House of Lords
Wednesday, 24 November 2010.
Prayers—read by the Lord Bishop of Wakefield.
UN: Security Council Composition
My Lords, my right honourable friend the Foreign Secretary has made clear the UK’s support for Security Council reform, most recently on 17 November in his speech on Britain’s foreign policy at Georgetown University, when he emphasised:
“We are ardent advocates of … the reform of international institutions, including a more representative UN Security Council”.
On the appointment of Secretaries-General, the UN charter is explicit that the General Assembly appoints a Secretary-General on the Security Council’s recommendation.
I thank the noble Lord for that reply, but does he not agree that now is the time to put in place convincing arrangements for the appointment of the next Secretary-General? Is it not absolutely crucial that we have a system which is robust and transparent and which sets out to find the best-qualified person in the world to do the job, as distinct from what is an acceptable compromise between people in committee rooms? Does he not also agree that, if we are to reform the Security Council, we also need to look at its remit to ensure that it is not simply about military security, as economic, environmental, migration and related issues are central to the remit of peace and stability in the world?
On the noble Lord’s second point, of course I agree totally. That is indeed the central requirement and concern. With regard to the selection of Secretaries-General, the noble Lord probably knows better than I do that this is a Security Council-dominated process. We believe that the Secretary-General should have the broadest possible support from the UN membership, which of course includes support from the Security Council and the five permanent members. The matter is not entirely in our gift and hands; nevertheless, the noble Lord’s points are very valid and we will bear them very much in mind in this process.
My Lords, will the Minister elaborate slightly on what the Foreign Secretary said at Georgetown? Are the British Government prepared to contemplate an interim step towards reform of the Security Council by having a longer-term category of members who are not yet permanent members—that would make the Security Council more representative—rather than trying endlessly to solve the Rubik’s Cube of new permanent members?
That is a possibility. The noble Lord was a member of the high-level panel—a very eminent member of a very eminent panel—which put forward various models. We would like to go forward with reform but, as he knows, first, there is resistance from some existing permanent members, who do not want any change at all, and, secondly, there is resistance from another group of members, who are not on the Security Council but who are opposed to any change for other reasons. It is therefore difficult to advance even to the interim arrangements that he so expertly described. Anything that can unblock the system and move forward to a modern and—dare I say?—fit-for-purpose United Nations structure, rather than the one that we inherited from the 1940s, would be a great improvement.
My Lords, the British and French Governments declared in 2008 that they would jointly move towards the intermediate arrangements of which the noble Lord, Lord Hannay, spoke, but the Foreign Secretary’s speech made no reference to that. I wonder whether the official position of Her Majesty’s Government is that they have abandoned that as a means of moving forward. I am sure that the noble Lord would agree with me that for us to say that Brazil should come in and for the United States to say that India should come in would hardly be a means to getting consensus, as we cherry-pick certain countries.
No, we have not abandoned that position. We continue to work very closely with the French. We are completely committed to enlarging the Security Council and including India, Brazil, Germany and Japan as permanent members. However, in the absence of agreement, which it would be nice to see, together with France we have suggested the intermediate model, which has already been referred to.
The problem is that there is more than one idea around, including the two from the high-level panel of which the noble Lord, Lord Hannay, was a part. One, indeed, was that the new members should have the right of veto, with, I think, six non-permanent members added. Another proposition is that the whole structure should be altered and the right of veto should be developed in different ways, with some vetoes on some issues. The noble Lord has been deeply involved in the United Nations—indeed, he was our representative there—and knows the difficulty of getting agreement on any of these patterns. One possibility is that the veto should be offered to new permanent members, of which the four are the front-runners, but it is only a possibility and I cannot put it higher than that.
My Lords, can the Minister assure the House that the coalition Government will maintain the pressure on the UN to implement all the reforms in the 2006 report Delivering as One, which would have an impact on the appointment of the Secretary-General and several other senior appointments, among other things?
My Lords, the noble Lord has my sympathy: I remember being asked a very similar question, quite possibly by my noble friend Lord Judd, in 1997, and, I am bound to say, giving a very similar answer. The noble Lord has listed four countries and they are indeed the same four countries as I think I listed way back then. There is, however, the question of Africa. What the noble Lord has proposed as the British Government’s position does not envisage any direct African representation. This is not a question of individual countries; it is a question of a whole continent. I wonder whether he would reflect on that.
The noble Baroness is almost certainly right about the similarity of the answer—we have not made much progress in the past year or two. She is also right to open the question of African representation. We have argued—as I think the previous Government of whom she was a distinguished member argued—that, as well as the four countries, there should be African representation. If she then presses me to say which countries, I would have to say that it is a little difficult to decide. However, the general proposition that there should be African representation as well is part of our policy and fully taken on board.
My Lords, we have no plans to review the rules governing taking children into care. The law, which has been in place since 1989, is clear that children should live with their parents wherever possible. However, action must be taken if a child is suffering, or is likely to suffer, significant harm. Where a child is taken into care on a care order, the court is required to treat the welfare of the child as its paramount consideration.
My Lords, why do family courts not follow the normal rules of justice and fairness practised in all other courts? Why are parents who are under threat of losing their children not permitted to know of any written evidence against them or to have an independent expert challenge such evidence? Why are they threatened with prison if they complain to their MP about that?
My Lords, I am aware that there are issues around the operation of the family courts system and a review of the family justice system is under way. I will reflect on the points made by my noble friend and would be happy to discuss them with her further and to arrange a conversation for her with my honourable friend Mr Loughton, who is the relevant Parliamentary Under-Secretary.
My Lords, the Minister will be aware that, following the Baby Peter case, there was a 37 per cent increase in referrals to the family courts on care orders. I wonder what the Government’s response is to that, bearing in mind that this is a local authority responsibility. The Government need to do all that they can, given what such an increase means for the nation’s children, to ensure that local authority social workers have as much support as possible through all the government channels that have been put in place in the near past, including the preventive services such as Sure Start and other under-fives services, so that children can stay with their families safely when appropriate.
I agree with both the main points made by the noble Baroness. In my Answer, I said that we think that the legal framework is broadly correct. The key issue is clearly the ability of social workers on the ground to make the right judgments. Those involved work extremely hard in almost impossible situations, but they are criticised from both ends because they are thought to intervene either too quickly or not quickly enough, so it is terribly difficult. Training is vital, and they need support. I also take the point about Sure Start centres.
I was very pleased to hear the Minister reaffirm that social workers must make these very difficult decisions on the basis of the paramountcy of the child’s interest, as enshrined in the Children Act 1989 and in the Every Child Matters agenda established by the Labour Government. However, is he aware that the every child matters website now displays a very prominent and somewhat intimidating warning that it may not reflect the policy of the new Government? Does this mean that the coalition is abandoning the principle that every child matters?
It is clearly not the case that the coalition Government are abandoning the principle that every child matters. I will look into the specific point that the noble Baroness makes about the website. That clearly is not the purpose. I hope that the priority that the Government give to caring for children, looked-after children and children at an early age is as strong as ever.
My Lords, I was recently contacted by a distressed grandmother because her grandchild was being taken into care by the local authority and it had not included her in its decision-making process. Can the Minister assure the House that, whenever there is a question of a child being taken into care, there is always a family group conference including wider family members who are willing to become kinship carers? Will he consider giving support, both financially and otherwise, to those kinds of carers who are willing to give a happy, stable home to vulnerable children?
Does the Minister accept that the Children Act 1989, to which he has already made reference, is perfectly adequate and fair in dealing with these situations? Even where the natural parent or parents of a child have let that child down badly by placing the child in jeopardy, nevertheless, no family court—whether it be the High Court, the county court or the magistrates’ court exercising that jurisdiction—should take away that child from another member of the family who is prepared and willing to take on that responsibility.
My Lords, I think that the Act makes clear that the priority in making those decisions is that a child should stay with the family or with a suitable family member. No one wants to get into the situation whereby there is a presumption that a child should be taken from the family into care. Everyone would want the child to remain with the family or a member of the family as long as the child is not at risk.
My Lords, my noble friend said that he would reflect on the Question of the noble Baroness, Lady Knight of Collingtree. Will he also reflect on the fact that the experience of Members of Parliament is that a lot of the distress caused in this area is due to lack of adequate and comprehensive communication between the local authority and the parents? Perhaps he might see whether, arising out of his reflection, some guidance would be helpful.
I am happy to take those points back and I hope that the Munro review, which is looking into this whole area much more broadly, will also come forward with helpful suggestions for all of us in this difficult area to make sure that we get the balance right.
Will the Minister confirm whether his honourable friend in another place was misquoted or quoted correctly as saying that people who volunteer could help families with vulnerable children—something with which we all agree—and that, as a result of such voluntary activity, there could be a reduction in the number of specialists working in this field? Will he confirm that volunteers should never replace but only complement qualified social workers?
I am afraid that I am unable to answer the first part of the question on whether my honourable friend was quoted or misquoted, but I will happily look into that and, if I can get an answer for the noble Baroness, I shall. On her second point, I can confirm that, much though we all want to encourage volunteers across the piece in all sorts of ways, the key role of well trained professional social workers must lie at the heart of dealing with these difficult and sensitive issues.
Coroners and Justice Act 2009
My Lords, no. My Written Statement of 14 October outlined those areas of Part 1 of the Coroners and Justice Act 2009 that we intend to take forward, such as a charter for the bereaved, and those that, because of the current economic climate, we are unable to progress with, such as the appointment of the chief coroner.
I am grateful to the Minister for that Answer, but would he not agree that a consistent standard of coronial practice is an essential ingredient of our civil and criminal justice system and that we do not, alas, have that at present, as a number of recent cases have unfortunately shown? Despite what he has said, the appointment of a chief coroner would ensure the proper and necessary governance arrangements for the coronial system. Will he look again at the proposal in the Public Bodies Bill to abolish the position of chief coroner?
It will be next week. The point is that the abolition of the post of chief coroner was taken on cost-saving grounds, which we have not hidden. However, the way in which we have done it enables us within the Ministry of Justice to take on board many of the central themes of the Act and to carry them out from within the department. Among those tasks is the need, which we fully accept, to get a level of consistency of performance throughout the coronial system.
My Lords, Section 51 of the Coroners and Justice Act, supported by the noble Lord when in opposition and indeed strongly encouraged on those Benches by the noble Lord, Lord Thomas of Gresford, is not now to be implemented. The section broadened the scope for legal aid so that bereaved service families would get legal aid for an inquest. If it is not implemented, some service families will receive legal aid only if they pass an exceptionality test. Will the noble Lord who speaks for the Government make a firm promise, indeed a guarantee, to the House that legal aid will be given in every inquest where service families ask for it?
My Lords, the noble Lord is right. We are not taking forward Section 51 of the Coroners and Justice Act 2009. On military inquests, exceptional funding is almost invariably provided on the basis of a recommendation by the Legal Services Commission. I do not think that there is any question of such funding not being available.
Is it the intention of the Minister or of the Government not to allow legal aid for the families of those who die in custody? If that is the case, will the Minister give an undertaking that neither the Prison Service nor the police will be represented by counsel and solicitors in such inquests?
My Lords, following the welcome Statement to this House from the noble Baroness, Lady Rawlings, that measures included in the Coroners and Justice Act to improve the treasure system will be implemented, and following the comparatively welcome news this week on funding for the Portable Antiquities Scheme, along with the commitment made by the Culture Minister to review the scope of the Treasure Act in 2011, may I encourage the Minister to continue in this positive vein where archaeology is concerned? What progress have Ministers made towards establishing a national coroner for treasure?
Believe it or not, a national coroner for treasure is not in this brief, so I promise to write to the noble Lord. As a former member of the All-Party Archaeology Group, I hope that progress is being made, subject of course to the financial constraints that we found ourselves in when we took office.
Does the Minister accept that one of the reasons for creating the post of chief coroner was to reduce the costs, both legal and administrative, of defective decision-making? Does he therefore not accept that to fail to proceed with the appointment of a chief coroner is a false economy?
I disagree. The savings are £10 million in set-up costs and £6 million a year in running costs. Although I freely accept that it is a big challenge for the Ministry of Justice, we believe that we can deliver the core measures in the Coroners and Justice Act through the ministry. We have put a great deal of effort into consulting on and then bringing forward a charter for the bereaved, which we hope will deal with many of the problems to which the noble Lord has referred.
My Lords, the response to last Wednesday’s flooding in Cornwall was truly a team effort. Over 250 properties in all were flooded and people were evacuated overnight. I would like to echo the praise given by the leader of Cornwall Council for the emergency services and offer sympathy to those whose lives have been disrupted. We will review what happened with partners to see whether lessons can be learnt about the future handling of such incidents.
Is it the case that flood defences, pumps, telephone warnings and ditches were deficient and that longer-term defences are likely to be hit hard by the cuts, thereby imperilling thousands of people, despite promises to the contrary? All this is happening when, as the Secretary of State for Climate Change has acknowledged, extreme weather is becoming more and more frequent.
My Lords, I do not accept the noble Lord’s first point. Environment Agency teams were out there before the floods happened, clearing out streams and culverts and doing all that they could to make sure that things were mitigated as far as possible. Sadly, the weather was so extreme that these measures were not able to cope with what happened. Something of the order of one and a half inches—that is 38.8 millimetres, if the noble Lord prefers that measure—of rain fell in one hour and, quite frankly, what was in place could not cope with that. I do not accept what the noble Lord said about cuts. We will be spending something of the order of £2.1 billion on flooding and coastal erosion over the next four years, which is only a very small reduction on the previous four years.
My Lords, I echo the Minister’s congratulations to people in Cornwall. A couple of properties within a quarter of a mile of my house were under five feet of water. Given that Cornwall abuts the Atlantic, the south-westerlies and the fact that these occurrences will happen more frequently, will the Government undertake a dialogue with councils in the south-west, particularly in Cornwall, to put in place more permanent arrangements for dealing with these incidents in the future?
