House of Lords
Thursday, 12 January 2012.
Prayers—read by the Lord Bishop of Gloucester.
Introduction: The Lord Bishop of Durham
Justin Portal, Lord Bishop of Durham, was introduced and took the oath, supported by the Archbishop of York and the Bishop of London, and signed an undertaking to abide by the Code of Conduct.
Introduction: Lord O’Donnell
Sir Augustine Thomas O’Donnell GCB, having been created Baron O’Donnell, of Clapham in the London Borough of Wandsworth, was introduced and took the oath, supported by Lord Armstrong of Ilminster and Baroness Manningham-Buller, and signed an undertaking to abide by the Code of Conduct.
My Lords, the Government have embarked on a series of policies to make the public safer—in particular, by breaking into the cycle of reoffending. Our policies, including measures in the Legal Aid, Sentencing and Punishment of Offenders Bill now before this House, are expected to impact favourably on the size of the prison population.
My Lords, does the Minister agree that since the coalition came to power, the number of people in prison has risen to a record figure of over 80,000, the highest ever for England and Wales, and that, even if the impact assessment on the legal aid Bill works out fully, that will barely bring the prison population down to what it was before the coalition came in? Is it not fair to say that the Government have given up on this?
My Lords, on the contrary, what the Government have not done is to play the numbers game. People are in prison as a response to offences committed and sentences imposed by the courts. Simply making arbitrary decisions on prison numbers is pointless, but what we are doing is putting into place policies which, as I have said, particularly tackle what I think is one of the major problems in the upward trend in our prison population—that is, the unacceptable level of reoffending. That is why we are putting a lot of effort into policies on the rehabilitation of offenders.
My Lords, will my noble friend bear in mind how many times we have seen news of a prisoner who has been let out of prison early causing great trouble, including murder? We must always keep an eye on the danger of letting people out of prison too early.
My Lords, that is the mirror image of the Question put by the noble Lord, Lord Dubs. There is no doubt that every time you release a prisoner, there could be a danger of reoffending. That is why the assessment is very thorough and the management—the Opposition Front Bench is nodding as though I was saying something brilliant. I am not changing policy at all, and what we are certainly not going to do is let out 80,000 people early because we have mismanaged the prison building programme. If anyone wants to talk about mismanaging prisons, we can look at the record over 10 years of the previous Government. In terms of the question asked by my noble friend Lady Knight, it is absolutely correct that Ministers are aware of public concern about the management of ex-prisoners. That is why we take great care in these matters and why, when we look at the alternatives to prison, we make sure that the public have confidence in the policies we put in place. That is the reality.
Again, there are great nods from the Opposition. Apparently the reality of the necessity for cuts has reached the Leader of the Opposition, yet any specific cut is met with shakes of the head. The police are being asked, as are many others, to carry through efficiency programmes, but we remain confident that they will deliver in terms of public safety while carrying out the programmes that have been requested of them.
That is exactly the point that my right honourable friend the Lord Chancellor made. It is the rehabilitation of offenders that we must look at. Yes, people who have committed serious crimes should be put in prison but, unless you are going to keep them in prison for ever, you are going to release them at some stage. Therefore, the policy aim must be to put in place programmes of rehabilitation to avoid reoffending wherever possible. It was put to me on a prison visit that the best chance of avoiding reoffending is for prisoners to have the prospect of a job, a place to live and a relationship. Those are difficult things to put in place but that is, and will continue to be, the thrust of our policy.
My Lords, can my noble friend tell the House about any progress that is being made in reducing the number of women in prison, both on remand and following sentencing? I know that he shares my view that this carries a huge cost—not just a financial one but in particular a social one.
My Lords, there are about 4,000 women in our prisons at the moment, and anyone who takes a moment to study these matters will say that that is far too large a number. We are taking forward a range of measures to look at how women who have committed crimes outside the prison regime can be treated. I pay tribute here to the landmark Corston report from the previous Administration. We are pursuing most of the recommendations, as did the previous Administration, but, like them, we have found the key recommendation specific to small units too costly to pursue. It is widely said that women need a different kind of treatment and I believe that to be the case. This is a serious problem and one that we are taking seriously in terms of initiatives on drugs, debt and treatment outside. Those are the facts.
My Lords, when the Government were in their first flush of enthusiasm, they were full of claims as to how much smaller the prison population would be by the time of the next general election. Who was playing the numbers game then? How times have changed. Particularly bearing in mind the increase in crime that is now being reported, what is the current forecast of what the prison population will be at the next election in May 2015? What a contrast all this is with the days of the previous Labour Government, when crime was being reduced by 43 per cent.
The commitment that we have made is to try to bring in a raft of policies that address specific problems about reoffending which are key to the size of our prison population. I am not going to play a numbers game; indeed, we never have. I look across at some of the heads shaking and nodding opposite, but I personally find this matter far too serious to play a numbers game.
My Lords, pathfinders are receiving national and local development support. With their SHA and PCT cluster, pathfinders are exploring approaches to clinical commissioning, including integration of health and social care. Key to this will be engagement with local authorities and secondary care. Our national learning network allows pathfinders to share learning and best practice. Pathfinders will be authorised to take on their full commissioning functions only when the NHS Commissioning Board is certain that they are ready.
I thank the Minister for his reply. He outlined the fact that local authorities will play a key role in this new world. We hope that they will commission for patients and not for the condition. For the health and well-being boards to operate effectively, they, too, need support. What support are the Government able to offer, and what support are they offering pathfinder health and well-being boards within local government at present?
My noble friend is right. We were very pleased to see the NHS Future Forum says that running right through the Health and Social Care Bill is the desire and aim to integrate services. That is certainly right. We recognise that there is a balance to be struck between allowing local ideas to spring up and people to progress their own ideas and having the necessary support from the centre to do that. We have established a national learning network for pathfinders to complement the support given to them by strategic health authorities and PCTs. Those learning networks will ensure that best practice is spread and, specifically, that pathfinders support other local groups which are less developed.
My Lords, perhaps I may ask a question concerning clinical commissioning groups and the legal advice and support they might be receiving. Has the Minister taken advice on the impact of EU procurement law as regards the tension in commissioning and delivering integrated services and the legal requirements concerning procurement of services which are integral to the Health and Social Care Bill that is before the House? Will the Minister make any such advice available to us?
My Lords, my understanding is that procurement law, which already applies in the NHS, is certainly part of the learning sets that clinical commissioning groups have been provided with. I would be delighted to supply the noble Baroness with further information but I do not have it in front of me.
Can my noble friend confirm that the NHS will take fully into account the success of pilot pathfinder projects in places as diverse as Newcastle, Swindon and Bedfordshire so that the NHS itself encourages the development of pathfinder projects? Will he also take into account the fact that GP co-operatives were very successful as long as they lasted, but the discouragement they were given by the previous Government brought a disastrous end to some very good schemes?
I am grateful to my noble friend. I think everybody agrees that integrating services, however one defines that—although the common denominator is surely from the point of view of the patient—is a good thing. We do not wish to lose sight of the lessons that have been learnt so effectively in the places mentioned by my noble friend. It is true that other areas have yet to catch up. We recognise that, and the focus over the next 12 months will be very much on sharing the lessons that have been learnt by the pathfinders that we know are working well.
Does the Minister agree that the success of this scheme depends a great deal on the facilities within the health service becoming much more community orientated and much more available to people in the community? It is not either social services or the health service. Both have to play their part. What are the Government doing to achieve that?
I do recognise that. It gave rise to the fairly famous quote by Sir David Nicholson, the chief executive of the NHS, who went down to Torbay to see the work being done there. He came away saying:
“I have seen the future and the future is Torbay”.
There was good reason for him to say that because Torbay has established close relationships between social workers, district nurses, therapists and allied health professionals through a single point of contact so that intermediate care services are delivered effectively, thus avoiding the need for patients to be admitted to hospital.
Can the Minister tell me—sorry, I would have given way to the right reverend Prelate. I had better press on. Does the Minister believe that the new legislation will change the problem that has always existed—that social care always felt that health should pay and health always felt that social care should pay? There may be good will and a wish to integrate, but can he assure me that the new financial systems in the health service will cover this point and prevent that problem continuing?
My noble friend is right. This has been a perennial problem. We are addressing it in a number of ways. There are measures in the Bill which lay out duties on bodies. We are constructing the outcomes framework in a way that encourages integration of services with the right metrics. We are trying to align the outcomes framework in the NHS with that for social care and public health as well so that everybody is working to the same agenda.
Railways: Train Design
My Lords, we believe that in most cases the procurement of rolling stock should be led by the rail industry, but in cases where the Government are involved we will take on board the conclusions of the Government’s recent review of procurement to give suppliers confidence to invest in their capability to meet future demand by publishing pipelines of future government needs and taking action to remove barriers to growth.
The announcement of the new train order to Bombardier took place 1,000 days after the last order was placed. There is no doubt that the Government are deeply involved because the short term of franchises means that no rolling stock company can get its money back in the duration of the franchise. The Answer that I have been given is quite disingenuous. I really want some assurance that British industry will be supported. It has only 100 days work from this new order and it is time that something was done to extend that period.
My Lords, noble Lords will know that this Government have made considerable investment in the rail industry and will continue to do so. Noble Lords should also be aware that there is considerable refurbishment work available on the existing rolling stock in order to make it compliant with new accessibility requirements.
My Lords, is the Minister aware that his first Answer to the noble Lord, Lord Bradshaw, demonstrates the inconsistency or lack of policy not only on who procures rolling stock but on who operates it and how many coaches there are? The OJEU notice on the First Great Western new franchise says in one paragraph that,
“the franchise operator will be expected to take responsibility for the provision of rolling stock”,
yet immediately follows that by saying that it will supply the IEP—the intercity train programme. How can any manufacturer or operator plan on such an inconsistent policy?
My Lords, the noble Lord will be aware that the IEP is in principle a bi-mode—electric and diesel—rolling stock project and is designed to run across several franchises. Central government therefore has to have an involvement. In general, it is a matter for the rail industry to procure rolling stock. However, central government has to ensure that the rolling stock contract is sustainable in case, as the operator of last resort, it has to step in and run the franchise.
My Lords, my noble friend will be aware that the Treasury and the Scottish Government announced recently that they would each put £50 million into the refurbishment of Caledonian railway sleepers, which many of us are delighted about, particularly if we use them twice a week as I do. Will the new franchise agreement, which I think will follow in 2014, also enable the train operating company—whoever takes on that franchise or continues with it now—to get good value for any commensurate investment that it might make in parallel to provide a really superb service?
My Lords, the House will recognise that the Government have had a somewhat torrid time with the carriage supply since the Siemens contract. However, would the Government take a constructive approach in these terms: can we not reduce the number of designs of carriages in order that suppliers work to a much more restricted form of contract and thereby provide much more cheaply the carriages that we all know we need?
On the noble Lord’s first point about the Siemens contract, he will understand that we operated the procurement process set up by the previous Administration. We look forward to the NAO investigation that will probably take place after the contract award in order not to interfere with the process. The noble Lord’s second point is an extremely good one. We have too many types of rolling stock. One difficulty is that the rolling stock has a 30-year life cycle and it is quite easy to end up with a large number of areas, but the noble Lord is absolutely right.
My Lords, does the Minister understand how important it is to place orders early to secure jobs in Bombardier and other places and to have long-term investment? Without that, who will take on apprentices or make a dent in the youth unemployment problem? We need immediate action by the Government to secure these news jobs and new youth employment.
My Lords, the noble Lord is absolutely right in everything he says; that is why we have the Crossrail project and other large infrastructure projects. The mischief is the feast and famine, which I am sure all policy-makers over many decades have tried to avoid.
My Lords, a contract has recently been let to move spoil from the Crossrail system. This means moving stuff from central London to the Thames estuary. It will all be done by German ships with German crews. Bearing in mind what the Government intend to do to support British industry, will we be putting measures in place to help British shipping in the same way as the German Government do to support German shipping so that we are working on a level playing field?
Health: Breast Cancer
My Lords, the expert group chaired by Sir Bruce Keogh concluded that, on the available data, PIP implants are not associated with a higher risk of breast cancer than other silicone gel implants. Women who have had PIP implants on the NHS following surgical treatment for breast cancer will be able to consult an NHS doctor and if they wish, in the light of that clinical advice, have the implants removed and, if appropriate, replaced.
I thank the Minister for that Answer. I welcome the Statement made by the Secretary of State for Health in the other place and the reviews being set up to look at both of the issues here. This is an issue that is causing a huge amount of concern for women with breast cancer. I welcome the assurances of the Secretary of State that, where women have been treated on the NHS, the PIP implant will be removed, and where patients have been treated privately, and those companies refuse to remove the implant, they can then seek help from their GP from the NHS.
I apologise, but I need to get the detail right. I am concerned about women who are diagnosed with breast cancer, treated privately and are then refused help from that private practitioner. At the moment, when they come to the NHS they are only promised the removal of that PIP implant, not subsequent replacement and reconstruction. I do not think that is right, and I hope the Minister will be able to reconsider that.
My Lords, I understand the point that the noble Baroness is making, but I think that most people would agree that it would be wrong to let private providers off the hook. In the first instance, we are saying that the woman, if she has been treated privately in the circumstances the noble Baroness has described, should seek advice from her private clinician. Only then, if the clinician or the clinic let her down, will she be able to have recourse to the National Health Service. I think that that is fair.
As regards the replacement of the implant, we do not think that other NHS patients should be disadvantaged in this way. Every time the NHS picks up the tab for the private sector, we are displacing patients of the NHS who are in need. Therefore, there is a balance to be struck here and we have made our decision on a very good basis.
My Lords, how is it that these PIP implants, which are now declared unsafe and substandard, were given the European CE mark—the safety kitemark? Does the Minister share my concern and dismay at the Harley Medical Group’s announcement yesterday? This is a group which for years and years has ruthlessly advertised, sold and fitted these substandard PIP implants to nearly 14,000 women and is now saying that it will not replace them. Is it not time to take action against these unscrupulous—it seems—private practitioners to make them take some responsibility?
We believe that in many instances private practitioners have a legal duty—certainly a moral duty —to address these matters on behalf of their patients. Eight private companies are offering to replace implants for their patients. We welcome that and are urging the Harley Medical Group to follow suit. I was encouraged to hear that the professional bodies representing cosmetic surgeons have sent out a letter, urging surgeons not to charge for their time when they remove these implants privately.
As regards the first part of my noble friend’s question, it remains to be seen whether there has been a failure of regulation. We are looking here at a deliberate criminal act by the manufacturer of these implants. It is very difficult to see how regulation, however tight and effective, could pick up something such as this, where there has been a deliberate effort to conceal facts from the inspectors.
Would the noble Earl not agree with me that the kind of behaviour by private companies that we are talking about, whereby they seek to wash their hands of problems that they have created, is the kind of thing that we will see a lot more of once the provisions regarding increased competition in the National Health Service contained in the Health and Social Care Bill come into force?
I could not disagree more with the noble Lord. He refers to the policy of “any qualified provider”. That policy gives absolute assurance to every NHS patient about the quality of the treatment that they get if they are treated by the NHS, whatever the provider setting. Therefore, the idea that this incident has any bearing on the provisions of the Health and Social Care Bill is absolutely misplaced. I cannot emphasise that more.
The noble Lord, Lord Low, asked a legitimate question. Any qualified provider goes through a process of approval in which the CQC is responsible for regulating clinics and services. That is exactly what the CQC has done for these private clinics. They have all been given a stamp of approval to carry out these operations by the CQC. That, surely, was the point of the noble Lord’s question. Therefore, what are the implications for “any qualified provider” under the fragmentation and increased marketisation of the NHS by the Bill?
The “any qualified provider” policy was instigated by the Government of the noble Baroness. There is no suggestion that these clinics have been carrying out procedures badly; the issue is around the quality of the implant, which they could not be expected to know about. Nevertheless, the CQC is conducting inspections, some of them unannounced, on cosmetic clinics to assure itself that everything is being done properly. I will not stand here and say that any of these clinics have carried out the procedures badly. We have no evidence to show that they have.
Business of the House
Timing of Debates
Immigration (Biometric Registration) (Amendment) Regulations 2012
Special Educational Needs (Direct Payments) (Pilot Scheme) Order 2012
Civil Procedure (Amendment No. 3) Rules 2012
Rules of the Court of Judicature (Northern Ireland) (Amendment No. 4) 2012
Motions to Refer to Grand Committee
Motion to Take Note
My Lords, I am grateful for the opportunity to introduce this debate, which takes note of the Government’s policy on electoral registration. This is often a highly technical issue, but it is always an important one. The struggle for the right to vote defines the history of our democracy but electoral registration makes that right a reality. This debate is a timely one, as the Government have embarked on a significant change to electoral registration, with potentially profound consequences for the health of our democracy.
Many issues could be addressed under the rubric of this debate. For example, it would be possible to explore why the Government have been so dilatory in pursuing proposals put forward by the previous Government to ensure that service personnel serving in conflict areas can cast their votes themselves. It would be possible, for example, to discuss the abolition of the edited register. There is also a range of other more technical issues that could be discussed. I hope that the distinguished noble Lords who will follow me in this debate will address some or all of these issues.
I want to focus on the introduction of individual voter registration. Most people, in all political parties, believe that the Government are right to bring in individual voter registration. The previous Government legislated for it—and I declare an interest as the Minister who brought in that legislation. I did so because I believed that it was right to do so. It is right, as a matter of principle, that citizens should be responsible for their own eligibility to vote. Individual registration can help to tackle fraud, although, as I will discuss later, the extent of fraud should not be overstated nor is individual registration a cure-all for it where it does exist. However, there is widespread concern about the way that the Government are introducing this change. I am particularly worried by their abandonment of the bipartisan approach adopted by the previous Government. I am also worried about the damage that they risk doing to the efforts to secure a comprehensive register, which must be the foundation of our electoral system.
For all its merits, the introduction of individual registration carries with it the severe risk that significant numbers of people who are eligible to vote will not be registered to do so and so will be unable to vote. This was the case in Northern Ireland when it moved to this new system of registration a few years ago. The report by the independent Electoral Commission on the experience in Northern Ireland found that the new registration process disproportionately impacted on:
“Young people and students, people with learning difficulties and other forms of disability and those living in areas of high social deprivation”.
That report concluded—and this is important, because of the specific circumstances of Northern Ireland—that:
“While these findings relate directly to Northern Ireland, they are not unique and reflect the wider picture across the UK. They present a major challenge to all those concerned with widening participation in electoral and democratic processes”.
In evidence to the Political and Constitutional Reform Select Committee of the House of Commons, Jenny Watson, the chair of the Electoral Commission, said that it is possible that, under the Government’s proposed changes,
“the register could go from around a 90% completeness that we currently have to around, say, a 60% completeness”.
There is already a serious problem with the electoral register in the United Kingdom. The latest estimate from the Electoral Commission suggests that at least 6 million people who are eligible to vote were not registered to do so in December 2010. The fact that so many people who should be on the register are not, despite all the measures taken by the previous Government to increase registration—measures which I am pleased to see the current Government are taking forward—shows how intractable this problem is. It damages our democracy when so many eligible citizens cannot vote because they are not on the register.
The introduction of individual registration risks making a bad situation significantly worse. That is why its introduction was delayed for so long. The improvements it is likely to bring to the accuracy of the register are balanced by the deterioration it is likely to bring in the register’s coverage. The previous Government sought to reconcile these competing objectives by tying the implementation of individual registration to the achievement of a comprehensive and accurate register by 2015, as far as it was practicable to do so. This timetable allowed for a phased introduction of the new system. However, that Government showed their commitment to meeting the timetable by giving the Electoral Commission the power to oversee the process independently and the obligation to report annually to Parliament, so that if Parliament wanted to make any changes as the system progressed it could do so. We also gave the Electoral Commission substantial new powers to carry out these objectives.
The previous Government spent a great deal of time and effort building cross-party agreement on this approach. In the debate in the other place on 13 July 2009, which was the major occasion when this issue was debated there, the Front-Bench spokespersons for both the Conservative Party and the Liberal Democrat Party supported the government approach and the timetable, and they did not vote against it. The present Government could have continued with this approach, but for reasons that they have never adequately explained they did not do so. They are rushing forward with the timetable for individual registration and removing the key safeguard of the requirement for a comprehensive and accurate register.
That is not all. The Government threaten to make the register even less complete by proposing to remove the civic and legal duty to register to vote, and to abolish the annual household canvass in 2014. I am sure the Government will say that they are taking measures to mitigate these potential risks just as the previous Government did—and I give them credit for that: they are—but nobody can be confident that such measures will solve the problem.
So why have the Government abandoned the previous Government’s careful, non-partisan approach to this important issue? They have suggested threats to the integrity of the register as a possible reason for this haste. In the words of the Minister, the noble Lord, Lord McNally, a few months ago in this place:
“for the first time certainly in my lifetime, the integrity of the voting system was starting to be called into question”.—[Official Report, 31/10/11; col. 974.]
So, by implication, the Government appear to be arguing that the need is so urgent that there can be no delay in bringing in a measure that can help tackle electoral malpractice. But independent bodies tasked with safeguarding the integrity of our electoral system do not share this assessment. The analysis carried out by the Association of Chief Police Officers and the Electoral Commission, for example, into the 2010 elections stated that,
“no evidence of widespread systematic attempts to undermine or interfere with the May 2010 elections through electoral fraud”,
was found. They said:
“we are not aware of any case reported to the police that affected the outcome of the election to which it related nor of any election that has had to be re-run as a result of electoral malpractice”.
There is never any justification for complacency about even a single incident of malpractice, but the evidence does not suggest that the level of electoral malpractice justifies the risk that the Government are running with the electoral register.
A report in 2008 from an independent body, the Rowntree Reform Trust, concluded:
“It is unlikely that there has been a significant increase in electoral malpractice since the introduction of postal voting on demand in 2000”.
It added that any malpractice that had taken place,
“related to a tiny proportion of all elections contested”.
Nor will individual registration, for all its merits, address all the cases of malpractice. The Association of Chief Police Officers and the Electoral Commission have concluded that the very nature of recorded electoral malpractice changes; as measures are introduced to tackle one form of malpractice, the problem shifts to other forms of it.
Indeed, I would say that the Government themselves do not see the problem as disproportionately pressing, because they scrapped ID cards. Whatever the justification for scrapping ID cards, they did scrap them. Whatever problems noble Lords may see with them, ID cards would have helped tackle the single largest category of alleged malpractice, which is voting offences, which includes personation at a polling station. The Government scrapped ID cards despite a recommendation by the Association of Chief Police Officers and the Electoral Commission that to strengthen the security of the electoral process, the Government should review the case for requiring proof of identity of voters at the polling station.
The weakness of the Government’s case for their approach is matched by the damage they risk doing. They risk excluding millions from their democratic right to vote. Their approach junks the principle, followed for good reasons by successive Conservative and Labour Governments, that fundamental constitutional change, particularly when it relates to the electoral system—the very wiring of our democracy—should only proceed, wherever possible, on a bipartisan basis. Their approach means that the boundary reviews in 2015 will be conducted on the basis of a profoundly flawed register, and therefore will subvert all the high-minded principles that the Government have advanced for these boundary reviews.
