirmation by the Secretary of State. Before the Secretary of State can confirm the order, public notice of it must be given, and persons have the right to object. If the Secretary of State receives an objection from any person he will cause a local inquiry to be held unless, in the circumstances, he is satisfied that it is unnecessary. Where a local inquiry is not held, the Secretary of State must take into account any such objections when deciding whether or not to confirm the toll order.
Those procedural safeguards ensure that interested persons have the opportunity to make representations about the proposed charging of tolls and that their views are properly taken into account by the Secretary of State in determining whether the toll order should come into effect.
The powers in the Bill could be used for any project where TfL has made a toll order under the New Roads and Street Works Act and that toll order has been confirmed by the Secretary of State. However, at present TfL has applied for the confirmation of only one toll order. That toll order relates to the construction of a new bridge, known as Thames Gateway Bridge, which would connect Beckton and Thamesmead. TfL has made a toll order to authorise the charging of tolls over the new bridge to finance its construction. An application has been made by TfL to the Secretary of State for the confirmation of the toll order, together with related applications for planning permission and the other orders needed to authorise the construction of the bridge. Those applications have been the subject of a public local inquiry in Charlton, which was concluded on 3 May 2006, and the Secretary of State's decision on those applications, including the confirmation of the toll order, is awaited.
The Bill seeks to enable TfL to make the current system of collecting and enforcing tolls under TfL toll orders more effective and efficient.
The central London congestion charging scheme is an example of an effective and efficient charging system that allows vehicles to enter the congestion charging zone seamlessly without the driver being required to stop at a booth or barrier to pay the charge. Similarly, if the Thames Gateway Bridge is given the go ahead by the Secretary of State for Transport, it is envisaged that its tolling system will be barrierless, with vehicles passing seamlessly from one side to the other.
The central London congestion charging scheme provides motorists with modern and efficient mechanisms for payment of the charge, including via the internet, the telephone and SMS text messaging. In addition, that system enables TfL to enforce payment by imposing penalties where the congestion charge has not been paid. TfL may issue a penalty charge notice to the owner of a vehicle who has failed to pay; the charge varies depending on whether it is paid early or late. Enforcement measures can be taken by TfL if the owner of the vehicle continues to refuse to pay. Provision is, of course, made for representations, adjudication and appeals in respect of the enforcement measures.
In the collection and enforcement of tolls under toll orders made under the New Roads and Street Works Act, the Bill would provide TfL with similar powers to those in operation for the central London congestion charging scheme. The Bill does not, I stress, give TfL any new powers to toll motorists; it simply enables TfL to provide, by order, for more efficient, effective and simplified means by which tolls can be collected and, where necessary, by which appropriate enforcement action can be taken. The provision of a more efficient means of collection and enforcement of such tolls can only be of benefit to the public purse.
I do not intend to describe the Bill clause by clause, but your Lordships may wish to be made aware of certain important features. The detailed provisions for the collection and enforcement of tolls under a TfL toll order are not set out in the Bill. Such provisions, which would be too lengthy and detailed to be appropriate for primary legislation, will be set out in an order, to be known as a supplemental toll provisions order, made by TfL.
Your Lordships will wish to know that the Bill provides appropriate safeguards to ensure that the power to make a supplemental toll provisions order is exercised reasonably. Clauses 5 and 8 provide those safeguards. Clause 5 provides that a supplemental toll provisions order made by TfL will not take effect unless it is confirmed by the Greater London Authority. The Greater London Authority may require TfL to consult other persons, to publish notice of the proposals and to consider any objections. It may also consult third parties.
Before confirming an order, the Greater London Authority is required by Clause 8 to give notice to the Secretary of State. The Secretary of State is then given an opportunity to scrutinise the order and has the power to object to any provision that confers a power on TfL or creates an offence unless the provision is substantially the same as one already in force for the purposes of a TfL road-user charging scheme; for example, the central London congestion charging scheme. A provision of an order to which the Secretary of State has objected cannot come into force unless and until the objection has been withdrawn. This will ensure that any new provision to be included in a supplemental toll provisions order is reasonable and consistent with government policy.
I am aware that the noble Lord, Lord Lucas, will raise issues regarding penalty charges and enforcement powers, some of which have more general application than this Bill. I am grateful to him for having taken the time to meet me and representatives of TfL to discuss those issues. TfL has sent him a detailed response that I hope will satisfy his concerns about the Bill or at least go a long way towards doing so. I look forward to hearing from him in this debate and can assure him that, if he has remaining concerns, TfL will be happy to discuss them with him further.
This useful Bill will facilitate the collection of tolls for financing valuable new infrastructure projects for London. I commend it to the House.
Moved, That the Bill be now read a second time.—(Lord Tunnicliffe.)
My Lords, I am grateful for the time the noble Lord, Lord Tunnicliffe, and many people from TfL have taken to address my problems with the Bill. However, some of them remain outstanding, and I shall go through them briefly.
I started out with great concern about the scope of the Bill. The New Roads and Street Works Act is capable of very wide interpretation, but I have been satisfied by what the noble Lord, Lord Tunnicliffe, said today and by what TfL has said to me. I understand that the ultimate protection we have against the wide extension of the Bill is that a toll order that involves an existing highway is subject to special parliamentary procedure unless the Secretary of State certifies that there will be an equivalent toll-free facility for the road user. I hope that the Minister will confirm that, or I will be very concerned about the wide exemptions from planning permission and the other freedoms given under the New Roads and Street Works Act were this to become a widespread practice in London. In application to a new bridge at Beckton, I do not see that it holds any terrors for me.