I accept my noble friend’s point that these things are likely to happen more frequently as a result of climate change. We will continue to talk with local authorities and all others, which is why today we have made an announcement about our response to the Pitt review and the new approach that should be followed to deal with floods and the danger of floods. We will look at new approaches to allow more schemes to go ahead that will attract money not only from the Government, through the Environment Agency, but from all other sectors.
Is not the lesson that we learnt from the floods in west Cumbria, where the noble Lord lives, and Cornwall that the aftermath always brings problems over house insurance costs? Cannot the Government now take a role in co-ordinating meetings with the insurance industry in order to get a better deal for home owners, who are greatly losing out and very often cannot reinsure their properties?
My Lords, I am glad that the noble Lord referred to the floods in Cumbria. I visited Cockermouth only last week on the anniversary of those floods and I was pleased to see the resilience with which the people of west Cumbria, where both the noble Lord and I come from, have dealt with the situation; I imagine that the same will be true of the people of Cornwall, who are equally resilient. He makes a perfectly valid point about insurance and the Government are talking—and will continue to talk—to the Association of British Insurers about how we can deal with these matters.
My Lords, can the Minister assure me that the new Government have had access to the report of the lessons learnt from the floods of six years ago in Boscastle, Cornwall? As I understand it, the role of helicopters, in particular, was absolutely critical in rescue operations then and may well be again in the future. Have the Government had access to any assessment of those lessons?
My Lords, we look at the lessons learnt from all floods and we have made great progress—as did the previous Government—in getting all agencies, whether local authorities or the voluntary sector, to work together in this field. My noble friend is quite right to refer to the role that helicopters can play, but there is also a large role to be played by the emergency services and the voluntary sector. We greatly praise the RNLI, which I know helped out in west Cumbria, the Red Cross, mountain rescue and many others who help on these occasions.
My Lords, I extend from this Front Bench the Opposition’s sympathy and support for those who have been affected by the floods in Cornwall, particularly those who had to be evacuated from their homes. Given the concerns expressed by the Environment Agency, the Institution of Civil Engineers and others about funding cuts in the next four years, and given that communities such as those in Cornwall and Cumbria need certainty about which flood protection projects will go ahead, may I ask the Minister what local authorities will receive from the CLG formula grant next year and when his department will publish a definitive list of projects that will receive funding and those that will not?
My Lords, I believe that the noble Baroness is referring to the help that we will provide to local authorities under the Flood and Water Management Act. I understand that they will receive some £21 million next year, due to phasing in, but thereafter it will be some £36 million. That will help local resilience forums, which are local authority-based, to do all the work that is necessary. We believe that the £8.1 billion that we are providing for capital work on floods is a pretty fair settlement in light of the deficit that we faced when we came into government. It represents only a very small reduction on what was available for the previous four years.
Torture (Damages) Bill [HL]
A Bill to make provision for actions for damages for torture and for connected purposes.
The Bill was introduced by Lord Archer of Sandwell, read a first time and ordered to be printed.
Economic Affairs Committee
Identity Documents Bill
My Lords, I am sure that the whole House would wish me to thank the Minister for her careful stewardship of the Bill during its passage through your Lordships’ House. She will be aware that, last week, the House voted to provide compensation to holders of the ID cards that are to be taken out of circulation in the next few weeks. Do the Government now intend to honour the vote and the intention of the House of Lords last week?
My Lords, I believe that this is a matter for the House of Commons.
Bill passed and returned to the Commons with an amendment.
Schools White Paper
My Lords, with the leave of the House, I should like to repeat a Statement made in another place.
“Mr Speaker, with your permission, I should like to make a Statement to accompany today's publication of the coalition Government’s White Paper on schools.
England is fortunate to have so many great schools, so many superb teachers and so many outstanding head teachers. Their achievements deserve to be celebrated, and I was delighted that, last week, the Prime Minister and I were able to meet hundreds of the very best school leaders in Downing Street, congratulate them on their work and welcome their commitment to the academy programme.
We are fortunate that our school system has important strengths, but our commitment to making opportunity more equal means that we cannot shy away from confronting its weaknesses. We are failing to keep pace with the world's best-performing education nations. In the past 10 years, we have slipped behind other nations, going from fourth in the world for science to 14th, seventh in the world for literacy to 17th, and eighth in the world for mathematics to 24th. At the same time, the gulf in the opportunities available to the rich and the chances given to the poor has grown wider; the gap between the A-level performance of children in independent schools and those in state schools doubled under Labour. In the last year for which we have figures, out of a population of 80,000 children eligible for free school meals, just 40 made it to Oxford or Cambridge, a drop from the previous year when just 45 made it. Social mobility went backwards under Labour, and it is the mission of this coalition Government to reverse that melancholy trend and make opportunity more equal so that we can become an aspiration nation once more.
If we are to make the most of the potential of every child, we need to learn from those countries that out-perform us educationally and have more equal societies. This White Paper does just that. It shamelessly plunders the best ideas from the highest performing education nations and applies them to our own circumstances. It is accompanied by an evidence paper that outlines the common features of the countries with the strongest school systems.
The single most important lesson, reflected in the title of our White Paper, is the importance of teaching. The best school systems recruit the best people to teach, train them intensively in the craft of teaching, continue to develop them as professionals throughout their career, groom natural leaders for headship positions and give great heads the chance to make a dramatic difference. That is why we will reform and improve teacher training by establishing a new generation of teaching schools on the model of teaching hospitals, outstanding schools that are showcases of the best in teaching practice; invest in doubling the number of top graduates who enter teaching through Teach First; create a new programme, Teach Next, to attract high performers from other professions into teaching; subsidise graduates in strategic subjects such as science and maths to enter teaching; and create a new Troops to Teachers programme to attract natural leaders from the Armed Forces into the classroom.
Because we know that the biggest barrier to recruiting and retaining good people in teaching is poor pupil behaviour, we will take decisive action on discipline. Unless order is maintained in the classroom, teachers cannot teach and children cannot learn. We will make it easier for teachers to impose detentions on disruptive pupils by abolishing the rule that requires 24 hours’ notice to be given. We will give teachers stronger powers to search students if they bring items into school intent on disruption, give teachers clearer rules on the use of force and protect teachers from false allegations made by disruptive and vindictive pupils if they act to keep order. We will support schools to introduce traditional uniforms, prefects and house systems, prioritise action to tackle bullying, especially racist and homophobic bullying, make it easier for schools to exclude disruptive children without the fear of seeing excluded children reinstated over their heads, and improve education for troubled young people by bringing in new organisations to run alternative provision for excluded pupils.
By improving behaviour, we can free teachers to raise standards. We will reform our national curriculum, so it is a benchmark that we can use to measure ourselves against the world’s best school systems instead of a straitjacket that stifles the creativity of our best teachers. We will slim down a curriculum that has become overloaded, overprescriptive and overbureaucratic by stripping out unnecessary clutter and simply specifying the core knowledge and strategic subjects that every child should know at each key stage. That will give great teachers more freedom to innovate and inspire, and we will support their drive to raise standards for all by reforming our exams. We will reform assessment in primary schools to reduce teaching to the test, make GCSEs more rigorous by stripping out modules, and make GCSE performance tables more aspirational by judging schools on how well all students do, not just in English and maths but in science, modern language, and humanities such as history and geography. We will reverse the last Government's decision to downgrade the teaching of proper English by restoring the recognition of spelling, punctuation and grammar in GCSEs.
Because we know that it is great teaching and great teachers who improve schools, we will reduce the bureaucracy that holds them back and put them at the heart of school improvement. We will double the number of national leaders of education: outstanding head teachers with a mission to turn around underperforming schools. We will raise the minimum standards expected of all schools so that primaries and secondaries that fail to get students to an acceptable level and fail to have students making decent progress will be eligible for intervention. We will make £110 million available to create a new endowment fund to turn these schools around, and will introduce a reward scheme to make additional incentive payments available for great heads who improve underperforming schools.
In our drive to improve all schools, local authorities will be our indispensable partners. They will play a new role as parents’ champion, making admissions fairer so that parents choose schools rather than schools choosing parents, acting as a strong voice for the vulnerable by ensuring that excluded children and those with special needs are properly supported, and helping us as energetic champions of educational excellence. As more and more schools become increasingly autonomous, local authorities will increasingly step back from management and instead provide focused leadership—challenging underperformance, blowing the whistle on weak schools and commissioning new provision, whether from other high-performing schools, academy sponsors or free school promoters.
The need for thoroughgoing reform is urgent. Our competitors are all accelerating the pace of their education reforms. From America to Singapore and from New Zealand to Hong Kong, schools are being granted greater freedom, great teachers are being given more responsibilities and exams are being made more rigorous. We cannot afford to be left behind. In the last three years of the last Government, reform went into reverse. Schools lost freedoms. The curriculum lost rigour. Labour lost its way. Now, under this coalition Government, we are once more travelling in the same direction as the most ambitious—and the most progressive—nations. Schools spending is rising, with more money for the poorest through the pupil premium; education reform is accelerating, with one new academy created every working day; and standards are being driven up, with teachers now supported to excel as never before.
The programme we outline today affirms the importance of teaching at the heart of our mission to make opportunity more equal. There is no profession more noble, no calling more vital and no vocation more admirable than teaching. This White Paper gives us the opportunity to become the world’s leading education nation. I commend it to the House”.
My Lords, I thank the Minister for repeating this Statement in your Lordships’ House. I am not going to make the same jokes about punctuation and spelling within the Statement that were made in the other place. We have two tests that we will apply to education policy: first, will it help every school to be a good school and, secondly, will it help every child to be the best that they can? I am sure that the noble Lord will be pleased to know that we welcome important elements of this White Paper but, overall, it fails the tests that we have set rather miserably.
This is a plan for some of our children but not for all of our children. I believe that the Government will have to work very hard to explain how this plan will not result in the damaging of morale in some schools, throwing them into decline and creating a new generation of failing schools. We welcome the retention of a floor target for secondary schools and the Government’s apparent change of heart about the role of targets in raising standards. This builds on Labour’s successful National Challenge programme and I, of course, welcome that. We welcome the expansion of Teach First, which we championed in government. Labour’s legacy, according to Ofsted, was “the best generation ever” of teachers and we share the Government’s aspiration to achieve the best teaching profession in the world. We also support anonymity for teachers who face accusations from pupils.
However, the Government’s overall direction is very worrying indeed. Their direction is driving us towards a two-tier education system. I support the focus on maths, English and science that we promoted vigorously when we were in government. We have seen the take-up of science doubling since 2004, and of course we set that direction in motion. By focusing entirely on the five academic subjects of the English bac, though, are the Government not encouraging schools to focus only on those children with a chance of achieving that particular batch of GCSEs? Is there not a huge danger of cementing the divide between academic and vocational qualifications, which really is not appropriate for the 21st century? There is a risk of the English bac becoming the gold standard by which schools are judged. The IPPR commented yesterday that:
“Schools will have an incentive to focus extra resources on children likely to do well in those subjects, rather than on children receiving free school meals”.
Is this really the right direction?
Is there not a risk that the pupil premium will not be spent on the children for whom it is identified? At a time when we all need to focus more on the 50 per cent of children who will not go to universities, is it not the case that the Government have very little to say to them today? The Government’s message today is that the vocational route is second best. Is there not a real danger that the combined effect of the announcements today will create a new generation of failing schools? Is it not the case that some improving schools will see themselves plummet down the league tables, damaging morale and risking throwing progress into reverse? Has the Minister considered that in detail? Many of those schools are the same ones that suffered from the Building Schools for the Future decisions. What hope can the Government give them today, having been through that experience, of extra support to raise standards for all their children, academic and vocational?
Teachers, support staff and careers advisers have worked so hard to reduce the divide between academic and vocational studies, to raise the aspirations of all children, and the Government seem to be throwing it away. How does that help to create the engineers of the future? There is a strong emphasis on teacher training in the White Paper and that is very interesting, but is there not a risk of ignoring the advice of experts? I know that there is an evidence paper but I have to be honest and say that I have not yet trawled all the way through it. Still, is there not a real risk of failing to listen to the experts? Ofsted said yesterday:
“There was more outstanding initial teacher education delivered by higher education led partnerships than by school-centred initial teacher training partnerships and employment-based routes”.
There is a real question there, and I am sure that the Minister will have something interesting to say on it.
Why are the Government planning to end university-led teacher training for a schools-based model? Why is that happening now? Will the Minister assure the House that it will not undermine the quality of teacher training and that it is not simply about cost cutting?
There is a much bigger contradiction that I am worrying about. Today the Government are laying down prescriptive standards for teacher training, but the message just a few days ago to free schools and academies was that they would be free to employ unqualified teachers. Is that not mixing the Government’s messages a bit and trying to have it both ways? This exposes a major flaw in the Government’s thinking, repeated throughout the White Paper. The Government talk a good game on central standards, but they say that they want schools to have the freedom not to adhere to them. So which is it—standards or freedom? Will the Government be clearer about that?
We support some of the proposals in the White Paper; indeed, we recognise that some important elements are built on our experience. I agree that improving teacher quality is key, but perhaps the Government are not going nearly far enough on that. This is because in reality, as we all know, the Government’s focus is on damaging structural reforms and pet projects like free schools, which are at best irrelevant for the vast majority of parents and at worst harmful, with poor facilities and untrained teachers. There are real risks in this structural obsession.
In the introduction, the Prime Minister quotes the 2006 PISA study to assert that our schools system is second-rate. Can the Minister tell the House how our young people compare using the more recent TIMSS study, which the White Paper commits to use as a future yardstick? Is it not the case that there is more recent evidence that makes a much better comparison and creates a much better picture of how our young people are doing? Is it not sad that that more recent evidence has been airbrushed out of the Prime Minister’s introduction?
In the Government’s rush to reform, mistakes are being made that will damage our education system. Ministers seem not to have learnt the lessons of the mayhem caused by the botched decision-making surrounding Building Schools for the Future. At the most crucial moment in our sporting history, on the eve of a home Olympics and on the very day of the opening of the Ashes, why are Ministers abandoning a school sports system that the Australians have called world-leading? Is this not ideology going too far in the face of really positive results achieved by school sports partnerships around the country? Does this not embody the Government’s approach to education—competitive sport for the elite, and forget about the rest in spite of the evidence to the contrary?
