House of Lords
Tuesday, 17 May 2011.
Prayers—read by the Lord Bishop of Winchester.
Death of a Member: The Earl of Onslow
BBC World Service
My Lords, we have regular discussions with the BBC World Service. We are aware that the BBC World Service has already reprioritised resources to minimise the effect of the cuts to the BBC Arabic service. We are also looking at ways that we can work with the BBC Arabic service and the BBC World Service Trust on specific projects under the Arab Partnership Initiative. We have also been in discussion with the BBC Trust, the BBC World Service and the Department for Culture, Media, and Sport over an amendment to the BBC agreement that will include setting out the role of the Foreign Secretary once the funding of the World Service transfers to the licence fee in 2014-15.
My Lords, I thank my noble friend for that reply, but perhaps I may raise specifically the cuts being planned in news reporting on the Arabic service, which, incidentally, will be unaffected by any resources from DfID through the World Service Trust. Does he not agree that this is a crucial time in the Arab world and the Middle East—so important that other television stations are expanding their reporting and Sky is soon to introduce an entirely new service there? Given that the World Service is already well established, respected and cost-effective, should not our aim be to develop the Arabic service, not to cut it back?
Of course that is absolutely right and my noble friend is extremely well informed on these matters. In fact, I really wanted to say to him that when he spoke about these matters the other day, I said that he was “misinformed”. On reflection, I think that that is too strong a word, and I apologise to him for it. He was correctly drawing on the BBC World Service circular, but that did not quite present the whole picture about the fact that the 24-hour service is being maintained in one form or another—although it is perfectly true that live broadcasts have been curtailed.
Nevertheless, as I mentioned in my Answer, we are working on specific projects under the Arab Partnership Initiative, and we hope that that initiative will be expanded and, therefore, that opportunities for more support for the service will expand. I should add that if one looks at the totality of the projection of our soft power communication with the Arab world, since between November last year and February there has been a 263 per cent increase in online BBC Arabic usage, a 949 per cent increase in requests for Arabic TV online streaming from the BBC, and a 559 per cent increase in online video requests. No one can say that we are backward in promoting the British message, persuading, using influence and communicating in a highly effective way with the turbulent Arab world.
Has the noble Lord taken into account the very important fact that not just in the Middle East but in Iran as well television coverage is particularly important and that it is much more expensive than radio coverage? Will he give the House an undertaking that, in looking at these figures, the Government will take into account the additional cost of TV coverage to the Middle East and Iran to make sure that we do not undermine this crucial part of our soft power?
The noble Lord is quite right. As I indicated in the figures that I gave, although radio remains immensely important, the trend is towards television becoming the dominant leader. We can see from the enormous rise in the influence of Al-Jazeera just how powerful it is and how important it is to promote our own TV services. Therefore, although I cannot give precise undertakings on precise figures, that is clearly a high priority.
My right honourable friend the Foreign Secretary gave permission for five foreign language services to be cut, mainly because their usage had fallen dramatically. However, the allocation of resources for maintaining foreign language services and the possibilities of bringing in commercial support are matters for the BBC World Service and, after 2014, for the BBC. The Department for International Development is discussing ways in which it can work in a more strategically joined-up manner with the BBC World Service Trust, which itself produces the prospect of more support for the services we want to keep and are effective and fit into the modern technological pattern.
My Lords, I hope that this is not irrelevant. If, as the noble Lord said, the BBC is cutting back, why do I have to listen at 3 am to the most ghastly children’s programme for the under-fives when that time could surely be put to use for foreign broadcasts somewhere in the world where it is not 3 am?
I have a feeling that the slightly cop-out answer is that that really is a matter for the programmers and directors of the BBC World Service and not for me at 3 am in the morning. Nevertheless, although the World Service and many other aspects of government and government agencies have had to trim their sails in line with the general austerity measures, for reasons which we all know about, in general great strides are being made in expanding the communication network in these areas and in reorganising BBC programmes in a way that, I hope, will not disturb my noble friend quite so challengingly.
My Lords, I suspect that many noble Lords saw the photograph of a young man protesting in Deraa, Syria, holding up a placard on which was written “Thank you BBC”. I think that that says it all. Can the Minister persuade his friends at DfID that the World Service is regarded by the recipients of our aid as priceless and ask them to look up exactly what that means?
I think that my honourable friends and colleagues in DfID are well aware of that. It is a very important element in the deployment of soft power by this nation and it makes an important contribution to the overall soft-power communication message. No one doubts that for a moment. The budget is still substantial. It has had to take a cut proportionate with the huge cut that the Foreign Office had to take at the time of the exchange rate farrago. That had a huge impact on the Foreign Office. All the agencies concerned have had to take a proportionate share of that, but no more than proportionate compared with 2008.
The finality and responsibility will be very carefully defined. A new broadcasting agreement is now being worked out between the Department for Culture, Media and Sport and the BBC that will define exactly the rights and responsibilities of the Foreign Secretary. However, at present, the final word is with the Foreign Secretary and it was he who sanctioned and approved the cuts in, I think, five of the foreign language services. Beyond that, it has been a matter for the BBC World Service itself to work out how best to use its resources.
Asylum Seekers: Democratic Republic of Congo
My Lords, failed asylum seekers are returned to the Democratic Republic of Congo only when we and the courts are satisfied that it is safe to do so. The Court of Appeal in December 2008 upheld the finding of the immigration and asylum Upper Tribunal that failed asylum seekers returning to the Democratic Republic of Congo were not at risk of persecution merely because of their involuntary return. Furthermore, inquiries made by the Foreign Office in Kinshasa have found no evidence that the returnees removed from the UK to the DRC have been mistreated. Nevertheless, each case will be considered on its individual merits.
My Lords, I declare an interest as patron of the Southampton and Winchester Visitors Group and welcome the Minister to her new responsibilities. This is the third time I have asked this question. Each time I have had the same ostrich-like unsatisfactory answer from two different Governments and three different Ministers. It is a real puzzle to me that the noble Baroness can give me these assurances if the Government and the Border Agency undertake no follow-up and rely for their information on those with whom those who return will not talk in the face of the information that they give to those with whom they have talked. Is the noble Baroness really up to speed with the number and consistency of reports of ill-treatment that constantly come back to this country and tally with the material about abuse and other things in the very country-of-information material of the Home Office itself?
My Lords, I am concerned to hear what the right reverend Prelate has said about his previous attempts to shine some light on this problem. Certainly, if through him or any organisation he puts the Home Office in contact with, there is evidence that needs to be examined or even re-examined, he has my personal assurance that that will be done.
Is there a policy of refusing DRC asylum seekers on the grounds that, although they might be at risk in certain areas of the country, they should internally migrate to somewhere else where they would be free of persecution? Can the noble Baroness remind us what the courts have had to say about this policy of internal migration?
My Lords, I cannot give my noble friend a factual account today of what the courts have said about internal migration because I have focused on what happens to returnees, and it was in that context that I responded to the right reverend Prelate. However, I give the noble Lord this opportunity, if he would like to take it. If he has evidence of a matter that we should be looking at as a Government, I will have it examined. I should add that I have had briefings that show that third parties, NGOs and others have brought cases to our attention but there has been no follow through yet in asking for specific evidence that we can investigate.
I can assure my noble friend that in respect of the Democratic Republic of Congo, we have no recent reports, from NGOs, the UNHCR or other such bodies, that remain to be investigated. Yet again, if there are internal reports that we should be made aware of, I would be interested to receive them because my understanding is that there is very thorough communication within the Democratic Republic of Congo and through our advice received in this country, and as yet I have seen no evidence of individual cases or trends that need to be looked at. I should add that a new report is coming forward this summer. It will be a year since we saw the last consolidated report, and it would be very helpful if that information was available to incorporate into the new report.
My Lords, this is Christian Aid week, and up and down the country large numbers of people are raising funds to alleviate poverty in the most needy parts of the world, including the Democratic Republic of Congo. Is it not unfortunate in this of all weeks that any Minister should suggest a weakening of the commitment in the coalition agreement to enshrine spending 0.7 per cent of national income on overseas development aid? Is the Minister in a position to affirm that that commitment remains intact?
I am most grateful to the right reverend Prelate, who I am very pleased to say I was able to work with on occasion in another place. I am able to give that guarantee on behalf of the coalition Government. That is the Government’s stated position, and that is the policy we shall pursue.
My Lords, we take very seriously the question of children. It is a matter that, coming new to this brief, I particularly wish to focus on. We will do all we can because we realise that the wider family, and children in particular, are particularly affected, and it is very important that while we carry out the procedures that are necessary to assess asylum seekers’ status, we take a humanitarian approach to the younger children.
Education: English Baccalaureate
The English Baccalaureate reflects vital subjects—maths, English and science—where pupils should have the option to take exams leading to A-level, and history, geography and languages, which have been in decline. However, these are not the only valuable or rigorous subjects. We are also making detailed performance information available so that the public can look at schools’ results in any combination of subjects.
I thank the Minister for that Answer. Does he not share my concern over a recent survey in which 60 per cent of the schools that responded said that they would no longer be teaching art and design at GCSE as a result of the introduction of the English baccalaureate as they have to concentrate on the subjects that it encompasses? The qualifications that count towards the current EBacc provide limited scope for the development of creative skills. Does the Minister not agree with me that, considering how important the creative industries are to the present and future prosperity of this country, that is really rather short-sighted?
My Lords, I agree with my noble friend about the importance of the creative subjects in terms of the contribution they can make to the creative industries, as she says, and as a good in themselves. It is right and good for children to learn about these subjects for the benefit of education, not just for some gradgrindian economic benefit. I agree with her very strongly on that. The thinking behind the EBacc is not in any way to undermine or diminish the value of other subjects that are not in the EBacc. The starting point is that all of us in this House are keen to encourage social mobility. The fact is that children, particularly from poor backgrounds, have not been having the opportunity to study the kind of academic subjects that will enable them to progress to higher education in the numbers that one would like. We are all keen for children from poor backgrounds to become doctors in the way that those from more affluent backgrounds do, yet only 4 per cent of children on free school meals take physics or chemistry. Any further measure we take will not help those children become doctors. We hope the EBacc will give children who want it the opportunity to study academic subjects. Children, however, come in all shapes and sizes and vocational, arts and creative subjects are equally important.
My Lords, I do not think that anybody in this House would doubt the Minister’s personal belief in the value of the subjects to which the noble Baroness, Lady Bonham-Carter, referred. Can he say how the Government will ensure that schools do not reduce the resources that they make available for the teaching of those subjects in order to boost their potential league table performance by concentrating only on baccalaureate subjects? Is it not the case that universities and employers look for young people who are not only good at passing exams in academic subjects, but are also well rounded human beings?
I agree with the underlying point. That is, of course, what employers are looking for. As the noble Baroness will know, one of the thrusts of our school reforms is to try to give head teachers greater discretion and autonomy to teach the subjects they think are appropriate for the pupils in their care. It is not for us to tell them what to do the whole time. If we can strip back the national curriculum, freeing up more unprescribed time to study some of these other subjects, I hope that will help. Ultimately, it is our view that it is for schools to decide and for pupils and parents to make their views known. The more information that we can publish so that parents and others can see what choices schools are offering, the more it will help to make sure that children are able to study the subjects that are right for them and are not driven by perverse incentives in league tables. This is where I agree with the noble Baroness. We have to be very careful that we do not end up with children studying subjects that are not suitable so that schools can do better in league tables.
My Lords, I preface my question by saying that for many years I was a parent governor of what was then the only comprehensive school in England doing the baccalaureate as an alternative to A-levels. Would the Minister agree that the baccalaureate has a big advantage in not pressing pupils into a science/arts split, in the way that A-levels tend to, and that it encourages a creative way of thinking and writing in depth at A-level standards?
My Lords, the international baccalaureate to which my noble friend refers, has many merits. I am not sure I would have benefited from it, because I was never very good at the science and maths bit, which it entails. I agree with him, however, that for many children it is suitable; it has many strong advocates. We are freeing up the system so that schools that want to offer the IB in the maintained sector are able to do so and that pupils can choose to study it.
My Lords, the Minister made great play of the fact that schools should not simply staff up to cover the English baccalaureate subjects, but there is already anecdotal evidence that that is happening. What is the department doing to monitor whether that is the case and what is happening on the ground now that the English baccalaureate league tables are being sought by so many schools? And what steps will the department take where that is identified as happening in schools to discourage them from doing it in the future?
My Lords, in some ways, if one of the consequences was that schools needed to employ more teachers to teach modern foreign languages or sciences, it would not be a development that I would deplore. I think that many of us in this House would welcome it. If more people were employed to teach those academic subjects, I would not see it as regrettable. The noble Baroness is right that we need to monitor what is happening to make sure that the provision of teachers in STEM subjects and other subjects is sufficient. We have had a long-term problem in ensuring that we have enough and we need to try to address that. We need to monitor that. The normal statistical returns which are produced each year and inform the department’s recruitment of teachers and trainee teachers will track that, enabling us to see what is going on.
My Lords, I welcome the reduction in child poverty from 2.8 million to 2.6 million children, but despite £150 billion spent on tax credits since 2003-04, largely aimed at families, that figure is a long way off the previous Government’s aim of halving child poverty by 2010. Noble Lords will be aware that the Government published their child poverty strategy on 5 April, showing how our radical reform programme will help to transform people’s lives and break cycles of disadvantage.
My Lords, I thank the Minister and I welcome the Government’s commitment to the eradication of child poverty. However, given that improved financial support for children played a key role in the previous Government’s achievement in reducing child poverty to its lowest level since 1985, will he comment on the Institute for Fiscal Studies’ prediction that cuts in such support could contribute to an increase in child poverty? Will he also explain why the child poverty strategy contains no specific, quantified targets for the period that it covers?
My Lords, that is a complicated question. As noble Lords know, fundamentally, child poverty has been stuck at the same level since around 2004-05. We have seen a statistically significant reduction this year, but it is very much the same figure as it was five years ago. The IFS, as the noble Baroness pointed out, predicts an increase of 200,000 in the number of children in poverty in two or three years’ time. That may or may not be true, but our fundamental reforms, particularly of the universal credit, will start to drive that figure down. We are predicting, as has already been announced, 350,000 fewer children in poverty as a result of the universal credit when it is introduced and 300,000 fewer workless families.
Does the Minister agree that the nutrition of children in poverty is a very important element? Now that the School Food Trust is a charity and has moved out of the department as an agency of government, do the Government intend to ensure that it has the wherewithal to do the research into the nutrition of children in poverty that is necessary to inform government policy?
My Lords, we have made quite a substantial change in approach to tackling child poverty. With our proposal to change the Child Poverty Commission into the Social Mobility and Child Poverty Commission, which went into Committee in the other place today, we are reinforcing some other measures beyond just income changes. We are using a series of other indicators to look at life chances as well as poverty in order to make sure that children have a better start and greater well-being.
My Lords, talking of a better start, the Minister will know that, unfortunately, where there is alcohol and drug abuse in a home, children often go hungry. I know that it is difficult, but can Her Majesty's Government take steps to ensure that every child, or as many children as possible, is able to get a breakfast before they go to their school in the morning?
My Lords, that is micromanagement on some scale. We are trying with our welfare reforms to treat families as responsible units and for them to take the decisions that they need to take. However, we acknowledge that there are groups of families who cannot handle that responsibility. In moving the whole system to transfer responsibility to most families who can take responsibility, we are concerned about the people who cannot and what are the right ways of helping them. That is something to which we are paying active attention.
My Lords, returning to the matter of targets, even if the Government are correct, as the Minister said, and 350,000 children are lifted out of poverty by the welfare reforms, the IFS has said that that will be wiped out by the numbers falling into poverty before reforms even take place. I am sure that everyone in the House wants to build on the achievements in raising children out of poverty. Would targets not be the best way to do that?
My Lords, it is important to look at what the figures have shown us. Last year we put an enormous amount of money into tax credits and the benefits system. The amount increased by 6.7 per cent and is the sole reason that we had income growth in this country in that year. It is not sustainable to do this by income transfers. Our aim is to try to transform the lives of people, and that must mean a renewed emphasis on getting people back into work, making them independent and leading their own lives. That is our strategy and that is how we have reformulated our poverty policy.
My Lords, any reduction in child poverty is to be applauded but, on the day those statistics were released, it was also revealed that the difference between the rich and the poor in this country had remained at the record levels of last year that it reached under the previous Administration. Does the Minister share my concern about the dangers that are inherent in that?
Yes, my Lords. One of the peculiar things about what happened under the previous Government was that the Gini coefficient went up to an all-time record. It has moved slightly in the past year but not in any meaningful way. It is important that we address that as part of the context of looking at our poverty approaches but, as noble Lords opposite will know, this is not an easy thing to do.
My Lords, the Minister referred to the importance of getting people back into work and I agree with that. Will he cast his mind back three or four years to a document that he wrote when the previous Government were in office? He wrote:
that is a Labour Government—
“has made strong, and in some respects remarkable, progress over the last ten years … The New Deals have been enormously successful—helping over 1.7 million people into work since 1998. The creation of Jobcentre Plus in 2002 extended the rights and responsibilities regime for people on all benefits … and is widely seen as having been a model for effective public service delivery”.
Does the Minister still hold to that view?
I used the expression “in some respects” and I stand by that. In some respects there was a great deal of success. Under the previous Government we discovered that active labour market policies worked, and when they were introduced—they were actually introduced by the previous Government—and pushed in they had a one-off effect. However, we are left with a huge problem of people on inactive benefits which the previous Government did nothing to solve. We are now trying to do that.
Arrangement of Business
My Lords, at a convenient point after 3.30 pm, the Leader of the House will repeat a Statement about House of Lords reform. The usual channels have agreed that the House may wish to hear from the Convenor of the Cross-Bench Peers, and also from the Bishops’ Bench, in Front-Bench time and that the time for Back-Bench questions and answers on the Statement should be extended from 20 minutes to 40 minutes. Immediately thereafter my noble friend Lord Marland will repeat a Statement on the fourth carbon budget.
Hybrid Instruments Committee
Moved by The Chairman of Committees
That Lord Addington be appointed a member of the Select Committee in place of Lord Sandberg.
Postal Services Bill
Report (2nd Day)
Clause 27 : General authorisation to provide postal services
58: Clause 27, page 15, line 34, at end insert—
“(ca) a notification condition (see section (Notification condition)),”
My Lords, I shall also speak to Amendments 68 and 72 standing in my name. During our discussions, many of your Lordships, who are leaving the House quietly, have raised concerns about the prospect of other operators cherry picking profitable parts of Royal Mail’s delivery business. We have listened to these concerns and, as indicated in Committee, we have looked again at the Bill to check that there is sufficient protection in place. While we are confident that Ofcom has the necessary tools to ensure fair and effective competition in the market, we have come to the conclusion that there may be occasions when Ofcom will need to build in greater time to inform its use of these tools. These amendments therefore give Ofcom the power to require operators to pre-notify it of a planned commencement or expansion of a letter delivery operation on a specified scale.
This notification mechanism will ensure that Ofcom has the necessary time to evaluate the potential impact on the universal service of such an operation before the operation has commenced and before any potential damage has been done to the universal service. The detail of exactly how Ofcom will calculate what constitutes a significant service will need to be determined, but the policy intention is for only significant letter delivery operations to be caught. As such it will not impose any additional burden on, for example, current access competitors, courier services or parcel delivery businesses.