My remaining concerns about the Bill are principally focused on the powers that it gives TfL’s contractors to enter vehicles. TfL has explained to me that it imagines that it will have a system of automatic detection of vehicles that go through the toll. That is quite a long way in the future as we are looking at 2012 for the opening of this bridge. Perhaps it will be swung out to the congestion charge at the same time; I do not know. It will be partly based on some kind of transmitter or chip inside a vehicle that will register the passing of an unauthorised vehicle and provide some kind of automatic imposition of the toll. To deal with situations where that chip or mechanism has been tampered with, there is a provision in the Bill that TfL contractors can demand entry to your car. If you refuse them entry you will be subject to a fine at level five or six months’ imprisonment. So it is a pretty hefty sledgehammer which TfL wish to take to crack this particular nut.
My first problem is that TfL’s contractors can be any old person. It employs a range of firms, one of which is Drakes, which was the subject of the recent whistle-blower programme in respect of its bailiffs’ activities. These people are not licensed in any public way, yet we are going to give them power to enter somebody's vehicle at any time of day, and—looking at the additional powers in the Bill—not only on the street, but in a “public” car park such as a supermarket, a hospital or an office, which are places one might regard as private or semi-private.
You can imagine yourself being confronted by some lumpy individual at 10 o’clock at night in the dark of a Marks and Spencer’s car park, demanding entry to your car, and saying that if you do not let him in, you are in for six months’ inside. I find it an extremely difficult bridge to cross as to whether these are the sort of powers we should give to unlicensed contractors of uncertain reputation.
I am told by TfL, although it is not something which I have investigated, that there is some legislative chain which leads back under the current legislation to mean that this power would have to be exercised either by a police constable or in the presence of a police constable. If that is the case, the Bill should state it. Let us have that provision in the Bill as something which is fixed and permanent. To have something which is subject to ministerial whim, to statutory instrument and to uncertain interpretation of lawyers is entirely unsatisfactory.
Let us also have a system for properly licensing the contractors who carry out the work. There is a system in place, the Private Security Industry Act, by which wheel-clampers are licensed. That is being extended by the Department for Constitutional Affairs to cover bailiffs and others. Its intention is that the same regulatory body will be expanded and given increased powers to cover them. That would seem to be an entirely appropriate body to carry out the licensing and supervision of those increasingly powerful contractors that Transport for London uses, particularly since, in the case of Drakes and, I imagine, one or two others, these people will eventually be subject to that body anyway; those firms are probably using the same personnel as bailiffs or for TfL enforcement alternately. Therefore, I do not think that this provision would create great problems. It would put these people on a proper footing with a proper set of responsibilities and a proper set of guidance, and it would give a proper way for the public to deal with situations where they overstep the bounds of reasonableness or misbehave themselves, such as will be provided for other people who find themselves in similar situations when TfL is not involved.
Such a provision could not be put in the Bill because the system is not there yet. However, an undertaking by TfL that it will pursue and be happy to talk to the Department for Constitutional Affairs about this, and that it will aim to have its contractors properly regulated when the new system comes into being in a year or two’s time, is necessary to give us the comfort required to allow these additional powers for Transport for London contractors.
As the noble Lord, Lord Tunnicliffe, hinted, some national problems also come to bear here. Increasingly, we are finding penalties imposed on the owners of vehicles rather than the people who are in charge of them at the time. As far as I can see, we have not as a nation taken any steps to ensure that the DVLA is up to the strain of imposing responsibility on the owner, when the owner is defined by the DVLA. People increasingly buy cars through the internet or magazines. If you buy a car in that way, you have no way to check whether any fines or other charges are outstanding on that vehicle. There is no central registration of those charges. There is no means of ringing up the DVLA to check. There is certainly nothing on the internet to enable you to call a number to ask whether the position is outstanding on that vehicle.
That would not present a problem under any form of data protection, because we already do that for the hiring status of vehicles, to find out whether there is any outstanding hire purchase on a vehicle. That is not beyond the wit of man. The Government may care to know that Transport for London is considering providing such a facility itself off its own bat for its own charges. That helps a bit but does not help for the more general picture. In the spirit of fair play, if the Government are imposing those additional burdens on the owners of cars for their convenience, they should provide as a convenience in return the ability for people to find out what is outstanding on their vehicle or a vehicle that they intend to purchase. That is not a complicated or difficult thing to do but would have great benefit and would enable the Government to roll out the principle of the owner being responsible much more widely, effectively and fairly.
That will come back to this House in the not too distant future when we consider the London Local Authorities and Transport for London Bill, in which we are considering giving individual London local authorities and Transport for London the power to clamp and take away a vehicle on which there are three or more penalty charges outstanding. But there is no way that anyone has of knowing whether their vehicle has that status and no way that a London local authority has of knowing whether the owner information shown is correct or whether the person responds at their existing address.
The whole thing is a disaster waiting to happen. If it is imposed on a large scale, a lot of people will find their vehicles removed for no good reason. They will then find that they have to pay enormous sums—£1,000 or more, even if there are only three tickets outstanding—to recover their vehicle, or face a wait of three months or more to recover it through argument. There is no clear way provided to deal with disputes about whether the vehicle has been taken correctly. People may find themselves arguing with a number of London authorities, each of which has one penalty notice that it says is outstanding against them.
So that is a really problematic area. More and more, local government wants to use those facilities to improve its ability to recover money due to it. I thoroughly approve of that, but if we are to do that, we must centrally provide the proper facilities to enable it to happen well. I shall not charge TfL with any of that responsibility; I am merely taking the chance to berate the Minister about it. I shall be much harder when it comes to the next TfL Bill, which would result in real damage. For today, I should be grateful if the noble Lord, Lord Tunnicliffe, can confirm whether TfL is serious about providing its customers, as it were, with the ability to find out what is outstanding on their car or any car, so that the powers in the Bill will not bite on a citizen who has acquired a car from a habitual congestion charge offender.