Ministers have been briefing newspapers that they will abandon the local authority role in school funding, but then telling the BBC the opposite. Quite apart from the protocol of coming to Parliament first on these matters, with the local authority acting as the parents’ champion and champions of excellence in our new free school world, can the Minister explain what powers local authorities will have to exercise this advocacy? In particular, will they have any powers to intervene in order to raise standards?
Is not the Government’s biggest mistake to destabilise the school system by telling schools at this incredibly late stage in the budgeting process that their budgets are protected, raising expectations, and by continuing to mis-sell the pupil premium? I have said before that I remain to be convinced that the pupil premium is anything but a con. It does not look very additional to me—in fact, it looks as if the areas of greatest deprivation will lose out. I look forward to being proved wrong on that. Will the Minister confirm that when schools receive their budgets in a couple of weeks’ time, those in the most deprived areas will be the biggest losers?
Far from helping all schools to be good schools and every child to be the best they can, this White Paper represents a plan for a fragmented and divided education system of winners and losers. This Government have nothing of substance to say to young people today. Vocational studies have been downgraded, apprenticeships for young people frozen and the EMA scrapped. As we sit here, listening to the helicopters circling and watching young people protesting outside, should we not all be worried that we are in danger of creating a lost generation as a result of an education system that confuses elitism with excellence for all?
My Lords, I welcome the points the noble Baroness made at the beginning of her comments about the areas where there is agreement. She knows, and the House knows, that I have always been quick to acknowledge areas where we have built on programmes introduced by the previous Government which have been successful, and I am happy to do so again today. The Secretary of State said in the Statement that he would be shameless about picking the best elements from systems in other parts of the world. I have the same magpie tendencies in terms of picking good things that the previous Government did on which we can build. The noble Baroness mentioned Teach First, for example. There is also agreement on floor standards, which I welcome, and the expansion of national leaders of education and local leaders of education, which we hope to double in size. More generally, there have been developments in recent years towards more partnership working in education, which I know the previous Government were keen on, as are we. There is quite a lot on which we can agree. Ditto the comments about anonymity around behaviour, which we all accept. If it can give teachers more support in their important work, we would be keen on that.
Where I cannot agree with the noble Baroness is in her contention that we are in some way downgrading the value of the vocational qualifications or want to introduce some kind of two-tier system. I am absolutely clear that the Government’s commitment to vocational qualifications is extremely strong. The noble Baroness did not refer to the increase in the number of apprenticeships, or to the debates that we have previously had in this House about university technical colleges and how we want to expand them. I personally am extremely committed to them and to studio schools, which were also pioneered by the previous Government. It absolutely is not the case that saying we want to raise academic standards and rigour implies or betokens any diminution of commitment to high-quality vocational, practical and technical skills. As the noble Baroness said, we absolutely want the engineers of tomorrow.
It is, if I may say so, a false choice to imply that having a more rigorous academic system will in some way damage the interests of the poorest children in society. We want to be in a situation where those children on free school meals and who suffer the greatest disadvantage—this is where the pupil premium comes in—will get the chance of a rigorous education and of going to university. They will have the chance to have their minds opened and extended by pursuing a broad range of academic subjects. The noble Baroness used the word “elitist”. I remember following the noble Lord, Lord Mandelson, as he now is, around the Labour Party conference in 1997. She may think that is a rather odd thing for me to have done. He talked about the importance of merit and meritocracy. It is possible to use “elite” or “meritocracy”. I am unashamed in my support for raising standards and aspiration, and for wanting people from all backgrounds to have the chance to experience the best in education.
It is not the case that we want to see the end of initial teacher training provided by higher education institutions. However, where there is high-quality teacher training in schools, we think this is a good idea. Teaching schools can offer an important route for trainee teachers to gain experience in the classroom, learn from others, observe and improve their performance.
The noble Baroness talked about what she called the Government’s pet projects and our obsession—I think that was the word she used—with structural change. We have debated this many times before and I know we will again. I am not in any way obsessed by structural change; nor do I have an ideological approach to any of these reforms. It is simply our contention that giving schools, school leaders, head teachers and staff greater autonomy gives them the opportunity to do what they went into teaching to do. Structures are not the answer to everything; great teachers are the answer to everything. However, our structural changes will give those teachers more latitude and freedom to do what they want to do.
The role of the local authority will continue to be important. We look to work with local authorities to identify schools that are failing and to intervene to raise standards. As the system develops they could acquire new powers to intervene and to act as champions for parents in flagging up concerns and anxieties, perhaps calling in Ofsted to enable a proper, rigorous check to be carried out.
I listened to the case that the noble Baroness made on sport. I know that there is concern around this point. Despite the large sums of money that were spent on school sports partnerships, relatively few children were taking part in competitive sports either against other schools or within schools, and we needed to address that. However, the overall thrust of the White Paper is to give teachers more support. I hope to raise the esteem in which they are held. They are vital to all our interests. I hope that these reforms will set a direction in which we can get out of their hair, interfere with them less, give them a higher professional status and enable them to do what they came into teaching to do—to raise standards for all children, particularly those from the poorest backgrounds.
My Lords, I welcome the White Paper, partly because I have lost count of the number of Liberal Democrat policies contained within its covers and partly because it does not focus on structures but on high-quality teaching and learning and school leadership. I wish to ask my noble friend a few questions. As regards the teaching schools, will there be a cap on the percentage of trainee teachers who can teach children in those schools because children have a right to be taught by experienced teachers as well as by young, energetic ones? Given that it is very important for anybody undertaking training in anything to have time to reflect on their practice and share it with other people, will he ensure that even a single trainee teacher going through the school-based process in a small school will have time to undertake that reflection in some way, perhaps through a higher education institution? I welcome the fact that schools will be judged on the progression of their pupils as well as on absolute attainment. Some schools that do really well with children who start off with very low standards may therefore come out of the failing schools category because they are adding a lot of value. However, can the Minister say how that progression will be measured? Finally, as regards the further guidance on the use of force, can the Minister assure me that all teachers will be given training on the use of force, as are staff in young offender institutions? Will they be given training on how to defuse potentially inflammable situations? If they have to intervene physically in the final resort and when absolutely necessary, will they be given training on how to do that in a way that is safe for the child and for the teacher, and which ensures that the teacher does not land up in court?
I am grateful to my noble friend. The key point around the school-based training is that the quality has to be extremely high. We have to work through the detail of how we will work up the new teaching schools but I will feed back her point about the cap on trainee teachers. My noble friend made an extremely important point about the new floor standards introducing a measure of progression, not just attainment. I accept completely the force of her remarks that judging schools on pupils’ progression, taking into account pupils’ backgrounds and initial standards, is just as important as judging them on attainment. We are working up the detail of how those measures will work and I will be very happy to discuss those with my noble friend. I take the point about the use of force and getting that right. These are sensitive issues. I will come back to her on that and we can discuss further how best to go about it.
My Lords, I thank the Minister for repeating the Statement. There is much that is good and valuable in this document. As a former teacher, I agree that teaching is a noble profession. However, it is a bit hyperbolic to talk about the melancholy trend under Labour. I cannot, of course, entirely agree with those remarks.
I welcome the importance of many issues that the noble Lord raised. I welcome the review of the early years’ curriculum; however, I am not sure how that can take place when one paragraph of the White Paper talks about removing the duty to co-operate with children’s trusts.
I have mentioned the reference to personal, social and health education and sexual relationship education. I see that the noble Baroness, Lady Walmsley, is nodding. Many of us have for years supported those as great ways of encouraging young people to relate to each other and to improve their learning and ability to cope with life.
Paragraph 4.14 states that:
“Academies and Free Schools will retain the freedom … to depart from aspects of the National Curriculum where they consider it appropriate”;
yet there is a requirement for,
“a broad and balanced curriculum”.
Suppose that an academy or free school did not wish to teach personal, social and health education, for example. Would that not be against the best interests of the schoolchild and possibly the parents? I hope that the noble Lord can explain that tension. What exactly does the paper mean when it states that those schools can have freedom, given that it could possibly work against the best interests of the schoolchild?
I am grateful for the comments of the noble Baroness that there is much in the White Paper that she can support. I am extremely aware of her strength of feeling on PSHE, and I have had an education at her hands on a number of fronts on that subject during the passage of the Bill, as I have also had from my noble friend Lady Walmsley. On the noble Baroness’s specific point about the curriculum, which we debated during consideration of the independent school regulations which cover academies, some aspects of sex education teaching would be covered by those regulations. It is important and we know that academies teach those subjects.
My Lords, from these Benches, I, too, thank the Minister for the Statement, its comprehensive nature and, particularly, for the title of the White Paper, The Importance of Teaching. One might make only one improvement to that title by stressing the importance of teachers. Given that I have taught in secondary and higher education, and I have a wife who has given her life to teaching, the emphasis on teachers in the document is particularly encouraging. Pressures on teachers—administrative, evaluative and disciplinary—have undermined morale over the past few decades, and the emphasis on teachers is very helpful. The slimming down of the curriculum is also helpful. I remember a few decades ago that a contrast was always made between France and Britain. France had a highly developed and overprescriptive approach to the national curriculum, and it is encouraging to see something more slimmed down.
However, I still have some points. First, I wish for reassurance about the retention of key core subjects in a slimmed-down curriculum and what those subjects might be. Secondly, the idea of working innovatively in schools on curriculum development is welcome, but support for that in small and rural schools will be required, because the necessary support within the schools themselves will not be there. Some reassurance on that would be good.
We should not lose the higher-education element in the training of teachers, because if we really are going to train teachers to promote a liberal education, the higher education element is just as important as the instrumental work that happens in schools.
I agree with the right reverend Prelate that we could just as easily have called the White Paper “The Importance of Teachers”. I hope he, and other noble Lords, will accept that there is widely shared support on all sides of the House for teachers, for the important job that they do and for the status that we want them to have. As I said, there will be a review of slimming down the curriculum. We want to slim it down so that teachers have more latitude and more time in the school day to teach a broader range of subjects, as they think fit. However, the emphasis on the core subjects will be important, and the introduction of the English baccalaureate as a sign of the breadth of academic standards that a school offers will also help with content. I take the point about the importance of rural schools and making sure that arrangements there are properly taken into account. If schools increasingly work together in federations and partnerships, there will be more opportunities to deal with those arrangements. However, I think that we all need to reflect on the particular circumstances of rural schools, including small ones.
My Lords, I very much congratulate the Government on this White Paper because, even from a quick glance at it. There are a number of things that we can all applaud and look forward to seeing developed. I have two specific points to make. First, the idea of bringing in second-career teachers under the Teach Next programme is excellent as it will bring in a range of different disciplines to schools. Speaking as president of the NGA, I am particularly glad that there is a reference in the White Paper to the role of governors and, indeed, that there will be opportunities for the National College to train the heads of governing bodies. However, I should like to ask about children with special needs and perhaps those who are difficult. Specifically, will there be early intervention to check the needs of children who may have autistic or other problems so that they can be dealt with and supported earlier? Secondly, there is reference to an experiment in how head teachers can be held accountable when they exclude a child from class activities. Can the Minister give us a little more detail about that? It sounds very interesting.
I am grateful for the noble Baroness’s comments, particularly about governance, which she and I have discussed at length. The NGA has repeatedly pointed out to us the importance of training for chairs of governors. As the noble Baroness rightly says, we hope to improve that training and to make it available through the National College. The White Paper also talks about the importance of trained clerks—another subject which I know is dear to the noble Baroness’s heart. We also talk in the White Paper about the option that schools will have to change their system of governance. Again, this is not a compulsory change; it is part of our permissive approach. Moving to smaller governing bodies that are more strategically focused with particular skills, rather than numerically prescribed, is also an option. I completely agree with the noble Baroness’s point about early intervention, and we must make sure that that persists.
The suggestion in the White Paper about a pilot is to see whether it would be possible, as the noble Baroness correctly identified, to give the budget and responsibility for excluded children to head teachers to address the perception of some that some schools parcel out difficult children and then wash their hands of them. Like a lot of these issues, this might not be straightforward. We need to see how it would work, which is why we are piloting it, but that is the thought behind that statement.
I congratulate my noble friend on the emphasis that the White Paper places on the importance of teachers, the training of teachers and support for teachers. I should say in response to some of the comments made by the noble Baroness, Lady Morgan, that surely having the strongest possible teaching force must be the best way to help all children in all schools. I declare an interest; I am chairman of the council of the Institute of Education.
I have a couple more questions for my noble friend on school-based teacher training, which can be highly successful in the right school and with the right support. It is very expensive. Each Teach First graduate costs £38,000 to produce. Of course, schools have to be very well equipped and supported. I know that my noble friend is very enthusiastic about this and I, too, will be enthusiastic, provided I am reassured that the costs have been taken into account and that the schools that are chosen to do this important work will be supported and equipped. Is my noble friend in a position today to lift the curtain a bit on the balance that he sees between that school-based initial teacher training and the teacher training that will continue to take place in higher education institutions? Have I dreamt it, or will there be a Green Paper on those issues?
I am grateful for the comments made by my noble friend. I know of her concerns for and experience in raising the quality of teacher training. There is not a huge amount more that I can say in a detailed response to her question, but I shall be very happy to continue that debate with her. In the White Paper, we are seeking to set the direction of travel. Basically, we think that the more experience trainees can have in a classroom—to learn from experienced teachers and great heads whom we hope will come through our teaching school idea, to have constructive feedback and to learn from the best in the profession—the better. That is the balance that we seek. I shall respond to her separately on the detail of those thoughts, if I may.
My Lords, in view of the strong support voiced in all parts of your Lordships’ House for the continued inclusion of citizenship education in the national curriculum, will the Minister say whether he is in favour of it and, if so, why the White Paper does not appear to mention it?
In relation to part 6 of the White Paper, on accountability and governing bodies, although the proposal to ensure that under the new regime governing bodies should have a minimum of two parent governors is welcome, will that extend to academies? What proposals will there be for local authorities to nominate a representative to school governing bodies?
