Wednesday, 17 November 2010.
My Lords, before the Minister moves the first statutory instrument to be considered, I remind noble Lords that, in the case of each statutory instrument, the Motion before the Committee is that the Committee do consider the statutory instrument in question. I should perhaps make it clear that the Motions to approve the statutory instruments will be moved in the Chamber in the usual way. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Apportionment of Money in the National Lottery Distribution Fund Order 2010
Considered in Grand Committee
My Lords, this order fulfils the commitments in the coalition programme for government and the Department for Culture, Media and Sport’s structural reform plan and business plan to reform the lottery so that more money goes into sport, the arts and the national heritage, restoring the shares for these good causes to 20 per cent each. The order amends the percentage apportionment of money held in the National Lottery Distribution Fund in two stages in order to protect the funding to the voluntary and community sector through the Big Lottery Fund.
From 1 April 2011, the shares for the arts, heritage and sport will increase from the current 16.66 per cent each to 18 per cent each, with the Big Lottery Fund going from 50 per cent to 46 per cent; and on 1 April 2012, the arts, heritage and sport will each go to 20 per cent, with the Big Lottery Fund moving to 40 per cent. Why we are doing this? The National Lottery was set up 16 years ago this month. It has been a huge success, raising £25 billion for good causes and over 350,000 projects. Every part of the country has benefitted. The success of the lottery depends on people continuing to buy tickets, of course, but sales remain very strong and noble Lords will be pleased to hear that, on current projections, they should remain strong.
It is important to remember the “additionality” principle. The lottery is intended to provide additional funds in the areas of the arts, the national heritage, sport and the voluntary and community sector. The lottery funding is not used for government matters and purposes, but rather for projects which the Government would be unlikely to fund. So despite the success of the lottery, we need to reform it so that it can remain true to its founding principles.
We have said that the share change alone will provide £50 million a year extra each for the arts, heritage and sport: a total of £150 million. However, when the effect of increased lottery income and the end of the Olympic transfers is included, the cash figures will be much higher. Arts Council England should receive around £80 million a year more from 2013-14. The Heritage Lottery Fund should receive around £115 million a year more. Sport England should receive around £70 million a year more.
We carried out a public consultation on our proposals between May and August, and received 362 responses. As well as the lottery distributors and the devolved Administrations, we also heard from local and community organisations and others with an interest. The response was overwhelmingly supportive of the change. Seventy-three per cent of the responses clearly supported the change, with just 12 per cent opposed. In the arts, heritage and sport sectors, 97 per cent were supportive.
Many respondents welcomed the idea of more lottery funding for these good causes. Some wanted the change to be made in one go. We considered that option, but because the diversion to the London 2012 Olympics does not end until 2012, it would not have been able to protect voluntary and community sector funding through the Big Lottery Fund. Some respondents from the voluntary sector were concerned about the impact on their sector, but others felt, as the Government firmly believe, that the protection of voluntary and community sector funding through the Big Lottery Fund, together with the additional funds that are available through the arts, heritage and sport, will enable the sector to benefit overall. Indeed, all lottery distributors should, on current projections, have more lottery income after the Olympic transfers end, including the Big Lottery Fund.
Alongside the order, we intend that the Big Lottery Fund will, in future, be able to focus its funding on the voluntary and community sector. We intend to issue a policy direction which the Big Lottery Fund would be required to take into account when it makes funding decisions. Our public consultation on this ended on 29 October and we are currently considering the responses received.
Many respondents wanted to ensure that increases in lottery funding should not be used as an excuse for reductions in government funding. The Government agree. We remain committed to the principle of additionality, as I have already mentioned. Nothing in the order would change the principle of additionality. The lottery regime, as set out in the legislation, and the way in which distributors function, are untouched by the order, save for a discrete percentage share change to the good causes.
The reductions to government funding announced in the spending review are necessary across the whole of government because of the structural deficit. They have not been made to the arts, heritage and sport, because increased lottery funds will be available. Actual funding decisions are for the lottery distributors themselves to make, acting independently of government, and they will continue to be required to report each year on how their grants have met the additionality principle. So the pattern of lottery spending will continue to meet the principle of additionality, and will not be used to replace the kind of Exchequer spending that is being reduced.
Some voluntary and community sector respondents wondered about the effect on their organisations, but I hope I can assure noble Lords that the Government believe that the staged change, together with the increased levels of lottery income and the extra money available when the Olympic diversion ends, mean that they will not be worse off. Indeed, from 2013-14, they will be very much better off than at present. Voluntary and community organisations will also be able to benefit from the additional funds that are available in the arts, heritage and sport. The Big Lottery Fund should have about £635 million a year from 2013-14, compared with about £565 million now.
Some respondents from Scotland, Wales and Northern Ireland were concerned that their countries might lose out from the change. The Government appreciate that it is difficult to make a precise estimate because a number of UK-wide distributors do not have formulas for allocating funds to each country, but we believe that in cash terms every country in the UK will be better off. Scotland should receive about £40 million a year more in 2013-14; Wales should receive more than £20 million a year more; and Northern Ireland £12 million a year more.
I commend the order to the Committee. I beg to move.
My Lords, I thank the Minister for her comprehensive statement. We on these Benches welcome and acknowledge the huge success of the National Lottery. Thousands of projects, small and large, throughout the country have shared in the fortune bestowed on them by the lottery, and thousands of community groups, millennium halls and galleries would never have existed had it not been for the lottery. That is in part because lottery money has supplemented and enhanced the work of government, thanks to the principle of additionality which the Minister spoke about. I will come back to that issue later.