However, there are things that I want to impose on TfL. We are considering a system that is not intended to be a disincentive to travel. When the congestion charge was introduced, it was deliberately made extremely hard to pay it, and it was deliberately made very painful for you if you forgot. After 10 o’clock at night, there was no escape; you paid the £50 penalty. There was no easy way of buying a book of tickets in advance and then simply ticking them off and being told when you had only two left. You could not pay by direct debit. All sorts of helpful ways in which payment could have been made were not implemented. We are getting slow and gradual improvement in that. I disapprove of this. I should be extremely upset if a Conservative mayor treated me that way. I expect it of the current mayor. There is some sense in it in that it is meant to be a penalty and a disincentive, and making it nasty and full of teeth is, in a way, a reasonable thing to do. That does not, however, apply to a toll.
We are providing this bridge to make it easier for people to travel between one place and another; indeed, we should encourage them to do so. We should therefore not deal with the toll as if it were a penalty and a disincentive. We absolutely must have a promise from Transport for London that, if it is going to take these powers and impose these penalties, it will make it as easy as possible for people to pay and that it will look for all sorts of innovative and useful ways to make as certain as possible that people using the bridge do not forget that there are many ways in which they can pay.
Transport for London must also ensure that when people fail to pay, by mistake or through inattention, they do not get slammed with a £50 fine that is part of a penalty regime. Of course people should pay a little extra, but it should not be a massive penalty or a trap for the unwary. A service is being provided. If someone is late in paying, the fee could be doubled, and then upped if it was not paid for a long time, but the regime should not be punitive. I really would like some comfort from TfL that it will approach this in the spirit of service to the user, rather than trying to extract the maximum possible revenue from those who are forgetful.
My Lords, I thank the noble Lord, Lord Tunnicliffe, for introducing the Bill and taking us through a number of its provisions, which are not immediately obvious to new readers, among whom I include myself. I should say to the noble Lord, Lord Lucas, that I am in no way a spokesman for the current mayor, although he would certainly wish to promote himself as someone who does not slap penalties on to users of roads subject to the congestion charge. My group was delighted when he eventually took up our proposal that there should be a facility for paying the following day. He had until then taken the view, which I felt was far too paternalistic and nannying, that it would confuse drivers to have the opportunity to pay the following day because they would naturally leave it until the next day and then forget. I am glad that that bit of progress has been made.
My Lords, it was not my personal initiative. I must ask the noble Lord, Lord Tunnicliffe, why he has introduced the Bill now. The Bill seems to spring from the requirements of the 1991 Act. Is it because of the prospect of the Thames Gateway Bridge? Perhaps the noble Lord will admit that someone has realised that the existing provisions are inadequate and that there is a need to expand them.
The first thing that occurred to me when I read the Bill was the constitutional position. We have heard about the safeguards, which are the Greater London Authority, which will have to confirm an order, and then, as a long stop, the Secretary of State. The mayor may be a member of Transport for London. If he is a member of the Transport for London board, he must be the chairman of that board. The Mayor also carries out the functions of the Greater London Authority. I admit that I have not quite got my head around the constitutional protections in Transport for London having to get confirmation of an order from the authority.
Clause 5(3) sets out a number of steps which the authority “may”, but not “must”, do in terms of consultation, publication and so on. It may be that this is exactly the same as under the congestion charging provisions. I have not had an opportunity to look, but perhaps the Minister or the noble Lord can assist me on that today or subsequently. I am unclear too on the parliamentary procedure or, to put it another way, the democratic input. Secondary legislation would normally have to go through some sort of parliamentary procedure, inadequate as many of us have described it on a lot of occasions.
I declare an interest as a member of the Liberal Democrat group on the London Assembly where we have considered the Thames Gateway Bridge frequently. If it is acceptable to us at all, it is acceptable only if there is a system of differential charging, so that vehicles such as international heavy goods vehicles are deterred from using the bridge as an alternative to the Dartford crossing. Very importantly, people who live locally want to be able to access employment opportunities and so forth on the north side of the river—the demand seems to be in that direction in particular—without having to pay as heavy a toll as those using it as a through route. I understand that local authorities, through the Thames Gateway London Forum, believe that this would be technically possible. On listening to descriptions of using new technology and vehicles, from a completely uninformed point of view, differential tolling seems likely, but I hope that that can be confirmed.
Before I say my next remarks, I should say that I and my party generally see a great deal of benefit in developing road pricing. A short search of the internet has turned up, inevitably, fairly extreme ideas, as one tends to get from people who share theirs with the world through the internet. How accurate it is, I do not know, given that the first item I found, from the London Motorists Action Group, says that this Bill has passed through the House of Lords largely unnoticed. Quite what we are doing giving it a Second Reading today, I do not know.
Perhaps the noble Lord would comment on an extreme, but possibly accurate, lay description of the Bill. It is a test bed for national schemes—I do not expect the noble Lord, Lord Tunnicliffe, to put his head on the block on that. Drivers will face six months in jail and a hefty fine if they tamper with spy-in-the-car tracking devices. There will be unprecedented stop-and-search powers to enter vehicles to check that devices have not been tampered with. Drivers who remonstrate with officials could face up to six months in prison. I do not imagine that they are fingered and put into prison immediately, but that is how this Bill reads. The same applies to obscuring registration plates or using false documents. Our discussions on the congestion charge have included quite a lot of debate on the obscuring of registration plates. Very muddy number plates are to be found on some vehicles.