This is a light-touch, narrowly focused regulatory safeguard that will help Ofcom address an issue that has concerned many of your Lordships. I hope therefore that your Lordships will be able to support Amendments 58, 68 and 72 and I beg to move.
My Lords, Amendments 58, 68 and 72 constitute a welcome and positive strengthening of regulation of the postal sector. By abolishing the licence system the Bill carries potential dangers of destabilising universal service provision by deregulating the provision of competition. The proposed new clause goes some way to averting this danger and will allow Ofcom, whether directed by the Secretary of State or not, to impose notice of condition on anyone intending to introduce a delivery of letters within the scope of the universal service beyond a specified level, so we welcome this set of amendments.
The objective of Amendment 67B is that in setting prices Ofcom should not exclusively focus on the cost of providing the network, which would satisfy the current requirement under Clause 37(6), but should take account of the true cost incurred by Royal Mail in providing the universal service itself. It is important to be clear—this amendment would not require Ofcom to ensure the cross-subsidy of the universal service from access products. It would ensure that Ofcom considers the true cost of the USO to Royal Mail in setting these prices. I look forward to a brief response from the Minister.
My Lords, Amendment 67B seeks to ensure that, when imposing prices to access the network of the universal service provider, Ofcom must have regard to the costs associated with meeting the universal service. I agree with the noble Lord on this issue and that is why we have tabled Amendment 61, which is in another group but is entirely relevant to this debate. Amendment 61 will ensure that when carrying out its functions, including when imposing access conditions, Ofcom must have regard to,
“the need for a reasonable commercial rate of return for any universal service provider on any expenditure incurred by it for the purpose of, or in connection with, the provision by it of a universal postal service”.
While I agree with the intention behind Amendment 67B, I hope that I have explained that government Amendment 61 in the next group and the government amendments in this group will fulfil the same objective. Therefore I hope that the noble Lord will consider withdrawing Amendment 67B and support government Amendments 58, 68 and 72.
Amendment 58 agreed.
Clause 28 : Duty to secure provision of universal postal service
59: Clause 28, page 16, line 10, at end insert “before the end of a reasonable period and for its provision to continue to be efficient at all subsequent times”
My Lords, I beg to move Amendment 59 and in doing so speak to Amendments 61 and 62 in my name.
We must strike the right balance between promoting competition and protecting the universal service, and I thank your Lordships for the many important contributions on this issue. However, the Bill by itself will not secure the future of the universal postal service or Royal Mail. To achieve that, Royal Mail needs to become financially self-sustaining. Therefore there needs to be certainty that, just as has been done in other sectors, Ofcom will have regard to the need for the provision of the universal service to be financially sustainable in establishing the regulatory framework.
Amendment 61 adds flesh to this requirement, specifically that “financially sustainable” should include,
“the need for a reasonable commercial rate of return for any universal service provider on any expenditure incurred by it for the purpose of, or in connection with, the provision by it of a universal postal service”.
The intention of this amendment is to allow the company the opportunity to earn a reasonable return on all expenditure incurred in providing the universal postal service and any regulated access services, in so far as they make use of the universal postal service network. The term “reasonable commercial return” in the amendment is intended to mean simply that in applying this duty Ofcom could, among other things, and when it deems it appropriate, take into account private sector international operators in the postal market, their respective levels of efficiency and the different markets they are operating in, as well as regulated commercial companies in other regulated sectors.
To be clear, it would be for Ofcom to determine exactly what to take into account when considering what constitutes a reasonable commercial return. This requirement is in the context of the need to ensure that provision of the universal service is, and remains, efficient after a reasonable period. Obviously, it is not within the gift of the regulator to determine precisely what returns Royal Mail can make; that should depend on the market and the company’s performance. However, it is essential that the regulatory framework should provide the space and incentives for Royal Mail to be successful, to make the necessary efficiency improvements and to allow for good performance to be rewarded, without regulation eroding the effect of increased efficiency.
The Government believe that, in the long term, the universal service should be both financially sustainable and efficient, and that this will be possible if Royal Mail continues with the good progress it has made in modernising. But of course this takes time. We have therefore tabled two other amendments to Clause 28 to specify that the requirement for efficiency should be,
“before the end of a reasonable period”,
to give Royal Mail time to continue its vital modernisation.
The amendments to Clause 28 constitute a major strengthening of the Bill. They provide even greater security for the universal service. I hope your Lordships will be able to support them.
My Lords, we welcome government Amendments 59 and 62, which would allow Ofcom to establish the timescale for the universal service provider to achieve the levels of efficiency which it is reasonable to expect. This is a recognition that Royal Mail is going through the difficult process of modernisation. The amendment acknowledges this process, which is entirely welcome. Government Amendment 61, which is also most welcome, recognises the universal service provider is entitled to achieve a reasonable commercial rate of return in the provision of the universal postal service, as indicated by the noble Baroness.
Amendment 60 seeks to prevent unnecessary regulatory intervention in areas of the market where effective competition exists. According to the regulator Postcomm, Royal Mail has complained of considerable overregulation since 2006, with approximately 80 per cent of Royal Mail letters revenue subject to price controls. A range of changes introduced in April this year has reduced this figure by just 5 percentage points. For example, Postcomm had previously proposed to remove regulation from pre-sorted bulk packets and parcels of more than 500 grams, but when Postcomm reached its final decision, it deregulated only for items above 1 kilogram. This was despite Royal Mail evidence suggesting that there was significant competition in the market for items weighing less than 1 kilogram. Preventing overregulation is seemingly a shared aspiration, and therefore I hope that Amendment 60 will find favour. The current regulator is clear that it would rather not regulate where Royal Mail faces competition; our Amendment 60 will make it imperative that Ofcom does not do so.
My Lords, I am a bit bothered about the amendment that the noble Lord, Lord Young, spoke to because of the great difficulty for anybody to define “effective competition” in a statutory way. The competitive market for communications is very complicated. Ofcom is a very big and well established regulator that no doubt understands that market better than Postcomm did, but Ofcom still has to determine the regulatory framework that it is to follow. Work is going on in the last days of Postcomm that will not be completed until next year.
That is not the only point. Effective competition includes digital competition. Many other means of communication have been developed that have superseded the forked stick, and I think that this amendment is a step too far. I cannot support it.
My Lords, Amendment 60 would place a new duty on Ofcom to have regard to the need to avoid regulation where market forces and effective competition allow. I understand the rationale behind this amendment. Indeed, the Government firmly believe that the regulatory regime going forward needs to be as light touch as possible. This was made clear by the Secretary of State for Business, Innovation and Skills who, in a recent letter on the subject to the chairs of Ofcom and Postcomm, stated:
“Given the seriousness of the problems facing Royal Mail, I believe that a comprehensive reassessment of the regulatory regime is required in the light of developments in the postal and communications sectors to … look again at where regulation is needed”,
“determine what form that regulation should take if required”.
While sharing the view that regulation must be as light touch as possible, we believe that a duty such as the one imposed by Amendment 60 goes too far and could have some very undesirable consequences. These undesirable consequences could come about because there may be real reasons why it might not always be possible for the universal service provider to be allowed to respond to market dynamics, as my noble friend Lord Eccles has said. For example, there is the requirement to provide the universal service at an affordable and uniform price. However competitive the market may be, it is by no means certain that market dynamics would force the universal service provider to meet those requirements. As such, Ofcom may need to regulate to some degree to ensure that these requirements are met even if there were a fully competitive market across the full range of postal services.
Finally, I would like to remind your Lordships that Ofcom is already under a duty to keep regulatory burdens to a minimum under Section 6 of the Communications Act 2003. I hope that this will reassure the noble Lord, Lord Young, and that he will feel able to withdraw this amendment at the appropriate time and to support the government amendment in this group. I beg to move.
Amendment 59 agreed.
Amendment 60 not moved.
Amendments 61 and 62
61: Clause 28, page 16, line 10, at end insert—
“( ) The reference in subsection (3)(a) to the need for a provision of a universal postal service to be financially sustainable includes the need for a reasonable commercial rate of return for any universal service provider on any expenditure incurred by it for the purpose of, or in connection with, the provision by it of a universal postal service.”
62: Clause 28, page 16, line 10, at end insert—
“( ) In subsection (3)(b) “a reasonable period” means such period beginning with the day on which the provisions of this Part come generally into force as OFCOM consider, in all the circumstances, to be reasonable.”
Amendments 61 and 62 agreed.
63: Clause 28, page 16, line 14, at end insert—
“( ) The Secretary of State may direct OFCOM to take, or refrain from taking, specified action for the purpose of securing that, in the opinion of the Secretary of State, sufficient access points are provided throughout the United Kingdom to meet the interests of the public.
( ) The duty imposed on OFCOM as a result of subsection (4) is subject to any direction given under this section.
( ) The action that may be specified in a direction under this section includes the imposition of a regulatory condition consisting of or including provision specified in the direction.
( ) Before giving a direction under this section, the Secretary of State must consult OFCOM.”
My Lords, I shall also speak to Amendments 71 and 73, which stand in my name. I will also say a few words, if I may, on Amendment 63A in the name of the noble Lord, Lord Young, which seeks to amend my Amendment 63. I believe that these amendments will address concerns raised in this House about access to postal services in rural areas or by vulnerable groups. They also address questions raised in the other place about access by consumers to Royal Mail’s services.
The central concern of those who have raised such issues is: how can we ensure that people right across the country and from all walks of life continue to receive the high standard of postal service that they depend upon? It is with this in mind that we should look at Clause 28(4) of the Bill, which specifies that Ofcom’s duties include ensuring that there is,
“provision of sufficient access points to meet the reasonable needs of users”.
An access point here encompasses pillar boxes, post offices and,
“any … receptacle or other facility provided for the purpose of receiving postal packets, or any class of postal packets, for onward transmission by post”,
so Amendment 63A, in the name of the noble Lord, Lord Young, is not needed because “access points” in this instance includes post offices.
In determining the “reasonable needs of users”, Ofcom will conduct thorough research and analysis, and will naturally consult users in order to take their views into account. Ofcom will also be bound by its duties, which I have just set out. I am confident that this will mean that Ofcom’s requirements on the distribution of access points across the country will continue to ensure that all users can post their letters, packets and parcels in a convenient way. However, while we are clear that the reasonable needs of users is the right test—it flows from the EU directive and is the duty that we have placed upon Ofcom—it is conceivable that in some cases the Government may wish to apply different considerations. For example, we may have wider public policy objectives to consider, perhaps in relation to rural policy or small business support. Such broader public policy goals are quite rightly a matter for the Government, not for an independent sector regulator.
I therefore hope that your Lordships will welcome this amendment, which allows the Secretary of State to step in and require Ofcom to ensure sufficient access points throughout the United Kingdom to meet the interests of the public. The term “interests of the public” is not defined but would allow the Secretary of State to take a broad approach and ensure that the Government could intervene for a range of reasons, some of which I have just described. This is not an amendment that we would ever expect to use. Its inclusion simply serves as a failsafe to address the legitimate, albeit unlikely, concerns expressed by noble Lords. Given Ofcom’s wider duties under this Bill, for example on the financial sustainability of the universal postal service, this amendment also requires the Secretary of State to consult with Ofcom before making such a direction, in order to determine the consequences of such an action.
Amendments 71 and 73 clarify the procedure for making, varying or revoking this direction and any others that may be made by the Secretary of State under Part 3. Amendment 71 does not make a material change to Clause 60. The amendments to the general procedural provisions in Clause 63 simply mean that an express provision is no longer needed in Clause 60. I hope that your Lordships feel able to support these amendments. I beg to move Amendment 63.
Amendment 63A (to Amendment 63)
63A: Clause 28, line 4, after “points” insert “and post office outlets”
My Lords, we welcome government Amendments 71 and 73, which are welcome improvements. Amendment 63 would empower the Secretary of State—not simply Ofcom, as currently set out in Clause 28—to direct Ofcom to take appropriate action for ensuring an adequate number of access points. That is a welcome improvement on accountability. I also welcome the Minister’s assurance about access points including post offices, which is the subject of our Amendment 63A.
My Lords, I have every sympathy with the intention of Amendment 63A, which seeks to refine Amendment 63, so I am grateful for the noble Lord’s comments. We want to ensure that there is a post office within reasonable access of everyone in the country. That is absolutely this Government’s policy. As I said earlier, I can reassure noble Lords that access points in this instance include post offices. The amendment is therefore not needed, as the noble Lord has acknowledged, so I hope that he feels that he has sufficient reassurances to withdraw the amendment.
Amendment 63A (to Amendment 63) withdrawn.
Amendment 63 agreed.
House of Lords Reform Bill
My Lords, I sense that this might be a convenient moment in the proceedings for me to repeat a Statement made in another place by the Deputy Prime Minister. These are his words on a subject that interests all Members of this House, namely House of Lords reform. The Statement is as follows:
“With permission, Mr Speaker, I wish to make a Statement about the Government's plans to reform the other place. At the last general election each major party committed to a democratically elected second Chamber. The coalition agreement set out very clearly the Government's intention to deliver this, but the roots of these changes can be traced back much further. A century ago the Government, led by Herbert Asquith, promised to create a second Chamber,
‘constituted on a popular instead of a hereditary basis’.
There has been progress in the intervening years; the majority of hereditary Peers have gone, and the other place is now predominantly made up of life Peers. We should see ourselves now as completing that work. People have a right to choose their representatives. That is the most basic feature of a modern democracy. Our second Chamber, known for its wisdom and expertise, is none the less undermined by the fact it is not directly accountable to the British people. So today I am publishing a draft Bill, and accompanying White Paper, which sets out proposals for reform.
In the programme for government we undertook,
‘to establish a committee to bring forward proposals for a wholly or mainly-elected upper chamber on the basis of proportional representation’.
I chaired that cross-party committee and we reached agreement on many of the most important issues, although not all, but good progress was made, and those deliberations have greatly shaped the proposals published today. I would like to pay tribute to all the Members, particularly from the Benches opposite, who engaged with us in an open and collaborative fashion.
Let me also thank those individuals whose past work on Lords reform has laid the foundations for what we are doing today, particularly the right honourable Member for Blackburn and the noble Lord, Lord Wakeham. Rather than start anew, the Government have benefitted from their previous endeavours. Today’s proposals represent a genuine collective effort over time. The draft Bill and White Paper will now be scrutinised by a Joint Committee composed of 13 Peers and 13 Members of this House. It will report early next year and a government Bill will then be introduced.
The Prime Minister and I are clear; we want the first elections to the reformed upper Chamber to take place in 2015. While we know what we want to achieve, we are open-minded about how we get there. Clearly our fixed goal is greater democratic legitimacy for the other place, but we will be pragmatic in order to achieve it. So, we propose an upper House made up of 300 Members, each eligible for a single term of three Parliaments. Three hundred is the number we judge to be right, but this is an art and not a science. In the vast majority of bicameral systems, the second Chamber is significantly smaller. That arrangement helps maintain a clear distinction between the two Houses. We are confident that 300 full-time Members can cover the work comfortably. We are, however, open to alternative views on this.
The coalition agreement committed the Government to producing proposals for a wholly or mainly elected Chamber. That debate is reflected in what we are publishing today. The Bill makes provision for 80 per cent of Members to be elected, with the remaining 20 per cent appointed independently. The 60 appointed Members would sit as Cross-Benchers, not as representatives of political parties. In addition, bishops of the Church of England would continue to sit in the other place, reduced in number from 26 to 12.
The White Paper includes the case for 100 per cent elected. The 80/20 split is the more complicated option, and so has been put into the draft Bill to illustrate it in legislative terms. The 100 per cent option would be easy to substitute into the draft Bill, should that be where we end up. There are people on all sides of this House who support a fully elected Chamber, believing that an elected House of Lords should be just that. Others, again on all sides, take a different view, and support having a non-elected component to retain an element of non-party expertise, as well as to keep greater distinction between the two Houses. Personally I have always supported 100 per cent elected, but the key thing is not to make the best the enemy of the good. That approach has stymied Lords reform for too long. Surely we can all agree that 80 per cent is better than 0 per cent.
Elections to the new reformed House will be staggered. At each general election a third of Members will be elected, or a combination of elected and appointed. That is to prevent the other place becoming a mirror image of this House. In the Bill we set out how those elections could be conducted using the single transferable vote. The coalition agreement specifies only that the system must be proportional, and what is most important is that it is different from whatever we use in the Commons. That is so the two Chambers have distinct mandates; one should not seek to emulate the other. STV allows for that, and would give the upper Chamber greater independence from party control. Votes are cast for individuals rather than parties, putting the emphasis on the expertise and experience that candidates offer, rather than the colour of the rosette they wear.
We want to preserve the independence of spirit that has long distinguished that House from this one. I know some Members prefer a party list system, including opposition Members of the cross-party committee I chaired. We are willing to have this debate, and have not ruled out a list-based system in the White Paper. The Commons will retain ultimate say over legislation through the Parliament Acts. It will continue to have a decisive right over the vote of supply. In order for a Government to remain in office, they will need to secure the confidence of MPs.
The other place will continue to be a revising Chamber, providing scrutiny and expertise. Its size, electoral cycle, voting system and terms will all help keep it distinct from the Commons—a place that remains one step removed from the day-to-day party politics that, quite rightly, animates this House. What will be different is that our second Chamber will finally have a democratic mandate. It will be much more accountable as a result. Clearly, the transition must be carefully managed. We propose to phase the reform over three electoral cycles. In 2015, a third of Members will be elected, or a combination of elected and appointed. The number of sitting Peers will be reduced by a third—we are not prescribing the process for that. It will be up to the parties in the other place to decide. In 2020, a further third will come in under the new system, and then again in 2025. There are other ways of staging the transition; the White Paper sets out two of them.
To conclude, history teaches us that completing the unfinished business of Lords reform is not without challenges. Our proposals are careful and balanced. They represent evolution, not revolution, a typically British change. I hope that Members from all sides of this House, and the other place, will help us get them right. The Government are ready to listen, we are prepared to adapt, but we are determined in the end to act. I commend this Statement to the House”.
My Lords, that concludes the Statement.
My Lords, I thank the noble Lord the Leader of the House for repeating the Statement made in the other place by the Deputy Prime Minister. As I understand it, although the Deputy Prime Minister is the prime mover behind the proposals in front of your Lordships' House today, he apparently feels the need to distance himself from them. Indeed, he is passing the torch of toxicity to the Leader of this House, in which case I offer my commiserations to the noble Lord.
I suspect that for many Members of your Lordships' House these proposals have a ring of familiarity about them. That is partly because the Government started leaking them in detail pretty early on. We have seen repeated leaks in recent weeks, culminating in a virtually line-by-line account in last week's Guardian of such detail that the Leader of the House was forced to disavow in this House yesterday, in advance of today's publication, one of the whizz-bang new ideas—that Peers could be removed from this House by lottery.
The Times tells us this morning that the Deputy Prime Minister has been busy over the past few days watering down his own proposals, while other media outlets report that the Deputy Prime Minister is to argue today for a 100 per cent elected House of Lords, so in effect, at the very moment he is promoting his new policy, he is taking the opportunity to argue against it. While this juvenile japery is entirely proper for party political conferences, fundamental reform of the constitution of this country, the Parliament of this country and the politics of this country is simply too important to be left to this clowning about.