I also put on record the achievements of those on our Benches in supporting the arts and heritage while we were in government. We greatly increased government investment, raising it to record levels. Funding for the arts rose by more than 70 per cent in real terms; and for sport, investment more than trebled. It is thanks to that that museums and galleries were able to open their doors to the public with free access. One enormous side benefit of that has been to the tourist industry.
Since the general election, we have had the comprehensive spending review, which plans substantially to cut the budget of the Department for Culture, Media and Sport by 24 per cent over the next four years. Cuts to the Arts Council will come to 29 per cent. English Heritage, so ably chaired by noble friend Lady Andrews, will see a third of its income cut. I would be grateful if the Minister could make a statement about what impact the Government consider these cuts will have on these vital areas of our public life.
I turn now more directly to the order in question, which is to fulfil a commitment in the coalition agreement to,
“reform the National Lottery so that more money goes into sport, the arts and heritage”,
as we heard from the Minister. I am sure all in this Room welcome that commitment. However, what was strangely absent from the coalition agreement was the resulting fall in money to the Big Lottery Fund from half of lottery funding to 40 per cent—a cut of 20 per cent. In other words, there will be a cut of 20 per cent to expenditure that is charitable or that is connected to health, education or the environment. The Government’s own assessment of the impact of this change, in paragraph 10 of the Explanatory Memorandum, is that,
“A smaller proportion of funding will be available for organisations and projects via the Big Lottery Fund”.
I also express great concern at the ongoing funding of many of the projects that the Big Lottery Fund has committed to. I quote from the Big Lottery Fund’s 2010 annual report:
“The fact that many of our grants will be paid out several years after they are committed means we make commitments from money we do not yet have”.
It goes on to say that if,
“Lottery income fell, we might be unable to meet all our commitments”.
Is this not an income fall for the Big Lottery Fund? Is this not an issue of great concern to the Government and to all of us?
We have heard a great deal from the Prime Minister about the big society and how important it is that the voluntary sector plays a greater part in our communities—a laudable aim with which we all agree. However, we are concerned that the big society is a mask for handing over swathes of responsibility for work that has been done by government to the voluntary sector simply as a means of reducing government responsibility and expenditure. At the same time, there is great concern that government funding of the voluntary sector is under threat. I would be grateful if the Minister could provide some reassurance on this matter.
It is because of the proposed cut in funding to the Big Lottery Fund that I ask whether the Government will listen to the concerns of those who stand to lose. In any redistribution of money, those getting the increases will, as we know, widely welcome them, often quietly, while those who lose will loudly protest. However, in this case it seems that some of the poorest and most disadvantaged in our country are to be the losers. They are the ones who do not have the voices to protest or friends in the media to make their case. I quote from the DCMS summary of consultation responses on this order:
“Many … respondents were concerned that transferring funding away from the sector would have an adverse effect on many organisations, and that this would compound the effect of the anticipated forthcoming reductions in public spending, both for the organisations themselves and for their clients and the communities they work in”.
I would be most grateful if the Minister could provide assurances to the organisations that have submitted those responses, of which I just gave an example.
I ask the Minister what plans the Government have to improve the efficiency of the lottery distribution organisations. The Government have indicated that they intend to impose a ceiling of 5 per cent of expenditure for administration charges. The Big Lottery Fund has reduced its expenditure on administration from more than 10 per cent to 7.5 per cent in the most recent year. How will the Government fulfil their objective, and when do they plan to do so?
Turning now to the proposed increase in funding, what criteria will be used to decide how the additional funding is apportioned? How transparent will the process be? Will Ministers be involved in any way? How will the balance between national and grass-roots spending be decided? Finally, as I indicated at the beginning, I come back to the question of additionality. It is right to say that the Minister gave an absolutely irrevocable undertaking on this matter during her speech.
My Lords, perhaps I may declare an interest as having been the Secretary of State responsible for the introduction of the lottery. I emphasise that the interest is emotional rather than financial. Additionality was discussed widely when the Bill was going through in 1993 and 1994. In those days it had the agreeable title of the National Lottery etc. Bill. There was a concern as to whether the charities would lose out through the apportionment, which was 20 per cent to each of the five lottery funds. During the passage of the Bill, the Government made the offer that in any Parliament there could always be a day’s debate to discuss whether the apportionments were in fact correct, and whether the charities were losing out as a result of what had occurred by comparison with the charitable money they had received previously. After 1997, when the Labour Government came in, a general debate did not occur, but there was a consultation to which there were about 600 respondents. It was not wholly surprising, given that the people who replied were mainly producers who would be the beneficiaries of any change in the apportionment, that 90 per cent communicated that they would like the apportionments to be altered.
The noble Lord, Lord Evans of Temple Guiting, alluded to additionality both at the beginning and the end of his speech, and perfectly understandably raised his concerns about the change in the Big Lottery Fund’s resources and that, inferentially, of its initial predecessors. I will say, having sat through the whole of the process between 1997 and 2001, that one noticed that if, for instance, the Department of Health decided that it would be agreeable for there to be a rather larger allocation from the lottery for cancer equipment, one did not hear from the lottery distributors that money was going to be coming to one’s constituency. The first thing one had was a letter from Frank Dobson saying how pleased I must be that money was coming to hospitals in my constituency. I did have to warn the Secretary of State for Health that it looked as though the doctrine of additionality was actually being offended against if he was the first person to communicate the news rather than the lottery distributors themselves.