The Minister may be able to comment on the suggestion that the Bill gives the Secretary of State for Transport powers to prevent a toll scheme going ahead if the equipment is incompatible with a national standard. This may be a matter for the original Bill, but it also occurs to me to ask whether the tolls we are talking about would apply to diplomatic vehicles, given the controversy over payment of the congestion charge by representatives in foreign embassies.
I have said that these suggestions are being put forward in lay terms. Because this is an enabling provision, but perhaps not only for that reason, the language of the Bill is not readily understandable and therefore it is not easy to understand its impact. I agree strongly with the noble Lord, Lord Lucas, that the legislative impact and legislative chains might well be made very clear.
My Lords, I thank the noble Lord, Lord Tunnicliffe, for introducing this small but interesting and possibly important Bill. I also thank my noble friend Lord Lucas for effectively giving us the opportunity to clarify some of its finer points today in your Lordships’ House.
The whole issue of how we pay for the use of our roads in this country is becoming increasingly vexed. We all saw the reports of how nearly 2 million people signed a petition on the Downing Street website opposing the Government’s grand plans for a national road charging scheme. We have also recently witnessed the westward expansion of the mayor’s congestion charging zone. We are in the middle of a departmental consultation on the new charging regime for the Dartford crossing. There is certainly a lot of movement in this area and it is therefore timely to be discussing legislation of this kind.
As the noble Lord, Lord Tunnicliffe, mentioned, the purpose behind the legislation is to set up a charging regime to pay for the new Thames Gateway bridge. Let me say at this point that of course we support the bridge and welcome the undoubted economic boost it would give to what has been traditionally a deprived area of London. However, it is the unintended consequences of this legislation which other noble Lords have mentioned that I wish to concentrate on. In general, we would be opposed to any road in London or anywhere else imposing two charges, both a toll and a congestion charge. If we are to have road charging, and it is likely that that will happen, it is only right that even if we have differential rates, each road should have only one charge on it. I am not clear how a congestion charge and a toll would fit together.
The chief objective of the Bill is to give Transport for London and by implication the mayor—although as the noble Baroness, Lady Hamwee, pointed out, the mayor could give himself his own approval—additional powers to provide for the operation and enforcement of toll orders similar to the powers exercised by TfL and the mayor over the congestion charge. However, my current reading of the Bill is that in theory—I stress that—it would confer on TfL the power effectively to impose a toll on any road in London. I know that my noble friend Lord Lucas may have been given some assurances, but I am still unhappy about this. In effect, any major trunk or arterial road could be subject to a toll; it would not restrict TfL to charging a toll on the gateway bridge. While TfL might have to go through a number of procedures and jump through some hoops before it could do so, the fact remains that this Bill may give it the potential to create new tolls wherever it wants.
The Highways Act 1980 provides the definition of a “special road”, as used in the New Roads and Street Works Act 1991, to describe which roads can be designated as toll roads, to which reference is made in the Bill. The 1980 Act provides that a special road is authorised not only by the construction of a new road but also by the “appropriation” of an existing one by the relevant transport authority, obviously in this case, TfL. Therefore, by definition, TfL could have the power to make a toll order under the powers in the Bill on any road in Greater London by appropriating an existing road and designating it as a special road.
Additionally, Clause 6 of the Bill states that the provisions of Schedule 23 to the GLA Act 1999,
“shall have effect in relation to the TfL toll order”.
Paragraph 9(2) of Schedule 23 to the 1999 Act states:
“A TfL scheme may apply to an area which consists of the whole or any part of Greater London”.
That could therefore mean that Clause 6 allows TfL to make a toll order on any road in Greater London. These are questions that in theory we all have some concerns about.
My other concern is that the Bill does not place any requirements on TfL to consult when exercising its powers. How will TfL meet the belief of London Councils that it is important that TfL should consult boroughs fully on any proposed toll order? Do the Government think there is a case for any proposed toll to be subject to full consultation with residents and businesses across the whole of London—even with the whole of the south-east—as London is strategically important to the whole region?
I hope I have managed to outline our concerns on this legislation. I hope that the Minister will be able to provide the reassurances that I and many Londoners are seeking. If he cannot give us all the answers tonight, I should be grateful if he would write to us and outline some of them further.
My Lords, I am grateful to my noble friend Lord Tunnicliffe, with his wealth of experience and his long history of working to make London a more mobile and accessible place. He has a great track record in that regard. I am pleased that it is he who is taking the Bill through the House of Lords rather than my good self. It is quite nice to share the excitement and the flak on these things, and he has done that job with his customary style and in good order. As the noble Lord, Lord Hanningfield, has said, this is a timely debate, given the issues that have been raised during this short discussion today.
My noble friend stressed in his speech that the purpose of the Bill is to allow Transport for London to make additional provision for the collection and enforcement of tolls pursuant to toll orders made under the New Roads and Street Works Act 1991. Great emphasis has rightly been placed on ensuring a more efficient and effective collection and enforcement regime. Having carefully considered the provisions in the Bill, I am happy to endorse my noble friend’s statements.
The 1991 Act provides for tolls to be collected to fund new roads. Transport for London, and indeed any other highway authority, may seek authorisation to charge tolls by making a toll order under the 1991 Act. Such toll orders are then subject to validation by the Secretary of State. Before the Secretary of State can validate the order, public notice must be given and interested parties have the right to object. If the Secretary of State receives an objection from any person, he can ask for a local inquiry to be held to consider any substantive points at issue. Such an inquiry is not mandatory. However, where a local inquiry is not held, the Secretary of State is still required to take into account any objections made when deciding whether or not to confirm the toll order. So there are checks and balances all the way through the process.