On governors, that is the model that applies to academies. Perhaps I can underline the point made in response to the noble Baroness, Lady Howe, that schools have the option to move to a freer arrangement of governance if they want it, but it is not something that we are saying they should do. It is absolutely the case that in many places the governors—I have been lucky enough to meet many of them—who have been nominated by local authorities, parents and community representatives, are doing an outstanding job, and I am sure that the schools would want to keep them.
Citizenship is an extremely important issue and one that many noble Lords have raised, including noble friends on this side of the House. I have in mind in particular my noble friend Lord Phillips of Sudbury, who has strong views on this. I think that everyone accepts the importance of the subject. The review of the curriculum, which will be announced shortly, will look into these and other important issues.
My Lords, I welcome the attention that the White Paper gives to the teaching of languages in schools; indeed, some of the press reports this morning describe the impact of the proposals as restoring a virtually compulsory GCSE in languages in schools. However, will the Minister also acknowledge that there could be a very important role for a mechanism such as the Language Ladder to make sure that children who are not up to GCSE can have language teaching on a virtually compulsory basis until they are 16, too? I have been speaking recently to special needs teachers who have told me that children in their class with conditions ranging from Down's syndrome through to autism are learning a modern language and that it is hugely enjoyable and hugely beneficial for them. So I would not like to see the virtually compulsory nature of language teaching restored in schools only for children who can do GCSE. I would like to see it available for everyone.
My second, brief question to the Minister is this. The importance of teaching is clearly the overarching theme of the White Paper. If languages are to be more important and more prominent in the curriculum, we will need more language teachers. Will he acknowledge the importance for the quality of language teachers of the year abroad they spend as part of their degree as language assistants? In that context, will he please give urgent consideration to restoring to the British Council that element of its funding that runs the language assistants programme? It is currently in suspension for undergraduates from England and Wales, even though those from Northern Ireland and Scotland are currently involved in their applications and their allocations. Without that year abroad as a language assistant—
Given the time, I think the simplest thing would be if I speak outside this debate to the noble Baroness about her concerns about language. I would do that with great pleasure. I do not know about the Language Ladder scheme and would like to find out about it.
Northern Ireland Assembly (Elections) (Amendment) Order 2010
Motion to Approve
My Lords, the two orders before us today are largely technical in nature and update the law governing elections to the Northern Ireland Assembly and to district councils in Northern Ireland in advance of elections in 2011. I will speak to the Assembly order first.
Noble Lords may be aware that the law governing elections to the Northern Ireland Assembly was substantially amended as recently as 2009. Since then, there have been some minor procedural updates that have been applied to European and parliamentary elections that should also be applied to Assembly elections for consistency. For example, Article 3 of the Assembly order makes provision to allow a candidate standing in the name of two or more parties to have one of those parties’ emblems on the ballot paper. It also enables a person who cannot sign his or her signature to place a mark in place of any signature required at the nomination stage. Article 4 requires individuals to give reasons if they request their absent vote to be sent to a different address from that at which they are registered. Although these changes are relatively minor, they nevertheless mirror updates to the law applying at other elections in Northern Ireland made since 2009 and will provide for greater consistency.
I now turn to the draft local elections order, which is more substantial and provides a much needed update of the law governing local elections in Northern Ireland.
The Electoral Administration Act 2006 made considerable amendments to the law governing parliamentary elections across the United Kingdom. As I mentioned earlier, these were applied to Northern Ireland Assembly elections and European elections in 2009, but have not yet been applied to district council elections in Northern Ireland. These amendments are set out in Schedule 1 to the order and include allowing returning officers to correct procedural errors and to supply documents in other languages and formats. Schedule 1 also makes provision for the control of donations to candidates at local elections in Northern Ireland, which brings them into line with the donation controls that apply at all other elections in Northern Ireland and across the UK.
Schedule 2 to the order makes changes to absent voting procedures, which again already apply at other elections in Northern Ireland. These include adding registered social workers to the list of those who may attest absent vote applications on the grounds of illness and disability, which will make it easier for people with disabilities living in the community to apply for an absent vote. Schedule 3 to the order aligns the law at local elections relating to access and inspection of documents with procedures at all other elections in Northern Ireland. The order also amends the local election rules contained in Schedule 5 to the Electoral Law Act (Northern Ireland) 1962. This includes updating the list of acceptable forms of photographic identity that can be presented in order to vote in Northern Ireland, which is, of course, crucial to ensure consistency of approach for all polls in 2011.
The order is lengthy and time does not really permit a detailed examination of each provision, but I hope noble Lords are satisfied that these small changes are nevertheless important to provide much needed modernisation of local election procedures in Northern Ireland and greater consistency with other elections across the UK.
Finally, I turn to Article 3 of the Local Elections (Northern Ireland) Order, which sets the date of the next district council elections in Northern Ireland for 5 May 2011. Noble Lords will be aware that, in 2008, the previous Government agreed to a request from the Northern Ireland Executive to postpone the local elections that were scheduled to take place in May the following year, 2009. Legislation was subsequently approved to postpone the election until 2011 on a date to be specified by further legislation closer to the time. The postponement was to allow time for new local government boundaries to be redrawn as part of the overall review of public administration that was taking place in Northern Ireland, which was to provide, among other things, for the number of district councils in Northern Ireland to be reduced from 26 to 11.
I have to report that this planned reduction did not proceed. Although the local government boundaries commissioner reported to the Executive with proposed new boundaries on time in 2009, an order has still not been brought before the Assembly to give effect to them. In June this year, my honourable friend the Minister of State made absolutely clear to the Executive that there could be no prospect of further postponement of the elections beyond the two years previously agreed. He also advised that further delay in passing the order to give effect to the boundaries would seriously jeopardise planning for elections in May 2011.
An urgent decision therefore needed to be taken by the Executive on whether the proposed new councils could be delivered in time to allow for elections to them in May 2011. On 15 June, the Environment Minister in the Northern Ireland Executive confirmed that the reorganisation would not now go ahead in 2011. The Government announced shortly after this that there was now no option but to hold elections in May 2011 to the existing 26 councils. The legislation before us this evening will now provide for this.
Noble Lords will be aware that elections to the Northern Ireland Assembly are also scheduled to be held on 5 May 2011 and that there is a Bill currently before this House to provide for a referendum on the alternative vote also on this date. I appreciate that there may be some concerns about holding all three elections on the same day and I agree that this will present unique logistical challenges.
However, I can reassure noble Lords that the Government have received the advice of the Electoral Commission and the Chief Electoral Officer on this matter and both are confident that a combined poll in May 2011 can be successfully delivered if the risks are properly managed. Officials are therefore working closely with the commission and the Chief Electoral Officer in the run-up to the polls to ensure the early identification and resolution of any potential problems.
In summary, I hope that noble Lords are satisfied that the vast majority of the provisions in these orders would result in small changes that are nevertheless important to ensure greater consistency with elections elsewhere in the UK. I also hope that noble Lords will agree that the date of the next local elections should be set for 5 May 2011 and are satisfied that all necessary steps will be taken to ensure that all three polls will be conducted successfully. I beg to move.
My Lords, I thank the Minister for bringing forward these orders and for allowing your Lordships the time to debate them today. Northern Ireland has made extraordinary progress in the past few years. With the support of all parties and all communities, Northern Ireland has seen political developments which have helped to bring it out of the dark days of the violence of the Troubles. Enormous efforts have been made and for the first time in a generation the majority of people in Northern Ireland can live peaceful lives, which is a tribute to many people in the Chamber today and to all our parties on working together. However, we cannot forget that the situation is fragile. Political stability is still relatively new and we must ensure that proposals to change the way in which the electoral situation works in Northern Ireland do not damage this stability.
These orders contain relatively technical issues. We understand that they are designed to facilitate the smooth running of the elections due to be held in Northern Ireland in May 2011, but of course they deserve proper scrutiny. We are particularly keen to ensure that the Government are taking all measures that they can to prevent difficulties in the conduct of these elections. We are concerned that any changes to the rules could cause confusion. The potential for confusion in Northern Ireland on 5 May 2011 is substantial. Two elections are already scheduled for this day; that is, the local council elections and a poll for seats to the Northern Ireland Assembly. As the Minister acknowledged, the Government plan to add to these a referendum vote on adopting the alternative vote for elections to the House of Commons.
These orders, together with the schedules to the Parliamentary Voting System and Constituencies Bill before your Lordships’ House and due to receive the forensic scrutiny that it deserves, facilitate the combination of the three polls on 5 May. Will the Minister assuage the worries of many Members on these Benches and, I suspect, across the House that holding so many polls on one day will lead to confusion? Is the Minister confident that all the rules will be in place in sufficient time in advance of the May polls? It is vital that the people of Northern Ireland get the maximum amount of information to ensure that they are fully prepared for what will be an unprecedented voting day next May. Will the Minister assure the House that this will happen?
We on these Benches are concerned that any undue confusion has the potential to be particularly damaging to the embryonic political settlement in Northern Ireland, and this cannot be put at risk. I acknowledge the Minister’s assurance that he is working with the Electoral Commission and that everything will be in place. But the task is enormous and I hope that the Minister and his colleagues will keep in contact with people in Northern Ireland to ensure that everything is properly in place, and that the Government will do everything that they can to assist if and when necessary.
The Government’s programme of constitutional reform would see boundaries redrawn and three fewer MPs available to serve the people of Northern Ireland. This will have consequential effects on the nature of representation in the Assembly. It is possible that this will result in there being 18 fewer MLAs. What might the effects of this be on the current balance in the Assembly? Can the Minister assure the House that the Government will give proper consideration to not disrupting the Assembly balance, and will he bring forward proposals to ensure that? If this does not happen, we fear another jolt to the stability achieved in Northern Ireland.
If the Bill for fixed-term Parliaments is passed as drafted, in 2015 we will have council elections, general elections and Assembly elections on the same day. The three elections will all be held using different, possibly very different, electoral systems. Furthermore, if the coalition Government get their way with their plans to dramatically redesign the constituency map of the United Kingdom, these elections will take place under new boundaries as well. This will mean the height of complication.
The Minister has told us that these orders are intended to smooth the running of elections in Northern Ireland. Taken together with the Government’s wider reform plans, we are deeply concerned that the result will be quite the opposite.
My Lords, I thank the noble Lord, Lord Shutt, for introducing these two orders. They take me back 40 years, to almost the middle of the last century, to when I was the Minister at Home Affairs responsible for elections in Northern Ireland. At the time, we had irregularities in elections in Northern Ireland. Some people would say, “Vote early and vote often. It works well”. But that does not exist today, far from it. I can well recall standing in an election in South Tyrone as a Member of Parliament at the time. We noticed a lot of applications for postal votes all going to an address in the Republic of Ireland. We were very worried about this because a nationalist candidate had done it. I said that there was only one answer, and that was to take the entire election team to the Republic of Ireland to be photographed in front of the house that was getting all those postal votes, and to get the photograph into all the media. We did that. We invaded the Republic, had a photograph taken of us with our rosettes, and the publicity meant that the postal votes were never exercised. I must say that I am glad to see in one of the orders before us today that postal votes will be delivered only to the address on the electoral register. That abuse is finally going to be ended.
I can say with no embarrassment whatever that today Northern Ireland has the best postal voting controls in the United Kingdom. It is now areas in England, such as Birmingham, where cheating is taking place. So far as the electoral laws in Northern Ireland are concerned, there are many that could now be extended and put into practice in the United Kingdom. This should be looked at by the electoral authorities in Great Britain.
The Chief Electoral Officer for Northern Ireland and his staff are to be congratulated on the control and efficiency of elections today. We are now debating the Assembly elections to be held on 5 May 2011, and as the noble Baroness has just said, there may be a third vote in the form of a referendum arising from the Parliamentary Voting System and Constituencies Bill. That would mean three elections in one day. Incidentally, that Bill will mean fewer Members of Parliament in another place, and since the Northern Ireland Assembly has six MLAs for each constituency, it would suggest that there are going to be fewer MLAs in Northern Ireland as well. I do not know whether the Minister will wish to comment on that because it strays slightly from the two orders before the House.
We are probably going to have three elections on the same day, and that will be slightly confusing. It will take a lot more time for a voter to exercise three separate ballots in the polling station. Will there be three separate ballot boxes in the polling station, and will the three ballot papers be of different colours, although I hope not green, white and orange?
I note that the notices about the elections can be reproduced in languages other than English. Of course, Chinese is now the second most spoken language in Northern Ireland after English, but I presume that this measure is also intended for the large number of European citizens who have come to live in Northern Ireland, especially Polish, Lithuanian and Portuguese people. Will the decision to use these languages—Chinese, Portuguese and so on—be left to the local returning officer or will it cover the whole of Northern Ireland?
The purpose of the orders is to establish consistency of electoral procedures at all elections in Northern Ireland. This is common sense and is to be welcomed. I recall a period when voting in parliamentary elections commenced in Northern Ireland at 7 am but devolved and local government elections commenced at 8 am. It was all very confusing.
I have a slight query about the fact that disclosure of information regarding ballot papers is to be under the direction of the returning officer. Very often on polling day the media—such as the BBC, local newspapers and daily papers—especially in Belfast, want to know how the polling is going: is there apathy or is there going to be a good turnout; is there an interest in this election? A restriction by the returning officer on telling the press and the media how the election is going could be a deterrent to people voting because they may not get prompted during the day that there is a big turnout and that they should go out and vote.
Do we still need polling agents inside our polling stations? They can be a problem because they leave some stations to give information to outside people as to who has or has not voted. These persons then visit the voter who has not voted and request them to vote. Such a visit can be quite intimidating. There is still a danger in the practice of people inside polling stations passing information to outside bodies—and I need not go as far as to tell your Lordships who those outside bodies can often be.
The location of polling stations has to be regularly reviewed as new urban housing is developed from time to time. I understand that there was a recent consultation about the selection of polling stations and their locations. Here I declare an interest as chairman of a media group in Northern Ireland. How was this consultation made known to the public across Northern Ireland? Was it advertised in the weekly papers? How many individuals—not political parties—responded to the consultation?