I conclude by saying that I wholly support what the Government are now doing and I congratulate the Minister on the way in which she introduced the order.
My Lords, I thank both noble Lords for their comments and I am pleased to respond to the points made. Our consultation has shown that there is wide support for the changes, with many people pleased to see increased lottery funding for the arts, heritage and sport. However, I would acknowledge to the noble Lord, Lord Evans, the contribution made by the previous Government on aspects such as free entry to museums and other measures that were taken during their time in government. I also reassure the noble Lord that, in cash terms, each of the good causes of the arts, heritage and sport should expect to receive well over £100 million a year extra from 2013-14 compared with the present total of an extra £300 million a year. The additional funds will be for lottery-funded projects and need not raise any questions about breach of additionality. On that, I noted with interest the comments of my noble friend Lord Brooke and assure him that lottery projects should certainly be decided by the distributors. We hope, too, that it will be the distributors rather than Ministers who convey information on those projects in order to get the proprieties right. Nothing about this order changes that in the lottery regime.
The economic situation of the country has meant that government funding has to be reduced across the board. The arts, heritage and sport are not being singled out because more lottery money will be available. The noble Lord raised his concerns about that, but I assure him that in cash terms, Big will have much more money in 2012 than now. Between now and then, Big is not restricted to its annual income because it has a balance on which it can draw, so the voluntary sector should not feel the impact too severely. Of course, if lottery income generally falls, there might be a problem, but we are confident from what we hear from the Big Lottery Fund that that is not anticipated in any way.
All lottery distributors, including the Big Lottery Fund, should have more lottery income after the Olympic diversions end in 2012, and the voluntary and community sector will certainly be able to benefit from the extra funds in the arts, heritage and sport. This order will allow a considerable increase in the funds available for additional projects in the arts, heritage and sport, while protecting the funds available through the Big Lottery Fund for the voluntary and community sectors.
The noble Lord, Lord Evans, asked whether there would be an effect on Exchequer cuts. There will be a spending review, and the Government will shortly announce the administration costs of lottery distributors, which relates to another question raised by the noble Lord.
If there are other points that I have not picked up on in my response, I shall of course write to noble Lords. I beg to move.
Official Statistics Order 2010
Considered in Grand Committee
My Lords, all Members of the Committee will be aware of the important work that is being done by the UK Statistics Authority. This body was created in 2008 with a statutory responsibility to promote and safeguard the production and publication of official statistics. This includes the authority monitoring and reporting on official statistics.
Under the Statistics and Registration Service Act 2007, statistics produced by the Office for National Statistics, government departments, the devolved Administrations and other Crown bodies are automatically deemed to be official statistics. The Act also makes provision for identifying other organisations as producers of official statistics. This is important as it enables their work to fall within the remit of the authority and for the public to have confidence in their statistics. The purpose of this order, which is subject to the affirmative procedure, is to specify these organisations.
The UK Statistics Authority has been consulted in preparing this order in accordance with the statistics Act, and is content for it to be laid. The Cabinet Office has laid this order on behalf of government departments in preference to each department laying an order for the bodies for which they are responsible. This approach saves considerable parliamentary time.
This is the third such order, and it revokes and replaces the one that came into force on 1 April 2009. The previous order contained 54 bodies. In arriving at the current order, three bodies have been removed from the previous order and six new bodies have been added.
On 14 October, the Government announced their plans to reform 481 quangos. Consequently, 37 of the 57 bodies in the order will be reformed. Once the Public Bodies Bill has received Royal Assent, many of these will be abolished through legislation. However, until the bodies are abolished or reformed, it is important to continue to recognise them as producers of official statistics so that the public can have confidence in their statistical outputs. The Government will lay a further order for the House to consider once the reforms have been completed. This is likely to be some time in 2012.
In summary, this order extends slightly the number of bodies that are subject to the UK Statistics Authority’s oversight. These bodies will have to work to the new code of practice for official statistics, and their statistics will have the potential to be nominated for formal assessment by the authority as national statistics. The agreement of the House to the order is a vital part of enhancing public confidence in official statistics. I beg to move.
My Lords, I am grateful to the Minister for his clear explanation. The integrity and validity of official statistics is an important issue. Numbers make the world go round, as the adage goes, and if the numbers are not right, authoritative and independent, the world has a greater tendency to go around wrongly. So the statistical output of a new number of public bodies being designated as official statistics is welcome.
The standards set for this designation are rightly high. The UK Statistics Authority, which we on these Benches established three years ago when we were in office, maintains high standards of integrity and independence, both in itself and in the statistics it produces—as, indeed, did its predecessor body the Office for National Statistics. It is important for the Government and for the country that it does so. Without proper statistics that are properly compiled, properly produced and properly presented, none of us can properly gauge the state of the country, the economy or where politics and government are taking us. So I welcome the inclusion of the statistical output of the new range of bodies listed in the schedule to the order and its status as official statistics. I am sure that the designation will be a benefit to the statistics, which will now be produced under official auspices.
One issue puzzles me, however. As the noble Lord recognised, as well as proposing this order he is also in the early stages of taking through your Lordships’ House the Public Bodies Bill, which aims to scrap or modify a number of non-departmental public bodies—or, as we might call them, quangos. The Bill had its Second Reading in your Lordships’ House last week, and although we on this side did not manage to convince the House of the value of sending the Bill to a special Select Committee, I think the Minister will agree that what was said in that debate gave him and his ministerial colleagues a considerable amount to think about.