At the moment, TfL has applied only for the confirmation of one toll order, which relates, as we have heard, to the construction of a new bridge, which all parties support, known as the Thames Gateway bridge, which would connect Beckton to Thamesmead. Transport for London has made an order to authorise the charging of tolls over the new bridge to finance its construction. That again has a long history, as the noble Lord, Lord Hanningfield, made clear in his comments relating to the Dartford toll.
An application has been made by Transport for London to the Secretary of State for the validation of the order, together with related applications for planning permission and other orders needed to authorise the construction of the bridge. As the House has already heard, those applications have been the subject of a public local inquiry in Charlton which was concluded on 3 May 2006. The Secretary of State’s decision on those applications, including the confirmation of the toll order, is awaited.
The Bill will not change the key provisions of the 1991 Act. Should it receive Royal Assent, toll orders will still have to be submitted to the Secretary of State for validation. The Bill instead proposes to take the established process for imposing tolls forward on new roads by addressing shortcomings in the collection and enforcement regimes. We would all accept that things have moved on since 1991, with new technology and new means of collecting tolls. Again, I stress that it will apply only in circumstances where Transport for London has previously been authorised to charge tolls under a toll order made under the New Roads and Street Works Act.
Toll orders made under the 1991 Act presume that tolled roads or bridges will have barriers at one or both ends that operate to secure the collection of tolls and a means of enforcement. These are toll gates as we recognise and understand them. As we know from our experience as drivers, they can be slow, but in most cases they work very effectively.
The Government recognise that while such a basic tolling system was reasonable in almost all circumstances in 1991, matters have advanced. Using toll booths and gates slows traffic unnecessarily and adds to journey times and congestion. In the mean time, modern technology enables tolling to be carried out without the need for barriers. The provision of a more efficient means of collection and enforcement of such tolls can be only of benefit to the public purse and to the public in other regards.
I accept the argument, and disagree with the noble Lord, Lord Lucas, that the detailed provisions for the collection and enforcement of tolls under a Transport for London toll order do not belong in a Bill. Such lengthy and detailed provisions belong in a supplemental toll provisions order made by Transport for London. The key question is, therefore, whether adequate safeguards are built into the approval process for such supplemental orders.
Before confirming such an order, the Greater London Authority is required to give notice to the Secretary of State, who will then have the opportunity to scrutinise the order. He will have the power to object to any provision which confers a power on Transport for London that differs substantially from an existing Transport for London road user-charging scheme; for example, the central London congestion charging scheme. Should the Secretary of State make such an objection, the provisions of a supplemental toll order cannot come into force until the objection has been addressed. In this way, the Secretary of State will continue to be able to ensure that any new provision included in a supplemental toll provision order is reasonable and consistent with government policy.
The noble Lord, Lord Lucas, asked whether I can confirm that the Department for Transport and Transport for London would ensure that TfL’s enforcement activities are within the scope of any changes which emerge from the current consultations of the Department for Constitutional Affairs. I am happy to be able to commit the department to take all reasonable steps to achieve that objective.
The noble Lord raised some other points, in particular with regard to ensuring that prospective owners of a car can establish whether it is subject to outstanding penalty charge notices. Vehicle owners are, of course, responsible for ensuring that the DVLA is informed of the sale of a vehicle. It is in the seller’s interests to ensure that they are not liable for offences committed by the new owner. Transport for London will use DVLA data to ensure that new registered keepers are not subject to enforcement activities taken against the previous keeper of their vehicle.
As the noble Lord noted, in London, Transport for London is working to set up a database that will allow prospective new owners of vehicles to check whether a vehicle has been logged as a persistent evader. In addition to alerting the DVLA, the new registered keeper will also be able to advise the database keepers of the transfer of ownership and have the database amended.
The noble Lord, Lord Lucas, asked another question to which I may have an answer, or I may have answered it already. He asked whether a special road scheme incorporates an existing road and whether the Secretary of State can confirm the scheme. The Secretary of State cannot confirm the scheme unless he is satisfied that another reasonably convenient route is available for traffic other than the traffic authorised by the scheme or that an alternative route is not reasonably required. That is in Section 18(6) of the Highways Act. I hope that that answers the noble Lord’s question.
The noble Lord, Lord Lucas, made other points about contractors, licensing schemes, enforcement and penalties for owners of vehicles. I think that most of those points have been responded to. The Department for Constitutional Affairs is dealing with SIA and so on. I think that I have covered most of the noble Lord’s concerns. If I have not done so, and if the noble Lord, Lord Tunnicliffe, is unable to do so, I am sure that we can properly check Hansard and correspond with noble Lords whose points have not been addressed.
The noble Lord, Lord Hanningfield, drew attention to the importance of consultation with London boroughs. I agree with him, and I am grateful to him for raising it. I am sure that we can ensure that more-than-adequate consultation with London boroughs takes place. The procedure certainly suggests that, and I would expect it to be the case in any event.
This is entirely useful legislation. It does not give to Transport for London anything more than it already has. The legislation is modernising and will facilitate the collection of tolls for the financing of valuable new infrastructure across London. For those reasons, I am happy to add my commendation of the Bill to your Lordships’ House.
My Lords, I thank all noble Lords who have taken part in the debate and particularly the Minister for his support. I shall respond to one or two of the points that were made by the noble Lords, Lord Lucas and Lord Hanningfield, and the noble Baroness, Lady Hamwee.