It is, by the way, a discourtesy to this House for proposals for further reform of your Lordships' House to have been given to any and every journalist who asked to be told about them before they have been placed before this House itself. However, these proposals are not only familiar because they have been so comprehensively leaked by the coalition. They are familiar because most aspects of the history, argument and practice of reform of your Lordships' House are familiar; few areas of the argument over reform have not been exceptionally well trodden over the past 100 years. That is not to say that the issues involved in further reform of this House are resolved. They are certainly not resolved by the proposals that have been published today, and they were certainly not resolved by the group established by the Deputy Prime Minister to consider these issues. I took part in that group, along with opposition colleagues from the other place. The purpose of the group was to produce a draft Bill, and I have to tell the House today that it did not do so. Indeed, I can inform the House that the group has not met since November—six months ago.
I saw the Bill for the first time when I came into the Chamber this afternoon. Make no mistake, this is a government Bill. Indeed, the glum faces on the Conservative Benches suggest that this is not even a coalition Bill. This is a Liberal Democrat Bill—if it is a Bill at all. We were promised a Bill; we were in fact promised a draft Motion “by December 2010”, according to the coalition agreement. A little while ago that started to be transformed into a Bill and into a White Paper. Now what we have before us today is a White Paper—a very green White Paper, at that, with green ink on the cover—at the back of which is tucked a little draft example of what legislation could look like, with the real legislation to come later.
What a difference a year makes. You start off roaring like a mountain lion about the greatest programme of constitutional change since the Great Reform Act 1832, and 12 months later you bring forward the little mouse that the Deputy Prime Minister has published today. Constitutional reform is indeed a difficult subject, and reform of your Lordships’ House is one of the most difficult aspects of all. It can be done, it must be done, but it must be done carefully, and it must be done by consensus, bringing as many people along with it as possible.
I pay tribute to perhaps the most significant reform of your Lordships’ House achieved over the last century—the introduction of life Peers, which transformed this House from a failing, moribund institution to something that, as the Government felt last week over the Police Bill, can have a real impact on the Government of the day. That reform, of course, was brought by a Conservative Government, and I pay tribute to the clear and apparent reforming zeal of the Conservative Benches in both this House and the other place for further House of Lords reform. Indeed, let me quote the noble Earl, Lord Ferrers, who, as well as having a good week with his book serialisation, was quoted in the Times this morning as follows:
“They can have a three-line whip but we don’t have to go along with it. If they tell us we have got to vote for this elected Lords, the majority of Tory peers would say we’re not going to. People might start causing trouble on other Bills. The Lib Dems made us have the AV referendum and got a complete drubbing; now they’re going to start wrecking the House of Lords. It’s mad”.
With support like that on the government Benches, the Leader of the House is clearly going to have the easiest of times getting this legislation through this Chamber. It will be a complete breeze. The real roadblock to reform of this place will be the Deputy Prime Minister’s coalition partners on the Benches opposite. The Conservative Party was the only party at the last election not to commit to a fully elected House of Lords in its manifesto. I know that the Leader of the House is himself utterly committed to Lords reform; 100 per cent committed. Perhaps today he is 80 per cent committed—I am not too sure. I do not for a single second believe that for him and Lords reform, his favourite part of the garden is the long grass. I wonder whether the Leader can confirm that there will not only be a debate in this House on these proposals, but that sufficient time will be provided for that debate—two days, perhaps even three, because these are serious matters. My own experience of the group led by the Deputy Prime Minister was that there was a whole range of issues that were so difficult that not only was agreement difficult but there was no serious or substantive discussion on some of the most difficult issues. So there was no detailed discussion in the group about the powers of this House in relation to the other place. Can the Leader, therefore, indicate what powers the Government actually want a reformed House of Lords to have?
We on these Benches welcome the proposal to establish a Joint Committee of both Houses to consider these issues in detail. The Government must avoid the rushed and piecemeal approach that has characterised their constitutional reform agenda so far. It is essential in considering these proposals that proper agreement is reached on the relationship between the two Houses and on the powers and privileges of each House. The Joint Committee will be essential for that. I have said many times that I thought that the group chaired by the Deputy Prime Minister should have included a representative of the Cross Benches. I commend the Government for their proposal that the Joint Committee should include representatives of both the Cross Benches and the Bishops’ Benches when it is established.
Can the Leader confirm that the Joint Committee will include as part of its remit the provisions of the previous Joint Committee on Conventions, chaired by my noble friend Lord Cunningham of Felling, and that in the light of the publication of these proposals the conventions will indeed have to be looked at again? Do the Government believe that the relationship between the two Houses, as set out in the conventions, and the powers and functions of both, should be codified? In terms of timing, can the Leader confirm that it would be inappropriate constitutionally for the Executive to suggest any limit on the time that a Joint Committee of both Houses of Parliament should take in considering these views? Can the noble Lord confirm that he wants these reforms to be on the statute book by the next election? Will he confirm whether the Government would use the Parliament Act in relation to these proposals?
Constitutional reform is difficult to get right. I believe that the last Labour Government got a lot of it right with a new Parliament for Scotland, a new Assembly for Wales and devolution for Northern Ireland. I am proud to proclaim our record on reform of your Lordships’ House—the removal of the majority of hereditary Peers, an elected Speaker, the separation of powers with the creation of a new Supreme Court in place of the Appellate Committee here, and the creation of independent Peers through the independent House of Lords Appointments Commission.
In terms of the Government’s Statement today, the country two weeks ago comprehensively rejected the AV system. Is the Leader seriously suggesting that his Government should impose a system of PR for the second Chamber without consulting the electorate? If indeed no Peers would be forced to leave the Chamber until 2025, what does he predict the maximum size of the second Chamber to be in the interim, and what will be the financial cost? Will the Government continue to appoint large numbers of new Peers to this House in line with the provisions in the coalition agreement? What do the Government believe is the role of Bishops in a reformed second Chamber?
These and similar questions are difficult and complex issues that have vexed the minds of many constitutional reformers over the past 100 years. In that light, I look forward to the response from the Leader. At a time of austerity and cuts, constitutional reform is understandably not an issue on most people's minds. However, constitutional reform is about how power is exercised in modern Britain, so it is vital that we get it right.
The Deputy Prime Minister declares himself in his Statement, as repeated by the Leader of this House, to be “ready to listen” and “prepared to adapt”, but to be,
“determined, in the end, to act”.
Determination to act is a very fine thing, but a determination to get it right is finer still. We on these Benches are committed to the reform of your Lordships’ House, but we do not believe in reform for reform’s sake. We want the right reform, and we want to get that reform right. That is why we believe, for example, in putting the substantial reform of this House to the people in a referendum—not today, not now, but when we have real reform before us; not today’s damp squib, not today’s little mouse, but reform, like Labour’s constitutional reforms since 1997, that improves the politics of this country, improves the governance of this country, and improves what we, as politicians, are here to do.
My Lords, I, too, thank the Leader of the House for repeating the Statement and, indeed, for the courtesy of briefing me before it was made first in the other place.
At a recent meeting of Cross Benchers when, not surprisingly, House of Lords reform was discussed, three phrases came up time and again. They were: independence is good for democracy; form follows function; and it is perhaps too rigid to equate democracy with elections alone, or elections alone with democracy. There are other forms of representation that could be considered to be democratic.
We now have the long-awaited White Paper with draft proposals, and the first thing to say is that the Cross Benchers, on whose behalf I am sure I am speaking, very much welcome the proposed 20 per cent independent element. We cannot but be happy about that and, indeed, about the fact that there is to be a statutory appointments commission. However, it is fair to say that there is concern about the elected way forward for this Chamber. If we agree—and perhaps most of your Lordships do—that the major function of the House of Lords is to revise and scrutinise legislation, an obvious response to the question of how best we can do that is by having available those who have relevant and current expertise in a wide range of areas. This, to my mind, necessarily means a part-time House packed with Members from the arts, sciences and humanities, with writers, film producers, IT experts, legal, medical and social welfare experts, distinguished scientists, philosophers and financiers, and those from the more technical professions to deal with increasingly technical legislation.
It would, I suggest, be difficult to achieve that by elections alone. It is more likely that there would be a greater number of politicians from the parties at the expense of the specialists whom I have already outlined. Although I would certainly not go as far as the late Michael Foot in describing a fully elected second Chamber as a “seraglio of eunuchs”, an elected House would mean more politicians—and, as Sir John Major wisely said, if the answer is more politicians, then the question is wrong.
Surely the outcome of an elected House would be to give it more political power than it currently has, despite what is said in the White Paper. That would be the inevitable result of an elected House or even a partly elected House, and I think that it would eventually result in the power of veto, otherwise why undertake such radical change? What would be the point?
Power is, as we all know, a tricky area and will have to be thoroughly addressed and resolved by the proposed pre-legislative committee. The issue of powers is so fundamental and this is so radical a proposed change that it may be justifiable to rephrase the question of reform to one of whether the House of Lords is in fact necessary at all. What I mean by that—it may not be a view shared by the Cross-Benchers but it is my view—is that I would be much more in favour of abolishing the House of Lords altogether and appointing external scrutiny committees than having an elected Chamber because I cannot be convinced that an elected House would be able to do its work better than the present House.
That said, there will be time to examine the proposals in far more detail. Once again, I welcome the inclusion of an independent element, which I trust will emerge as a truly independent element and not merely one for the purpose of rewarding the great and the good.
My Lords, I, too, thank the noble Lord the Leader of the House for bringing this Statement to your Lordships’ House. As noble Lords would expect, we on these Benches welcome the proposal that, if there is a partly appointed House, a smaller number of Church of England Bishops will remain as full Members, allowing for the smaller number of Peers in general. We stand ready and welcome the proposal that one of our number should be part of the Joint Committee. However, it is amazing to me that, as we have heard, the committee that has brought the Bill forward has not worked out or prescribed, or even suggested, how that lessening of the number is to be achieved. For many Members of your Lordships’ House, that will be one of the most crucial questions. How are they to be—I am trying to find a neutral word—excluded? It was very coy of the Statement to make no such suggestions.
Many of your Lordships know that right through this process the Bishops’ Benches have spoken about the place of the Bishops only at the end of all the papers that they have been brought forward. That was the case with the paper produced for the Deputy Prime Minister’s committee by our convenor, my right reverend friend the Bishop of Leicester, at the end of July last year. Our interest throughout has been, and continues to be, effective government, holding the Executive properly to account, and the proper scrutiny, review and revision of legislation. If those are to remain, the prime focus of this House, alongside ensuring that the House of Commons does not seek to take all power, must be much of what the noble Baroness, Lady D’Souza, has just set out. That is absolutely critical. Those points were made to the committee—albeit, noble Lords will not be surprised to hear, in slightly less trenchant terms—in the submission of my right reverend friend the Bishop of Leicester.
I did not have the opportunity of seeing the material beforehand. However, I did a very brief scrutiny of the document, which says that, were there to be a House of 300, its Members should all be full time. Of course, Bishops will not be full time and nor will the 20 per cent of those who will have made their reputations and gained their expertise outside the world of party politics—if that is to be the number; my belief is that that is far too small a proportion. That seems to be a straight contradiction in the material that is put before us. The information recently noted—that some 40 per cent of the amendments to legislation brought forward in your Lordships’ House have been accepted and become law—only underlines the critical importance of having a competent, widely experienced upper House of Parliament, full of a variety of expertise. I am very puzzled to see how that can happen, though it is absolutely necessary if your Lordships’ House is to be an excellent body of scrutiny, review and revision, with a sizable proportion made up of those who are not already committed to the party structure.
The Statement that we have had repeated in this House said very little about the cost. I note the green White Paper—I cannot believe that the noble Baroness is the only one of us who takes as significant the green print on the front. There are pages and pages in it about costs, tax and all sorts of things, which seems a very strange thing to be leading into at this stage in this country’s history when so many other things are under such enormous financial pressure. I hope that, as the discussion continues, those on our Benches—of whom I shall not be one because I am soon to retire—will want to contribute very fully on the kinds of questions that both the noble Baroness, Lady Royall, and, very particularly, the noble Baroness, Lady D’Souza, raised. We shall be working very particularly on good and responsible governance and, in the strongest possible sense, on legislation being expertly and carefully scrutinised. I find it difficult to see how even an 80 per cent elected House will be prepared to bring the expertise and to give the time to the hard, line-by-line work that this House undertakes.
Lastly, I shall not use the tough words of the late Michael Foot any more than the noble Baroness, Lady D’Souza, did, but I find it hard to think that there will be people prepared to stand for election for this kind of role when—much though we may regret it—the reputation and standing of elected politicians is so remarkably low. Sheer wishful thinking is coming from all three political parties in so many different areas. The role of the Cross Benches and—dare I say it?—the Bishops over these next many years of discussion will be very important.
My Lords, on behalf of the whole House, I pay tribute to the right reverend Prelate who, after 15 years as a Member of this House, will retire at the end of this month. Although he will be remembered for many great speeches, I am sure that his last contribution will be quoted on many occasions. The right reverend Prelate raised some very important issues on the full-time role of Members of this House once elected, on the rationale behind the proposals to have an elected House and on whether it would continue its scrutiny role. I see around me in this House many Members who have stood for election in another place and in other elected Parliaments and Assemblies, and they have the skills of scrutiny, so there is no reason why we should not be able to elect people to sit in this House who would have similar skills.
The question about full-time politicians is also important. What is intended by this is the expectation that those who stood for election would have the time available to devote themselves full-time to this House while the House is sitting; namely, around 150 days a year. It would not be a full-time job in the same way as being a Member of the House of Commons is a full-time job, with all the coalface representative functions of constituencies on the ground.
I also welcome the words of the Convenor of the Cross-Bench Peers in welcoming the 20 per cent option, continuing the role of the Cross-Benchers and the appointed element with a statutory Appointments Commission. Of course I understand her concerns about the role of an elected House, and many others around the House will make that point.
There is a rationale for an elected House: it is to give legislators in this House the authority of the people who would elect them, to make the powers of this House stronger and to make this House more assertive when it has that authority and the mandate of the people. The noble Baroness said that it would have more political power, and I think that is right. It is one of the essentials of doing this. All of us who are in favour of an elected House should recognise this.
That is why I was so disappointed by the Leader of the Opposition, the noble Baroness, Lady Royall, and underwhelmed by her contribution. The reason why this White Paper is presented today is because there is a political consensus right across the parties—the Labour Party, the Liberal Democrats and the Conservative Party—all of whose elected representatives stood on a manifesto in favour of a democratically elected second Chamber, but you had to strain your ears to hear that from the Leader of the Opposition this afternoon. Indeed, the noble Baroness did not tell us that the Labour Party’s position is now to have a 100 per cent elected House. She did not tell us, nor did she explain, why she and her party see no role whatever for the Cross-Benchers in this House and believe that they should be removed immediately, nor any role for the right reverend Prelate and his colleagues. “No Bishops”, says the Labour Party sitting opposite. I am glad that the noble Baroness is now nodding in agreement. I wish she had said that in her statement.
The noble Baroness did ask several questions, which I am very happy to answer. Today is a day to deal with the Statement and the immediate questions. There will, of course, be a requirement for debate, and it is one which the Government are very happy to agree to. A one-day debate—two days, if required—will be made available, probably within the next four or five weeks, and an early announcement will be made.
The Joint Committee of both Houses will be set up fairly soon so that it has an opportunity to meet before the Summer Recess and decide on its work programme. As I said in the Statement, it will be made up of 26 individuals. From the House of Lords, it will include Members of the Cross Benches and a Bishop in order not only to represent their views but to share their experience, knowledge and undoubted wisdom.
The noble Baroness, Lady Royall, asked about the powers. It is an important assumption that underlies the White Paper that the powers of the existing House should not be changed it if it were to be elected or partly elected. There is one very good reason for that. If I were to propose that an elected Chamber should have less power than an appointed House, that would begin to look ridiculous. Of course, over time, the relationship between the two Houses may change. It already has changed over the course of the last 20 or 30 years. There is no reason why it should not do so in the future.
The noble Baroness, Lady Royall, asked whether the Joint Committee would be able to examine the report of the noble Lord, Lord Cunningham. Of course, it will be entirely up to the Joint Committee to decide. While it is in accordance with precedent for the Government to invite the Joint Committee to produce its report by the middle of February of next year, it would be entirely up to the Joint Committee to take a view as to whether that was possible. I hope that this House and another place will co-operate in setting up a Joint Committee to look at the proposals in a sensible way and give it the kind of expertise in pre-legislative scrutiny that I know so many noble Lords are keen that we should demonstrate.
The noble Baroness also asked about the Parliament Act. The Parliament Act is a process that comes into effect when the two Houses are in disagreement with each other. At this stage, there is no Bill before Parliament and there is no disagreement between the two Houses. It is therefore impossible to tell whether the Parliament Act would be used. If, or indeed when, the Government come forward with legislation, which I hope will be supported by the noble Baroness and her party, as with all government legislation, the Parliament Act is always a fallback.
Finally, the noble Baroness asked about the system of proportional representation. It was a bit odd for her to suggest that if it were to be PR, there should be a referendum on it as one of the proposals for PR was proposed by her party—namely, a list system which means that you vote for a party as opposed to individuals.
I hope that I have covered the ground reasonably well as regards those who have spoken. There will now be 40 minutes for me to reply to individual Peers, which, as you can all imagine, I am looking forward to immensely.
We have got 40 minutes. Let us show ourselves on our best behaviour. I suggest that the noble Lord, Lord Cunningham, asks first, and then perhaps we can hear from the Liberal Democrat Benches.
I am grateful to the noble Lord. Can I remind the Leader of the House that the Conventions of the UK Parliament report was unanimously approved by the committee, unanimously approved by your Lordships’ House and then unanimously approved in the other place—a unique record for any such report? That report, inter alia, said that if this House, or part of it, were to be elected, and people had a mandate, it would be bound to call into question the relationship and the conventions operating between the two Houses. Indeed, the report went further and said in paragraph 61,
“should any firm proposals come forward to change the composition of the House of Lords, the conventions between the Houses would have to be examined again”.
That was a decision of both Houses of Parliament. Does the Leader of the House not recognise that all the evidence underwrites these conclusions of the committee, and not only in our country, if we look at the relationship between the House of Representatives and the Senate in the United States of America or between the Japan Diet’s House of Representatives and House of Councillors? They moved to change their powers in the relationships just as this House with an elected mandate would seek to do, with the most profound consequences for the governance and the constitution of our country.
My Lords, I entirely agree with the noble Lord. His report was extremely useful, was well received in both Houses and is a testament to his skill as a chairman. I dare say that he will be called upon again to examine many of these issues. It will be up to the Joint Committee whether it wishes to examine that precise aspect of his report on conventions. During the transitional period between the wholly appointed House and an elected House, over 10 or 15 years, I fully expect the conventions and agreements between the Houses to change, to evolve and to adapt to different circumstances; it would be very strange if they did not do so. I also think that both Houses will be able to develop a mature relationship so as to retain the best of what we have now, but, as I said earlier, it would mean a more assertive House with the authority of the people and an elected mandate.
My Lords, I thank the noble Lord for repeating the Statement made earlier in the Commons by my right honourable friend the Deputy Prime Minister, Nick Clegg. The Statement gives us an opportunity for the first time to focus attention on some of the key issues that this House has debated from time to time. I detect much amusement, but let us not forget that there are some very serious matters on which there is a general consensus in this House; for example, matters relating to the statutory Appointments Commission and the preservation of an independent element among its membership. The key point that we cannot forget is that this is a draft Bill accompanied by a White Paper. It is evolutionary and consultative in its content; it addresses the manifesto commitments, whether we like it or not, of all three parties; and it removes the suspicion and hype that have arisen from misrepresentation in some recent press articles.