The point that I wish to draw to noble Lords’ attention today is a point which the noble Lord has himself recognised: the overlap between the organisations appearing in the list set out in the schedule to today’s order and the lists of organisations set out in the schedules to the Bill. Let us take the new organisations that are listed in the schedule to today’s order. Of the six new additions to the list detailing the organisations that produce official statistics, half of them appear on a list in a schedule to the Public Bodies Bill as being under review and, in effect, two statutory instruments away from abolition: the Marine Management Organisation, the Qualifications and Curriculum Development Agency and the Children and Family Court Advisory and Support Service. On the one hand, the Government, the Cabinet Office and the Minister are saying that the statistical outputs of these bodies is of such value that they qualify to be designated as official statistics, while on the other hand the Government, the Cabinet Office and the Minister are placing these organisations on a list of public bodies that have been characterised, rightly, as having, in effect, the sword of Damocles dangling permanently above their heads. And that is only with the new bodies coming on to the list in today’s order.
The same applies to a number of bodies that are already on the list, such as the British Tourist Authority, the British Transport Police Authority and the Competition Commission; I could go on. So the question is this: where is the consistency here? Where are the signs that the Government have thought through all these issues? How does the Minister square the inclusion of a number of new and extant members on the designated list before us today with the proposals in the Bill? How can he value these organisations in one way but threaten their very existence in another? What will happen to the statistical outputs of these bodies if they are axed by another part of the Government in the future?
Consistency in politics is hard to achieve, but the Government seem to be doing two entirely opposite things at the same time. I would be grateful for an explanation of how and why the Government are doing so.
My Lords, I think I have the dubious distinction of being the only person in the Room who has taken part in previous debates on the equivalent order. I do not want to repeat the debates that we have had in previous years, but I draw to the Minister’s attention a point that was originally drawn to the attention of the House by the noble Lord, Lord Hunt of Wirral. The body that produces the most statistics and is the most controversial, but sadly does not appear on this list, is the Bank of England. We have had happy debates in previous years about whether it would be a good idea to include the Bank on the list. I think that in the past the Bank has succeeded in persuading the Treasury that it should not be included—surprise, surprise—but the list would be strengthened, and indeed the way in which the Bank’s own figures are viewed would be strengthened, if the ONS could have a look at them. I do not expect the Minister to have anything of comfort to say because I know how formidable the Bank can be in guaranteeing and protecting its independence, but it is a logical body to be covered by the order. I remain sorry that it is not.
I thank both noble Lords for their contributions to the debate. I shall deal first with the point made by the noble Lord, Lord Newby. He is quite right that I am not in a position to give any immediate comfort, except to say that he will of course recognise, as does everyone, that the independence of the Bank of England has been a major development in politics. Indeed, one has to give credit to the previous Government for putting the Bank of England in a position of independent standing. Although the authority and the Bank are in regular contact with each other, they have agreed not to include the Bank in the 2010 order, and that has been done with the consent of the Cabinet Office and the Treasury. The Bank has its own code of practice for statistics, which works well for its specific and important role. It passes a lot of data on to the Office for National Statistics, and any resulting statistics, including parts of the national accounts and their publication, Monetary and Financial Statistics, are national statistics and therefore fully compliant with the authority’s code.
The noble Baroness, Lady Royall, the Leader of the Opposition, made a strong point about the overlap between this order and the Public Bodies Bill, and those who are responsible for my briefing for this short debate will vouch for the fact that my first reaction on receiving the brief was, “Oh, public bodies again”. There is, of course, an overlap, but I hope to persuade the noble Baroness that there is a consistency in that the Official Statistics Order deals with the current position and is designed to implement this year’s additional bodies and reinforce their standing.
As the noble Baroness rightly pointed out, the Public Bodies Bill is legislation in progress. It is not for me, standing at the Dispatch Box and dealing with this order, to presume the outcome of the legislative process in Parliament. The Government clearly have to allow for the passage of the Bill before they can address its statistical consequences.
I can reassure the noble Baroness that placing bodies in Schedule 7 does not mean that they are threatened with immediate abolition or that the statistics that they produce are not an important part of government. It is therefore very important to recognise that, although a number of bodies in this order are also mentioned in the Public Bodies Bill, the collation of statistics is a matter for government and will continue to be so. Any process that produces statutory instruments under the Public Bodies Bill will address the issue of the statistics that a body may well provide to government and to the public.
Legislative and Regulatory Reform (Regulatory Functions) (Amendment) Order 2010
Considered in Grand Committee
My Lords, I am pleased to present this order to the Committee. It will be aware that my honourable friend the Parliamentary Private Secretary for the Natural Environment and Fisheries presented this statutory instrument in another place yesterday. As the Committee knows, better regulation across government and its network of delivery bodies is an important tenet of the coalition Government’s drive for responsible and accountable policy and delivery. This statutory instrument seeks to ensure, formally, that the Marine Management Organisation adheres to a common standard of better regulation by adding it to the existing list of bodies that are subject to the legislative and regulatory format of 2006.
The principles of better regulation stipulate that regulatory activities should be transparent, accountable, proportionate, consistent and targeted. I am sure noble Lords will agree that these principles must underpin the effective working of all our public bodies. The MMO has been following these principles since vesting on 1 April this year. The framework document setting out its remit and corporate governance responsibilities, as agreed by the MMO and its sponsors, states:
“As a government regulator the MMO must have regard to the five principles of good regulation … The MMO will have a risk-based, proportionate, targeted and flexible approach to regulatory inspection and enforcement”.
