House of Lords
Monday, 20 April 2009.
Prayers—read by the Lord Bishop of Ely.
Death of Members
My Lords, I regret that I have to inform the House of the deaths during the Recess of Lord Moore of Wolvercote, Lord Slynn of Hadley and Lord George. On behalf of the whole House, I extend our condolences to the noble Lords’ families and friends.
Education: Further Education Building Programme
My Lords, Sir Andrew Foster’s key finding was that a “good policy” had been,
“compromised by the manner of its implementation”.
We have fully accepted all of his recommendations, including the need to,
“agree how the present demand-led approach to the programme is replaced by a needs-based approach with explicit priorities and choice criteria”.
The LSC is now consulting the sector on the approach that should be used in prioritising schemes. This work will be taken forward urgently in order to bring clarity on the position as soon as possible.
My Lords, occasionally I have a bout of prescience, but not that much. I regret that I cannot. The LSC is now consulting the sector on the approach that should be used to prioritise schemes, and it has established a reference panel of college principals to help meet Sir Andrew’s recommendation to develop a needs-based approach. From our point of view, we want this to go forward as soon as possible; we know that a lot of colleges are eagerly awaiting the outcome.
My Lords, does the delay in capital spending not run totally counter to the Keynesian statements that the Government have made with regard to the recession? Is it not essential that these capital projects should proceed as soon as possible, if we are to have the trained and skilled people who we are told will be necessary for the future?
I agree, my Lords, but, to put this in perspective, between 1997-98 and 2006-07 more than £2 billion was invested in modernising FE facilities. My department will spend another £2.3 billion in the current spending review period, and we have brought forward £110 million in 2008-09 within that spending review period as part of our response to boost the economy. This relates back to the point that we need to get the programme going again, but yes, I agree with the noble Lord.
My Lords, is this not an example of a real confusion on the part of the Government and the Learning and Skills Council? The noble Lord mentioned a figure of £2 billion. I am told that the figure for London—for schemes held in abeyance and for which promises have been given—amounts to more than £1 billion. Why is it, in these circumstances, that the only people who ever resign are the officials in charge and nobody from the Department for Innovation, Universities and Skills?
Do I detect a certain scepticism, my Lords? I am shocked. To treat this seriously—as we do, because of the repercussions—the deficiencies were recognised by the LSC. That is why the chief executive, Mark Haysom, resigned on 23 March. As Sir Andrew Foster pointed out, the FE capital programme is a good policy that has delivered benefits for countless students, but it has been compromised by the manner of its implementation. That is unfortunately where the problem lay. We have appointed a new chief executive, Geoffrey Russell, who is getting on with the task.
My Lords, Sir Andrew Foster has called for a clear capital investment strategy for the further education sector. How can that be achieved when the responsibilities will very shortly be split in two between the pre-19 sector, which will be looked after by local authorities and the new Young People’s Learning Agency, and the post-19 sector, which will be looked after by the Skills Funding Agency? Who will oversee the capital budget?
I detect scepticism again, my Lords, but I assure you that we will. The most important point, which I reiterate, is that the LSC is consulting the sector on the approach that should be used to prioritise schemes. It is important to get the schemes which can go ahead back into operation. I will write to the noble Baroness and advise her in detail of the precise responsibilities of the Skills Funding Agency and the Young People’s Learning Agency.
My Lords, while all this is going on, what exactly are the Government doing to help the colleges continue all the valuable work they are doing in training students, training trainees, helping apprentices and doing what they can to get the economy started?
My Lords, does the Minister agree that this latest failure is symptomatic of a general failure to fund education properly in recent years, especially higher education? We read in the recess of the failure to fund sixth-form students properly and of money being withdrawn at the last moment. This has happened in higher education over the years. Does the Minister agree that it is not satisfactory to build up expectations of higher education and then fail to fund them when the young people come forward?
My Lords, we are dealing here with further education rather than higher education. It cannot be said that we are not spending significant sums on further education, including over £1 billion on the apprenticeship programme and similar on the FE programme. Similarly, over £2.3 billion will be spent on modernisation in the current spending review period.
Olympic Games 2012
My Lords, I thank the Minister for that response, but is she aware that the recruitment pattern shows that people are withdrawing from the sport and exercise medicine training scheme because no consultancy posts are available at the end? As part of a legacy issue, what will this mean for the Government’s target of having 1 million people taking exercise and doing sport, or will we allow them to do so only if they do not get soft tissue injuries?
My Lords, part of the legacy, as the noble Lord is well aware—he has been actively involved—is the creation of a faculty of sport and exercise medicine and the provision of consultants. That has already started. Seventeen consultants are now being trained, with a five-year training period. They will help to support the Olympic Games but they are, more importantly, part of the legacy. As the noble Lord will be aware, all the planning for NHS workforces is done locally, so the department is working with the planners at local level to ensure that the SEM consultants are integrated into local forward planning and the specialty is integrated in the NHS.
My Lords, the host country is responsible for what happens in the sports venues but, as the noble Baroness will be aware, many countries bring their own medical staff, so we also have an integrating and co-ordinating job to do. Many of the smaller countries are dependent on the UK providing them with some support before the Games to train their staff. That is integrated into the planning.
My Lords, the noble Baroness points to the very important matter of backfilling. As she will be aware, we will recruit volunteers. That recruitment starts towards the end of this year; the job descriptions will be written over the summer. We have set up a committee within the department to plan the backfilling. We have no intention of lowering any of the standards of provision, either in hospitals or in relation to doctors across the capital. We are keen that our medical expertise should be used to support the Games.
My Lords, does my noble friend recall that the 2014 Commonwealth Games are to be held in Glasgow? What co-operation and discussions are there between the Government and the Scottish Executive about mutual co-operation and assistance on this and other matters?
My Lords, any major sporting event between now and the Games is, of course, an important dry run to make sure that we achieve the right kind of medical support at the Olympic Games. The team within the department that is responsible for planning this is indeed working with the Scottish Executive, both to support them in their efforts for the Commonwealth Games and to make sure that we use that as a training ground for the medical expertise that we will need for the Olympic Games.
My Lords, will the Minister please say what evidence there is that the Mayor of London and his team grasp the scale of the opportunity in east London presented by the Games outside the 11-mile blue fence that surrounds the Olympic Park? What steps are they taking to promote the Water City vision for the place and the people, which is in all the documentation about the future of the area? What practical steps are they taking to engage with social entrepreneurs and social enterprise, which both main parties say are central to their thinking? I declare an interest as a promoter of the wider Water City vision.
My Lords, the noble Lord is going slightly wide of the mark of the subject of medical help. However, as he will know, I am very sympathetic to his work in promoting social enterprise across London and particularly in east London. I know that the mayor and the mayoral office have been active in trying to bring that forward and to ensure that small businesses and social enterprises play a part in the construction and delivery of the Games.
My Lords, I bring the Minister back to the essential problem, which is that there are not enough consultants in sport and exercise medicine. There are not enough being trained, there are not enough posts and there are not enough career pathways. If we add to that the fact that the Government are encouraging everyone between the ages of 40 and 74—although I am not quite sure why there is that cut-off point—to take more physical exercise, would she agree that it might be better if we followed the dictum of the late Max Beerbohm, who said that whenever he felt the need to take exercise he simply lay down until it wore off?
My Lords, I thought that it was George Bernard Shaw who said that. The noble Baroness raises an important point, but the point about the medical staff whom we need to deliver the support for the Olympic Games is not that they should all be consultants; the important point is that we have the right doctors in the right place with the right experience. I just make the point that, week in and week out, we have medical staff and doctors on football pitches and at athletic events across the UK and theirs is the experience that we will draw on. However, we are committed to the growth of this speciality and to making sure that the jobs are there for the young doctors who commit to becoming sports consultants.
My Lords, the commitment made in the bid was not about consultants but about doctors who are qualified to do the job to support the Games. We are committed to creating medical consultants for sports and exercise as part of the legacy. That is the point.
My Lords, all sentenced prisoners detained in UK prisons are barred from voting in British electoral regions for European elections. EU citizens who are eligible to vote in other member states will be given such assistance as practicable to enable them to exercise their vote. Arrangements for British prisoners detained in prisons in other member states are for the authorities in the relevant member state in accordance with those prisoners’ voting entitlement.
My Lords, I thank the Minister for that predictable reply. I remind the House that it is now five years since the European Court found that the Government were in breach of European human rights by denying prisoners the right to vote and four years since the Government’s appeal against that ruling was rejected. It is also four years since the Government announced a consultation on that ruling, which was reported on only last week at the same time as the announcement of a second consultation on the same subject. I have two questions: first, why is there this continued prevarication in defiance of the rule of law, of human rights and the rehabilitation of offenders—all causes that the Government claim to champion? Secondly, what message does the Minister think that that continued defiance of the rule of law sends to prisoners?
My Lords, there is no defiance. Prisoner voting rights is a sensitive and complex issue. As Ministers have promised, we recently published a second, more detailed public consultation on how voting rights might be granted to serving prisoners and how far those rights should be extended. Frankly, we need to take the wide spectrum of opinion in the United Kingdom together with the considerable practical implications for the courts and prison authorities and for the conduct of elections. We aim to arrive at a solution that fully respects the judgment of the court while fitting appropriately with the traditions and contexts of our own country.
My Lords, is the Minister aware that the Republic of Ireland, the Republic of Cyprus and Hong Kong have found it easy to enact measures to give prisoners voting rights? Will he explain why we are finding it so difficult, if it is not—as I believe it to be—an example of timidity in the face of what the Government fear from the press? Have the Government taken into account that their timid prevarication will lead to costs to the taxpayer if prisoners take cases to Strasbourg for this gross violation of a binding judgment and then we have to pay the costs of all these legal proceedings? Was that taken into account when the Government decided to kick this into the long grass?
My Lords, on a previous occasion I quoted the noble Lord back to the House. The noble Lord is on record as saying only in November of last year that neither he nor the Joint Committee on Human Rights was suggesting that the Government have an overall bad record in terms of implementation of the judgments of Strasbourg. He went on to say that that is not the case. In answer to the supplementary question of the noble Lord, Lord Ramsbotham, I tried to explain that the question of whether prisoners, who by some arguments forfeited their right to vote while they are in prison, should be allowed to vote is a difficult one. The European Court of Human Rights has spoken, and we have to implement that judgment. How we implement it is a difficult issue, and would be for any Government.
My Lords, does the Minister not agree, however, that it is simply not a matter of “may” or “might” but of “must”, and that for some years we have clearly been in breach of a specific legal obligation? Does he not agree also that it is entirely wholesome that these people, who have been placed beyond the walls of society for their transgressions—and perfectly properly so—should be reminded that they are human beings and citizens with fundamental rights? Indeed, in some cases that situation may remind them of the reciprocity between obligations and rights in relation to the community.
My Lords, I have to remind the House that when the European Court of Human Rights ruled on the appeal in October 2005, about three and-a-half years ago, it did not specify which prisoners should be given the vote. Indeed, the Court held that the blanket ban was unlawful, but expressly recognised that each member state had some discretion as to who should be given the vote. The Court expressly stated that it was not for it to impose on the UK full voting rights for all prisoners, but it was for the UK, through its democratically elected Parliament, to implement the judgment, taking into account its constitutional traditions. That is why in the second consultation paper, produced earlier this month, we set out a number of different options. Indeed, we invite noble Lords with views on this to answer the consultation.
My Lords, is it not clear that despite the judicial imperialism, to which we are becoming accustomed, the British people have not been asked to give their view on the matter, and that the Parliament of this Kingdom has not yet been invited to give its view on this matter? The noble Lord and his colleagues are to be congratulated on resisting the judicial imperialism, of which we hear far too much.
My Lords, I am tempted to thank the noble Lord. However, I will resist that temptation because we do not see this as judicial imperialism. I have to say that the judgment of the Court could just as easily have been made when the Government of which he was a distinguished member were in power, and it would have been just as necessary for them to react to it in the same way.
My Lords, whether or not prisoners have the right to vote in European elections, is it not worth reflecting on a broader note? Of those who have the right to vote in European elections, a substantial majority do not bother to exercise it. Is not one of the reasons for this that elections to the European Parliament are conducted on the basis of proportional representation, a system that removes the relationship between the elected and the electors? Would it not be wise to take a lesson from recent history, that the best system for European and any other elections in this country is that of first past the post?
Conflict Prevention Operations
My Lords, the process of prioritising conflict resources for 2009-10 has involved difficult decisions. We cannot fund all activity to the same level as in previous years, including civilian secondees. However, rigorous prioritisation and the additional £71 million of departmental resources have allowed us to maintain our significant contribution to international peacekeeping and to fund priority conflict prevention and stabilisation activity. We will keep the allocation under review to ensure that it focuses on the highest priority areas.
My Lords, I thank the noble Lord for that somewhat discouraging reply. Is it not the case that not only are the Government not restoring any of the cuts that they are making, but that, if you read the Written Statement given to this House and the other place on 25 March, you see that in the event of assessed contributions—that is, legally enforceable contributions to UN operations—increasing, or the exchange rate falling again, this discretionary spending on civilian peacekeeping will be further squeezed? Is this not the worst possible time for the British Government to be cutting their contribution to these programmes? Does that not set an appalling precedent for other major donors?
My Lords, we probably all share the noble Lord’s concern. Since he first raised this matter in a letter to the Financial Times with others of his colleagues in this House, we were able through great efforts by three departments—the Department for International Development, the Ministry of Defence and the Foreign Office—to add £71 million to our total peacekeeping budget. This year it will stand at £627 million as against just under £560 million last year, so we have increased the resources. The difficulty, as the noble Lord indicated, is that the assessed contributions—the UN and other operations for which we pay a fixed proportion of the cost—have increased because the number of those operations has grown.
My Lords, the Minister mentioned the Ministry of Defence. Does he agree that the Armed Forces are now so stretched by current operations that they are unable simultaneously to perform the peacekeeping roles that they have so successfully performed in the past?
My Lords, the UN-mandated peacekeeping operations, OSCE operations and others involve quite small numbers of UK forces. We therefore very much hope that we will be able to hold our own and remain involved with both military advisers and civilian expertise where required.
My Lords, does the Minister accept that this is just one of a series of notifications that we have had in recent months about squeezes on defence spending and further squeezes on the Foreign Office budget? It is now clear that, whoever wins the next election, there will have to be some fundamental thinking about how much we spend on foreign policy, defence and overseas aid and how that money is distributed. Some of us are old enough to remember the painful all-party commissions on that subject in the 1960s. Would it not be sensible for the Government to invite the other parties to support an all-party review of how much we spend on what, ready for whoever comes into office after the next election?
My Lords, I suggest that one of the noble Lord’s colleagues asks that question of the Chancellor in the other House. If we believe what we read in the newspapers this week, all government spending will be squeezed significantly; that is a cost of the recession and the necessary response to it. However, I point out to noble Lords that on this issue we have increased our spending by £71 million precisely because we share the concern of many here that we must try to maintain our role in peacebuilding and conflict prevention.
My Lords, on the reality behind those figures, what impact will this have in Liberia, which I visited recently on behalf of the FCO, where I saw for myself the important work of peacekeepers in bringing a degree of security and stability to a country which is still feeling the impact of the ravages of civil war, and where theft and violence, particularly sexual violence, are a reality of daily life for many of its citizens?
My Lords, I do not have the exact figures for Liberia. However, in Sierra Leone, which I visited recently and which has had a major UK programme, there are real costs, as there are in Ghana. Overall, we will see a reduction of something like £45 million in our conflict prevention and peacebuilding spending in Africa. I stress that there is an enlarged envelope, but peacekeeping operations such as those in Darfur are now reaching full deployment and the costs of those assessed contributions are squeezing out the funds available for discretionary ones.
My Lords, are other countries playing their role? There is no doubt that the British Government are doing an enormous amount in all these areas, and have a high reputation in that regard, but the perception is that, proportionately, other major economies are not doing anything like what we are doing. Can we put pressure on them to pay up?
My Lords, the noble Baroness will have noticed that at the G20 summit the UK pressed heavily for other countries to meet their commitments to development assistance and will do so at the forthcoming G8 summit. Our track record is without equal, at least among the G8 countries. I acknowledge the tripartisan support that has enjoyed here and in the other place. Although we carry a disproportionate part of the peacebuilding and peacekeeping burden in theatres such as Afghanistan, other European countries do proportionately much more than we do in other, much smaller operations such as the Balkans.
Arrangement of Business
My Lords, with the leave of the House, my noble friend Lord Myners will now repeat the Statement on the G20 summit made in the Commons before the Easter Recess on 2 April. Given the level of interest on the G20 summit in the House, the usual channels have agreed to extend the period of time for Back-Bench questions and answers by 10 minutes, from 20 minutes to 30 minutes. My noble friend Lord West of Spithead will then repeat the Statement on Operation Pathway.
My Lords, with the leave of the House, I will now repeat a Statement made in another place by my right honourable friend the Chancellor of the Exchequer on the G20 meeting held on 2 April. The Statement is as follows:
“Today, leaders and Finance Ministers from countries all over the world have come together in an unprecedented show of unity to take action on the greatest economic crisis of modern times. That crisis has deepened since the last G20 summit and it is now affecting the lives of people in every country. Today, we have agreed to do whatever is necessary to restore confidence and growth in our economies, to repair the financial system, to restore lending, to strengthen regulation and supervision, to rebuild trust in the financial system, to fund and reform the international financial institutions to overcome this crisis and prevent further ones, to promote international trade and reject protectionism, and, crucially, to build an inclusive, green and sustainable recovery.
There are no quick fixes, but, because of the progress that we have made today, by agreeing to work together we can help to restore confidence, save jobs and bring the world economy out of recession.
First, we agreed to deliver the scale of sustained fiscal effort necessary to restore growth. That does not mean that all countries will act in exactly the same way or at exactly the same time, but it does mean that an agreement has been made to take whatever action is necessary to restore growth. We are confident that the action agreed today will accelerate a return to trade growth.
Since the summit in Washington in the autumn, G20 countries have announced and are now implementing the greatest macroeconomic boost the world has ever seen. The combined fiscal expansion across the G20 will put an additional $5 trillion into the world economy by the end of next year. That will save or create millions of jobs across the world this year alone.
Central banks across the G20 countries are also taking exceptional action, cutting interest rates aggressively in most countries and using all levers available to put money into their economies to support growth. We have already made available significant support for individual banking systems through liquidity, recapitalisation and dealing with problem assets in line with our agreed framework for restoring lending. In all the actions to support the economy, there is a determination to ensure long-term sustainability and price stability, as well as exit strategies for Governments’ involvement in the banking sector.
The immediate cause of this crisis is a failure in the global financial sector and in global financial regulation. It is imperative that we rebuild trust and clean up the global banking system. As part of that, we must build stronger regulatory systems that support growth and serve the needs of people and business. Domestic financial regulation must be reformed to promote integrity, guard against all types of risk, discourage excessive risk-taking, dampen rather than amplify the effect of financial shocks and protect consumers as well as investors.
We also want a more globally consistent regulatory system. To that end, we agreed today to establish a new Financial Stability Board, with wider groups of developed and emerging countries as members, which will work together with the International Monetary Fund to spot risks and provide early warning. We also agreed to endorse and implement new tough principles on pay and compensation and to expand regulatory oversight to all systemically important financial institutions, including hedge funds.
We will also take action to protect the world’s financial system—and therefore our public finances—by cracking down on tax havens, and we note that the OECD has today published a list of countries assessed by the global forum against the international standard for the exchange of tax information.
We must give international financial institutions, such as the IMF and the World Bank, the legitimacy and the power to provide surveillance and support. It is crucial that emerging and developing economies can continue to receive the flows of capital on which they depend. Over the past few years, some 70 per cent of world economic growth has come from those economies, and we must not let them down now.
We have agreed a trebling in the resources available to the IMF, from $250 billion to $750 billion. We also support a substantial increase in lending of at least $100 billion by the multilateral development banks, including to low-income countries.
We have also agreed to support an injection of a further $250 billion into the world economy, increasing global liquidity through a greater allocation of IMF special drawing rights. These steps will provide an additional $850 billion of financing to support growth in developing and emerging countries, which will be able to continue trading with us and other G20 economies, in turn supporting global growth and employment.
Hand in hand with more resources will come reform of the IMF and the World Bank. Emerging and developing countries need to be represented too, so we agreed that the next review of IMF representation should be concluded by January 2011, while World Bank reforms must be completed by next spring.
World trade has underpinned rising prosperity for half a century, but today it is falling for the first time in 25 years, so we have agreed to support international trade as a crucial driver of growth in countries everywhere. International trade is currently being undermined by a shortfall in trade finance, on which 90 per cent of all world trade depends, so we have agreed today to make available over the next two years not $100 billion but $250 billion through G20 export credit and investment agencies. So in total, we have agreed over $1 trillion of additional support for the world economy, and this will support trade, growth and jobs.
We remain committed to reaching an ambitious and balanced conclusion of the Doha development round, as we believe that this could boost the global economy by a further $150 billion a year.
The fifth element of the agreement today is a commitment to help the world’s developing and emerging countries. We reaffirmed our historic agreement to meet the millennium development goals and to achieve our respective pledges on aid, debt relief and development.
This action, and the decisions that we have taken today, will increase the resources available to low-income countries by $50 billion, for social protection and long-term food security, for example. We will act and do everything possible to build a fair and sustainable recovery.
We agreed also to make sure that when we support our economies, we do so in a way that also protects the environment. We will support investment in clean, innovative and resource-efficient low-carbon technologies.
We will also support those affected by the crisis by creating job opportunities and through income support measures. We will support employment by stimulating growth and investing in education, and through active labour market policies that focus on the most vulnerable.
This is a global crisis, and today there has been a global response. We will play our full part, and I commend this Statement to the House”.
That concludes my right honourable friend’s Statement.
My Lords, I thank the Minister for repeating the Statement made in another place immediately prior to the Recess. It is, of course, unusual for Statements to be repeated after the lapse of so much time, but this Statement was due to be made after this House had risen for the Recess, and we therefore agreed that the House would be better served by taking the Statement today.
The G20 leaders are now long departed, having duly praised themselves at the concluding press conferences, and we have had the intervening two and a half weeks to reflect on what the G20 meeting achieved. The G20 has barely left the headlines in the media in the past couple of weeks, but for all the wrong reasons. The behaviour of the police, at the G20 demonstrations and subsequently, has raised serious questions about the acts of individual police officers and the strategy for dealing with demonstrations.
The Minister did not repeat what the Chancellor actually said in the other place. The Minister omitted an expression of the Government’s thanks to the police for their effectiveness and professionalism. For the most part that was justified praise, but we cannot airbrush the problems away. I hope that the Minister will agree with me that it is vital that the Independent Police Complaints Commission conducts its inquiry into the death of Mr Tomlinson and into the other complaints as rapidly as possible.
The Prime Minister puffed the G20 meeting in advance as creating “a new world order” and “a new Bretton Woods”. Of course, it did nothing of the kind, and the Chancellor’s Statement had the good sense not to claim that. Nor was it an abject failure. It avoided disagreement, although this was achieved by avoiding contentious issues such as the impact of China’s trade surpluses and currency policy, and by appeasing our quarrelsome European neighbours. It did achieve agreement to some important things, such as reform of the World Bank and the IMF, at least in terms of direction if not yet in terms of tangible outcome. It did not seem to agree to some things which are manifestly wrong or harmful. For example, despite all the Prime Minister’s efforts to the contrary, the G20 did not advocate a further fiscal stimulus.