The increasingly unrepresentative register that is likely to result from the Government’s approach will restrict the pool of those available for jury service, and so it will threaten the quality of justice in our country. Scope has warned that,
“the transition process must be handled carefully so that it doesn’t inadvertently exclude disabled people”.
Finally, the Government’s approach risks turning our electoral arrangements in this country into a matter for partisan dispute for the first time in over a century, and this is potentially toxic for our democracy. Most agree that those eligible voters not registered to vote are most likely to vote Labour when they do vote. It is true that the Liberal vote in the inner cities is also likely to suffer. The Electoral Commission has found that,
“under-registration is notably higher than average among 17-24 year olds … private sector tenants … and black and minority ethnic (BME) British residents”.
It also found that the,
“highest concentrations of under-registration [are] most likely to be found in metropolitan areas, smaller towns and cities with large student populations, and coastal areas with significant population turnover and high levels of social deprivation”.
The evidence suggests that the party that will suffer least, if at all, from a fall-off in registration is the Conservative Party. Electoral registration is only 90 per cent complete in Labour seats, but 94 per cent complete in Conservative seats.
Politicians and Parliament have been falling into disrepute in recent years—it is a matter of grave concern, I know, to everyone in this House and in the other place. I ask your Lordships to consider the impact on the health of our democracy if it turns out, as it might, that the outcome of a general election has been determined by the fact that millions of eligible voters could not vote because they were not registered to do so, and that this was the result of a government policy deliberately pursued despite all the evidence that it would have precisely this consequence. Whatever the motivation behind the Government’s precipitous abandonment of a bipartisan approach to individual registration, they still have a chance to return to the approach adopted by the previous Labour and Conservative Administrations.
Independent bodies have now reported on the Government’s approach and expressed concerns about it. The House of Commons Political and Constitutional Reform Select Committee, on which the Government have a majority, has noted,
“serious concerns that the Government's current proposals will miss an unacceptably large number of potential electors”.
The Electoral Commission has argued that the UK Government and UK Parliament should make a number of changes, including requiring electoral registration officers to run a full household canvass in 2014, abandoning the government proposal to allow voters to opt out from registration, publishing a detailed implementation plan, considering how to ensure the change is delivered consistently and ensuring that sufficient funding is available for the activities involved in implementing the change from household to individual electoral registration.
I hope that the Government will now take the concerns of these independent bodies more seriously than they have done up until now. I suggest to the Minister that one way of addressing all the problems that the Government’s approach risks creating would be to set up a working group, consisting of representatives of all the political parties represented at Westminster, to agree how best to tackle the problems that have been so widely identified and by independent bodies. There are many distinguished Members of your Lordships’ House, many of whom will speak in the debate today, who I am sure could make a major contribution to such a working group. I recognise that the Minister may not be in a position to respond substantively to this suggestion today, but I would be grateful if he could agree to write to me with a considered response if he is not able to do so today. If he rejects this proposal, could he set out in detail whether he accepts that the introduction of individual registration will lead to increased numbers of eligible voters falling off the electoral register? If he does not, can he guarantee that this will not happen?
This is a technical issue but, as I hope I have indicated in these remarks, it is one with potentially profound consequences for our democracy. I hope the Minister will not brush these concerns aside, but respond to them constructively and in a way that can re-establish the bipartisan approach that should always characterise public policy on such constitutional issues.
My Lords, the initial language of speeches in debates such as this is conventional, even to the extent of seeming Chinese. However, on this occasion, which is also the 180th anniversary year of the Great Reform Act, convention can be thrown to the winds and the noble Lord, Lord Wills, can be thanked for and congratulated in an old-fashioned, John Bull-ish, Hogarthian way on the immense service that he has done to your Lordships’ House in securing this debate and opening it so well, even if sometimes controversially.
To genuflect towards the Great Reform Act, I remark in passing as a former Member of Parliament for the City of Westminster that my predecessor, Charles James Fox, required seven votes to be elected in Midhurst and 13 in Malmesbury, but was confronted by an electorate of 6,000 when he came to Westminster, on a property franchise so liberal that the electorate actually fell after the 1832 legislation. The noble Lord, Lord Wills, will be aware that, although the House of Commons Library note on this subject was intended as briefing for an opposition day debate in the other place on individual electoral registration on 9 November 2011, he will also be aware that that debate did not take place and never has since. So this debate is the subject’s first parliamentary outing since the White Paper of last summer.
My noble friend the Minister who is replying to the debate is himself a living embodiment of the coalition. I am happy to say that voter registration is a subject on which the two coalition parties do not in principle seem to have differences of opinion. I can still recall, in opposition in your Lordships’ House, my agreeable surprise in another such debate when my now noble friend Lord Goodhart, speaking after me, said that he had agreed with almost everything that I had said in preceding him. I also derive satisfaction for having spoken in the Second Reading debate during the passage of the Electoral Fraud (Northern Ireland) Act 2002 in your Lordships’ House—a debate that precipitated the wholesale rewriting of the Bill at the behest of the late, great Lord Williams of Mostyn between Second Reading and Third Reading and the requirement therefrom for people registering to vote to provide their personal details, including a national insurance number, an event that provides forbear ancestry to this debate. The fall of 10 per cent in the Northern Ireland electorate was a consequence but not, in my view, an inexplicable one. The new electoral register involved a sharp reduction not only in duplications but in those removed to a higher place by death without having been removed from the electoral register as they crossed the bourn.
In Great Britain, after the boundary changes leading up to the 1983 general election, my inner-city seat had the lowest turnout in the country at 58 per cent, a level the country itself reached two elections ago; clearly, where Westminster leads, so goes the nation. I told my agent, the admirable Donald Stewart, who retired last year, that this position in the turnout list must never be repeated. Over my next three, and final, elections, we rose 24 places in the turnout list, overtaking not only other inner-city seats in the great cities of the nation but some Northern Ireland seats as well. Personally, I enjoy election canvassing, but I enjoy it the more when I am confident in the security of the register. I also have profound consequential admiration for inner-city postmen.
I hope that I am not telling tales out of school when I say that some years back the Conservative Party’s research department’s statistical side did some research into the electoral registers of marginal seats. As its motivation was primarily political, it did not go further and compare its data academically with those for other, less marginal, seats. However, the outcome was very similar to that which emerged from the post-2002 Northern Ireland data. One additional element was the significant number of aliens on the register not yet entitled by citizenship to vote. I am not in this regard implying fraud, although of course there may have been some. An alien with imperfect English might well feel that he was obliged by law to fill in the annual household electoral request from the local authority. Nor do I blame electoral registration officers for failing to conduct a full electoral canvass. Funding for electoral registration officers is not ring-fenced, to pick up where the Welfare Reform Bill Report stage left off last night. Moreover, as the House of Commons Library note says, the Electoral Commission,
“initially saw the change as being an essential ‘building block’ for e-enabled elections but individual registration was later seen as an important measure to guard against electoral fraud”.
All this, however, militates in favour of a full 2014 canvass at this stage in the programme’s evolution, rather than relying on an updated 2013 register.
One of the incidental consequences of the international détente of 1989 and the fall of both communism and the Berlin Wall was the exposure of UK electoral experts, often as election observers, to the practices of the eastern European countries, where it transpired that voters very much had to prove who they were, not least in the Balkan imbroglio. My late first wife was a Brazilian citizen who also carried a British passport, but I did not then realise that in Brazil too you had to prove at the time of voting who you were. The majority of countries now require a photographic card or even a specific electoral registration card.
I realise the bias against identity cards in this land and the distaste for indelible ink on our hands, but I wonder whether we are not being offered the opportunity to learn from the experience from others. We had the first industrial revolution and other countries learnt much from it—indeed, improving on it in the process. We were, with the exception of Albania, the last country in Europe to create a modern national lottery and, as the Minister who introduced it, I can testify to how much we learnt from the experience of others to create what is widely regarded as the best lottery in the world. I know that we are the mother of parliaments, but perhaps humility might help us to make the giant leap to an electoral registration card ourselves. We are conscious of the importance that the coalition attaches to the Parliamentary Voting System and Constituencies Act 2011. The same importance should be attached to a copper-bottomed improvement to the whole electoral procedure.
On a final elegiac note, one of the losses from 18th-century electioneering history is the gradual disappearance today of constituency agents from the ranks of our political parties. As the farm labourer disappears from the land, so does a great deal of knowledge of country lore. For the benefit of the Hansard writer, I spell that word with an “o”. The same is true of agents —and I spell “lore” in that instance with both an “o” and an “a”.
My Lords, I join the noble Lord, Lord Brooke, in congratulating my noble friend Lord Wills on raising this important issue. Like many Members of your Lordships’ House, I spent many happy hours, extending to 50 years, using the electoral register for the purpose of canvassing. As my noble friend has said, the keystone of any working democratic electoral system is, of course, that there should be an accurate and comprehensive register. As he said, all political parties have subscribed to the view that individual registration is desirable, albeit that that necessarily involves much more work and perhaps more cost to ensure its efficient administration than the situation hitherto.
The electoral register primarily serves as a function of democratic politics but it also serves other purposes. We may well hear in this debate about the uses to which the register can be put—for example, in relation to jury service, the avoidance of fraud through the use of the register by credit agencies and the like. On the downside, there is legitimate concern about the use of the register by commercial organisations for the purposes of marketing and so on, but that is a subsidiary question to the one that we are addressing in your Lordships’ House today.
Democracy ultimately depends on participation, and the attitude of the Government appears to be that inclusion on the register is to be voluntary—a sort of lifestyle choice. I suspect that most of us in your Lordships’ House would take the view that inclusion on the register is in fact a civic responsibility. Many of us would go further and say that voting is a civic responsibility. Some of us might be tempted to say that voting should be compulsory, but that is not within the province of this debate and would no doubt be a more controversial proposition.
It is clear that there is a real risk of a significant decline in numbers registering under the present proposals. My noble friend has referred to the Electoral Commission’s estimate of a 65 per cent effective register. The numbers have been declining in any event over recent years; 65 per cent would put us at less than the United States, whose record in these matters generally is regarded as pretty deplorable. In evidence to, I believe, the Electoral Reform Society at an event that it staged, the returning officer for Hackney predicted a reduction of 25,000 to 30,000 from an already low base of an electorate of 165,000. That is a very significant reduction.
Of course it is right, as noble Lords have already said, to create barriers to electoral fraud, but as my noble friend rightly points out, fraud essentially has been pretty minimal. There had been concerns around postal voting, but I have to say that postal voting has substantially sustained turnout in local elections. In my own authority in Newcastle, one of the experimental policies in 2004 was to have 100 per cent registration for postal votes. Since then, the turnout in local elections has resulted in 70 per cent of those with postal votes actually voting, with only a 15 per cent turnout among those not using the postal vote. There has been no evidence or even any suggestion of postal vote fraud in that authority. So postal voting, properly administered, can certainly help sustain turnout.
Making registration voluntary is surely a mistake. It is necessary to have the sanction of a possible fine—although very rarely, if ever, used. I think that perhaps a few more cases would engender more people registering now. If voluntary registration appears to be the order of the day, it is likely to engender a significant further fall, as has happened in Northern Ireland, as has already been said. When a few years ago the poll tax was a hot political issue, we saw a substantial decline in registration. People effectively sought to evade the poll tax by keeping their names off the electoral register at a time when there were potential sanctions to be applied. Without sanctions, there may very well be an even worse level of registration and therefore turnout. As my noble friend has indicated, this is particularly likely to be the case with young people, with people from ethnic minorities and with private tenants. When one goes canvassing, as I was doing last weekend, it is striking how in areas of private-rented housing one comes across a significant number of properties where there is no name on the electoral register; it is much less the case in local authority housing or in owner-occupied areas. That constitutes disenfranchising—admittedly by omission on the part of the residents—of a significant proportion of the population.
This has effects beyond just the turnout in individual seats. Potentially it influences hugely the drawing of parliamentary boundaries. Clearly, under registration, it could significantly distort the pattern of parliamentary boundaries that was determined under the legislation passed last year. The boundaries are now to be reviewed every five years instead of approximately every 10 years, and that could, of course, significantly affect the political outcome.
One area that has not really been touched on is the position of voters who, like Members of your Lordships’ House, are entitled to vote in local elections but not in national elections. That includes EU residents. I do not think that their position has been canvassed—to use an appropriate phrase—at all in these discussions. It is perhaps a matter that ought to be considered. They are entitled to vote and there is no reason why they should not vote, since they are paying local taxes. It seems to me that it ought to be part of the responsibility of the electoral registration process to ensure that EU citizens in this country with the right to vote in local elections are included in the register.
The Political and Constitutional Reform Committee of the House of Commons considered these matters and clearly took a strong view that the offence of failing to co-operate with the electoral registration officer should be retained; that the Electoral Commission should promote a public information campaign on a regular basis to inform people of their rights and responsibilities in this respect; that there should be, as the noble Lord, Lord Brooke, confirmed, a full canvass in 2014, which will be critical as we approach the next general election—assuming that we have to wait until then; and thereafter that the register should be adequately maintained.
There is a resource implication. Local authorities’ budgets are under huge pressure and it is tempting to dispense with the necessary investment in keeping a register up to date. However, the temptation should be resisted and resistance would be facilitated if a grant were specifically ring-fenced for this purpose. I am not normally in favour of ring-fencing grants to local government, but this has implications for our whole political system and is a case for which I certainly would be prepared to make an exception. A project of data-matching is also under way, and that should also be evaluated.
The Welfare Reform Bill, which has occupied the House —and will continue to do so—for some time, threatens to take us back in certain respects to the 19th century Poor Law. I hope that these changes in the electoral system do not take us back to a 19th century electorate.
My Lords, first I congratulate the noble Lord, Lord Wills, on securing this debate. It comes at a good time because the recent report by the Electoral Commission highlights a number of weaknesses in the current electoral registration process, especially in the completeness of the voting register. It suggests that perhaps 6 million or 7 million people who should be on the register are not. The current household-based processes for registering voters in Great Britain are not consistently applied. The system is not accurate and is antiquated in that it requires action by someone acting as head of household—a position that does not exist in any household that I would recognise.
Any unnecessary change to the system beyond a simple switch from household to individual responsibility that might risk missing out many more voters while doing nothing to improve accuracy would be a very bad step in the wrong direction. I am pleased that any changes will now be open to very considerable pre-legislative scrutiny. Many representations have been made suggesting that the recent White Paper probably puts accuracy above completeness as a priority in the registration process. However, both principles are very important. Fraudulent entries on the register are abhorrent, but the absence from the register of people entitled to vote fundamentally weakens our democracy. I am pleased that the idea of encouraging voters in effect to disfranchise themselves through a so-called opt-out box on the registration form has been dropped; it would have sent a totally wrong signal about responsibility.
There is agreement among the parties on the principle of individual electoral registration, but, in considering any other changes to the process, clear evidence of the benefit of the changes to the accuracy and completeness of the electoral register must be shown if they are to be made. Many people consider that the main strength of our existing registration system, and the reason for widespread compliance, is that it is based on a legal requirement. Electoral registration officers clearly consider this requirement to be vital to the process, because the registration forms that each officer designs make the requirement clear above anything else.
I shall quote from some of the forms that I have been able to collect from different local authorities which are sent to every household as part of the registration process. Exeter City Council’s form says in bold near the top of the form:
“You are required by law to give the information requested on this form”.
Wandsworth Council’s form says in large print at the very top:
“You are required by law to provide the requested information even if you do not qualify to vote”.
Elmbridge Borough Council’s form says in large bold type under the address of the recipient:
“By law you must return this form every year even if there are no changes to make”.
Edinburgh’s form emphasises that the information is “required by law” by emboldening those three key words. Lambeth Council’s form says at the top:
“By law you have to register every year”,
and this form, like many others, also leads with the fact that,
“You can be fined £1,000 if you do not reply”.
Eastbourne’s form also states most prominently in bold print the legal requirement to comply with the process and also features the sanction of a fine of up to £1,000 if you fail to do so. In fact, every single form that I have been able to collect strongly emphasises this point of legal requirement. I suggest that this is clear proof that the statement is considered to be of significant value by those most concerned with the detail of the process.
Of course, prosecutions for failure to comply are very rare, but the threat of legal sanction is considered to be very effective. The Electoral Commission has relayed to me the views of the Association of Electoral Administrators. These administrators are the people who employ those who go round visiting homes and chasing the forms to try to ensure that they are returned and that the register is as complete as possible. The association says that interrupting households to ask them to fill in a form is never easy, and if completion becomes a voluntary activity—simply a polite request—it does not think that the forms will be completed. The fact that it is a legal requirement is what persuades the vast majority of people to comply with the registration process.
The Electoral Commission clearly agrees. It concludes that:
“Without some form of sanction, we would expect a lower rate of response to requests for information than is currently achieved”.
The threat of legal sanctions is what makes the existing register as comprehensive as it is. Without them, the completeness of the register is likely to fall considerably. Removing legal sanctions would put the quality of our democracy at great risk—for no benefit to that democracy. That is why I will not support any change that does not satisfactorily preserve this legal requirement to comply with the registration process on everyone who should fill in a form to register to vote. Registration to vote is not a personal choice in our system and it should not become one. It is voting or not that should remain a personal choice. This is not just about the fairness of elections but about the fairness of the way in which constituency and ward boundaries are drawn up.
I am sure that Ministers will remember the many occasions last year on which they defended the electoral register—as it now is—as the basis for drawing up constituency boundaries. They said that we could be proud of an estimated 92 per cent compliance with the registration process. They must now realise that if we change the basis of the register in fundamental ways, it may no longer be fit for purpose for redrawing boundaries.
There are many issues that I would like to raise in relation to this, particularly the need for a full and comprehensive canvass in 2014. We know how important that is, but for reasons of time I have chosen to concentrate on that specific issue, which I consider to be of paramount importance. I hope that my noble friend Lord Tyler will shortly take up some of the other issues about which I am also very concerned.
My Lords, our country has before it the prospect of a new system of individual electoral registration. That prospect has been widely welcomed, and rightly so. In one part of our country the new system is already a reality. It has operated for a number of years in Northern Ireland, for which I have a strong and enduring affection.
As a deeply committed supporter of Northern Ireland’s union with Great Britain, I hold firmly to the view that, in matters affecting the UK as a whole, the same approach should be followed throughout it. In Northern Ireland, it is a criminal offence not to complete a voter registration form when asked to do so. No such provision is currently being proposed for Great Britain. A thoroughly undesirable distinction will, therefore, be created between the system in Northern Ireland and that elsewhere. Equity demands uniformity. As the Political and Constitutional Reform Committee of the House of Commons noted last November in its report on the proposed new system:
“There appears to be no reason why failure to complete and return a registration form should be a criminal offence in Northern Ireland but not in Great Britain. The Government should take steps to remedy this inconsistency”.
I hope that when my noble friend the Minister comes to reply to this debate, he will be able to tell us that the necessary steps will be carefully considered.
Action to establish better arrangements for electoral registration will be deficient and incomplete if it does not tackle a problem that has been allowed to continue for far too long. I refer to the position in which the vast majority of our fellow countrymen and women living abroad find themselves. Two simple statistics need to be borne constantly in mind. It is estimated by the Electoral Commission that 5.6 million British citizens are resident in other countries. Just 30,000 of them are registered to vote alongside their fellow citizens in the country to which they belong. Yet today, to a greater extent than ever before, many British expatriates retain close ties with their country and, in doing so, keep a strong feeling of attachment to it, however extensively they may involve themselves in the practical affairs of the communities where they reside. In the age of the internet, our fellow countrymen abroad can follow closely what is happening in their native land and contribute powerfully as online participants to developments taking place here, whether they reside in Berlin, Brisbane or Buenos Aires.
Sadly, however, for many expatriates a feeling of attachment to Britain cannot gain the full expression that it naturally seeks. After 15 years’ absence, the right to vote ends. No one has ever argued that a sense of belonging to our country dies after 15 years’ absence from it. The withdrawal of voting rights after a decade and a half rests on no clear, settled principle. Their termination could equally well occur after other periods of residence abroad—indeed, it has done so. Participation in our elections was originally closed after five years’ absence. Then the qualifying period was quadrupled to 20 years. No rationale was offered for these sudden changes, nor for the decision to slice five years off the total, which has brought us to the present position. Our fellow citizens abroad are surely entitled to a firm, stable set of arrangements. Instead, they have been subject to arbitrary upheavals.
Other advanced democracies have not chopped and changed in this extraordinary fashion. The United States of America, France, Italy and the Netherlands, among others, all provide lifelong voting rights for their nationals living in other countries, as do Australia, Canada and New Zealand. It is true that some countries are more restrictive. Germany, for example, grants lifelong voting rights to its citizens living in other EU countries but voting rights for 25 years to those living outside the EU. However, no other leading democracy takes as restrictive an approach as our country. It is high time that the United Kingdom joined the international consensus.
How is this to be achieved? The forthcoming legislation to introduce the new system of individual registration can provide the perfect vehicle for change, as my friend Mr Christopher Chantrey, chairman of the British Community Committee in France, pointed out in his evidence to the Commons Select Committee. The unjustifiable time limit on the right to vote abroad should be swept away completely, bringing us into line with the United States, France and other countries.
Our fellow countrymen abroad already have individual voter registration but in a particularly cumbersome and inefficient form. The existing complex and time-consuming registration arrangements have deterred many who do meet the existing qualifying conditions from claiming their right to vote. As Mr Chantrey stated in his recent submission, overseas voters, as opposed to UK resident voters, can be positively identified through an official document: the British passport. A simple system, he went on, could easily be established to enable overseas voters to register electronically or by post, providing the basic information needed to confirm their identity. Once a general election or referendum was called, Mr Chantrey concludes, a ballot paper would immediately be electronically generated or printed, and e-mailed or sent by post to the overseas voter.
Great men and women—John Bright, Gladstone, Disraeli, in his idiosyncratic fashion, and the Pankhursts, among others—campaigned with vigour and conviction to make the franchise the birthright of their fellow countrymen and women. Of course it never occurred to them that, in a future age, over five and a half million British people would live and work abroad without the right to vote in the national parliamentary elections of their countries of residence. For far too long, far too many of them have been effectively disenfranchised. Now, a great opportunity has arisen to end their disenfranchisement. We should seize it.
My Lords, I, too, thank my noble friend Lord Wills for initiating this debate about a very important aspect of our democracy. We take voting for granted in modern Britain and it is fundamental to our basic freedoms. We have, however, become rather sanguine about the downturn in voter turnout and casual about the ways in which the voting system is corrupted.