On the scope of the Bill, and as has been confirmed by the Minister, I can assure both noble Lords that the Bill does not propose to provide Transport for London with any additional powers to impose tolls or to provide for London-wide road-user charging. Transport for London cannot impose tolls on roads without the Secretary of State’s confirmation under the New Roads and Street Works Act 1991, which is subject to procedural requirements including, in appropriate cases, the holding of public inquiries. Additional statutory safeguards, including parliamentary procedure, exist in relation to the imposition of tolls on existing roads. The Bill does not alter that position.
The noble Lord, Lord Lucas, also raised the matter of vehicles being entered by enforcement officers. The powers proposed by the Bill are based on Transport for London’s existing powers relating to congestion charging. As with the existing powers, the powers in the Bill would operate only in circumstances where it is suspected that deliberate steps have been taken to avoid payment of the toll or to avoid being identified as failing to pay the toll. The existing powers can be exercised only by constables or in the presence of constables, and it is envisaged that the same restrictions would be applied to the proposed powers.
I understand the concern of the noble Lord, Lord Lucas, about private bailiffs and the desirability of their being regulated. However, TfL does not use the services of private bailiffs. TfL officers who carry out on-street enforcement activities are governed by the Road User Charging (Charges and Penalty Charges) (London) Regulations 2001. Bailiffs who carry out debt collection on behalf of TfL are members of either the Certificated Bailiffs Association or the Association of Civil Enforcement Agencies and operate under a code of conduct.
The noble Lord, Lord Lucas, mentioned also that the payment of the tolls should be user-friendly. There were some teething problems with payment of the congestion charge when it was first introduced. Since that time, Transport for London has listened to customers and improved the payment methods available by introducing new methods to make payment easier. The payment methods are kept under review and Transport for London is considering the introduction of payments through direct debit.
Transport for London has sent a written response to the noble Lord, Lord Lucas, replying in more detail to the points raised by him and, as I said in my opening speech, Transport for London will be very happy to continue to discuss any remaining concerns of the noble Lord and other noble Lords and will respond to the detail in writing.
The noble Baroness, Lady Hamwee asked, “Why now?”. The answer is, of course, the Thames Gateway bridge and the need to put together a package so that negotiations can be entered into by potential construction and franchising firms. We will write to her on the constitutional matters but, broadly speaking, the constitutional form is meant to mirror identically, or more or less identically, the congestion charge regime. As for differential charging, Transport for London has shared some of its ideas with me that go some way to meeting the noble Baroness’s concerns, and we shall share the details with her in writing.
The two offences that carry the possibility of imprisonment are equivalent to existing offences relating to the congestion charging scheme which carry the same penalties. The first category relates to persons interfering with the equipment, obscuring or tampering with number plates or falsifying documents with the intention of avoiding payment of the toll or being identified as liable to pay the toll. The second category is when a person intentionally obstructs an officer authorised by TfL in the exercise of the powers under the Bill to enter vehicles when that person has reasonable suspicion that the vehicle contains equipment relating to the toll that has been tampered with or there are false documents. These are instances in which deliberate steps are being taken to avoid payment of the toll or being identified as failing to pay the toll, such as tampering with equipment or the provision of false documents. TfL considers that taking such deliberate steps is a serious matter and, in these limited circumstances, considers that the proposed penalties are justified.
I hope that I have covered most of the points made by the noble Lord, Lord Hanningfield. I say again, because it is important, that the Bill does not give TfL any new powers to impose tolls.
Noble Lords raised several other points, but there is other business to follow so I shall stop. I assure all noble Lords that what has been said will be very carefully studied by Transport for London. It is a great pleasure for me to be able to assure noble Lords that they will be written to on their points and the letters shared between them, and it is a great pleasure to know that I shall not be writing the letters but TfL will.
The Bill will assist Transport for London to finance the construction and operation of important new infrastructure projects in London, particularly the new bridge.
On Question, Bill read a second time, and committed to an Unopposed Bill Committee.
London Local Authorities Bill [HL]
Read a third time.
Clause 1 [Citation and commencement]:
moved Amendment No. 1:
1: Clause 1, page 2, line 30, leave out paragraph (b)
The noble Lord said: My Lords, perhaps notwithstanding the lateness of the hour I might be allowed a few introductory words. The promotion of a private Bill can be a long and tortuous process. Noble Lords may be surprised to learn that it was back in July 2005 that the House passed the Second Reading of this Bill.
A Bill of this nature is likely to attract opposition from a variety of quarters, and indeed that has been the case. When it was introduced, and as it remains, this Bill is the largest general powers measure promoted by local authorities in this House for very many years. Perhaps that may go a long way to explain why it has taken so long to reach this stage. The subject matter of the Bill is very wide-ranging in nature, dealing with matters as diverse as hostess bars, portable advertisements and overgrown gardens, and many other issues.
Opposition to the Bill came from a variety of quarters, including government departments. Originally, 26 petitions were deposited against the Bill and altogether there have been some 17 government reports on it. But I am pleased to report to the House that constructive discussions between the promoters and at least some of the petitioners and government departments led to amendments being made in Committee that have proved acceptable.
Not all petitioners were equally satisfied. The Select Committee, assiduously chaired by the noble Baroness, Lady McIntosh of Hudnall, and her colleagues—I see that my noble friend Lady O’Cathain, who was also a member of that Select Committee, is present—sat for 11 days in March 2006 and heard arguments from petitioners on a number of subjects. One of the most contentious, which noble Lords will remember was raised by a number of noble Lords on Second Reading, was that of Lincoln’s Inn Fields. Noble Lords will no doubt be pleased to learn that the Select Committee decided that those particular provisions should be struck out and they do not appear in the Bill before us this evening. The Bill was then considered by an Unopposed Bill Committee in June last year over two days, and since then it has been awaiting this stage.