We are thankful that the communiqué referred specifically to the need to preserve long-term fiscal sustainability and to credible exit strategies from the measures already taken. We hope that the Chancellor has taken this to heart. The Budget later this week must not be an exercise in avoiding the truth about the country’s financiers and must recognise, as the G20 did, the need for fiscal sustainability.
One area where the G20 was disappointing was on world trade, where there was talk of remaining committed to reaching a conclusion to the Doha round but no associated actions. Can the Minister explain what this commitment means in practice? What precisely is going to happen to the Doha round and when?
More generally on trade, the communiqué reaffirms the Washington commitment to refraining from raising new trade barriers without even acknowledging that 17 of the G20 have, since last November’s meeting, raised barriers or tariffs. This commitment has been extended only to the end of 2010, which sounds like a free-for-all waiting in the wings. Can the Minister explain what the Washington commitment now amounts to?
Lastly on trade, the communiqué refers to at least $250 billion of trade finance over two years. Can the Minister say what this means in monetary terms in each of 2009 and 2010? By how much do UK exporters benefit, and is this new money or is it a reannouncement of existing commitments? The back-up documents show only $3 billion to $4 billion going into an IFC liquidity pool but what about the rest of the $250 billion? Which countries is that coming from and where will it go? How much will the UK provide?
The Statement referred to more than $1 trillion of additional support for the world economy, which was a fine headline-grabbing amount of money. Apart from trade finance, to which I have just referred, the IMF will get $500 billion in increased resources and $250 billion of special drawing rights. Was all the $500 billion new money agreed at the G20 or did it, as the Prime Minister has appeared to suggest, include $200 billion of money already pledged by Japan and the EU? How much is the UK contributing and when? Will it show up in this week’s Budget Statement? Can the Minister say how much of the $500 billion is being paid to the IMF in hard cash, and when will the IMF receive it?
Turning to the $250 billion of special drawing rights, can the Minister confirm that this is the IMF’s form of printing money? The small print says that there will be a general allocation of SDRs and that $100 billion will go to emerging markets in developing countries. Where is the rest of the $250 billion going? Can the Minister explain where the liquidity for the SDRs will come from and what controls the IMF will exercise over their use?
The Government have been talking up taking the stigma out of applying to the IMF. We have no wish to stigmatise those countries which, through no fault of their own, have seen their economies hit by the collapse in global trade. However, we have a problem if the Government are rolling the pitch for an application by the UK. If we have to go down the 1976 route again, the Government will most certainly deserve blame. Will the Minister today rule out the Government applying to the IMF for funds?
Lastly, the Statement talked about saving or creating millions of jobs across the world in this year alone. Do the Government not realise that statements such as that demonstrate more than anything else that G20 meetings and the like have no resonance for the people in this country? Unemployment in this country is now over 2 million, rising at the fastest rate since records began and likely to hit a peak of over 3 million. How many jobs are being saved here? People will not be fooled by headlines created by a passing caravan of world leaders. At the end of the day, fine words and smiles from world leaders have no meaning if jobs are still being lost and houses are being repossessed. The task of fixing the UK's economy remains a massive one and that is the task by which the Government will be judged.
My Lords, we are grateful to the Minister for repeating the Statement, albeit after such a long interval. For those noble Lords who are not avid readers of every last bit of your Lordships’ Hansard, I can say that the Minister, the noble Baroness and I spent the afternoon of Thursday 2 April, when we might have been taking this Statement, happily engaged in Committee on the Saving Gateway Accounts Bill, to which we return tomorrow. That is presumably why we did not take the Statement then.
Two and a half weeks later, the Statement already reads like an historical document, but we should accept as a starting point that the summit, by the standards of these events, was quite a success. That was for two reasons. First, arguably for the first time ever, the key developing economies participated on an equal basis with everybody else. The benefit of operating through the G20 rather than the G8 on major international economic issues was amply demonstrated in this summit. The second reason why the summit was a success was that it reached agreement on a raft of issues, which, if implemented, could have a substantial impact on the global economy. Obviously, as the noble Baroness said, it does not solve every last issue facing global leaders in economic management, but it dealt with a substantial number of the most urgent of them.
However, I am aware, and I am reminded of it by the noble Baroness’s response today, that there is a considerable degree of cynicism about such summits, not because of what they agree at the time but because of the extent to which agreements reached at the time are then carried out when the leaders go home. I have a question for the Minister on the process that now follows the summit. I gather that there is to be another, follow-on summit in September or some time in the autumn. In the mean time, has the noble Lord, Lord Malloch-Brown, been condemned to act as a perpetual Sherpa shuttling around trying to ensure that there is an adequate report on progress between the summits and a sensible agenda for the next summit? I rather hope that he might do that, because he is probably very good at it, but will the Minister say something about the process and how we can ensure that these events, which have a big part to play in driving forward co-ordinated action at a global level, are properly supported rather than requiring huge efforts by the host leader, which might or might not happen depending on domestic circumstances? Such summits also require a tremendous amount of back-up work across a whole raft of issues. What action will the UK take to ensure that we play our part in that and that the process itself is robust?
On the specific issues that arose, the Statement talks about exit strategies, as the noble Baroness mentioned, including involvement in the banking sector. I will say something about the banking sector in a minute, but in the mean time I would welcome a commitment from the Government that, until we have an exit strategy—we certainly do not at the moment—for those banks that are now in the public sector, they will be treated as if they were in the public sector with government direction rather than as if they were in the private sector and therefore incapable of being so directed.
Secondly, there was a welcome reference to cracking down on tax havens, which is an issue that we debated recently in your Lordships’ House. The question is, again, whether the momentum will be maintained. In the UK, on Wednesday, we have the publication of the Foot report on tax havens in those territories for which we have some responsibility. I rather regret that the report is being published on Budget Day, when it will get the least possible coverage. I would welcome an assurance that that does not mean that the Government will let up on their new-found desire to be tough on tax havens.
The summit agreed to $1 trillion of additional support for the world economy. In its minor way, that is a great achievement for the Prime Minister, because he said that he wanted the summit to agree to a boost to the global economy of at least $1 trillion. He did not mean this kind of $1 trillion; he meant a fiscal stimulus. However, he has managed to cobble together $1 trillion of worthwhile support by the IMF. Like the noble Baroness, we hope that that $1 trillion will be put to use rather than sit on the books of the IMF. I share her concern that there was but a passing reference to Doha at a time when we need far more impetus on it.
The summit discussed briefly the need to do everything possible to build a fair and sustainable recovery in a way that protects the environment. There has been quite a lot of criticism that the summit did not do more in that respect, but I was cheered by statements over the weekend by the Chinese suggesting that they may set energy efficiency targets and CO2 targets way beyond anything that they have done before. I wonder whether the Minister could say anything further about that. If the Chinese come on board in that way, for the first time it will be possible to have a global settlement on CO2 targets.
However, the Government need to look to their laurels in respect of the environmental agenda. In particular, their foot-dragging on carbon capture and storage over the past two or three years has been absolutely pathetic. Can the Minister tell us anything today about when serious decisions will be taken to get pilots on carbon capture and storage moving ahead? There is no reason to delay.
Finally on the specifics, the Statement talked about tough new principles on pay and compensation. When the Statement was read in another place, my colleague Mr Cable asked the Chancellor what that meant for British banks, particularly the nationalised banks, in respect of pay. He pointed out that the Royal Bank of Scotland was proposing to double the pay of its senior management from an average of £150,000 to £300,000 to compensate for the loss of bonuses. He asked whether that was true and, if so, whether the Government would stop it. The Chancellor did not begin to give an answer and I wonder whether the Minister may do so today.
Generally, does the Minister accept that, across the broad swathe of issues covered by the summit and the communiqué that he read out today, the best way in which Britain can exercise its influence on a global stage is by taking the action that the summit requires of everybody, so setting a lead that others may follow?
My Lords, I start by responding to the final comments of the noble Lord, Lord Newby. I believe that the G20 made major progress in establishing a basis for restoring confidence and growth in the world’s economies and repairing the financial system and, in so doing, restoring the availability of credit, which is so important to economic activity—but restoring a growth of credit in an environment of strength, regulation and supervision, which will address the core causes of much of the serious problem that the global economy currently faces. If we do that successfully, we will rebuild trust in our financial system and in our financial institutions. To do this, we also need to fund and reform the international financial institutions: the IMF and the World Bank in particular. That was an important area of shared agreement in the G20 announcement. We will also work hard with other member countries of the G20 to promote international trade and to reject protectionism.
I welcome the strong endorsements by the noble Lord, Lord Newby, for the G20. For far too long, these international fora have been dominated by the old world order built around dominant countries from the developed world. We have now brought into this forum a much broader membership, which is absolutely critical. The next stage is to ensure that the importance of the world’s developing economies is reflected in the governance of the IMF and the World Bank.
The noble Baroness, Lady Noakes, quite correctly pointed out that I did not include the words that my right honourable friend the Chancellor used in advance of reading his Statement to the other place, which included a reference to the policing of that day—an issue that was also picked up by Mr George Osborne. I share her concern that, if there were any policing failures, they must be appropriately investigated and followed up. I am not going to prejudge this matter; it is being appropriately handled. I warmly support and endorse the right to demonstrate—the right to join others to express views. Indeed, I have participated in demonstrations in my own past. I have always done so lawfully, but that requirement to be lawful applies to all involved in the demonstration, including those who are charged with policing and managing it.
The noble Baroness referred to a number of achievements, particularly the strengthening of resource for the IMF and the World Bank, and I am grateful to her for those comments. There are, of course, no quick fixes; this is a global problem of truly enormous scale and is quite unparalleled in modern times. However, we saw in the G20 a commitment to sustained fiscal effort across G20 countries. There was a commitment on the part of all countries to recognise that no one country can lead us out of global recession through its own fiscal policies and that there is a need for each country to determine, as part of a global commitment, a series of domestic programmes appropriate to its own particular circumstances.
I share the noble Baroness’s concern about Doha. I know that many in this House, and certainly in government, wish to see real progress on Doha. There have been a number of changes in international leadership and in the heads of Governments of major economies in recent months, and we are hopeful that those changes may presage a change of attitude to bring Doha to a conclusion. It is simply unacceptable for Doha to continue to lie in the “work pending” basket rather than being put into the “work completed” basket.
The noble Baroness asked about trade barriers. There is an incipient tendency towards protectionism under the guise of patriotism. The G20 was clearly alert to this and charged the WTO specifically with drawing to the attention of G20 leaders and monitoring any steps that they regard as protectionist.
The noble Baroness asked a number of questions about IMF resources, in particular whether they represented a printing of money. The SDR issuance is not simply an increase in the global money supply; it is closer to global liquidity insurance programmes. A substantial SDR allocation will increase EME access to liquidity and will therefore provide an important source of credit and liquidity to keep the global economy operating in an efficient manner.
The noble Baroness also asked about the $250 billion of additional short-term trade financing, which will be made available over the next two years. Of that sum, approximately $50 billion will come from public/private sector commitments via a new IFS facility. Nearly $200 billion of world trade support will come from G20 members bilaterally, predominantly via their export or investment agencies. Whether the UK will benefit from this, or the extent to which the UK will benefit, will depend on how well we compete in international markets for the provision of products and services. I am confident that our outstanding skills in manufacturing and export services mean that we will get our full share of the benefit of the increased demand that will arise as a consequence of this new facility.
In her closing remarks, the noble Baroness referred to a passing caravan of world leaders having little impact on people’s lives. I believe that that is to understate the consequence of the G20. The G20 brought together the world’s major leaders in a quite unparalleled commitment to address a global shortfall in demand and to be frank about the causes of that shortfall; to bring forward specific programmes to address deficiencies in the governance, leadership and regulation of financial institutions; to broaden the span of institutions to be brought under regulatory control; to address tax avoidance through tax havens; and to ensure that in doing this we remained alert to the needs of those who were not represented at the G20, including those in the poorest countries of the world.
I am pleased that the noble Baroness referred to concerns about people in this country, including those who have lost their jobs or have had houses repossessed. It is pleasing to hear the Conservative Party finally acknowledge that these are real issues, even though it does not seem to have policies that will do anything to ameliorate the concerns of those who are most exposed at the moment. The Government, through their international and domestic policies, are clearly driving an agenda to address the source of the problems, which are essentially global.
I share the admiration of the noble Lord, Lord Newby, for the work of my noble friend Lord Malloch-Brown. I do not think that we could possibly have a better Sherpa, but the noble Lord raises some interesting questions about whether the G20 may need or would benefit from some form of permanent establishment or facility to support its work. In the mean time, we should not lose sight of the fact that, in taking forward the work of the G20 ahead of the next meeting later this year, the IMF, the World Bank, the new Financial Stability Board and the World Trade Organisation have all been given specific mandates and responsibilities for aspects of the G20 communiqué.
The noble Lord, Lord Newby, raised questions about UK banks. The UK banks in which the public, through the Government and UKFI, have significant shareholdings remain in the private sector. They will continue to be managed in a way that is appropriate to all their shareholders, rather than denying the rights of the other shareholders by using them as a tool of public policy. I assure the noble Lord that there is no question of a doubling of salaries at the Royal Bank of Scotland in order to compensate for the loss of bonuses. I can also assure the Liberal Benches that, contrary to a quotation in the papers last week from the noble Lord, Lord Oakeshott, there is no suggestion that the making of loans to employees of RBS and Lloyds Bank is a way of providing covert bonuses.
The noble Lord, Lord Newby, makes an important point about tax havens. I can assure him that the Government are as committed as the Government of any country in the G20 to addressing the issue of jurisdictions that provide protection for tax evasion. He hopes that the interim report from Mr Michael Foot will not be lost in the noise of Budget Day. It is a valid point and the Government will ensure that that does not happen.
Finally, I am sure that I am going to be tempted to speculate on the content of the Budget announcement this coming Wednesday afternoon. I will say nothing more about it other than to address the comments made by the noble Lord, Lord Newby, about environmental taxes and carbon capture and to note that this will be the first Budget in the world to set a carbon target enforceable under law. Otherwise, we will await the Statement of my right honourable friend the Chancellor on Wednesday.
My Lords, I welcome the Statement that the Minister has repeated, in particular the increase in resources for the IMF and the World Bank, which is extremely important for emerging markets with their own banking crises. Did the Minister notice the statement by Dominic Strauss-Kahn, the managing director of the IMF, on the eve of the G20 summit in which he said that the lesson of 122 banking crises which the IMF had overseen was that until the banks were cleaned up, there could be no—repeat, no—recovery. By “cleaned up”, he did not mean future regulation: he meant the removal of toxic and impaired assets from the banks. Since the Minister is deeply involved in this, can he give the House an update on the position of the Government’s asset insurance scheme? I know that this is a complex problem, but there is an impression that it is overly complicated, is taking too long, and is not as definitive as the scheme put forward by the Irish Government where every bad asset is being put in one bad bank. Can he assure us by setting out what are the next stages in the insurance scheme and how it is working?
My Lords, I was aware of the statement made by M. Dominic Strauss-Kahn immediately before the G20 summit. “Cleaning up the banks” is a term that can mean many things to many people, but I agree with the noble Lord that it is about addressing the issue of bad assets, and I do not think that one should limit them to the term “toxic assets” either. There are issues around assets that are impaired in terms of credit and which may or may not improve with time, and there are issues where the core problem is one of liquidity. Various jurisdictions have adopted different approaches. The American approach, led by Mr Timothy Geithner, is focused on using the limited resources available to the American Government to leverage them up in order to buy bad assets off banks through hedge funds and private equity. That was announced three or four weeks ago, but to date there has been no further progress. There are also doubts about how the scheme will operate in practice, whether it is structurally at risk of being gamed by participants, and whether there are inherent risks around agreeing the valuation of the assets that will go into the scheme.
Elsewhere, other methods have been adopted. In Switzerland, loans have been taken off the balance sheet of UBS, while in Ireland the Government have announced an intention to do something similar, although again—addressing the core of the noble Lord’s question, which is what progress are we making and how is this going to work in practice—the Irish scheme also raises a number of questions. In particular, the Irish Government have talked about making a levy on the banks to eventually recover the costs but have not been specific about how that levy will operate.
Our own asset protection scheme is now closed in accordance with the timetable we set at the end of March and we have agreed conditional access for the Royal Bank of Scotland and Lloyds Banking Group. This has been hugely welcomed by markets. The share prices of those institutions have risen, the claw-back share price for Lloyds Banking Group being now well below the current share price, and the availability of credit to those institutions and the cost of credit has fallen. So we have already achieved a positive step forward in confidence. We said that it would take three to four months to complete documentation because these are enormously complex programmes. I previously said to the House that in each case we would be talking about several billion data points for each of the banks. But we remain on timetable to complete documentation and I am encouraged by the fact that the banks, their customers and the markets are taking considerable comfort from the robustness of the model that we have introduced and will be completing, as I said, before the summer.
My Lords, one of the things to which everyone at the G20 agreed was the need for more integrity and fairness, not only in banking but in business generally, in trade and in company and individual taxation. Does the Minister agree that this is one thing on which everyone was agreed? If so, how is it going to be achieved?
My Lords, I thank my noble friend for that question. We have witnessed a profound collapse in standards of integrity and purpose on the part of a small number of people at the top of a small number of important international banks. This is the consequence of the adoption of a new model of banking in which banks no longer regarded themselves as having a long-term relationship with their clients but instead preferred to originate and follow a composed portfolio and distribute model which meant that their loans were passed on to other people. With the benefit of hindsight, this weakened the sense of ownership and commitment and the fundamental understanding of a shared interest which had previously typified the relationship between a bank and its customers. That is now being reversed as a consequence of the very expensive lessons that have been learnt, but it will require more engagement on governance, supervision and regulation.
I, for one, strongly endorse the broad issue of the importance of high ethical standards and integrity in all aspects of commercial and government life. We need to return to better standards of conduct and a broader sense of responsibility than has characterised an era of greed which has brought so many fine banking names to a point of acute weakness.
My Lords, in view of the fact that even the Financial Times stated during the G20 conference that the Prime Minister had a reputation for,
“numerical inflation … and double counting”,
why on earth does the Minister expect us to believe the figures he gave today— repeated from his right honourable friend’s Statement in the House of Commons earlier—and that the resources to be given to the IMF are extra, new resources when he must have known that this was not the case? This is another confirmation of numerical inflation. Does he share the view expressed by the former senior economist at the IMF, Professor Subramanian, that these figures were wrong? Does he also share the professor’s view that the statements connected with the figures for the IMF were all spin and lacked substance?
My Lords, in intervening in this debate I should probably declare an interest as I am going to mention the Bretton Woods institutions: I spent 30 years at the World Bank and am in receipt of a pension from it.
I am looking for some reassurance from the Minister—I apologise if this is a rather esoteric point—about the real purpose of the new Financial Stability Board and how its mandate will be strengthened in contrast to the Financial Stability Forum, of which it is the successor. I was never totally convinced of the Financial Stability Forum in the first place; that body seemed to be largely second-guessing what the outcomes might be.
It is said that,
“the FSB should collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them”,
but the IMF and the World Bank together are extremely well placed to fulfil that function, as the noble Lord, Lord Ryder, has mentioned with regard to the former chief IMF economist. They are a powerhouse of research information and good ideas about where the global economy is going.
Since the Financial Stability Board does not even represent all the countries of the world, I wonder what the added value is of having a board of this kind. The fact that it is asking for an increase in the powers of the FSB compared with the Financial Stability Forum suggests that the forum itself was not working very well. Will the Minister reassure me that this body really is necessary, that it is not just second-guessing what the IMF and other institutions can tell us about what needs to be done to improve our understanding of macroeconomic and financial risks, and that it is not simply a cosmetic institution-building exercise?
My Lords, I thank my noble friend Lord Grenfell for his question and for his declaration of interest about his pension. I am wrestling with myself over whether I should ask more questions about it, but on this occasion I will probably be excused by the House if I do not.
It is the very success of the Financial Stability Forum that has led the G20 countries to believe that it can play an even more important role in the future if given more resources and broader membership. I discussed this with the chairman of the FSB, Mario Draghi, at the recent ECOFIN meeting in Prague, and he certainly relishes the opportunity for the FSB to be given an even more important role as a result of having a broader membership reflecting that of the G20, rather than its previous membership, which more loosely paralleled that of the G7 and the G8.
The FSB will consist in future of a chairman, a steering committee and a plenary group comprising all national members. The steering committee will remain smaller and therefore able to continue to operate as effectively as the FSF has in the past, but it will have a slightly changed membership. The FSB will also have a full-time secretary-general and a much enlarged secretariat, because the work of the FSF to date has been achieved on what can—by international banking organisation standards, at least—be described as a shoestring.
I believe that the FSB in particular will provide a powerful role in addressing such matters as the co-ordination of international accounting standards; the extension of regulation into areas which are not currently as well regulated as perhaps they should be, such as the derivatives market; and the challenges of institutions which are not presently closely regulated but are nevertheless of systemic importance, such as the largest macro hedge funds. The FSB will also have a very important role to play in addressing the challenge of macro-prudential supervision, the term now used to address the fact that we might have been rather better, globally, at regulating individual institutions than has been the case in the past. However, that was seriously undermined by the fact that no agencies were addressing with sufficient force systemic and generic problems affecting multiple institutions.
My Lords, the Minister referred to policing in the context of the G20. He even suggested that there is evidence that, whereas the mass of police officers acted very properly and lawfully, there were exceptions on the part of a very small minority. Does he agree that there seems to be a great deal of eyewitness evidence, supported and corroborated by photographic evidence, that a small number—a significant number—of police officers removed or hid their badges of rank and registration numbers? If that was so—and it does appear to be the case—does he not agree that such action would be utterly reprehensible on the part of a police officer? Does he agree that in light of the fact that there is bound to be a fuelling of the debate about the relationship between the police and the public, one should accept the definition given by the late Lord Callaghan of Cardiff—a very great Home Secretary, whom I had the honour to serve under as a Minister 40 years ago—when he described the police as citizens in uniform, no more and no less?
My Lords, I am sure that the noble Lord, Lord Elystan-Morgan, would not expect me to go beyond saying that I think that questions have been asked which need to be appropriately investigated. Those include whether, as some have suggested, members of the police force concealed the numbers that they should be wearing, although I understand that that requirement is limited to certain ranks. We need a forensic investigation to establish whether those who may not apparently have been showing their numbers were actually required to do so. There is a need for a proper investigation, which I fully support.
My Lords, the noble Lord had a great many interesting things to say about the board, and he described its very extensive functions. To whom will the board be responsible and what powers will it have to exercise its authority as far as individual countries are concerned?
My Lords, the new Financial Stability Board, under its continuing chairman, Mario Draghi, who is the head of the central Bank of Italy, will be accountable to the IMF and the World Bank and, through that accountability, to the G20. More announcements will be made in due course about the membership of the FSB and how it intends to conduct its work. It would not be appropriate for me to anticipate those announcements.
My Lords, I apologise to the noble Lord, Lord Broers, for not answering that question. The noble Baroness always asks many questions and I always appear to fail to answer them all, for which I apologise. I diligently go through Hansard to identify those that I have failed to answer and write to the noble Baroness and others. The UK’s contribution to the IMF will be in accordance with the existing formula. Importantly, the IMF is also talking about broadening its governance and membership and the allocation of funding responsibilities. We stand four-square behind the IMF in ensuring that it has the necessary funds and resources to play its critical role at this very difficult time.