Although the MMO already complies with this, it is nevertheless important to recognise formally its commitment to these regulatory principles.
The Committee will also know that the MMO is the Government’s key delivery body for marine policy, bringing together management for a number of marine activities including fishing, nature conservation, planning, licensing and enforcement. Delivering functions on behalf of a range of government departments, the MMO is jointly sponsored by the Department for Communities and Local Government, the Department of Energy and Climate Change, the Department for Transport, the Ministry of Defence, and my department, Defra. The length and breadth of responsibilities that rest at the door of the MMO are huge and range from planning and fishing to aggregate extraction and pollution control. Its influence is felt not only locally but at a national and international level.
That is exactly what we—the Government, the Opposition and all parties—envisaged when the Marine and Coastal Access Act 2009 passed through Parliament. People right across the political spectrum worked together to put this important piece of legislation on to the statute book. For my part, now that we are in government we want to ensure that the legislation is enacted correctly. It is therefore right that the MMO adheres to the common standards of better regulation, and today this statutory instrument recognises its efforts. I beg to move.
My Lords, I thank the Minister for bringing forward the order and for explaining it. From the outset, I can assure him of the support of the Opposition for the instrument. It is good that, as a result of the delay caused by parliamentary business, the MMO could be consulted; obviously, it is right to add it to the list of regulators and that it should have to meet the key principles of good regulation which the Minister has enunciated.
As he said, the MMO was created as part of the Marine and Coastal Access Act 2009. It is a cross-cutting body that brings together key maritime decision-making powers—planning, regulating and licensing activity—in the marine area. It has the overarching emphasis on and duty to the promotion of sustainable development. Generally, I strongly agree with the Minister that the Act and the establishment of the MMO are good news for the public, particularly with the establishment of marine protected areas, which have been described as doing what national parks did for enhancing awareness of the natural environment and countryside but this time in the marine environment.
The role of the MMO is very important in fulfilling the terms of the Act. Not surprisingly, the Minister will understand that I, as a north-easterner, very strongly welcome the establishment of the MMO in the north-east of England, with its long maritime tradition, its superb Newcastle University marine research department and, indeed, allied facilities such as the very long-established research facility, the Dove Marine Laboratory at Cullercoats.
I am also glad that the Government have a strong commitment to the MMO. Perhaps, via the Minister in this House, I could congratulate the Minister in the other place who spoke to this order yesterday. He admitted that in opposition he had concerns about the MMO, but he said firmly that his reservations had been resolved after visiting the organisation and that he now had nothing but praise for the motivation of the staff and their determination to make it a success. I, for one, very much welcomed the remarks that the Minister in the other place made in Committee yesterday.
Not surprisingly, I have concerns about the effect of budgetary cuts on the organisation. It was recently established, and it was to be a lean, mean and efficient organisation without lavish start-up costs. For that reason, we are concerned that it should not bear the heavy brunt of cuts in current circumstances, and that it should have the resources to carry out its work and responsibilities.
The Minister in the other place gave some assurance yesterday that the cuts that might be asked of the MMO would be much less than those for other organisations in the department. At the same time, he indicated that further details would become available. I urge the Minister today to keep the House informed of the effects of budgetary cuts on the MMO and its ability to carry out its functions. Not surprisingly, given that the current Opposition were in government when the MMO came into being and were committed to its establishment and the effective workings of the Marine and Coastal Access Act 2009, we will be watching this closely; we are anxious to make it a success. Having said those words, I am happy to support the Minister in what he has said today.
I thank the noble Baroness for her comments. We are grateful for them, particularly for certain points that she underlined, such as the fact that there is a duty on the MMO to promote sustainable development. We will ensure that that continues. I also thank her for emphasising its north-eastern connections. I might be from the north-west but these matters are still important to me. I will certainly pass her remarks back to my honourable friend, who will, I am sure, be very grateful for what she said in praise of him and what he said in another place.
The noble Baroness asked, in effect, only one question and that was about the spending review and the effect it might have on the MMO. She will appreciate that I cannot go into any further detail only 24 hours after my honourable friend spoke in another place, but I will make two comments, which I think my honourable friend made, to give her some assurance. First, we accept that the MMO is a new organisation and has been created as a lean and fit machine, as the noble Baroness described it. The implication behind this was that there might not be much fat on it. Its newness and the fact that it has further duties that it will have to take on next year will be taken into account as we develop the details of the spending review. Obviously, no part of government or Defra can be immune from that, but those two factors are relevant to any decisions that we make about the MMO.
Secondly, as an adjunct to that, the noble Baroness asked that we keep her and the House informed of any details of this. Again, I have given assurances that that will be the case in due course. I end by thanking the noble Baroness again for her contribution. I beg to move.
Producer Responsibility Obligations (Packaging Waste) (Amendment) Regulations 2010
Considered in Grand Committee
My Lords, these regulations set new recovery and recycling targets for packaging waste for 2011 and 2012. They will also improve transparency in the way in which the packaging recycling system is funded and will make a number of technical changes to improve the clarity of the regulations and reduce costs to business.
First, it should be remembered that tackling waste is not just the responsibility of government; it is a responsibility for all of us, including businesses, private individuals and local authorities. It is for this reason that the Government are undertaking a review to look at all aspects of waste policy and delivery in England. The review’s main aim will be to ensure that together we are taking the right steps towards creating a zero-waste economy in which resources are fully valued and nothing of value gets thrown away.