Noble Lords may be interested to know why that long delay occurred because there were further discussions between the promoters and various bodies concerned with Part 4, which deals with second-hand dealers. That innocent phrase includes the whole of the London trade in arts and antiques. My noble friend Lord Brooke of Sutton Mandeville, who apologises for not being present, proved to be a doughty champion of that trade.
With that in mind, I shall now describe briefly the various amendments that are grouped with Amendment No. 1. These amendments reflect the decision of the promoters of the Bill to withdraw Part 4, which deals with the registration of second-hand dealers. Although that part is well precedented in other Private Acts, it attracted very strenuous opposition from the British Art Market Federation, which petitioned against the Bill and appeared before the Select Committee. It was only after that stage had been completed that the promoters became aware of the opposition of no fewer than four government departments; namely, the DCMS, which had the interests of the art market at heart; the DTI, which raised concerns about internet dealers such as eBay; the Cabinet Office better regulation unit, whose remit is to ensure that regulation is required only where necessary; and, perhaps most importantly, the Home Office, which objected to the fact that the police were to be given powers under Part 4 to carry out investigatory and enforcement activities. Given that the main purpose of Part 4 is to deal with the market in stolen goods, the promoters came to the view that without police powers the legislation would be largely fruitless. They considered the great weight of the opposition against them and came to the conclusion that it was so great that, had Part 4 survived this House, it might well have fallen in another place. We look forward to seeing how the Government take forward the whole issue of the registration of dealers in second-hand goods in the light of the consultation exercise, which I understand is to be undertaken by the Home Office.
I express my gratitude to the members of the Select Committee who argued, on balance, that the part should stay. I am also grateful to my noble friend Lord Brooke of Sutton Mandeville for withdrawing the amendments that he tabled at the request of the BAMF. Amendments Nos. 1, 3, 28 to 38 and 44 all involve the removal of Part 4. I beg to move.
My Lords, I thank the noble Lord for giving us the opportunity to have this Third Reading. I will speak briefly to set out the Government’s position on the Bill and on the amendments being tabled by the noble Lord today.
This is a private Bill and, by convention, the Government officially take a neutral line on such Bills, although perhaps with this one we might be stretching the definition of “neutral”. I am pleased that it has finally been able to have its Third Reading today, nearly two years after its Second Reading. I understand that an enormous amount of work has been put into the preparation of the Bill, and the discussions between the petitioners, the departments and its promoters have been taken very seriously. I pay tribute to all those involved for engaging so positively. The amended Bill is now a much more appropriate piece of legislation as a result of its scrutiny by the Select Committee and Committee on Unopposed Bills and the considerable negotiations that have taken place.
As the noble Lord indicated, when the Bill was first introduced there was considerable concern from many departments about specific provisions, which my noble friend Lady Andrews drew attention to when she spoke on behalf of the Government on Second Reading. I welcome the promoters’ positive engagement with departments over the past couple of years to address those concerns. I am pleased that the amendments being moved today address all of the Government’s remaining concerns, especially, as the noble Lord has highlighted, the withdrawal of Part 4 of the Bill about the registration of second-hand dealers in London, on which several departments had expressed concerns.
That means that the Bill is now much narrower in scope than originally intended, and I understand that that will have been a disappointment to the promoters. Nevertheless, it should still be very useful legislation, enabling boroughs to tackle more effectively a wide range of local problems in London, from unsafe portable adverts to mail-forwarding scams. It is a tribute to the noble Lord that he has persisted with the promoters to bring the Bill to this stage. I am happy to support this group of amendments and other amendments today.
My Lords, I thank the noble Baroness for her kind remarks. I am sure that the promoters will also be grateful for her concluding words. They have worked extremely hard at this, and they deserve praise.
I will say a word about the Committee on Unopposed Bills. It is one of those unsung services that Members of this House can perform from time to time with enormous value to the public weal, but for which there is never any publicity or kudos awarded. The promoters of the Bill, the whole House and I are deeply indebted to the noble Baroness and her friends, who spent so long examining the Bill, including a visit to Lincoln’s Inn Fields, which I am sure they enjoyed.
My Lords, as the chairperson to whom the noble Lord referred, perhaps it is appropriate to say that, although it was hard work, it was an invigorating, informative and, at times, extremely entertaining 11 days’ effort on our part. It is an entirely good thing that the Bill has survived in some form and that many of the promoters’ intentions have been preserved. Much in the Bill, even in its unreformed state, was well worth the effort.
I should also record my personal thanks to my fellow committee members, although they are not all in their place today. They worked extremely hard.
On Question, amendment agreed to.
moved Amendment No. 2:
2: Page 2, line 31, at end insert “and
(d) section 90 (mail forwarding businesses),”
The noble Lord said: My Lords, I shall also speak to Amendments Nos. 4, 40 and 41, all of which relate to Clause 90, on mail-forwarding businesses. The clause will introduce a registration scheme for such businesses in London. Its purpose is to assist trading standards departments in local authorities to fight the growing problem of mail-order scams, where people respond to advertisements by sending money to box numbers, only to find that they are being ripped off. The amendments are technical in nature. They serve two purposes. The first is to allow the London borough councils to bring the clause into effect on a date that they choose. This is a common-sense amendment because it enables them to ensure that they have all the registration documents in place first and that they are geared up to enforce the clause properly.
The second amendment introduces a transitional provision that will ensure that existing mail forwarding businesses are given a period of grace during which they can make an application for registration without fear of prosecution by the council when the provision first comes into effect. I beg to move.