My Lords, would the Minister accept that there is a great gap between the public’s understanding of the G20 bulletin and their understanding of the effect on themselves? Is it the Government’s intention to try to close that gap by making clear how what was said at the end of the meeting goes beyond the very welcome fact that the 20 met? I entirely agree with the noble Lord, Lord Newby: it is very good that the meeting was held, but there is a gap in the minds of the public. How do the Government intend to close it?
My Lords, the noble Viscount, Lord Eccles, issues a challenge that I will be most surprised if the Chancellor does not respond to in his Budget speech on Wednesday afternoon in the other place—to take from the global to the national to the specific, and to show how such issues as IMF special drawing rights and world trade agreements translate into matters that are comprehensible in terms of people’s security of employment, confidence in the future and capacity to honour their financial obligations. That will be one of the things that my right honourable friend the Chancellor of the Exchequer will ensure is appropriately reflected in the text of his Budget speech.
My Lords, with the leave of the House I will repeat a Statement made by my right honourable friend the Home Secretary, entitled “Operation Pathway”. The Statement is as follows:
“With permission, Mr Speaker, I would like to make a Statement on the 12 arrests which took place in the north-west of England on 8 April under the Terrorism Act. These arrests are part of an ongoing and fast moving police investigation. I am sure that honourable Members will understand, therefore, why I cannot go into detail on the investigation or the individuals involved.
On Wednesday 8 April, the North West Counter Terrorism Unit, working with Merseyside Police, Greater Manchester Police and Lancashire Constabulary arrested 12 men under the Terrorism Act. Of those 12 individuals, 11 remain in custody and have had their detention extended to 22 April. Ten of the individuals are Pakistani nationals and one is a British citizen. The 12th individual, who is believed to be an Afghan, has been transferred to immigration detention. In addition to the arrests, a number of premises have been searched. These arrests were pre-planned as the result of an ongoing joint police and Security Service investigation. The decision to take action was an operational matter for the police and the Security Service, but the Prime Minister and I were kept fully informed of developments. The priority at all times has been to act to maintain public safety.
The House will also be aware that, during Wednesday 8 April, photographs were taken of Assistant Commissioner Bob Quick as he was going to a meeting in Downing Street. Mr Quick was carrying papers which contained sensitive operational detail about this investigation and some of that detail was visible in the photographs. As a result, a decision was made by the police to bring forward the arrests to a few hours earlier than had been planned originally. The fact that these papers were inadvertently made public did not make any difference to the decision to carry out arrests; it simply changed the timing by a matter of hours. Assistant Commissioner Quick offered his resignation to the Metropolitan Police Authority on the following day and this was accepted. I pay tribute to his work on counterterrorism and for his many years of service. He has made an enormous personal contribution to making our country a safer place.
I am sure the House will want to join me in thanking all the police forces involved in this operation. They are to be commended for the professional manner in which they carried out the arrests. I also express my thanks to members of the public in the communities most immediately affected by these arrests, including at education institutions, for their patience and measured response to events. The police, with support from local authorities and elected representatives, are working closely with local communities to discuss issues or concerns linked to the operation.
Last month the Government published their revised strategy to counter the threat to this country and to our interests overseas from international terrorism. A key theme in CONTEST 2 is the need to co-ordinate our work with our international partners. The Prime Minister has already made it very clear that we need to continue to enhance co-operation on counterterrorism with Pakistan. He has spoken to President Zardari and they have agreed that our two countries must continue to work together as closely as possible to counter this threat. We are working with the Government of Pakistan to bolster their efforts to build civic society, to tackle violent extremism and to help build resilience in Pakistani society against radicalisation, just as we seek to do in the UK. This includes support for modernisation of Pakistan’s security apparatus, support for governance and the rule of law, and work to undermine extremist ideology.
Our counterterrorism programme with Pakistan is worth approximately £10 million per annum and is our largest such programme. In addition, to help the Government of Pakistan to reduce poverty, the UK has doubled its aid programme to £480 million during 2008-11. The House will understand that I do not wish to compromise an ongoing investigation by discussing the specifics of this case. However, there has been some speculation that this investigation raises wider questions about the criteria for obtaining student visas, and about the issuing of licences by the Security Industry Authority. I would like to clarify the position on both points.
We are currently delivering the biggest reform of border security and the immigration system for a generation. Last year, we completed the rollout of biometric visas across the world. Fingerprints are checked against counterterrorism and crime databases, as well as UK Border Agency records. In posts that we have classified as high risk, such as Pakistan, we have a risk management network, which helps to ensure that the right visa decisions are made—for example, by working with the local authorities—to ensure that the qualifications of prospective students are independently verified. The impact of these changes is demonstrated in the increased refusal rate for visa applications from Pakistan nationals.
Under tier 4 of the points-based system, educational institutions that wish to bring in international students for more than six months must now be accredited by an independent body and licensed by the UK Border Agency. There will, for some time, be a number of students who have continuing leave under the old system. Many of these will be studying at colleges now on the PBS register, but some will not. Over half these students with existing leave will see their leave expire within 12 months, the vast majority within two years, and almost all within three years. Any student who does not bring themselves within the new PBS regime or leave the country when their leave expires will be subject to appropriate enforcement action. Before the points-based system was in place, around 4,000 institutions brought in international students. Now, under the PBS, about 1,500 institutions are registered to do so.
I have asked the UKBA to prioritise enforcement activity on institutions which applied but have not made it on to the PBS register, and subsequently on the remaining colleges that have brought in international students in the past but have not applied for a PBS licence. Where there is evidence of criminal activity, we will prosecute. Where colleges have decided that the requirements of our new, tougher regime are too onerous, we will not allow them to bring in international students.
On the issue of Security Industry Authority licences, applicants have to satisfy a number of criteria before a licence can be issued. In particular, no one is awarded a licence without a criminal record check and without having their right to work in the UK confirmed. I have asked the SIA to conduct an urgent review to look at whether the existing processes need to be strengthened, and at the extent to which students—particularly foreign students—apply for SIA licences and, importantly, whether this has implications for the security checks conducted by the SIA and the advice provided to employers.
The threat level to the United Kingdom from international terrorism is still assessed as severe. A terrorist attack is considered highly likely, so I repeat my thanks to the police and the security agencies for their work in relation to this investigation and for everything that they do to protect this country and the people who live in it from the threat of terrorist attacks. I commend this Statement to the House”.
My Lords, that concludes the Statement.
My Lords, I start by thanking the Minister for repeating the Statement on what can only be described as a most serious situation. The loss of one of the most senior counterterrorism officers under any circumstances would be bad enough, but the fact that it has happened because of a self-inflicted gross security blunder is a disaster, which has ended his career. He was a talented and well regarded senior figure in the Metropolitan Police. This one catastrophic mistake has terminated his career, denied the service of an informed and experienced officer and brought a serious investigation to fruition earlier than anticipated. Whether this will have an adverse effect is not yet known; only the outcome of the current inquiries will confirm that. However, the police involved in this serious incident are to be commended for being in a position to bring forward the matter when it became urgent to do so.
Assistant Commissioner Quick’s replacement, Assistant Commissioner Yates, even with all his knowledge and experience will have a considerable job to do quickly to establish his credibility in this part of the service—he is well known in other parts—and to come to grips with the enormous amount of work that has to be done to ensure the safety of this country. I am sure that he is more than capable of doing that; he has a good reputation within the police service.
There is probably little point in going over the almost unbelievable lapse of security for which Assistant Commissioner Quick so rightly fell on his sword. One hopes that lessons have been learnt, not only about the advisability of secret documents being laconically carried in full view of the press, but about transmitting such material in a way that enables briefings on sensitive issues to take place without the need for paper reminders.
The Minister might like to comment on the suggestion made by one photographer that the Government had been warned that the use of digital cameras by press photographers in Downing Street would mean that sensitive documents, if held openly, could be photographed in detail. Was such a warning received? If so, what action was taken on it?
The result of Assistant Commissioner Quick’s lapse meant not only that secret information was available to the public but, far more importantly, that Operation Pathway had to be brought forward. We have yet to find out whether those arrested are to be charged, but there is at least a rumour that some—one or two—will be deported. Can the Minister say what discussions, if any, will be required with, presumably, the Pakistani authorities, or maybe those of another country, to ensure that anyone who is to be deported will be taken back on acceptable terms, particularly in view of the general difficulties over deporting people not only in the past but also at the moment? If there are to be deportations, how will those difficulties be overcome?
Phil Woolas, Minister for Immigration, has recently been quoted as saying that abuse of student visas has been the biggest loophole in Britain’s border control. It has been suggested that at least some of those arrested are here on student visas. Can the Minister tell the House what is being done to tighten up the issuing of these visas, particularly for those applying from Pakistan? Is the Minister aware of the comments by the Pakistani high commissioner that his country would be willing to help with the scrutiny of those applying for visas to verify their bona fides? Has this matter been considered and discussed? The Home Secretary said in her Statement that we need to enhance co-operation with Pakistan. Would this be an opportunity to do so?
The UK Border Agency recently reported that, of the 2,100 applications from colleges for a licence to educate overseas students, over 460 had been rejected, although that was expressed in slightly different terms in the Home Secretary’s Statement. What action is being taken to close down these colleges, or at least to refer them to the education authorities to be investigated? I note that the UK Border Agency will have some role in this, but I suspect that such colleges are also registered under other departments.
The Minister has been at pains to explain to the House on a number of occasions that the new tier system of visa control means that the number of people seeking to enter this country for work or study is being reduced. However, I am afraid that he may now need to explain more regularly how the abuse of student visas is to be stopped, with genuine students permitted to continue to benefit from our country while those who wish us ill are prevented from coming.
The police have a very difficult job. However, they have been in the limelight for all the wrong reasons in the past few weeks. Today, we have not had an opportunity to comment on the problems that have arisen regarding the performance of a few of them during the G20 conference. There are issues to be addressed, including the suggestion raised during the previous debate that some police officers were covering up their number tags. I realise that there is an independent police inquiry, but this is another issue that has recently bubbled up. There are also outstanding matters regarding the arrest of my honourable friend Damian Green. However, on today’s Statement, Operation Pathway and its attendant dramas have been a real wake-up call: security means security to everyone involved.
My Lords, we on these Benches thank the Minister for repeating the Statement with his normal assiduousness. We certainly accept that terrorism remains a serious threat and pay tribute to the police and security services in this case.
That said, the Statement is something and nothing. Of course, as the Minister said, we can know no details. In fact, all we know is that 11 people are still in custody and have not been charged after 12 days, and that the 12th individual, as the Minister said, is in immigration detention; one must assume that he is not a terrorist, then. We may have 11 terrorists or we may not. The Statement certainly diverts the House from the Statement that we should have had, as was said on the Conservative French Bench just now, on the policing of the G20 and the disgraceful way in which some members of the police address legitimate protest, treating it not only as a criminal activity but one to be brutally put down, in one case with fatal consequences. I expected a Statement to be made to the House today on the policing of the G20, as there is clearly an appetite for one, although an inquiry is being conducted. As the Minister said in relation to the terrorism issue, this is ongoing work, but I believe that a Statement should have been made.
The Government continually blur the crossover between criminal activity and terrorism. That occurred again recently in Plymouth, where I believe young people were arrested under the terrorism laws. I understand that they were engaged in criminal activity—spraying anti-capitalist, anti-G20 graffiti—but not terrorist activity. The Government need to address this cultural problem and make clear what constitutes terrorism, what constitutes criminal activity and what constitutes protest. We are nowhere near the bottom of that yet.
The Statement refers to co-operation with Pakistan, which is an extremely important issue. However, the paragraph dealing with support for Pakistan smacks of complacency and overoptimism. I understand from colleagues that the situation in Pakistan is very difficult indeed. To say that we are simply supporting governance and the rule of law suggests that the situation is far less difficult than it is.
As regards former Assistant Commissioner Bob Quick not concealing documents in a briefcase, the Government were aware of the dangers of people taking digital photographs, as that was exactly the trap into which Caroline Flint had fallen. In Bob Quick’s case, the consequences were much more serious and we have lost a very senior police officer with expertise in these issues. If the relevant operation was not compromised but merely brought forward by a few hours, it seems a little odd that he resigned, with all that that entailed in loss of knowledge and expertise.
The Minister will appreciate that we discussed student visas in great detail during the passage of the Borders, Citizenship and Immigration Bill. Does he propose to table further amendments to that Bill in the light of the information that he now has? Is he happy with the speed at which bogus or dodgy colleges are being validated? How many Pakistani students apply for such visas per year?
The Minister and I were new to the Home Office brief when a Statement was made on a problem with the Security Industry Authority. The Minister explained the problem in the Statement and we had understood that it was being cleared up. It seems strange that more than a year later the problem still exists. Is this the same problem or a different one? Why was it not cleared up when it was first identified?
My Lords, I thank both noble Baronesses for their questions and their input. I was particularly pleased to hear their support for our police services and agencies. I cannot talk about this operation in any detail, as it is ongoing, but I am proud of the professionalism and competency shown by our police and agencies.
I was up with the north-west counterterrorism unit some weeks ago, looking at the details of operations that it was conducting. I was very impressed by how these new regional counterterrorism units are working and by how they are able to call in resources from other counties. We should all be very proud of this aspect. I am pleased that since the last attempted attack and the last real attack on our transport we have been able to disrupt these plans and prevent any of these events from happening. One touches wood furiously, because there is a real and severe risk, but it is because of the good and detailed work by these people that we are as safe as we are in very difficult circumstances.
The loss of Bob Quick is extremely sad. It was a momentary slip by a very busy man, for whom I have a lot of admiration. I imagine that he was reading the document in the car. It was a stupid thing to do, and he knows that it was a stupid thing to do, and it is typical of the man that he tendered his resignation and went. I fear that it is just one of those things that happen. After many years of being in areas where there are a lot of pressures and difficulties, I would say that one must never assume that there is not someone who can do your job. There is always someone who can do your job; there is someone who could do my job here probably just as well as, if not better than, me. There is always someone who can do that, and good people will step into the breach and do it. I refuse to be too dejected about it. I am dejected only at the loss of an extremely good man.
The noble Baroness, Lady Hanham, asked whether we were aware of the ability of new cameras; the issue was also touched on by the noble Baroness, Lady Miller. Yes, we were aware of that. The noble Baroness referred to a Minister who had a document that was photographed, after which a warning was sent out to people to be aware of this fact. I do not know the detail of how that might have gone out within the police service, for example, but I am aware that a warning went out to all those going to No. 10 that this was a risk. For example, in my office, I no longer allow any files that have a clear front cover, because it is too easy to forget and to step out and have something photographed that one would prefer not to have photographed.
It is very difficult on these occasions, because I know so much, so to speak, and I can say so little. I have spoken before on the Floor of the House about deportation with assurances, on which the noble Baroness, Lady Hanham, touched. I cannot talk about that now, because it is an issue for negotiations with another country and nothing has been agreed yet.
Possibly people are being a little harsh on the abuse of student visas. In 2007, when I took over, I looked at a number of issues for the Prime Minister. One of the issues that we identified that I was concerned about was border security. We looked at tightening up border security and the issue of a border force. A number of people mentioned student visas and students coming into this country, which we looked at, and we decided that we had to tighten those things up and do something about them, as we have across all sorts of areas of our immigration policy. We are doing a huge amount and we should be proud of what we have achieved over the past two years in tightening all this up. In a minute, I will go into some of the details of what we do regarding someone coming from Pakistan. There was a worry, which is why we have done something about it.
Quite often when I am standing here pushing through legislation that would tighten up immigration, I feel that I am being shot to ribbons by the opposite side of the House. When something like this happens, one sees why we are doing these things. We do not do them because we wish to be draconian and unpleasant; we do them because there is a requirement so to do, which is why we are pushing these things forward.
I was aware of what the Pakistan high commissioner said. I do not think that he was completely aware of what the Pakistan authorities already do for us. They work with us on a number of these things. I will quickly run through some of the things that we do regarding students. Their fingerprints are checked against our police fingerprint database to see whether there are any criminal records, including serious crime and terrorism, through SOCA. Checks are also made with the UK Border Agency immigration and asylum records. We have the Risk and Liaison Overseas Network, which provides additional checks and supports for all high-risk posts—in Pakistan, for example—in making the right visa decisions. It has been there since 2005. We have an agreement with the Pakistan Higher Education Commission to ensure that the qualifications of prospective student visa applicants can be verified. That has been done since 2007, when we realised that we needed to tighten this up. The refusal rate for visa applications for Pakistan nationals has risen from 32 per cent in 2006 to 44 per cent in 2008. The refusal rate for students increased from 63 per cent to 69 per cent in 2008. That shows me that something was wrong that needed tightening, and we are doing something about it.
The introduction of tier 4 to the points-based system means that there are robust new controls on how education institutions bring in international students. These institutions now have to pass two tests before they can sponsor international students. The institutions must show that they have been inspected and audited, must hold valid accreditation with one of five approved accreditation bodies and must be licensed by the UK Border Agency. Any foreign student who wants to study in the UK, since tier 4 went live, has to demonstrate that they have a place at one of those institutions. Individuals who want to extend their student leave need to meet the requirements of the points-based system, including studying at licensed institutions; if they want to switch, they have to notify that. We have quite a comprehensive system in place. Is it perfect? I would say that it is not yet perfect, and we shall have to keep working at it. We can always improve things and, of course, nothing will ever be watertight. I am afraid that it is rather like the threat from terrorism: we have done a huge amount to make us all safer, but we are still at risk. You cannot ever, I am afraid, remove that risk.
The noble Baroness, Lady Hanham, mentioned the G20 and the covering-up of number tags. All that I would say is that I am delighted that a number of proper inquiries are in place, because there are things that absolutely need to be looked into. If police officers took off their numbers, that was completely wrong. The investigation will bowl this out and we will get them. However, I would add that my son, who works for the media, was filming that day at the riots. He said that he was very impressed, as he went from place to place, at how professional and good our police were in the face of some quite awful intimidation at times. That does not for a second condone things that are wrong and, if the investigations show that the police have broken the law, those involved will be hit by the investigations. Overall, however, the bulk of our police do a remarkable job in extremely difficult circumstances and I, for one, feel really pleased that they are there doing that for me. Basically, they are on our side—let us not fool ourselves; that is what they are there for—and I am very proud of what they actually achieve.
We have had a number of debates on the Floor of this House about security meaning security and the protection of data. It is quite right that the House should have been concerned about the protection of data. There have been lapses, but we have done an awful lot to tighten that up. We are in a world that is rich in data and needs data to run and to administer things, to check on people and to make us safer. There is a whole raft of things and we have to be better at this. Indeed, we are getting better at it. I think that government is now better at it than businesses; we have become better than them. This is something that we all have to learn, because we are in that very rich data environment.
The noble Baroness, Lady Miller, said that this was something or nothing. Unfortunately, although I know an awful lot, I cannot say very much. That is one of the unfortunate things about these issues, because it would be wrong to say something about them. However, the noble Baroness pointed out how important it is to protect the public; I agree and I hope that what I have said shows how important it is. As I have said, we welcome the inquiries into the G20 issues. I cannot talk about the issue in Plymouth because the inquiry is ongoing. All that I would say is that we are very even-handed when one looks across the board, because we are often accused by the Muslim community of focusing on it. We focus on anyone who we believe is trying to take violent action against our society and our people. We are even-handed on that.
I have touched enough on the issue of Bob Quick’s lack of a briefcase. He was probably just reading in the car. It is sad and unfortunate to lose a good man like that, but it is a mark of the man that he was willing to go at that stage. That is a rather good thing for people to do occasionally.
We are doing a lot on student visas. The Home Secretary has announced that she will speed up the work of looking at the various institutions and do even more. In fact, the reduction is quite dramatic. For there to have been a reduction from some 4,000 to something like 1,500 institutions shows that there was a real worry. When we looked at this, we found that most of the concerns were related not to terrorism but to breaking immigration rules. We are putting a cap on that and stopping it, which is an appropriate thing to do.
Over a five-year period, about 358,000 Pakistan students applied to come here—it is a huge number. We have, I think, let in between 15,000 and 20,000 in those five years. We have to remember that education in this country is a marvellous means by which we can influence the rest of the world. It is also a big money earner for us. I think that the figure raised from educating foreign people in this country is £6 billion per annum, which is rather important. I hope that I have answered all the various points that were raised. If not, I shall be very happy to come back in writing on them afterwards.
My Lords, my noble friend has hit on a very important point, which is of course that I am unable to say anything about that on the Floor of the House. I am sorry but I really cannot speak on that issue. Perhaps a little further down the track it will be possible to talk about it in private.
My Lords, the Minister very appropriately referred to foreign students in the context of terrorism. In inviting him to return to this matter, I declare an interest that I have referred to on previous occasions in this House in relation to higher education. Does he agree that there are three separate questions? The first concerns the problem of the student who comes for higher education in the United Kingdom from a thoroughly bogus educational institution—one that has no significant academic merit. The second concerns the well qualified and properly qualified academic who either has come with the firm intention of being involved in terrorist proclivities or is open to persuasion in relation to such matters. The third question concerns persons of genuine academic merit who come to Britain for wholly genuine educational purposes but are then corrupted and ultimately take part in terrorist proclivities. Does the noble Lord agree—indeed, I think that he has already suggested this—that it would be extremely unfortunate if there were a blanket antipathy towards foreign students, particularly Pakistani students, who contribute so much culturally and, as the noble Lord has already mentioned, financially to the United Kingdom?
My Lords, I can only agree with the noble Lord, Lord Elystan-Morgan. He is absolutely correct. The bulk of students who come here have a real desire to learn. They wish to use what are probably some of the best educational establishments in the world, and it is absolutely right that we should try to provide such opportunities for them. Equally, we have to protect ourselves. Looking back, I do not think that we have been as good at that as we should have been, but I think that the things that we have put in place over the past two years are good and are protecting us. We can probably do even more and we are tweaking and slowly adjusting those measures to achieve that. However, it is absolutely right that we should encourage people to come here. We want real students who really want to learn, who can then go back to Pakistan and help that country. I believe that the education situation has been one of the key problems there in that it has allowed al-Qaeda and extremism to prosper. If we can do something about that, it will have been a marvellous thing to achieve.
Perhaps I may go back to a figure that I quoted wrongly. I wish to clarify that 358,000 is the total number of students who came here in 2007. Of those, 15,000 to 20,000 were Pakistani.
My Lords, I join in congratulating the police and the intelligence services on their remarkable recent achievements in this operation. On the Statement, how many languages are spoken by the 12th individual in detention, who, in the words of the Statement, is believed to be an Afghan? Secondly, what proportion of the 1,500 institutions currently registered to bring in international students simply teach English as a language and what proportion teach academic, technical or vocational subjects?
My Lords, the noble Lord shows his knowledge of the world of agency spookdom and so on. I am afraid that I cannot talk in any detail about what languages this person may speak. I do not wish to go into this case as I am afraid that it would give things away. On the other point about teaching English as a language and other types of subjects, I shall have to come back to the noble Lord in writing, as I do not have that detail at my fingertips.