Vote-rigging is, in fact, much more widespread than some of our speakers have indicated, and there has perhaps been just too much complacency about the things that have gone wrong. It has been proven to have occurred in Birmingham, Slough, Peterborough, Reading, Bristol, Burnley, Blackburn, Halton, Guildford, Havant, Bradford and other towns and cities. The judge who presides over the Election Court, Mr Justice Mawrey, has much to say about the reasons why this has been taking place. In fact, he concluded in the 2004 Birmingham City Council case that the elections would have been a disgrace to a banana republic. I recommend to this House a booklet by Sam Buckley about the many cases that have taken place during the past decade and a bit.
I chaired the Power inquiry, and we looked at the reasons for the downturn in electoral turnout. One thing that we found was that the habit of voting was not being established in the young. When this was not established—certainly before people were 30—it was very unlikely, as used to be the case, that they would start voting once they had a family, a household and so on. Many people do not ever turn to it.
The recommendation before this House is that we introduce individual voter registration. I support this, but not as a sole response to problems. It should exist alongside the current system. It should be possible for somebody who somehow or other has failed to get their name on to the register to be prompted to do so—and to do so individually with much greater ease than is currently possible.
I do not agree with the noble Lord, Lord Rennard, when he says that he does not know households with a head. I think that now we would talk about heads of households where families take very different forms and where people may consider themselves, in marriages and partnerships, much more equal. What we want, however, is for one of the heads of a household to take responsibility for trying to get people’s names on to the register. I, like the noble Lord, believe that there should be a legal sanction, because if there is not, the seriousness of being on the register will not be accepted.
The noble Lord, Lord Lexden, raised the question of why there is some kind of discrepancy between here and Northern Ireland. It is, of course, because the long history of gerrymandering in Northern Ireland has made it a sensitive issue. However, it should be becoming more of a sensitive issue here, given the history of hearings before the Election Court that have taken place in the past decade.
The Representation of the People Act 2000 was introduced because of falling voter turnout. In the 1997 election, only 71 per cent of those who could vote turned out, and it was the lowest since the Second World War. That led to an inquiry and, in turn, to the legislation. We would now be thrilled if we could go back to those figures. In fact, over the past 14 years we have seen participation hovering at around 60 per cent, so we have seen a serious reduction. Therefore, despite the remedies that have been sought, we have not managed to improve things considerably.
We have expanded postal voting, but I am afraid that I still see it as the wrong solution to the wrong problem. It was a misidentified problem because politicians always want to believe that the reason people do not vote is because they are too busy, it is too complicated, they are too preoccupied or some other such reason, when in fact most of the time it is because people do not see the point in doing it. In conducting the Power inquiry, we found that people did not vote usually because they felt that it did not affect the outcome. They believed that lobbyists and vested interests had more power than they had, along with many other different reasons, but it was rarely because it was too difficult to go across the road or to find the voting station. Postal voting has operated successfully in some areas—certainly for those with infirmities, those who are living abroad or are going abroad for a period, and for other good reasons. However, removing a rationale for using a postal vote and making it available on demand has, I am afraid, expanded fraud.
We have to call it fraud and not just the word that was being used by my learned friend—malpractice. We have seen serious fraud taking place. The change to postal voting on demand was followed almost immediately by instances of fraud. Within a year, in local elections held in 2002, we had an instance of fraud where postal votes were being abused in local elections held in Birmingham. John Hemming, who is now an MP, showed that four fraudulent postal votes were cast in the Billesley ward, where the majority achieved by the candidate was three votes. We started seeing this happening with much greater frequency. I urge noble Lords to read the judgments of the Election Court. Of course, Birmingham in 2004 was the worst example. Some 70,000 postal votes were registered within days of the election, because you only have to register within five working days of an election and you do not have to give a reason. Suddenly, there was an inundation of applications for postal votes, 40,000 of which arrived within the marginal days of the deadline. In one ward, 8,241 people applied in the final days before the election. This is not about malpractice, mistakes or whatever; it is about crime and the stealing of elections, and it is a problem that we have to address if we take our democracy seriously.
I remind the House that some of the reluctance of people to register started with the poll tax. Noble Lords will remember that it was instilled in the minds of many people that being on a register to vote would affect other aspects of their lives and would have a financial impact on families. Lots of people did not want to register to vote. Until we have a secure and separate electoral register which people do not feel is going to impact on other aspects of their lives, we are going to see, particularly among the poorest in our society, people being unwilling to register.
However, what I really want us to consider is the business of postal voting because I think that it should be revisited. If we are going to look at ways of making our electoral system better, we have to revisit it. Article 3 of the European Convention on Human Rights requires Governments to hold free elections that will,
“ensure the free expression of the opinion of the people in the choice of the legislature”.
That is important whether it be for local elections, European elections or our general elections. In 2006, a motion was placed before the Council of Europe that there was enough fraud involved in the system of postal voting in the UK to make us fall foul of our duties under Article 3. I am afraid that we were criticised by the Council of Europe for the system that we have in operation, so it should be revisited.
I believe strongly in the democratic moment. I believe that going into the polling booth and putting your cross on the paper matters, and we have to instil the importance of that in new generations. As others have said, it is our birthright, and I do not think it should be treated like filling in a questionnaire or a consumer survey. If we want to look at registration, we have to look at it in the round of all the ways in which people come to vote.
My Lords, I would like to concentrate on postal voting, particularly postal voting from overseas, and on the comparisons between the previous general election and the AV referendum. I am grateful to the noble Lord, Lord Wills, for giving us the opportunity for this debate. I should declare again that never in my life have I been able to vote in a general election, although I have been able to vote in other elections, so I have no interest to declare in that way.
In the 2010 general election, 6.9 million people—15 per cent of the electorate—were issued with postal votes, and 83 per cent of those issued with a postal vote returned it. That compared with six out of 10 people registered to vote at a polling station exercising their vote. Almost one in five votes at the count was a postal vote, so it is an interesting statistic which shows how successful postal voting is. In the recent referendum, there was an increase in the number of people voting by post to 7.2 million, which is around 16 per cent of the electorate, and 72 per cent of those returned their postal vote. That compared with fewer than four in 10 registered at a polling station actually turning up to vote. We can see that postal voting is increasing in this country and is likely to grow even more. Merely 11 months ago we had a debate on this issue and the Minister, the noble Lord, Lord McNally, who answered for the Government, said that they would consider the issues of postal voting with urgency. I think that 11 months just about qualifies as “urgency” for any government.
One of the issues we discussed then was the depressing fact that in the 2010 general election, only about 500 soldiers out of 10,000 who were serving abroad, mainly in Afghanistan, actually managed to return a postal vote. The Minister gave assurances to your Lordships that he would try to improve on that before the AV referendum. I wonder whether the Minister who is to respond to the debate has any statistics to show whether he was successful or not. It was bizarre that there we were in Afghanistan trying to encourage the introduction of an electoral system into that country while our brave soldiers serving over there were unable to join in the electoral system in this country. I would be interested to know what the statistics are. The Minister also agreed that we should take a radical look at voting for overseas residents, and I wonder whether the Government have any statistics on how many people resident overseas voted by postal ballot in the AV referendum compared with the previous general election.
The Government have made a welcome proposal to extend the timetable for UK parliamentary elections from 17 to 25 working days from the dissolution of Parliament to polling day, with a longer period between the close of nominations and polling day. However, I am concerned that the full benefits of this extended timetable will not be available to all postal voters. The Government have not indicated that they intend to amend the relevant rules which specify that ballot packs cannot be dispatched until 5 pm on the 11th working day before polling day. We are concerned that they may not arrive in time. Perhaps I may quote a counting officer at the last election who said, “The timescale is too tight to allow sufficient time for overseas electors to complete and return their ballot papers. They are basically being disfranchised every time an election is held. One overseas elector called on polling day as he had just received his postal vote, despite an early turnaround and issue by airmail”.
That is the problem, and as my noble friend Lord Lexden said, there were only just over 30,000 overseas voters on the register at the last election out of 5 million British citizens who live abroad, of whom at least 3.5 million are probably eligible to vote. We ought to do something in this country to encourage them to take part in the electoral system. Many people go abroad or work abroad, but that does not mean to say that they have lost interest in this country. They read English newspapers on the internet every morning, and indeed many of them want to return to this country at some point in the future. They should be able to take part in our electoral system.
My Lords, the debate has mostly been concerned with the direct application of the register and the changes that will be made in it to individual registration from the present system of head of household registration. We have asked what that means and whether it will make it more difficult to avoid fraud. But there is a secondary purpose that I want to mention in the debate, which is that for many years, at least 30 years to my knowledge, the electoral register has been used commercially to indicate the truth about residence, permanency of residence and so on, along with identification of people on the register by credit reference agencies. I hope my noble friend Lord Beecham does not mind me saying that they are commercial entities; they are in business for commercial reasons. But they provide a useful public purpose in that, both for creditors and indirectly for consumers, they indicate various pieces of key identification and household information to suggest the creditworthiness or otherwise of the consumers to whom credit providers are inclined to offer credit.
Credit reference agencies have for many years had the privilege of being entitled to have access to the full electoral register. They are approved or licensed by the Office of Fair Trading at the present time and in future by the Financial Services Authority, and that is an indication of the probity of the particular agencies I am talking about. There is a small reference in paragraph 13 of the White Paper on this subject to indicate the significance of credit reference agency use of the electoral register.
There is a change suggested by the Government in the White Paper to individual electoral registration but the Government propose to remove existing penalties for non-registration. As I understand it, admittedly from a sitting position, my noble friend Lord Campbell-Savours does not think much of penalties because they are very rarely imposed and people are very rarely prosecuted. I would suggest, as the noble Lord, Lord Rennard, indicated in his useful speech, that if there are to be penalties, as there have been in the past, they will be quite useless unless, at least from time to time, there are examples of prosecutions and fines imposed and whatever other penalties it is thought desirable there should be for non-registration.
I am very concerned about paragraph 16 of the White Paper, which makes the point that it is not compulsory for anyone to vote in this country, unlike in Australia, and the Government do not intend to compel people to vote. It then goes on to say, displaying a bad sense of logic, that it is sensible that registering to vote should also be a choice for the individual concerned. I do not think one thing follows from the other at all. Surely one can be in favour of allowing people the freedom to vote or not to vote on election day and yet regard it as a valuable requirement to make the comprehensiveness of the register a reality. I think the noble Lord, Lord Rennard would agree that they are separate matters. From the point of view of the secondary value of the electoral register that I am referring to, I would say that it is a helpful indication in relation to the creditworthiness or otherwise of individuals. It would be a severe loss if the register was much less comprehensive than it has been, let alone more comprehensive. So I doubt the logic of the Government’s view on this matter.
Others have said that this is not the subject of this debate but I may surmise that voting should be compulsory. There are indeed arguments to that effect. I am certainly saying that registration to vote is a public duty and should be enforceable by appropriate penalties. As I understand it, leading credit reference agencies as well as the Political and Constitutional Reform Committee in the House of Commons want registration to be mandatory. I entirely agree and I agree with the value of the 2014 household canvass that has been referred to by others in this debate.
In principle the move to individual electoral registration seems to me to be correct and we want to ensure that that principle is backed up by a greater reality than seems likely from the current proposals. As my noble friend Lord Wills has indicated, the reason why the proposals are inadequate at the moment is that the Government have rejected compulsion and various other ideas, especially those formulated by people outside the Government, and they have failed to go along a bipartisan route.
My Lords, this is a very timely debate that my noble friend Lord Wills has called for today. We were reminded of just how timely by the publication yesterday of the proposal by the Welsh Boundary Commission for the new Welsh seats—a proposal greeted with universal disbelief. There should not have been disbelief because it was an inevitable product of the Parliamentary Voting System and Constituencies Act. It reminds us of the importance of the rules of the electoral game, which is what we are discussing today. That Act is on the statute book so there is no point in going over it. At least it was subject to a good deal of public examination, not least thanks to the reasonably extensive debate it received in your Lordships’ House. By contrast, the Government’s proposals on electoral registration, though scarcely less important in their potential impact, have received practically no public scrutiny. There was an excellent report by the Political and Constitutional Reform Select Committee of the Commons, a useful seminar recently at the British Academy with experts and academics, and a well informed article—the only one I have read in the press—by Martin Kettle in the Guardian, but that is just about it. If you asked 100 electors what was proposed, I doubt you would get one coherent response.
The desirability of the change in principle is common ground across politics and across parties, with the main aim being to eliminate potential fraud. It is also common ground that the switch is likely to cause a drop in registration. The completeness of the electoral register has been declining gradually for a number of years, from north of 95 per cent at its best to perhaps 91 per cent or 92 per cent today. There was, however, one big drop, and that was when the Thatcher Government introduced the poll tax. According to estimates by the academics Iain Maclean and Jeremy Smith, this can account for slightly more than one-third of the estimated 1 million person shortfall between the electoral register and OPCS population estimates—in other words roughly 300,000 people stripped of the vote.
Estimates of how far registration will fall as a result of individual registration vary for two reasons. First, it depends on how it is done, and I will come back to this. If the Electoral Commission’s excellent proposals for a household canvass and for compulsion are followed, there will be much less of a drop than if they are not. Secondly, however, we are in the field of the unknowable, and speculation is inevitable.
There are estimates, however, and they vary from the worrying to the simply terrifying. In Northern Ireland, individual registration caused a shortfall of roughly 11 per cent. In evidence to the Commons committee—the noble Lord, Lord Wills, referred to this in his introduction—the Electoral Commission floated an Armageddon scenario in which all those who do not vote in general elections do not bother to register either. On that basis, the fall would be from 92 per cent to perhaps 60 or 65 per cent—in other words roughly one in three of the people who appear on the register at the moment would not appear. That is not quite as bad as it may sound, because a lot of the people who do not register would not have voted anyway. As completion of the register goes down, the turnout figure will go up—no doubt we shall all congratulate ourselves on that—but it is still a worrying thought that a third of the people now able to vote might not be able to do so.
When a proposal about elections comes before Parliament it is the duty of this House to satisfy itself that what is being done is being done not for partisan reasons but for reasons of merit. The fact that individual registration has been the policy of successive Governments shows that nothing too wicked is being done, but I cannot emphasise strongly enough that the effect of the change in the system will be completely different from what it would have been under the previous Government’s proposals, simply because of the parliamentary voting Act.
It is less likely that Labour voters will register than Tories because they are younger, and all the evidence is that younger voters register less. That will not affect the result of the general election much, because most of them would not have voted in any case. However, what it will affect greatly—on the Armageddon scenario —is the partisan distribution of constituencies, because when the Boundary Commission comes to work on the next review of boundaries, it will work on the basis of the register and will be obliged, as we all know, to make sure that constituencies have, plus or minus 5 per cent, the same number of registered electors. Labour constituencies, where registration is likely to be down greatly, will be too small; Tory constituencies, where registration will be reduced by less, will be too big. Labour constituencies will have to be abolished and Tory constituencies increased in number. It is likely that this will help to counter the current anti-Tory bias in the electoral system, which is a very good thing, but it may create a new pro-Tory bias which I am sure the whole House would agree would be as bad a thing as the present pro-Labour bias.
Here, I find myself slightly puzzled, because it sounds from that as if we have to worry greatly about partisanship. But what gives me pause for thought is that this is not an exclusively Tory Government, it is a coalition Government. It is a Tory/Lib Dem coalition. In allowing this change to go forward without the assurances required on compulsory registration and on the household canvass, the Lib Dems are committing electoral suicide. One thing to emerge from the Royal Academy’s survey, with all the greatest experts present, is that it is Lib Dem voters—younger, mobile voters—who are the least likely to register, and therefore it is Lib Dem seats, particularly urban Lib Dem seats, that will be reduced most by the boundary redistribution resulting from this register.
Perhaps I may end on a slightly light-hearted note, though it may not seem so light-hearted to the Lib Dem Benches opposite. There are lots of predictions as to how many seats they will win in 2015. Some people think they may have enough to fill a minibus; others think that a London taxicab will suffice. I express no opinion on this, but when one looks to the election after this, and unless the necessary steps are taken to make sure that registration under the new system is adequate as the Electoral Commission proposes, I think that a Smart fortwo should comfortably suffice.
My Lords, I thank the noble Lord, Lord Wills, for securing today’s debate. I agree that this is an incredibly important issue. However, I fear that I must begin with a confession lest I be accused of hypocrisy. Late last night, to my horror, I realised that I am not currently registered on the electoral register.
I moved flat a couple of months ago, so I am inaccurately registered. This is one of the ways in which we lose people permanently from the register. It got me thinking as I walked home about the question, “How do you trace me?”. I thought, first, of my self-assessment tax return, but then thought that it might not be too wise to get HMRC involved in this issue. I then turned to my utility bills as a way of being traced, but they were not all in my name and I switched provider in the move. But I then came up with an idea that is perhaps worth the Government investigating. I redirected my post. How many people who move use this facility? Would it be worth requesting that the Post Office add to the form the question, “Do you wish to be added to the electoral register at the address to which you are redirecting your post?”. With 13 to 15 per cent of people now missing from the electoral register, I ask the Government to consider whether this is worth investigating.
I realise that that is a very pragmatic beginning to a speech on an issue of the highest principle. I shall seek briefly to speak about the lack of party consensus on the matter and the current “nudge” philosophy of this Government. The Minister in the other place stated on 15 September 2010:
“The need to improve the accuracy and completeness of electoral registers is an issue on which there is cross-party consensus. As we move forward, it will be important for us to maintain consensus and we will be seeking to work closely on implementation with political parties across the House”.—[Official Report, Commons, 15/9/10; col. 885.]
However, when I googled this issue, I found that there is anything but party consensus. So often during the past 11 months in your Lordships' House, I have been told, “You have joined at rather a strange time”, or, “We are not normally this party political”. If one were to think of elections and government as analogous to a board game then issues such as the number of MPs would be part of the game, and the system of voting, AV or otherwise, would be rather like the rules. However, the electoral register determines who gets to participate in the game. This issue is fundamental to our democracy and sits in a different category of issues, rather like judicial independence. Therefore, to see cross-party fault lines develop on this issue concerns me greatly. I know that this can then lead to the argument, “It was not we who party-politicised—it was you”, but I believe that we must depoliticise this issue, and swiftly. If the Minister were willing to consider the working group suggested by the noble Lord, Lord Wills, I would add that political parties should be supplemented by—or there should perhaps even be a majority of—independent representation, which would greatly assist in rebuilding public confidence in our system.
This is a Government who believe in the “nudge”, a theory perhaps best explained by example. If you wish to apply for a driving licence, you must now answer the question whether you wish to be an organ donor before your form can be processed. If you do not answer the question, the form will not be processed, the theory being that there will be a higher level of organ donors as the system will have nudged everyone to answer the question. That being so, surely the Government would want to nudge people to ensure that there is the highest level of voters on the register and the highest level of people eventually voting. Had the behavioural insights team that now exists in No. 10 Downing Street been asked about the opt-out mechanism, I doubt that it would have been proposed.
In Northern Ireland, one has to complete the voter registration form, and I wonder why the British Government are taking away this minimal form of compulsion when undertaking the greatest change to UK elections since the granting of universal suffrage. Why do I have to fill in the self-assessment tax form and register my car, if I own one, with the DVLA, but not have to fill in this form? I would be grateful for further evidence from the Minister that making the whole system voluntary will not affect the completeness of the electoral register.
I note that the report from the Information Society Alliance states:
“Compulsory registration does not in all cases yield registration rates notably above those achieved in countries without compulsory registration”.
But will it be so in our case? Were the four of us who shared a house alone in knowing that someone had to fill in that form so we could not leave it hanging around forever?
Finally, I have much sympathy with the need for a full household canvass in 2014, as the Electoral Commission has stated that about 20 per cent of people eligible to re-register will not actually be written to in the first write-out in 2014. I presume that that 20 per cent is in addition to the 6.5 million people who are not even on the register at all. I am not convinced that a full household survey in 2013 is more important than in 2014, if resources are the issue at stake.
Accuracy and completeness of the register are but a means to an end, that end being public confidence in the outcome of the election. Is it impossible for the UK to have problems? Let us look at the United States and the hanging chads of the presidential election in 2000. In 2015 it could be a tight race, again. It could be in poor economic conditions. We know that there will be a reduction of MPs to 600. Moreover, 2015 will be the first truly Twitter, Facebook, internet election, with potentially restless people in touch by smartphone. Any complaints or hyperbole, whether well founded or not, travel fast nowadays—August’s disturbances taught us that if nothing else. Let us not take anything for granted, especially our free, fair and peaceful elections.
My Lords, like everyone else, I thank my noble friend Lord Wills for introducing this particular subject and for his excellent introduction. He has raised a subject that is at the very heart of our democracy: the people's right to vote and therefore to be on a register. That is more important than what appears to be the underlying theme behind what the Government are doing—a point that other noble Lords and noble Baronesses have remarked upon—that the prevention of fraud is more important than the right to vote. Electoral fraud appears to be the driving force behind this particular move, and the Electoral Commission makes that quite clear. That is wrong. It ought to be that people have the right to vote and we investigate if there is fraud. This is not new. Anyone who has studied history will know that people have been defrauding in that sense for some time.
It might not surprise many people here that I take the view that the register is just part of an outdated, very old fashioned electoral system. We now live in an age of hi-tech science and development. No wonder a lot of our youngsters do not go out and vote and are disillusioned with our electoral system; they consider it to be so out of date and old fashioned. They vote for their favourite characters in “The X Factor” and “Strictly Come Dancing” by mobile phone. They do not have to traipse along a road on a cold wet night, to be crossed off a paper register and given another piece of paper on which to put a cross after going into a booth, thus deciding how they are going to vote and putting it into a box. Afterwards, there is a long drawn-out process whereby those ballot papers are taken somewhere else and counted by various people. It takes long hours. I have been through this process. I was an MP for over five elections. We sat for night after night, waiting for the result to come in for our particular constituency.
Surely, in this day and age, it is time we started to use modern technology as part of our electoral system. Many of those who have opposed this measure so violently will disagree with me, but I am sorry to say that we have to have a national identity card and a national register to go with it. Then the electoral register could be drawn up on the basis of that national ID card register. It would be a smartcard. Smartcard technology has moved on so fast in the past four or five years that it is no longer the problem that it was even a few years ago. The cost is also considerably lower, because that is the nature of technology—the price comes down all the time. It also solves some of the problems of service voters. If you are in Afghanistan, why wait for a postal vote if you can vote using your ID card in some form of electoral machine that will allow you to do that?
The starting point for that register is an ID card that is compulsory: that everyone must have. They must update their address when necessary or the penalty will be severe, a measure which the noble Lord, Lord Rennard, wants to apply to electoral registration anyway. He, of course, was massively in favour of the abolition of the ID card but is now in favour of it.
I should say in passing that I was the spokesman for the Opposition in the other place when the Scottish poll tax Bill was introduced. If the noble Lord is worried about the £1,000 fine, it was increased by the then Tory Government to deal exactly with the problem of people possibly coming off the electoral register. The fine used to be £50 if you did not send in the form. It then became £1,000 to deal with the poll tax problem.