The main issue arising today is the postponement of the proposed reform of local government and the reduction in the number of existing district councils from 26 to 11. There is a stalemate in the Northern Ireland Assembly on this issue so, sadly, there will now have to be elections in the existing 26 district councils even though they are out of date. Regrettably the Northern Ireland Assembly has a record of stalemate and inaction: not only has local government reform been halted but the proposed sports stadium fell through; the extension of the Belfast City Airport runway fell through; Ryanair withdrew last month with the loss of 1,000 jobs; the planning application for a large John Lewis store was not proceeded with after three years; and the replacement of the 11-plus examination is at stalemate after four years. This is a very poor record for the Northern Ireland Assembly and does not encourage people to vote. It is therefore a good idea to have the three elections on the same day. It might help to achieve a better turnout for the Northern Ireland Assembly election than would otherwise have been the case.
How will the chief electoral officer alert the public to the various elections? There was a very reduced turnout in the last European election in Northern Ireland and I had warned in a Grand Committee that this would probably happen. The advertising of elections in Northern Ireland needs to be reviewed. The selection of newspapers such as the News of the World or radio stations such as Classic FM—which I personally like—is not the best way to inform a cross-section of Ulster society. Closer attention must be given to the advertising of elections.
The best way to make contact is through the network of weekly newspapers and commercial radio stations across Northern Ireland—I have already declared my interest. Those who live in Belfast are inclined to think that there are three daily newspapers and that that is sufficient. The Belfast Telegraph has a circulation of 55,000; the Irish News, 50,000; and the News Letter, 26,000. This is in sharp contrast with the circulation of the Morton weekly newspaper group, of 65,000, or that of the largest weekly group, Alpha, with a sold circulation of 85,000.
With 26 district councils in Northern Ireland, the Telegraph would not sell more than 2,000 newspapers in the area of Down District Council, for example, whereas the locally owned family newspaper group there, the Down Recorder, sells 12,000. There is no doubt that it is wiser to advertise in the local paper in Downpatrick. The same applies to most other towns in Northern Ireland. In Dungannon, for example, the Tyrone Courier sells 15,000 newspapers, and in Ballymena the Ballymena Guardian sells 10,000. Those figures should be compared with the fewer than 2,000 sales of the Telegraph in each of those district councils. The advertising policy for elections requires a review by the Chief Electoral Officer.
The same argument applies to radio stations. RAJAR gives the listenership figures for all radio stations. It confirms that, instead of Classic FM, Cool FM, Downtown and the six radio stations of the Northern Media Group are the most listened-to radio stations in Northern Ireland.
I once again welcome the two orders. I wish the Chief Electoral Officer every success, because it is quite a challenge to have three elections in one day.
My Lords, I welcome the two orders before the House today, but I should first declare an interest as a member of both the Northern Ireland legislative Assembly and Belfast City Council. I welcome in particular the provisions which allow voters to use the same form of ID for all elections, as it removes much of the confusion that voters currently face. I welcome also the provision which expands the variety of people who can attest to vote applications. In the past, this has been a real worry, particularly for elderly voters, who will now find it much easier to have their social worker sign rather than to have to arrange to have someone visit them for that purpose.
The order relating to the Northern Ireland Assembly elections brings much needed change to the system of postal ballots. Thankfully, Northern Ireland escaped much of the controversy that surrounded the system of postal ballots in England in May. However, as I am sure noble Lords are aware, Northern Ireland has had more than its fair share of voting irregularities in the past. It is to be hoped that the amendment made by the Assembly order will mean that any such instances for postal ballots are avoided in the future, while maintaining a very good, workable system.
While most of the changes contained in the local elections order are slight, they contribute to making the election process much more transparent. There is no doubt that the public have taken an increased interest in the past few years in how politicians and political parties operate, particularly how they receive money to fund their campaigns. It was quite regrettable that, for a number of years, so few safeguards were in place to ensure transparency in the electoral process. It is important that elections are fair and that all parties operate under the same constraints. For many years in Northern Ireland, some candidates and one party in particular received large donations and gifts for their campaigns from what can be described as very nefarious sources.
I am hopeful that the current process that we are involved in, of which this order is a part, will bring us to a situation in which there is greater clarity and light brought to the conduct of election campaigns. I know that people in Northern Ireland look forward to the campaign for the Assembly and their local government elections next May, and I know that it will bring greater transparency. I trust that the Minister will continue to consult closely with the Electoral Commission.
My Lords, I, too, thank the noble Lord, Lord Shutt, for introducing these two draft statutory instruments today and say that I broadly support their thrust—with one caveat, which I shall come to.
It might help the House briefly to explain why the Government are right to go ahead with the local government elections next year, even though there has not been the reform and rationalisation of local government that we were hoping for in Northern Ireland. It is right because we now have a situation, because of the long years since the last local government elections, whereby nominations have become more and more the practice in filling our city councils. I remember saying to the noble Baroness, Lady Royall, about 18 months ago, when she was dealing with this question with her usual skill, that it is a problem, and that if the large political parties believe in direct elections to your Lordships' House it would be a good idea to start with the principle of direct elections to councils in Northern Ireland. At that point, the Dunmurry ward of Lisburn City Council already had a majority of councillors who were not elected but were nominated by the main parties as a result of people retiring from their positions for various reasons—some five out of nine. Just today, the Irish News has published figures for Belfast City Council, the largest council. By January, it is clear that there will be only 32 out of 51 elected members in Belfast City Council, and 40 per cent will be nominated.
We have reached a point whereby it is absolutely essential, despite the difficulties and the fact that it would be much better if we had a reform of local government first, that the Government should say that we will have two elections and possibly a referendum on one day. But that is where my caveat comes in: it will be very hard work indeed to ensure that nothing goes wrong, especially because a number of the polling stations in Northern Ireland are actually rather small places, physically. Will the Minister reassure us that the Government, at least in part, get that point? If you have two elections and one referendum on the same day, in the circumstances that exist, the Government will have to do an awful lot of preparation to ensure that nothing goes wrong and that we have a satisfactory polling day.
My Lords, I support these two orders. I think that they are tidying-up orders and are necessary. I support very much what the noble Lords, Lord Kilclooney and Lord Bew, said. However, pace the noble Baroness, Lady Royall, in my experience the most sophisticated electorate on these islands is to be found in Northern Ireland. I do not know this in any pejorative sense, but they actually know how to vote under different systems and have been doing so for a long time—far longer than anywhere else in the devolved regions. I genuinely believe that it would be in the capacity of the electoral authorities and the electors to have two elections and a referendum on the same day.
My Lords, first, I thank the Minister for the clarity with which he explained the order in front of us. It is, I suppose, not the thing to do, but I am going to spoil the party to some extent because, in reality, I cannot say that I welcome the patch over the wound that is being proposed today.
Northern Ireland has had an opportunity to reform local government. I believe that people have gone the wrong way about it because they inherited an idea that was intended to be implemented if we did not reach an agreement on an Assembly. We were going to have five—or was it seven?—supercouncils. We now have this wonderful compromise where we are to have 11 sub-supercouncils, as I call them. Looking at the present councils, one will find that as well as our three MEPs, our 18 MPs and our 108 MLAs, with the 12—or is it 13?—devolved departments, we also have 582 councillors. The councils have virtually no devolved powers. They have, among them, the ability to spend something like £680 million per year, yet what is their responsibility?
Waste collection and disposal are, I suppose, very much justified at every level. The figures that I quoted—three, 18, 108 and 582 elected members—are for a population of 1.77 million people and I suggest that, for that size of population, we certainly need a waste collection agency. I am not a great fan of agencies, but when it is practical and there is a job to be done, Northern Ireland should have a waste collection agency. This is taking away first-line responsibility for that, so what will Northern Ireland be left with? It will be left with those things that it possesses: meeting rooms, swimming pools, recreation centres, theatres and playing fields. Those do not require, as I think is the current figure, 420 civil servants or employees being paid at director level for those 1.77 million people.
A huge difficulty arose when we had the Belfast agreement. It was contrived in a way that was meant to embrace our entire community but it did not suit some extremes, so the previous Government did us the disfavour of slipping off or taking the people who carried the bulk of the work, marginalising them and—I will not say bribing; well, I might—bribing the remainder to move towards the centre. When that did not work, we had the Hillsborough meeting, where much the same thing happened.
It struck me that the noble Baroness, although I am sure that she did not mean it in this sense, was worried about how the changes that we are discussing may alter the balance in Northern Ireland. We need the balance changed. We need reality, but we are not going to get it as a result of somehow devising a means to elect another 582 local government councillors who have no statutory authority at all, or very little of it. Does anyone believe that 13 departments—I think that it is 13 now—with 14 Ministers are suddenly going to devolve responsibility to local government? The answer is, “Nay, it’s not going to happen”.
I will not be walking through the No Lobby on this today, but we have not had time to look at the knock-on effects. We are putting a plaster across a minor scratch, the way you do with little children to please them: “I’ve hurt my knee”—stick a plaster on and there is a smile on someone’s face. Well, this plaster does not bring a smile to my face. It removes real responsibility from those who should have that responsibility thrust on them and those who should yield a product through their elected position. I leave the Minister to consider the headache, as I see it—or should I say, “scratch on the knee”?—that is not helped in any manner by what is being proposed today.
My Lords, I thank noble Lords who have contributed to this debate and will endeavour to respond to the points that have been raised. The noble Baroness, Lady Royall, paid tribute to what has been going on in Northern Ireland in recent times. We are all much happier about matters there than we were some years ago. I understand the fragility that she speaks about, but these elections, certainly as all three will be on the one day, are an opportunity for a democratic moment in Northern Ireland.
My noble friend Lord Smith talked about the sophisticated electorate. There are clear advantages to having the three polls on one day. It is more convenient for voters and, indeed, in these difficult times, it will lead to financial savings because of the shared resources. There will be unique logistical challenges, but I am satisfied that the practical risk can be managed properly. I have asked officials to continue to liaise closely with the Chief Electoral Officer and the Electoral Commission to ensure the early resolution of potential problems. The commission believes, certainly at the moment, that the preparations are on track.
The Government have considered the impact of the Parliamentary Voting System and Constituencies Bill on the composition of the Assembly. We will not dictate the size of the Assembly; that is for the Assembly to consider. When it has considered this issue, we have committed to legislating to give effect to its wishes regarding its size.
The noble Baroness, Lady Royall, referred to different electoral systems. If the AV Bill and the referendum are carried, it is certain that in all elections in Northern Ireland at any rate the elector will not face confusion because every ballot paper will be marked “1, 2, 3, 4” for them to mark their preferences.
The noble Lord, Lord Kilclooney, referred to his time in government in Northern Ireland and the “vote early, vote often” regimes. I think that he sees the point of having three elections on one day.
The position of the boxes will be a matter for the electoral returning officers. The ballot papers will be different colours so that there is no confusion, but it is up to the returning officers in Northern Ireland whether there is one box or three. I know from my experience that, if there are three boxes, all three will have to be emptied at once because there may well be ballot papers in the wrong box. It is important to give that proper consideration, but it is a matter for the Chief Electoral Officer. It may be simpler to have the one box rather than three, but that is for him or her to decide.
The noble Lord referred to advertising. Public awareness of the forthcoming elections is a matter for the Electoral Commission. I will draw to its attention the noble Lord’s comments about the validity of advertising in local newspapers. The Chief Electoral Officer is required to publish the draft polling station scheme and place a notice in local newspapers to let electors know that it is subject to consultation. This information is also published on websites.
The decision on what languages to use in the publications will be made by the Chief Electoral Officer rather than at a district level.
Northern Ireland has seen the arrival of thousands upon thousands of Europeans. People from one country go to one town and people from another country go to another—it is not spread evenly across Northern Ireland. For example, you get lots of Portuguese in Dungannon, while in Armagh there are lots of Poles. We need to be careful which language we select in which area. We just cannot have it generally across the whole of Northern Ireland.
My Lords, I am grateful for that comment. Clearly, it will be up to the Chief Electoral Officer, and he or she will be able to decide whether to use the languages across Northern Ireland or whether to be selective in where to use them. I will make certain that the Chief Electoral Officer is aware of that concern.
The noble Lord, Lord Kilclooney, referred to polling agents. I understand that polling agents are used in Northern Ireland; they can, of course, be used at every election in the UK, but it has been the tendency not to use them. Certainly in my part of the world polling agents have not been used, but tellers have been. Tellers are always outside the polling station, not inside. I understand that there is concern about polling agents but some effort is being made to ensure consistency with Northern Ireland and the rest of the UK. Polling agents are available to be used in the rest of the UK.
The noble Lord also referred to consultation. I will have to respond to him later about that; I did not quite catch his concern and I do not have a note on it. However, I heard the comment about stalemate as far as local government is concerned, which other speakers also mentioned.
I was grateful for the comments of the noble Lord, Lord Browne of Belmont, who, in effect, welcomed the orders. He will understand that, as we all know, it is harder to obtain a postal vote in Northern Ireland. Indeed, although there is some easing because of social workers being able to sign and so on, it is still very difficult to get a postal vote, compared to what happens in England, where it is offered freely.
The noble Lord, Lord Bew, referred to the nominated members. Clearly, this is a good reason why we cannot go on for ever saying, “They might revise local government so let’s just hang on and give them another year”. If 32 out of 51 members are nominated by political parties and have in no way been chosen by the electorate at large, it is a valid point. It makes the case that there should be an election for local government according to the present wards and boundaries, in the absence of reform.
I am glad to have the support of the noble Lord, Lord Smith of Clifton, who understands that these orders are a positive way forward. The noble Lord, Lord Maginnis, referred to the patch on the wound, which became a plaster when he finished. I understand and accept the point about the local government review, but this is devolution. If we devolve and Northern Ireland is given the powers, it must make its own way with local government. Once we have allowed devolution and taken the view that this is the position, it is up to those people and, indeed, people like the noble Lord and others who have influence in Northern Ireland to make the case for change. However, it is their decision; you cannot have devolution and then take it back.