My Lords, is it normal practice to hold meetings of the security services and the police in Downing Street? Whether or not there was someone carrying a folder with a transparent cover, there will always be interest in who is coming to Downing Street and what they are coming for. If it is obvious that a meeting involves the security services and the police, security matters are likely to be the answer. Does the Minister regret that this particular meeting was held in Downing Street? What was the added value of holding it there?
My Lords, clearly the decision to move or not to move against a plot or suspected plot is a matter for the police and agencies. It is not for Ministers and it should not be, because that would be wrong. The police and security services have to make that decision, but they are very clear that they must always bend very far towards making sure that they protect life and look after people in this country rather than letting things slip the other way to ensure that they have some nice evidence in the bag and take the risk of something happening. But it is totally their decision.
On this occasion, I believe that Assistant Commissioner Quick was going to Downing Street to brief the Prime Minister about what the police intended to do having made their operational decision. It was not a discussion or big briefing of the type referred to. There is always an issue about people monitoring who goes into No. 10 and what that means, but you cannot always draw conclusions, because someone such as Assistant Commissioner Quick might need to go there to talk about a number of things. The risk is more apparent than real on that, but that is the background.
My Lords, I understand that so far 2,195 universities, independent schools and colleges have applied of the 15,000 that were doing this before. Just under 500 have actually been turned down. I do not have a breakdown of the exact reasons, but the figure shows that a number of so-called establishments were not really establishments at all—perhaps there were a number of names with the same postbox and things like that to allow people to come in as immigrants. That is why it is so important, as we identified back in 2007, to do something about this. I will answer the noble Baroness in writing if I have details of why they were turned down and I am allowed to put them on paper.
My Lords, with a major operation such as this, word gets out very quickly and people know that something is going on. Clearly, we needed to talk to the local community and make people aware of what was happening. All that was done immediately after the arrests were made. Then one has to go through the whole process of looking for evidence. Very often, as we know from historic cases where people have been charged and are now in prison, we start with what one might call no hard evidence. It is all intelligence based. That is one of our real problems. If we want to prevent a major atrocity, the police and agencies have to move before we have gathered hard evidence. That has been debated a number of times before in this House and is one of the real difficulties that we wrestle with. That is why we have arrived at this position.
Postal Services Bill [HL]
Committee (3rd Day)
70: After Clause 19, insert the following new Clause—
“Protection for certain members and prospective members of the RMPP
The Secretary of State may make regulations for the purpose of securing that—
(a) no qualifying member of the RMPP is placed in any worse position by reason of—(i) any winding up, in whole or in part, of the RMPP; or(ii) any amendment of the RMPP which results in benefits under that scheme being reduced, or contributions by employees being increased, and is made otherwise than in such circumstances as may be prescribed;(b) no person who is an active member of the RMPP or who could be an active member of the RMPP upon the attainment of a specified age or upon making an election to be such a member is to be prevented from becoming entitled to or continuing to participate in or acquire pension rights under the RMPP by reason of any change of employer—(i) which does not affect his continuity of employment and is made otherwise than in such circumstance as may be prescribed; and(ii) in the case of which his new employer either is a participant in the RMPP or is wholly owned by one or more companies which or each of which is such a participant; and(c) no person is placed in any worse position by reason of any change of employer of a person which does not affect his continuity of employment but prevents him from continuing to participate in or acquire pension rights under the RMPP.”
First, I declare my interest. I do not want to repeat it because it is on the record, but I was a Post Office worker and have had other contacts with the Post Office. I also apologise to the Committee for my voice. Until about three o'clock this morning, I did not think that I would be able to speak at all, but some of you may be pleased about that.
My amendment 70 would follow Clause 19 and is headed, “Protection for certain members and prospective members of RMPP”. As I shall say later, the protection for members of the Royal Mail pension plan contained in the new clause has antecedents arising from the privatisation of other formerly state-owned industries. The new clause would spell out in unambiguous terms what the protection would be. It would not be an interpretation at a later date but a clear and meaningful addition that I believe is necessary.
As I said earlier, the proposal has antecedents. When the electricity supply industry and the railway industry were privatised, a new sectionalised scheme was created. There was the electricity supply pension scheme in the first case and the railways pension scheme in the second. Employees of the new private companies could lose all their future service rights under the newly created industry-wide scheme if the employer took the simple expedient of opting out of the scheme. The employer would have to pay off the deficit but, subject to that, could offer whatever future service provision it thought it could get away with.
In the case of the Royal Mail pension plan, the problem is heightened. The basic idea behind the Government’s proposal is to create a new sectionalised scheme that has no deficit, or a vastly reduced deficit. In that situation, the new companies would be mad not to walk away from RMPP as soon as they could. My new clause empowers the Secretary of State to make “protected persons” regulations similar to those applying in the electricity supply and railways protected persons regulations. The wording is substantially derived from the electricity supply regulations.
New paragraph (a)(i) states that no member can be placed in a worse position if his or her employer winds up their section of the RMPP, or if the RMPP winds up in its entirety. That means that the employer would have to create a new mirror-image scheme. Proposed new paragraph (a)(ii) states that the scheme cannot be worsened by amendments cutting benefits or increasing contributions. Otherwise, the employer could achieve the same basic purpose of walking away from the scheme by cutting benefits to a minimum level.
Proposed new paragraph (b) deals with the situation in which a member moves from one Royal Mail or Post Office company that participates in the scheme to another company. In that event, if the member’s continuity of employment is not broken, the member retains the right to participate in the RMPP. Proposed new paragraph (b)(i) would require continuity of employment, so if a member left the industry and then returned, their protected person status would be lost. Proposed new sub-paragraph (ii) would require both companies already to be participants in the RMPP.
Proposed new paragraph (c) deals with the situation in which an employee transfers from one company that participates in the RMPP to another related company that does not. Typically, that situation will arise when an employer creates a new subsidiary and transfers employees to it. The new company could open a new section of the RMPP, in which case proposed new paragraph (b) would apply. If it did not, under proposed new paragraph (c) the new company would have to make alternative pension arrangements that were at least as favourable.
The proposed new clause would be an important protection for members. Without it, the very first thing that will happen if the Government assume responsibility for the deficit is that the new employers will opt out of the RMPP for future service. They will be free from the deficit, which is what prevents them from closing the scheme now. If they did so, they would have to pay for it. That is the imperative. I beg to move.
When the Minister responds, will he clarify whether the circumstances contemplated by proposed new paragraphs (a) and (b) of the amendment—respectively, a winding-up, which incidentally I would like to think we have no reason to expect, and a new partner changing the pension rules—would not more appropriately be a matter for the trustees rather than the Secretary of State?
On proposed new paragraph (c), is there any circumstance in which an employee could, without his consent, be prevented from participating?
Part 2 of the Bill sets out the Government’s proposals to address the deficit in the Royal Mail pension plan to facilitate a strategic partnership. As a result of this support, Royal Mail would be in a much better position to act as a sponsoring employer for the RMPP. In addition, the use of a clear cut-off date, which is intended to be 16 December 2008, allows the Government to provide certainty for members on the effect of the Government’s proposals, and to define and limit the liabilities for which the Government, and ultimately the taxpayer, will take responsibility.
On our previous day in Committee on Part 2, we covered the extensive protections for members that are at the core of the Government’s proposals. These protections are set out in Clause 19 and it may be helpful if I briefly go over them. The first layer of protection in subsection (2) limits the Secretary of State’s key powers in Clause 16 to establish a new scheme or to transfer rights to a new scheme, in Clause 17 to divide the RMPP into sections, or in Clause 18 to amend the RMPP. The Secretary of State must ensure that in exercising these powers he does not negatively impact the pension position of members of the Royal Mail pension plan.
The second layer of protection for members is in subsection (6). This limits the Government’s ability to amend the new public service scheme to protect the accrued benefits of members that have been transferred across from the RMPP.
As set out in our policy document, the RMPP will be in a much improved funding position as a result of the Government’s proposals in Part 2. In addition, existing pension legislation provides a number of protections for members of an occupational pension plan that will also apply to the RMPP in the future. These include: the statutory priority order for the distribution of assets, as set out in Section 73 of the Pensions Act 1995; the statutory debt, which is calculated on a buyout basis, which falls on an employer under Section 75 of the Pensions Act 1995 if a winding-up is triggered; and the creation of the Pensions Regulator and the Pension Protection Fund in the Pensions Act 2004.
Under this amendment, if the company and trustees decide to wind up the scheme, the Government would have the power to make regulations to secure that no member is placed in a worse position. However—I think that this is the point that the noble Lord, Lord De Mauley, raised—there is no reason to conclude that by achieving a properly funded RMPP, which is the right size for the business, it will lead to the winding up of the scheme. That is especially the case given the recent reforms to the RMPP which began to take effect from April 2008. These reforms, which included the closure of the scheme to new members, were designed to improve the affordability of the RMPP going forward.
Under the RMPP’s scheme rules, the company has no express power—I repeat, no express power—to wind up the scheme and would need the agreement of the RMPP trustees to amend the rules to do so. This agreement would also be required for any modification to the basis of accrual of benefits by members. Indeed, removing the cost of paying off the historic deficit should in fact significantly increase the viability of the scheme, not the reverse.
The proposed amendment would also give the Government power to take steps to preserve the pensions rights for members who transfer employers in certain circumstances, so that they would retain the right to belong to the RMPP or to a scheme that provides the same benefits as the RMPP. This goes well beyond what the Government have set out in their policy statement and could provide members with a new right that they do not currently have. In summary, the proposed amendment would give power to the Government to constrain the future pension arrangements made by the Royal Mail Group Ltd. We believe that decisions on future pensions provisions are rightfully an operational matter for the Royal Mail board and therefore we do not think that this amendment is appropriate.
My noble friend prayed in aid precedents; namely, the electricity scheme and the rail industry scheme. In relation to the latter, the protection provided to employees of the rail industry privatisation related to circumstances which I suggest are very different. In that case, the historic BR pension scheme was abolished and replaced with a new industry-wide scheme. In addition, employees were transferred from British Rail to a new employer—one of the newly created private sector rail companies. Neither of those changes applies here. The Government do not propose any changes to the RMPP and Royal Mail will continue to be the sponsoring employer of the scheme, together with Post Office Ltd. Both will remain under public ownership—Post Office Ltd will remain in 100 per cent public ownership—as enshrined in Part 1.
I hope that that provides reassurance to my noble friend and that we have made it clear that the Government are underwriting the accrued rights, as well as scaling down the scheme for RMPP going forward, which should make it much more viable. I should stress again that the sponsoring company, which I would suggest could not be overly influenced by a minority partner in any event, does not have the power to wind up the scheme. It could do so only if changes were introduced into the arrangements, which would require the agreement of the RMPP trustees, as well as RMG. I should remind my noble friend that the trustee board has an equal number of company-nominated and member-nominated trustees, plus an independent chairman. The trustee board is not controlled by RMG. I hope that that provides sufficient assurance to my noble friend to enable him to withdraw the amendment.
The noble Lord, Lord De Mauley, asked whether there were any circumstances in which a company might act in such a way as effectively to transfer the employment arrangements for an individual and therefore take them out of the scheme. Technically, that could happen at the moment, although there is no increased risk from the proposed arrangements. Clearly, if an employer sought to do that there would be substantial issues around employer relationships.
I thank the noble Lord, Lord De Mauley, and the Minister for their comments. When dealing with this sort of amendment, one of the problems we face is the trust we have in the words of the Bill as a whole. My noble friend said that the existing provisions give the protection that my amendment seeks to get, and I am directed towards those parts of the Bill that purport to give these rights to the people concerned. I am surprised that the railway scheme was put to one side by my noble friend because the scheme has been abolished. You could have fooled me, because the scheme being proposed here as good as abolishes the Royal Mail pension schemes as they exist at the moment. However, the amendment gives me the chance to ask the Minister for an assurance that every single employee of Royal Mail, from the top to the bottom, will be in the scheme. Alternatively, will there be two separate schemes, one for senior management and one for the rest of the staff? If people move from one status to another, these things have to be clear.
I tabled this amendment to look at the question of trust. This has to be spelt out in the Bill because when we say we are going to protect members’ interests, we mean it. As I said when moving the amendment, we want this to be clear, unambiguous and meaningful. We have had some difficult experiences over the years with trustees and the pension fund, with the ownership of the fund and with the rights of the fund members. My suggested new clause would do away with the smoke and mirrors and deal with exact wording. Clearly there is a lot to consider in what the Minister has just said and I will look at the parts of the Bill he referred to. However, I want to know categorically whether we are talking about every member of Royal Mail being part of the same scheme, or whether there will be two schemes so that senior management gets an enhanced scheme over the rest of the staff. Perhaps he could comment on that before I decide what to do with my amendment.
I am happy to try to place as much on the record as I can to give my noble friend the quite reasonable assurances he seeks in a number of areas. As we touched on during the last Committee day, at the moment there are effectively three schemes: the RMPP scheme, the executive scheme and the new DC scheme into which all new entrants are directed. The DC scheme will continue to operate for new entrants. No proposals in this Bill impact on those arrangements, and neither do they impact on the current executive scheme. That will stand and fall going forward on the same basis as it does at the moment.
The provisions in relation to the RMPP, as we discussed on the last occasion, are meant to apply to qualifying members as defined. We have tried to make it clear that, subject to all the issues around state aid, it is meant to apply to all the existing members of the scheme at the relevant date.
I thank my noble friend for that further clarification. If I have understood him aright, and I am not the brightest person in this House, there will still be an executive pension scheme which differentiates between senior people and the rest of the staff. Having said that, I need to consider carefully what my noble friend has said before we move on to Report. For the moment, I beg leave to withdraw the amendment.
Amendment 70 withdrawn.
Clause 20 : Transfer of assets of the RMPP
70A: Clause 20, page 10, line 31, leave out paragraphs (a) and (b)
What I have to say in relation to this amendment is very simple. Where the Bill states that:
“The Secretary of State may by order make provision for the transfer of assets to the RMPP”,
we want to delete paragraphs (a) and (b) referring to the “Secretary of State” and a “nominee of the Treasury”. That is what we are asking for. It is pretty straightforward and I hope that my noble friend will be able to agree to the amendment. I beg to move.
Although my name is not on the amendment, the name of my noble friend Lady Turner is and, in supporting the amendment, I take the opportunity to tell the Committee that I spoke to her last night. She has had major surgery on her knee but she is in very good spirits and hopes to be back among us as soon as possible. In the mean time, she sends her best wishes to all her friends. It was nice to speak to her last night because her heart and mind are on the Bill, to which she is so committed.
As my noble friend said, the clause deals with the assets of the RMPP that will be transferred to the state in return for the state’s agreement to underwrite the past-service deficit. In other words, it is about the money, not the pension rights. The assets will consist of cash, government bonds, gilts and equities. The gilts and equities could be sold by the RMPP and transferred as cash, but that would suit no one as they might be sold into a falling market. The Government’s intention, as outlined in the debate on 31 March at col. 1023 of Hansard, is that gilts will go to the Treasury, cash to the Consolidated Fund, and other assets to a freestanding fund which would gradually sell them when the market was right. The effect of the amendment would be that all the assets were transferred to the freestanding holding fund. In other words, the gilts and cash would not be simply swallowed up by the Government.
The purpose of the amendment is that there should continue to be a fund available to underwrite the transferred pension rights. It would exist as a kind of trust fund, albeit managed by the Secretary of State’s nominees rather than by trustees. It would give additional security for benefits that might still be in payment 80 or 90 years from now. If the benefits are paid on a pay-as-you-go basis, they are only as secure as the political willingness of Governments over that period to leave them intact. In similar past cases, including rail and coal, the assets were left as a trust fund and not transferred to the Government’s coffers.
The Minister should remember that these assets are, in part, funded by the contributions paid by members over a number of decades; it is their money that we are talking about and not some mythical money that has been spirited out of the Treasury. I do not know what my noble friend Lord Hoyle intends to do, but I see this as a probing amendment and I ask the Secretary of State to give a formal, on-the-record guarantee that the transferred pension rights will be paid, come what may, if they are not underwritten by a fund.
The amendment raises some important concerns about what the Government propose will happen to the assets they are transferring out of the RMPP. The Government’s policy paper says that their intention is to sell the assets,
“over a number of years to protect value for money for the taxpayer”.
That, of course, is sensible so far as it goes. We have debated the Government’s interesting timing in choosing to sell off a large minority stake in Royal Mail during a severe economic crisis, which has already raised concerns about whether the taxpayer will get value for money. The same, of course, applies to the pension assets. How are the Government going to decide when the assets will be sold? Do they have a target level for the Financial Times Stock Exchange index or some other index at which they will sell, or do they intend to sell the individual bonds and shares when they each reach what the Government regard as a satisfactory price? If so, how will they recognise a satisfactory price when they see one? We need to know a little more about the Government’s decision-making process.
Where possible, assets should be held on to until the best return can be got. To do anything else needlessly increases the taxpayer liability, already calculated to be somewhere north of £6 billion. I hope the Minister will be able to go into more detail on how long the Government are prepared to wait before liquidating the pension assets. Are they looking to offload them as soon as is reasonable, given the economic situation, or will they hold on to them until they need to be liquidated to meet the associated pension liabilities? What will be the remit of the person charged with the administration and management of the fund under subsection (3)?
Amendment 70A relates to the treatment of assets that are transferred to the Government. I shall start by setting out the Government’s intended approach to the treatment of assets and how we expect the pay-as-you-go scheme to be governed. Clause 20 covers the transfer of assets from the RMPP to the Government. The Government’s intention to transfer members’ qualified accrued rights to the new public service scheme represents an estimated £29.5 billion liability.
To partially offset that cost to taxpayers, Clause 20 provides that the Secretary of State can, by order, transfer assets from the Royal Mail pension plan to the Government. Based on the 2007-08 scheme accounts, the Government estimate that they will use their power under this clause to transfer something like £23.5 billion of assets, which amounts to 80 per cent of the cost of the liabilities transferred. At the point of transfer, the Government intend to leave the remaining RMPP with sufficient assets to meet its liabilities, currently estimated by the Government to be £3 billion. That will require state aid approval.
A transfer of assets will not affect the qualifying accrued rights transferred to the new public service scheme. To be clear to my noble friend, these will be protected in law and paid on a pay-as-you-go basis, as with many other public service pension schemes.
The Government are conscious that these changes could entail a significant transfer of assets out of the scheme. Those assets have been accumulated over many years through the contributions of scheme members, as my noble friend said, and of Royal Mail as the sponsoring employer, as well as returns on the scheme’s investments.
I stress that any such transfer of assets can take place only if the Government have also taken responsibility for the relevant liabilities—the qualifying accrued rights. In other words, at the point that the assets are transferred, the Government will also have taken on responsibility for the payment of past-service benefits to which those assets relate, as well as the responsibility for the shortfall in funding that will almost certainly be the case. It should also be remembered that, under Clause 19, members’ accrued rights that are transferred to the new scheme will be protected in law.
A number of questions have been raised with regard to the governance of the new pay-as-you-go scheme; the noble Lord, Lord De Mauley pressed some of these matters as well. Because many public service schemes are not established under trust and do not have assets to manage, they do not have trustees. Instead, the responsibility for the management of such schemes is delegated to a professional scheme manager, who is able to draw on the full range of professional advice available to a trust-based scheme. The interests of members are reflected through statutory protection for benefits, and through other stakeholder consultation arrangements as part of the broader governance of the scheme.
It is envisaged that similar arrangements to those applicable in other public service schemes will be developed in respect of the new scheme created under Clause 16. However, as the new scheme has no active members and there is no employer, many of the decisions that need to be made by other public service schemes, such as those relating to future benefit accruals, will not arise.
As a public service scheme, it is envisaged that the new scheme will prepare an annual set of resource accounts. These will be informed by regular actuarial assessments and updates of the key assumptions used to calculate the scheme’s liabilities, including longevity.
Given the nature of the liabilities that will be transferred to the new scheme, and the protection for members provided through the Bill and in the related secondary legislation, the Government regard the established model for governance of public service schemes as the most appropriate model to be applied in this case.
I turn to the detail of Clause 20. Subsection (1) contains provisions for where the assets will be transferred. We intend for any gilts and cash transferred to go to the Treasury’s Debt Management Office and the Consolidated Fund respectively. The intention is that the other transferred assets will go to a fund established by the Secretary of State and will be sold over a number of years, with proceeds going to the Consolidated Fund.
Clause 20(1)(a) allows for a transfer of the assets directly to the Secretary of State. That would allow for the transfer of any cash to the Secretary of State, who could then pay it into the Consolidated Fund. It is also a contingency measure, should the fund envisaged under Clause 20(1)(c) not have been established when the transfer of assets is required to take place. Clause 20(1)(b), which gives the power for the assets to be transferred to a nominee of the Treasury, is designed to allow gilts to be transferred directly to the Debt Management Office. I hope this has provided noble Lords with clarity on our proposed treatment of assets and how that relates to the transfer of qualifying accrued rights.
Amendment 70A, which I accept is probing, proposes to remove paragraphs (a) and (b) from subsection (1). The effect would be that assets could only be transferred from the RMPP to a fund established by the Secretary of State rather than directly to the Secretary of State or a nominee of the Treasury. That would have no beneficial effect for members, whose qualifying accrued rights would already be protected in law, and would be funded from general taxation and not from the fund established by the Secretary of State. However, it would restrict the flexibility which the Government may need in the interim to implement the transfer successfully and could add to the costs of asset disposal.
The noble Lord, Lord De Mauley, asked a number of questions about how the assets would be dealt with and, in particular, what we mean by their being sold over a number of years. Let me be clear that the Government are not interested in a fire sale of any assets; they are committed to selling the assets over a number of years. It would not be appropriate to include a timeframe in the Bill because it is not possible at this stage to predict when sales will be appropriate and deliver value for money. Similarly, it is not appropriate at this stage to predict when sales will be possible. Therefore, the decisions will be for Ministers and the BERR accounting officer to make. The BERR accounting officer will be responsible for ensuring that asset sales deliver value for money for the public sector as a whole. This follows the standard procedure used for all public sector bodies, as set out in HM Treasury’s publication Managing Public Money.
The Government recognise the importance of transparency on the pension proposals. We are currently considering the various options for how best to achieve this, including that of setting out a disinvestment strategy, but that is just under consideration.
I hope that that explanation has dealt with each of the points that noble Lords have raised. I ask that the amendment be withdrawn.
This is a probing amendment and I desire to go over in detail what my noble friend has said. We may have to return to this as we are concerned about the protection of members, but in view of what has been said already I beg leave to withdraw the amendment.
Amendment 70A withdrawn.
Amendment 71 not moved.
72: Clause 20, page 10, line 41, at end insert—
“( ) The Secretary of State must inform Parliament of the classes of assets transferred under the order.”
The amendments in this group address two concerns. Amendment 72 deals with which of the RMPP’s assets the Government intend to take. The more substantive Amendment 74A concerns the assumptions on which the safeguard in subsection (1) will be based.
Let me deal first with Amendment 72. Your Lordships will appreciate that some of the assets in the RMPP are of considerably better quality than others. The variety of assets is presumably very wide, ranging from property to overseas equities to index-linked bonds, and so on. Some are subject to much higher levels of risk. If the Government are not intending to take over all the assets, do they intend to take a fair selection of each class of asset, or will they seize only the safest, leaving the highest risk and most toxic assets behind for the ongoing fund to handle?