The fact is that we should have such an electoral register. To start with, we would not move straight to electronic voting. That ought to be the way in which we are moving. Instead, we seem to be standing still, not moving with the times, technology or science on this. Not just youngsters, but 75 year-olds like me, use smartcards, which we all have in our wallet, all the time. I do not think I bought anything with cash over Christmas. I used my bank card, which is a smartcard, or I bought online with it. Why should I not be able to vote in the same way, or at least prove my identity to electoral registration officers and those at the polling booth in this manner?
Surely we must move to having some form of compulsory ID card in this country in order to ensure that we have as full a register as possible and do away with some of the electoral fraud that might take place. When going to vote, you would have to produce an ID card with your photograph on it. It could then be checked whether the right person was actually voting. Surely that is the way forward. Instead, we are tinkering around with a system that is increasingly old fashioned, out of date and not working properly. It really is time that we moved on rather than standing where we are at the present, using a system that is completely out of date.
My Lords, I pay tribute to the noble Lord, Lord Wills, and not just for initiating this very timely debate. He has also had an impeccable track record of support for the advantages of individual electoral registration, against equally determined delaying tactics from some members of the previous Administration, for whatever reason. It is right that we should look very carefully at the extent of cross-party consensus on this issue. I agree with him and other Members of your Lordships’ House who have made this point.
I should remind noble Lords that the Electoral Commission, to which I have been privileged to give informal and obviously non-remunerative advice with a cross-party group for some time, recommended the move to IER as long ago as 2003. If we reach that point in 2013, 10 years is an awfully long time.
One major change that we should recognise in the context of our debate is that there has been a tendency in recent years to think that the present system is pretty good. Yet the latest research that has just reached us in the last few days from the Electoral Commission has pointed out that it is very inadequate. The present register, far from being 90-plus per cent accurate is somewhere down in the 80s and has got appreciably worse since the 2010 general election. There are all sorts of reasons for that, but none of us should be satisfied with the status quo. That is probably an accepted point around your Lordships’ House. The noble Lord, Lord Wills, said that the danger is that a “bad situation” could become “significantly worse”. I directly quote what he said and he was spot-on. Of course, it also means that the urgency—or lack of it—in the last Parliament with the last Administration is frankly inappropriate. There is a greater urgency to move on and try to ensure that any new system is better than the existing system in all the respects that have been referred to across all sides of your Lordships’ House.
I want to pick up on one or two points that my noble friend Lord Rennard was not able to address because of the time constraints. It is very important for the citizen to have confidence in the register and the consistency of the register throughout the country. If there is wild inconsistency from one area to another, think what effect that has on confidence in the jury system. It is a very serious issue if in inner cities it is thought that the pool available for jury service is very limited for various reasons—social, economic, age group and so on—and you get juries that frankly are not representative of the wider community. The role of the electoral register as the pool for jury service is extremely important. We cannot have a postcode lottery on something as important as that in different parts of the country and different social and economic circumstances. The register must have consistency.
That has very important implications for the powers, responsibilities and moderating role of the Electoral Commission. It has a role to ensure that there is a consistency of approach nationally, not just in general terms but in every different area. It may be that that means more resources have to be put into particular areas where there is more churning between general elections.
There is a particular issue about the use of the national insurance number. This is something that my noble friend Lord Rennard has referred to previously. The Electoral Commission estimates that 18 per cent of eligible voters will be less likely to register if required to give their national insurance number. Imagine circumstances in which this issue comes to the fore at the same time as, for example, a proposal to recall MPs. Imagine the circumstances in which triggering the recall of an MP—one of the considerations that all three parties have been looking at—has to depend on signatures. If there were no authenticated signatures on which to base that, you can see the considerable challenge that there could be to the whole process.
In all parts of the House—I have heard this from several noble Lords—there is a view on the absolutely critical importance of reinstituting the 2014 full canvass. The churning in some areas in a matter of months since the 2010 election makes it absolutely essential that there is a full canvass in 2014—again, the Electoral Commission made this clear. Of course there are resource implications, but let us recall that there is a statutory responsibility on the electoral registration officers and processers to make sure that their register is as accurate as possible. There will be cost implications there. If we do not have that canvass, those officers and authorities will have to use extra resources to try to make their register more accurate.
I will briefly address some of the positives about the principle of individual registration and about the progress that we can make by being more innovative about getting people on to the register. For example, the Electoral Commission should be specially told that it must find better ways of ensuring that the Armed Forces are given every possibility of being registered in good order and good time—a point made by the noble Viscount, Lord Astor. Frankly, that cannot be that difficult. The Electoral Commission should be asked to look at that urgently with the Ministry of Defence. I understand that the ministry has not been very enthusiastic about looking at that, for whatever reason.
We must ensure that, if handled properly, individual registration is an opportunity to revolutionise, modernise and improve registration, not just to mitigate some possible problems, to which others have referred. For example, instead of relying on parents to register 16 and 17 year-old children, we should facilitate registration at school, with each pupil signing their form as part of a citizenship lesson. There have been good examples of this—there is a good record of success in Northern Ireland. We should follow that up.
We need to ensure that the Electoral Commission can take a proper lead in ensuring best practice at registration with better designed forms. It is ridiculous that my noble friend Lord Rennard has to look at all these different forms from different parts of the country. Why can we not have a standard form? It should of course include the standard wording about the obligation and the penalty for failing to register. We are already seeing some attempts at pilots on data matching.
We should also ensure that the distribution of poll cards should be earlier in the process as that often prompts people to recognise that there is someone in the house who does not have one and so should be registered. We perhaps need to look at the late date for registration. Again I understand that Canada has been very successful with that in getting people involved when they start to see the battle hotting up in that constituency or in the general election generally.
As has already been referred to by the noble Lord, Lord Borrie, businesses selling to customers, credit reference agencies and countering fraud could all be improved by this exercise if we get it right. There should not be a real downside in terms of social mobility, if exclusion from the register leads to exclusion from credit. For some of these reasons, I feel that the edited register should continue, although that is for another day.
I hope that my noble friend the Minister, when he responds to this extremely timely debate, will be able to give your Lordships clear reassurances that the Government are prepared to look very actively at the two most fundamental issues raised by so many noble Lords—the need for an individual legal obligation to register to remain with proper penalties and the need for a full canvass in 2014—and, if necessary, consult with other parties to make sure that the consensus continues. I hope that he will take forward with his colleagues the many excellent points made on many sides of the House today. This has been a timely debate but there is a remarkable consensus, too, about the obligation on the Government to make cross-party consensus a reality.
My Lords, I would like to congratulate my noble friend Lord Wills on securing this debate on government policy on electoral registration. It is a very timely debate, as other noble Lords have said. I am well aware of my noble friend’s passion on the subject, and his desire to see individual registration properly introduced and for that to improve both the completeness and accuracy of the electoral register. I had the pleasure of working with my noble friend when he was the Minister responsible and it is to his credit that much was done in legislating for the introduction of individual electoral registration. We sometimes seem to forget in this House that individual electoral registration is already on the statute book, introduced by the last Labour Government.
I should advise your Lordships’ House that I am a member of the Electoral Commission. I was appointed as one of the first political commissioners. Like other noble Lords, I want to ensure that we have the most accurate and complete registers possible. We should all work with the Government, the Electoral Commission, local authorities and the professionals on the ground—the electoral registration officers—to ensure that we have the best and most robust system in place. The suggestion from my noble friend Lord Wills that there should be open, all-party talks on this matter, with a view to achieving a bipartisan consensus on the way forward is one that the Government really should take up and run with. Many noble Lords from all parties could play a decisive role if that offer was taken up.
It is also important that the Government are open to ideas and suggestions on what is best practice and that we get the widest possible consensus on where we are going on this subject, so crucial to the health of our democracy. I want to see real consultation with the Local Government Association, SOLACE and the Association of Electoral Administrators—the EROs’ professional body.
Like other noble Lords, I want to refer to the research that the Electoral Commission published before Christmas. This research was funded by the Government and provided a very welcome wake-up call for us all. I hope that it will be used in a positive way to shape the Bill that will come before Parliament in the next Session and will seek to speed up the process and make a number of other changes. All noble Lords in your Lordships’ House should work to ensure that nothing in the proposals from the Government, when they come before the House, weakens measures to improve the accuracy and completeness of the register. If we allow that to happen, we will have failed the citizens of the United Kingdom.
The research tells us that parliamentary registers are 82.3 per cent complete and local government registers are 82 per cent complete. This equates to 8.5 million people unregistered as of April 2011. I fully accept that not all those people are necessarily entitled to vote, but the research goes on to estimate that at least 6 million people who are eligible are not registered to vote. That is a really shocking figure.
I recall, not least when the Parliamentary Voting System and Constituencies Bill was before this House, Members on this side of the House suggesting that there could be more than 3 million people missing from the register. That sometimes received a sceptical response from the government Benches opposite. I wonder how different the proposals from the Boundaries Commissions of the United Kingdom would be if all those people actually registered to vote. Is it really surprising that accuracy and completeness levels are lower where residents have moved since the previous canvass; or that the lowest level of completeness is recorded among 16 to 18 year-olds and 19 to 25 year-olds; or that in black and minority ethnic communities, completeness is 9 per cent lower than in white communities? I want to hear from the noble Lord, Lord Wallace, a real expression of willingness to work with everybody and anyone to improve the situation.
It is important also to incentivise people to return registration forms, as many noble Lords have mentioned, and to ensure that they understand that it is a civic duty to participate in our democracy. I recently thought that one possibility could be a scheme where every property that had an individual or individuals registered would qualify for a £50 discount in its council tax. I think it should be looked at. Of course other issues need to be addressed as well, but in the short time available cannot be covered in great depth.
We hear many debates and all noble Lords know that life is very tough for people at the moment. If we have more people falling off the register, life just gets tougher for them. Being on the register is one of the most important factors in respect of your credit rating. If you are not on, you are either not going to get credit or you will be forced to the more expensive end of the market. Noble Lords will be aware that I have raised the issue of financial inclusion many times. I hope the noble Lord, Lord Wallace, will give a commitment to the House today to speak to his colleagues in the business department about this possibly troubling, unforeseen consequence if this is not managed correctly.
In conclusion, I again thank my noble friend Lord Wills for calling this debate. It has been very worthwhile and I look forward to the contributions from my noble friend Lord Bach and the noble Lord, Lord Wallace, from the Government.
My Lords, in speaking in the gap I would like to express the hope that Ministers and civil servants will very closely read the speech of the noble Lord, Lord Rennard, today in this Chamber. He set out a powerful argument which is supported universally—certainly within the Liberal party and the Labour Party—as to what the problem is with the proposed system. I do not intend to rehearse the arguments that I have used over many hours in Committee and on the Floor over two Bills, in which I expressed my total and unalterable opposition to this whole exercise, which I believe is going to be a disaster for the British electoral system.
Many of the arguments that have been deployed in the debate today were predicted—in fact, not just many of them but all of them. They were all predicted during the course of those previous Bills. Everything that has been said in terms of alerting the House to the dangers inherent in the proposed system were all commented upon in great detail over the course of a number of amendments. However, that is the past, and while I remain totally hostile, we have to move forward and find a way to try to make what I believe to be a stupid system work.
I want to make a proposal which the Government might wish to consider. Over the coming few years, as more and more evidence surfaces as to the inability of this system to secure what was its original intention, why do the Government not introduce a grant to local authorities—and we will come to the funding of that grant in a moment—whereby local authorities are paid per elector who is registered? In other words, for every elector who is registered, they will receive a sum of money—it might be £10 per elector; I do not know, but that is the figure that comes to mind. I have discussed this with some people in offices of local authorities, and they are concerned about how it would be funded—because it would probably be funded in part by a reduction in revenue support grant elsewhere. However, it is the only way I can see whereby we can build into the system an incentive to encourage local authorities to carry out this requirement.
Furthermore, local authorities could then advertise in local newspapers explaining that individual registration meant more money for local authorities, and that it was the duty of each citizen to register so as to enable that authority to secure that sum of money. It would help the elector identify more directly with local authority expenditure. I hope Ministers will consider that proposal.
My Lords, I would like to make two brief comments in the gap: one about the short term and one about the medium to longer term. In the short term, the Government have found themselves in a problem largely because they are trying to row in two directions at the same time. I agree with the short-term measures to patch up the electoral registration system and the voting system that the noble Lord, Lord Tyler, mentioned earlier on. They are sensible if we are going to stick with the present system. However, to do it in the context of the introduction of legislation which is going to have a counterbalancing and opposite effect seems to be completely non-productive. We have a plus and a minus, and I cannot see how, in the context of the present legislation, even the introduction of the advantageous advances mentioned by the noble Lord, Lord Tyler, would compensate for that.
It is really about the medium and longer term that I want to speak. When I read and listen to these debates, the elephant in the room has been ridden by every other component in our society, such as retail trade, financing trade and social networks. It is electronic communication. It seems to me absolutely inconceivable that we can be planning for a future without three elements using modern information technology: first, individual registration; secondly, ease of access to voting; and, thirdly and very importantly because the first and second require the volunteering of information, the protection of information should it be lost or stolen or otherwise accessed by others.
I know the controversy that surrounded this, but it was precisely that third element that lay behind voluntary ID cards. That is because online registration is now prevalent for bank accounts and necessary to receive benefits. The amount of information that one supplies to the Government which is sitting there in huge data banks will be added to by any form of electoral registration, particularly if national insurance numbers are added. That electronic information, just like paper information, is going to be lost or stolen. When and if it is lost or stolen, it is not an argument against biometrically protected ID cards. It is an argument for having biometric identification, because in those circumstances, no one can access that information. No one can go into your bank account unless they happen to have your five fingers and your iris. It is precisely about the protection of the individual.
Therefore, I would suggest that at least some serious consideration is given to online registration and the introduction in the medium to longer term of some form of identification that protects the individual’s identity through their iris and fingerprints. I do not entirely agree with my good and noble friend Lord Maxton; I have never been in favour of compulsory ID cards. However, I am in favour of compulsory registration. I believe that the future is having an ID card in your pocket. I have one and it was massively convenient in allowing me to walk into France and Germany without a passport, giving inviolable proof of my identity to anyone, unlike every smart card in my pocket.
My Lords, I start from the Front Bench with a cry from the heart. Unlike the noble Viscount, Lord Astor, I have been lucky enough to be able to vote in general elections, but that right has been taken away from me and I have a severe grievance about it, as do many noble Lords around the House. It would be good to think that the Government might consider that issue when they come to their Bill in the next Session of Parliament.
My noble friend Lord Wills deserves huge praise for and congratulations on securing this debate in the first place and praise because he has expertise in this field that is matched by very few. As a fellow Minister of his—now a little time ago—I was always impressed by his clear-sightedness and forward thinking. We saw that again today. I have also been extremely impressed by the experience and expertise of all the other speakers in the debate. The House has a huge amount of expertise in this field and I very much hope that the Government will listen. I know that the Minister will listen and pass on what has been said but I hope that the Government as a whole will listen to the points made largely consensually, as the noble Lord, Lord Tyler, said, in today’s debate.
I had the privilege of taking the Political Parties and Elections Act 2009 through this House. It had been made clear in the other place by my noble friend that the then Government intended to add clauses to the Bill to introduce individual registration. The manner in which this was to be done was carefully thought through. While the accuracy of the register would be improved by the introduction of individual registration, this had to be balanced by the equally obvious proven risk that the completeness of the register might well be harmed by introducing individual registration too soon. How to marry these contradictions was the issue for government. That is what we attempted to do with a gradual introduction—a voluntary start, followed by compulsion, with final decisions to be taken, as I remember, in 2014. It seemed then—as it does to me now, I must confess—an excellent solution. My noble friend is right when he reminds the House that the then opposition parties in another place, when this matter went back there, agreed too. I have quotations here from what they said in that important debate but I will not waste the House’s time with them now.
I am not sure why there is the change in timescale, why there is no voluntary part of this process or why that was agreed by the two coalition parties when agreeing their programme for government some 19 months ago. I wonder whether it was slightly the result of a somewhat desperate effort to find as many items as possible on which those parties agreed rather than any great matter of principle.
The Statement made by the Minister, Mr Harper, on 15 September 2010 really started this new phase of the debate. In that Statement, he argued for the opting out from registration itself. That is when the issue first raised its head. I have to say that I agree entirely with what the noble Lord, Lord Rennard, and other noble Lords said about it. The noble Lord, Lord Lexden, also referred to it. We are absolutely opposed to any such step for a number of reasons. One is the erosion of civic duty. At a time when there is concern about the decline in public participation in the formal political process, it would seem an absurdly retrograde step to remove one of the few legal obligations in this area.
As has been said, registration covers much wider areas than just elections, important though they are. There are the issues of juries and credit agencies, which arise under this argument. Of course the act of voting can reasonably be regarded as a personal choice, not least because of the secret ballot. However, we believe that registration is and should remain a civic duty and we were pleased when the Deputy Prime Minister said some months ago that he is minded to change the position on that when the Bill is published. However, I hope the Minister will forgive me if I press him to find out what the latest position is on that. Can he tell us whether the Government have made up their mind about what they intend to put in its place? We hope that they will just remove that part of their thinking completely.
My next question is about the 2014 canvass. Strong arguments have been made around the House that there should be such a canvass under the system that the Government are proposing. I do not need to repeat them now. I should be grateful if the Minister could, in summing up, tell us what the Government’s position now is on the need for a full canvass in 2014.
I move on to my next item, about which I should like some information from the Government. As has been raised in the debate, it is a matter of concern that, while the draft legislation contains a safeguard to ensure that the next general election, in 2015, is not undermined by a significant decline in registered electors, there is no such safeguard for the boundary review that is due to take place later that year. If people registered under the old household system are to be carried forward for the general election, it is surely sensible to ensure that they are also carried forward for the boundary review a few months later, or that the May 2015 register is used for the purpose of the boundary review. I wonder whether the noble Lord can say anything about the Government’s thinking on that.
We believe that funding for local authorities should be ring-fenced for electoral services. Do the Government also believe that there should be ring-fenced funding for that crucial matter? Once that funding starts to disappear, all the problems that have been raised today will just get worse. I also ask the Minister about data-matching pilots. We know that they have been tried and we welcome that. We wonder how well they have gone and whether the Minister can tell us something about that, too.
We have praised the Government for the pre-legislative scrutiny of the Bill. That is something that we encouraged, and we encourage the Government to do it on all occasions. Alas, they have not done it for all constitutional Bills but they are doing it for this one, so let me be generous about it.
The point about broad consensus is of crucial importance. If I may say so, I was very impressed by the remarks of the noble Baroness, Lady Berridge, on this point. If the Government of the day, whatever their political colour may be, do not look for consensus in this sort of field, anarchy potentially reigns. In other words, it can get completely out of hand: points are taken that are simply partisan and we do not look for the better solution for the country. I am delighted that around the House there is the feeling that what is needed here is consensus if it can possibly be achieved.
I am about to sit down. We have a real and pressing problem in this country. Six million to 7 million of our fellow citizens who are all eligible to vote in elections are not at the present time on our register. This is a grievous problem. Indeed, it has been worked out that that is the equivalent of the electorate of 79 of the new constituencies set up under the controversial Act last year. It is a scandal. I hope and presume that the Government will respond in all that they do to that scandal and will try to remove that huge number of people from being unregistered in our system. We need as many citizens as possible to vote and they cannot vote unless they are registered.
My Lords, I thank the noble Lord, Lord Wills, very much for giving us the opportunity to have this debate, which, as one or two noble Lords have remarked, was intended to take place in the other place some months ago. It is very good that we are now focusing on this important matter.
We are one of the very few countries left in the world that has a household basis for registration. I think it dates from the Reform Act 1867 and is possibly a little outdated by now. The case for moving from household to individual registration was in every party manifesto and is generally accepted. The question is how we do so while ensuring that we end up with as complete, accurate and trusted a register as possible. I wish to stress those three aspects as being very important. The register has to have integrity—it has to be trusted by everyone and must not be subject to too much fraud; it has to be as accurate as possible; and it has to be as complete as possible. Those three things are difficult to achieve together and the question of balance is always a very different one.
The system of registration also has to have the support and confidence—that is part of the question of integrity—of all those concerned. We now have the Electoral Commission as a non-partisan, trusted umpire for us all to listen to. The research paper that it has just produced has been a very valuable contribution to the debate. One of the things that it shows us is that we are not half as good in the current system as we thought we were. The current system does not itself provide full registration. It was not at 90 per cent, as the study in 2000 suggested. Last year’s study suggested that we are now down to between 82 and 85 per cent. We are right to ensure that when we move to the individual system we are at least as good as that.
Let us recognise that we are not necessarily losing vast numbers of people as we move from one system to another: we have already suffered to some extent from a range of social and other trends. We all need to recognise that one reason why electoral registration has fallen is that popular commitment to the electoral process has also fallen. Popular alienation or disengagement from politics is part of the problem, as the noble Baroness, Lady Kennedy, said. All parties share a duty to respond to that disillusion rather than to concentrate on Westminster games.
I can assure everyone that the Government will listen to and read this debate. I will take back and discuss with others the question of a working party. I will certainly also include in that the suggestion of the noble Baroness, Lady Berridge, that, if we are to have a working party, it must include not just the beneficiaries of the current system—the two parties to which the noble Lord, Lord Wills, referred so frequently in his references to bipartisan agreement—but the wider group of those who do not support either of the two main parties. I remind noble Lords that in the last two elections the number of people voting for the two major parties slipped well below three-quarters and down towards two-thirds of those voting. In his rather uncharacteristically sour speech, the noble Lord, Lord Lipsey, was obviously hoping that we would go back to a two-party system. I think that that is one of the things least likely to happen in the future.
We all have partisan interests in this. We recognise that the Labour Party is deeply concerned about the boundary review. I heard—again, from the noble Lord, Lord Lipsey—the argument that Labour represents the unrepresented and the unregistered. It is an interesting but untestable conclusion. The Conservatives are a little partisan in the assertion that the voting rights of overseas citizens are very important. This is another very large issue, and I simply remind the noble Viscount, Lord Astor, that the American system is that citizens abroad should all vote but should all also pay full tax on their global income—no representation without taxation. We will perhaps need to consider that issue in parallel with any extension of the rights of overseas voters. The Liberal Democrats, as noble Lords will know, are very concerned about the fairness of the current voting system—something about which the Labour Party has very mixed views.
We have to be concerned, above all, with the question of how we re-establish the trust of our voters and our citizens in the system that we have. The register is much less complete than it was, and we therefore need now to look at how we might improve it. There are some philosophical issues underlying this, such as questions of citizens’ responsibilities as well as their rights, how far the act of registration and the act of voting ought to be considered something which every citizen should do, the relationship between the individual citizen and the state, and the concept of civic duty. We all share a broad interest in addressing the extent to which our citizens now talk about rights but not sufficiently about responsibilities and seem to think that they may have contact with the state without having obligations, in return, to the state. One of the issues that we have been talking about in looking at data-matching with regard to the DWP database and others is how you might provide incentives. As people meet with their benefit office or apply for a driving licence, or whatever, you remind them that now is also the time to consider the other part—what you contribute to your public, national community as well as what you get out of your state.