On Question, amendment agreed to.
moved Amendment No. 5:
5: Page 3, line 28, leave out “said notice” and insert “notice in the London Gazette”
The noble Lord said: My Lords, I shall also speak to Amendments Nos. 8 to 23, 26 and 39. I do not intend to go through all of them in detail. They are minor drafting points that have been picked up since the Committee stage. One of them is a self-inflicted wound by the promoters. In the intervening period, the organisation’s name has changed. What once was the Association of London Government is now the London Councils; that has been reflected in Amendment No. 45. This gives me an opportunity to declare an interest as a joint president of London Councils, along with the noble Baroness, Lady Hamwee, and the noble Lord, Lord Graham of Edmonton. I beg to move.
On Question, amendment agreed to.
Clause 5 [Portable advertisements]:
moved Amendment No. 6:
6: Page 5, line 23, leave out “either” and insert “any”
The noble Lord said: My Lords, I shall also speak to Amendment No. 7. Clause 5 deals with a problem that was originally peculiar to Westminster and the West End but is now spreading to other London boroughs. The number of portable advertisements now being displayed in Oxford Street alone is out of control. As your Lordships will know, the display of advertisements is strictly controlled under town and country planning law but a loophole now enables “board guys”, as I understand they are called, to stand in the street holding sometimes enormous placards on heavy metal bars in quite inappropriate places. Clause 5 would bring the display of these advertisements under the control of the local planning authority.
The amendments are technical and have been requested by and agreed with the Department for Communities and Local Government. I hope that they are not controversial. They are intended to ensure that the offence of unlawful display does not, for instance, extend to the carrying of plastic bags with traders’ names on them or the wearing of T-shirts with company logos on them. I beg to move.
On Question, amendment agreed to.
moved Amendment No. 7:
7: Page 5, line 29, at end insert “or
(c) that the advertisement was displayed on an item used wholly or mainly for purposes other than advertising.”
On Question, amendment agreed to.
Clause 12 [Railway undertakers: provision for purposes of section 11]:
moved Amendments Nos. 10 and 11:
10: Page 17, line 25, after “undertakers)” insert “of the said Act of 1995”
11: Page 17, line 26, after “(4)” insert “above”
On Question, amendments agreed to.
Clause 23 [Regulations relating to receptacles for waste: enforcement]:
moved Amendments Nos. 14 to 21:
14: Page 26, line 2, at end insert “(in this section referred to as the “person responsible”)”
15: Page 26, line 11, leave out from second “the” to end of line 12 and insert “person responsible”
16: Page 26, leave out lines 15 and 16 and insert “person responsible”
17: Page 26, line 23, leave out from first “the” to end of line 24 and insert “person responsible”
18: Page 26, line 32, leave out from second “the” to “on” in line 33 and insert “person responsible”
19: Page 26, line 35, leave out paragraph (b) and insert—
“(b) a written statement that the accused was the person responsible on that occasion is produced to the court; and
(c) the statement purports to be signed by the accused,”
20: Page 26, line 39, leave out “statements” and insert “statement”
21: Page 26, leave out lines 40 and 41 and insert “person responsible”
On Question, amendments agreed to.
Clause 32 [Application of section 215 of the Town and Country Planning Act 1990 to vegetation]:
moved Amendment No. 24:
24: Page 35, line 33, leave out subsection (2)
The noble Lord said: My Lords, with this amendment I will discuss Amendments Nos. 25, 27 and 43. The Bill contains a large number of clauses that amend the existing street trading licensing regimes in all the London boroughs, excluding the City. One of the proposed amendments was to alter an exemption that is enjoyed by news vendors who sell their newspapers on the street, provided that the news-stand or cubicle that they use does not exceed a certain size. These are the sort of booths that we all find in the street and from which people sell papers such as the Evening Standard. When I was a young man, there were three papers: the Star, the Evening News and the Evening Standard. Now, there is only one such paper that you pay for.
I should emphasise that the exemption does not have anything to do with those who distribute free newspapers in the street, of whom there are now very large numbers. That activity is the subject of other private legislation in London, which has now been taken up by the Government nationwide under the Clean Neighbourhoods and Environment Act.
The Bill as it stands would remove the exemption for news vendors in cases where they were located within a certain distance of London Underground or mainline railway stations. I understand that, when the Bill was deposited, some London boroughs were of the view that they had no power to deal with these news vendors, even if there was a perception that they were causing a safety risk. On further reflection, and after some positive discussions with the representatives of Associated Newspapers, it has been decided that the provisions are not required at this time. These amendments remove them. I beg to move.
On Question, amendment agreed to.
Clause 49 [Transitional provisions]:
moved Amendments Nos. 40 and 41:
40: Page 71, line 21, at beginning insert “On and after the appointed day,”
41: Page 73, line 18, at end insert—
“(15) Subsections (16) and (17) below apply to any person who carries on a mail forwarding business in a borough on the date on which this section comes into force in that borough.
(16) Until the period of four weeks commencing with that date has expired, subsections (1) and (6) above shall not apply to the person in question.
(17) If an application for registration under this section is made in respect of the mail forwarding business during that period, the person in question—
(a) may lawfully continue to carry on the business as a mail forwarding business; and
(b) need not comply with the requirements of subsection (6) above,
until the council issues a certificate under subsection (2) above or the application is withdrawn.”
On Question, amendments agreed to.
Schedule 3 [Part III of the London Local Authorities Act 1990 (c. vii) as having effect as amended by the London Local Authorities Act 1994 (c. xii), the London Local Authorities Act 2004 (c. i) and this Act]:
moved Amendments Nos. 44 and 45:
44: Page 1, line 14, leave out paragraph (5)
45: Page 2, line 14, leave out “the Association of London Government” and insert “London Councils (formerly the Association of London Government)”
On Question, amendments agreed to.