Local government is a matter for the Executive. We still hope that agreement can be reached but it clearly will not be reached this side of the local government elections, which we hope will be on 5 May 2011. I trust that this is a fair response to the points that have been made and I hope that these orders can now be agreed.
Local Elections (Northern Ireland) Order 2010
Motion to Approve
Equitable Life (Payments) Bill
Second Reading (and remaining stages)
My Lords, the Government take very seriously the injustice that Equitable Life policyholders have faced. In our programme for government we pledged to implement the Parliamentary and Health Service Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders for their relative loss as a consequence of regulatory failure. The importance that the Government place on Equitable Life is clearly reflected in our actions and our desire to achieve a swift resolution for policyholders. Today’s Bill is an important step towards delivering this ambition.
Since coming to power in May we have made more progress on this issue than the previous Administration achieved during their entire tenure in office. We have done this by publishing Sir John Chadwick’s report on losses suffered by policyholders and their impact; by commissioning the first bottom-up estimates of losses suffered by policyholders and publishing them in full; by establishing the Independent Commission on Equitable Life Payments; by announcing our intention to start making payments by the middle of next year; and by announcing that around £1.5 billion of public funds would be allocated to the payments scheme. While it is important to note just how far we have come, I am well aware that there is still some way to go.
The Government accept that the relative losses suffered by policyholders amount to some £4.3 billion. This is the difference between what policyholders who invested from September 1992 onwards received from their policies and what they would have received if they had invested elsewhere. It includes all the Parliamentary Ombudsman’s findings of maladministration, which the Government accept in their entirety. At the spending review, my right honourable friend the Chancellor of the Exchequer announced that around £1.5 billion of funding would be allocated to the scheme. This is more than four times the £340 million figure recommended by Sir John Chadwick.
A number of parties have raised the plight of with-profits annuitants—WPAs. They are trapped with policies that are providing a declining income for their retirement. As a Government, we have recognised their circumstances and decided to cover the full cost of their losses. This amounts to approximately £620 million. WPAs will be paid their losses through regular instalments for their lifetime.
Taking into account the pressures on the public purse, Her Majesty’s Treasury could allocate only £1 billion over the first three years of the spending review. This will cover the first three years’ payments to WPAs and lump sum payments to all other policyholders, and to the estates of the deceased, which will also be paid during this period. The remaining amount of approximately £500 million will be used to provide ongoing regular payments to WPAs.
There has been some disappointment from policyholder groups about the amount that we have allocated to this scheme. However, there are many competing priorities for the limited funds that we have at our disposal. We must also remember that the Parliamentary Ombudsman herself stated that,
“the public interest is a relevant consideration and that it is appropriate to consider the potential impact on the public purse of any payment of compensation in this case”.
I know that independence of the payments scheme was a key concern for many parties, and I can assure this House that it is also an important issue for the Government. In July, the Government established the Independent Commission on Equitable Life Payments. The commission has been asked to advise on how best to allocate fairly funds provided for the scheme to all policyholders, with the exception of WPAs and their estates. The commission is in consultation with interested parties. This will help us to ensure that the views of policyholders are heard, and will help to inform the commission’s advice. The Government are keen that the commission should conclude these discussions as quickly as possible and have asked it to submit its report by the end of January.
Regardless of the final design of the scheme, the Bill before the House today is essential to ensuring that payments can be made. The Bill authorises the Treasury to incur expenditure and to make payments to those adversely affected by the Government’s maladministration in their regulation of the Equitable Life Assurance Society. The Bill also allows the Treasury to make provision for these payments to be disregarded for tax and tax credits. My right honourable friend the Chancellor of the Exchequer announced in another place that we will use this power so that payments will be made free of tax to all policyholders.
The Government have also discussed the issue of means-tested benefits with the Department for Work and Pensions. Those discussions have led to the decision that lump sum payments will be treated as capital for the purposes of assessing eligibility for means-tested benefits. This is fair because in normal circumstances this money would have become part of policyholders’ capital whenever it was received. Capital limits do not immediately cut off eligibility for benefits; they work on a sliding scale, gradually reducing support for individuals with larger assets. However, for WPAs the payments will be treated as income for the purposes of means-tested benefit. This is also fair as it reflects the structure of the policy that they bought and which gave them a regular income stream.
The Government have decided that National Savings and Investments—NS&I—is the preferred option for delivering this scheme. As part of its normal functions, NS&I already makes millions of payments to customers every month. It has the necessary processes and infrastructure in place successfully to deliver a scheme of the size and scope that we have proposed. The Bill will grant NS&I the power to administer the scheme and ensure that payments can be made as soon as possible. As I have said, it is our ambition to start making payments in the middle of next year.
I am sure that we all want a swift end to this matter, and the Equitable Life (Payments) Bill is a key milestone on the road to resolving these long-standing issues. It is a clear sign of the Government’s commitment to those who have suffered losses due to the maladministration in the regulation of Equitable Life. Policyholders have waited for more than a decade for justice. Passing this important piece of legislation is essential to achieving it. I beg to move.
My Lords, perhaps I may say immediately that we do not oppose the Bill and, indeed, we support the Government in seeking to bring a resolution to an issue that has been the subject of eight inquiries. I pay particular tribute to the inquiry conducted by the right honourable Lord Penrose which resulted in his magisterial analysis of the history of Equitable Life and the factors contributory to its failure. One recollects that Lord Penrose concluded that the Equitable was largely the author of its own misfortune—substantially through management failures.
The Government have announced a compensation scheme of around £1.5 billion against the losses of policyholders, calculated at some £4.3 billion—thereby compensating some 35 per cent of the losses. The underlying rationale for this compensation is in respect of regulatory failure. Compensation, we are told, has been discounted to strike a fair balance between the interests of policyholders and taxpayers. The Minister has confirmed the Government’s commitment to,
“fair and transparent payments to … policyholders”.
To enable such transparency, will the Minister indicate what discount has been made to reflect the taxpayers’ interest? I ask this because it is not clear what proportion of the overall loss is attributed to regulatory failure. Plainly, on the arithmetic, it is more than 35 per cent; but what is the actual proportion? Is it 40 per cent, 50 per cent, or more? Again, I ask this in the light of Lord Penrose’s conclusion that the principal source of the losses was failure within Equitable Life. Surely, transparency requires that we know the extent to which taxpayers have been protected, vis-à-vis the policyholders’ interests. The relevant money sum would give at least a guide.
Furthermore, and again to enable transparency and a better understanding of how fairness to taxpayers was considered, will the Minister reveal how the discount on the overall loss was calculated? To put it another way, what factors were considered and what weight were they given in the process of calculating the discount?
One of the features of the Government’s balancing exercise is their decision to cover the full costs of losses to holders of the with-profits annuity policies—the WPAs. What is the estimate of the number of such policyholders? It would obviously be useful to understand why other policyholders are unlikely to have the full cost of their losses met. What factors have been taken into account in that decision? Is there a view on what average compensation such policyholders, the non-WPAs, might hope to receive? Given that the ombudsman linked a policyholder’s losses to reliance—I repeat, reliance—on regulatory return data, will there be an obligation on non-WPA policyholders to prove reliance on such data? Alternatively, will reliance simply be presumed? If a policyholder is dissatisfied with the judgment of their entitlement to compensation, will there be an appeals procedure or will the policyholder perhaps have to rely on judicial review remedies? Given the ambition to put in place a fair compensation scheme, it would be interesting, not least to the non-WPAs, whose losses will not be fully covered, to understand better what will guide the content of such a scheme. Perhaps I may put it this way: how has “fairness” been determined in dividing the compensation moneys so that £880 million is earmarked for the non-WPAs?
I appreciate that the independent commission has been put in place to advise on the allocation of payments, but the Government have presumably developed principles, at this stage at least, that they would wish to apply in determining fair allocation. Will the Minister indicate what those principles are? For example, is it a general principle that those suffering from government maladministration can look for compensation? More particularly in the context of the Equitable situation, are there any guiding principles as to which, if any, groups other than the WPAs may receive special treatment? It is of course plain that the very elderly will be especially anxious to hear how they may be treated, but what about, for example, the Equitable “late joiners” who joined the Equitable scheme in 1999 and thereafter? Some clarity on this would be helpful.
I should say that my questions are intended to encourage clarity and are not aimed at criticising the terms of the Bill. We are glad that the Government have moved forward to bring a resolution to this vexed issue. We hope that it will prove successful in operation and we will support this short paving Bill.
My Lords, I am very pleased to contribute to this important Second Reading debate. It is a tall order to expect a two-clause Bill to bring closure to this saga. It has been going on for a long time and I have not been studying it to the extent that other colleagues have, but it is a complete and total tragedy from beginning to end. It has ruined the retirement prospects of thousands and thousands of our citizens and it must never be allowed to happen again. A sum of £1.5 billion may not sound like a lot if you are suffering reduced compensation but it is a lot to the taxpayers in the circumstances in which we find ourselves.
I apologise for going into what are really Committee stage questions. However, this is a money Bill and we have no option but to put detailed questions at this point. I concur with many of the questions that have already been raised and look forward to hearing the answers. If the Minister cannot deal with them all, perhaps he will write to us.
I should like an assurance that the Government are comfortable that they have got this matter covered. By today’s standards, anyone trying to offer a guaranteed annuity rate would be completely misguided and accused of misjudgment. As I understand it, they would not get across the door before they were brought to book by regulators. The tragedy was partly brought about by the fact that the Equitable Life situation straddled two different sets of regulatory authority: the whole system before 2000, which was the SIB regime, and then the FSA regime. I think that some of the problems were caused by the fact that there was a fault line between those two regimes. Although I support the Bill and think that it will go a long way towards achieving closure, I think that the British public would like an assurance that, if this is not closure, we can be absolutely certain that these circumstances will not arise again.
The length of time that this has taken to sort out is unconscionable. It is pointless allocating blame but it has covered two previous Administrations. The second ombudsman report, which was produced in July 2008, pointed out—I did not realise this until I went back to it—that five of her findings in fact which she complained about were before 1997 and five were after. We are all in the dock together, as it were. It has taken an unconscionable time and that suggests that we now have a duty to get on and sort this out.
I commend the coalition Government for dealing with this as expeditiously as I think they have. I hope that the Minister is absolutely confident that he can deliver a start payment date as early next year as he can reasonably manage. NS&I is a very sensible vehicle for payment. It is tried and tested; people trust it; it knows what it is doing and all it needs is the money. If he can sign a cheque as soon as it comes across his desk, that would be very welcome.
There is still no agreement about the losses which were suffered and the proportionality of the blame. I think I am right in understanding that this is an ex gratia payment—merely an ex gratia payment—so the Government can control what they do with the money. Clearly, there is a discrepancy, as the Minister acknowledged, in the difference between £1.5 thousand million and £4.3 thousand million. That is quite a gap to try to bridge. As I said earlier, I do not think that £1.5 thousand million from the taxpayers’ purse is an insignificant amount of money. Getting that paid will be the best thing we can do to start to make amends for some of these issues.
It seems to me that the Equitable Members Action Group still has some pertinent questions. I do not understand some of them as they are so technical and quite a long way above my pay grade. Perhaps the Minister can give an assurance that this is a paving Bill—a perfectly adequate description of it—but that it is not the end of the story. I hope he will continue to have an open-door policy for members of the action group who are still deeply affected by this and who still might, if they spend some face time together, get a better resolution, given the decisions that have been taken by the Government to date. If he can undertake that this is not the end of the ongoing discussions—it may be wrong to call it negotiations—and that they should certainly be carried forward, that would be extremely useful.
Obviously, the Treasury needs two things to pay this money which it does not have at the moment and which it gets through this Bill: one is the power to pay the money and the other is the resource itself. I notice that there is no figure in the Bill, unless I have missed it. Therefore, when the Bill gets Royal Assent, the Treasury will have the power to pay the money, which will not be restricted necessarily, at law, to £1.5 thousand million. Therefore my question is: if over the two CSR periods that this money will be spent, which is quite a considerable time in any political calendar, circumstances change substantially in terms of bond yields and other things that have a bearing on some of these contingent and other losses, what scope is there in the Bill for looking again at £1.5 thousand million by way of compensation? It appears to me that there is some scope for thinking about that, should circumstances change over the period of the payments that are envisaged in the Bill.
There is a subsidiary question to that. Once the Treasury has this power, under the appropriation rules it can spend £1.5 million—not billion, million—each year without further parliamentary recourse, normal standards being accepted. Even I know that £1.5 million might not go very far towards bridging a gap between £1.5 billion and £4.3 billion, but what scope is there for flexibility in the future? If, for example, in the fullness of time, the independent commission—Mr Pomeroy and his colleagues, who have a responsibility to look only at allocation, which is a big enough task; if they can complete it by January they will be doing quite well—came back to Ministers looking for a little extra flexibility to the extent that the appropriation rules would accommodate it, would that be considered as a way of increasing the flexibility available to Ministers?
The final point I want to make is on capital thresholds. I understand the Minister’s ruthless logic about how capital thresholds will be applied to some of those who receive compensation. Many of them will be very elderly households. The Minister knows as well as I do that capital threshold has been static for years—I think that it is still £16,000. If the independent commission does its work in January and these people get some money later in the year, this money will be top-sliced for many of them. That will add insult to injury. Although I immediately concede the Minister’s strict logic in saying he will apply capital thresholds in dispersing this money, I would just ask him to think about that very carefully again and not to make a final decision until he has looked at the impact and consequences for some of the elderly households who will receive this money.
Having said all that, I welcome the Bill. It has been done in good time, and not before time. However, in the haste to get some of this money into the domestic accounts of individuals who have suffered the loss, I hope we do not grab at things like capital thresholds too quickly and end up prejudicing some of the entitlements from these richly deserved ex gratia payments. I hope the negotiations will continue to see if further refinements can be made to deal with some of the outstanding questions legitimately being raised by the Equitable Members Action Group. On that basis, I am very happy to support this Second Reading.
My Lords, I should declare that I am a trustee of pension schemes with some members who have AVC savings in Equitable Life.