The Statement rightly emphasises the options that exist for the political composition of the House and its elected elements. It offers options for the method of election and the numbers required effectively to carry out Lords functions. Let us not forget that it is not simply for this House to determine what it wants. The other House, too, has an interest in how this matter can be taken forward. Will the noble Lord ensure that the terms of reference of the Joint Committee provide for Members of both the House of Lords and the Commons to be consulted, so that it can take a constructive approach in reaching its final conclusions?
My Lords, I readily agree with my noble friend, most particularly that these are serious matters on which a great deal of debate has been expended over the years and that there is a good deal of consensus on the way forward. I also agree with him about the Joint Committee; it is important that it should work and consider these matters, bringing together all the knowledge and experience that senior parliamentarians would have and with an aim of trying to improve on the draft Bill and some of the options outlined in the White Paper.
My Lords, my noble friend has given a great account of the Deputy Prime Minister’s proposals for the House of Lords, which we will all of course study very carefully. However, a very important issue is the effect of the weakening of the House of Commons resulting from these proposals. Does my noble friend consider that to be a proper subject for the Joint Committee to consider in the work that it will shortly undertake?
My Lords, my noble friend has had years of interest in this issue—not only in Parliament but on the royal commission, which completed its work just over 10 years ago.
I have long believed that giving this House an electoral mandate would make it stronger, more independent of party and more assertive. That would obviously have an impact on the Executive and on another place, but whether it would be weakening or strengthening I am not sure. Many people argue that the House of Commons and the Executive have become too strong and that this could be one way of changing that balance. I believe that the Joint Committee should examine the issue.
Many commentators believe that the question of the reform of the House of Lords affects only this House. It does not. It affects both sides of the building and I am sure that Members of another place will take a great deal of interest in the announcement that has been made today.
My Lords, I noted with interest that the noble Lord, Lord Strathclyde, emphasised that the Statement he was repeating belonged to the Deputy Prime Minister; he did not imply that he agreed with it.
Can the noble Lord confirm that no senior Member of your Lordships’ House will be compelled to waste their time on a Joint Committee—including, perhaps, himself as a senior Member? When he is considering this issue, will he be careful not to take it for granted that any leader in either House can speak for all the Back-Benchers in this House?
The noble Lord emphasised the accountability and democracy of an elected House. Does he accept that the difference might be marginal when under the list system—STV or whatever—candidates are selected initially by political parties? How different will that be from the current situation where Members are appointed by leaders of political parties and/or an independent commission? What difference does he see between the two? Will he at some time have it in mind to let your Lordships into the secret of how during the transition the membership of the House will come down to the 300 that he has in mind?
My Lords, when the noble Lord reads the White Paper he will certainly find the answer to his question on transition. It proposes one option and provides for two alternatives which the Joint Committee and the noble Lord will wish to examine.
I can confirm that no one will be compelled to sit on the Joint Committee. However, there is a great deal of interest. If the noble Lord wished to sit on the Joint Committee—I am sure he would be an eminent member—he should address himself to the leader of his party.
Of course I recognise that political party leaders do not necessarily speak for their Back-Benchers in this matter—not only in this House but also in another place. One of the hallmarks of this debate has for many years been the divisions within parties rather than between parties. Sometimes it leads our leaders to believe that because they can reach a consensus between themselves, everyone else will sign up to it. I do not believe that and I am well aware of the divisions that exist. That is why I hope that when the Joint Committee is selected it will show a balance of views and interests across the House and between the parties because that is how we can best use the knowledge in this House.
I agree with the noble Lord on the list system. One of the reasons I would oppose a list system is because it is simply appointment by party by another name and I am not sure that it would be worth going through that process. We are, however, as a coalition committed to a system of proportional representation, on which I am not an expert. However, the Deputy Prime Minister—who is—is very keen on STV.
Does my noble friend not realise that the inevitable effect of following these proposals and having two elected Chambers will be to introduce into this country the worst features of the American constitution without the mediating powers of the President, which can resolve conflict between them? Secondly, as this is a matter for both Houses and is of supreme constitutional importance, throughout the proceedings on these proposals and any other proposals connected with them, will there be a free vote of both Houses of Parliament on the merits of them?
My Lords, my noble friend is entirely entitled to his view and the comparison he makes between the Senate and the House in the United States. However, there are many examples around the world of bicameral systems with two elected bodies which manage to sort out their differences, and I am sure that it would not be beyond the wit and wisdom of these two Houses to be able to find a way through that. If a Bill came forward it would be a government Bill and would be treated as such, but no final decision has yet been taken as to whether there should be a free vote and it would not be taken until we proposed a Bill.
My Lords, how would an elected second Chamber improve the performance of Parliament? Why would an elected, or a predominantly elected, second Chamber be better than this House—at debate, scrutiny and revision, and holding the Executive to account?
My Lords, that is a central question in this debate. The leadership of the noble Lord’s party and mine and the Liberal Democrats are so keen on an elected House because they believe philosophically and rationally that at this stage, 100 years after it was first mooted, it is time to move on to a House selected on a political basis. Why? Because political authority, which we wield in this House, should only be wielded with a clear mandate of the people. Whether it would make things better is a good philosophical question which is very hard to answer. I dare say some things might be better; some things might be worse. But overall, when a second Chamber took a decision with the backing of the electorate it would be more authoritative and would have greater impact on another place and on the Government of the day.
My Lords, if the determination to follow and ensure democracy in this country is the aim of the Government and of us all, why is this suggestion now before us as a serious move when not one indication of public demand for this change has been made? In the many years I was a Member of the other place, I got not one request for this, either in a surgery or in thousands and thousands of letters. There are no marches; there are no banners waving about it. Where did it come from?
My Lords, 100 years ago the Parliament Act was passed, which certainly recommended that we should move forward on a popular basis. It is true that in the last 10 or 15 years there has been increased interest in electing a second Chamber; indeed the previous Government had numerous Joint Committees and White Papers on it. For those of us who argue for an elected Chamber, it is also true that it is very difficult to do so in the light of the fact that this House, currently constituted, does the job it is asked to do extremely well and effectively. Therefore I rely on the answer I gave the noble Lord, Lord Howarth: that it is ultimately about authority of the mandate and giving us the ability to wield that authority more effectively.
Can I make it clear that I am in favour of a 100 per cent elected House? Does the White Paper make reference to an indirectly elected House? Does it rule it out? Does the Leader of the House have a view on the question of an indirectly elected House?
My Lords, the White Paper does not rule it out because it does not mention it. I am not quite sure what the noble Lord intends by it; there are so many different models for indirect election, but the White Paper is very much in favour of giving a direct vote to elect Members of this House.
My Lords, my noble friend has dealt with one matter very clearly in his answer to the noble Lord, Lord Howarth. The transformation by increasing the electoral component here will certainly not lead to an improvement in the ability of this House to do the functions that it has done so well for many years. He has also conceded without any hesitation that movement in that direction would increase the liability of this House demanding the right to impose its will more strongly than it has in the past. Those two together fundamentally transform the structure.
You could even compare it for a moment with the structure in our criminal courts, where there is no doubt that it is the judge who determines the technicalities, the detail and the framework within which most expert guidance can be given, but it is the jury who have the last word. In those circumstances, the judge as he comes to the end says, “It is entirely a matter for you, members of the jury”. That is precisely the structure that we have in the relations between the two Houses at the moment; we would not dream of challenging the final verdict—after ping-pong—of the other place. That is the essential difference; they have the last word, and they must retain it as a power of that kind, while we make the contributions of the kind that we traditionally make in that context. Any change from that cannot and has not yet been justified by any rational argument.
My Lords, I have heard my noble and learned friend speak on many occasions on plans for reform of this House. He has done so always with integrity and very much in favour of the powers and composition of the House as it is. Even I am deeply impressed to hear him speak today and, in doing so, bring forward an entirely original analogy that he has not used before in describing the relationship between the two Houses. It is an eminently good one—I do not wish to argue about that—which is why I say that with an elected Chamber the relationship between the two Houses would change. It is up to Members of this House but also, most importantly, Members of another place to decide whether they wish to make that change.
My Lords, I wonder whether I could ask the Leader of the House to address more directly what I took to be the central point made by the noble Baroness, Lady D’Souza, and echoed by my right reverend friend the Bishop of Winchester. It was that a House of 300 full-timers would simply not have the expertise in the scrutiny of particular subjects that is afforded by the present composition of the House. In that case, how could this new House do its work as effectively as I believe this House does?
My Lords, there is no magic about the figure of 300, any more than there was magic about the 600 figure for the House of Commons. Many argue that the existing House is far too big, but nobody has a view as to what the exact figure should be. There are many examples around the world of second Chambers being smaller—and sometimes substantially smaller—than the primary Chamber. I think that we ought to be able to manage with 300 full- time Members if they were elected.
My Lords, the Statement says very clearly that people have a right to choose their representatives. If this House is to become a House of representatives, it will have to have the real powers to represent. The Leader of the House has spoken about the mandate of the people. In answer to the points raised by the noble Lord, Lord Wakeham, and the noble and learned Lord, Lord Howe, he said, “Yes indeed, the powers of the House would have to change if there were to be an elected House, or an 80 per cent elected House”. Can he explain how his commitment on that sits alongside paragraph 7 of the White Paper, which states:
“The Government believes that the change in composition of the second chamber ought not to change the status of that chamber as a House of Parliament or the existing constitutional relationship between the two Houses of Parliament”?
Surely those things cannot be true. This House cannot have more powers to do the job as a House of representatives and the relationship between the two Houses remain the same. The two are completely inconsistent, and I would be grateful if the noble Lord would explain it.
My Lords, paragraph 7 is in the context of the powers of the House not changing. I made that plain in the original Statement, and I make it plain again. However, the relationship between the two Houses would evolve over time. I see no difficulty in that. It has already evolved over the last 20 years and I think it would continue. The only basis for having an elected House would be to give this House greater authority to use its powers more assertively and effectively.
My Lords, I wonder whether my noble friend has read the report published last week from the House of Commons Political and Constitutional Reform Committee, which said,
“those proposing radical reform need also to address other incremental, urgent reforms that would improve the functioning of the existing House of Lords”.
Does that not echo the recommendation about retirement in the report of the committee that his noble friend Lord Hunt reported on a few weeks ago? Since my Bill deals with these issues, has already had a Second Reading and is just awaiting Committee stage, why do the Government not take it over and get on with it?
I hope that my noble friend is pleased that the Procedure Committee will very soon, I hope, bring forward a proposal for permanent voluntary retirement from this House. The White Paper also lays out a statutory appointments commission if we should still have appointed Members. If we are to go forward on this, it is likely that we would spend many days and weeks on it. Therefore I wonder whether my noble friend really feels the need to progress with his own Bill.
My Lords, obviously what we are dealing with is an important constitutional issue. That is what we need to concentrate on. I want to put two specific points to the Leader of the House, because while I do not care too much about the new elected Members, I care about my friends who are here now.
My first point is that, when we come to the first election, the draft Bill proposes in Schedule 6 that two-thirds of the existing Members would be considered transitional Members. Accordingly, one-third of my friends—I cannot see which ones—will not be here any more. I really think it is essential to be clear how it is going to be achieved. The Leader said that that is dealt with in the document but I cannot find it, even though I read very fast.
My second point is that this document sets out the membership of the House and includes the transitional Members. Again, in Clause 59, the draft Bill says that all Members listed at the beginning are to receive a salary. Accordingly, I assume that all my friends here who have not been slung out because they are not in the two-thirds will receive a salary. Would the noble Lord confirm that?
My Lords, it is likely that the salary would be set slightly lower than that of a Member of Parliament, but slightly higher than Members of the devolved Assemblies and Parliaments. It may be that the White Paper says what the noble Lord says, in which case it is an error. Transitional Members would continue on the same basis as currently—namely, they would receive the daily allowance.
On the question of transition, the draft Bill proposes that, with each third of elected Members coming in, a third of the House would depart. My noble friend Lord Steel has consistently said that there is a large number of Peers waiting to retire, so I suspect that a number of Peers would take the opportunity of the elections not to remain behind. Of those who did, if there were insufficient retirees then within the parties and the Cross Benches a decision would have to be taken. We have a precedent for that in 1999, when elections took place to reduce the numbers of Peers. There is no reason why that should not happen again.
My Lords, in supporting the move towards a democratically elected House, may I put two concerns to the Leader of the House? First, if we are to be elected once for 15 years there seems to me to be a singular lack of accountability. The point of being elected is that the voters should be able to throw one out and during those 15 years they will have no chance to do that. My second concern is that, if we are to have very large constituencies, who will determine the candidates? It will be not the ordinary people but the party machines. Could I urge on him that the constituencies should be small and that one should have to be re-elected to have proper democratic accountability?
My Lords, on the first point regarding accountability, what is envisaged here is to try and preserve the independence of party that is such a hallmark of this current House, but also to have the power and authority given by an elected mandate. While the noble Lord may be strictly right that there is no accountability if you cannot go back for re-election, those who would stand would make commitments to their electorate as to what they intended to do when they got here. I have some sympathy with what the noble Lord says about the size of constituencies and about creating the link between the elector and the elected Member but that is a matter which, quite rightly, the Joint Committee will wish to look at in detail before coming up with its own proposals.
My Lords, my noble friend’s recent replies—I feel very sorry for him—make me want to quote PG Wodehouse. This is not a half-baked scheme; it has not even been in the oven. Would he address the point that was just raised by the noble Lord, Lord Dubs? The abolition of this House and its replacement by an elected House, with people elected for 15 years by proportional representation but with no accountability, will immediately challenge the other place and will completely distort the balance within our constitution. The only comfort we can take this afternoon is that Clegg is no Cromwell.
My Lords, I have dealt with the question about accountability and 15 years. If the White Paper had proposed a first-past-the-post system, my noble friend could quite legitimately say that two Houses elected on a similar mandate could well clash far more than those elected on different mandates. It is up to my noble friend but I am sure that he does not think that PR is a more legitimate system than first past the post.
First, I thank the noble Lord for his elucidation of the thoughts of the Deputy Prime Minister, which I am sure he has done to the best of his ability, but could he help us further? Since the Executive under our constitution—the Government —are so by virtue of their ability to command a majority in the House under the democratically elected system, and since it is obvious that the Deputy Prime Minister considers that the electoral system of proportional representation with which this House would be elected better represents the common will, why, under the reform programmes would the Executive—that is, the Government—be chosen on the basis of a majority under first past the post in the House of Commons rather than under a majority under proportional representation in this House? Was he briefed on the Deputy Prime Minister’s thoughts on this?
My Lords, that is a clever argument, but it will not wash. There is no intention at all to change the primacy of another place or of the Government being able to govern by commanding a majority in another place. In fact, PR would preserve the system that we have here, whereby the Government do not have a majority.
May I warmly congratulate the noble Lord the Leader of the House, on the consummate skill with which he side-stepped the question of the possible invocation of the Parliament Act, were this House to afford a total challenge to the other place? Does he appreciate that, in the fox hunting case of some years ago, learned Lords expressed the gravest doubts whether a fundamental constitutional change could possibly be brought about by such a machinery? In the circumstances, may I suggest to him that that is a matter to be decided now, not when the cameral battle begins? Will he say whether the Government have taken legal advice on this matter, and if so, what that legal advice was?
My Lords, I cannot say whether or not the Government have taken legal advice on this specifically, but my reading of that judgment and my understanding of the constitutional position is that the Parliament Act would apply to a Bill brought similarly along the lines of the draft Bill published today.
My Lords, will the noble Lord accept that the part of his Statement in which he referred to Mr Clegg’s committee and that—as I think my noble friend the Leader of the Opposition said—it last met in November, is little short of scandalous, given that it purports to be representing different points of view? Based on the number of options that we have, what has Mr Clegg been doing since November —working out permutations of possibility?
My Lords, the Joint Committee—on which the noble Baroness sat and was such a distinguished and senior member—met, I think, on seven occasions. I cannot remember whether the last time was in November or December, but it is true that there has been a gap of several months before we have been able to publish this today. There is nothing in the White Paper with which the leadership of the Labour Party, the shadow Cabinet or indeed the noble Baroness would seriously disagree. It is a pretty good distillation of the consensus or, in some instances, the lack of consensus that was reached in that Joint Committee.
My Lords, can my noble friend confirm that there are many features of the current White Paper that simply repeat the features of the White Paper produced by Mr Jack Straw in the last Government? Can he also reassure the House that he has been told by the Official Opposition that they intend to conduct pre-legislative scrutiny with all the constructive contributions that we in this House take such pride in? Would it not be ridiculous if Members on the other side—or indeed any side of this House—attempted to obstruct or filibuster when at the same time they take such pride in saying that the other House should retain primacy? Can we be assured that the Government have been given an indication that they are all signed up to using this exercise, in the best traditions of this House, to undertake proper, constructive pre-legislative scrutiny of these proposals?
My Lords, I am sure the whole House will have heard my noble friend. I can confirm that it is my understanding that not only the Opposition but also the Cross Benches and everybody else who wishes to play a part in the Joint Committee will wish to do so most constructively to try to reach a good solution that would suit not just this House or the other place, but also the nation.
My Lords, is the Leader of the House aware that in the House of Commons this afternoon, in response to questions on this very matter, Ministers prayed in aid the fact that the present House of Lords is unsustainable on the grounds that its membership is approaching 800 and will go beyond that? Does he not agree that it is the present Government who are doing the majority of the appointing? The White Paper states that a statutory appointments commission should be available to deal with 20 per cent of Members, if they are appointed. Why can we not go forward with the Steel Bill and say that the present appointments, which would include a formula between the parties on a ceiling, should not go forward? The Government claim—even though we will obviously be here for some years yet—that it is unsustainable to have the present growth stampede, led by the Government, in changing the composition of the House.
My Lords, I do not know how long the noble Lord will be here, but there is no need to go forward with the Steel Bill if the intention is to have elected Members by 2015. We will spend probably the next Session and maybe even the Session after that on passing the House of Lords reform Bill.
My Lords, I congratulate my noble friend on how he has dealt with this matter today. May I press him on the answer he gave to the noble Baroness, Lady Symons? Throughout the Statement, he has been at pains to say that of course elected Members would change the relationship with the House of Commons. I have got only as far as page 7 of the White Paper, which says:
“We propose no change to the constitutional powers and privileges of the House once it is reformed, nor to the fundamental relationship with the House of Commons”.
Who should we believe? Should we believe what it says in the White Paper or what my noble friend has been telling us this afternoon?
My Lords, there is no tension between the two. All I say is what is obvious: in a House that is entirely elected, over time there will be evolution, as there already has been over the past 10 or 20 years. That is entirely natural and entirely in accordance with what is said in the White Paper.
My Lords, the noble Lord the Leader of the House has emphasised the statement in the White Paper that the intention is that the other place will remain the primary House in this Parliament. If the Joint Committee on Scrutiny concluded that it would be impossible to secure the primacy of the other place if your Lordships’ House were abolished and replaced by an elected Chamber, would the noble Lord consider it appropriate to proceed with the Bill?
My Lords, that is a very clever question—one that would allow me to indulge in much philosophical debate about the primacy of the House of Commons and the workings of the Joint Committee. The Government hope that the Joint Committee, when it is set up, will give the White Paper and the draft Bill serious scrutiny and examination. Of course it will want to look at peripheral matters, such as the role of the Parliament Act, that of the Cunningham committee, many other things and various alternatives. In the end, it will have to focus on whether this House is to be elected; if so, how it is to be elected; what it will be called; transition and so on. It will then put proposals to the Government. I hope it will do so in a most realistic way. Everything that I have heard this afternoon leads me to believe that the Joint Committee will have plenty of work to do.