We are looking carefully at the issue of compulsion. As noble Lords will be aware, at the moment it is not an offence not to be registered; it is an offence not to return the household registration form. To extend the compulsion to the act of registration itself would be extending the degree of compulsion. I hear very clearly what the noble Lord, Lord Rennard, said and I note that this is widely supported around the House. That is something that the Government will consider further.
To my great surprise, the noble Lord, Lord Lipsey, said that this proposal had received very little scrutiny. It has received full pre-legislative scrutiny. The Government will provide a response to that very shortly, which will take us a degree forward. The Deputy Prime Minister has already responded to a number of concerns. This is an area where the Government are still listening. We all know that we have to have a dialogue about a new system which will command the support and trust of all those concerned.
The question of how far registration should be compulsory takes us on to the issue of nudge and whether we can push people without frightening them at the same time. Uncharacteristically for a deep liberal, the noble Lord, Lord Rennard, wants to frighten people with large notices on the top of their forms. That may perhaps be necessary, as with cigarette smoking and other examples but, again, it is an area at which we need to look a little more. We do not see that moving to individual registration will necessarily lead to a net reduction in those on the register.
Although we support individual registration, many of us are concerned about the young—the 18 year-old who is not in school. I very much support the idea of doing some work in schools, as the noble Lord, Lord Tyler, suggested, but what do you do about the poorest who are not in school and who therefore may not be registered? The provision on households helped, whereby it was the single-parent mother—or whoever’s name was on the lease—who put all the names on the registration form. How do we deal with that issue?
The Government and the Electoral Commission are both looking at this. Regarding the question of where canvasses are concentrated and how far one looks at suggestions such as the need to supply postal addresses on envelopes, council tax bills and utility bills, other Governments have experimented with, for example, the need to provide utility bills. This is part of the issue of asking what relevant data one might be able to use to help to pick up, as the noble Baroness said, particularly those who are young and unmarried, who move much more often or who live in private rented accommodation—those who, as we all know, are in the vulnerable sector.
One thing that we have done is to publish draft legislative provisions to extend from 17 to 25 working days the timetable for registering to vote in parliamentary general elections. This will take effect in time for the intended 2015 general election. Part of the reason for that is that we have discovered a surge in late registrations once an election has been announced. As the noble Lord, Lord Tyler, remarked, once polling cards are sent out, people living in multi-occupancy accommodation sometimes think, “Oh dear, I didn’t get a polling card. I am not on the register, and I must register”. On the other hand, that of course opens opportunities for fraud, particularly regarding late applications for postal votes. Therefore, there has to be sufficient time for some checking of late applications in those terms. That is the game we are attempting to negotiate, so to speak.
The noble Lord, Lord Maxton, says that voting is rather old-fashioned in the electronic age and that we should be using much more modern technology. The Government propose to move towards electronic registration, but we are approaching somewhat more cautiously the issue of moving towards electronic voting. Once I had been briefed on cybercrime, cyberwarfare and the ease with which one can hack, I was a little less enthusiastic than I had been previously about moving immediately to electronic voting.
As to the problems of citizenship engagement, I have some sympathy with the preference of the noble Baroness, Lady Kennedy, for the democratic moment in which the majority of people—
Going back to the cyber question, it is a big problem. Is the Minister aware that the best protection against misuse or fraud on cyber issues is biometric protection? With identification by your own iris or fingerprints, no one else can pretend to be you.
I take that point on board and we will feed it back into our considerations, as and when the issue of electronic voting comes up.
I was commenting on whether the physical act of voting in a particular place, within a particular community, or—for those who are deeply committed to single-Member constituencies—within a particular constituency, ought not to be part of the way in which the citizen relates to his community and thereby to his state. We should not entirely rule out the importance of that.
A number of noble Lords asked about pilots. The Government, in their response, will discuss some of what has been learnt through the attempts at data-matching—comparing different databases, not integrating them. A certain amount has been learnt and this is part of the way forward for picking up those who would otherwise have been missed. Again, we have been looking at international comparisons of electoral systems and the Electoral Commission has produced a useful paper on them.
Other uses of the register were raised by the noble Lord, Lord Borrie, and others, ranging from the letter I received from a number of charities, which talked about the importance of access to the register in order to send out fundraising letters, to commercial use and credit checks, as well as jury service, which is also part of the citizen’s obligation to the state.
The noble Viscount, Lord Astor, asked about members of the armed services. The new employment model for the armed services will enable many more armed services members to have a longer-term home base. We already know that a number of service members are registered from their home base, and the number of those who are voting from abroad by postal votes may therefore indicate that the system is underestimating those who are able to vote. A number of us have family members serving abroad. My wife currently has a proxy vote for our son, who is on postdoctoral study in the United States. That issue also extends to the armed services. The new employment model will therefore help considerably with the levels of service registration.
The question of fraud has been raised. That is part of the issue of integrity. There is, as the noble Baroness, Lady Kennedy, remarked, some not insignificant fraud in particular constituencies, and I am well aware that it takes place. Therefore, we have to maintain an effective system of checks, and that is part of the reason why we have to close down late registration and late applications for postal votes some days ahead of each election in order to provide sufficient time for adequate checks.
The noble Lord, Lord Brooke of Sutton Mandeville, raised the question of—
Before the Minister leaves the question of fraud, does he accept the repeated judgments and findings of independent bodies such as the Association of Chief Police Officers, the Electoral Commission and the Rowntree Reform Trust about the very limited extent of systemic fraud in our elections?
Lord Wallace of Saltaire: Instances of fraud are very much localised in particular communities and constituencies; they are not systemic throughout the country. That is not to say, however, that they may not be significant in particular constituencies and in particular instances. To say that this is not widespread is not to say that it may not be significant.
I am not familiar with those particular reports. We wish as far as possible to prevent fraud in the system. That is an important part of any approach to the electoral system. We have to have the maximum degree of trust in its integrity.
On the question of the full household canvass in 2014 and ensuring that for 2015 we have as complete a register as possible, the Electoral Commission has suggested carrying out a canvass in early 2014, rather than in late 2013. These subjects are still under full discussion, but the Government are of course well aware of the importance of having as complete a register as possible, both through the transitional period between 2013 and 2015 and after the election, as a basis for the new boundaries.
Lastly, the noble Lord, Lord Bach, asked when Peers would be allowed to vote in general elections. I rush to assure him that that is of course an issue that will be caught up with the House of Lords Reform Bill, which I know he is much looking forward to—as are so many other Members of the House.
I had my ear bent at considerable length by an electoral registration officer in Wandsworth two days ago, when I phoned him up about something else, on precisely how Wandsworth does this. We will look at ring-fencing. However, I believe in localism and I am against ring-fencing in principle. But the question of how much it will cost—
Both the Government and the Electoral Commission are looking at how we manage to ensure that an adequate canvass is maintained throughout the transition period and after. There are regular consultations between electoral registration officers, the Electoral Commission and the Government, and they will of course continue.
This has been a useful debate and I just wish to end where I began. The Government are still in listening mode. We are all committed to a transition from a household system of registration to a system of individual registration, and we all have a strong interest in ensuring that the new system which emerges is accurate, complete and widely trusted. That is our aim; we shall continue to consult and will then take the Bill through both Houses while continuing to listen as the Bill goes through both Houses. I trust that when the new system emerges we will find that we have achieved those aims as far as is possible in a highly mobile society. We live in a country where a substantial proportion of those who have contact with the state are not necessarily British nationals, and some of those who have contact with the state and fill in forms are functionally illiterate or do not fully understand English. Nevertheless we aim to overcome those problems as far as we can and achieve, we hope, as complete and accurate a register as we can, both for the next election and as a basis for the next boundary review.
We have had a very wide-ranging and useful debate. I am grateful to all those noble Lords who have contributed their experience and wisdom, and in the case of the noble Lord, Lord Brooke, some valuable historical insights as well.
There is a consensus across the House that this is an important issue, and I think there is also agreement on the diagnosis of the problem. My noble friend Lady Kennedy placed this in the wider context of the state of our democracy. There is widespread agreement, which I am glad to see the Minister has noted, about the importance of the 2014 canvass. We heard some very powerful speeches in favour of the legal requirements and graphic illustrations from the noble Lord, Lord Rennard, as well as powerful speeches from my noble friends Lord Borrie, Lord Beecham and Lord Bach. There has been a widespread feeling that it is very important that this subject is approached on a bipartisan basis. We heard that from the noble Lord, Lord Tyler, from the noble Baroness, Lady Berridge—
The noble Lord is quite right to correct me on that. When I say bipartisan, I actually mean a cross-party, all-party basis. We heard a very important speech from my noble friend Lord Lipsey illustrating the dangers of the Government’s approach. I very much hope that the Government and all Members of this House will study his speech in Hansard because he illustrated with great precision the dangers of the approach that the Government are taking on this. My noble friends Lord Kennedy and Lord Bach also placed great emphasis on this.
The noble Lord, Lord Lexden, quite rightly raised the question of overseas voters, and although there are issues about expatriates and those who do or do not pay tax, there is a very real issue about those who are on international service working for international organisations or studying abroad but particularly those who are working for organisations such as the United Nations. The noble Lord, Lord Hannay, who is not in this place today, raised this with me when I was a Minister. We were looking into how we could address this problem. I am not sure where the Government have got to on this, but maybe the Minister will take that away and look at it.
The noble Viscount, Lord Astor, very importantly raised the question of service voting. There were plans to deal with this issue under the previous Government but they seem to have been put on the shelf by this one. I hope the Minister will take them off and get on with it. It is a very important issue, as I think all sides of this House recognise.
I am grateful to all those who came forward with positive solutions—the important issue of ring-fencing mentioned by the noble Lord, Lord Brooke, and the useful and helpful contribution from the noble Baroness, Lady Berridge, on trying to get electoral registration tied into the way that citizens interact with the state. These were both measures that I tried to introduce as a Minister and I regret to say that I failed. I failed to get ring-fencing and to secure the sort of measures that the noble Baroness, Lady Berridge, was advocating. I hope that this Government will be much more successful than I am in taking these measures forward. They are very important. We heard some far-sighted contributions from my noble friends Lord Maxton and Lord Reid about the importance of electronics and information and communication technology. This has to be part of the future.
Finally I am grateful to the Minister for his constructive and reasoned response. I am slightly surprised about how insouciant he appears to be about the risks of the register being damaged significantly by the approach the Government are taking. There is no evidence to support such insouciance, but I welcome his undertaking to explore further this question of a cross-party group. I particularly welcome the suggestion from the noble Baroness, Lady Berridge, for a more independent component as well as the cross-party complexion of it. I hope he will set this up quickly so we can deal with all these issues.
I am not sure how I am meant to conclude this new form of debate, but I have said all I should so I am now going to sit down.
Motion to Take Note
My Lords, I am grateful for the opportunity for today’s debate on the Government’s green agenda. It seemed to me that 20 months into this Government it would be helpful to have a look at the Government’s green agenda and green policies and how they measure up to the Government’s own commitment to be, as David Cameron announced on 14 May, “the greenest Government ever”.
The Minister will recall my reaction when he announced in an earlier debate:
“My Lords, whether you like it or not, we intend to be the greenest Government ever”.—[Official Report, 2/11/10; col. 1576.]
I assured him then that we did like it and would support that approach but we would hold the Government to account should they fall short of achieving their objectives. It is a laudable objective and a benchmark against which the Government can be judged on the progress they are making towards their target, although I think it is disappointing that having made that pledge, which was received with great enthusiasm and hope, the Government did not set up any mechanism to allow for any scrutiny of that pledge.
It is even more disappointing then that the Government abolished the Sustainable Development Commission. I understand, perhaps more acutely than most, that it is not always comfortable for Governments to be held to account for their promises, yet perhaps it is more important for this Government as the coalition programme for government was never endorsed by the public. When Ministers make statements such as “the greenest Government ever”, it is important that progress against that pledge can be measured.
Many have taken the opportunity to do so. Noble Lords may have seen that the Guardian has a green-o-meter which seeks to track how the coalition is faring on a range of issues, such as climate change, wildlife and conservation, energy efficiency and renewable power. As of October it had judged 10 policies as being green, 13 as not being green with the jury still out on four. It reserved its strongest criticism for the Chancellor’s Budgets and Autumn Statement, describing Budget day in March 2011 as a “green catastrophe”.
Wildlife and Countryside Link is an umbrella body of 35 wildlife and countryside organisations, representing more than 8 million people and managing more than 690,000 hectares of land. In its document Nature Check: An Analysis of the Government’s Natural Environment Commitments it reports a mixed bag of results on the 16 major commitments on the natural environment. It praises the Government on two of their commitments on the international environmental stage but classifies seven as amber (delay and underdelivery) and seven as red (not delivered or delivered poorly).
Probably the most extensive of all the reports looking across Government is that from Friends of the Earth entitled “The Greenest Government Ever: One Year On”. In its fairly forensic examination it concludes:
“At this stage, the likelihood of the Coalition Government living up to its ‘Greenest Government Ever’ pledge is vanishingly remote … It is … unavoidably depressing to see just how rapidly things have gone backwards since May 2010”.
The RSPB says:
“If we’re honest, Cameron’s greenest Government ever feels like it is being unstitched day by day”.
Then, following the Government’s backward move to review the targets for halving emissions by 2025, the Environmental Audit Committee said:
“It makes business think that David Cameron is not really serious about being the greenest Government ever”.
Perhaps most worrying for the Government is the response from the CBI, which has accused the Government of failing to provide the leadership that business needs for green growth. Those changing decisions on feed-in tariffs, the green investment bank and zero carbon homes make business and investors cynical and somewhat nervous about the Government’s intentions and commitments.
Despite those criticisms, my sense is that these organisations—their members, investors and the public—really want the Government to succeed in being the greenest Government ever and they want green growth. If we go back to “like it or not”, as the noble Lord said previously, we would like to note that, despite some rare successes with which the Government do themselves credit, the record and the omens so far are not too good. However, I hope that the Minister and the Government would be sensitive to such informed criticism—the Minister seems to find it quite amusing—and would want to respond positively to the concerns that are raised. As I say, those organisations want the Government to succeed. I will address just a few of those causes of concern, and my colleagues will raise others. I hope that the Government can find some way of addressing these to bring them back on track on their pledge.
The Green Deal is the Government’s flagship policy for energy efficiency, thereby reducing carbon and providing warmer homes. I certainly support this objective, and the Minister has publically acknowledged how constructive we have been. Cold homes are a serious environmental, social and economic problem, and the Government have recognised that. A Save the Children study found that over half of parents on the lowest incomes worry that their children’s health will suffer because their home is too cold. They are right to worry. It is estimated that cold homes cost the NHS £145 million every year. The real concern, however, is the detail of the secondary legislation that will make the difference between success and failure. The Minister has been very helpful and we had a short briefing on this yesterday, but I understand that the Government have now delayed the implementation because of the amount of detail that still has to be worked out. Even the Committee on Climate Change has felt the need to send an open letter to the Secretary of State to express its concerns about some of the details of the Green Deal and the energy company obligation. It is right to delay if it is a matter of getting things right to ensure that the Green Deal will work, but can the Minister tell me when he thinks that the first home will have energy measures installed through the Green Deal? How long is that now going to take? Despite our doubts about the details, we welcome it and want it to succeed.
A huge concern is the initial exclusion of the private rented sector, which has many of the least energy efficient and coldest homes. I welcome the statement in May from the Secretary of State, Chris Huhne, in which he said:
“From 2018, the rental of the very worst performing properties—those rated F and G—will be banned through a minimum energy efficiency standard”.—[Official Report, Commons, 10/5/2011; col. 1064].
That would be great, but they will not. They will be banned only if they have not had any energy efficiency measures implemented through the Green Deal. If they have had those measures installed but are still, in Chris Huhne’s words, one of the “very worst performing properties” they can still be rented out. I do not understand the logic of that. Either a home is one of the very worst performing, producing excess carbon or being cold, which should not be rented out, or it is not. I urge the Government to address this as a matter of urgency. Clearly, the Secretary of State thinks that it is policy, so it should not be too difficult to change.
The announcement of the green investment bank was warmly welcomed by green groups, businesses and investors. The initial announcement of £1 billion was topped up with £3 billion in the March 2011 Budget, but not only does this fall short of the £4 billion to £6 billion estimated by Ernst & Young as needed to make it work, but the money is dependent on the sale of assets which creates uncertainty. As the bank is unable to borrow or raise money until 2015, there has to be an indication from the Government, in actions as well as words, that they remain committed to the project, and that funding will be available to make it effective. The Pew Environment Group reported that the UK has fallen from sixth to 13th in the ranking of countries encouraging green investment with a 70 per cent fall in such investment. That is a dreadful condemnation and a serious retreat from the green investment under Labour.
Let us be clear. We want the green investment bank to succeed, but there is a lot more to be done before that is the case. The Minister is nodding his head; if he could give us some reassurance on that, it would be really welcome. Investment and investor confidence are crucial and are critical to the success of the green investment bank. The Government have to show leadership and commitment to ensure the confidence of investors.
I will examine one area of government policy on renewables that has badly shaken that confidence and offer a way forward. The solar feed-in tariffs were brought in by the Labour Government with huge success. The Chancellor announced a cap on funding in the comprehensive spending review and, in February, announced a review of all solar PV plans over 50 kilowatts. They were then ended. He then swiftly announced further changes in funding. It was not quite as straightforward as that. It seemed to be regular announcements coming out of the department on the changes that were going to be made and consulted on.
I know that the Minister is aware that the industry is reeling from so many significant changes so quickly. The real shock was when the level of the FITs was halved. I hope that, in trying to explain or defend this, the Minister does not fall into the trap of caricaturing the opposition to changes in feed-in tariffs as those who do not want any change at all. I know that he knows that that is not true. He knows that investors, installers and customers understood that changes and cuts were needed. But it is the speed, scale and way in which the changes were made that is so hugely damaging to the industry and its capacity to grow and further reduce costs. We now see something like 20,000 jobs at risk.
I do not know whether the Minister is aware that when he capped the scheme at 50 kilowatts, that is exactly what the energy companies originally lobbied for. Friends of the Earth has taken the Government to court over this. The hearing on the Government’s appeal against the court’s decision is tomorrow. It would be more helpful if, rather than appealing, the Government looked at and discussed it with the industry to see what less drastic action could be taken to ensure that the industry could continue to grow to a point where any government subsidy, if it was needed, was minimal. There is no doubt that the Government’s credibility with investors has been severely damaged at a time when the Government’s own energy White Paper confirms that £200 billion of investment is needed in our energy system to make it fit for the 21st century. Ernst & Young has stated that the whole investor market has been ripped up by the feed-in tariff review and that revisiting FITs at such an early stage of their existence has undermined investor confidence not only in the UK solar industry but also potentially in the wider UK renewables market.
There is still a way forward on this. The court case is tomorrow, but I urge the Government, even at this late stage, to seek compromise. The Minister will find, if he talks to those who are taking the action, that they are realistic business people who want solar to succeed and understand the Government’s concerns over funding.
When the Government announced that their final remaining flagship carbon capture and storage project at Longannet had failed, the dismay felt was tempered by Chris Huhne’s announcement, confirmed to me by the Minister, that the £1 billion of government funding would remain and that they expected further promising bids. Chris Huhne said, “Absolutely. No backsliding”. But what now? In his Autumn Statement, the Chancellor raided the budget. Again, we come back to investor confidence, and whether investors are prepared to trust the Government on their track record. We all understand that the economic situation is difficult, but the constant merry-go-round of policy changes on CCS, FITs, the green investment bank and even on airport expansion is creating the very situation that the Government need to avoid: that of lack of direction and confidence. Investors need the Government to show leadership.
The real opportunity to show leadership and commitment to the greenest Government ever was in the Chancellor’s Autumn Statement. The message that has come out is that environmental protection has to be sacrificed for jobs and growth and that businesses should not be burdened with social and environmental goals. This completely undermines positive initiatives such as the green investment bank and the natural environment White Paper.
I genuinely want to give credit where credit is due. The Green Deal could be a success. I hope that it is. We will work with the Government to do our best to ensure that it is. The Government’s role at the 2010 Nagoya meeting was widely applauded. The 2020 biodiversity target deserves congratulations. The UK position on whaling and ivory continues to be firm. The Government’s own carbon reductions exceeded their target. The Government have continued our commitments on climate change. However, the issues I have mentioned—the downgrading of zero-carbon homes, the scrapping of the Marine Renewables Development Fund, cuts to the Carbon Trust and Energy Savings Trust, badger culling, the proposed forestry sell off, the U-turn on airport expansion at Gatwick and Stansted, bringing forward the previously ruled-out proposals to build an airport in the Thames estuary and the one-third budget cut for Defra in the first spending review—all cause alarm. We all know that these are difficult economic times, but there is a real prize to be won if the Government can stimulate significant investment in green growth to meet their carbon reduction targets and create jobs.
The big question for the Minister today, after the débâcle of FITs and the lack of commitment from HMT to carbon capture and storage, is how the Government will be able to reassure investors and encourage green investment. That is really the response that I am seeking from the Minister today. If he can give reassurance that the Government have such a commitment, want to ensure that they are the greenest Government ever and want to attract genuine and significant investment that can address some of the concerns that have been raised, that would be a welcome response. The Government are right to have the objective of being the greenest Government ever. There is just a little more to do to match action to those words.
Flattery gets you everywhere. I wish to look at this issue of the Government’s green agenda from a slightly different perspective and take a different line across country. I remind the House that we are talking about a great international problem, and there is no future in our finding a solution to our problems if the result is that other countries simply replace what we are doing and carry on in the way that we are at present. This is a problem that in the end every country will face. Third World countries living relatively simply today will have to look at measures such as those that we are examining.
The other point that is worth noting at this stage is that the two biggest carbon dioxide emissions countries in the world, the United States and China, are also the two biggest countries investing in green technologies. Perhaps there is something in that; it is a real and remarkable point. The fact is that every major economy in the world is concerned about this issue.
I am going to begin with an interesting fact. I have obtained some information from the Carbon Dioxide Information Analysis Center at Oak Ridge in Tennessee, in the United States, where a group has plotted graphically the carbon emissions performance of almost all the countries in the world. In the instance of the United Kingdom, that goes back to about 1750. We can all make those comparisons, and it is worth looking at what has happened in the past.
For the purpose of today’s discussion, I wish to tell the House that we have pledged an 80 per cent reduction in our 1990 emissions. That implies that we are going to reduce our emissions to a point that we passed in 1850 when the population of this country was 22 million. That is the breadth and depth of the task that we have set ourselves, and it is a big one. We now have three times the population using five times the amount of energy, and modern society is energy-intensive and will continue to be so.