Last year, nearly 11 million tonnes of packaging were placed on the United Kingdom market with the products that it protects. About half this packaging is from household goods, and after use it accounts for about 20 per cent of household waste. The rest of the packaging is used and disposed of by businesses, and it accounts for about 10 per cent of commercial and industrial waste.
The EU directive on packaging and packaging waste, which has been in place since 1994, requires member states to recover every year a minimum of 60 per cent of all packaging waste, of which 55 per cent must be recycled. Through the producer responsibility system that we have put in place in the UK and which is set out in these regulations, the UK achieved those targets in 2008 and 2009 and is on course to do so again in 2010. However, the current regulations set recycling targets for packaging producers in the UK only until the end of 2010. We therefore need to put measures in place to ensure that the UK continues to meet the EU packaging recycling targets in future years, and so ensure that packaging waste continues to be recycled. If we do not, we can expect rather costly infraction proceedings. At the same time, we need to ensure that these targets are achieved at the lowest possible cost to businesses to support them in this challenging economic climate.
The Government will set out our long-term approach to packaging as part of the waste review, to which I referred, which is due to be published next spring. In the mean time, the Government propose in these regulations to set packaging recycling targets for 2011 and 2012 only, and at a level that will ensure the delivery of the EU targets in the packaging directive but no more. Targets for 2013 and beyond will then be considered in light of findings of the review.
The regulations also include provisions to improve the transparency of the funding associated with packaging waste recovery notes, PRNs, and packaging waste export recovery notes, PERNs—the evidence notes issued by reprocessors and exporters to show that recovery and recycling has taken place. Reprocessors and exporters will now be required to report on how they have spent the PRN revenue against new more defined categories. The new categories, developed with the industry, will provide a more accurate picture of how this funding is used to benefit the packaging recycling system as a whole.
Finally, the regulations contain a number of minor technical changes. Most of them aim to clarify definitions, key dates for data returns and payment deadlines, and update references to legislation revised since 2007. Two changes are deregulatory. First, the amendment removes the requirement for reprocessors and exporters to have an independent audit, which can cost up to £10,000 for a large company. Secondly, it will allow a certain category of smaller businesses to use a simpler method to calculate their legal obligation, which will save time and effort. Benefits from these mean that as a whole, the proposed package of changes will reduce the net administrative burden placed on UK businesses by between £285,000 and £371,000 annually.
In conclusion, I believe that the amendments that the Government are proposing to the packaging regulations will enable the UK to continue to meet its EU obligations, while minimising costs to UK businesses; will make the flow of producer funding more transparent for producers and local authorities; and will resolve a number of technical issues, which will overall reduce costs to business. I commend the regulations to the Committee.
Sitting suspended for a Division in the House.
My Lords, again, I begin by thanking the Minister for his explanation of the regulations and for bringing them forward today. They are in many ways a continuation of an existing policy and approach, and derive from EU obligations. As the Minister explained, the targets needed to be updated for the immediate future. In responding for the Opposition, I simply raise a few questions that are largely stimulated by the Explanatory Memorandum. We know that consultation has taken place on the regulations, and I ask the Minister about the level of interest in the consultation and the overall responses to it. Is he happy about how extensive the consultation was and whether those who will be affected by the regulations heard about it and had a fair chance to give their views?
The Minister was uncharacteristically uncharitable yesterday at Question Time in referring to consultations under the previous Government. In my modest experience as a Minister, consultations were very important in arriving at and even changing government policy. It would be interesting to hear how effectively the Minister rates the consultation process that took place on the regulations.
At paragraph 7.3 of the Explanatory Memorandum, mention is made of the targets being set higher to offset the exemption for small businesses. Were any problems created through that; were there any specific areas of difficulty? I am not sure what proportion of SMEs are covered by the regulations. Does the Minister consider that the burden that is now on SMEs through the renegotiation of the regulations is reasonable?
In paragraph 7.6 of the Explanatory Memorandum, the Government talk about longer-term targets being set. I would be grateful if the Minister could give us an idea of the timetable for that process. In paragraph 7.7, mention is made of the revenue that can be raised. It states:
“Reprocessors and exporters are not compelled to spend the revenue in any specific way”.
Was any specific obligation on the spending of that revenue ever considered? Does the Minister have any further information about that?
In paragraph 7.10, the Government say:
“Most of the changes will have a negligible impact on businesses”.
I am happy to accept that that is the case, but since “most” is not all, it would be interesting if he could give us any information about what seem to be the most significant impacts of the changes.
Paragraph 7.11, to which the Minister referred, states that there is to be:
“The removal of the requirement on reprocessors and exporters to be independently audited”.
When I first read this I felt some concern, because independent auditing requirements are often extremely important. However, I understand from a later point in the Explanatory Memorandum that the regulators were happy with this change. None the less, I would be grateful if the Minister could tell us whether the regulators have any outstanding concerns about that. I realise that this may not be easy to answer, but can he say whether this requirement for independent auditing happens elsewhere in the EU, given that we are talking about EU regulations?
My final question is fairly basic but important. Can the Minister assure us that nothing in these regulations will affect negatively our recycling targets and the other environmental commitments that we have entered into? We want to be reassured on that point.
Once again, I thank the Minister for the way in which he introduced these regulations and for explaining the large element of continuity in them, which certainly seems to be in evidence.