On Amendment 74A, following our debates on 31 March, the Minister helpfully wrote to my noble friend Lord Skelmersdale concerning the assumptions. It would be helpful if the noble Lord could expand somewhat on how the Government will ensure that an objective analysis of volatility and risk will appropriately be taken into account. I beg to move.
I have listened with interest to the debates on the amendments moved by the noble Lords, Lord Clarke, Lord Hoyle and Lord De Mauley, and I am puzzled. Perhaps the Minister can help me. There seems to be considerable concern in your Lordships' House that somehow the Government are going to pinch the assets. We did not devote a lot of time to worrying about that on these Benches, and perhaps we were wrong. I had understood that the taxpayer was going to subsidise this pension fund and that one of the purposes of the Bill is to put in place the mechanism under which the Government—that is, taxpayers—subsidise the shortfall in the pension fund. Why does the Minister think that there is this concern that the Government are going to pinch the assets?
I start by responding to the latter point made by the noble Lord, Lord Razzall. While I cannot, perhaps, articulate why there are concerns, I can tell you why there should not be concerns. The issue is that liabilities—currently estimated to be some £29 billion—are being taken on and underwritten by the taxpayer on a pay-as-you-go basis. The assets of the scheme are being transferred to the Government, except to the extent that sufficient assets will be left with RMPP to cover its liabilities at the point at which the split occurs. The proposition that the Government are somehow pinching the assets is misguided. Liabilities are being taken on that are expected to exceed considerably the value of any assets that the Government will take on.
When the Minister winds up on this point, will he explain why the Government are simply not agreeing to leave the assets there and meet any deficiency? Why does there have to be this transfer of some assets, leaving others behind, which of course is causing concern and suspicion to the noble Lord, Lord Clarke of Hampstead, the noble Lord, Lord Hoyle, and—dare I say—the Tories? Of course, we on these Benches would never suspect the Government of such skulduggery.
I am grateful for what I take to be a measure of support from the noble Lord. The reason for adopting this approach is set out in the impact assessment. Another option would be for the assets to be transferred, for there to be a funded scheme as the noble Lord suggests, and for the Government simply to plug the gap on some ongoing basis. The analysis in the impact assessment very clearly shows concerns over the investment risk that that would involve and leave the Government with. It was not an attractive option. It was estimated that, over time, it would lead to greater costs being borne by the Government and the taxpayer. That is the fundamental reason for adopting the current approach.
Amendment 72 would require the Secretary of State to report on the assets that are transferred from the RMPP to the Government. At present, as the noble Lord, Lord De Mauley, suggested, the assets in the scheme are a mixture of equities, gilts, properties, bonds and cash. The type and mix of assets left with the RMPP will be the subject of discussions with the trustees and actuaries. That is the discussion that must take place to identify the appropriate mix of assets to be left, bearing in mind the ongoing liabilities that the RMPP will have. An exact pro rata mix is unlikely, given the indivisibility of some investments.
The Government fully recognise the importance of transparency in any transfer of assets. Indeed, we would expect an order for the transfer of assets to include details of the classes of assets transferred, including, for example, details of any cash or gilts that were transferred to the Consolidated Fund or to the Treasury. However, the order will need to contain some flexibility on the exact mix of assets transferred, given that a transfer may take place some months after a transfer of liabilities and the time an order is laid. There could conceivably be some changes in the value and composition of the relevant assets to be transferred, so any order cannot be totally prescriptive.
Following a transfer of assets, the Government will also be transparent in publishing the breakdown of assets and the wider public finance impact in the Pre-Budget Report or Budget immediately following the transfer. As this information will already be in the public domain in the ways that I have described, we see no necessity for a separate obligation for the Government to report on the classes of asset transferred. I hope that the noble Lord, Lord De Mauley, will accept that because what he seeks to achieve in respect of transparency will arise from the mechanisms that I have just set out.
Amendment 74A concerns Clause 21. This clause limits the Secretary of State’s power to transfer assets out of the RMPP. It provides members with a legal safeguard to ensure that the transfer of assets does not worsen the funding position of the RMPP. In relation to this restriction on the transfer of assets, subsection (4) provides that the values of liabilities and assets will be determined, calculated and verified by a prescribed person and in the prescribed manner, the details of which will be set out in secondary legislation.
Similar to what Amendment 74A proposes, the Government intend to hire an appropriately qualified actuary, but we do not believe that it is necessary to put this on the face of the Bill. There are a number of factors that Government will need to take into account in procurement decisions, and this is just one factor. In addition, the relevant actuarial bodies could change in the future. I understand, for example, that a merger has been proposed between the Institute of Actuaries and the Faculty of Actuaries. It therefore makes sense to set out in secondary legislation the details of who will carry out the valuation and on what basis.
Amendment 74A also requires the valuation to employ,
“a conservative set of assumptions used in the private sector”.
This amendment appears to relate more to a full actuarial valuation of the scheme such as the one the trustees are currently undertaking. The purpose of the valuation referred to in subsection (4) is different and much narrower in its scope. It is purely to ensure that the restriction on the transfer of assets in Clause 21 is met. It is important that the assumptions used are appropriate to the RMPP and protect both scheme members and the taxpayer. As such, it is entirely legitimate for the Government to set out the assumptions in an order after consultation with the trustees. By contrast, the proposed wording of Amendment 74A is unclear and could hold the Government and the taxpayer hostage to fortune.
I hope that that explanation has reassured the noble Lord, Lord De Mauley, and that he will be able to withdraw the amendment.
I am most grateful to the Minister. I am also grateful to the noble Lord, Lord Razzall, who, as always, goes right to the heart of the matter, even if it was not the specific matter that I was raising in this amendment—but no less important for that.
I shall consider the Minister’s response in the context of his recent letter. For today, I withdraw the amendment while reserving my right to return to it later.
Amendment 72 withdrawn.
Clause 20 agreed.
Clause 21 : Restriction on power to transfer assets
73: Clause 21, page 11, line 4, leave out subsection (1)
Once again, the noble Lord, Lord Clarke, who spoke earlier about trust, like us appears to have similar concerns about the discrepancy between government promises and the drafting of the Bill. At Second Reading, the Secretary of State made a clear statement, echoing what had been published in his policy paper, that:
“At the point the historic liabilities are transferred to the new public scheme, we will leave the Royal Mail pension plan with sufficient assets to meet its liabilities”.—[Official Report, 10/3/09; col. 1067.]
That seems completely unambiguous. The RMPP is to be left fully funded, albeit, as we have discussed, on the 2006 valuation. However, this is not what the Bill says. Clause 21(1) is equally clear that the Secretary of State is not to be held to the promises that he has made. According to the Bill, the Secretary of State must only make sure that the RMPP is not left with a worse ratio between its funding levels and its liabilities than before the relevant time. Which is it to be—the soothing promises of the Secretary of State or the wording of the primary legislation?
If the Government intend to leave the RMPP fully funded, why have they not drafted the Bill in that way? This is just one more example of unnecessary and deeply concerning ambiguities in the drafting of this Bill. Do the Government intend that the RMPP should be fully funded or not? I beg to move.
This group includes Amendments 74 and 76. In Amendment 74, I am saying:
“The power of the Secretary of State to make an order under section 20 (a “transfer order”) may only be exercised if the assets of the RMPP are sufficient, at the relevant time, to enable the RMPP to be wound up and all of its liabilities discharged in accordance with section 74 of the Pensions Act 1995 (c. 26) (discharge of liabilities by insurance, etc)”.
This is an important clause, because it defines the amount of assets that can be transferred to a new public scheme or a segregated section of the RMPP, sponsored by the Secretary of State. The value is defined negatively. Clause 21(1) tells you what must be left to the RMPP, rather than what it can transfer. It says that the funding ratio in the rump RMPP must not be worse as a result of the transfer. The funding ratio can be determined in a number of different ways; the relevant ones are on an ongoing basis or a winding-up basis. The winding-up basis is more stringent; broadly speaking, it is the cost of buying out the benefits by purchasing annuities.
Members of the scheme want the RMPP to be as strong as possible after the division. The strength of the new free-standing Royal Mail and Post Office companies is not all that clear—and I venture to suggest that there are not that many people either here or in any other place or in the Government who are clear on what is going to happen. That is why, when I talk about trust, it is difficult to have trust in something that is not very clear. In the case of a similar separation in the private sector, the trustees of the remaining section—that is, the rump RMPP—would insist that they are left with enough to buy out all benefits if the sponsor collapsed shortly after the separation into a number of different companies. Amendment 74 therefore says that once the assets are divided, the RMPP should be fully funded on a buy-out basis. The addition of new subsection (6) in Amendment 76 may not be strictly necessary until such times as we hear something that blows away some of the fog about the future of the company.
I have raised the question under Amendment 74, so I shall leave Amendment 76 as it stands and hope that it is not necessary to return to it. We want to suggest that the scheme should not be wound up. In an earlier contribution, the noble Lord, Lord Razzall, put his finger on it. If you go outside this building and talk to a Post Office worker who remembers what happened in the early days of my Government with pension funds—the way in which they took money out of not only that but many other pension funds—you will find that they are not terribly keen on seeing something that has been in place since 1969 being swept aside. It was made clear that this could be overcome by saying simply that there was a problem with the deficit—but why muck up the whole of the other scheme? Why destroy the trustee-based scheme that has served well, other than in the question of the deficit? Massive surpluses of billions of pounds used to be run up, until such time as both Conservative and Labour Governments allowed the terrible business of a holiday, with no money going into the scheme from the employer, although 6 per cent of members’ money still went in. That is why I speak very forcefully about the fact that it is our members’ money that we are talking about and not something handed down as some sort of gift.
There is suspicion, and these amendments attempt to put that suspicion to one side and to clarify things. In fairness, I ought to say that even though we have been on a break I have been very pleased to have contact with Ministers about the need to get these things right. I am sure that there will be time between now and Report to see whether some of the fog can be blown away and we can come back with something that the Government can be proud of in its transparency, accountability and commitment to a structure allowing trustees to play their full part. I shall be very interested to hear what my noble friend has to say.
I rise to support my noble friend. What we are on about here is the members and trying to protect them, because, as he said, while the two Governments were taking a holiday, the members were making their contributions to the scheme in any case. There has been talk of suspicion, fog, mist and a lack of clarity. I hope that when the Minister replies he will try to meet our misgivings; indeed, that he will end them and give us assurances that we have no need to fear what might happen. That will be a big test, because as my noble friend Lord Clarke has said, the members of the scheme are extremely suspicious of what might happen to the scheme and, indeed, what might happen to them. They have paid into a pension fund for such a long time and they want to ensure that it is protected. It is part of their security for the future and was part of wages they deferred in the past in going forward. Therefore, I hope that my noble friend Lord McKenzie can give us some reassurances, or at least some details that we can look at to see whether we have the kind of reassurances that we actually need.
I will again do all I can to try to make sure that on the record we give the assurances that I believe are embedded in the legislation. We will do all we can, both in these proceedings and, if necessary, at meetings outside to lift some of the fog that my noble friend may feel is still present around these proceedings. I say to my noble friend Lord Hoyle that protection is very much at the heart of what we are proposing in Part 2.
Amendments 73 and 74 concern subsection (1) of Clause 21. As we have discussed, subsection (1) requires that the ratio of assets to liabilities in the RMPP is no worse immediately after the transfer of assets and liabilities than immediately before it. The restriction applies to all sections of the RMPP, including the new sections for Post Office employees and Royal Mail Group employees. This represents an important legal safeguard for the trustees and for members with accrued rights remaining in the RMPP.
Amendment 73—I accept it is a probing amendment—removes subsection (1) and would remove this protection. It could allow the Secretary of State to leave the RMPP in a relatively worse funding position than at present. Not only could this be detrimental to the members of the RMPP, it would also present a barrier to partnership because of the additional risk that it would impose on any potential partner in Royal Mail Group. Therefore, the Government cannot accept the amendment.
Amendment 74 aims to require that a transfer of assets to Government may only be made if the RMPP is left fully funded on a buyout basis. That is the most cautious basis for funding pension liabilities, often used to assess the cost of winding up a pension scheme. It would require that following a transfer of assets and liabilities, sufficient assets are left in the RMPP to fund the purchase of insurance company annuities covering all members’ benefits that remain with the RMPP.
Amendment 76 is consequential on Amendment 74 and clarifies that this does not imply an intention for the scheme to be wound up. I certainly accept that. In dealing with these amendments, we should bear in mind that both the Royal Mail pension plan and its sponsoring employers will be, as we discussed a moment ago, in a significantly improved position by virtue of the measures in the Bill. It would be perverse to argue in this context that the trustees somehow need full funding on a buyout basis to protect members going forward. Nor is it desirable to specify a particular funding basis for the purposes of Clause 21. The Government have stated their intention that when transferring assets and liabilities from the Royal Mail pension plan, sufficient assets will be left to cover its liabilities. In calculating those liabilities, the Government will work with the trustees to find an appropriate valuation basis that delivers value for money without putting members’ accrued benefits at risk. The details of the valuation will be set out in secondary legislation.
Let me repeat, as I think it addresses the point the noble Lord, Lord De Mauley, raised directly, that the Government intend to leave the RMPP with sufficient assets to cover its liabilities. That will require state aid approval. It is not appropriate, therefore, to include a requirement to that effect in the Bill. Although the Government are confident that it will be possible for state aid approval to be obtained, they cannot pre-judge the Commission’s detailed decision or rule out the possibility of modification to the proposals. That is why the Bill is not written in those terms, but the protection is written in there as I have just outlined.
Funding on a buyout basis could involve a large cost to Government and the taxpayer but provide members with little extra protection. It would also—I think my noble friend Lord Clarke identified this—provide an incentive for the company to wind up the scheme, which the Government have no intention of doing.
I can confirm in relation to Amendment 76 that, as we discussed earlier, there is no express power in the RMPP rules for the scheme to be wound up. There are, as I have said, state aid implications. The pension proposals, including the value of assets left with the Royal Mail pension plan, will require state aid approval. That is why it is not appropriate to include a requirement on the funding basis in the Bill.
Given the difficulties I have mentioned, I hope that the noble Lord, Lord De Mauley, and my noble friend Lord Clarke will not press the amendments, and that I have provided the assurance that I think they are seeking. If I have not, I am very happy to have another go and put something further on the record if that would help.
Amendment 73 withdrawn.
Amendments 74 and 74A not moved.
Amendment 75 had been withdrawn from the Marshalled List.
Amendment 76 not moved.
Clause 21 agreed.
Clause 22 : Taxation
77: Clause 22, page 11, line 41, at end insert—
“(5A) Regulations shall be made under this section that shall ensure that, for the purpose of any relevant tax, benefits payable or prospectively payable under—
(a) the RMPP, and(b) a new public scheme,are treated as benefits payable under a single registered pension scheme.”
The amendment tries to get a single scheme for tax purposes. First, I am advised that the current basic rules for tax limits are that everyone has a right to contribute up to 100 per cent of his or her taxable earnings to one or more pension schemes. I am not worried about that: members will not be contributing to the new public scheme at all. They can contribute whatever they like to the RMPP going forward or to a personal pension to buy additional pension.
Secondly, everyone has a single limit on the total value of the pension rights that they can have from every pension scheme that they hold. This total value is described as the lifetime allowance. For example, if a member has three pension schemes—schemes A, B and C—the limit applies to the total benefits that they get from all three schemes. If pension A comes into payment at age 60 for instance, you work out the value of pension A and knock that off the value of the total to see what is still available. You do that again when pension B comes into payment and again when pension C comes into payment. Each time a pension comes into payment it is called a “benefit crystallisation event”.
The way in which the value of a pension is calculated is complex, but the key point is that it is the capital value of the pension. A defined benefit pension is valued at 20 times the value of the initial pension; for example, if pension scheme A produces a pension of £20,000 per annum, £400,000 of the lifetime allowance is used up.
The lifetime allowance is set at £1.75 million for the tax year 2009-10 and will not bother many people. It certainly will not bother many postmen or postwomen; I can assure the Minister of that. This is not a big concern for most members, but might affect some high earners. Perhaps those people in the executive scheme that we heard about earlier on would fall into the lifetime allowance that I have just described. It just makes their lives a bit more complicated if one or other of their Royal Mail pensions comes into payment before the other.
Thirdly, there is a limit on the amount of pension that you can convert into a cash lump sum. This is the rule that matters: in short, you can convert up to 25 per cent of the value of your pension when it comes into payment. In my example, when pension A comes into payment, its capital value is £400,000, as I have just said, and the maximum lump sum is £100,000. In the case of the Royal Mail pension plan, let us imagine a member with a pension payable by the new public scheme that is worth £10,000. When the member retires, he or she has built up a further pension under the RMPP worth another £10,000. Each pension is worth a capital value of 20 times £10,000—£200,000. If he or she takes both pensions at the same time, the maximum lump sum is 25 per cent of £200,000 plus 25 per cent of the other £200,000, or two lump sums of £50,000 making a total of £100,000, just as before.
However, what if he or she takes one pension at the age of 60 and the other at age 62? If it is a single scheme for tax purposes, he or she can take the whole £100,000 out of the first pension at age 60. If there are two schemes, he or she can only take £50,000 at age 60 and the other £50,000 at age 62.
This is probably not the most important point in the world, but it affects some members who want to draw their pensions in two parts. Other tax rules have different effects, depending on whether it is one scheme or two. The tax administration of two schemes becomes twice as complex. If the RMPP trustee is going to administer both schemes, as the Secretary of State suggests, why not treat them as a single scheme? I beg to move.
The noble Lord, Lord Clarke, has highlighted another complication that might fall on pensioners as a result of the Government's policy. I hope that the Minister will be able to reassure us that members will not be disadvantaged by the new arrangements as to their tax liability.
It is notable that Clause 22 gives powers to the Treasury, which is not bound by the material detriment safeguard in Clause 19. It therefore seems quite possible that new rules could be imposed on members to their detriment. Is that the case?
Once again, this clause allows the Government to do pretty much anything. As far as I can see, there would be nothing to stop the Treasury, by regulation, imposing 100 per cent tax on the income that members receive from both the new public scheme and the ongoing RMPP. I am sure that this is not the Government's intention—or, if it is, that we are not going to hear of it today—but it seems that this clause would allow for it.
More realistically, it appears that the Treasury intends to tax the fund set up under Clause 20(1)(c). Is this the case? Why are the Government considering taxing a fund owned by themselves? I cannot think of a single beneficial effect except for the useful massaging of current account figures.
Similarly, in what circumstances do the Government envisage withdrawing relief on the ongoing RMPP? Would this not breach the spirit of the Clause 19 safeguard?
I think that the understanding of the noble Lord, Lord De Mauley, on the clause is a little misplaced, but I hope to put something on the record to clarify matters. I think that I followed my noble friend Lord Clarke’s example, but would need to read the record. Certainly, his exposition of lifetime allowances, benefit crystallisation and issues of lump sums was correct. I certainly accept that you could see an anomalous situation arising from the possible reorganisation if the clause were not available to address it, as it is intended to do.
The Government have outlined the framework for the pension proposals. However, the specific detail of the proposals for the reorganisation of the pension provision will be set out in secondary legislation and the reorganisation could result in unintended consequences. For example, a tax charge might arise solely as a result of the reorganisation.
Clause 22 will allow the Treasury to change how a relevant tax would apply to: the Royal Mail pension plan or its members; changes relating to the Royal Mail plan or its members; a new public scheme or its members; and a fund set up to hold the assets of the Royal Mail pension plan. This clause is necessary so that the Treasury can neutralise any tax disadvantage or advantage that may be caused by changes to the pension arrangements; its purpose is to neutralise the potential impact of tax in these circumstances. So where a reorganisation of the pension arrangements would otherwise create an unintended tax charge, that tax charge can be removed by amending the relevant legislation.
For example, Clause 22 will allow regulations to be made to treat the new public scheme as a registered pension scheme. So when members’ rights are transferred from the RMPP to the new scheme, tax charges of up to 70 per cent—equating to the amount of tax relief that will have been received—of the amount transferred will not arise.
Clause 22 also provides the power to make provision to remove the tax charge where assets of the RMPP are transferred to a fund in Clause 20(1)(c). If the fund is not a registered pension scheme, the transfer of the assets and the income and gains that arise on the investments would be taxable. This clause would allow regulations to be made so that the investments may attract tax relief as if they had been transferred to a registered pension scheme. To answer the point of the noble Lord, Lord De Mauley, on whether we are looking to tax the fund set up under Clause 20, I say no. The impact of this is to enable the fund that holds the assets to be treated in the same way for tax purposes as though those assets continued to be held by the scheme.
Without the power, these amendments could not be made otherwise than by primary legislation at some time down the line. If this clause were removed, tax charges of up to 70 per cent on payments out of the pension savings could arise simply because of the reorganisation of the pension arrangements.
This sort of clause to neutralise unintended tax charges is not novel. In 2005, a similar power—Section 102 of the Finance Act 2005—was taken in relation to the Pension Protection Fund, the Fraud Compensation Fund and the board of the Pension Protection Fund. It was taken for similar reasons, essentially as a precautionary measure to ensure that, when the detail was finalised, unintended consequences could be dealt with. Therefore, it is important that this provision is flexible. The tax consequences will depend on the specific detail which will be set out in secondary legislation. Clause 22 provides the power to make regulations to meet any concerns that may arise on the taxation of the pension reorganisation.
Amendment 77 would require the Treasury to make regulations ensuring that, for tax purposes, benefits paid out of the Royal Mail pension plan and the new public scheme are treated as if they were paid out of the same pension scheme. This is unnecessary and could cause difficulties. Current Royal Mail employees will probably receive benefits from both the Royal Mail pension plan and the new public scheme. In previous debates on this matter, I have confirmed that the Government’s aim to protect members is at the core of these pension changes. For tax purposes, the Government aim to treat the members of the RMPP and the new public scheme, as far as is possible, as if the reorganisation had not taken place.
That is why we have Clause 22. If inadvertent tax charges arise out of the changes, Clause 22 provides the power for the Treasury to make regulations to vary the tax rules. The clause is included in the Bill to cover precisely this sort of detail. So where unintended tax charges arise from the pension proposals, Clause 22 allows the regulations to neutralise tax disadvantages that may be caused by changes to the pension arrangements. The amendment would oblige the Treasury to make regulations to treat the benefits as payable under a single registered pension scheme whether or not such regulations were an appropriate way to resolve the potential problem.
Even more seriously, creating the fiction that the benefits of the two schemes are paid out of the same registered pension scheme for tax purposes would introduce unnecessary confusion over which scheme is responsible for the payment, without providing any additional tax advantage over what is already possible under the existing version of Clause 22. This is because each registered pension scheme has to appoint a person responsible for its tax issues—the scheme administrator. This amendment would create uncertainty over exactly who has that responsibility and may even restrict the ability to make changes which neutralise the tax position.
The amendment provides a rigid requirement for the Treasury to make regulations when the tax consequences of the detailed pension proposals, and whether and in what form tax changes will be needed, are still unknown. The Government think that the flexible provision in Clause 22 is the best way of dealing with the tax consequences that may arise out of the pension proposals. My noble friend Lord Clarke asked why we should not treat as one scheme pensions taken two years apart. My note says that the treatment would be the same if £100,000 were taken first and another £100,000 were taken two years later, irrespective of whether the sums were in one or two schemes. The thrust of the point I am seeking to make is that the concerns on which my noble friend has alighted can be dealt with by Clause 22. That is the purpose of that clause. We believe that is a better and more flexible approach than having the rigid approach of treating the two schemes as though they were one for tax purposes, given the difficulties that could generate, as I have explained. I therefore ask that Clause 22 stand part of the Bill and I hope that my noble friend will withdraw the amendment.