It is inevitable that our approach to begin with is based on what we can do immediately, because that must be the quick and easy way to start. We have the Climate Change Act and we have set targets. The Climate Change Committee actually reduced the targets —I am sorry; there is a question of whether it is a reduction or an increase—rather, it set a more severe target as soon as it was formed, giving us the 80 per cent figure that we have to go for. However, the question that tends to be asked is, “What do we have to stop in order to solve this problem?”. My concern with that question is that the public at large see that as a negative question, and they do not like negative questions. Somehow we have to turn it around to a positive one: “What do we have to do in order to ensure that we can keep everything going?”. That is a very different approach and one that would be much more acceptable to the general public who on the whole—I say as far as I am capable of experiencing the public’s views—are rather bored by the entire subject and think that it does not really apply to them. At least if we get the long-term implications right, we should begin to make some progress.
The present problem is exacerbated by an approach that appears to treat all carbon dioxide emissions equally. I am not going to say that carbon dioxide emissions are ever beneficial, but some are much more essential to society than others. When we look at the severity of that 2050 target, I suggest to the House that we are simply looking at having emissions by that date that are essential for society—everything else has to be emission-free.
I am going to be a bit daring and suggest some possibilities that are essential. We cannot do much about emissions from agriculture, currently about 8 per cent of total emissions. The food business is an international problem. The emissions largely come from livestock—it is not really an arable sector problem. Food is both essential and the biggest single emitter of the categories that I am going to enunciate.
The smelting industries are essential to society; we cannot do without our metals. Cement manufacture is essential to society; we cannot do without construction. And finally—I nearly used a phrase that I used once before and which got me into trouble—international transport, both aviation and shipping, are now essential to all communities across the world, and we cannot cut those back. We may need to think about treating the emissions from those sectors—other people may wish to add to that list—in a different way from how we treat the generality of emissions. Outside that field, everything has to become zero-emission.
That is a harsh analysis, but we need to be moving in that direction now. We need to start thinking about those distinctions so that we know where we are going, because they define the depth of the problem that we face in trying to make homes and all land-based business and transport zero-emission. We already have a basket of technologies that would make that possible. However, there is a problem: we do not know which of those technologies will in the end be successful in the international field. We are a country that lives by international trade and development going on across the globe. As I have already said, this is an international problem, so that factor is very important.
What particularly concerns me is that in the short term we can take decisions, partly as a result of this approach, that will actually make it more difficult for us to hit the long-term targets, partly because we shall be committing ourselves to technologies that are expensive and in fact will have to be written off because they do not prove to be internationally competitive. I regret to say that I see no solution to that risk—I wish that there were one—so it is one that we are going to have to take in our development. That means that we should not put too many eggs in one basket. It also means that we should not go too quickly at present. I do not care for the targets for 2020, 2025 or even 2030, unless and until we have totally considered the 2050 target and its implications for society at large. I am satisfied that that can be done. If you supply a house with nothing but emission-free energy, then by definition, Green Deal or no Green Deal, that house is zero-emission. The same applies to every business and, if we can do it, to transport; the technologies exist. We need to take a careful look at the long term, and use that to apply our policies today.
My Lords, I will not get into the Essex origins because we went through this in a previous debate and, as the noble Baroness has indicated, it is probably absolutely the wrong route to go down.
I will reflect very briefly on some of the history of climate change. It is now 15 years since the Kyoto Protocol was first signed, although it did not come into effect until 2005. Of course the noble Lord, Lord Prescott, was very involved in making sure that that was delivered, and it was a very important role for the United Kingdom at that time. We had climate change science at that time that meant that the international community really made choices and decided to move forward, not in a perfect way but it actually moved forward. It started by setting itself targets, it determined who should be in and who should be out, and so on. Of course, since that time the scientific evidence for climate change really happening has become stronger because of the actions of human beings on this planet. So that is the background to this debate.
During that time, certainly over the first decade, we had real motivation to make sure that not only the United Kingdom but the European Union and the global community started to bring in policies, targets and plans that would make a real difference to the future of our planet and to global warming. We had the boost of “An Inconvenient Truth”, the video from the other side of the pond; in our own actions we had the Climate Change Act 2008 that went through this House and the other place with broad all-party consensus. On the whole, everything was gung-ho until a couple of years ago.
Now we are in a very difficult place in many ways, because climate change is no longer fashionable, it is disputed by many people despite the facts, and we have tabloid papers particularly criticising electricity bills because of renewables—very understandable in terms of the problems of increased fuel poverty. I was very pleased that the report of the Committee on Climate Change, showing the vast increases in energy prices between 2004 and 2010, of an increase of around £450, only about £30 was due to renewable technologies. However, we have had various other assaults in terms of climate change and the green agenda, some of them very properly driven not least because of the current economic climate. What is clearly on the minds of most households and families, and therefore on the minds of most democratically elected Governments, is their economic and financial survival. They are not looking to the year 2050, as we did with the Climate Change Act.
However, that does not change what is important and what is not. We have to solve both of those crises —one medium and long term, the other immediate—in terms of getting through the democratic processes and ensuring the planet’s survival in the future. One of the main reasons I was very committed to the coalition after the last election when that possibility arose was the very strong green and environmental core to the coalition’s programme. Of course, at that time we knew that there would be economic difficulties. We did not think that everything was fantastic in terms of the economy, but we did not realise just how long those difficulties would go on.
I will come to some of my caveats later, but I want to congratulate the Government on the number of things that they have done already. Earlier this week we had the announcement of HS2. The noble Lord, Lord Adonis, who was in his seat earlier in this debate, brought that back on the agenda, and this Government have moved forward with it. There has been the Green Deal, as the noble Baroness mentioned. As we went through that legislation in Committee, we had reservations about a lot of things, and there still may be a lot of things that have to be tweaked to make sure that it works. However, certainly on briefings that we have had since then, I am very pleased that the Government are putting a lot more emphasis on the involvement of local authorities to make sure that streets and districts as a whole are converted so that that really happens. Of course, the thing about the Green Deal is that it is around energy saving. So often in the past the emphasis has been on new technologies, on ways of decarbonising power—all of which are important. However, energy saving, which is one of the cost-effective ways of producing a decarbonised and less energy-intensive economy, has often been left behind. I hope that that programme will last for decades.
We have had the announcement about the third runway at Heathrow. What we will do in the future about air travel is a more difficult issue, but the UK Government have backed Europe in terms of the EU ETS and airlines. Despite considerable resistance from China and the United States, we have gone ahead with that programme. The smart meters programme is continuing. The renewable heat initiative—again, brought in by the previous Government—although a direct cost on taxpayers in these difficult times, fiscally is still going ahead. The carbon budgets have been confirmed by this Government and go way off into the future. So even during these difficult fiscal times, we have a government programme that the coalition has stuck to. It is delivering those commitments despite great opposition from some Members of the Conservative and Liberal parties in terms of wind power and other such issues.
I would be interested to hear about particular policy decisions in certain areas. The Green Investment Bank, which has been mentioned, is clearly a very important part of the Government’s jigsaw in moving the green agenda forward. I think that needs to be in place and functioning fully in its ability to bring in funds well before the next election. I would again ask the Government to look at biodiesel, a very important UK industry, to make sure that that is not held back by some of the changes announced in the Budget. On the point that my noble friend Lord Dixon-Smith mentioned about carbon-intensive industries, the Government should start to look at carbon footprint accounting on carbon budgeting, as well as the production base, because that actually gets around that problem. One is not a substitute for the other; both of them should be taken into consideration.
I will mention two last measures. One is company reporting. In the Climate Change Act we had an amendment that brought in mandatory carbon reporting. The CBI is very keen that this starts and that it is defined properly. I would like to see that introduced. The last one is the whole area of research and development. It is something that we ought to be doing right across Europe, particularly when we have the new financial framework in Europe between 2014 and 2020. It is a combined European effort on research and development in climate change technologies.
I think that the Government have done well in resisting the pressure—sometimes even from the office of the Chancellor of the Exchequer—to pull back on their green agenda. I think we need to move ahead. We have not had a great result in Durban; we have had a much better one in Copenhagen. Now we need to get the rest of the world to follow us.
My Lords, I congratulate the noble Baroness on getting this debate on climate change, particularly as we did not get a Statement after the Durban negotiations. I understand the reasons and cast no blame, but it is important that we continue to debate this. Funnily enough, there may be more public consensus on this big issue than on the economy. The Government are basically carrying through policies that we implemented. Therefore, I congratulate them on bringing forward their statements on green schemes and policies. They are statements at this stage and we need to see how far we progress with them. Whatever we decide on the matter of climate and negotiations, to achieve green policies there are number of areas in which we have to operate. It is not sufficient to get good agreement on a global scale; we must have policies and implementation at a lower level, where it really makes a difference.
Three phases are essential to implementing such a policy. One is the global one. I have to say that what the Government achieved—particularly the Secretary of State for Energy and the Environment—at the Durban conference that I attended, has continued the principles we established at Kyoto in 1997. They fell a bit at Copenhagen, and in debates in this House I have constantly said: “You will have to extend the period beyond the Kyoto date of 2012. You will have to make sure that you have the money and you cannot have the legal framework at this stage, although hopefully it will come”.
In a debate in this House in November I asked the Government if they would adopt the “stop the clock” policy that I developed as a rapporteur at the Council of Europe. I am glad to say that that is exactly what happened. They have now extended the period. They have not got rid of the Kyoto deal but have extended it to 2016. That means that the proof of the pudding will be in the eating. When they meet next time at Rio this year they will have to flesh out the bones of the framework that was established at Durban. Thank goodness this brought us back from the disastrous conference at Copenhagen. We are on the right track but we certainly have not solved the problem. We need now to make sure that we have green policies at national, local and regional levels. The green schemes that we talk about are the nitty-gritty. If we do not get it right in these policy areas we will not readily be able to achieve the targets that we accepted in international negotiations.
I come to the second strand. We are on the right path with global negotiations but we must put flesh on the bones that were agreed at Durban and must have policies ready by 2016. We are already behind time in achieving what we thought we would through the Kyoto agreement. Perhaps we have not made a big step for mankind but we have made a small one, and that is important; we are going in the right direction. However, I wonder sometimes whether the sledge and the huskies are going in one direction while the driver is getting himself into a quandary about whether food will be provided for the dogs to allow them to achieve their target—I am flogging that metaphor to death. Basically, it is important that the national policies are right.
Of course there are things that we could do more or less of with national policies, but there is not a great deal of disagreement on the general policies on energy, on the statements that we made and certainly on the statutory requirements that set our targets. No other country has done that. It started under the previous Government and has continued under this one. They have toughened up the requirements and we are going in the right direction; there is major consensus on that. As other speakers have mentioned, that is an important step forward in keeping the show on the road to achieve those targets.
I am a little doubtful about the 80 per cent target; that is a bit of climate rhetoric. I said to the Energy Minister: “You’ll be dead by then so you won't know whether you're right or wrong”. We should try to avoid that rhetoric because it will give my former Permanent Secretary a chance to get up and say that it is not realistic. No doubt he will say that again today. We did not say that in government, but I understand that this House is a different place. The national policies have achieved a great deal of what we wanted to secure to keep to the targets that we agreed.
The third strand is how policy develops from national to regional and local levels. I will make specific points about that and look at the demands for low carbon. The move to renewables means major changes in this kind of industrialisation. It is a new form of industrialisation. There will be major changes in the economy, in attitudes and in culture. We want people in the communities to play their part. At the moment they are sitting, observing and thinking that it is just a global problem. That is not the case. I will use my own area of Hull as a good example of regional policies. The Humber estuary is one of the few areas in which there are developments on both sides of the river. Perhaps we built the Humber bridge to remind ourselves of this. The Humber played a major part in the first industrialisation. The port did manufacturing, importing and exporting. Coal was brought in and exported. Industrialisation was located in coal, steel and iron—all in that area. Those industries are now very much on the sidelines, although I think that there is still a role for coal. I understand all the carbon arguments, but sequestration may help us towards a balanced energy policy that includes coal. Those debates will come.
Yorkshire, with its steel and coal, was almost the centre of the development of energy, wealth and manufacturing. That was the substance of the first industrialisation. The second industrialisation will be built on renewables. Investment in the assets of the estuary is already turning it into a major part of the new, low-carbon industrial development. The Humber has assets on its banks that are associated with that kind of development. It will play a major part in this change. We see that in many ways as we try to get a reduction in carbon. The Humber is almost the highway of the new industrialisation that will take place along its banks. Some of the old assets are being converted to a new, low-carbon development. Right at the bottom of the estuary one finds Drax with biofuel. It is a very important development that we seem not to treat as fairly as we do the wind industry. That argument will continue. There is a mix of coal and bio, with the deep water necessary for the estuary and the promise of building more biofuel plants.
I say to the Minister that there is a tendency to look at energy distribution and pricing in terms of the lowest price that the world market has decided, but one has to have a mix of energy. That is why we had nuclear power to begin with. We need to recognise contributions to achieve carbon reduction targets. It may be a little more expensive to use one fuel than another but we have often lived with that. We now have to put into the price analysis how it reduces carbon production. That is the target we have set ourselves. We need mixed energy. It is no good concentrating simply on what is cheap internationally. We already have gas coming from certain parts of the world that we are not very happy with. I think we are all agreed that we need a balanced energy policy, although there will still be arguments about the mix.
When we contrast investment in biomass with that in the wind industry, we find that we do not give generously to the biomass industry. Those arguments will continue and I will contribute to them. We are also developing tidal power on the estuary. That is very important. It is difficult but it is certainly part of the development that is already going on now. The maritime port of Hull now calls itself a green port because it is the area in which Siemens is investing. Billions of pounds will be invested in wind turbines. Whatever the arguments about that, it is under way. We are a major centre for production, too. Coal sequestration was referred to. We have the infrastructure that brought gas in. With sequestration we can take it out of the coal industry and put it into the empty holes in the North Sea from which we originally took gas. That, too, is important infrastructure for lowering carbon emissions.
Best of all, we have wind, wind, wind. We no longer have just fishing and ports. Wind is our biggest asset at the moment. I know that it is controversial, but there is a lot of it up there. A lot of our people in east Yorkshire are not very happy about it; they do not like the high towers. They do not mind lighthouses or electric pylons but they do not want these things, which spoil their picture-book view. However, I am concerned about prosperity. My final point is that the local council, led by Steve Brady, is very much involved in the green city of Hull.
I will finish with one quick point. The community must do something. I managed to get my community to work on one idea. We are an energy poverty area; lots of people are in energy poverty. We got E.ON to agree to put smart meters in people's houses. The Archbishop Sentamu Academy works to get children to take the meters home. If you want to influence parents, get the kids on your side. They will soon say: “Why are you using energy in this way? Can you cut the cost of energy? Can we reduce carbon?”. Cutting the cost of energy means that they improve the quality of their life. That is a better way to put the point across.
For all these things—in culture, technology and the regions—I invite the Minister and the Government to come and look at the estuarial development of low carbon, a new river of prosperity. It is good for the region and good for the country, and I hope with their green investment funds and other bodies they will take that into account and look at perhaps prioritising investment on a regional basis in the Humber, in Hull, and in the areas surrounding Humberside.
My Lords, in a short debate, I will concentrate my remarks on one issue only, the governance of the science, as this is vital for the credibility of the thinking upon which the Government’s policies are based.
In a debate in December 2009 on a report by the Committee on Climate Change, I said:
“Below the surface there are serious questions about the foundations on which it has been constructed”.—[Official Report, 8/12/09; col. 1051.]
Over the subsequent two years my concerns have increased rather than been assuaged.
The governing narrative for our climate change framework can be summarised as follows. Our planet is not just warming—this is not in dispute—but the rate of warming is projected to accelerate sharply: rather than the increase we have witnessed of less than 1 per cent per century, by the end of this century the planet is projected to be around 3 degrees centigrade hotter, taking the centre of the range. Some time during this century we will pass a 2 degree centigrade threshold, which is portrayed as a tipping point beyond which serious harm to the planet will occur. The main driver of this is man-made CO2 and the principal response must be the almost complete decarbonisation of the economies of the industrial world less than 40 years from now.
This narrative is largely based on the work of the Intergovernmental Panel on Climate Change, so the competence and integrity of the IPCC are of huge importance if it is to drive the massive social and economic changes being advocated. The reliance that one can put on the report of the noble Lord, Lord Stern, is also at issue, since it adopted large parts of the IPCC framework.
Over the last two years, there have been three separate reports on the IPCC. They are: the report by the InterAcademy Council, a collective of the world’s leading scientific academies; the report written by Professor Ross McKitrick, a Canadian professor of economics who for a time served as an expert reviewer for the IPCC’s fourth assessment report; and a book, The Delinquent Teenager Who Was Mistaken for the World’s Top Climate Expert, written by Donna Laframboise, a Canadian journalist. Although they write from three different perspectives, in different styles, the message is the same: there are serious flaws in the competence, operations and governance of the IPCC.
The reality is a long way from the way that the IPCC describes itself. The IPCC claims that it employs the top scientists in the field; it uses only peer-reviewed material; its staff are independent and impartial; its operations are transparent; its procedures for review are rigorous and free of conflicts of interest; and its role is to present objective scientific advice to policymakers, not to advocate policy responses. None of these claims is true.
There are many instances where it has not employed the top practitioners in the field, and worse, many instances where it has employed researchers who have barely completed their PhDs—and in some cases not even that. There has been substantial use of “grey”—that is, non-peer-reviewed—literature. The IPCC has been extensively infiltrated by scientists from organisations like Greenpeace and WWF. There is no transparency about how its lead authors and reviewers are selected and what their expertise is. It has been obstructive to outsiders seeking information on data sets and working methods. It is resistant to input from those who do not share the house view. It was specifically criticised by the IAC for not giving sufficient weight to alternative views.
Its review procedures are flawed, allowing too much latitude to lead authors in choosing which of its reviewers’ comments to accept or reject. It has allowed lead authors to introduce new material after the review phase has been completed. Its policies on conflict of interest are inadequate. It blatantly adopts an advocacy role rather than confining itself to scientific advice. Its Summary for Policymakers is a serious misnomer. The scientists prepare a draft but this is redrafted in a conclave of representatives from the member Governments, mostly officials from environment departments fighting to get their Ministers’ views reflected. In short, it is a Summary by Policymakers not for Policymakers.
In a pamphlet I wrote last year for the Global Warming Policy Foundation, chaired by the noble Lord, Lord Lawson, I said:
“In my opinion, the IPCC and its current leadership no longer carry the credibility which politicians need if they are going to persuade their citizens to swallow some unpleasant medicine. It is therefore regrettable that the UK Government has taken no steps to find an alternative and more credible source of advice”.
I see no signs that serious reform of the IPCC is on the agenda for the fifth assessment. The IAC specifically recommended that the chair should serve only for one cycle. Meanwhile, Chairman Pachauri doggedly clings on.
In the field of governance, things are not a great deal better in the UK. We have seen a second instalment of the CRU “Climategate” e-mails, which tell us little new but confirm the culture of shiftiness, obstruction and the stifling of debate seen in the first instalment. We still hear from time to time the mantra of, “The science is settled, the debate is over” from politicians and even from some scientists.
Therefore, I was very heartened to hear Professor Brian Cox, the pin-up boy of British science, and his colleague Professor Jeff Forshaw on the “Today” programme recently. Professor Cox said:
“Science is an improvement in our understanding of nature ... There are no absolute truths in science. It’s the only human endeavour where that level of modesty applies”.
Professor Forshaw said:
“We are always trying to improve on the theories we have got ... And we always expect that they are going to be just temporary structures and that they are going to be replaced at some point”.
So let us have no more “the science is settled/the debate is over” nonsense, particularly in the field of climate science, which is so complex and so young.
My view on the Durban conference is that while many of the participants came away disappointed, it was a sensible conclusion—in the words of the noble Lord, Lord Prescott, to “stop the clock” on the emissions issue for a decade—while the science improves and the evidence accumulates, an approach I have heard suggested by the noble Lord, Lord Rees of Ludlow. However, there is good news to report. The Chancellor of the Exchequer has drawn the UK back from its extreme unilateralism, for which he should be congratulated rather than criticised.
Finally, I have a few personal observations. In my pamphlet I wrote that,
“if a technology exists only by virtue of subsidy we only impoverish ourselves by trying to build jobs on such shaky foundations”.
The debacle in the solar sector was, therefore, entirely predictable. My second observation is that if a debate with the same title as today’s had taken place 15 years ago when I became Permanent Secretary at the old Department of the Environment—where I had a very happy year working for the noble Lord, Lord Prescott—it would not have been so dominated by decarbonisation but would have been much more about those aspects of the environment people care deeply about: air and water quality, habitats, birds, forests and the countryside. How sad that the issues have been pushed so far down the agenda, accelerated by the misconceived transfer of climate change from Defra to DECC.
In 40 years engaged on public policy, I have come across a number of cases where there was a strong international consensus among political elites, but for which the intellectual underpinning proved to be weak, as those elites were slow to acknowledge. The first was the so-called Washington Consensus which came to be seen as promoting globalisation with the maximum liberalisation of trade and finance and the minimum of regulation, but it turned out to overestimate the efficiency of markets. I confess that I swallowed that one pretty much whole. The second is the euro, where the European political elite pressed on despite warnings about the internal contradictions of the project and even now, it has yet to acknowledge the full extent of the problem. I never bought into the euro from the start.
Climate change—or more accurately, the current decarbonisation project—is in my view the third. Originally I bought in to the IPCC narrative on the science and its impacts while remaining critical of the policy responses. However, the intellectual certainty is beginning to crumble. In the next 10 years I believe we will see the current narrative replaced by something more sophisticated —perhaps drawing extensively on the work of the noble Lord, Lord Hunt of Chesterton, who will speak shortly—more eclectic, less alarmist and, in Professor Cox’s words, more “modest” in its claims.
My Lords, I thank my noble friend Lady Smith for securing this important debate. I would like to take a minute to respond to the statement made by the noble Lord, Lord Turnbull. It strikes me as not at all modest to suggest that we should stop our investment in alternatives to fossil fuels and wait for 10 years. If it happens that the noble Lord, Lord Turnbull, and similarly sceptical climate commentators are wrong, we are risking the future of the planet. If we turn out to be wrong, all we will have done is diminish our reliance on fossil fuels, which seems to me a good thing given that they will run out anyway and that they lead to lots of additional problems to do with air quality. It is not modest at all to say that we should stop; it is terribly arrogant to assume that we should risk the entire planet. Anyway, I am sorry—I shall return to my speech.
On the coalition’s record on stimulating green growth, I will come across as being quite negative, although I will end with a positive, as it is not all bad. What I want to focus on is where the main problem lies within government. It is not with DECC; in fact, I think that the Department of Energy and Climate Change has done quite a good job of continuing many of the policies that were introduced under our Government, with substantially less budget, so I think that congratulations are in order. The problem lies with the Treasury and particularly the hypocrisy of our Chancellor on this topic. He is responsible for introducing revenue-raising policies masquerading as green initiatives, which, in reality, push up the costs of energy prices while delivering no environmental benefit. Yet it is the same Chancellor who is undermining investor confidence and risking the increase of the cost of capital for investors by calling into question the UK’s green ambitions. This seems ludicrous.