My Lords, I apologise for not being here for the Minister’s speech, except for his excellent final paragraph, but I was caught in the Chamber, having intervened on what turned out to be a rather controversial occasion. Politeness meant that I had to remain there until it had finished. I should also declare an interest—two interests, really. I was the Minister who invented these regulations and drew up the environmental regulations that were accepted by the European Union. This is unusual, because these regulations were created by Britain and France together to avoid the interference in trade that had otherwise occurred. Therefore, the regulations are permissive in the means by which we meet the ends. It is a very British concept. I also declare an interest as chairman of Valpak, which is the largest of the organisations that help businesses to meet the obligations under the regulations. It is a not-for-profit organisation set up by British industry and covers about 65 per cent of those who have to meet the regulations. I declare an interest, but perhaps I also declare knowing something about how these things work, which is not easy because they are somewhat complicated.
I have to say that there is a real and fundamental disagreement with the way in which the Government have decided to proceed. Britain has managed to become not the worst operator of recycling—as the noble Baroness knows, we have not been very good in our recycling record—by having the most permissive system that you could possibly have. It is very competitive and we have managed to do this probably more cheaply than any other country in Europe. Last year, it cost British business roughly £180 million to meet the obligations. It is likely to have cost German business about £1.8 billion. That is the difference in the efficacy of our systems; this is not a heavy burden on our businesses. Indeed, we actually have a positive advantage, because we run the system so effectively. I have to say that that is because we went in for a good capitalist system—it is competitive. Anyone who provides services has to compete with everyone else; if you do not provide or buy the evidence of recycling at the lowest possible cost, they do not come to you, they go to someone else. There is a real reason for this.
The other reason why it has worked is that every year the targets have been lifted, not hugely but enough to keep the whole thing moving. Those who provide recycling facilities know that if they invest in them on the basis of this year’s demand, by the next year there will be sufficient increase for that investment to have been worth while. On the one occasion on which the previous Government did not act in this way, it had a very serious effect. Recycling facilities were laid up and the programme for the creation of such facilities was interrupted. It took us at least a couple of years to get back into the system. History shows that when you do this, it has a real effect.
I ask my noble friend why he has decided to do this when almost the whole of British industry is perfectly happy to have gently rising targets. It has accepted that it is a sensible system. The noble Baroness mentioned SMEs. One problem with the system is that it has a very high de minimis level. Because of this, SMEs are to a large extent excluded. They do not normally put enough on the market to bring them into the system. That means that when you talk about meeting a percentage target, it is the percentage of a sum that is affected by the de minimis numbers being excluded. We could even have a situation in which we technically recycled more than 100 per cent of the total amount because we exclude so much at the bottom.
This system is designed to help the poorest, those least able to pay and those with the least opportunity to have a proper system that enables them to manage the bureaucracy. However, I say to my noble friend that I have canvassed opinion widely. The industry, large and medium-sized players alike, very much welcomes the fact that the previous Government went into a system in which they advertised the increase in targets well in advance. People knew that they were coming and very much welcomed that fact. Therefore, when one has fundamentally flat targets, the effect on the system is serious. It is already serious. One has only to look at the effect on glass prices at this moment. They have been very much affected by this knowledge, which has been around for a long time; people have known what the Government had in mind.
I put this to my noble friend; if we have two years of flat targets, there will be a considerable diminution in the amount of money that goes to local authorities. If the targets are low and people do not pay a proper price for recycling, the return to a local authority for collecting, say, bottles diminishes. It may be excluded altogether. A large number of local authorities may find it difficult in these straitened circumstances to continue with their services, which would be a great pity. I know my noble friend thinks that my warnings are not correct. However, we are both Conservatives. Conservatives normally go for their advice to those who actually do the job. There is a universal view among those who do the job that a gentle increase is the way to achieve this end.
I would not have troubled your Lordships on this occasion. Indeed, it is my first attempt to speak in Grand Committee, which is daunting because of the small numbers that are present; it is a curious way of speaking. Perhaps this is an occasion on which declaring an interest is valuable. It shows one’s technical understanding of what is going on. I know that this is not a sensible system because we cannot change the regulations. However, I would like an absolute assurance that, if I am right, my noble friend will not wait for reports from waste committees and so on, but will return to this Committee next year with a change, which is perfectly possible under these regulations, to ensure that local authorities can go on doing their job and that British industry is listened to. That is what it wants. It would be improper of me to quote them, but hardly a household name agrees with the regulations. Most are overwhelmingly in favour of a gentle increase.
Finally, I hope the Minister will set his face against those who somehow think that it is an imposition on British industry to do better in environmental matters than the rest of Europe. One of the things we are up against is that the European Union, of which I am a passionate supporter, is slow in putting all this right, so we are in position in which we can do this. It is a pity that we have not set an example and that we have not moved as we should have. I hope my noble friend will give a commitment to try this. If he is right, I shall be happy to come back on a suitable occasion and say, “Mea culpa. I was wrong; the expert was faulty and the onlooker saw more of the game”. I would be as humble as he would wish me to be. In return, if it turns out that there is a serious diminution in the provision for recycling, and if there is a clear sign that local authorities are finding things more difficult than before, I hope he will give a commitment to come back to the House and lay a new order.
My Lords, after the last speech I feel that I am treading on someone else’s carpet. It was an extremely interesting intervention and both my noble friends should be encouraged to continue talking about the questions raised. If there is a danger that the incentive to carry on will be removed, given the expertise here we should consider that matter. If allies of long standing, new allies and all those who are interested in the field say that there is a danger here, perhaps the Minister can give an assurance that the Government will keep a weather eye on the situation. I would be reassured by that commitment.