One has to enter the discussion on this Bill by acknowledging the extent of the anxiety and hardship that all too many Equitable Life policyholders have experienced. I recognise that the Bill is an important step in resolving the Equitable Life affair, which is to be welcomed. However, as has been said, the Bill gives the Treasury power to make payments without the full detail of the compensation scheme currently having been published. This raises some matters of concern on which I seek clarification.
The Government have confirmed a definition for relative loss suffered by policyholders, an approach that encompasses all the Parliamentary Ombudsman’s findings of maladministration, which the Government fully accept. I note that that decision by the Government leads to the taxpayer carrying liability for a form of compensation, which may well set for the future a moral precedent, expectation, or indicative principles of some significance. It would be useful if the Minister could clarify the point made by the noble Lord, Lord Kirkwood, about whether these payments are in fact ex gratia in status. I had understood that they were not. The actual amount of public funding for the compensation payment scheme is to be constrained by considerations of the public purse, in line with the view of the ombudsman. Such a consideration would always be relevant, whatever the state of the economy at a particular time. The state of the public finances may influence the weight that is given to this consideration, but not the principle of consideration itself.
The Government have determined that the total funding for the Equitable Life payment results in a figure of £1.4 billion and a £0.1 billion contingency for longevity risk. The distribution of that aggregate figure in allocated payments has been determined in part by the Government with £620 million to cover the total relative loss suffered by with-profits annuitants, £775 million to be distributed between approximately 500,000 holders of individual policies, and £600,000 in GPPs. As to further distribution to these latter policyholders, the independent commission set up by the Government is looking to determine and apply a set of principles for the fair allocation of funds. Those principles will also underpin any prioritisation of payments.
Therefore, two key sets of judgments or decisions are being made here that are important not least for the expectation principles that they may state morally, if not legally, for the future: what adjustments to make to the £4.3 billion relative loss figure for public purse considerations; and what principles of fairness to apply to the allocation of funding and the priority of payments to policyholders who are not with-profits annuitants.
If we take the first matter, it is not clear, as my noble and learned friend Lord Davidson said, how the relative loss figure has been abated for public purse considerations. What were the considerations that led to that £1.5 billion figure being announced in the spending review? How have the Government decided to ameliorate their liability? Little or no adjustment has been made to the compensation for with-profits annuitants as the Government propose to cover their total relative loss because of the irreversible nature of the purchase transaction and the size of the losses. It is the funding allocated to the other categories of policyholders where the extent of the adjustment to the public purse is greatest and the reasoning least transparent. These issues are very important. How matters were determined in this instance could well influence the reasoning of others when borrowing in future. It is important to understand whether the process followed by the Government is based on safe and sound principles. I noted that the Parliamentary Ombudsman said in the Public Administration Select Committee on 14 October:
“My view was that compensation for relative loss was the appropriate remedy. Then I did something unusual, which is to say, ‘That's a very large sum of money, and I absolutely understand that considerations of the public purse can legitimately come into play’”,
thereby confirming her statement that we are in new territory.
As to the second matter, principles of fairness identified by the independent commission may also set an expectation. Will the Government reflect on this before accepting any recommendation, not least to ensure that there are no untenable contradictions as to the hierarchy of priority between this compensation scheme and others that may exist, including pension saving compensation schemes? Hierarchies of priority have proved contentious in the past, not least in respect of pension savings.
Clause 1(3) confers on the Treasury the power to make provision for the payments to be disregarded for the purposes of tax, entitlements to tax credits and the liability to make payment in respect of provision for goods and services. On 10 November, the Financial Secretary to the Treasury, in his response to a question in Committee, confirmed that payments should not be treated as income for tax purposes, so providing a benefit for policyholders. If that is the case, will the Minister say whether the loss to the with-profits annuitants is calculated on a gross basis, whether the reference to disregarding payments for the purposes of tax credits would be extended to entitlements to pension credits and savings credits, and whether any payments can be disregarded in respect of liability or payment for social care?
I have also been reflecting on non with-profits annuitants. Is there an issue to be addressed in distinguishing between the holders of indexed and level annuities when assessing relative loss?
I recognise that the Government are keen to start making payments as soon as possible. Speed is obviously important, particularly given the age of many with-profits annuitants. The independent commission is looking at whether the timing of any payments could be prioritised, but will the Government also consider making interim payments soonest to those who need them most? Notwithstanding the aspiration around the timetable, does the Minister remain confident that the report from the independent commission will be received by the end of January 2011 and that payments will commence by the end of the first half of 2011? It would also be welcome if the Minister could confirm that a review body will definitely be accessible to policyholders who wish to challenge payments, with the review body having the power to overturn calculations.
I recognise that the Government’s weighing of the public purse with the compensation for injustice is a difficult issue. Citizens look to the Government to protect them against injustices experienced as a result of regulatory maladministration or inadequacy. Equally, the Government have a duty to taxpayers to have regard for the liability and responsibilities which they require the taxpayer to accept and the competing demand for public resources—a difficult balance. There have been significant controversial compensation cases over the past few years, as instanced both by Equitable Life and by the creation of the financial assistance scheme that was set up to compensate pension scheme members whose employers became insolvent prior to April 2004. It is probably appropriate for me to say that I am on the Pension Protection Fund board, which of course administers the financial assistance scheme.
It is important that people are not put off saving, and off pension saving in particular. I share the concerns of the noble Lord, Lord Kirkwood, who said that we must avoid such a tragedy happening again. How confident are the Government that their approach to regulation will ensure that such a tragedy does not happen in the future? With the advent of auto-enrolment in 2012, we will see millions more people saving and a significant increase in the level of saving going into private pension provision. Much of that saving will go into contract-based pension products. We will also see a corresponding growth in the annuity market. It is important that the regulatory system for long-term saving is robust and fit for purpose. There is a need to create an environment in which the need for compensation in the future becomes negligible.
The policy of auto-enrolment strikes a deal between the Government and the citizen that the latter will take greater responsibility for saving for their retirement. In return, the citizen deserves a regulatory system and a standard of governance and behaviour in the financial and insurance industry that support them in taking on this responsibility. I know that the Government are set on a programme of reform for financial regulation and the creation of a new consumer protection and markets authority.
The noble Lord, Lord Kirkwood, referred to conflicts between regulators. There are currently two regulatory regimes in the area of pension saving—the Pensions Regulator and the body or arrangements that will replace the Financial Services Authority. I will not go into the detail of who covers what, but there is an issue to be looked at here because there is unquestionably regulatory overlap, particularly as the future will provide a combination of contract-based and trust-based saving.
In implementing these reforms, will the Minister give the assurance that giving savers confidence in insurance and long-term saving in the future will be at the forefront of government policy and action?
My Lords, I declare an interest as a trapped annuitant of Equitable Life, but I am one of the lucky ones who comes within the post-1991 provisions. According to the Bill and the Explanatory Notes, I will be compensated. I congratulate the Minister on dressing up a bare half loaf as a full and scented loaf of bread because a number of pensioners fall outwith the provisions of the Bill, in particular the trapped annuitants who are in the same position as those of us who are going to be compensated, but who took out their pensions before the end of 1991. I should like to speak up for those people.
These people are suffering in the same way as the post-1991 trapped annuitants, but they will not be compensated. It is worse for them because they are older and have no real means of support other than their pension payments, which have been greatly reduced. But for what I believe are spurious financial reasons, they have been excluded from the provisions of this Bill. I say that they are spurious because I read the debate in the other place in which Mr Mark Hoban set out the provisions of the Bill. The substance of his argument was that because of Equitable Life’s maladministration, the earlier pensioners were so-called “over-bonused” in the years before 1991. They had received more money than they should have and therefore they did not need any money after 1991. I do not think that stacks up either factually or morally.
It was not their fault that they were over-bonused, it was yet more poor regulation and mismanagement by the board of Equitable Life. Surely it cannot be right that because of so-called over-bonusing for a few years, these people are to be denied any compensation at all. At that point they had no way of knowing that they were being over-bonused, so are the Government really saying that because they were kept in the dark, they should not be entitled to any justice? I cannot believe that that is the Government’s intention. As I have said, they are just as disadvantaged as all the other trapped annuitants of Equitable Life. Moreover, they are older and therefore in more need. It is only right that they should be properly compensated.
Their pensions, as is the case for pensions such as my own, lost value and were significantly reduced after 2002 when the whole horror show became public following the case here in the House of Lords. Like the post-1991 annuitants, they were trapped as well. They were effectively in a house on fire with no escape. The post-1991 trapped annuitants are being offered an escape, but the pre-1991 people are not. I cannot believe that that is what the Government want.
The noble Lord, Lord Kirkwood, was absolutely right to point out that the pre-1991 annuitants did what successive Governments urged them to do. They took out pensions for their retirement so as not to be a burden and to enjoy a reasonable old age. However, they are now left with virtually nothing, with no chance of any compensation whatever. In his opening remarks the Minister quoted what the coalition Government said in May this year:
“We [will] implement the Parliamentary Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure”.
But the ombudsman’s recommendation was that all policyholders should be restored to the position they would have been in had no maladministration occurred. That is patently not the case for the pre-1991 policyholders. I should say also that it is not the case either for the unlucky 1 million policyholders who are also, I believe, being unjustly treated: those who have not yet vested. Under the provisions of the Bill, they will receive only around 15 per cent of the compensation that they would otherwise have been entitled to. They will not be getting just a hair cut, but a crew cut, because a cut of 85 per cent is really savage. Of course, as the ombudsman said, public expenditure should be considered but it should be proportionate. Why not take the kind of percentage that government departments are being asked to implement—namely, 19 to 20 per cent—which would be fair? Eighty-five per cent is not at all equitable.
Can the Minister explain a little more fully why the Government first accepted £4,500 million as the amount due to the Equitable Life policyholders in compensation but have now reduced that to £1,500 million? The Chancellor has just tossed £7,000 million to the Irish Government to bail out their failing banks; surely pensions in this country deserve just as much as the bailing out of BIFFO’s banks in Ireland. There must be enough money to spare if we are sending £7 billion over there.
Equitable Life was nothing but a giant Ponzi scheme that slipped under the radar of three successive well-paid regulators. I hope the Government will listen to what the noble Lord, Lord Kirkwood, said about continuing some form of discussion with the Equitable Life Members Action Group to see if they can do a little better than this. I do not believe at the moment that all the pensioners who have suffered from misregulation have been properly compensated. This is not the justice envisaged by the ombudsman.
My Lords, this short debate has inevitably ranged wider than the provisions of the Bill. As we have heard, the Bill is an enabling measure which authorises payments to be made where persons have been adversely affected by maladministration in the regulation of the Equitable Life Assurance Society before 2001. It also enables provision to be made for disregarding such payments for tax, tax credit and certain other payments. The Bill does not spell out the detail of any compensation scheme or how the provisions of Clause 1(3) are to be implemented. As far as one can tell, no parliamentary approval for the scheme is necessary, although I believe Ministers in another place have committed to finding a way for Parliament to hold the Government to account when the independent commission produces its final proposals. Can the Minister say whether such a way has now been determined and whether it will apply to your Lordships’ House as well as to the other place?
As my noble and learned friend Lord Davidson of Glen Clova made clear, we do not oppose the Bill and consider that we should play our part in bringing resolution to this protracted issue. However, because it is a money Bill, we are constrained from making detailed amendment.
There are many strands to the Equitable Life saga. It is the UK’s oldest insurer but was brought down by what might have seemed the innocuous development some 60 years ago of guaranteed annuity rates on with-profit pension plans. As the noble Lord, Lord Kirkwood, remarked, who today would contemplate such a prospect? However, these were different times. Lower returns on gilts and increasing longevity emphasised that the Equitable Life business model was not sustainable. Its attempts to cover the costs by paying lower final bonuses to with-profit policyholders fell foul of the courts and eventually it was forced to stop writing new business in December 2000.
The impact that this had on its investment policy and returns and the consequent range of decisions inflicted on policyholders fuelled the campaigns for compensation led by the Equitable Members Action Group and the Equitable Life Trapped Annuitants. Matters were not made easier by these issues straddling two regulatory regimes and Governments of the Conservative, Labour and now coalition variety. A lot of water has flowed under the bridge since the failings of Equitable Life became apparent. The matter has spawned a range of inquiries and reviews, including by the FSA, the Treasury Select Committee, the actuarial profession, the Treasury, the ombudsman twice and the Public Administration Committee. As well as reviewing the predicament caused by Equitable Life, these variously ranged over the regulatory regimes, the Government Actuary’s Department, the actuarial profession, the governance of mutual life offices and the accounting for with-profits business by life insurers.
We can therefore support the Government in seeking to bring this matter to a close, notwithstanding that their approach is different from that which we adopted. We have heard from the Minister that it is to be done on the basis of accepting all the ombudsman’s findings and the setting-up of an independent commission to design a fair and transparent payment system.
We know that the CSR has provided an envelope for overall compensation of £1.5 billion. This has been argued to be consistent with the ombudsman’s findings, which acknowledged that a compensation scheme should consider the impact on the public purse. This is a principle with which we agree but, as my noble and learned friend inquired, can the Minister say a little more about how the judgment was made and how this particular figure was arrived at?
The Government have determined that all policyholders of with-profit annuities from the end of 1992 will have their losses covered in full. As we have heard, this figure is calculated to be £620 million. This implies that the balance of £880 million—but only £775 million within the CSR period—is allocated to cover other losses. As the starting point is the recognition of relative loss of £4.3 billion, this means that there is £880 million to cover the recognised loss of £3.7 billion—some 24 per cent. According to the document issued by the Independent Commission on Equitable Life Payments on 3 November, this amount is to cover almost 500,000 holders of individual policies and 600,000 group pension policies. Can the Minister confirm these figures?
Will he also say whether the calculation of relative loss is on a pre- or post-tax basis, a point probed by my noble friend Lady Drake, and what this means for any orders which might be made under Clause 1(3)? It was made clear in another place that payments under the compensation scheme would be free of tax. If relative loss is calculated on a gross-of-tax basis and the post-1992 with-profit annuitants are kept whole on this basis, will not the tax exemption go further than full reimbursement?