Energy: Fourth Carbon Report
My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Energy and Climate Change. The Statement is as follows:
“Today, I am announcing that the Government propose to set an ambitious target in law to reduce greenhouse gas emissions in line with advice from the independent Committee on Climate Change. Signing up to an ambitious fourth carbon budget will result in no additional costs to the consumer during this Parliament. We will undertake a review of progress early in 2014 to ensure that our own carbon targets are in line with the EU’s, and we are working up a package of measures to be announced by the end of the year to help energy-intensive industries adjust to the low-carbon industrial transformation while remaining competitive.
By agreeing to the Committee on Climate Change’s proposed level, we are demonstrating our desire to drive the changes needed to turn the UK into a dynamic, low-carbon economy that is attractive to investors in the new and growing low-carbon sectors. We are also sending a clear signal to the international community that the UK is committed to the low-carbon economy. This will help us reach agreement in Europe on moving to a 30 per cent emissions reduction target, and build momentum towards a legally binding global climate change deal.
The Climate Change Act 2008 sets a target to reduce greenhouse gas emissions in the UK by at least 80 per cent from 1990 levels by 2050. The Act also requires the Government to set carbon budgets, which are limits on greenhouse gas emissions in the UK, for consecutive five-year periods. These carbon budgets must be set at least three budget periods in advance. They are designed to put emission reductions on an appropriate and cost-effective pathway to our 2050 target.
The first three carbon budgets were set in 2009, following advice from the independent Committee on Climate Change. The fourth carbon budget—the limit on emissions for the five-year period from 2023 to 2027—has to be set in law by the end of June this year. As advised by the Committee on Climate Change, the level we propose setting in law would mean that net emissions over the fourth carbon budget period should not exceed 1,950 million tonnes of carbon dioxide equivalent—a 50 per cent reduction from 1990 levels. As required by the Climate Change Act, once the fourth carbon budget has been set in law, we will publish a report setting out the policies and proposals required in the medium-long term to meet the budget, building on the strong foundation provided by our existing policies. This will take the form of the revised government carbon plan later this year, following the publication of the interim version in March.
The Committee on Climate Change advised that we should aim to meet the budget through emissions reductions in the UK rather than relying on carbon trading, such as under the EU Emissions Trading System or the purchase of international credits from projects abroad. We will aim to reduce emissions domestically as far as is practical and affordable, but we also intend to keep our trading options open to maintain maximum flexibility and minimise costs in the medium-long term. Given the uncertainty of looking so far ahead, this is a pragmatic approach.
Under the Climate Change Act, emissions reductions by the UK’s industrial and power sectors are determined by the UK’s share of the EU Emissions Trading System cap. This protects UK industrial and power sectors from exceeding EU requirements. However, if the EU ETS cap is insufficiently ambitious, this could mean placing disproportionate strain on other sectors outside the EU ETS, such as transport. To overcome this and to provide clearer signals for businesses and investors, Government will review progress towards the EU emissions goal in early 2014. If at that point our domestic commitments place us on a different emissions trajectory from the emissions trading system trajectory agreed by the EU, we will, as appropriate, revise up our budget to align it with the actual EU trajectory. In line with the coalition agreement, the Government will continue to argue for an EU move to a 30 per cent target for 2020 and ambitious action in the 2020s.
As part of the transition to a low-carbon economy, we need to ensure that energy-intensive industries remain competitive and that we send a clear message that the UK is open for business. Before the end of the year we will be announcing a package of measures for energy-intensive businesses whose international competitiveness is most affected by our energy and climate change policies. Rising electricity costs pose a risk to these sectors which are critical to our growth agenda. We will therefore take steps to reduce the impact of government policy on the cost of electricity for these businesses, allowing them to continue to play their part in delivering our green industrial transformation. In this way, we will ensure that that these sectors remain internationally competitive and that we send a clear message that the UK is open for business.
It is important to stress that the UK’s existing policies already put us on track to meet the first three carbon budgets. They also provide a strong foundation for the fourth carbon budget, implying no additional near-term costs. We are reforming the electricity market, making homes and businesses more energy efficient through the green deal, ensuring that new homes are built to a high energy-efficiency standard, encouraging the uptake of ultra-low-carbon cars, and setting up a green investment bank. Meeting the 1,950 million tonnes target we are proposing for the 2023-27 period is ambitious but achievable. By providing long-term clarity for investors, the fourth carbon budget places the UK at the leading edge of the global low-carbon industrial transformation. It will set Britain on the path to green growth. It will establish our competitive advantage in the most rapidly growing sectors of the world economy, generate jobs and export opportunities in these sectors, maintain energy security and protect our economy from oil price volatility. It is a framework not just for action on climate but for growth and prosperity”.
My Lords, that concludes the Statement.
My Lords, I thank the Minister for repeating the Statement and for his customary courtesy and co-operative approach to the issues. I know that he will understand how concerned we were that an issue of this magnitude could have been presented to Parliament as a Written Statement. I am very pleased that there was no hint of reluctance on his part to repeat the Statement to your Lordships’ House today.
Tackling the environmental impact of energy production and use, and energy security, are issues that concern and affect us all, whatever our politics. We broadly share similar objectives and commitments, although we may have differences in how to achieve them. The objective to reduce emissions of greenhouse gases by 80 per cent to 1990 levels with targets along the way to assure energy security for the future are crucial to the well-being and economic prosperity of this country. I welcome the fact that this Government have been prepared to continue the work started by the Labour Government when they set up the Committee on Climate Change, and I thank the Minister for his recognition—indeed his appreciation—of that.
I also thank the Committee on Climate Change for the work that it has done, not just on this fourth budget for the period 2023-27, but on its work to date, which has been of enormous importance. It is not an easy task to balance national and international environmental interests with the needs of the economy, and at the same time recommend environmental changes. As we have found, not everyone will welcome the changes that are recommended. They are challenging and can be difficult to achieve, but the Committee on Climate Change does not act in a vacuum and it makes it clear that it gives advice,
“based on the latest climate science, the evolving international framework, feasible and cost-effective emissions reductions …and plausible paths for 2050 targets”.
As the Minister indicated, this legislation for the current budgets has to be in place by the end of next month. I have three specific points for him, but first I would like some clarification on the review. If I understand him correctly—I am happy to be wrong on this—this report has only been accepted conditional on a review in 2014 that seeks to ensure that our own carbon targets are in line with those of the EU. I know that the Minister understands the need for certainty for business and for investors who will support the Government’s objectives, but is he aware of the sense that the Government lack such certainty? We have seen changes to the feed-in tariffs, the ending of the commitment to zero-carbon homes, delays and bickering about the green investment bank and, even worse, delays and bickering about this very report. I do not for a second doubt the noble Lord’s commitment—he has been very clear with this House—but I am sure that he will privately share some of the despair we feel about the lack of clarity on a number of issues.
If the review that is to take place in 2014 does not show that the EU is coming into line with the UK, does that mean that there is more than just wriggle room for the UK and that the entirety of the Government’s carbon budgets could be thrown out? That is our concern. Could that review completely change the results of the Government’s announcement today? Any enlightenment that the Minister can offer on this issue would be greatly appreciated.
I wish to raise three specific issues. First, we welcome the Minister’s indication of support for the energy-intensive industries. All of us understand their concerns, and they face the greatest potential competitive impact. Action to support those businesses is essential. It is clear that they are willing to and want to reduce their energy use. As well as contributing to our national emissions reduction targets it also reduces their costs. Any further information that the Minister can give on the package that will come forward would be helpful— when it is likely to come forward, and what discussions and consultation with the industry there will be. We would be keen to be kept involved as that matter progresses.
My second point is on transport. This weighty report of more than 400 pages highlights the significant impact that more fuel-efficient cars are having on government income from fuel duty and vehicle excise duty. It estimates a potential loss of up to £10 billion by 2030. The report then highlights the fact that this will create the need for fiscal rebalancing and suggests that because road congestion is likely to increase, road pricing is an option that the report says will have environmental, economic and fiscal benefits. However, the report also adds that this should be in addition to fuel duty, not instead of it. When the report was published back in December, the average price per litre of a gallon of unleaded petrol was 13 or 14 pence less than it is today—partly, but not just, as a result of the Government’s increase in VAT. In their acceptance of the report, are the Government really considering that the motorist should pay to use the roads as well as paying fuel duty and vehicle excise duty?
Will the noble Lord look at this issue again? If the car industry and the motorist play their part, and their actions have a real impact in reducing emissions, and as a consequence that reduces their contributions to the Treasury, it seems grossly unfair that they should be penalised for doing so through widespread road charging in order to raise the money lost to the Treasury through the actions we have demanded of them. That would create a disincentive to the motor industry and to the motorist. I am sure that that is not what the Government intend, but it could well be the consequence. We know that the car industry wants to play its part—there are new hybrid and electric cars for example. The survey by Road Pilot indicated that 46 per cent of motorists claim to have reduced their speed to save petrol and save money. We should not penalise them for doing so.
The third and final issue I wish to raise with the Minister is fuel poverty. The committee recognises that since its 2008 report rising fuel prices have significantly increased the number of people living in fuel poverty. The report predicts that gas and electricity prices are likely to increase even further and that household income growth will be slower than the previous committee report indicated. The current report recommends that this issue can and should be addressed through energy-efficiency improvements and other measures such as social tariffs, and arrangements such as winter fuel payments, which unfortunately were reduced in the Budget—after the committee’s report.
I appreciate that in the Energy Bill the Government are bringing forward the Green Deal and other energy-efficient measures. We have already considered the Bill in this House. As the Minister knows, we welcome the concept, but consider the Bill to be too weak in its ambition and scope, and too light on detail. I assure the Minister, your Lordships’ House and Members of the other place that we will work with all colleagues and with the Government to get the improvements this Bill needs.
I highlight the need to improve the provisions for the private rented sector, where fuel poverty and emissions are very serious matters. Therefore, I ask the Minister and his colleagues to consider the changes to the Bill that we have proposed to bring about energy-efficiency improvements for the private rented sector and to set minimum levels of energy efficiency for those properties in order to reduce emissions.
Written Answers that I received today from the Minister confirm that in the past year 127,930 households have been assisted by the Warm Front scheme, yet over the next two years, due to government cuts, this number will fall dramatically to around 47,000 and 45,000 respectively. Given that fuel poverty was specifically raised in the committee’s report, I ask the Minister to look at this matter again. In the light of the report that the Government have accepted, I seek an assurance that there will be no further reductions in winter fuel payments for pensioners.
My initial enthusiasm when I heard about the Government’s acceptance of the report has been somewhat dampened. I hope that the Minister can address some of the points that I have raised today, and I look forward to welcoming the Government’s response with great enthusiasm.
My Lords, I thank the noble Baroness for her excellent résumé of matters and, as always, for posing some very incisive questions. Of course, much of this builds on work carried out by the former Labour Government, and I applaud that. I also add my thanks to the Committee on Climate Change for its excellent fourth report.
The noble Baroness asked four questions. The first one concerned the review in 2014. As this Government intend to be the greenest Government ever, it is incumbent on them to lead by example. We know that Europe does not always follow our leadership but we will try to lead by example in every possible way and encourage it to adopt a 30 per cent target. For the sake of the prosperity of this country, it would be totally wrong if we ended up not agreeing to a 30 per cent target and having some of Europe marching out of line. The review gives us a fallback position if Europe agrees to, for example, a 25 or 35 per cent target. However, the intent is there in our desire to strive for greater carbon reductions and to show leadership, as indeed the previous Government did. I see in his place the noble Lord, Lord Prescott—one of the leading advocates in that area. The noble Baroness need not fear—I do not despair. I feel that we are marching forward very co-operatively and that things are going well.
The noble Baroness asked about transport. We have an issue with the Committee on Climate Change over moving to electric hybrid targets. The committee’s target is set at roughly 60 per cent by 2030. We think that it will be difficult to achieve that target. It has to be balanced fiscally, which of course is an issue for the Treasury. We are looking at that very closely in our review of the committee’s reports, and we are quantifying its suggestions, as one would expect. We do not necessarily disagree with the committee but we have come up with different figures, which we will look at and bring into law when we have had discussions with the committee. I should add that there are very few differences between us and the Committee on Climate Change, but it would be rare if there were no differences.
Fuel poverty is a fundamental issue, as we have discussed before. If the noble Baroness will forgive me, I will not get into a debate on the Energy Bill and go over the marvellous things that we discussed for hours on end, although we can doubtless look at them again at another point. The first, second and third carbon budgets had no effect on fuel poverty, although the fourth budget should have an effect with all the new measures that we are bringing in. The noble Baroness shakes her head. I know that she has read the document. I cannot remember the exact page but there is a paragraph on fuel poverty which I am happy to point out to her.
Finally, as the noble Baroness quite rightly says, we have to take into consideration the effect on the energy-intensive industries. They are very substantial employers. They fulfil great needs and are a requirement for this country. I listened to the views of a group of energy-intensive industries when they came to visit us in the House, which quite rightly they enunciated extremely well. I agreed that we would look at the matter as appropriate and report back on our commitment to them in October.
My Lords, I welcome the Statement. As someone who was a negotiator at Kyoto, I fully recognise the legal framework and commitment to targets. I recognise that the Government are accepting the Committee on Climate Change’s recommendation of 50 per cent to 80 per cent change by 2050. That is clearly a very ambitious target. It concerns me that the Government were committed to a legal framework that collapsed at Copenhagen. I worry that they are setting themselves a target for which they might be cheered at the moment but, when they do not achieve it, they will face derision from the NGOs and others. Is the Minister aware that the committee pointed out in its report that it had made such a recommendation to avoid the ups and downs in the global negotiations concerning climate change? It is more than an up and down. What took place at Copenhagen—and was confirmed at Cancun—is a complete reversal. There is no longer a legal framework that will be agreed to for at least a decade; it is now a voluntary one with voluntary targets. What worries me—and I see that the Minister has left the back door open—is that if Europe does not confirm its 30 per cent target, and I do not believe for a moment that it will, we will be faced with changing our position and face derision rather than cheers, which tends to undermine confidence in global negotiations.
There is no one more experienced on this issue than the noble Lord, Lord Prescott. He adds great value on the subject in this House. Describing the past is extremely interesting because I was at neither Copenhagen nor Cancun. The reality is, as he knows, that we have to set an example—as he did himself—and an aspirational target. We have been accused of not leading the way in Europe; now we will lead the way. We cannot have it both ways. We will put our aspirations down on the table as we did in Cancun. I pay great tribute to the Secretary of State, the right honourable Chris Huhne, for the way in which he brought the climate change issues back on to the agenda at Cancun, which, as the noble Lord rightly said, fell apart. Clearly, our fallback position is 20 per cent. We are comfortably going towards that 20 per cent. We feel that we can up the ante and show Europe how to do so, and 2014 gives us the fallback if we cannot achieve it. Those are our aspirations. I think that he would, broadly speaking, applaud them given the position that he tried to lead us to.
My Lords, this is certainly the announcement that we wanted to hear. I congratulate the Government on agreeing this target, which is important in terms of our leadership, as the Minister has so rightly said, but also in terms of keeping faith with the Committee on Climate Change, which is such a central part of the architecture. Having said that—and as a parliamentarian—it should not be taken for granted that the Government would accept every recommendation within the Committee on Climate Change’s report. This is the headline; this is the one that is important. However, all recommendations of such reports should be applied to the democratic process and decided on by Parliament rather than by the committee itself. However, I very much welcome the broad thrust of the Government’s agreement.
One of the ways to possibly change how things work that has been discussed and is in the Statement is carbon trading. Although the noble Baroness, Lady Smith of Basildon, seemed somewhat equivocal about it, I remind her that the way that this accounting should work was written in specifically by the last Government and was strongly resisted by certain parts of this House. However, I accept that under certain circumstances it can be the right way to go, and maybe it provides the flexibility.
I also welcome the fact that the Government are still angling after a 30 per cent reduction by 2020, although even I admit that this should not be just blind adherence to that target. I would be interested to hear from the Minister how those negotiations with Europe are proceeding, certainly within the international context that the noble Lord, Lord Prescott, mentioned.
I want to return to the point about energy-intensive industries. We clearly value those industries in this country and do not want to see them be offshored because all that will do is mean that carbon emissions worldwide stay the same while ours perhaps decrease, hence some of the problems over carbon production accounting. Will the Government ensure that the trade-offs for those extra costs still leave the incentives for those industries to reduce their energy and their carbon emissions while helping them in other areas of their profit and loss account?
Eighty per cent.
Thank you very much indeed. I make no comment on that.
The point on energy-intensive industries is well made. We must not let them off the hook, but we must recognise the industry they are in. Between now and October, we will be working very hard to work through the implications. As the noble Lord alluded to it, I should just say that we are going to have the opportunity to debate this. We have a statutory instrument coming up on this. We are doing an impact assessment, and then there will be a debate on these issues in the two Houses. I am looking forward to that debate and to hearing more information, and I value comments. That just shows that the democratic process is working. It also gives us the opportunity to discuss openly the committee’s recommendations and those things we agree with and do not agree with.
I speak as the president of BALPA. What specific discussions have taken place with the aviation industry? It is important that the Government should speak to all sections of the industry, the trade unions and, not least, consumers. If the Government have not yet taken steps, what do they propose in that regard?
The aviation industry is clearly a very high-carbon-using industry. I think I am right in saying that at the moment it is outside the EU ETS and that there is a programme to get it into that scheme. Of course, we will recognise that aviation is part of our everyday life. It is not something you can turn off overnight. There are big technological advances going on in the aviation world. We applaud that. We applaud the fact that the industry is making every effort to recognise the need for carbon reduction globally, and we would be completely mad not to listen to what it has to say.
My Lords, I am one of the growing group of people inside and outside Parliament who think that this whole policy is completely misconceived. Even if you believe and accept the link that the Climate Change Act makes between carbon emissions and world temperatures, surely the way that this policy is operating at present is curious economic masochism. At a time of falling real incomes for families and a desperate need for economic growth, it is imposing additional costs in terms of fuel bills.
The Minister said that the Government are looking at the problems of energy-intensive industries to make sure that they remain competitive. I do not know whether there will be any left here in 2025. The Minister may be aware that a large German cement manufacturer recently moved its plant to Asia and financed the whole of the new factory by selling its carbon credits in Germany. That is the perversity of the way this policy operates. How can we make energy-intensive industries remain competitive while at the same time achieving these targets to which their contribution is so important?
The noble Lord’s views on climate change are well known. As I said, the energy-intensive industries are fundamental to this country. Obviously, it is incredibly disappointing that, at this particular economic time, they are leaving and moving to China. The whole reason why we will be spending a lot of time looking at it is that we can address some of the fears that the noble Lord puts forward. I would say, though, that we must be very careful about criticising some of the endeavours here. We are accessing, arguably, a £31-trillion marketplace, which will be good for British business. We already see signs of Siemens starting factories, of GE wanting to start a factory, of new investment coming into the country, which we want to encourage. We also have to realise that this Government—and indeed the previous Government—inherited an electricity market dependent on oil and gas, which was diminishing in supply. No Government had put in place a replacement for it that allowed us to have the energy security that we desperately need to stand alone. Energy security is very high on this Government’s priority list. I would hope that the noble Lord would recognise that, and support us in that endeavour.