It is more reassuring when you hear from someone who genuinely knows what they are talking about; not a parliamentary expert, which is how I interpret someone who has merely spoken on the subject three times, but someone who knows something about it. I hope the noble Lord, Lord Henley, will say that the Government are watching the situation and monitoring these concerns, because if we cannot have a broad church on environmental matters we should give up and go home now.
My Lords, the noble Baroness, Lady Quin, teased me at the beginning of her remarks that I had possibly over-attacked her at Question Time yesterday on the subject of conservation, and I wonder whether I possibly over-egged my remarks. Perhaps I was provoked by the noble Baroness; I am not sure. I accept that her Government consulted effectively on some occasions and I hope she will accept that, when we consult, we consult genuinely and with a real intention to listen. She asked what interest was shown. I can assure her that we had 96 responses from local authorities, producers and trade associations, and that the consultation covered the usual 12 weeks. I hope I can say that we consulted enough; that, as far as one ever can, we got to everyone it was necessary to get to, although one can never guarantee that; and that we covered as many SMEs or their representatives as possible. Very often, SMEs do not have time to respond themselves but have representatives who can.
As far as I am aware, that was not the case. I shall write to the noble Baroness in due course about that.
The noble Baroness then asked about the waste review—again, a matter raised by my noble friend Lord Deben—and when it would come out. Our intention is to publish it in April of that year. April might turn out not to be a suitable month because, as the noble Baroness will know, there are local government elections on 5 May. It might therefore have to be published on 6 May, but I cannot give a precise date other than an assurance that it will be before June.
On independent auditing, again I can give an assurance that, as I made clear in my opening remarks, we are keen to try to reduce the burden on all businesses. So far as I am aware, the regulators were perfectly happy. I am not aware of any concerns. We will continue, as we have said in the past, to make sure that we strive to meet all our recycling targets, and our targets post-2012 will be considered as part of the review to be published in 2011.
I turn to the points made by my noble friend, and again I pay tribute to him for, as he reminded us, inventing these regulations, getting them through with the support of the French—something I hope we will be able to do more often in the future, but we are all learning new tricks at this stage—and getting them agreed. I am also grateful to him for stressing their efficacy and the competitiveness of our system. What my noble friend is saying in effect is that our targets for 2011-12 are not ambitious enough. The simple answer to that is that we will have the review and we want to make sure that we get everything right before we move on.
I understand my noble friend’s view, but this is a continuing system. If you decide to stand aside for a relatively important period, as this would be—if my noble friend can tell me that it will be for only a year I shall be happier—the fact of history is that it takes you several years to catch up if you discover that you do want to raise the targets. As I cannot imagine that anyone in the coalition would want to lower the targets, it might be better to do this as we have done it for the past 12 years.
I can see my noble friend’s argument. In some respects we are continuing with that line. Perhaps I can offer him some encouragement in another field in this area. One of the other drivers of these things is the landfill tax. It will continue with its escalator, which is due to go on up to 2015, at which point I think it will reach £80 a tonne. It is certainly a driver for all those involved in waste when considering how to handle waste. What happens to the tax after that, as my noble friend is perfectly well aware, is not a matter on which I can comment. No doubt colleagues in the Treasury will look at the efficacy of that particular tax because it is one of the most successful taxes that has ever been created in changing behaviour.
My noble friend also said that he has been listening to those who advise him and that he wants the Government also to listen to them. He said that if he was wrong he would come to me, as he put it, covered in sackcloth and ashes and admit it. If we are wrong, I see no reason why we cannot amend things later, but in the mean time we want to get the waste review right. Once we have done that we can look at these issues again.
Can my noble friend assure me that nothing will stop him—let me put it as delicately as that—coming back next year with a revision, or does he really mean that the arrangements for the waste review will mean that it will be at least two years before he can change this?
I cannot give my noble friend an absolute assurance because we want to consider the results of the waste review before we come to decisions. He will know that Governments can do a great deal of things as and when they wish, particularly after publishing a review. I certainly cannot give an assurance that we will do something. All I can say is that we might, if it was necessary. I would then come to the noble Lord in sackcloth and ashes to say “Mea culpa” and whatever else he wished me to say. I am not saying that we will do this; I am saying that it is always a possibility.
Of course my noble friend cannot say that he will do it; indeed, that is not what I asked him. I asked him whether, if it turned out that it were necessary, he would do it. I am sure that he would. My question now is: if it were necessary, could he do it in the time, or could something in the circumstances make it impossible? If nothing in the circumstances would make it impossible, I am happy to rest on his good assurances and he need not say “Mea culpa” to me.
I can never give an absolute guarantee; it would have to be a guarantee given by me at this stage. All that I am saying is that I believe that it would be possible if necessary. I might be wrong, but my noble friend will have to rest on that assurance. The important thing is that we think that it is right and proper to get these things sorted out, as we are doing now, for 2011-12, then publish our waste review and then take things forward and make further decisions thereafter. I know that my noble friend says that the price of glass has collapsed. We have seen that in the past and it has gone back up again. We have seen that with other recyclables. I think we can cope with that. These are not the only drivers in this field; as I mentioned, there is also the landfill tax. I do not believe that we face the problems that my noble friend suggests.
I hope, therefore, that the Committee will accept that at this stage it is right and proper that the regulations go through, and that we will consider them again in the light of the review, which will be published in the spring of next year.
Committee adjourned at 5.18 pm.