I shall use a couple of examples. The carbon reduction commitment—I have to admit that it was never a very attractive policy—applies to downstream emissions of greenhouse gases from large commercial energy users. A large portion of these is already capped upstream, so it is, in effect, a duplicatory policy. However, it was at least designed to be an awareness-raising policy in boardrooms. It was also designed to be revenue neutral, with the proceeds of all the auctions being returned to the participants. One of the first actions of the coalition Government was to change all this by deciding that the revenue should be kept by the Treasury. This, of course, raises costs for all the participants, which in turn will be handed on to consumers. Does it deliver a significant environmental saving? No. As I have just mentioned, a large part of these emissions is already capped. Any savings will simply be traded away within Europe as a result of the way in which the Emissions Trading Scheme works. While the Chancellor may claim that he is putting the brakes on our getting too far ahead of Europe, it is in fact his department that is doing exactly that. He is adding additional costs relative to our European neighbours through his redundant policies.
The second and possibly more worrying policy is the carbon tax, which takes the form of a floor price in the carbon market. This policy applies directly to participants in the EU’s Emissions Trading Scheme, which applies to 50 per cent of the UK’s emissions and covers our largest point sources of emissions—our power stations and heavy industry. This flagship European policy is currently failing. It is not stimulating a significant investment in abatement—in reduction—in emissions because, for three of the four years during which it has operated, the cap on emissions has been higher than the emissions themselves. The regulation has, therefore, become almost redundant.
The solution is to adjust the cap to create greater ambition. That would rebalance the market, make sure that there were more buyers in the market than sellers and help to boost the price. That is the solution. It has not, however, been achieved to date. Sadly, that is partly because of this Government’s inability to control their Conservative MEPs, who, last July, voted against efforts to tighten the cap. While we see Conservatives in Europe blocking progress, we have a Chancellor at home deciding to take unilateral action to increase the cost of emissions allowances in the UK. This is the Treasury’s policy and it pushes up costs again relative to the rest of Europe. How can the Chancellor be putting a brake on our ambition? It simply does not add up.
The question is: to what end? There is certainly no environmental benefit to this policy. As I said, the way in which emissions trading works is that, if any reductions are achieved additionally in the UK, this simply frees up allowances to be sold to would-be polluters in Europe. It does not, therefore, have any additional environmental ambition, which can be achieved only if we remove the allowances, rather than just making them more expensive.
The stated aim of the policy is that it should create investor confidence, which will lead to the building of new infrastructure, particularly in the power sector. That is a laudable aim, but is this the best policy to achieve it? I would say that, if such large amounts as are being raised by this tax are being raised, there should be at least some guarantee that they will be spent on something that is actually built. The renewables obligation definitely adds to energy bills also, but it is designed in such a way as to ensure that something is actually built. There is no such guarantee with the carbon floor price. It is simply a means of raising revenue for existing players in the market. The main beneficiaries of the carbon floor price are the owners and operators of existing low-carbon infrastructure, who receive a large windfall as a result of not being exposed to the unilaterally inflated carbon price. This translates to British Energy and EDF. The income that they will receive from this policy may or may not be spent on the building of new nuclear reactors, or it may simply disappear into the company coffers.
The clearest indication that this policy is not delivering what is claimed is the fact that, on top of this, the Government are currently consulting on radical changes to our electricity market. If this un-green carbon tax were doing what it was supposed to do, why would we need to consult on a long-term fixed price contract for new build, which is part of a proposed package of reforms to our electricity system? It seems to be a belt and braces approach, which indicates that perhaps one of these policies, at least, is not needed. If the Chancellor is concerned about green policies and the fact that they might be putting an undue burden on our economy—when, in fact, they are probably stimulating growth and investment—he really only has himself to blame. His policy is the least useful and most expendable among the mix.
This leads to strange outcomes. Unfortunately, the Business Secretary, Vince Cable, was very damning about the UK’s carbon budgets, but in fact they are a sensible policy and he would have been far more effective if he had focused his ire on the carbon floor price and the changes to the CRC scheme, which directly raises costs for the businesses that he represents. His intervention has led to a conditionality being applied to the carbon budgets, which now sends mixed signals. The UK’s landmark Climate Change Act is seen as an example by many around the world of solid leadership on climate change. Indeed, earlier this week I was lucky enough to take part in a meeting hosted by Globe with a delegation of Chinese lawmakers who had come over here keen to learn from our experiences as they draft their own legislation on climate change. Sadly, we have gone from a good policy to the introduction of a review clause that muddies an otherwise crystal-clear policy that can create good, sound investor confidence.
The other serious issue that I want to raise in relation to the Government’s performance is their handling of policies that are designed to stimulate investment in clean technologies. I will not dwell on the feed-in tariff fiasco, which my noble friends have already touched on. My concern is a more general one. The Government appear not to be able to see the difference between winners and losers in the race to develop new low-carbon technologies. They seem to be enslaved by slightly flawed economic models of how the world should behave and are not applying themselves to noticing how it does behave in reality. If we are guided purely by these models, my fear is that we will continue to be forced to cut off at the knees industries that are starting to blossom while vainly clinging to the notion that some of the tried and failed technologies will one day come and rescue us.
I want to mention the renewable heat incentive and the renewable transport fuels obligation, which are both examples of policies that can lead to the stimulation of jobs in new industries. However, we must learn the lessons from our experience of the feed-in tariff and have sufficient flexibility to ensure that, if those policies introduce changes, we can give sufficient notice to the industries concerned.
I shall end on a discussion of whether the tried and failed technologies that we talk about a lot will deliver, and by that I mean the current generation of nuclear reactors. We often hear the promise that we are going to build eight or even 10 new reactors to replace the ones that are closing. My reading from those whom I speak to in the industry is that there is a great deal of cynicism about this. It is very unlikely that we will see the scale of build that the Government are anticipating because our current reactor designs are simply not attractive. As one executive who had looked at both designs put it to me, “They are both pretty awful and we do not like them”. I think that a nuclear renaissance is possible and indeed desirable, but it will have to be achieved by looking at the full range of new generation nuclear reactors. It will come as no surprise that I shall mention thorium molten-salt reactors, because of all the technologies that I have looked at in relation to climate change this one has huge potential. If we were able to match the amount of money that we are currently spending on nuclear fusion, there is no doubt that we would develop a technology that had massive potential for export. I would like to mention the Lords Science and Technology Select Committee report on nuclear research and development. It is an excellent report and I hope that the Government will respond to it, because we really do need to look again at our spending.
My Lords, I congratulate the noble Baroness, Lady Smith, on securing this debate, but I note that her Motion talks just about the Government’s green agenda. I agree with the noble Lord, Lord Turnbull, on one point: it would be regrettable if we interpreted the green agenda as meaning just carbon reduction or even climate change; it goes much wider than that. As for his other remarks, I agree with the noble Baroness, Lady Worthington, that what we should be talking about is our use of resources and the need to drive down our use of non-renewable resources, even if the science of climate change is wrong and the survival of the planet is not under threat. Trying to preserve as many resources as we can for future generations is our absolute responsibility.
I shall confine my remarks today to a completely different issue on the green agenda, and that is food. Of course, food encompasses energy use, land use and water use, while the food we waste has big implications even in terms of climate change when we consider methane escaping from landfill sites. That leads to my first question for the Minister. Other countries in the EU have now set a final date in many cases of 2015 for ending the dumping of biodegradable waste in landfill sites. Is the UK going to reconsider this? There are so many useful ways to utilise waste food. Separation technologies have progressed a long way, so it is no longer only a question of anaerobic digestion processes. However, anaerobic digestion allows the heat generated to be used and the resultant fertiliser to be used on farmland. There are a lot of interesting things to think about in this area. One of the most useful things that has happened recently is the quality marking given by the Environment Agency and WRAP to the fertiliser produced by this process. Farmers can now be sure that they are using a quality product and do not have to worry about it.
I also want to share with the House today a couple of particularly inspiring matters that Members of the House may have heard about on the BBC Radio 4 “Food Programme”, which itself deserves an award. The first is the Derek Cooper Award, which recognises long-term work. In this case, it went to a partnership between the Health Education Trust, Garden Organic, Focus on Food and the Soil Association for all their work with schools on improving school food and children’s understanding of where food comes from, as well as every aspect of how children are impacted by the food they eat. I cannot think of anything more important. The noble Lord, Lord Prescott, referred to the effect that children can have in their homes by influencing their parents, so this is not just about the children.
In schools where the Food for Life Partnership has worked, there have been tangible benefits. For example, twice as many primary schools received an “outstanding” Ofsted rating after working with the Food for Life Partnership. Nothing could be more tangible than that. I am very pleased that this Government have been encouraging that sort of very practical and important work on food in schools. Sarah Teather, the Minister with responsibility for schools, has brought in new powers so that schools will, for example, be able to offer price promotions on meals to particular pupils, encouraging more children to try a healthy school lunch. There has always been a bit of tension between local takeaways encouraging children to go in and buy a portion of chips and school canteens selling a healthy school lunch. Freeing up schools to be able to offer healthy food cheaply sometimes, as a special promotion, is really important.
The other award went to Jeanette Orrey, who has probably done more for school food than almost anybody else. She was a dinner lady but I guess she does not have much time to be a dinner lady now. She got an MBE in the New Year Honours List for services to food in schools. Those people have influenced the up-and-coming generations tremendously.
Two other examples of communities—one very big and one very small—greening themselves were outlined recently in your Lordships’ House on 6 December 2011 to the All-Party Group on Agroecology. The group heard first from Rosie Boycott, who is chair of the London Food Board and its subset Capital Growth. She told us of Capital Growth’s ambition to create 2,012 new growing spaces for people to grow their own food in London. This is incredibly important when you consider how few allotments there are and how long the waiting lists are—you can be on the waiting list for just about your entire adult life. This organisation has set about creating new growing spaces in, for example, skips behind Kings Cross, which is being developed. When the development moves to its next stage, the skips can be moved. Some have been created on unused land that is earmarked for development. So far, Capital Growth has 1,460 vegetable growing spaces in the capital, 50,000 volunteers, which is a phenomenal number, and 50 hectares of land. The project involves 21 London boroughs, 10 housing associations and 10,000 schoolchildren.
One of the very interesting things that Rosie Boycott told us as she showed us some fantastic illustrations of beans growing up the sides of buildings and beehives on the tops of buildings was that the spaces are never vandalised. The tangible, measurable benefits include better health, literacy rates going up, obesity rates dropping, an increase in science uptake in schools where there is vegetable-growing, lower crime rates—the police said that a community vegetable space means that fewer bobbies on the beat are needed—attractive routes to work and an entrepreneurial impact. Therefore, some of the work that the London Food Board has been doing reaches out far beyond food.
At the other end of the scale in terms of size but certainly not in terms of impact, the all-party group heard from Mary Clear, who has led a project in the small town of Todmorden, which has renamed itself “Incredible Edible Todmorden”. She was probably the most inspiring person I heard speak last year. She told us why food is an agent for change and why growing food builds communities. She described how they had even persuaded the police to allow a vegetable garden to be built outside the police station. When the PCT was going to be rebuilt and had £20,000 for landscaping, they hijacked all the money in order to plant orchards and an apothecary garden. They also have pick-your-own herbs at the station. The fire station joined in, as did six primary schools and a secondary school. It is hard to put over the enthusiasm and energy that this town has brought to this project, but it has clearly brought the whole town together and the streets are lined with vegetables and fruit trees. It is quite incredible. If that can happen in the sort of climate that you find in the north of England, it could happen anywhere in the UK.
We should think of food as an agent for change and for reminding people why “green issues” means something much wider than just carbon reduction. We need to see it from an entrepreneurial perspective as helping economic growth as well. We must return to thinking of the green agenda as being wide, and a very good place to begin is with food. I thank the noble Baroness, Lady Smith, for giving us the chance to debate these issues today.
My Lords, I am extremely pleased to follow the noble Baroness, Lady Miller. I used to be on the allotments committee of Cambridge City Council and tried to connect allotments with education, but without great success. Maybe, 20, 30 or 40 years on, this great development will occur. I welcome this debate also for the presence of the noble Lord, Lord Marland, who I know has put huge effort into his position as Minister, and some great benefits have come from that. But this is obviously the sweetener before a few critical remarks.
The broad aim of green policies is to preserve the natural environment for present and future generations, and to enable people to live safely and well in harmony with the environment. Most people now live in the very complex, unnatural and artificial environment of urban areas. As we have just heard from the noble Baroness, Lady Miller, that is an area, too, that we can be very creative about.
I declare an interest as a director of an environmental company and president of an environmental NGO, ACOPS.
In an open democracy, environmental policies should be not only acceptable but actively supported. All this requires that information and advice should be available to politicians, local government and the public. Although the climate change committee, which I am pleased to say survived the Government’s culling of NGOs and bodies and agencies of that sort, will continue and is certainly proving its independence, I regret that there has been a considerable abolition of the bodies that have been important in providing environmental information. The Audit Commission had an important role for local government; the Health Protection Agency has been “secretised”; research councils have become partly “secretised”. I heard recently that scientists in research councils have been told not to talk to politicians without permission from BIS. This is an extraordinary situation. It is a bit like Russia in the 1970s, when we used to have conversations with the taps running, or Washington, where I can talk to government scientists only by going to Starbucks. I hope that we have not reached that stage, but it is looking like it.
The UK has a history of bold and innovative environmentally oriented policies, even when these required people to change their lifestyle and pay more. They began with the banning of open coal fires in the 1950s, which was a massive cultural change in the UK—it was of course introduced by a Tory Government. Pedestrianisation, as I know from Cambridge, was a considerably controversial matter. In London the congestion charge has been a great success and has brought about a 20 per cent reduction in traffic, whereas, as we heard this morning in a meeting to do with green policies in local government, it seems to be politically impossible still for any other borough in this country to introduce something like it. The present Government are not campaigning on that issue, yet air pollution in London and all cities of Europe is exceeding health standards and is not significantly improving.
I am delighted that the present Government are continuing the Labour policy of investing in urban rail systems, which is an important part of reducing traffic pollution, but they are not campaigning or legislating to reduce motor vehicle traffic in towns. With 20,000 to 30,000 deaths per year caused by air pollution, this should be a central policy for a green Government. Indeed, this Government are now proposing to increase the speed of cars. I suppose that you might say that the only green thing about Mr Toad was the colour of his skin.
Regarding another environmental issue, 2012 will be a very important test for the Government and particularly for Defra. I am pleased that the people in the Box today can talk to their colleagues in Defra. Defra will be implementing the marine Act, which was the really important environmental measure of the previous Government. In general, it was not a party political Act. Importantly, this year there will be a number of marine protected areas around our coasts. It is of great concern to NGOs and many bodies that the Government will weaken and not resist certain fishing, extractive industries and leisure interests, so there will not be as many MPAs, strongly policed, as there needs to be.
One of the points made during the pre-legislative scrutiny of that Act was that we had uncertain data from Defra but extremely clear data from the European Commission. A witness talked about the reduction of fish in the waters of northern Europe and of the urgent need for these marine protected areas. New Zealand, of course, has shown emphatically that a rigorous programme of MPAs can lead to the preserving of fish stocks. We are in a critical situation. Any green Government should regard this as a very serious matter. It is also very important to negotiate with our EU partners because there are complications about applying marine protected areas when there is European fisheries legislation.
Another crucial area which many of us have discussed today is the environmental policy for reducing greenhouse gas emissions. The present Government have certainly pushed with gusto—I think that is the word I would apply to the Minister—Labour’s policies for international agreements plus a vigorous national programme for lower carbon energy systems. I am particularly delighted that, like many of our Lib Dem Members, Mr Hoon has changed his spots and now strongly supports nuclear energy. The Government have also pushed forward the large offshore wind and energy conservation programmes. The noble Lord, Lord Prescott, referred to the wind programme. The UK should certainly reach the target of 30 per cent or more of its energy coming from zero or low-carbon sources by 2030. It will perhaps even exceed that. However, we should not be too boastful because in France, which of course has the lowest carbon footprint of the developed world, the Left and the Right are debating whether nuclear sources will provide 80 per cent or 50 per cent of its electrical energy. We are a long way off that.
I hope the Minister is also thinking about our nuclear programme, in so far as we do not want to repeat the mistakes of the 1960s when the two famous great nuclear Lords, Lord Marshall and Lord Hinton, produced a variety of nuclear solutions which led to Britain never exporting a single nuclear power station except Latina in Italy. So we very much hope the new programme will be systematic, and that we will use this investment to develop a UK industry. However, we will not do this by having five different nuclear power stations.
As political parties advocate the UK’s contributions to reducing global emissions, they all have to acknowledge that there is a reduction in popular support for measures to deal with global warming. There is overwhelming scientific evidence for climatic events resulting from the effects of greenhouse gases, especially in developing countries and Arctic areas. Politicians in Durban and South Africa pointed this out at a meeting in Bangalore in the summer to discuss Asian climates. The consensus is emphatic.
Some of the popular understanding comes about because of the statistics of the measured trends. It is a fact that over the last 10 years the average of the temperature of both the land areas and sea areas has been static. However, over the land areas the temperature has risen significantly and over the sea areas, particularly in the eastern Pacific, it has fallen. There is a technical oceanographic phenomenon of cooler water coming up from this area. It is remarkable that an area of a couple of thousand square miles off South America can affect the global average surface temperature. In the deeper layers of the ocean, the temperature is getting warmer. This is why we are seeing strongly a steady rise in sea level.
At Durban, the director general of the World Meteorological Organisation presented the explanation that I have given today. I understand that an explanatory leaflet produced by the Parliamentary Office of Science and Technology—POST—will be in the Library in a few weeks. A consensus of modelling suggests that, with the emissions going on around the world, we should certainly see a rise of three or four degrees by 2100. These are extremely serious effects. It is why China has such a strong programme: it has already seen a rise of two degrees since the 1960s.
Finally, I should emphasise that the Government are continuing the programme of the previous Government, that green policies must also include the vital element of adaptation to climate change. We have a very strong sub-committee on adaptation chaired by the noble Lord, Lord Krebs. It is important to have precautions against extreme precipitation or flooding and, if possible, to do the kinds of things that they do in the Netherlands of having dykes with windmills on top so that we combine adaptation with mitigation.
My Lords, as a former director of Oxfam, I start by paying tribute to the quality of the work, research, analysis and advocacy on the issues we are debating contributed by NGOs such as Friends of the Earth, Oxfam, Tearfund, Save the Children, Christian Aid, CAFOD, ActionAid and others. I am sure that my noble friend, whose debate is so timely, would agree that their thousands of dedicated supporters across the country deserve our warm appreciation for making possible our input to these deliberations. The briefs are impressive and helpful. I just hope that I can do justice to those for today in what I want to say.
Notwithstanding the gravity and scale of the economic challenges facing the nation, Europe and the international community as a whole, by far the greatest challenge remains climate change. The Prime Minister on taking office seemed to have grasped this with his “greenest Government ever” prediction. However, George Osborne’s contribution to the last Conservative Party conference was an explicit break with the broad consensus that has emerged in recent years that tackling climate change and protecting the environment are essential to and not in contradiction with a modern, successful economy. Indeed, the CBI and the Federation of Small Businesses recognise that. Why has the Prime Minister failed to challenge the Chancellor and reassert his own commitment? Economic discipline requires that we get the climate change priorities convincingly in place. If we do not, the economic catastrophe that will face us all will dwarf our current preoccupations.
The feed-in tariffs have been a resounding success, creating 30,000 new jobs delivering community ownership of energy, reducing energy bills significantly, including some for the poorest people in social housing, creating green energy and transforming how people think about energy. Yet I am afraid that the Treasury-imposed cap and the way that the Department of Energy and Climate Change handled the reduction in tariffs needed in line with falling solar panel costs is jeopardising the jobs created and the future of solar in the United Kingdom.
Instead of appealing against the High Court’s decision in favour of the challenge brought by Friends of the Earth, Solarcentury and HomeSun on the handling of the case, why have the Government not ended the damaging uncertainty over the tariff level and established a system which enables feed-in tariffs to fall from mid-February, in line with the falling costs of solar technology, thereby supporting the continued growth of the industry and the employment opportunities? Why have they not increased the overall budget for the feed-in tariffs, using tax revenues generated by the jobs created, thus enabling more households to benefit from solar power? Why on earth have they not excluded housing associations, schools, council and other community projects from the damaging proposal to give multibuilding projects ever lower financial support? As things stand, if one thing is certain it is that they are making foolhardy, short-term economies at the price of aggravating the long-term economic costs and dangers to the nation. The noble Lord, Lord Stern, has estimated that in the long term, climate change could cost 5 per cent to 20 per cent of gross domestic product. He argued that this projection must be factored into the current discussion about the UK economy. Here at least the Government deserve commendation for having adopted the recommendations of the climate change committee in setting their most recent carbon budget: a 60 per cent reduction on 1990 levels by 2030.
As the key NGOs with front-line experience keep reminding us, it is the poorest countries, like Ethiopia, Sudan, Malawi and Bangladesh, which are most exposed and vulnerable to the consequences of climate change. The World Bank lists the main existing impacts and the accelerating future threats to such countries as droughts, famine, floods, sea-level rises and adverse impacts on agricultural production. The Humanitarian Response Review, led by the noble Lord, Lord Ashdown, underlined that climate change was likely to increase the frequency of disasters and that from 2015, such disasters might affect 375 million people every year. Tearfund, for example, describes as “imperative”—they use that word—the prioritising by Government of international climate change issues and of identifying and securing long-term additional finance to meet the challenges of mitigation in the reduction of emissions and of adaptation.
Tearfund, Oxfam and others, with their invaluable experience, firmly welcome the role played by DECC in international negotiations. Nevertheless, while recognising that the agreements recently reached in Durban are positive in laying the foundation for a comprehensive framework from 2020, they, like many of us in this House, are dismayed at the lack of short-term targets for reducing global emissions. Surely the Government should continue to press for a European target of a 30 per cent reduction by 2020 and to champion climate finance and the redirection of fossil fuel subsidies as the way of driving low-carbon development.
The UK has arguably made a good start by delivering on its fast start climate finance commitment of £1.5 billion and establishing the international climate fund at DfID. The emphasis on using the available finance for adaptation is sensible, but deep concern remains that this money comes from our overseas development budget. The World Bank has estimated that adaptation alone will require between $75 billion and $100 billion a year in addition to existing essential aid commitments. As the current annual global aid flows are between $129 billion and $150 billion, it is obvious that we cannot continue to raid aid budgets in order adequately to finance climate action on a necessary scale.
Under the previous Government, some of us argued hard for a financial transactions tax. This was a cross-party drive; some of those who argued most hard are sitting on the coalition Benches. I can see one prominent player with us today. Some are even on the Front Bench. Why do the Government remain so obdurate and so firmly against this tax? A minute rate of tax could make a huge contribution towards meeting the challenges of climate change and securing a more positive prospect for the global economy and global well-being. Virtually all the relevant experienced and authoritative organisations call for this. In 2011, Bill Gates’s report to the G20 argued its virtues, saying that,
“the IMF and World Bank proposals to tax shipping and aviation fuels can help countries start making the necessary adjustments … If a modest portion of these revenues were devoted to helping poor countries adapt to climate change, it would protect the livelihoods of millions of very poor people”.