My Lords, I naturally sympathise with the predicament of the Minister having to ventriloquise the zeal of the Minister in another place—not for the first time this afternoon. However, will he personally reflect on whether the robustness of climate science justifies the UK, uniquely in the world, setting statutory carbon reduction targets way out into the middle of this century? Secondly, will he reflect on whether the Intergovernmental Panel on Climate Change is still credible as the principal source of advice to Governments in this field?
I am not sure whether the answers are yes, no, no, yes. Broadly speaking, I do not stand here trotting out cant or zeal that has been put to me by my colleagues. We work very closely as a team in coming up with what we think are the right policies. There is no difference between us in that. The Committee on Climate Change does an excellent job. It gives us a guiding principle on where we need to go as a responsible society. We must remember that we have a responsibility not just for our lifetime, but our children’s lifetime, and—the noble Lord is too young to have grandchildren —our grandchildren’s lifetime.
My Lords, I congratulate the noble Lord not just on the Statement but on the work that he and his colleagues must have done in the department to enable them to present it to the House. I doubt that it was an easily won text.
It is very important that the House remembers that the Climate Change Bill went through a long scrutiny process during which we managed to maintain an all-party consensus on all the significant issues. Both Houses signed up to it. No one worked harder than the noble Lord, Lord Taylor of Holbeach, to make this possible. It is very important that we maintain that all-party approach to this issue. Frankly, it is very important that the department is robust in resisting the cries not only from inside this House but from outside it, and in not allowing itself to be deflected from these targets. They are important. That Bill, now an Act, is one of which this House and the nation should be enormously proud.
I get around the world quite a bit and I know that other countries think that we have done a remarkable thing here. For us to start to back off and become in any way apologetic for our achievement would be tragic. I enthusiastically welcome this Statement and I am absolutely delighted about the battle we have won.
I am very grateful to the noble Lord, Lord Puttnam, who is a friend of the department, irrespective whether there is a Labour or, as at present, a coalition Government. We are very grateful for his positive remarks. I, too, pay tribute to my noble friend Lord Taylor of Holbeach, who has been at my side during many debates on this subject. In fact, he very kindly answered for me on a statutory instrument earlier today when I was called elsewhere. On both counts, I am marching shoulder to shoulder with the noble Lord.
There are a number of costs floating around the place. The gross cost of the carbon budget over the five-year period is estimated at £7 billion. However, because we have the benefit of, and are keeping our options open on, utilising carbon trading, and because we have consistently established a surplus which we can trade into the market, and given a number of the domestic improvements that we are making through the Green Deal et cetera, we feel that figure can come down to £1.7 billion over five years. I think that noble Lords will agree that that is a very containable figure, given the opportunity of accessing an enormous market that will bring prosperity and jobs into the country. I hope that the benefit of that will far outweigh that figure.
My Lords, briefly, what assumptions are being made by the Government in their plans for the building of new nuclear power stations or the introduction of carbon capture and storage, and the cost thereof? They are subjects which seem to be absent from the Statement.
The right reverend Prelate hits on a very topical issue. I am very happy to say that tomorrow we will present the findings of Mike Weightman, who was commissioned by the Secretary of State, Chris Huhne, to report on Fukushima, and look at them in terms of the future of the nuclear industry in this country. It would be wrong of me to intercept that report in this House, as it will be announced tomorrow. However, I can say that I met Mike Weightman earlier this week when we went through the implications of his report. We must not be complacent about our own position, but I think that we will feel quite positive by the end of tomorrow. That will, I hope, bring new nuclear back on to the agenda. I think that it has the broad approval of the House and it of course goes to the heart of carbon reduction and energy security.
On carbon capture and storage, as the right reverend Prelate knows, I am leading negotiations on the first demonstrator. I had meetings last night with the chairmen of each of the consortium companies to try to get us to the timetable that I have mentioned to the House. Broadly speaking, we are on track with that timetable and we are now looking at a cost which should be achievable. I hope that we will have that fully on the agenda towards the autumn—as I hope, for my part, we will have with new nuclear.
My Lords, I am one of those who have been involved in the programme in one way or another since Rio in 1992. Some of the fiscal questions now being raised are timely. I should like to ask about the relationship between the Government’s Statement and the Committee on Climate Change, and which is which. Page 2 of the executive summary indicates that there is an assumption that the price of carbon will rise to £70 a tonne in real terms, on present values, by 2030. You can see that this is necessary to make the arithmetic work. I am rather reminded of doing the national plan in 1965, where we played around with investment numbers and price numbers till everything fitted. We are doing an exercise in looking at numbers that will fit fiscally, but without saying to people what carbon tax they will have to pay in real terms. We must of course be transparent and honest with people. However, a carbon tax—albeit a European one—which I advocated in my maiden speech 11 years ago and I am not against, is a regressive tax. Now is the time to be much more transparent in how all the fiscal arithmetic fits together. There is a growing demand for that, however it is managed. The document is very short on financial figures; it is all tonnages of carbon dioxide. On the financial side, there is scope for a bit more transparency.
Postal Services Bill
Report (2nd Day) (Continued)
63B: Clause 28, page 16, line 17, at end insert—
“( ) The Secretary of State shall ensure that the current designated universal service provider secures an inter-business agreement with Post Office Limited for a period of not less than 10 years from the date at which the provisions of this Part come generally into force.”
My Lords, this amendment is of the utmost importance to the post office network, which has been in steady decline over the years. I welcome the Government's commitment to oppose post office closures, although that is not entirely in their hands. However, if an inter-business agreement between Royal Mail and Post Office Ltd is not enshrined in law, there is a real concern that, over time, Royal Mail will downgrade the value of its contact with the post office network, putting it under even more financial pressure. I am not alone in thinking this, and many noble Lords have raised similar concerns. Indeed, the Minister agreed that the Government hoped to achieve a 10- year agreement prior to disposal on our previous day on Report. With such agreement on the record, I hope that the Government will accept this amendment and see that the concern which is shared across the House is addressed.
The post office network is part of the fabric of British life. In Northern Ireland, as elsewhere, the local post office is so much more than a retail outlet; it is an essential community hub. I fear that, without an inter-business agreement, a privatised Royal Mail will seek new outlets for its services, which can be only a bad thing for our struggling post office network. The amendment in my name and that of the noble Lord, Lord Laird, seeks to guarantee that local post offices are able to continue to plan and operate their business safe in the knowledge that they will continue to receive the revenue streams from Royal Mail that help them survive as small businesses.
We cannot legislate to protect the post office network for an indefinite period. It is probably true that, at some point in the future, the post office network will end up going it alone, which will be regrettable, but, as Royal Mail goes through a major transformation and the post office network’s existence depends upon a very generous taxpayer subsidy, it is surely vital that we do all we can to help it through these tumultuous times.
Post offices provide a vital service to communities around the United Kingdom, especially in rural areas in Scotland, Wales and Northern Ireland. But their existence is fragile. Over the past 20 years, there have been some 9,000 post office closures. An inter-business agreement, enshrined in law for 10 years, provides the stability that the post office network needs to survive. Without an IBA, the future of post offices across the United Kingdom looks bleak and further closures will undoubtedly follow.
My Lords, I rise to speak to Amendment 67A in this group and to give our support to Amendment 63B in the names of the noble Lords, Lord Laird and Lord Rogan. We associate ourselves with the remarks that the noble Lord, Lord Rogan, has just made.
The Bill separates Royal Mail from the post office network, the first time such a separation has happened anywhere in the world. Throughout our debates in your Lordships' House, we have stressed the importance to the country of the post office network, not just as a vehicle for the day-to-day transactions of our citizens and in support of our small businesses—important though those are—but because the post office is at the heart of our communities up and down the country. In an earlier debate, the noble Lord, Lord Empey, described the post office as part of the national infrastructure. It is, indeed, a vital part of the hard wiring of our country and, with its continuing presence and high standards of operation and service, it helps to define who we are in an increasingly globalised world.
The Government have supported the post office network and we pay tribute to this. It must have been hard to secure the funding necessary to honour the increase to £180 million per annum in the previous Government’s social network payment for otherwise unviable post offices, but they have secured the necessary investment within the confines of the spending review and they have specified that Post Office Ltd must have 11,500 outlets in the year 2014-15. That is all very welcome but—there is always a but—it leaves a number of operational and practical questions unanswered, which we fear may bring down what are the clearly genuine good aspirations of the Government for the post office network. Of these, the two areas our amendment probes are what happens after 2014-15 and what is to stop a privatised Royal Mail reducing its use of post offices.
As we have heard, the Post Office is dependent on Royal Mail’s business for its survival. Over one-third of its revenues, £343 million, and one-third of sub-postmasters’ pay, £240 million, is generated selling Royal Mail products and services. The bald fact is that there is nothing in the Bill to require a privatised Royal Mail under new ownership to utilise the current post office network. Andy Burrows of Consumer Focus has said:
“It’s entirely conceivable … that several years down the line you could have a post office network where you cannot undertake mail transactions”.
We already know that post offices, predominantly those in rural areas, are finding it hard to survive. As the National Federation of SubPostmasters has said, many sub-post offices are “hanging by a thread”.
Despite Ministers’ assurances that there will be no government programme of post office closures, post offices are closing. Last week it was revealed that there are now 400 post offices which are, in the parlance, subject to “long-term temporary closure”—up from 150 last year. I am sure that all Members of your Lordships’ House hope that “long-term temporary closure” is not just a euphemism for permanent closure. Whatever the truth of that, the fact is that there are nearly 1,000 sub-post offices up for sale but unsold. We accept that there is always churn, but this is an unusually high number according to the NFSP.
We have argued throughout the passage of the Bill that we simply do not understand why it is impossible for the Government to work with the component parts of the present Royal Mail to broker at least an extension of the current agreement between Post Office Ltd and the soon-to-be separated Royal Mail so that our post office network has a more certain future. They currently have an agreement in place and both managing directors appear to believe that such an agreement is necessary and makes good business sense. The experience from the rest of the world suggests that neither Royal Mail nor Post Office Ltd could survive for long without such an inter-business agreement. It seems logical that any private sector bidder for Royal Mail would appreciate the good sense of having an agreement in place at the time of sale. It would be an asset, not a liability.
The Minister for Postal Services told the other place that,
“we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled”.—[Official Report, Commons, 12/1/11; col. 357.]
So what is the problem? If the Government have the power at the moment to require the Royal Mail and the Post Office to conclude an agreement or to extend the present one, and they believe they have the power as shareholder to ensure that Royal Mail concludes the longest legally permissible contract before separation, why on earth do we not put it in the Bill and be done with it? It would be very sad if, a few years down the track, the post office network collapses because the new owner of Royal Mail does as we fear. It may seem overly melodramatic to say this, but I do not think the country would ever forgive a Government that passed over the opportunity to save our much loved and cherished post offices.
We believe the Government should do it—as do the noble Lords, Lord Rogan and Lord Laird—and so we support the amendment standing in the names of the noble Lords. Our amendment does not ask for the Government to determine the terms of an inter-business agreement—that would be a matter for the two companies —but to ensure that the agreement is of sufficient duration, which we suggest should be 10 years, so that the people who operate and work in our post offices, most of whom invest their own money in the business, know where they stand.
George Thomson of the NFSP told the Public Bill Committee in another place:
“We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI to build a school or hospital, you would get a 21-year contract. I am not asking for a 21-year contract, but, by God, I am asking for a 10-year IBA contract”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 39.]
Those are strong words, but we firmly believe that your Lordships’ House should listen carefully to those on the front line.
My Lords, I hope my noble friend will in the end decide to resist the blandishments that have been advanced across the Floor of the House. The noble Lord, Lord Stevenson of Balmacara, gave the game away at the end of the speech when he said, “We are not asking to legislate for the terms of an agreement”. These are complex agreements and it is much better that they should be left to the two companies—both of which are now under competent and trustworthy leadership—to determine the terms of the agreement. As the noble Lord, Lord Stevenson, said—the noble Lord, Lord Rogan, made the same point—there is an existing agreement between the Post Office and Royal Mail and there needs to be, in one way or another, a continuing agreement.
The noble Lord, Lord Stevenson, said that the two organisations could not exist the one without the other. Without being an expert in this area, I do not know how far that would be true in perpetuity but it certainly would be true for the time being. Therefore it is very much in the interests of both Royal Mail and the Post Office that there should be a workable agreement between the two. It is for them to negotiate, decide and then sign; it cannot be a matter of Parliament legislating and telling them what to do. Otherwise, what is the point of having the present leadership of these two organisations? Why should it not be in the Civil Service?
But, of course, they are commercial companies. They are facing the problems we have debated at some length over recent weeks and they have to be given the trust to do what they consider is in their best interests and the best interests of their customers and employees. I used the word “blandishments” earlier; I was being fairly kind. Parliament should not interfere in this area in the way the amendment suggests and I hope my noble friend will feel able to resist it.
My Lords, everyone in the House would entirely endorse the remarks made by the two noble Lords who have brought forward amendments in relation to the importance to our national life of the post office network. That is a given on all Benches and I suspect that no Member of your Lordships’ House would disagree.
I have two propositions, which I hope your Lordships’ will accept, which are totally germane to why the two amendments should be rejected. First, from a commercial point of view, it is virtually inconceivable that any operator of the Royal Mail with a universal delivery obligation to deliver mail six days a week would not wish to avail themselves of the services of the Post Office. There is no other network in the United Kingdom that would enable that obligation to be fulfilled. There is, therefore, an essential logic as to why any owner of the Royal Mail would wish to continue to use the post office network.
Secondly, the noble Lords who have brought forward these amendments have to take on board that, were their amendments to be carried and the requirement placed in the Bill, there is a significant concern that the European state aid rules would come into play. The whole transaction could be held up for a year or two while the European state aid issue was resolved, during which time the Royal Mail would get into further financial difficulties.
In my view, it is inevitable that any operator of the Royal Mail is bound to use the Post Office to deliver the universal service obligation. At the same time, I would not wish to risk the hold-up of this transaction, thereby jeopardising the future of Royal Mail, because of the operation of the state aid rules.
My Lords, I was not going to intervene in this debate because I agree with much of what has been said by the noble Lord, Lord Rogan, and my colleague on the Front Bench and I have intervened in this area at earlier stages in the debate. Parliament has a huge responsibility here as two great parts of the nation’s infrastructure are in trouble and both require a new start. The Government have concluded that, in respect of the Royal Mail part, the new start shall be under private ownership. As the noble Baroness knows, I do not entirely agree with that, but nevertheless that is where we are. Everybody who has contributed agrees that there has to be some sort of stable relationship between the two parts, as we move into this new world. The Government’s difficulty is that they have to find a buyer for Royal Mail, the logistics part of the operation. Nobody is saying, and indeed my noble friend Lord Stevenson explicitly said, that Parliament should lay down the terms of that relationship, but Parliament has a right to know that that relationship will exist because it will determine the nature of both sides of that organisation—in terms of this amendment for the next 10 years. Clearly both sides may have an interest in ensuring that such an agreement is established prior to this Bill being implemented and the privatisation going through.
If I can be a little rude, I want to talk about the elephant in the room. The suspicion on this side is that if an amendment of this nature is not passed then the issue will not be the nature of the negotiations between Royal Mail and the post office network but the nature of the discussions between the Government and a potential investor. The Government will not find it easy to find an investor. The last Government did not find it easy to find an investor for a rather smaller proportion of Royal Mail and, if the interests of Post Office Ltd were sacrificed by untying some of the responsibilities of Royal Mail towards its Post Office Ltd partner as part of the deal, the interests of both sides and particularly those of the post office network will have been sacrificed. I hate to put it this way, but I have a degree of suspicion not of Royal Mail or the post office network but of the Government’s need to induce an investor in Royal Mail in the first place. If one of the terms of that inducement were to prejudice the future relationship with the post office network then the suspicions could be justified.
My Lords, it would be the nature of any investor in any situation to maximise their degree of flexibility—any company investing in any potential asset, particularly one which has so many obligations on it in the public domain, wants to maximise its flexibility. I do not know the investors the Government have in mind—we have not been clear on that; we have not even been clear whether it will be a single investor or an IPO or another arrangement—but my expectation is that it will be one or perhaps one or two in a consortium buying Royal Mail. They would wish to maximise their investment, on that front, as on other fronts. Giving them that flexibility could seriously prejudice the future of a socially, economically and regionally important part of our infrastructure. That is the suspicion that lies, in my view, behind this amendment.
I do not understand the point of the noble Lord, Lord Razzall, about state aid because if you have an agreement of that length in any case, whether it was voluntarily negotiated or imposed by Act of Parliament, state aid may be involved. So either way the possibility of state aid interest arises, and I recognise that that is one of the inhibitions on government. I am afraid that, if the noble Baroness does not accept this amendment or something like it, then she is heightening the suspicion that we are going to fall over backwards to placate a potential investor to the potential detriment of the post office network and those who depend on it.
My Lords, I want to come in now on this conversation. The noble Lord, Lord Whitty, talked about an elephant in the room and then dismissed the EU state aid issue. Many Members of this House have been following the debate from the beginning—some have come in perhaps a little later, but many have been engaged from the beginning—and have heard directly from Moya Greene, the current chief executive of Royal Mail, that she would wish for the longest possible agreement that she could achieve within the law for an inter-business relationship with the Post Office. Many will also have heard the same from Paula Vennells, the managing director of the Post Office part of the current Royal Mail Group whom I think we may regard as the chief executive presumptive of the Post Office when it becomes a completely separate entity. They have also heard the Government say, on many occasions, that they would wish for, and would try to achieve, the longest possible agreement that could be done legally.
The issue of European state aid rules is absolutely critical. The noble Lord, Lord Whitty, will have looked at the financial condition of Royal Mail Group and will understand that it is urgent that new investment comes in, in a very timely manner, if the group is to be preserved. The Post Office side also needs the injection of £1.34 billion that the Government are committed to putting into it, which would come through this legislation and the new structures. That is what will guarantee its future.
However, all of that would be jeopardised when—one could say “if”, but I suspect that if we go back to the lawyers and ask the Government it would be “when”—the state aid rules were tripped by one of these two amendments. I am rather under the impression that the Government have done everything they can to find language that would not trigger European state aid rules and cannot find it. The language proposed today by the noble Lords, Lord Stevenson and Lord Rogan, trips the European state aid rules. That would mean 24 months of constant wrangling, in which it is impossible to go out and bring in a new investor. All investors require some degree of certainty about what is happening to the organisation they are meant to examine and on which they are meant then to make an offer. It would also mean 24 months of uncertainty for the public. If this was two or three years ago, the luxury of including a clause like this and being resigned to spending two years fighting through state aid issues might have been possible. I suggest that we do not have that luxury at the moment.
We have two key organisations which matter to all our communities. We have people who work for Royal Mail—the regular staff who do incredibly hard work and need certainty about their jobs—and we have communities that rely on the Post Office. If we inject something like 24 months of further uncertainty, and who knows what comes out of the state aid negotiations, we jeopardise everything we have been trying to achieve—for weeks now in this House and in the other place—which is to make sure there is a secure future for the Royal Mail Group and that both the Royal Mail and Post Office parts of it can thrive. I understand that people have suspicions and concerns and will not take government assurances because they do not like to take them and perhaps do not quite believe Moya Greene or do not quite take the word of Paula Vennells. I understand all that, but there is an overriding issue and it has not been addressed by those who moved this amendment. The language triggers state aid provisions—we cannot afford the consequences of having that in the Bill.