Incidentally, it is noted that Clause 1(3)(b) enables compensation payments to be disregarded for tax credit purposes—another point on which my noble friend touched. What is the intended position for pension credit, which is not specifically mentioned in the legislation, and how is this provided for within the Bill?
The Minister will be in no doubt that there are those—in EMAG in particular—who are far from happy with what is proposed. Their anger has been fuelled by raised expectations created by the pledge made by many MPs, overwhelmingly Tories and Lib Dems, in the run-up to the last election—in particular the commitment to support and vote for proper compensation for victims of the Equitable Life scandal and a scheme, independent of government, which was,
“swift, simple, transparent and fair”.
This pledge was effectively replicated in the coalition agreement. Does the Minister argue that what is proposed meets the terms of this pledge, or were those who now support what is on offer ill informed or ill advised? How does the Minister respond to the challenge from the Equitable Members Action Group that the £4.3-billion figure reflects a calculation based on accepting just some of the findings of the ombudsman, which are those that the previous Government accepted, and not the full findings which the coalition Government have adopted?
The Minister will be aware that a particular bone of contention, as we have just heard from the noble Lord, Lord Willoughby de Broke, is the start date for compensation. This is set at policies taken out from September 1992, notwithstanding that the ombudsman concluded that nobody would have sensibly invested in Equitable Life after 1 July 1991. Others have argued on moral grounds that a compensation scheme should even predate 1991. In the other place, the Government have seemingly relied upon a variety of arguments to justify the September 1992 date, including the arguments that: maladministration before that date would have led to overbonusing, a term I am not sure has entered the lexicon of the banking community; that records prior to this time are not readily available; and that policyholders would not have been aware of regulatory failure, had proper regulatory returns been made, before the autumn of 1992. It would be helpful if the Minister could be clear precisely on which of these grounds, or indeed any other, is the basis for the chosen start date. Should the ombudsman at any point in future review the compensation scheme and determine on one basis or another that it is not consistent with her findings and recommendations, will the Government seek to adjust the funding envelope?
The challenge of calculating and devising a compensation scheme is daunting, which is why we in government appointed Sir John Chadwick. His approach was based on different terms of reference, but the concept of looking at classes of policyholders rather than seeking to unpick the investment decisions of millions of separate transactions is sensibly being adopted by the commission. The concept of relative losses has been accepted, as has the methodology. But perhaps the Minister might just comment on the assertions from EMAG that the calculation is in error in that non-contractual exit costs have been deducted from the comparator, thus reducing the difference, on the basis that it would not have been necessary to quit a comparator entity.
In Committee in another place, the Minister indicated that a lot of effort was going into producing a,
“means by which policyholders can raise concerns about the incorrect application of scheme rules to individual cases”.—[Official Report, Commons, 10/11/10; col. 331.]
That implies an opportunity to challenge the calculation, but not the rules of the scheme itself. My noble and learned friend inquired about this, but does the Minister have any further news on how this might operate?
The noble Lord's ministerial colleague has received representations from the Guernsey Financial Services Commission about Equitable Life policies written by its Guernsey branch. This seeks assurances of equality of treatment with UK resident policyholders and policyholders resident in other jurisdictions. What is the Government's response to this and to what extent did the financing envelope reflect this potential obligation?
This has been a brief discussion. As we have already said, we will support the Bill. This has been a long and arduous journey for those who have lost out from regulatory failure, and I fear for some that the journey is not yet at an end. But the Government are entitled to be given credit for the determined manner in which they have taken this forward. We need to ensure that we have robust regulatory systems so that people have confidence to save. As my noble friend Lady Drake has noted, this is even more important with the onset of auto-enrolment. I look forward to hearing the Minister’s reply.
My Lords, first, I thank noble Lords for their valuable contribution to this afternoon’s debate. It is clear that there is a depth of support for ending the plight of Equitable Life policyholders and that we all agree that this saga has gone on for far too long. I am particularly grateful to the noble and learned Lord, Lord Davidson of Glen Clova, and the noble Lord, Lord McKenzie of Luton, for making it clear at the outset that the Opposition support the Bill.
The matter of Equitable Life is very complex and continues to affect directly the lives of a very large number of people, both in Britain and abroad. There is a pressing need to get on and reach a resolution swiftly, as policyholders have already waited 10 years for the Government to address this long-standing issue. Many of those people are elderly, as we have been reminded, and should not have to wait a day longer than necessary for justice. I shall not repeat the steps that we have already taken since coming into office, but I am grateful to my noble friend Lord Kirkwood of Kirkhope for recognising the steps that the coalition Government have taken.
I am getting somewhat experienced in doing Second Readings and other readings in this House. A great number of technical questions were asked today in relation to the length of the debate. Noble Lords will perhaps forgive me if I inevitably have to leave a number of points on the table, but I will write to sweep up the points that I cannot answer now. I note that the Benches behind the opposition Front Bench are commendably empty of one or two of the usual suspects who tend to come in during my closing remarks, but I will deal with as much as I can.
First, I want to take the opportunity to recognise those who have continually fought in the interests of policyholders, going back to 2000. That point was first mentioned by my noble friend Lord Kirkwood of Kirkhope. Particular mention must go not only to the Parliamentary Ombudsman but to the Equitable Members Action Group and the Equitable Life Trapped Annuitants, who have been referred to already. The Government have held meetings with these parties on numerous occasions and I commend them for their commitment to this cause. Their views have helped us to shape our understanding of the issue and given us an insight into the views of the broader group of policyholders. Their insights have of course proven invaluable. We need to get this right. The best way to achieve that is to interact with the people directly affected and to gain a clear understanding of their position.
There has, of course, been disappointment from those policy action groups about the amount that we have made available for the scheme, but we have had to strike a difficult balance between the valid, deserving cause of policyholders and the wider interests of British taxpayers. It is important to remind the groups that the Parliamentary Ombudsman herself stated that it was appropriate to consider the potential impact on the public purse of any payment. I know, as has been recognised today, that there are many important conversations to be had about how the scheme will operate. It would be preferable to have had all those conversations before turning our attention to the Bill but, in the context of needing to get on and conclude this episode, we wanted to make sure that the process was not unnecessarily extended.
I shall address some other, specific points that came up. The noble and learned Lord, Lord Davidson of Glen Clova, and the noble Lords, Lord Willoughby de Broke and Lord McKenzie of Luton, in different ways, raised the question of the quantum of the pot and the size of the cut for non-WPAs. I can confirm that it is, on average, around 66 per cent. One question was how this compares with a spending review where the departmental cuts were, on average, around 20 per cent. First, the spending review was not a linear exercise; there were different cuts in different areas. Secondly, it has been a difficult balance between fairness to policyholders and fairness to the taxpayers. It is important that we have still managed to cover the costs of payments to the WPAs who purchased their policies after 1 September 1992. I will come back to that cut-off point in a moment, but it is important to recognise that we have covered those payments in full, because we believe that that is the hardest-hit group. It is also important that non-WPAs are still getting more than twice what they would have received with a scheme based on the loss figures produced by Sir John Chadwick’s methodology.
We accept that the relative loss figure is around £4.3 billion. At the end of the day, it has essentially been a matter of judgment as to what the appropriate number should be. Approximately £225 million of the initial £1 billion is for WPAs and their estates, leaving approximately £775 million for the lump-sum payments to non-WPAs. Based on the current Towers Watson estimate of WPA losses, that leaves approximately £395 million for the rest of the WPA losses from 2014-15 onwards.
There were questions from the noble and learned Lord, Lord Davidson, and the noble Baroness, Lady Drake, about an appeals process. There will indeed be means by which policyholders can raise concerns about any incorrect application of the scheme rules to individual cases. Full details of that will be included in the document setting out the scheme design, but I can say today that it will certainly include a process whereby, if a policyholder believes that the rules of the scheme have been incorrectly applied to his or her data, he or she will be able to raise a query with the delivery body stating the nature of the concern. The query will be pursued by the delivery body and, if there is merit in the challenge and the challenge is upheld, a recalculation will take place.
If the challenge is not agreed by the delivery body, the policyholder will have the option of taking the case to the review panel. The panel will consider the case in full and will be able to make a fresh decision based on the facts of the case. If a complainant’s case is upheld, again, a recalculation will be carried out. The review panel will be independent of the original decision-making process and will be suitably qualified to consider the complaint in full according to public law principles, although it is too early at this stage to state who might be on the panel.
On the question of why we are covering the cost of post-1992 WPA losses in full, throughout this process the policyholder groups have made it clear that, due to the nature of their policies, WPAs have been one of the hardest-hit groups. They were particularly vulnerable to losses because they were unable to move their funds elsewhere or to mitigate the impact of their losses through employment. They are also generally the oldest policyholders. In answer to the specific question from the noble and learned Lord, Lord Davidson, approximately 37,000 WPAs will be paid under the scheme.
The noble and learned Lord also asked about the role of reliance. Given the time that has elapsed and the almost impossibility of policyholders proving what they would have done in a counterfactual situation, faced with properly regulated returns, a truly reliance-based approach is impossible in this case. I have explained the approach that we have taken.
On the question of how fairness has been worked out within the compensation pot and the principles that applied, the independent commission is now considering the split of the pot. It has made an interim report and its final report will be published by the end of January. The noble Lord, Lord McKenzie, asked about public scrutiny of the commission’s report. At the time we publish the document, I anticipate that my honourable friend the Financial Secretary will want to make a Statement in another place. Before we get to that, there is a further round of consultation by the commission. Therefore, I believe not only that is there a full consultation process but that there will be appropriate opportunity for Parliament to consider the results of the commission’s work. The commission’s report will of course be made available to both Houses of Parliament.
My noble friend Lord Kirkwood of Kirkhope asked about the scheme paying out. I confirm that it is our ambition to make the first payments in the middle of 2011. This is a complicated scheme, and we must get the details right. We believe that starting to make the payments in the middle of next year is an ambitious but achievable target.
My noble friend also asked whether we might in any circumstances be able to pay out more than £1.5 billion. I should make it clear that £1.5 billion is the figure that we judged the British taxpayer can afford to pay, so I cannot hold out any hope of us finding more money at a future date. This process has dragged on too long already, and we need finality.
On capital thresholds and the way in which benefits operate, capital limits do not immediately cut off eligibility for benefits because they work on a sliding scale, gradually reducing support for individuals with larger assets. It is unlikely that many recipients who would otherwise have been eligible for means-tested benefits will receive large enough payments to affect their eligibility dramatically.
In answer to a couple of questions from the noble Baroness, Lady Drake, we have no plans to make interim payments. Again, they would introduce more complexity and could delay the set-up of the overall scheme. We want to focus on getting the main scheme up and running as quickly as possible.
There was a question about consistency with similar payment schemes. The independent commission will consider aspects of fairness that it deems appropriate and the Government will take its advice very seriously. However, it is important to remember that the specific features of the Equitable Life payment scheme make it very different from some other pension schemes, so there is no broad read-across.
There were a couple of questions, including from the noble Baroness, on the gross/net issue. The calculations for the WPA payments are being made on a gross basis. The noble Baroness asked a broad question about long-term savings, which links back to my noble friend’s question about different regulatory regimes. I think that in some ways she answered my noble friend’s question when she pointed out that we had been through one very significant change in the insurance regulatory regime a number of years ago and are about to go through another fundamental change to the overall regulatory set-up. Of course, there is never a no-failure regime in financial regulation, but the landscape will change significantly. In that context, we take the sustainable and healthy long-term savings market in the UK extremely seriously.
I am conscious that one very important question was asked by the noble Lord, Lord Willoughby de Broke, and was touched on by the noble Lord, Lord McKenzie of Luton. That is the question of the pre-1992 with-profit annuitants. The first issue here is that they took out policies before any maladministration could have affected their decisions. That is the first and principal reason why they have not been included in the Government’s proposed payment scheme. WPAs were affected by Equitable Life being run badly, in part as a result of the Government’s maladministration. Sir John Chadwick and Towers Watson looked into what these WPAs would have received had there been no maladministration. They concluded that the pre-1992 WPAs received more from Equitable Life than they would have if the society had been properly regulated. That is because Equitable Life paid out more to them in the early years than it would have done if there had been no maladministration. Even though it paid out less than it should have done in later years, the former overpayment outweighs the latter, so it is the Government’s view that no compensation is due to that category of annuitants.
My Lords, I direct the noble Lord’s attention to paragraph 15 of the Explanatory Notes, which says:
“They are a group of policyholders who are ‘trapped’ in their policies, in receipt of a declining income in their retirement and generally the eldest”.
That is the absolute definition of the pre-1992 annuitants. Their income has gone down very significantly since 2002 and it was not, as I said, their fault that they did not know that there was maladministration. It is grossly inequitable that they are left out of this arrangement altogether and just abandoned to twist in the wind by the Government.
My Lords, I am conscious of the time that we have got to. I can only repeat that, while I accept what the noble Lord reads out as factually correct, he omits to point out what I have said: it is nevertheless the fact that those pre-1992 annuitants could not have been affected by maladministration, which is the purpose of this compensation scheme. Although I entirely accept the analysis of what has happened to their income levels in recent years, the judgment is that, on balance, they were paid more in the early years than they should have been, and that exceeds the reduction in more recent years. It is a regrettable situation but not one that it would be proper to bring into the compensation scheme.
My Lords, the Minister has been very full in his replies. Could he comment on one specific point? I think that he has confirmed that the comparator is on a gross-of-tax basis. Therefore, if WPAs who have been kept whole in addition get a tax exemption, does that not provide for that group more than its actual loss on that basis?
I am conscious that I have not answered the question. Given the time, I will write with a clear analysis of the tax position and what it results in. I have not lost sight of the question and I will sweep up anything else that I have missed.
I reconfirm that the Government take the maladministration of Equitable Life very seriously. We have shown that resolving this issue is a real priority of the Government and have taken the necessary action to reach a fair and swift resolution. I fully sympathise with the plight of policyholders who have waited more than a decade for justice. It is time we brought their suffering to an end. I believe that ours is the appropriate course of action and that the Bill before the House today will help us achieve that.
Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.
House adjourned at 6.36 pm.