I am left with a feeling that my noble friend has been helpful, although I shall not become too euphoric about that but take it as it comes. However, some of his comments add to the problem. The framework of the scheme is there but not the detail, and secondary legislation might have to be introduced. These matters are uncertain; anything could happen in the future. That is why I have made such a fuss about the need for transparency and to get as much detail of the Government’s intentions as possible in the Bill. I leave my noble friend with the following comment. If the RMPP trustee is to administer both schemes, as my noble friend said, why not treat them as a single scheme for tax purposes? However, for the moment I shall withdraw the amendment as I am pretty sure that we shall return to it at a later stage.
Amendment 77 withdrawn.
Clause 22 agreed.
Clause 23 : Information
77A: Clause 23, page 12, line 15, after “otherwise)” insert “that is not legally privileged”
Our final amendment on Part 2 from these Benches is very simple and I hope can be dealt with quickly. Our concerns here are about the drafting of the Bill, not the Government’s intentions; at least, I hope that they are not, because, having said that, it occurs to me that there has as yet been no indication of what the Government’s intentions are with this clause.
Have the Government had any difficulty extracting the necessary information from the relevant people? Indeed, the only people whom I can imagine holding relevant information are the trustees of the RMPP, and the Minister has said many times that the Government are working closely with them. Therefore, I cannot see why this clause is necessary.
The amendment suggests the barest possible safeguard as regards how this provision might be used, which would be to protect legally privileged information. It is a common safeguard that has been drafted into many precedent pieces of legislation. Will the Minister explain why it has not been included here? I beg to move.
Before I deal with the amendment, I wish to deal with the question that the noble Lord raised about our having difficulty getting information from the trustees and their having been reluctant to provide information. The answer to that is a very clear no. The power that we seek here is to safeguard future information requirements connected with the establishment of the scheme. To date there has been no requirement to exchange detailed information. We have been dealing with aggregate data in looking at the projections and the work that has been done.
I would like to explain the purpose of Clause 23. In order to implement the measures set out in Part 2, the Secretary of State will need access to certain information. We would expect such information to be readily provided by the appropriate parties but, should this not be the case, the clause provides a power for the Secretary of State to make an order requiring the provision of that information.
The information covered under this power will comprise principally details of the scheme’s assets and the liabilities related to individual members, which are currently held by the RMPP. The Government will require access to that information in order to make orders concerning the transfer of certain liabilities to the new public service scheme under Clause 16 and for the payment of benefits to members by that new scheme; to establish the new section for Post Office employees under Clause 17; to transfer assets from the scheme under Clause 20; and to ensure that any asset transfer order meets the requirements set out in Clause 21. The power to obtain information can be exercised only where it can be demonstrated to be required for the provisions under Part 2. Before it is exercised, there is a further requirement under Clause 24 for consultation with the RMPP trustees.
We will be discussing, as part of the ongoing meetings that we are already having with the RMPP trustees, the information requirements. We do not envisage that this power will in practice be used, other than in exceptional circumstances. However, access to the relevant information is important not just for the effective exercise of the powers under Part 2 but in order to safeguard members’ and taxpayers’ interests. The clause therefore provides the necessary powers, should they be needed.
The amendment would exclude from the power in Clause 23 any information that is “legally privileged”. The meaning of legal privilege is well defined. The British courts have been clear that legal privilege is a fundamental right, which cannot be abrogated by statute unless done so by express words in the statute or as a necessary implication of the words of the statute. The Government have not put in any such wording in relation to this power because they fully recognise the fundamental right of legal privilege and do not intend to encroach on this right. We do not therefore think that this amendment is necessary. I hope that the noble Lord understands our reasons and that he will withdraw it.
Amendment 77A withdrawn.
Clause 23 agreed.
Clause 24 : Orders and regulations
Amendment 78 not moved.
78A: Clause 24, page 12, line 21, at end insert—
“(1A) The Secretary of State may not make an order under any provision of this Part which adversely affects a relevant pension provision contained in the RMPP without the consent of the trustee of the RMPP.
(1B) For the purpose of subsection (1A), “relevant pension provision” has the meaning set out in section 19(3).
(1C) Regulations made under section 259 of the Pensions Act 2004 (c. 35) shall apply to a proposal to make an order under this Part as they apply to a proposal by an employer to make a decision prescribed for the purposes of that section.”
Amendment 78A is really a rehash of my amendment to Clause 18. I said then that any amendment to the RMPP should require the consent of the trustee in consultation with members. On the subject of trustee consent, my noble friend Lord McKenzie said at col. 1060 of Hansard that the Secretary of State needs to be able to amend the structure of the scheme as regards investment, governance and funding without risking a veto from the trustee.
The amendment that I propose today says that the trustee should have to consent to any relevant pension provision, which essentially means any benefits; in other words, the trustee should be able to comment on, and veto, amendments to the benefits structure. As regards consultation on members’ requirements, my noble friend Lord McKenzie said that members are adequately consulted because they have member-nominated trustees. That entirely misses the point that member-nominated trustees are subject to confidentiality obligations.
I will spend one moment on the confidentiality obligation of the trustee. One day, when the Secretary of State is in his place, I will be able to ask him questions directly. I will return to the question of the letter from the chairman of the current pension scheme, who, on 18 February, wrote to the Secretary of State after a meeting with him. The letter was published by the Secretary of State on 23 February. As I have told noble Lords before, that date is important, because it was the day when Post Office workers, responding to the lurid headlines of, “Posties’ pensions now at risk”, attended rallies and meetings convinced that their pensions were at stake. It did not matter how many times I or others who had some knowledge of the subject were able to say, “Not to worry”. We could not say very much, because the confidentiality obligations of the member-nominated trustees are paramount.
I asked some of my friends who are still trustees, as I once was, to tell me more about the sequence of events of the meeting, the letter, the publication and the retraction by the chairman—noble Lords may have missed that—in which, effectively, she disowned some of the things that she said in the letter following the meeting with the Secretary of State. I shall ask about those things again, because one day I will try to get a clear answer on the sequence of events.
The member-nominated trustees have this confidentiality responsibility. That is why the second part of the amendment would require consultation with members if benefits are changed. The reference to Section 259 of the Pensions Act 2004 is a reference to the provision that says that members must be consulted if benefits are amended. It would not give members a power to veto any change or even to delay changes.
I ask noble Lords to note that those two proposals go no further than what is required in every other private sector scheme and what currently applies to the Royal Mail pension plan. I ask the Committee to carefully consider and support the amendment, which I beg to move.
The noble Lord, Lord Clarke, returns to the question of the Secretary of State amending the RMPP without the trustee’s consent. The Minister has dwelt on the close consultation that the Government are already engaged in, but I have not detected that he has made clear what would happen if any disagreements remained at the end of that consultation. Indeed, the whole matter is rather complicated by the possibility of plan B, which the Minister also went into on the last day of Committee on 31 March.
If the Government were unable to gain the necessary permissions to take over the old liabilities directly and were forced to sectionalise the old RMPP under Clause 17, there would presumably be much more government interference in the day-to-day running of that section and so even more scope for disagreements to come up between the Secretary of State and the RMPP trustee. Having said that, I have a hunch that the Minister will tell us that he has quite a bit more work to do on this whole area and, if he does, we will clearly need to come back to it in some detail on Report. I very much hope that the noble Lord, Lord Clarke, will not feel the need to press his amendment today.
I support what my noble friend said. He is right to draw attention to what has happened in the past in relation to the chairman and the strange behaviour that took place. It is no wonder that there are some suspicions, which no doubt my noble friend can clear up for us. Again, there is the question of where we are going to draw the line and there is the question of the responsibility of the trustee. At the end of the day, we are trying to make sure that the members are protected in the best way possible. That is why we are saying,
“without the consent of the trustee”.
I hope that my noble friend can throw some light on this and on the role of the trustee in the future because, at the end of the day, we are trying to get rid of the fog, the mist and the mistrust that appear to exist at the moment with the members of the pension scheme.
I will intervene in the debate with a word of advice to the Government. If they want to avoid some of the mistrust to which my noble friend referred, which relates not only to the pension scheme but to the total package before us in the Bill, the full details of which are not yet clear, they would be as well, either by adopting my noble friend’s amendment or in some other way, to indicate that the Government do not have any intention of altering the terms of the pension scheme by Secretary of State decree.
I am not sufficiently informed to know whether my noble friend’s wording is the correct way to do this, but it seems to me that in Clause 19 we have made it clear that transfer would not immediately adversely affect any person in the scheme. However, the suspicion remains that the Secretary of State may have a power to change subsequently the entitlement of a member of the scheme and that therefore the guarantee in Clause 19 is not sufficient for the members of the scheme to feel safe that things would not be changed subsequently. As my noble friend Lord Clarke has said, the normal way of changing the terms of a scheme remains, which would have to involve consultation and eventually consent and agreement at the trustee level with the employer or, in this case, the Government.
I am not sure that the Government would lose anything by accepting the amendment, but they would remove a suspicion that the intention is to dilute or adversely alter the nature of the scheme some way down the line and thereby avoid expenditure by the Government. We should not avoid putting this in a broader context. We know that the Government and the Opposition have made some rumbling noises about public sector schemes in general. This is about to become a public sector scheme more explicitly than previously and it would be appropriate for the Government to give some reassurance to postal workers on this front, which may help them in their general dealings with the postal workers and their unions over the total package.
This has been an interesting, if somewhat compacted, debate. Let me try to unpick one or two issues. My noble friend Lord Clarke raised several points about the communications between the chair of the trustees and what had transpired. Forgive me that I have no briefing on that. I have a copy of the letters. If there is a way in which we can add further clarification, I am happy to take that away.
My noble friend Lord Whitty asked for an assurance about the Government’s intentions going forward. He is right to say that there are clear protections for the RMPP members at the point that the scheme is effectively split into two. I will come onto that in a little bit of detail in a moment So far as the new public sector scheme is concerned, the Secretary of State would similarly be constrained by Clause 19(6) in respect of any adverse change to qualifying and accrued rights, and those would be dealt with only under very narrow circumstances, one requiring consent and one being amended in the prescribed manner for which, as we debated last time, we were trying to replicate what is in Section 67 of the 1995 Act.
The other principle is that the Government take responsibility for accrued liabilities going forward for the operation of the pension scheme, which is the routine, normal manner of the Royal Mail Group and Post Office Ltd in respect of their action, and that the protections that are currently available generally in pension legislation would continue to apply. The Government have no particular powers in the Bill to seek to amend the scheme, as far as I am aware, and I will certainly write if the contrary proves to be the case. The Secretary of State does not have that power going forward. The operation of the slimmed-down scheme will be a matter for Royal Mail Group, as should be the case. We have made that policy clear from the start.
More specifically, the amendment raises a number of issues regarding consultation that we touched on in our discussions on earlier amendments. I appreciate the importance of the issues raised by noble Lords and I hope that my response to these amendments will address any remaining concerns.
The first part of the amendment requires the consent of the RMPP trustee to be obtained where an order is made that adversely affects any relevant pension provision contained in the RMPP. In other words, although the general requirement under Clause 24 is that the Secretary of State must consult with the trustee before any order is made under Part 2 which affects the RMPP, the effect of the amendment would be to require the consent of the trustee in circumstances where pension provision within the RMPP was adversely affected as a result of an order being made.
I question how, given the existing protections in the Bill—this comes back to my earlier point—the circumstances to which this amendment is addressed would arise. Under Clause 19(2), an order by the Secretary of State to establish a new scheme, transfer qualifying accrued rights to the new scheme, sectionalise the RMPP or amend it cannot be made unless relevant pension provision for RMPP members is, in all material respects, at least as good immediately after the exercise of the power as it was immediately before. As I explained in response to an earlier amendment, the definition of “relevant pensions provision” at Clause 19(3) is broad in its effect.
These provisions in Clause 19 are a significant constraint on the powers of the Secretary of State and reflect the importance that the Government attach to protecting members of the RMPP from being detrimentally affected by the Government’s proposals. The clause explicitly rules out the possibility that the Secretary of State would amend the RMPP in a way that had a material adverse effect on relevant pension provision. Accordingly, I cannot see circumstances in which the amendment, if accepted, would serve any purpose. By definition, if there is no possibility of an order being made that had a material adverse effect on relevant pensions provision contained in the RMPP, the trustees would never have to agree to such an order being made.
Turning to the final part of the amendment, subsection (1C), I should make it clear that it is indeed important that members of the scheme, both current and former employees, should be made aware of what changes are being made and the effect of the changes particularly in terms of issues such as administration. The Government have already met representatives of current employees and pensioners to explain the proposals in the Bill. The Government intend to keep those organisations informed as the Bill progresses and we move towards implementation.
As I mentioned earlier this month, we are also discussing with the trustees and Royal Mail on how they should best engage with current employees and other scheme members as the proposals are developed. While this legislation is progressing through Parliament, it is right that member engagement is the responsibility of the trustees and not the Government. But we are rightly maintaining a close interest and have discussed with the trustees appropriate communications that would meet the needs of the scheme members, stressing the strength of feeling expressed in this House during our earlier debates in Committee.
I now turn to the proposed application of the consultation requirements set out in the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006, which are the regulations made pursuant to Section 259 of the Pensions Act 2004, as is envisaged by this amendment. Those regulations require employers with more than 50 employees to consult affected employees about a proposed significant change, known as a listed change, to their pension scheme for at least 60 days before implementing the change. Listed changes include closing the scheme to new members, changing the accrual rate in a defined benefit scheme, changing a defined benefit scheme to a money purchase scheme, reducing employer contributions and increasing member contributions. The requirement to consult gives affected employees the opportunity to have their say about future changes to the pension scheme. It ensures that affected employees are fully aware of the changes and the implications for their future pension provision.
The key point is that the Government are not proposing any such changes to the RMPP. Members’ pension entitlements accrued up to the cut-off date—the qualifying time—are not changing as a result of the Government’s proposals. Members’ future accruals in the RMPP will remain, as at present, a matter for the Royal Mail and the trustees. The Government are not proposing any changes. Were Royal Mail or Post Office Ltd to propose changes to the scheme, as employers they would be subject to the obligations under the regulations that I have described. However, no such changes are proposed as a result of the measures set out in the Bill, so the requirements under those provisions are not relevant here.
I hope that the explanation has provided some reassurance. I accept that my noble friend may wish to dwell on the precise wording, because it is important that we provide reassurance to people and make clear the protections that are available under these provisions. Accordingly, I hope that he will feel able to withdraw the amendment.
I thank my noble friend for that very informative response to this short debate. He started by saying that it was interesting; it was certainly interesting to me once again to see that the willingness to talk about consultation and transparency is there in the Minister’s mind. I welcome that. It is another thing not to see that in the Bill.
It is said that the Government are not proposing any changes at the moment. We cannot live on the basis that it will always be “at the moment”, because at a different moment different people will be administering different things. That is why throughout these debates I have said there is a need for trust, consultation and accountability so that people can understand the situation.
There is not very much wrong with the first part of the clause. My noble friend is saying that there is no need to require the consent of the trustees. Over the years, consent in pension schemes has been as my noble friend Lord Whitty described; when a change is proposed, whether on an investment policy, the benefits structure or the administration of the scheme, there has been consultation. As I said at the time of the first deficit of £1.18 billion in the scheme in 1973, which was accumulated after only four years of the scheme, common sense prevailed and the parties came to an agreement.
All that this amendment says is you have to have the consent of the trustees. They are not out to try to hoodwink the employer or the Government; they represent the members. The trustees are looking after members’ money and investing on their behalf. It could be agued that some of the trustees may have not done that very well in the past few years, but I have explained time and time again that that was a direct result of the policies of former Governments and the present Government in allowing that almost obscene pensions holiday to take place, whereby the money accumulated from members’ contributions, not from the employer. At the same time money was pumped into the Exchequer from the external finance limit. So you could say that in the past the trustees may not have done their job as well as they might have done.
The noble Lord, Lord De Mauley, asked me not to test the opinion of the Committee this evening. I got the impression that he may want to bring something back to make this issue clearer. As I have said—now for the third time—if we do not get on the face of the Bill a clear and concise commitment to consultation, I shall, without any shadow of a doubt, support any amendment that states that there should be consultation. I know that consultation is provided for in other parts of the Bill, but when people read legislation, they want to see it wherever it is necessary. My amendment states that it should occur on this matter.
I think that sometimes in this discourse we are in danger of interchanging consent and consultation. I refer my noble friend to Clause 24, which makes it absolutely clear that the Secretary of State must consult the trustee of the RMPP before making an order under Clause 16 or any order under any other provisions of this part. That is embedded in the legislation and it is very clear. Perhaps we may look at what happens with the process going forward once the Government have taken on board the accrued liabilities. As I said a moment ago, in the normal course of events, going forward it is a matter for Royal Mail Group Ltd and the trustees. However, there could not just be a spurious adjustment to the terms of the RMPP going forward without requiring the processes set down in general pensions legislation to kick in. Therefore, a requirement for consultation is set down in the Bill.
I thank my noble friend for that comment. He draws attention to Clause 24, which deals with orders and regulations. If it is good enough to put that in the orders and regulations, why not put it in here? If it is a principle worthy of putting into a later clause, why not put it into this one?
I look forward with great interest to the letter that I think will come regarding my comments on the relationship between the chairman of the existing pension fund trustees and the Secretary of State. I wish that the Secretary of State were here so that I could say this to his face but I shall say it once again anyway. I believe that there was some scaremongering in the department that sought to frighten decent people regarding the future of their pensions.
I have not been involved in the detail on this but I have certainly been in the presence of the Secretary of State—I think that it may have been said in this very Chamber—when he has made it clear that he published the letter and did not leak it. He published it because he believed that it was a significant issue that should be taken account of in the deliberations that were then under way. I do not think that it is fair to attribute to my noble friend any underhand or devious motivation, which I do not believe was present.
My old employers used to say that that sort of argument was the salami treatment, cutting one slice off at a time, but we have gone a bit further than that. My point is that we have not yet had a public explanation of why the chairman of the trustees has, in effect, withdrawn her comments regarding the Hooper review in relation to pensions. Some of those things had nothing to do with pensions; they were to do with quality of service and administrative matters relating to Royal Mail. That is the answer that I will continue to try to get. Why was it necessary for someone of as high standing as the chairman of the pension scheme to write to all the members assuaging their fears?
I am sure that we will come back to that when my noble friend has had a chance to have the drains up and has had a good look round and seen the sequence of events relating to the letter written on 18 February and published on the 23rd, and later when, following lurid headlines, some of the comments in that letter were withdrawn. Taking the advice of the noble Lord, Lord De Mauley, I shall not test the opinion of the Committee on this occasion but I shall continue to come back to the question of consultation and the relationship between the trustees and the Government. In the mean time, I beg leave to withdraw the amendment.
Amendment 78A withdrawn.
Amendment 79 not moved.
Clause 24 agreed.
Clauses 25 to 27 agreed.
Clause 28 : Duty to secure provision of universal postal service
80: Clause 28, page 14, line 17, at end insert—
“( ) In carrying out its functions in relation to postal services, OFCOM shall have regard to the interests of—
(a) individuals who are disabled or chronically sick;(b) individuals of pensionable age;(c) individuals with low incomes;(d) individuals residing in rural areas;(e) small and medium size enterprises;but that is not to be taken as implying that regard may not be had to the interests of other descriptions of users.”
We now move on to a series of amendments dealing with the duty of the future regulator. Amendment 80 seeks to reinsert into legislation the duty that was previously imposed on Postcomm—without me getting too excited about the way that it has helped to bring the Post Office to this parlous state—in the Postal Services Act 2000. That duty meant that Postcomm had to consider, in relation to the postal industry, the specific problems facing people with particular needs. I refer to the disabled, the chronically sick, pensioners, the poor and people living in the countryside. Of course, it can be said that Postcomm did not display any great energy in defending the needs of such people, but that must not be an excuse to ignore their needs in the new Bill.
There is no reason why Ofcom should have fewer obligations than Postcomm. Changing the regulator does not change the circumstances of the users of Royal Mail. I am pleased that the Bill restates the need to maintain a service for blind people but it is not clear whether the deletion of those additional duties on the regulator is due to oversight or deliberation. If it is an oversight, I expect the Government to accept this amendment. If it is a deliberate exclusion, we must have an explanation from the Secretary of State. After all, the current recession is, in part, a result of Governments around the globe deregulating services to excess.
The market does not provide solutions to many problems. Left to the market, postal companies see only higher costs in providing rural services; left to the market, the disabled, the low paid and pensioners find themselves with a bad bargain. It would be a great mistake to lower the social concerns of the regulator. I cannot accept that the loss of this duty is somehow compensated for by the ability of the Secretary of State to offer guarantees on,
“the attainment of any social or environmental policies”,
set out in Clause 52. Such guidelines should supplement the permanent concerns covered by the amendment.
In the interim report published by Richard Hooper in May 2008 entitled The Challenges and Opportunities Facing UK Postal Services, we find a fine observation:
“The postal service enables daily communications across all 28.4 million business and household addresses in the UK, regardless of the location, and beyond. It helps social cohesion by linking rural communities with more densely populated areas of the country, and ensures that older people and those with disabilities have an accessible, reliable means of communication and the capacity to send and receive physical goods”.
Unless your Lordships accept this amendment, that statement by Richard Hooper’s team will no longer be true, for those elements of social cohesion referred to in the report will be removed with the passage of the Bill as it stands. I cannot for one moment believe that this House wants to see, for example, a deterioration in the service offered to rural communities by the universal service provider.
There is an important difference between the duties listed in my amendment and those outlined in the Postal Services Act 2000. In this instance, I have added the category of small and medium-sized enterprises. I omitted them in my first submission on this clause and am now pleased to say that they feature as part of this amendment.
In Hooper’s interim report, there were many useful observations on the impact of competition on the mail market. Unfortunately, much of that work was forgotten by the time the final report was published—presumably because the final report is more concerned with justifying the privatisation of Royal Mail—so it is necessary to return to the interim report to get a clearer picture on the issue of competition. The report makes it quite clear. It says:
“There have been no significant benefits for small businesses yet as a result of liberalisation”.
It continues by pointing out that,
“small businesses have relatively little choice. The vast majority use Royal Mail’s services. Their dependence on Royal Mail seems to reflect an assumption that they are unable to attract alternative carriers, particularly if located in rural areas, based at home, or do not have high volumes to offer. Penetration by alternative carriers in the small business sector will increase over time, as owners have more information about their choices, are able to set out their needs, and new products are designed”.
Surveys so far carried out show high levels of satisfaction with the quality of service offered at today's prices. Some 83 per cent of small businesses believe that first class mail offers good value for money. The response is higher still for a medium-sized enterprise at 92 per cent. But they do not believe that the service fully meets their particular needs. In some cases, recent changes in collection and delivery have made it more difficult to carry out their business.
In spite of advances in technology and online banking, many small businesses are dependent on the postal network to organise financial transactions. More than 50 per cent of companies surveyed by the Federation of Small Businesses send over three-quarters of their bills and invoices through the post. When profit margins are tight, the ability to receive payment and avoid penalties for the late settlement of bills is vital. With that in mind, small businesses want later collections and earlier predictable delivery times. Liberalisation has not delivered that yet.