My Lords, I thank very much indeed noble Lords who have spoken before me. I particularly thank my noble friend Lady Kramer for the exposition that she has just given to sum up with. I shall leave as many of those comments aside because they speak well for what I would like to say. I shall address some of the comments from the Opposition and the Cross-Benchers who moved the amendments.
The issue of the inter-business agreement between Royal Mail and Post Office Ltd is one of the issues which has stimulated the most debate throughout the passage of this Bill, both in this House and in another place. The noble Lord, Lord Razzall, summed up in his words the fact that all of us who have taken part in these discussions wish to see the same thing—this body established within the nation’s life to be continued in the best way possible. But we are going to do it in the way that we think will be effective; we have watched the Opposition try to do it in a different way and it was not effective. We are right to want to ensure the best possible future for the Post Office, which, as many noble Lords have pointed out, is a national institution highly valued by communities up and down our country.
Before I turn to the substance of the amendments, I would like to respond to the comments of the noble Lord, Lord Stevenson, on the 400 long-term temporary closures. There are inevitably changes in the total number of post offices from month to month, as some offices close and others are reopened. In fact, there has been a net reduction of only 58 offices in the last nine months—and this is, of course, constantly in flux. The Government have committed to no new programme of post office closures, as noble Lords have kindly noted.
Your Lordships are of course well aware of the fact that Royal Mail’s business is extremely important to the Post Office. This fact has not escaped us in government either, or the two companies themselves, as you have heard many times in our discussions. As your Lordships will by now be well aware, the chief executive and chairman of Royal Mail have pledged to ensure that the longest contract legally permissible will be in place before any sale. Edward Davey, the Minister in another place, and I have committed to both Houses that we will ensure that this pledge is upheld, and your Lordships have approved an amendment to the Bill to ensure that the report on the disposal of shares in Royal Mail will include details of the ongoing relationship between the two companies.
The new contract between Royal Mail and Post Office Ltd is not yet finalised, and, as I have said before, it serves little purpose to focus on the duration of the contract alone. The contract, which we hope to be ready to be signed next spring, will contain far more complex details, such as pricing and service level agreements, volume commitments and exclusivity agreements. The final nature of all of those details will have a bearing on the longest legally permissible duration of the contract. These details should not be presided over by government, but must be agreed by the two companies and their advisers. They are the experts, they know the businesses best, and it is they, not we in Parliament, who should fine-tune the details of this contract.
When this amendment was debated in Committee in this House, the noble Lord, Lord Young, posed various questions regarding what the longest legally permissible contract actually meant. I wrote to him following that exchange and, as I said in that letter, because the contract will focus on many other factors as well as duration, it is difficult to speculate on how long the longest permissible contract would be. We hope that the contract’s duration could be for as long as 10 years, or even more, but this cannot be finalised until all of the detailed negotiations are complete. The Government could not accept any contract between Royal Mail and Post Office Ltd which might be liable to legal challenge. Without a robust long-term contract between them, both companies would suffer commercially precisely the circumstances that noble Lords are seeking to avoid through their amendments. The Government could also not accept a legislative obligation which might lead to that very situation. As I have said repeatedly, the terms of this contract must be negotiated between those who know the businesses best.
In response to the concern expressed by the noble Lord, Lord Whitty, about the impact that a potential bidder for Royal Mail could have on the terms of the inter-business agreement, I would like to reassure noble Lords that any investor will have no input into these terms. As the chair and chief executive of the Royal Mail has stated, the longest legally permissible contract will be put in place before any investment into the Royal Mail. We will of course ensure that that happens. As I have said previously, what the Secretary of State, and indeed the Government, can and will help to do is to ensure that there is a contract in place between the two businesses before separation, and its duration will be for as long as is legally permissible. But most importantly, government must also help to create the conditions in which both businesses will flourish in partnership with one another.
Let me reassure this House that the separation of Post Office Ltd and Royal Mail will not lead to dangers for the post office network. As my noble friend Lord Razzall, emphasised, operationally, these companies are reliant on one another. Post offices carried out over 3 billion transactions for Royal Mail in 2009, and they will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together. The noble Lord, Lord Stevenson, noted that there are no international precedents for splitting a mail provider and retail arm. The Government are not aware of any international comparisons for the Post Office, which has such a vast branch network, offering a broad range of government, financial and mail services in the heart of communities. Separation from Royal Mail will give the Post Office the chance to focus on growing its revenue and getting the most out of its branch network. It will ensure that each organisation is able to focus more effectively on its own challenges and help to secure a sustainable network. The separation of Post Office Ltd from Royal Mail was welcomed during the Public Bill Committee evidence sessions in the other place by the consumer group Consumer Focus, the current regulator Postcomm, and the independent expert Richard Hooper.
It is of course important too that the Post Office continues to offer the very best possible service to Royal Mail, as well as to other current and potential clients. Our £1.34 billion funding package to the Post Office over the spending review period will ensure that the service provided by post offices is modernised and improved, to ensure that people continue to see their local post offices as the natural and convenient place to access Royal Mail products and that the Royal Mail management continues to see the Post Office as its retail partner of choice. This Government have not given Post Office Ltd such a considerable sum of money for nothing. We will do all we can to ensure that Post Office Ltd has a vibrant future, and continues its valued relationship with Royal Mail. As I have said before, it is primarily by attracting customers for all types of services that the Post Office will ensure its future success. With this Government’s funding and support, I believe that is precisely what it will achieve. As such, I would ask the noble Lords to withdraw their amendments.
Clause 32 : Exceptions to minimum requirements
64: Clause 32, page 19, line 9, after “be” insert “highly”
My Lords, this amendment seeks to strengthen Clause 32 by tightening the definition of when the universal service does not apply from exceptional to highly exceptional circumstances. I fully recognise that there will always be extreme circumstances under which the universal service need not apply for practical or safety reasons. However, in the context of a privatised Royal Mail and a new regulator, Clause 32(2)(b) is an avenue that could be exploited.
The Scottish Affairs Committee has had serious concerns about the potential for this loophole to be exploited. Tim Brown, chief executive of Postcomm, gave assurances to the committee that the current rate of exceptions is very low. He stated:
“There are about 1,400 exceptions for delivery in Scotland and a total in the UK of just under 3,000”.
The Minister for Postal Affairs sought to reassure the committee that the clause replicates the current situation and that the way in which it would be applied would not change. He stated:
“This subsection in clause 32 reflects that. It uses language that comes directly from the postal services directive and is identical to what was in the Postal Services Bill 2009. It also reflects the current situation. It is not some sort of get-out clause; it is for exceptions only for health and safety, geography and weather”.
The Scottish Affairs Committee reached the following conclusion in its December 2010 report, Postal Services in Scotland:
“We recommend that clarification be included on the face of the Bill that this clause should only ever be applied to a very small number of addresses, similar in order to the current number”.
In its response to the report, the Government gave the following assurances:
“The Government reiterates the assurances given by the Minister for Postal Affairs in his oral evidence to the Committee and agrees that the number of exceptions should be kept to a minimum—but this system is only workable if we give Ofcom, as the expert independent regulator, the necessary discretion. The Government is not aware of any concerns with the way Postcomm have set up and run the existing system for exceptions and Ofcom have indicated that they have every intention of continuing with the Postcomm system”.
We do not think that this goes far enough. Greater assurances that the application of Clause 32(2) will not be extended would give peace of mind to those who fear the erosion of postal services in rural areas. I recognise that, in highly exceptional circumstances, exemptions from the universal service are necessary and that the current level is acceptable. I invite the Minister to give the stronger reassurance that was sought by the Scottish Affairs Committee.
I will now deal with Amendment 66 before turning to Amendments 65 and 65A. Amendment 66 seeks to make it clear that in any review of the universal postal service that may take place, the principle of “one price goes anywhere” in the UK is maintained. As we know, Clause 33(5) permits the Secretary of State by order to change the minimum requirements of the universal service. In Clause 30, requirement 3 demands,
“affordable prices …. in accordance with”
the uniform public tariff, but that can be amended by the Secretary of State under Clause 33. Clause 33(6) states:
“The provision that may be made by an order under subsection (5) does not include the making of different provision in relation to different places in the United Kingdom”.
I am sure Ministers intend that to require a uniform tariff, but a tariff is not mentioned. The European standard does not require a uniform tariff in each country, nor does Clause 35 specify that the prices imposed as part of a universal service provision condition should be universal. A uniform tariff is an essential part of the universal service. It is important to business and to the general public. Amendment 66 seeks only to confirm that a USP condition must maintain the universal service at a uniform tariff and I hope that the Minister can be reassuring on this matter.
I turn to Amendment 65 and its supporting Amendment 65A, in the name of the noble Lord, Lord Low. The noble Baroness, Lady Wilcox, told the House at Second Reading:
“We have no intention of downgrading the minimum requirements of the universal service”.—[Official Report, 16/2/11; col. 776.]
The question remains: why does Clause 33 set out the means for the Secretary of State to do just that? Ministers have clarified the scope of the Ofcom market review under Clause 29. Again, the Minister told the House that,
“the review cannot recommend a downgrade of the minimum requirements after 18 months”.—[Official Report, 16/2/11; col. 777.]
Yet it is perfectly clear that Clause 33 allows just that, without any time constraint. It could happen after six, 12 or 18 months.
The Delegated Powers and Regulatory Reform Committee of this House expressed concern at the way that Clause 33(5) contains, as it said,
“a significant power which would allow the Secretary of State to alter the minimum requirements for a universal postal service set out in clause 30”.
Ofcom can carry out a review of the minimum requirements at any time, at its own initiative or under the direction of the Secretary of State and, the committee said,
“the Secretary of State may then, by order subject to affirmative procedure, amend clause 30. The Secretary of State is not constrained necessarily to follow any conclusions of the review”.
Ministers will tell us that this clause provides three locks against change to the universal service requirements, but those could equally be seen as three steps to changing the universal service obligation. Use of this power in Clause 33 could see a reduction of the universal letter service from six to five days a week or remove certain requirements for services to be provided, including a reduced service for the blind and partially sighted.
A recent report for Postcomm estimated that Royal Mail’s net cost of delivering on a Saturday, compared with a five-day universal service, is £256 million. TNT in the Netherlands has labelled the universal service as a kind of Jurassic Park that it should get rid of. Without this amendment, the Government will be inviting upon themselves an intense lobbying campaign from Royal Mail’s new owners aimed at both Ofcom and themselves to downgrade the universal service requirements.
In Amendment 65 we do not seek to reverse the powers provided for in Clause 33. All we ask for is a five-year transitional period of restraint: restraint to set an atmosphere of confidence for customers at a time of difficult change; and restraint that the Government have already said that they intend to observe. Ministers have, to their credit, listened to representations and tabled amendments to provide similar transitional periods.
Under Amendment 69, Ofcom could not choose to review the cost of providing the universal service, as provided for under Clause 42, for five years rather than three. How surprising that similar restraint would not be shown in the centrepiece of the Bill, the universal service. Amendment 65A in the name of the noble Lord, Lord Low, also seeks no diminution in the minimum standards of the universal service for at least five years.
This is a test of the Government’s commitment to the current requirements of the universal postal service. All we ask is for five years. After all, five years under the Fixed-term Parliaments Bill is only the duration of a Parliament. If the Government really mean what they say about protecting the universal service, I hope that they will look favourably on these amendments. I beg to move.
I should like to speak to Amendment 65A. I think I can be quite brief because the noble Lord, Lord Young of Norwood Green, has covered quite a lot of the ground. I thank him for his supportive remarks. My Amendment 65A seeks to curtail the Secretary of State’s power to make an order amending the minimum requirements of the universal postal service, as set out in Clause 30, by providing that, for five years after the Bill comes into force, he,
“shall not make an order which diminishes or erodes the minimum requirements of the universal postal service”.
I tabled a number of amendments at Committee designed to reinforce the minimum requirements of the universal postal service so that they could not be downgraded. My noble friend Lord Tenby kindly moved them for me in my absence on 6 April. At cols. 1782-84, the Minister gave comprehensive reassurances about Ofcom’s ability—or, rather, lack of it—to vary the minimum requirements. I confess myself fully satisfied with these. She made it clear that the primary purpose of the Bill is to protect the universal service. “Ofcom’s overriding duty,” she said,
“is to secure the provision of a universal service”.
The Bill requires Ofcom to secure the provision of the universal service. She continued,
“the market assessment that Ofcom is obliged to carry out as a result of Clause 29(4) is not a review of the minimum requirements”,
contained in Clause 30, and:
“It cannot change those requirements”.
Furthermore, the Minister said, “The power in Clause 33,”—for Ofcom to review the extent to which the minimum requirements reflect the needs of users of postal services—
“enhances the safeguards against changes to the … minimum requirements”.—[Official Report, 6/4/11; cols. 1782-83.]
Finally, the Minister made it clear that the Government have no intention of reducing the minimum requirements of the universal postal service. That is all very satisfactory and we can accept that Ofcom does not pose a threat to the universal service.
Amendment 65A therefore has a specific and narrowly focused target in view: the Secretary of State’s power under Clause 33(5) to amend the minimum requirements contained in Clause 30. As the noble Lord, Lord Young of Norwood Green, said, the Delegated Powers and Regulatory Reform Committee makes reference to this provision in its report on the Bill in paragraph (9), under the significant heading “Clause 33(5) alteration of the minimum requirements for the universal postal service”. It says:
“If OFCOM carry out a review (and they may be directed by the Secretary of State to do so) the Secretary of State may then, by order subject to affirmative procedure, amend clause 30. The Secretary of State is not constrained necessarily to follow any conclusions of the review. The Committee makes no recommendation on clause 33(5), but draws it to the attention of the House as a significant power which would allow the Secretary of State to alter the minimum requirements for a universal postal service”,
without reference to any Ofcom review.
Fears have been expressed that once Royal Mail has been sold off, the new owners will put pressure on the Secretary of State to reduce the minimum requirements of the universal postal service on the ground that they impose a burden on the business, which undermines its viability. What they really mean is that it will erode their profits. I believe this is a reasonable concern and my amendment curtailing the Secretary of State’s power to reduce the minimum requirements of the universal postal service for five years would afford a period of stability and be good for employees of Royal Mail and users of postal services across the United Kingdom.
I have had constructive discussions with Edward Davey, the Minister responsible for the Bill in another place, and I am grateful to him for making himself available to meet me. As I said, I believe I have identified a problem in Clause 33(5) and suggested what I think is a workable way forward which would meet the needs of both the Secretary of State and users of postal services. However, if the Minister can repeat her assurance this evening that the Government have no intention of eroding the universal postal service and can assure me further that they have no intention of using the power in Clause 33(5) within a decent period of time, we might be able to get by without the need to divide the House.
My Lords, I want to make a couple of quick comments and ask a couple of questions of the Minister. I do not have the scope to get clarity myself.
Is it possible to constrain Ofcom’s powers to review by setting a clear period of time in which a review may not take place? We have a problem with the European postal services directive, which requires that the regulator responds to the needs of users. In other words, it has five years in which it cannot provide the response required under the directive. We have a possible problem with that.
I also looked quickly at the Communications Act 2003, which sits alongside this new legislation. Most of its content is about Ofcom’s regulation of television and radio, and so on. However, it also has a series of general obligations for Ofcom, which presumably apply to every activity in which Ofcom participates. These again require—as I read them; others may have a different view, but I think probably not—an ongoing process of review, so we have a potential conflict between two pieces of legislation. Does that exist? It would obviously add to the complication.
Having been in the other place, which I know is not always a good thing to say about oneself when in your Lordships’ House, I know that the chances that any Member of the House of Commons would allow an affirmative resolution to reduce the universal service obligation have got to be pretty close to zero. Frankly, I could think of nothing more suicidal in whatever election that individual has to face next. Some people may not consider that to be the strongest possible lock but, frankly, I find it hard to think of a stronger one. Far stronger, as far as I can see, than any legislation is the power of realpolitik that would apply under these circumstances.
My Lords, subject to the questions that have usefully been asked by the noble Baroness, Lady Kramer, and to which the Minister will no doubt respond, the amendments proposed by my Front Bench and the noble Lord, Lord Low of Dalston, are useful and would have definite gains if they were accepted by the Government. I want to make two points. First, in relation to a review by Ofcom, which is provided for and to which one cannot in principle object, Amendment 66, in the names of my Front Bench team, would confirm the uniform tariff. I do not see how the Minister can object to that; it is a brief and clear amendment. The second point, which was mentioned by both the noble Lord, Lord Low, and the opposition Front Bench, is that there should be a transitional period for the thing to work through. There should be a period in which there will be no change. That, too, seems a helpful and creative amendment, which has been modestly but clearly put forward.
My Lords, Clause 33 provides for a process that has been accurately and elegantly described by the noble Lord, Lord Low, whose amendment concentrates on the Secretary of State’s powers. That is clearly the right place to put the emphasis. There seems to be no case at all for preventing Ofcom carrying out the review. The clause is expressed in entirely neutral terms, but in accordance with European legislation. It just says:
“OFCOM may from time to time review the extent to which the provision made … reflects the reasonable needs of the users”.
I cannot see how anybody could object to that. The review might indeed come out as saying not that the obligation should be reduced but that it should be increased. It is a neutral expression.
What is of more consequence is the point made by the noble Lord, Lord Low. Not only can the Secretary of State direct Ofcom to carry out a review without prejudice to what that review says or what the Secretary of State’s reaction to it will be, but he also has these order-making powers. What is being sought by the amendment of the noble Lord, Lord Low, is a statutory delay in the ability to use those powers. I find that difficult because Ofcom is coming to this service obligation afresh. We simply do not know what conclusions about the overall needs of the regulatory regime it will come to when it presents them in the first quarter of next year. Ofcom is independent, very large, very experienced and has substantial resources. It is most unlikely that it will come to conclusions that do not meet the reasonable needs of the users of postal services. That is what it is required to take into account.
In that event, we could speculate about the content of an order made by the Secretary of State in response to an Ofcom review but, frankly, it would be pure speculation. There is the conspiracy theory that is being promoted by the Benches opposite. Nothing supports the contention that there is a conspiracy in this. You can have doubts about how private sector companies behave. They have an ability sometimes to be one step in front of Whitehall because, on the whole, they do their homework with great diligence and know what they are allowed to do and what they are not allowed to do. However, we have decided in this Bill that we want private sector investment in both Royal Mail and, eventually, via the mutual option, the post offices.
Then we come to the question of whether the Secretary of State would decide, in response to an Ofcom review, to make an order. It is not self-evident that the order would diminish the obligations under the universal service provider’s arrangements. It might do the opposite. The order is also subject to the affirmative resolution, which means that it gets debated in both Houses. If one House or the other does not like it, it can vote it down. The safeguards in this clause, particularly in view of the speed with which this market is moving and of the relative newcomer Ofcom coming to the scene at a very important time, mean that there is nothing in the clause to which we should object.
My Lords, I can confirm that the very purpose of the Bill is to protect the universal service. I should like to put the mind of the noble Lord, Lord Young, at rest on that before I go any further. I hope, too, that I can satisfy my noble friend Lady Kramer in my response. I know that the noble Lord, Lord Low, has spoken to the Minister in another place, Edward Davey. I hope I can reassure the noble Lord on the points he was most worried about.