The introduction of a new cost-reflective pricing structure based on weight and dimension known as pricing in proportion means that consumers are more likely to need advice about sending their letters. Small business representatives in particular have expressed concerns about the growing complexity of sending mail. These changes will have the greatest impact on those who work and live in more rural areas as well as domestic consumers unable to travel to the nearest post office, including the elderly and those with disabilities. We can see that there is no real gain for small and medium-sized enterprises.
Market innovation by competitors has been almost entirely confined to the skimming off of the conveyance of bulk mail to Royal Mail sorting and delivery offices. Neither Postcomm nor Hooper suggested how liberalisation could actually deliver benefits to small and medium enterprises. Postcomm was convinced that there would be some sort of trickle-down benefit, yet that has not occurred. Why should competitors develop a highly dispersed customer base? Only Royal Mail has the network and coverage to address the needs of small and medium-sized enterprises. Therefore, it is appropriate to impose on Royal Mail the duty to consider the specific needs of small and intermediate enterprises and I hope that noble Lords will see the logic and sense in this amendment. I beg to move.
I support my noble friend. Once again, he has stated the facts. Certainly, Postcomm, once it was charged with the provision of a universal postal service, was always more concerned about competition rather than provision. The emphasis in Hooper, in putting forward Ofcom as the best regulator, was to say that universal service provision must take priority. We should back that up in a little more detail for those who are absolutely dependent on a universal postal service.
It goes without saying that for those who are disabled, chronically sick or not mobile, the universal postal service is part of the value and quality of life, but the universal service must serve their actual needs. Once more, I could use a similar argument in relation to those on pensions because pensioners become less mobile as they get older—apart from those who attend this House, of course, who are the notable exceptions. Nevertheless, it is generally true that people of pensionable age require the provision of a universal postal service. Those with low incomes are always most adversely affected by any change and that would particularly be so if we did not ensure that the universal postal service served their needs.
My noble friend talked about rural areas. While I cannot be said to live in a rural area because, after all, our village has about 6,000 people, we are part of a rural area as my noble friend knows. Again, it is absolutely dependent. Information carried on the national news this weekend rang alarm bells. In remote parts of Scotland, the postal van has also acted as a people carrier and people have been passengers in it, but they are now told that that is not commercially viable. I should like to know from my noble friend why that is so. Surely it cannot be costing a large amount, yet those without a car will now have to walk. Their standard of living will certainly go down.
That is the kind of thing that will occur. The market cannot provide for that: it is about a universal service provision that caters for those people who so require it. As I said, it alarmed me when I heard about that. This is the first sign of going down that road, knowing that privatisation may mean that the service side will come second to the commercial side and the making of profit. It will be about efficiency, whatever that means. Efficiency can certainly mean depriving people who need it of the universal postal service, particularly in rural areas.
My noble friend was right to say that small and medium-sized enterprises depend on it. Certainly, competition has benefited large businesses: there is no doubt about that. It has given them a choice, but small and medium-sized businesses are absolutely dependent at this stage of their development. Certainly, as Hooper admitted, there has been no trickle-down to them to enable them to improve their choice from the competition that has already taken place. We must protect them. They are suffering at the moment in the economic squeeze that is going on. They do not need in addition to that to be affected by changes to the postal service being provided to them. Many of them will not be able to continue in business.
Listing all those categories, my noble friend and I are right to say that this is not to be taken as implying that regard must not be had for other descriptions of users. We are trying to protect the rights of those individuals in our society who are absolutely dependent on the universal postal service—one that can be provided not on the basis of competition or profits but on the basis of need. They certainly need it. I hope that my noble friend will reply to me and assuage the fears that I have expressed in all of these categories but particularly in relation to rural areas. As I said, developments have occurred in Scotland before partial privatisation has even taken place. I support my noble friend in this.
I also support my noble friend in this amendment or something very like it. I declare an interest as the chair of Consumer Focus which inherited the duties of Postwatch. I also want to emphasise that I support the broad thrust of Part 3 of the Bill. I support putting the universal service obligation on the face of the Bill in unequivocal terms. There were fears that that would not be done. It ensures that the individual or business expects the same service on the same terms and at the same price whether they are in the furthest reaches of Fermanagh or based in inner London. I greatly welcome that.
I also welcome the transfer of responsibility—the abolition of Postcomm—for reasons that my noble friend hinted at and has previously expounded on. Postcomm’s tradition and attitude to consumers has not always been of the best, whereas Ofcom has a positive reputation in this regard, at least in general terms. I draw attention to a recent publication by Consumer Focus which rated Ofcom as one of the better regulators in relation to consumer interest. No doubt the Minister, the noble Lord, Lord Carter, who has just joined us, will take some credit for that in one of his earlier capacities. So I welcome the general direction of this part of the Bill.
However, two things are missing. One is that unless we say otherwise, the interests of consumers can be interpreted as the interests of the mainstream or average consumer. We need to make it clear that the interests of vulnerable consumers—whether geographically vulnerable or vulnerable because of their personal circumstances—need to be taken especially into account in Ofcom’s deliberations. In general, I am happy that the details of the regulatory framework are left to Ofcom, but it needs to be clear in the Bill that that consideration of vulnerable consumers is an obligation on the regulator. I hope that the Government would indicate through my noble friend that they are prepared to move in that direction.
The other point is that, despite the stipulations on the universal service obligation in the Bill, it will always be possible for the Government to alter or interpret it. It is very important that it is clear in the Bill, or at least in a ministerial commitment, that any change in the universal service order contemplated would be subject to consultation with consumer organisations including Consumer Focus—I repeat my interest there—and with representatives of organisations that purport to talk for small businesses, to which my three noble colleagues have already referred.
We need the double guarantee that the vulnerable consumer will be given special attention by the new regulator and that any change in the USO will be spelt out and subject to clear consultation. Both of those things need to be somewhere in the Bill.
In intervening for the first time today, I remind noble Lords of my interests as set out in the Register of Members’ Interests, including my having been a partner for more than 40 years in the national commercial law firm Beachcroft LLP.
I am very sympathetic to the amendment moved by the noble Lord, Lord Clarke. When looking at designating the UPS, Ofcom should consider not only the average user but those groups for whom an effective universal postal service is of the greatest importance. I was very interested to hear what the noble Lord, Lord Hoyle, and, in particular, the noble Lord, Lord Whitty, said. I had been reading Consumer Focus’s March 2007 publication, Rating Regulators, about Postcomm. I quote from page 10, where Consumer Focus argued against designating in the way in which the noble Lord proposes in the amendment. It said that this,
“labels everyone falling into these groups as vulnerable, which ignores the diversity of capability within these groups and feels patronising to the individuals targeted”.
I was not quite sure from what the noble Lord, Lord Whitty, said, whether Consumer Focus has changed its mind about that or whether that comment is now out of date, because Consumer Focus went on to suggest that a statutory framework—putting it into the Bill—
“may lack the flexibility to allow regulators to respond to changing ideas about the nature of consumer disadvantage”.
In expressing my sympathy with the amendment, I say to the noble Lord that I hope that the Minister will be able to reassure the Committee that the list of minimum criteria, such as that there be an affordable uniform tariff, will be assessed against the sort of groups that the noble Lord’s amendment highlights. Surely that is the main purpose of today’s debate.
As the noble Lord has asked the question, perhaps I can respond briefly. My point is that there needs to be some reference to vulnerable consumers or those who are likely to be more disadvantaged. The previous documentation objected to a list that implied that everyone within the list was vulnerable and that people who were not on the list were not vulnerable. The final paragraph of my noble friend’s amendment covers the second point. There may be other ways to cover the first point, but the principle is that particular attention must be paid to the more vulnerable and disadvantaged consumer, not simply the average consumer.
I am grateful to the noble Lord for that explanation. It highlights the fact that we are now dealing with some important issues that are causing considerable concern to a wide range of people in this House, another place and outside. I hope that the Minister will be able to reassure us. It also gives me the opportunity to mention that the Business and Enterprise Committee in the other place has produced a report since our previous Committee sitting—it was published on 1 April—which raises a whole series of points that must give us all cause for reflection and, in various cases, concern. For example, the Select Committee in the other place pointed out in paragraph 88 of its report:
“The Communications Act 2003 requires Ofcom to have a Consumer Panel, advisory committees for different parts of the United Kingdom and on elderly and disabled persons. We are concerned about the extent to which Ofcom will be required to take into account the interests of vulnerable or marginal members of society in provision of postal services. Under the Bill their interests would have to be taken into account as part of Ofcom’s duty to review whether the universal service provider is meeting the reasonable needs of users, but members of particular groups may feel better protected if the requirement to address their needs is listed expressly on the face of the Bill, or if the Government can give an assurance that the advisory committees of the Communications Act 2003 will be expected to advise on postal services in addition to their existing tasks”.
There we have the problem; it is causing concern elsewhere. I wonder whether in responding to Amendment 80 the Minister might tell us what the Government intend to do about that detailed report, in which many points are raised. We could, during all these debates and when we return on Report, ensure that all the concerns are raised, but it may be easier and quicker if the Government publish their response to the Select Committee report within the normal timescale, which I understand is within two months. If the Government could by the end of this month or during next month respond in detail with their answers to all the questions raised by what I feel is a very good report raising all sorts of issues that we should consider more carefully, that would not only assist our understanding in relation to the noble Lord’s amendment but probably shorten a lot of our other debates.
I thank my noble friends for tabling the amendment. Before we delve into the detailed amendments, of which there are many to this section on regulation, I thought that, as this is the opening debate on this section, it might be worth making a couple of comments.
The first observation to be made on the Government’s behalf is that the purpose of the change is to achieve a clear rebalancing and reprioritisation of the regulatory regime for postal services. It is not to remove any element of competition from the postal services market. Indeed, Royal Mail, in both its written and its verbal response to the Hooper review, made it very clear that competition was a significant force for good. However, there was a clear question about balancing priorities where the search for competition sits alongside the universal service obligation and the nature of the regulatory regime.
I hope noble Lords will forgive me if I do not join the long queue of people rather gleefully burying Postcomm, as I have sat alongside it as a regulator—my noble friend Lord Whitty referred to this—and have been regulated by it, albeit in a non-executive capacity, when I sat on the board of Royal Mail. Postcomm in many ways did an admirable job, but it was working within a specific regime which we propose to change. Everyone, including Postcomm, is aware of that and welcomes it. It is time for a change. That change comes in many forms, not least in the overall regulatory regime change from a licensing regime to an authorising regime, which brings with it flexibility for the regulator which Postcomm did not have.
My noble friend Lord Clarke raises a number of issues, which I will come to in a second. He asked about small and medium-sized enterprises and the need to ensure that the regulatory regime takes their needs into account. He can rest assured that that is the case. Indeed, Section 405 of the Communications Act, which controls Ofcom’s overall responsibilities, specifically requires Ofcom to take into account the needs of small and medium-sized enterprises and the business consumer in the exercise of its responsibilities. The same is true of the at times vulnerable groups to which noble Lords have referred. I will come back to that.
My noble friend Lord Hoyle asked about the use of Royal Mail vans in remote areas. He might be reassured, and possibly amused, to know that I spoke only this morning to the current chief executive of Ofcom, who spent his Easter vacation on the remote Western Isles of Scotland, where he discovered, as a result of hitching a lift, the value of the Royal Mail vans in location.
I stand duly corrected. As I was going to say, the use of the post bus service is an operational question for Royal Mail’s management, but I am sure that this evening’s debate will raise those issues.
On the security of the universal postal service, Clause 28 gives the Bill one of its essential features: Ofcom’s primary duty in this rebalancing is to secure the provision of the universal postal service. Amendment 80, tabled by my noble friend Lord Clarke, seeks to ensure that Ofcom takes into account the needs of the disabled, pensioners, those on low incomes and those living in rural areas when it carries out its primary duty to secure the universal postal service. This is a laudable aim from my noble friend and one which the Government share wholeheartedly. The wording proposed by Amendment 80 replicates Section 5(2) of the Postal Services Act 2000, which requires Ofcom to have regard to the needs of special interest groups when carrying out its duties. The Bill does not include the same wording simply because Ofcom is already required under the Communications Act 2003 to take into account the needs of the disabled, pensioners, those on low incomes and those living in rural areas. This requirement applies to all Ofcom’s functions, including its new responsibilities for the postal services.
Section 3(4) of the Communications Act 2003 requires Ofcom, in performing its general duties, to have regard to the needs of persons with disabilities, the elderly and those on low incomes and to the different interests of persons in the different parts of the United Kingdom and persons living in rural and urban areas. In fact, the Communications Act 2003 goes further than Amendment 80, as it requires Ofcom to take into account and explain a wider range of interests, such as the vulnerability of children, regional differences across the UK and ethnic minorities.
I therefore hope that I can reassure your Lordships that Ofcom will have to have regard to the needs of the disabled, pensioners, those on low incomes and those living in rural areas in carrying out its postal duties. There is no extra protection to be had by accepting this amendment, as it is already there in statute and, perhaps more reassuringly, already operates in practice.
Amendment 86 from my noble friend deals more broadly with the needs of users in accessing the universal postal service. It relates to Clause 32 on the designated USP conditions—conditions that Ofcom can impose on the designated universal service provider to secure the provision of the universal service. Those can require the universal service provider to do a variety of things, including,
“to provide, or make arrangements for the provision of, access points for the purposes of the universal postal service”.
My noble friend wishes to add to this his amendment to take into account the needs of users. I reassure noble Lords that the needs of users are at the heart of what we propose with this Bill and why we propose it. We have repeatedly argued that the universal postal service is part of the social and economic glue that binds us together as a society. It is therefore paramount that the needs of users in accessing that service are given a central place in the new regime that we are setting out.
Clause 28(3) clearly provides Ofcom with a duty to,
“secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service”—
all users whom Ofcom will be required to take into account. Clause 29 then requires at least one collection from access points for letters and packets within the universal postal service order. The Bill therefore ensures reasonable access to the universal postal service. I would add that in this respect, on a practical level, the Bill mirrors the current system whereby, through its licence granted by Postcomm, Royal Mail is required to provide access points that meet the reasonable needs of users.
On the broader points made by the noble Lord, Lord Hunt, and my noble friend Lord Whitty about the role of advice from the consumer panel and my noble friend’s own organisation, Consumer Focus, noble Lords can rest assured that Ofcom will be well advised by its own consumer panel—a critical friend that is within the regulator but is without it in terms of its ability to offer advice across the new extended remit—and by Consumer Focus’s broader responsibility to represent the consumer interest in these discussions. I assure my noble friend Lord Whitty that Ofcom will consult fully and in the normal manner on any changes to the universal postal service order following the general duties that apply in best regulatory practice.
I hope that these comments have reassured noble Lords that the needs of users generally and the particular groups mentioned in the amendment are catered for in the Bill and that my noble friend Lord Clarke will see fit to withdraw his amendment.
I am sure that the Minister is about to deal with my question, which could help to shorten some of the debates not only on this issue but on others: do the Government intend to respond to the very detailed report by the Business and Enterprise Select Committee? The report raises a whole series of questions not only in this area, which the Minister has dealt with in part, but elsewhere. It would be of great assistance if he could reassure the Committee that the Government intend to respond in detail, certainly in the next month. Any advance information would be very useful to your Lordships in dealing with a whole series of issues that we have still to debate.
My apologies: as the noble Lord has said, it is an important and excellent report. I am afraid that my official briefing says that we will of course look and publish our response as soon as possible. I am not sure I find that terribly clarifying and I suspect that he does not. I will do my best to get a more specific response to him forthwith.
This debate has been interesting. I am astounded that we have someone in this House who has confessed to being a supporter of Postcomm and followed that up with the words that it is time for a change. The time was eight years ago. I have dug out a copy of Hansard which reports my, approximately, fifth attempt to expose not only the bias and unfairness, but the almost sleight of hand, of an organisation which purported to be a regulator, but was so biased against the Royal Mail and the Post Office. I am tempted to go into more detail, but I will not. However, I will refer to some of the things I said in 2006. I spoke about cherry-picking, downstream access and the cost to the Royal Mail of subsidising our competitors. I said that a number of times in this Chamber.
Eight years after I first raised that issue, the Government have said it is a time for a change. That time has gone. I have the greatest respect for my noble friend Lord Carter, who takes responsibility for Postcomm. I wonder whether later this evening he will be able to advise me on my issues with Postcomm. When will the French liberalise their post? The answer might be that it has nothing to do with us. Why do you interfere with the tariffs of the Post Office? He might answer that that is the Government’s responsibility. Why do you not charge the right amount for the downstream access? Again, the answer might be that it is nothing to do with us. It is late so I will not go on. However, anyone who wants to can read about the times I have raised the unfairness of a regulator that did not ever regulate, but which promoted Federal Express, Business Post and all the competitors, and showed them how they could make money off the backs of postmen and postwomen who were delivering mail that was collected under the arrangements that Postcomm agreed. I had better leave that there before I get excited.
I am delighted that my noble friend Lord Carter described the business report referred to by the noble Lord, Lord Hunt, as excellent. I would say that, wouldn’t I? From Second Reading, I have been trying to say that the Government have got this issue wrong, that it has been ill thought-out and has been dressed up as a group of things to try to justify selling off the Post Office and the Royal Mail. I thank all those who were able to see the picture clearer than those who have brought this discredited Bill to this House.
When people mention post buses, I get a little emotional because I was one of the officers who negotiated the provision of post buses in the Highlands and various parts of the rural community. I remember our arguments with management about the insurance, the seats, the seat belts and all the rest of it, but we won. My colleagues in the Post Office provide an excellent service, which is why I reacted to my noble friend calling them vans. They are not vans. They convey passengers and are doing a first-class job in many parts of the country.
I have nothing but admiration for people who can link their jobs with giving a valuable public service, which is at the base of this issue. Do we or do we not want a public service? If you want a public service, you have to pay for it and will the means to do it. If you do not want it, you can do what our political opponents are likely to do, which is to sell the blooming lot off in one go. That is what would happen. I hope that all my colleagues who were so sure that this bit of ownership would be temporary until we get another Labour Government are right. Last Friday, I was 77 and I do not know whether I will live long enough to see what will happen to my Post Office.
Oh yes you will.
I thank my noble friend very much for that. But, quite seriously, will we always have this benevolent Government who say that we do not have to worry about getting the relevant words in the Bill because something is already inherent? Yes, it is time for a change. I thank all those who have taken part in this debate. I am conscious of the time and we have lots more to do today. I hope that what has been said in this debate will be taken away and that the report referred to by the noble Lord, Lord Hunt, is read. Noble Lords do not need to read it all; they can read just the bottom of the first page and part of the second page of the summary. The Government have not thought this matter through and it is about time that this House raised its voice. We do not want to be awkward people, but deep down we have a belief in the public service.
Amendment 86, to which the Minister did not give much credence, would insert,
“taking into account the needs of the users”.
Is that a bridge too far for the Government? We are asking them to take into account the needs of the people who we aim to serve. I have no doubt that I shall come back to this amendment, and I shall probably be armed with pages and pages of my reports about the activities of Postcomm. For the moment, I beg leave to withdraw the amendment.
Amendment 80 withdrawn.
Clause 28 agreed.
Clause 29 : The universal postal service
81: Clause 29, page 14, line 37, at end insert—
“( ) a network of access points and postal offices whose density and adequacy ensure universal access to the service provided for in this subsection,”
Amendment 81 deals with access points, to which my noble friend Lord Whitty referred at Second Reading. When he referred to the obligation imposed on Ofcom he noted that the Bill was silent on Ofcom’s duties towards Post Office Counters. It is very difficult to talk about the Post Office without realising that the brand is not just those people running around in post buses, but is about such things as counters, delivery people and trunking. When we look at the services of the Post Office, we also have to look at the access referred to in this amendment.
As the noble Lord, Lord Whitty, noted, Postcomm had the duty to look at the level and adequacy of the number of post offices. I am one of those people who will rejoice when we emblazon across all the newspapers what the Secretary of State recently told this House: namely, that there will be no more closures. Was it not good news for those people on all sides of this House who have spoken about people walking with their Zimmer frames to a post office that is more than a mile away? Wonderful people from various parts of this House have said that it is wrong to deprive decent, ordinary, hard working and sometimes very vulnerable people of access to a post office. Now we have it: there will not be any more closures. I suggest that wherever noble Lords go they make sure that the Secretary of State’s words are repeated. They might even do some good if noble Lords are canvassing for a candidate.
It would be a grave mistake to leave the network of post office branches without statutory protection. This amendment locates the network of branches within the universal postal service. In future, the universal service provider, which in reality can be borne only by Royal Mail, would be obliged to maintain a branch network which guaranteed universal access for all customers. I welcome the recent move by the Government to underpin the work going through the network of post office branches. I particularly congratulate the Government—I nearly said the Secretary of State—on ensuring that the Post Office card account replacement is to be managed by the Royal Mail. Further, I greatly welcome the suggestion that the Government are anxious to examine ways of increasing the products and services delivered through local post office branches. I hope that this will lead them to look favourably on the proposal for a Post Office bank offering comprehensive and innovative services.
Given the continued turmoil in the financial markets, it is noticeable how the Post Office is a trusted and reliable brand for large sections of the public. Such good will needs to be built upon. This will not be possible if the existing network collapses through neglect or by design. The amendment would ensure that such a scenario was not possible. Local post offices are a powerful platform for delivering the universal service, and the regulator will have to take this into account with its guarantee in legislation. I notice that during the second day in Committee the Secretary of State said that no more post offices would be closed, and I hope I live long enough to see that promise fulfilled.
I know that such a statement is generally welcomed, and the noble Lord, Lord De Mauley, did exactly that in summarising the debate around Amendment 31. However, I will draw the Secretary of State’s attention to the Labour Party manifesto of 2005. The document represents a promise made to the British people, who responded favourably enough to give the Labour Government a further term in office to honour it. In particular, I draw attention to the commitment which states that,
“we have given the Royal Mail greater commercial freedom and have no plans to privatise it. Our ambition is to see a publicly owned Royal Mail fully restored to good health, providing customers with an excellent service and its employees with rewarding employment”.
I shall stop there because I was going to repeat the long quote when we first heard that in the 2000 Act. At the time, Stephen Byers MP gave certain assurances to the British people. We might get a chance to return to the point when it is not such a late hour and I will be able to tell noble Lords exactly what we told the world in 2000 and 2005.
It still sticks in my throat that we are debating plans to privatise Royal Mail, or as they say, at least part of it—I say “they” meaning the Government, who I do not agree with. Given that, what begins to emerge is the commitment made by the Secretary of State to the future of the counters network. Does he mean that the Government have no intention of supporting any programme of post office closures before a general election or does he mean that the Government would actively say to the electorate in 2010 that they oppose any further programme of post office closures and will wish to be elected on that basis? The seriousness of our concerns about the future should lead the Government to consider embracing Amendment 81. I beg to move.
I support the noble Lord, Lord Clarke, in the points he has made, including that about no more closures. We all welcomed the Secretary of State’s words, and indeed had I not been sitting down I might have collapsed in a heap. Such a specific commitment was very welcome and pertinent to what we are talking about, particularly the commitment of noble Lords on these Benches to post offices and the universal service. The noble Lord, Lord Clarke, also asked whether the commitment to no more closures is to last for ever. I assume so because it seemed to be made on that basis, but certainly it is welcome, as indeed is his Amendment 81.