The Bill requires Ofcom to secure the provision of the universal service and to ensure that it meets the reasonable needs of users. That latter point is a requirement not just of the Bill but of the European postal services directive. On Amendment 64, Clause 32(2)(b) retains the ability for the regulator to make exceptions where the minimum requirements for delivery and collection in Clause 30 need not apply. These are for exceptional circumstances or geographical conditions. Amendment 64 seeks to change the wording to “highly exceptional”. The wording of the clause directly replicates Section 4(1)(a) of the Postal Services Act 2000. It also exactly replicates a provision from the Opposition’s 2009 Bill. It flows from Article 3(3) of the European directive, which states that member states must take steps to ensure the universal service,
“save in circumstances or geographical conditions deemed exceptional”.
The kind of situation that constitutes an exception would be an address on a remote island, where there is a single ferry service a week. It would be unreasonable to expect Royal Mail to deliver every day to such an address, as it would require it to charter its own boat. Another example would be where dangerous dogs at an address pose a genuine threat to postmen or postwomen. Currently this allows Postcomm to permit Royal Mail not to make daily deliveries to some addresses in extreme circumstances. Present exceptions apply to only 0.01 per cent of the approximately 28 million United Kingdom addresses. We agree with the intention behind this amendment—that the number of exceptions must be kept a minimum. However, I must confess to your Lordships that I am not sure precisely what effect saying “highly exceptional”, as opposed to “exceptional”, would have. It would appear to raise the bar, although to what height is unclear. We must recognise that raising the bar is likely to have two effects. First, it will probably result in more risks for hard-working postmen and postwomen, who will be asked to go to a large number of unsafe addresses. Secondly, it will probably put a greater burden on the universal service provider. I have to say to your Lordships that on both counts I am uneasy.
The question I ask your Lordships is whether the current situation is unacceptable. My view is that there is no evidence of a need to move away from what we now have. Indeed, that was the view of the Opposition two years ago. Unless noble Lords opposite can provide us with a rationale for this change, the Government cannot support it. I therefore ask them to consider withdrawing this amendment.
Amendment 65, in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, seeks to prevent a review of the minimum requirements for a period of five years from when this part of the Bill comes into force. Similarly, Amendment 65A, in the name of the noble Lord, Lord Low, seeks to prevent the Secretary of State reducing the minimum requirements—again for a period of five years from when this part of the Bill comes into force. The whole issue of the minimum requirements is something we considered during our deliberations in Committee, and I am sorry that noble Lords were not convinced by my contribution to that debate. As I have said, the power in Clause 33 enhances the safeguards against changes to the universal service minimum requirements. Clause 30 enshrines the current minimum requirements for the universal service, with the important addition of free services for the blind or partially sighted. These requirements gold-plate our European obligations, but it is gold-plating of which we are rightly proud.
As I said during Committee, and as my colleague the Minister for Postal Affairs has said in the other place, the Government have no intention of reducing the minimum requirements of the universal service during this Parliament. As things stand now, and as they would have stood under the 2009 Bill, a future Government could reduce those minimum requirements to the level required by the European directive through a negative resolution procedure using powers under the European Communities Act 1972. This means that, until this legislation is passed, Saturday deliveries could be dropped, and different prices could be charged for sending letters to different parts of the country. We do not believe that that is acceptable, and that is why we have introduced Clause 33. Clause 33 puts in place a clear procedure to be followed before the minimum requirements could be altered. Through this procedure, it offers vital new protections for us all. The protections are threefold, and I think it is important that I set this out again for your Lordships. First, there can be no changes to the minimum requirements unless Ofcom has conducted a review of the needs of users, which would, of course, inform any subsequent Secretary of State’s decision. Secondly, the clause guarantees that no change can result in a different minimum level of service to different parts of the country, so we could never have a five-day-a-week letter delivery requirement in Cornwall, but a six-day-a-week requirement in Birmingham, and services must always be priced uniformly. Thirdly, any proposal for change would be subject to the affirmative procedure in both Houses.
Given these enhanced protections, I am afraid that I do not believe it would be helpful to tie the hands of the regulator or the Secretary of State in the way proposed by these amendments, as mentioned by my noble friend Lord Eccles. Ofcom will be responsible for regulating the postal services market and should be able to review the market and user needs where it feels it is appropriate. Let us not forget that Ofcom’s primary duty will be to secure the universal service. It will need to be able to gather information on customer and market needs if it is to fulfil this obligation. That would include vital information about the needs of vulnerable consumers. This is an important point as one of the general duties of Ofcom under Section 3 of the Communications Act 2003 is a requirement to have regard to the needs of persons with disabilities, the elderly and those on low incomes.
Furthermore, it has been made absolutely clear by both myself and the Minister for Postal Affairs that the Government have no intention of reducing the minimum requirements of the universal service. Even if a future Government believed that changes should be made, the Bill guarantees that no change can result in a different minimum level of service to different parts of the country, and guarantees that services must always be priced uniformly. Critically, any proposal to change the minimum requirements would have to come before this House and the other place and be subject to the affirmative procedure in both Houses.
It has been put to me that the first thing an investor in Royal Mail would do is lobby the Government, Ofcom and Parliament to reduce the minimum requirements of the universal service. Let me be clear to this House: any investor in Royal Mail will know our position on the minimum requirements. They will be fully aware of the strong protections that we have built around them, and they will therefore invest in the full knowledge of these protections. Of course, we cannot stop them lobbying, but I can reassure this House that they will not find it straightforward.
Finally, while I hope I have made clear that this Government have no intention of changing the minimum requirements, I am happy to put on the record again, as the noble Lord, Lord Low, has requested, that that assurance applies for the rest of this Parliament, which is almost four years. However, I should also point out that the European Union directive requires that the universal service must respond to the needs of its users. A five-year legislative ban on any changes could therefore amount to non-compliance with our European Union obligations.
Given the reassurances I have made on the protections for the minimum requirements, I would hope that the noble Lords, Lord Young and Lord Low, will feel able not to press their amendments.
My Lords, I apologise as I do not think that I have spoken to Amendment 66. I know that I have taken rather a long time to reply to this group of amendments, but it contains some very important points, particularly in relation to the matters raised by the noble Lord, Lord Low.
Amendment 66 is similar to an amendment tabled in Committee, although that was to Clause 35. As with that amendment, I agree wholeheartedly with the intention behind it. However, I am delighted to assure the noble Lord, Lord Young, that it is simply not needed. It is the Government’s intention to ensure that the one-price-goes-anywhere service is protected and that the minimum requirements of the universal service cannot vary across the United Kingdom. We are absolutely clear that the wording of the Bill as it stands—specifically requirement 3 in Clause 30—fulfils that intention. There is no cause for doubt. Furthermore, in Clause 33 we are putting in place new safeguards that explicitly prevent any changes to the minimum requirements that would result in non-uniform pricing, so the one-price-goes-anywhere service is protected now and in the future.
In Committee, the noble Lord, Lord Stevenson, asked about the interplay between uniformity and the requirement in Clause 35 that if a designated universal service condition makes provisions for the tariffs to be used for determining prices for universal services, Ofcom must take into account the costs of providing the service or part of the service. There is no contradiction between this and the need for uniform pricing. It simply means that the uniform price should take account of the total costs. Uniformity is a defining feature of our universal service and the Government are committed to maintaining it as such. I do not think that I can be any clearer than this. The provisions in Clause 30 and Clause 33 already guarantee a one-price-goes-anywhere service. I hope that the noble Lord will, at the appropriate time, not press the amendment.
I thank the Minister for those comments. There were references in her previous contribution to a uniform tariff, so I was not going to be pedantic. I welcome the further words that she has put on the record.
I wanted to respond to the point made by the noble Viscount, Lord Eccles, on the conspiracy theory. I do not subscribe to conspiracy theories as a rule, and I do not in this circumstance. We are perfectly right to express our concerns. That is what the Delegated Powers and Regulatory Reform Committee did, so I rest our case on that. It was a perfectly reasonable response and I listened carefully to the noble Lord, Lord Low of Dalston, in his—as usual—beautifully argued and rational contribution. I am reassured by the Minister in relation to Amendment 64. Why did we seek to introduce the word “highly”—a nuanced amendment, if you like? We saw in a fully privatised environment a different environment, and I welcome her comments on that. I also welcome the assurances that she gave in relation to Amendment 66 and will take them into account.
I listened carefully to the contribution on Amendment 65 and Amendment 65A, tabled by the noble Lord, Lord Low. The Minister kept us in suspense until the end of her contribution when she gave an assurance about extending the restriction to the end of this Parliament. Who am I to quibble over four years rather than five? I welcome the intent of that and the other words in that assurance. With those comments, I beg leave to withdraw the amendment.
Amendment 64 withdrawn.
Clause 33 : Review of minimum requirements
Amendments 65 to 66 not moved.
Clause 34 : Designation of universal service providers
66A: Clause 34, page 19, line 38, leave out subsection (1) and insert—
“( ) OFCOM must designate a postal operator as universal service provider.”
The point at issue in Amendment 66A is whether Royal Mail should be allowed to be hived off and broken up into pieces. We are proud of the fact that there are 115,000 post boxes around the country. Royal Mail has increasingly modern mail centres and the famous fleet of 30,000 red vehicles. The Royal Mail Group’s letters and packages business covers the whole of the UK with a one-price-goes-anywhere universal service, six days a week. That is something that Royal Mail is proud of, and something that we, as customers, want. It works only because it is part of an integrated system. Amendment 66A would ensure that we cannot have a situation where everything is shattered into smithereens, people pick up the bits that they want, cherry picking, and the bit that needs most help and support—the bit that is most threatened—is left. The consequence of such a situation may be to undermine our universal service, so we seek support for Amendment 66A.
I shall comment, if I may, on government Amendment 69. Clause 42 provides for Ofcom to review the extent to which the universal service provider is bearing a financial burden by providing the universal postal service. Clause 43 provides for the regulator to consider mechanisms to provide for a burden-sharing arrangement, if Ofcom finds that such a burden exists. This is both a necessary and welcome mechanism in the Bill. Government Amendment 69 would prevent Ofcom from making such a review for a period of five years rather than three years, as originally proposed. This could be seen as a concession to those who want to resist a levy to share the burden of the universal service. We are a bit concerned about that and would like to hear the Government’s reasons. However, we can see the argument for a five-year transitional period in this case, as we have sought for the USO minimum requirements under Clause 35.
Government Amendment 70 is exactly in line with the provisions that have been sought by the Opposition. It is welcomed by both management and staff in Royal Mail. With the potential turmoil and uncertainty of privatisation, it is important to provide some guarantee that Royal Mail will be able to make long-term investment decisions in the provision of the universal service. If it could lose all or part of the universal service, that would surely be a deterrent to major investment in the network that guarantees that the universal service is provided. By guaranteeing the universal service provision to Royal Mail for a 10-year period, this amendment gives Royal Mail the confidence to make necessary future investment. We are delighted that the Government have listened to the submission on this question from this side of the House, and from those inside the sector who have argued for such an amendment.
Amendment 70A goes on to seek that a reasonable period of notice be given before any other operator can begin providing postal services required under a universal service obligation. Under Clause 43, Ofcom can make a procurement determination—in other words, allow some or all of the universal service to be provided by a company other than Royal Mail. Royal Mail and the postal sector desperately need stability. Royal Mail is undertaking a major programme of modernisation involving more than £2 billion of investment. This process, combined with an aggressive regulatory regime, means that the company is facing a very restricted financial position. The business must be given sufficient notice of such a drastic change if it is to be able to plan effectively and to continue to provide the services expected of it. We are pleased that the Government have listened to representations and agreed that there should be no procurement determination for at least 10 years. However, if such a drastic move were to be made to remove Royal Mail as universal service provider, Amendment 70A would simply ensure that a reasonable period of notice would be required to allow everyone to make the transition. We hope to hear an assurance to this effect.
My Lords, I listened to the noble Lord, Lord Young, but there are anxieties that the protection of the universal service and the amendments he has moved may, to some extent, weaken the determination of the management of Royal Mail to make the maximum effort to achieve the efficiencies that are now widely recognised as being an essential part of the whole programme. The Bill contains measures which would enable the Government, on the advice of Ofcom, to take other measures, for instance going for procurement, to which the noble Lord referred, if somebody else is prepared to offer the service at a lower cost because they are more efficient. It would be difficult to preclude that happening by legislation. Similarly, on the question of the fund, if other providers are to contribute to a fund, is there not a danger that they will find themselves contributing to reinforcing the inefficiencies of Royal Mail? I have said in previous debates that the chief executive of Royal Mail is making a tremendous, herculean effort as a manager to secure the efficiency savings that can be made. She is the first to admit that there is more to do. Royal Mail recognises that it has made a start and that she has the apparent support of the workforce. There needs to be greater efficiency.
I read these amendments, tabled by the Opposition, as removing some of the pressure on Royal Mail to get ahead with that. The noble Lord shakes his head but that is the fear. I therefore hope that that amendment will not be accepted. The amendments proposed by my noble friend on the Front Bench seem to be an admirable way of giving the appropriate protection to ensure that the services have the opportunity to become as efficient as possible, so perhaps not surprisingly, I find myself supporting the government amendments. I hope that they will not be used so that competitors, who could offer other services, find themselves subsidising the inefficiencies of Royal Mail. I know that that is not my noble friend’s intention but nevertheless there are fears among some of the competitors that that might be the unintended consequence. If my noble friend can reassure me on that I will be very grateful.
My Lords, I thank all noble Lords who participated in this short debate. I shall speak to the amendment the name of the noble Lord, Lord Young. It would remove from the Bill the ability to designate, even in extremely limited circumstances, more than one company as a universal service provider. The intention of Clause 34 is to give Ofcom the power to designate more than one universal service provider in two specific circumstances only, in order to ensure the provision of the universal service.
As with other elements of the Bill, Clause 34 has been drafted to ensure that the Bill stands the test of time. It enables the regulatory regime to adapt when it needs to, in order to ensure the continued and long-term provision of the universal service. The measures we are taking in this Bill are designed to put Royal Mail on a sustainable footing so that it can continue to provide the universal service that we all value so highly.
However, it makes sense to set the legislation in this way to ensure that the universal service could continue to be provided in two specific, and extreme, circumstances. The first of these is where providing the universal service is found to represent an unfair financial burden on the universal service provider. The Secretary of State agreed with Ofcom’s advice that the best way of addressing that burden was through a procurement exercise, provided for by Clause 43.
I want to be clear that this is not about another operator being able to cherry pick profitable parts of Royal Mail’s business. This scenario would transpire only if it was determined that Royal Mail was subject to an unfair burden in providing the universal service. Ofcom would then assess whether another company could provide the relevant part of the universal service with less of a burden—in effect, removing the burden from Royal Mail. It is in this scenario that another company could be designated the universal service provider for that part of the universal service.
The second circumstance—and we all hope that this will never happen—is where Royal Mail has become insolvent and has entered special administration. Where a postal administration order has been made under Part 4, and it is not possible to rescue Royal Mail as a going concern, some of its activities could be transferred to another company, and Ofcom could then designate that company as a universal service provider as well, in order to secure the universal service.
As I have said, the full package of measures in the Bill is designed to secure the future of Royal Mail and the universal service, and therefore to ensure that we do not end up in either of those scenarios. Both the procurement process and the special administration provisions are backstops to be used only if the future of the universal service is at risk. However, as already has been mentioned, having the ability to make such designations in these specific cases is a sensible and pragmatic safeguard.
It is also important to make it clear that having more than one designated universal service provider in no way provides for or permits a varying level of minimum service across the country. Provisions elsewhere in Part 3 guarantee that the minimum requirements of the universal service remain uniform. I hope that, with those assurances, the noble Lord will feel able to withdraw the amendment.
Turning now to Amendment 70A in the name of the noble Lord, Lord Young, let me start by saying that I could not agree more with the intention behind this amendment, which seeks to protect the universal service provider from harmful cherry picking that could undermine the universal service. However, I hope to convince the noble Lord that this amendment is neither as strong nor as targeted as government Amendment 68, which we discussed in an earlier group, and government Amendment 70, to which I will come shortly.
Amendment 70A would apply only after several conditions had been met. First, a review of the costs of the universal service under Clause 42 would have to have taken place and, as we will discuss shortly, we are proposing that this cannot take place for five years. Secondly, Ofcom would have to have determined that the universal service provided an unfair burden, and would then have to report to the Secretary of State setting out its recommendations for dealing with any unfair burden identified by Ofcom. Finally, the Secretary of State would have to make a decision on what action to direct Ofcom to take, and all this would have to take place before Amendment 70A would apply.
However, government Amendment 68, which gives Ofcom the power to impose notification conditions on any operator who is starting or expanding a service within the scope of the universal service, will apply from day one of the new regulatory regime coming into force. I ask the noble Lord, Lord Young, to accept that the government amendment therefore offers even stronger protections for the universal service than his Amendment 70A. Our amendment is also targeted at the area of activity that really threatens the sustainability of the universal service. The noble Lord and I agree that that is the cherry picking of letter delivery. I therefore hope that the noble Lord will consider not moving Amendment 70A in light of the government amendments whose purpose is to deal with his concerns.
Turning now to government Amendments 69 and 70, we all recognise that Royal Mail needs to modernise and become more efficient. My noble friend Lord Jenkin, more than anyone, has referred to that. As part of that process, Royal Mail will need to invest in new machinery and new technology and, before making long-term investments, boards and shareholders look for certainty. Amendment 70 seeks to give certainty to Royal Mail that for a significant length of time it will remain the universal service provider throughout the whole United Kingdom.
As your Lordships know, in this Bill we were keen to put more tools in the regulatory toolbox to ensure that Ofcom can fulfil its overarching duty to secure the universal postal service. To that end, if Ofcom concludes, following a review under Clause 42, that providing the universal service represents an unfair burden to Royal Mail, we have included in Clause 43 a number of options for addressing that burden, including that of a procurement process.
The procurement option will allow Ofcom, if the Secretary of State so directs, to carry out a form of competitive tendering to see if any other postal operators are able to provide some or all of the universal postal service in a manner that eliminates or reduces the extent of the unfair burden. The advantage of this would be that it could result in the requirements of the universal service being met, but at a lower cost. It could therefore provide benefits to consumers in securing the long-term future of the universal service, on which we all rely.
However, as my noble friend Lady Kramer eloquently argued in Committee, there could be some unintended dangers resulting from the current drafting of the Bill. Some have seen this procurement option as a potential mechanism to transfer all, or a large part, of the universal service provider designation to a new provider. This is not our intention, nor is it how we would expect such an option to be used. Our expectation is that a procurement determination is much more likely to apply to small areas where, for example, a local provider or possibly a community provider might be able to deliver savings.
We accept, however, that the clause as drafted could give rise to doubts over the certainty of Royal Mail’s designation as universal service provider in the short-to-medium term. The Bill as currently drafted effectively gives a three-year moratorium period before there could be a procurement determination. We accept that the risk of Royal Mail losing part or all of its designation after three years may discourage the company from making otherwise rational and important investments in its infrastructure to provide the universal service that payback over a longer period. That is absolutely not the Government’s intention and that is why we have brought forward Amendment 70. That amendment will give Royal Mail a 10-year period of certainty. We believe that this length of time is appropriate to the sorts of decisions the Royal Mail board will be taking. The same period of notice is currently in Royal Mail’s licence from Postcomm and is not dissimilar to the length of time that is common in other regulated sectors where obligations such as the universal service are imposed.
However, let us not forget that the procurement option could potentially be to the advantage of Royal Mail by relieving it of the requirement to provide the universal service in an area where it is an unfair burden. Our amendment does not therefore rule out a procurement determination entirely for 10 years. It allows for one if Royal Mail also agrees. We believe that this combination is the best way of meeting our central objective of securing the universal postal service,