I shall speak to Amendment 85A, tabled in my name, which addresses a more specific point. We seek to provide for access points specifically “within each postcode district”. The general commitment to provide a reasonable number of access points, while well made, does not address the specific argument that has been put to us by a number of people. Using “specifically” again, my colleague the Member for Argyll and Bute has said that his constituency shares a postcode with urban Renfrewshire. This means that many parts of the constituency of Argyll and Bute could be left without a post office. So I look forward to the Minister’s response because this is a key issue, since we are all dedicated to the concept of universal service provision. If the point made in our amendment and that of the noble Lord, Lord Clarke, is not answered specifically, a situation could arise where if delivery of your mail is attempted when you are out, you will be required to go somewhere else to retrieve your post—and that place might well be an unsustainable distance away.
I am making this specific point in addition to what the noble Lord, Lord Clarke, has said, and I look forward to the Minister’s specific answer.
In supporting my noble friend once again on access points, I say that he is right that many of us were surprised but delighted at the Secretary of State’s statement that there are to be no more closures. I hope that when the Minister comes to reply, he will underline that. We are still reeling at the news and wondering whether it is exactly true. Did the Secretary of State mean it? I am sure he did because I have great respect for him, but if the Minister could say, “Yes, that is what we mean”, that would be a great help. As my noble friend Lord Clarke pointed out, the Government were elected on that.
I am concerned about a town like Chorley, which I know very well. After the main post office there are only two sub-post offices for the whole area, despite its density of population. One widely used post office was closed. There was no reason for closing it, and it means that people are now finding it difficult to access a post office because they are often over a mile away. The speaker on the Liberal Benches was right to make the point that someone may have to travel several miles to collect post that could not be delivered. If you have not got transport of your own, access can be very difficult.
Given all that has been said, I cannot see any reason why my noble friend could not accept these extremely reasonable amendments. After all, he would only be reiterating what the Secretary of State has said. The fact that we are not to have any more closures is very important indeed. If my noble friend accepts these amendments, we will not need to return to them, which would be quite positive in relation to the Bill, and indeed there is no reason why they cannot be accepted in view of the categorical assurance given to us by no less than the Secretary of State.
These amendments raise some very important questions about what sort of network of access points will be maintained under the new regime. The importance of an access point is unrelated to the number of users who rely on it. The lack of alternatives to the universal postal service, especially in rural areas, makes those access points critical. The idea of the noble Lord, Lord Cotter, of assessing a proper network by means of postcodes is interesting, but I think I would prefer to see the UK-wide network safeguarded by ensuring that Ofcom keeps the importance of rural access points in mind. I hope that the Minister will reassure us that there will be no pressure to cut costs by getting rid of services in far-flung regions.
The amendment of the noble Lord, Lord Clarke, also mentions post offices. As amendments we tabled to Part 1 showed, we are completely in support of maintaining the current post office network, and if possible even reopening some of the post offices that have recently been closed under this Government. Having said that, I am not convinced that the post office network should be protected through regulation by Ofcom. We feel that it should be a matter for the Secretary of State, and we will certainly return to this issue on Report.
Both Amendment 81, tabled by my noble friend Lord Clarke, and Amendment 85A, tabled by the noble Lord, Lord Razzall, deal with the issue of users’ access to the universal postal service. I should like to reassure your Lordships that the needs of users are at the heart of the Bill. The universal postal service is part of the social and economic glue that binds us together and it is paramount that the needs of users in accessing that service are given a central place in the new regulatory regime.
Access to the universal service for consumers is via both post boxes and post offices. With respect to Amendment 81, I understand my noble friend’s concern that Postcomm’s existing duty to review the post office network is not being transferred to Ofcom. Section 42 of the Postal Services Act 2000 requires Postcomm to provide advice and information about the number and location of post offices. This power is not transferred to Ofcom because, in our view, it is not needed. Consumer Focus, the body which represents consumer interests, can already investigate anything in relation to the number and location of post offices and, under the Communications Act 2003, Ofcom already has the power to undertake research in relation to any matter relating to its functions.
There is already provision within the Bill to address my noble friend’s concerns. Clause 28(3) will widen Ofcom's functions to include ensuring the provision of access points, such as post offices and post boxes, to meet the reasonable needs of users. It is therefore part of Ofcom’s primary duty in respect of post. This means that Ofcom would, in any event, have the power to monitor the size and distribution of the post office network. On a practical level, the Bill mirrors the current system whereby, through its licence granted by Postcomm, Royal Mail is required to provide access points which meet the reasonable needs of users.
Amendment 85A, in the name of the noble Lord, Lord Razzall, seeks to require that an access point for the universal service exists in every postcode district. I believe the reference to access point actually means a reference to post offices. “Access point” can also mean post boxes, so it is important to be clear. A sufficient number of access points is crucial to the provision of the universal postal service. I have already pointed your Lordships to the requirement that Clause 28(3) puts on Ofcom but I will repeat it again because it is so important: Ofcom must carry out its functions in relation to postal services in a way that it considers will secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service.
Your Lordships will know that in 2007 the Government set minimum access criteria for the post office network, the first time that any protection of this kind had been provided. These criteria are indeed more stringent than was previously thought necessary by the regulator for access to the universal service. The post office access criteria reflect the important social and economic role that these branches play in their communities and this Government’s commitment to maintaining a post office network with national coverage. As the Secretary of State has said, we have no intention of supporting a further programme of post office closures.
The criteria that must be met in respect of post offices include that 99 per cent of the UK population nationally must be within three miles, and 90 per cent of the population nationally be within one mile, of their nearest post office outlet. Furthermore, there is a criterion requiring that in each postcode district at least 95 per cent of the population should be within six miles of their nearest post office outlet. Currently 99.8 per cent of postcode districts comply with these criteria. I hope your Lordships will agree that these are very stringent criteria. Indeed, given that postcode districts vary in size, specifying, as we already do, that the vast majority of the population must be within a maximum distance from their nearest post office may actually be more stringent than merely having at least one in each postcode district, as the amendment seeks.
It is the Government’s view that it would not be proportionate for us to set further criteria on the number and distribution of post offices. The criteria that exist for the post office network already provide for a broad distribution of outlets providing reasonable access on a nationwide basis and specific protection for remote and sparsely populated areas across the country. It is much better for the issue of access to the universal postal service to be tackled, as it is within the Bill, by reference to the needs of users.
The Secretary of State made a statement about post office closures. He stated during earlier Committee stage debates that the Government have no intention of supporting any further programme of post office closures and in no way did he caveat that statement by time. The Government have established access criteria to ensure a truly national network of post offices. For the first time ever the criteria have a minimum carriage level and Post Office Ltd is required to exceed or meet them. Given the size of the post office network, with some 97 per cent of offices privately owned and operated, there will always be changes resulting from natural churn. The new code of practice jointly agreed by Post Office Ltd and Consumer Focus sets out detailed arrangements to inform and consult customers and local stakeholders on the reasons for any substantive changes in service and proposals for future provision.
The Secretary of State has separately recognised the value of wider use of the post office network and we are considering a people’s bank. We fully endorse the idea that the Post Office should do more on financial services. It already provides a wide range of financial services products, which are very popular, and there are a number of good suggestions which we and post offices will consider.
As to postcode districts and the Argyll problem, as I will call it, the present requirement on postal districts is that 95 per cent of people in each postcode district shall be within six miles of a post office. The current situation is that all but five of the 2,796 postcode districts comply with the access criteria. As at the end of February, there were four failing postcodes, but four out of these five will be compliant by 12 May. Whether or not the fifth is Argyll I am afraid I do not know; my notes do not tell me.
I hope I have addressed the points on access made by the noble Lord, Lord De Mauley. De facto, the Government set the requirements on the post offices by their legally binding contract with Post Office Ltd and we anticipate that arrangement continuing. No time limit has been put on the assurance and the criteria that I have referred to are set out in that agreement.
With those reassurances, I hope that my noble friend will not press the amendment.
Amendment 85A is a little sweeping in the way it is drafted but there is some merit in considering the possibility of having an access point in most postcode districts. One of the by-products of this is what is known as the 739 service. When they get the grey envelope it tells the postal delivery officer not to 739 it. If it gets 739’d, it goes back to the office and people then have the problem of going to the office, which could be miles away. Even given the six mile criteria that the Minister mentioned, that can be difficult.
I think there is a way around these things, given good will towards the new watchdog, or whatever you want to call it. I have been through this with the Post Office Users Council and then Postwatch, and now my noble friend Lord Whitty is going to take over some of those responsibilities. With some understanding between the parties, there could be a system that avoided the long treks to the delivery office that happen now. I am lucky; I can drive to the one in St Alban’s, although it is about six miles away and it is a nuisance.
We have to find a way for people to call a number and get through to a human being in the area they were talking about. Sometimes you will get an operator in Belfast who will tell you they do not know when the delivery can come out because they are nowhere near the place where your parcel or recorded delivery is. There is some merit in trying to find access points in and around a postcode district, so I would not dismiss the idea, although it needs some work. I am sure that the new regime under my noble friend and others along with Ofcom will look favourably on it, so long as they have in mind what the Minister has repeated—that is,
“take into account the needs of the user”—
although the Government would not accept that in the previous amendment, which is why we will have to come back to it.
I think I have answered the point made by the noble Lord, Lord De Mauley, about the sort of access point that we are talking about. There is a way that it could be done, but it would require some understanding of what we want at that point—do we want to post mail, collect it or use other services provided by the Post Office or Royal Mail?
It is tempting to talk for longer about the regulation by Ofcom, but it is very late. I wish Ofcom every joy in what it wants to do. As my noble friend Lord Whitty will be putting consumers’ interests into the melting pot, I hope we will get back to the idea that we are providing a public service. It is costly and difficult, but we should have it in our minds that we are here to serve, not to try to cut things. I am pleased that we have had a reassurance again about no closures of post offices.
I was delighted to hear the comment about the people’s bank. There is no need to spend too much time or money; all it requires is someone to go down to the archive and dig out the files on an organisation that started its life as National Girobank. It was a successful and simple banking operation that served so many people who had never even seen a chequebook in their lives, let alone owned one. To my sadness, there is still only one paper in this country that has printed the truth about that: the Scotsman. The bank was almost given away, even though some of us tried to form a consortium to buy it. I will not go too far, but I have said on previous occasions that it was a giveaway to the Alliance & Leicester, and we have had to pay the price. Do not spend too much time looking at the people’s bank that might be; go and get the Girobank files out, and then build on it so that it provides the financial services that a good people’s bank should.
As I say, it is late, so I shall cut most of the end of my speech. I assume we are going to have a break soon—I hope so—and I beg leave to withdraw the amendment.
Amendment 81 withdrawn.
House resumed. Committee to begin again not before 8.44 pm.
Racial Hatred: “Undercover Mosque”
Question for Short Debate
To ask Her Majesty’s Government what assessment they have made of the investigation by the Crown Prosecution Service and West Midlands Police into the Channel 4 Dispatches programme “Undercover Mosque”; and whether this has affected policy on the prosecution of offences of incitement to racial hatred.
My Lords, on 15 January 2007, Channel 4 broadcast an episode of its current affairs series “Dispatches”, entitled “Undercover Mosque”. The programme, made by Hard Cash Productions, was the result of nine months’ undercover investigation of a number of mosques in London, Birmingham and Derby, where recordings were made of various preachers in action. Copies of DVDs and handouts of their speeches and sermons, which were freely available at these venues, were also considered.
I shall give a flavour of the nature of this material. The programme included the following. At the Sparkbrook mosque, a visiting preacher was captured on film praising the Taliban. In response to the news that a British Muslim soldier had been killed fighting the Taliban and had been hailed in the press as a hero, the speaker declared:
“The hero of Islam is the one who separated his head from his shoulders”.
In a Green Lane mosque internet broadcast, another said of women:
“Allah has created the woman—even if she gets a PhD—deficient. Her intellect is incomplete, deficient”.
On gay rights, another recommended the Islamic punishment for homosexuality:
“Take the homosexual and throw him off the mountain”.
Democratic government was not in favour either. A speaker at the Sparkbrook mosque told his flock that Muslims cannot accept the rule of non-Muslims:
“You cannot accept the rule of the kaffir”—
that is, the non-Muslim.
“We have to rule ourselves and we have to rule the others”.
The programme’s message was that extreme, anti-democratic and unpalatable views were being preached in a number of mainstream mosques and Islamic organisations that claim to be committed to interfaith dialogue.
The West Midlands Police launched an investigation immediately after the programme was transmitted into whether criminal offences had been committed, particularly by three of those who had been teaching or preaching at the mosques and other establishments. On 26 March 2007, the police sought and obtained at the High Court a production order for all the secretly recorded footage that had not been broadcast by Channel 4. When the order was obtained, Channel 4 made it clear to the police that the legal advice that it had received over a period before broadcasting was that, while the film contained many clearly expressed abhorrent views, those professing those views were not breaking any law. After investigation, the police presented their file to the Crown Prosecution Service, which decided, as Channel 4 lawyers had advised, that there was insufficient evidence to bring charges against any person featured in the programme.
Then everything was turned topsy-turvy. The West Midlands Police were not going to let their investigation go to waste and on 8 August 2007 they and the CPS issued a joint press release. It was revealed that they had jointly gone on to consider potential offences that might have been committed by those involved in the production and broadcast of the programme—specifically, whether they had been stirring up racial hatred and committing offences against the Public Order Act. The CPS reviewing lawyer, Ms Bethan David, who had reviewed all 56 hours of the media footage, announced:
“The splicing together of extracts from longer speeches appears to have completely distorted what the speakers were saying”.
“We have been dealing with a heavily edited television programme, apparently taking out of context”—
My Lords, I hesitate to stop the noble Lord in full flow, but he will remember that an order was made pursuant to hearing in relation to that press release. That order prohibited the repetition of the complaints that were made, which the noble Lord is about to deal with. I wanted to remind him of that, because I am sure that he will be anxious to comply.
I most certainly am, my Lords. Because of that, I took specific instructions from those at Channel 4 who were involved in the consent order that was subsequently obtained. I am informed by them that the order was subject to no restriction save that the libels should not be repeated. My speech is directed not to that but, as the noble and learned Baroness knows, to a wider context.
As I was saying, the CPS lawyer said in the press release:
“We have been dealing with a heavily edited television programme, apparently taking out of context aspects of speeches which in their totality could never provide a realistic prospect of any convictions”.
True it was that the CPS advised that a realistic prospect of a conviction of the production company was unlikely, but that was because it was not possible to identify a key individual in the production company who might have had the necessary intent to stir up racial hatred.
The joint statement went on to reveal that the West Midlands Police had referred the matter to Ofcom, complaining of distortion. Assistant Chief Constable Anil Patani, who was in charge of security and cohesion, wrote that the programme had been,
“subject to such an intensity of editing that those featured in the broadcast programme had been misrepresented”.
He complained that community cohesion was undermined and that an unfair, unjust and inaccurate perception of both the speakers and sections of the Muslim community had been created.
No attempt was made to discuss their concerns with Channel 4 in advance of going public. The authors of the joint statement knew that an allegation of fakery would generate significant media interest, as indeed it did. This was the very first time that any police force in the United Kingdom had seen it within its remit to make a complaint to Ofcom about the subject matter of an investigation in lieu of prosecution. Its complaint was rejected by Ofcom on 19 November 2007, when it was said that “Undercover Mosque”,
“was a legitimate investigation, uncovering matters of important public interest”.
Ofcom found no evidence that the broadcaster had misled the audience or that the programme was likely to encourage or incite criminal activity.
On 15 May 2008, a consent order was made, to which the noble and learned Baroness has referred, in which the West Midlands Police and the CPS apologised in the High Court to Channel 4, the makers of the documentary, accepting that there was no evidence to found the complaint that they had made. They jointly paid £100,000 in damages and costs. To the Home Affairs Committee on 4 November last, Deputy Chief Constable Gormley said:
“We got it wrong; it is as simple as that”.
The CPS has stated, as the noble and learned Baroness has just said, that it cannot talk about the circumstances because of the court order. I have already indicated to your Lordships what my inquiries have revealed as to the nature of that court order.
My first question to the Attorney-General is: what influences were at work on the CPS reviewing lawyer who, while rejecting the inflammatory material as unlikely to stir up racial prejudice, nevertheless appears to have encouraged the police to complain of distortion to Ofcom? Was she on a frolic of her own? Was she of equivalent status in the CPS to the Assistant Chief Constable, Mr Anil Patani, with whom she shared that statement? To what extent did she see the independence of the CPS in being a party to it? Was her collaboration with him known to her line managers, and was the joint press statement vetted by a higher authority in the CPS in such a highly sensitive area? Indeed, was the Director of Public Prosecutions himself consulted?
In his response to queries raised by my colleague, Paul Holmes MP, Mr Vernon Coaker, Minister of State, wrote saying that the complaint to Ofcom was made independently of the CPS and not with its approval. Does that mean that the CPS as a body disapproved and that the complaint was contrary to its advice? It is an attempt to distance the CPS from the West Midlands Police and is quite inconsistent with the apology that the CPS made in the High Court. Eleven months have passed since that apology. Has there been an investigation into the circumstances or any disciplinary proceedings? What management lessons have been learnt and put into practice? What management controls are in existence?
The second area of questioning that I have for the noble and learned Baroness is the guidance given to prosecutors on the right to free speech, enshrined in the common law of this country, not to mention the European Convention on Human Rights. It would seem that the CPS recognised the rights of the imams to free speech by refusing to prosecute them. Mr Coaker, in the letter to which I have referred, refers to the ECHR principles in Section 2.6 of the code for prosecutors. There is no specific reference to freedom of speech in that paragraph, nor, more importantly, does freedom of speech appear as a public interest factor in the decision to prosecute in Section 5.10 of the code. What steps has the Attorney-General taken to advise the DPP to direct prosecutors to take the right of freedom of speech into account when deciding when to prosecute, in particular to prosecute the hate crimes of incitement to religious hatred and the like? Will she support its inclusion as a public interest factor in a revision of the code?
Episodes such as this have a corrosive effect on freedom of expression in general and on self-censorship by the press and the media in particular. It is crucial that the media feel that they have as much freedom to expose and criticise unpalatable views and beliefs as those who are free to expound them. It is also important that, where public authorities have admittedly made mistakes, a full explanation should be made for the public and for those who have been affected. There should be no hiding behind court orders. I look forward to the noble and learned Baroness’s explanation, transparency and reassurance.
My Lords, I thank the noble Lord, Lord Thomas of Gresford, for initiating this debate. It is on a most important matter—a neuralgic issue in our public debate. It is of crucial significance, as it bears not only on contact with the police but also on the way in which free speech operates in our society. In his broad account of the history of this controversy, I have little to quarrel with. However, I wish to add one further point.
At this moment, investigations are going on into two recent controversial cases involving the police—the policing of the G20 demonstration and the arrest of a Member in another place, Damian Green. There is good reason to believe that we are going to get to the bottom of both cases; there is no good reason that I am aware of for not believing that at this stage. In both cases, we know many interesting things. We know what the Permanent Under-Secretary at the Home Office said to the Home Secretary, or something of what their discussions were in the context of the Damian Green case, and so on. But in the case of the “Undercover Mosque” programme and the investigation, we have had nothing but silence for a year. We do not have a proper explanation for this rather astonishing turn of events. Therefore, the noble Lord, Lord Thomas, has provided a tremendously important service in bringing this debate before the House tonight. It seems to sit on its own in a very particular and rather worrying way. I am very grateful to the noble Lord for the action that he has taken.
The “Undercover Mosque” controversy ran from the time that the programme was shown in January 2007. The noble Lord’s account of the contents of the programme is pretty accurate. I would add only one passage to which he did not refer. The programme demonstrated that the London Central Mosque was selling a video in which Sheikh Feiz, a Saudi-trained cleric, told his congregation that Jews are pigs and will have to be killed. He is quoted as saying that they will be snorting, all of them, every single one of them. It was in the context of that remark and other such remarks that Roger Godsiff, the MP for Sparkbrook, originally complained, leading to the original police investigation. I quite understand the position of the police. Proving hate crimes under our current law is very difficult. It is the sudden change of tack thereafter, and the focus on the programme, that is so striking. This concluded, eventually, in the retreat, essentially, of the Crown Prosecution Service and the police and the payment of £100,000 to Channel 4.
We have heard nothing yet in explanation of what happened. The noble Lord, Lord Thomas, has already referred to the evidence given to the House of Commons Home Affairs Committee inquiry on police and the media by the deputy chief constable involved in this case, Phil Gormley. He said that the police had made a mistake. He remarked that,
“a view was formed at the time that we now realise was mistaken … We have apologised, together with the CPS, publicly and we got it wrong”.
There is no explanation of how the mistake occurred. Is it simply that the police are not good at O-level or A-level media studies? It is almost at that level; perhaps that is the answer.
We have talked already in this debate about selective quotation. There is a point to that. In what context could the sort of remarks that the noble Lord, Lord Thomas, and I quoted be exculpated, or their force reduced? It is quite true that the speakers may well have spoken on other subjects. I am an academic historian. For the first time in my life as a professional historian I have recently been working on the speeches of Adolf Hitler. I can assure noble Lords that to discover that Adolf Hitler meant ill to the Jews you have to quote selectively. You can find speeches by Adolf Hitler in June 1940 saying that he means no ill to the British Empire and that, if it was not for that difficult man Churchill, everything would be all right. He says that he means peace and no harm to the British Empire.
I am sorry, but it is a simple matter of fact that the only way in which to discover what an ideology is is to look closely at it in all its ramifications. The charge that somehow the programme was based on selective or distorted splicing together of evidence does not seem to be a serious charge and is certainly not one that Ofcom accepted. There is the amazing problem that, despite everything that has happened and despite the evidence bravely given to the Home Affairs Committee in the Commons, there is no explanation. We have heard, “Sorry, we made a mistake, but we cannot tell you why or how, or the context of the mistake”.
It would be wrong to overemphasise the role of the police. For one thing, as the noble Lord, Lord Thomas, has made clear, we are also talking about the Crown Prosecution Service. The issue that has to be raised is that of the advice that may or may not have been taken. In particular, there is the role of Birmingham City Council, of its elected and unelected officials, and the role of the regional “Prevent” team. It is perfectly legitimate to ask these questions, which are asked in all other cases of this sort, as in the cases that we are currently witnessing and where we look into possible misconduct by the police. It is very strange that, somehow, the lines of public inquiry and discussion have, in this instance, silted up. There are issues about the sort of e-mails that might or might not have been sent and whether there was a calculation about the public mood in Birmingham and the sort of issues that affected it. Did these play a role? These are the sort of questions that we legitimately need answers to.
I turn finally to the Government’s new document, Pursue Prevent Protect Prepare: The United Kingdom’s Strategy for Countering International Terrorism. This document is of considerable importance and value. I draw attention to one passage on page 87, which struck me as being of particular relevance in the context of this evening’s debate. The Government outline their policy in this respect:
“As a Government, we will also continue to challenge views which fall short of supporting violence and are within the law, but which reject and undermine our shared values and jeopardise community cohesion—the strong and positive relations between people of different ethnic, faith and cultural backgrounds in this country. Some of these views can create a climate in which people may be drawn into violent activity”.
I regard this as a very important statement of policy. It arises from a public debate that has gone on and in which Policy Exchange, the think tank with