Angela Merkel herself told the German Bundestag’s Development Committee on 30 November last year that she was open to some of the proceeds of the European FTT, which she so strongly favours, going to finance the costs of dealing with climate change and overseas development. For the record, she said that one could talk about the use of part of the revenue from the FTT for development and climate adjustment.
Rio next June will be a make-or-break occasion. If it fails, the future costs and consequences for humanity will be incalculable and catastrophic. We must all get behind the Government in ensuring that the UK is second to none in striving for its success. This will necessitate disaggregated, specific, formal and legally enshrined commitments by Governments, but it will also involve, as my noble friend Lord Prescott so powerfully argued today, disaggregated and specific requirements for local authorities and those with regional responsibility. We are talking about no less than the survival of the human species as we know it. On climate change, we are literally all in it together. There is no corner of the world where people will be sheltered from the consequences of failure—certainly not the people of the British Isles.
My Lords, I am in a position to repeat and summarise some of what has been said today in the course of this debate. I particularly appreciate the remarks of my noble friend Lord Judd. However, my own appraisal is by no means as sanguine as some that I have listened to. Also, the tendentious attack on the science of the IPCC that we have heard has filled me with despair.
In the run-up to the most recent general election, the Conservatives made some remarkable commitments that undoubtedly improved their image in the eyes of the electorate. They claimed, for example, that the NHS would be safe in their hands. They proposed immediately to curb the power of the bankers. They promised to take steps to foster industry and enterprise by favouring small and medium-sized businesses. However, perhaps the most remarkable of the Conservatives’ promises was that they would become the greenest Government ever. Of late, it has become clear that every one of these promises has been broken. Today we have been discussing the Government’s retreat from their much proclaimed green agenda. It might be debated whether these pre-election promises were made in a spirit of cynical bamboozlement or were instead the products of self-deception. I should imagine that they were a mixture of both ingredients.
However, if the espousal of a green agenda was a marketing ploy, it was a brilliant one. We know that, from a right-wing perspective, a concern for the environment is often seen as a preoccupation of wishy-washy sentimentalists and nostalgic romantics. It must have seemed to many that if it could adopt a green agenda, the Conservative Party had surely changed out of all recognition. Such a seemingly changed and reinvented party could easily divest itself of the unpopularity of previous Conservative Administrations.
A clear indication that the Government have relinquished their green pretences came from the Conservative Party conference in May 2011. There, the Chancellor, George Osborne, roundly declared:
“We’re not going save the planet by putting our country out of business”.
In effect, provisions that are crucial to our long-term survival were being regarded as luxuries that we cannot afford. George Osborne’s dictum summarised his attitude to the environmental policies and protections that he and his allies are keen to dismantle. Some recent examples of the effects of this attitude should be mentioned.
The Government have proposed a new National Planning Policy Framework in which, in their own words, the presumption should be in favour of the developer. They have proposed to sweep aside the accumulation of planning laws and regulations that date back to 1947, which have served over many years to protect and preserve the rural environment. They wish to allow developers to exploit land that had hitherto been off-bounds but which has not benefited from the ultimate protections of the existing system. This is at a time when an unprecedented number of brownfield and post-industrial sites are available for development.
Under the cover of an urgent need to consolidate and simplify the existing planning regulations, the Government are proposing a wholesale deregulation. Natural England, which is the wildlife watchdog, the Environment Agency and the Forestry Commission have all been told that they are forbidden from commenting on the policy. They have, in effect, been subject to gagging orders. This has not prevented other organisations not under the control of the Government, such as the National Trust, English Heritage and the Campaign to Protect Rural England, among many others, from voicing their concerns.
We should not forget either that long before the issue of these planning laws arose, the Government had intended to sell the woodlands owned by the Forestry Commission in England. There had been no mention of this idea in either the Conservative manifesto or in the coalition document. Public outrage stopped these plans.
A further weakening of environmental protection is an inevitable consequence of the Government’s recent Localism Act. The Act aims to transfer power from central government to local authorities and local communities. The Act removes responsibility from central government, and does nothing to ensure that local authorities will assume the responsibility instead. One wonders, for example, how the overriding commitment to reduce the emission of carbon dioxide can be maintained when councils are free to pursue local priorities and when they are accountable only to local residents. In times of economic stringency, it is inevitable that local priorities will take precedence.
The Localism Act enshrines one of the cornerstones of a conservative political philosophy. This is the belief that individuals and organisations, if left to pursue their own ends, will be led, as if by an invisible hand, to promote the interests of society at large. This is a central tenet of neoclassical economics, which was famously expressed by Adam Smith. Those doctrines may have had some relevance to the conditions of Britain in the middle of the 18th century, but they are dangerously out of touch with modern realities. There is nowadays a pressing need for strategic thinking and for concerted action to deal with modern environmental problems and to take the necessary initiatives to sustain a competitive modern economy.
Given the increasing cost of carbon-based fuels and given the manner in which their consumption threatens the global environment, a modern economy must be based increasingly on carbon-neutral and fuel-efficient technologies. It is in this connection that the Government seem to be failing to live up to their promises and our expectations in almost every respect.
Early in July 2010, the Government announced cuts of £34 million in the support provided to low-carbon technology. Capital grants to support the development of offshore wind farms were reduced by £3 million. Support for biofuels was cancelled, saving £4.7 million. The technology trials of the Energy Saving Trust were to be curtailed and the low-carbon building fund, which was to provide grants to help householders to install small-scale renewable sources of energy, was to be withdrawn, saving £3 million. These are very small sums serving important purposes, and it is absurd to withhold them. It seems that some much bigger expenditures have been deferred. We suspect that these deferments are really cuts in disguise.
The plans for the green investment bank, which was intended to make loans to households and businesses to enable them to invest in carbon-reducing measures including insulation, have effectively been suspended. George Osborne has drastically limited its powers by ensuring that it cannot borrow funds until the Government have completed their deficit reduction plans in 2015 or later.
The Government have drastically curtailed their subsidies for solar power—first they imposed a cap on the available finance, then they slashed the feed-in tariff for big installations over 50 megawatts so as to concentrate the subsidy on householders. Now they are planning to halve the subsidy for them and for everyone else. They intend to reduce it even further for multiple installations and to specify that buildings must meet high energy-efficiency standards before they qualify for a rebate. These cuts threaten to have a fatal impact on Britain’s solar industry.
From my own point of view, one of the most distressing spectacles recently in Westminster has been the announcement in the House of Commons of the outcome of the Durban climate conference. The Secretary of State for Energy and Climate Change, Chris Huhne, was able to tell the Commons that talks had resulted in an agreed plan to begin negotiations for a new agreement. This agreement would not take effect before 2020. The goal of limiting average temperature increases to below 2 degrees above pre-industrial levels had been relinquished. Notwithstanding the evident satisfaction of the Secretary of State at the outcome of the conference, which had seemed to be in doubt until the eleventh hour, the long delay before any effective international agreement can materialise is a frightening prospect. The Chamber of the House of Commons was virtually empty on that occasion. Very few Members from the Conservative Party were present. This speaks of an extraordinary insouciance in the face of the pre-eminent threat to the global environment.
My Lords, I apologise to the House for being a late addition to the debate, but the opportunity to speak for four minutes in the gap is a great aid to energy efficiency delivery—so here goes.
I very much welcome the opportunity to debate this extremely important issue. As I explained to the noble Baroness, Lady Smith of Basildon, before the debate, I have strongly felt all along that there has been a moral and economic imperative, as a baseline starting point, to be less profligate with our energy use. I have a few interests to declare. I am a landowner, a chartered surveyor with a particular interest in older building stock, a member of the Country Land and Business Association and its heritage working group, and I chair a small energy panel for the South of England Agricultural society, of which I am a trustee.
I very much welcome the policy on green energy, and my only concern is that it could work better. That is where I am coming from. I am glad to say that my first point has been much more ably made by the noble Lord, Lord Judd, with regard to the changes to the solar photovoltaic feed-in tariff. They were a somewhat lamentable move. The noble Baroness, Lady Smith, mentioned investor confidence—and so do I. We need to move to somewhere near a single-pot budget that is allocated according to cost-benefit rather than having different little pots that risk running out and being hypothecated towards only certain aspects. We need to look at energy in the round.
Many projects, apart from solar and photovoltaic, have to reach a very advanced stage before they can be certain of getting any subsidy allocation at all. This lack of security and certainty adds to the costs and risks, and makes such projects relatively unattractive to prospective applicants. The financial prop that the Government could offer through effective preregistration would significantly reduce the risks and raise a scheme’s viability. I do not suggest that this be done without due consideration to the cost-efficiency of the scheme in question.
The minimum code C level of thermal efficiency for buildings with solar photovoltaic that are to benefit from a feed-in tariff is another concern. The site and location of a PV panel is a very different concept from the nature of the fuel and the energy efficiency of the building or structure to which it is attached. The two are not ad idem. There has been a little incoherence here and I should like that issue to be addressed. Only 9 per cent of properties in the UK, according to my understanding, achieve code C. Their energy use and generation may coincide, but given that 75 per cent of homes are not heated by electricity, one can begin to see the disparity. I would hate to think that we were eliminating good and worthy green energy-generation sources simply because of some other relatively unrelated criterion.
Consumer knowledge of and control of how energy is used is vital. The cost-benefit of the myriad schemes and products with which we are presented is an issue that is reaching a level of incoherence. Although smart metering will help, it will deal only with the electricity aspect. What we need is a complete lifecycle energy assessment for all products and processes, and informed choices could thereby be made. That will empower people and lead into a better concept of energy conservation. It would certainly—to use the point made by the noble Lord, Lord Turnbull—avoid people chasing grant and subsidy regardless of the internal efficiency of the project or product in question.
I shall conclude there because my four minutes are up, but I thank your Lordships for your indulgence.
My Lords, I thank the House for its indulgence in allowing me to speak in the gap today, and I am sorry that you are not hearing the rather more mellifluous tones of the right reverend Prelate the Bishop of London, who was expected to speak today. Sadly he has been called away to the bedside of Lady Runcie, the wife of the former Archbishop of Canterbury, who is believed to be in the last hours of her life.
It is a tribute to Members of all parts of this House that although there is debate on the various issues in the green agenda, it has not become a denominator in party politics. This is one of the most depressing aspects of political life in the United States, and it is vital that the environment does not become a political football. But there is a temptation, in a time of economic anxiety, for the green agenda to lose priority. I believe that one of the reasons for that is that the “economy”, in common parlance, is conceived in narrow financial terms, such as the inflation rate or gross national product. The gross national product is, of course, calculated excluding externalities such as costs to the environment. If we want sustainable prosperity then our accounting practices must be developed to include such factors.
A focus on sustainable prosperity suggests that growth without limits is not a plausible option. At the same time, all the world’s wisdom traditions regard human beings as accountable tenants for the earth, responsible for the web of life from which we have emerged. Perhaps “economy” is best understood as the laws of home and management, and truly sustainable prosperity and well-being requires us to broaden our concept of the economy.
Here I must declare an interest as a member of the Church of England’s attempt to put its own house in order as a response to the green agenda. The programme goes under the name of Shrinking the Footprint. Indeed, my own residence, which is the rather splendid palace in Wells, has become the first residence to have instituted a truly green restaurant, shop and education centre on an ecclesiastical property. It is also developing a community garden, very much following many of the suggestions made by the noble Baroness, Lady Miller of Chilthorne Domer, in her speech, and I am particularly pleased about that. Why? Because it helps make the global local, and the local global, and if people are to understand these things, they have to be able to see them being worked out in their reality.
That in some ways draws me to the main purpose of my short speech. In view of the somewhat abrupt change in the level of feed-in tariff incentives for installing solar photovoltaic panels, I believe that it is important that we continue to recognise this as the most practical and potential way for so many people. Will the Minister give me a response to three quite specific requests which affect all places of worship? Would it be possible to allow places of worship until 31 March to complete and install projects in the pipeline with the benefit of the current FiT regime? Speaking for my own churches I believe that some 200 were actively planning to install panels when the cut came into place. Secondly, would the Minister give consideration to including churches alongside other community projects for a specific community tariff after 1 April? We have been working closely with the Jewish community in this particular area. Finally, would the Minister consider exempting churches—because of their special characteristics which often preclude the kind of alterations necessary to get close to even a C-rating—from the need to obtain energy performance certificates, providing that some other suitable benchmarking audit system can be put in place?
I want to give just a note of praise to the chairman of Shrinking the Footprint, the right reverend Prelate the Bishop of London, who has an alternative benchmarking scheme which has been developed with expert partners in the Diocese of London. To offer a little help to the Government, that could, with government approval, become a national test of energy efficiency in respect of church buildings. Thank you.
My Lords, this has been an excellent debate on one of the fundamental challenges we face at a transition to a low-carbon economy with environmentally sustainable new technologies. It is also an excellent time, as we draw near to the end of the first Session of the Conservative coalition, to assess the reality of actions against the prospectus of promises of the new Administration.
In her opening remarks my noble friend Lady Smith gave a telling assessment of the new Government’s commitment to be the greenest Government ever. She longed to be impressed by the coalition but remains unconvinced.
On inheriting the momentum set by the Labour Administration, the coalition agreement included more than twice as many green polices as any other area. In their first days in power, the Government signed up to, and subsequently met, the 10:10 pledge to reduce government emissions by 10 per cent in their first 12 months. On the international stage, the Government continued the leadership of Labour by working as part of an EU delegation in Durban to pave the way for a new, legally binding treaty by 2020.
At home, the Government signed up to the climate change committee’s fourth carbon budget to halve the UK’s carbon emissions by 2027, giving the UK one of the most ambitious emissions reduction plans in the world. However, the week of speculation and rumour of a Cabinet in deadlock that preceded the decision betrayed an increasingly stark divide on the environment at the heart of government. It is a divide between the fair-weather environmentalists, who still perceive environmental considerations as an afterthought—an expendable burden—and those who argue that a sustainable economic future and a sustainable environment are necessarily dependent.
The green agenda means nurturing change through growth options, encouraging entrepreneurship and innovation even through tough times, rather than restricting future options. We have heard how, in the Autumn Statement, the man setting the Government’s financial priorities is firmly in the “fair weather” camp. By painting environmental regulation as a ridiculous cost to business, the Chancellor has shown his true colours after his rhetoric of 2009 when, as shadow Chancellor, he described the choice between economic growth and the environment as “a stale argument”.
My noble friend Lady Worthington today extended criticism of the Treasury into the emissions trading scheme and the balance of revenue with its expenditure on green policies. My noble friend Lord Judd also asked searching questions of the Treasury. The Chancellor singling out the habitats directive in particular in his Autumn Statement is perhaps emblematic of an underlying attitude, and especially counterproductive as the Government, recognising the resonance of things such as “Hugh’s Fish Fight” with the public, have taken up the debate in Europe on the issue of progressive reform of the common fisheries policy, which has presided over the current overfishing of European waters by 73 per cent. The habitats directive is key to delivering an ecosystems-based management of our marine and coastal resources. Watering down—if I may use that expression—the habitats directive will undermine the key framework needed to deliver a sustainable future for our fisheries.
These sorts of confusing mixed messages towards the environment must serve as a harsh warning to the Government. I am grateful to the noble Baroness, Lady Miller, for placing her remarks on resources, agricultural impacts and the challenges faced with food in schools, on the record.
The various voices within government that create a false opposition between the environment and economic growth fail to recognise two important things. First, the biggest deterrent to the emerging high-tech innovations that our low-carbon economy needs to be built on is uncertainty: market uncertainty fostered by policy reversals, particularly the solar industry retrenchment that has landed the Government in court; investor uncertainty, fostered by ideological divisions, particularly the lack of clarity over the Green Investment Bank; and financial uncertainty fostered by a lack of vision, particularly delays on the first carbon capture and storage project.
Secondly, short-term budgetary belligerence can come at a high long-term cost: the high cost of ignoring that growth needs encouragement and a commitment to policy stability. My noble friend was particularly critical of the Government’s contradictions. Of concern are the proposals in the draft national policy framework which will allow developers to recoup legal costs from environmental agencies and other statutory bodies advising on future developments, which will serve as a significant deterrent to agencies already threatened by significant budget cuts to doing their job in critiquing plans for the future. I know that this may not be in the Minister’s portfolio, but do the Government believe that the draft national planning policy framework will lead to fewer challenges to planning applications on environmental and sustainability grounds? What areas of the habitats directive do the Government believe should be rolled back, and what impact does the Minister anticipate this will have on the delivery of ecosystem services? What steps are the Government taking to implement the proposals of the natural environment White Paper?
In the energy sector, the coalition recognised the direction of travel set by the previous Labour Administration. The transition to a low-carbon economy will require investment. By investing in more diverse energy sources, the UK will be less vulnerable to fossil-fuel-distorted price hikes. By investing in insulating buildings and homes better and creating more fuel-efficient cars and methods of transport, the UK demand for energy can be reduced. By investing in industries that suit our geography and skills, such as offshore wind and carbon capture and storage, the UK can develop competitively priced energy security.
All the contributors today recognised in some way the size of the challenge. In recognising the problem, the noble Lord, Lord Dixon-Smith, brought to our attention the question of whether there is an absolute to achieve in carbon reductions. The noble Lord, Lord Teverson, was happy with the achievement so far in recognising the core green agenda, but asked for far more emphasis on the Green Investment Bank and looked for more research to inform our decisions. The noble Baroness, Lady Worthington, took up the challenge with an interesting overview of the unintended consequences of government monetary levers, which my noble friend Lord Judd also drew attention to, and the contradictions between short-term finance and long-term objectives.
My noble friend Lord Prescott also drew attention to this global recognition, and asked for it to be translated into good regional and local action plans. He drew my attention, at least, to the problem that transfer pricing will require differing energy sources as it translates into energy pricing. The noble Lord, Lord Turnbull, was concerned about the lack of alternative scientific and views, and about how that may be constraining in our policy objectives.
The financial benefits of the various low-carbon support mechanisms accrue either to big utilities or to wealthy investors, and the cost is often borne by ordinary energy consumers. Perhaps the Government need to reflect on this and on how the impacts of their policies translate across the economy. The principal delivery mechanism has been the renewables obligation and the pledge that, by 2020, 20 per cent of our electricity should be generated from low-carbon sources. This transition investment has led to a fierce debate about the rising costs—I am sorry, I have been confused by the time; it says five minutes in front of me—and about who should shoulder the burden and in what percentages between industry, household and government.
Green energies to build a low-carbon economy could be no more expensive than other options. DECC’s Chief Scientific Adviser, David MacKay, has been reported in the media confirming similar findings by Mr Mackenzie in the EU 2050 roadmap and Ofgem’s Project Discovery. This concludes that the renewable/highly energy-efficient combination scenario comes out cheaper than the high-nuclear/less energy-efficient scenario. There is a strong economic case in favour of renewable technologies beyond climate change and energy security reasons.
The renewables industry still needs the coalition Government to develop a coherent industrial policy around the renewable energy target. Joined-up government is, as ever, hard to achieve, and schemes such as the electric vehicles show that BIS, DECC, the Department for Transport, CLG and the Treasury need to understand the important role that renewables can play in rebalancing the UK economy and supporting newer manufacture.
The call to transform the new economy needs to be met by all sectors. Labour’s leader has coined a new term to draw attention to the impact of this conservatism—the “squeezed middle”. In this debate we do not mean hard-pressed families, we mean mid-sized technologies between domestic and utility scale, which are being squeezed out as being unable to contribute. On the one hand, EMR is too complex for many important investors such as mid-sized companies, farmers, and public sector and community schemes—all could be catalysts for a new economy; on the other hand, the feed-in tariff has focused on the domestic and is now in chaos. Will the Minister say how these vital new investors can be encouraged and included within the wider policy framework?
The coalition Government are barely one Session into the new Parliament. There is still some way to go before half-time. Have not the Government to regroup quickly and urgently if they are to get the UK economy into a game-changing performance?
My Lords, I am very grateful to the noble Baroness, Lady Smith, for initiating this debate. I am sure that I speak on behalf of all noble Lords here in saying that our thoughts are with the former Archbishop and his wife at this very difficult time and I quite understand the reasons why the right reverend Prelate the Bishop of London is not in his place today.
The reason I am very grateful for this debate is that it is very important, as a number of noble Lords have said, that we keep the green agenda at the forefront of people’s minds because there are signs that people’s attitudes are changing towards it. Therefore, it is fundamental that in a debate like this we pursue the green agenda. It is very important for me because I learn a lot. We have seen today a broad canvas of ideas, views and information that I find extremely valuable, as I am sure everyone else does.
The delivery of this agenda is clearly critical. Before I get to the excellent work that the Government have done, I will deal with one or two specific points from noble Lords. The noble Baroness, Lady Smith, as a native of Essex, along with the noble Lord, Lord Dixon-Smith—I am glad to see that the natives are not revolting from Essex—asked quite reasonably about scrutiny. Here we have it before our very eyes. We have eminent Lords and Baronesses challenging us on every occasion as to government policy, and, of course, the Committee on Climate Change, which does a fantastic job, sets targets for us. Therefore, I do not believe for one moment that there is no scrutiny in this area.
The noble Baroness asked about the Green Deal. Clearly it is a very complicated project, made more complicated by the very significant and excellent input from this House in the legislation. We have a very good working dialogue, as the noble Baroness referenced. Yesterday we had another session where we sought to inform each other and move the matter along. We want to get it right, and it is very important that we get it right for consumers, that there are warranties in place to protect them and that we do not go off half-cock. We are committed to getting this off the ground in 2012 and, as the noble Baroness knows, no one is more committed to it than I am.
I will deal later on with her points on solar PV, which a number of noble Lords mentioned. As for CCS—carbon capture and storage—we did pull the plug on the first coal-powered power station. I was responsible for the negotiations. I was not prepared to commit taxpayers’ money to something that was being incorrectly priced by the only winners we had in the project. However, we are working to a very fast and hard timescale and I am convinced that by this time next year we will have established a winner for a gas carbon capture and storage project. It is quite clear that the Chancellor has committed the £1 billion of funds available. Through that, there will be leading technology, jobs and growth.
My noble friend Lord Dixon-Smith asked whether the targets for 2020 were the right ones or whether those for 2050 were right. I think that he preferred the latter. It will come as no surprise to him that we have targets for both. We look at both very carefully and have to interweave them because, as the noble Lord, Lord Prescott, said, there is no one product fits all policy for delivering energy to the country. We will have to deal with all manner of policies, get the mix right and deal with inclement weather. For example, if there is another nuclear incident in Europe it will lead to the destabilisation of our nuclear policy. We will have to deal with that. Therefore, we will have to have flexible targets. However, the noble Lord is quite right to say that we have to look to 2050.
As always, I am grateful to the noble Lord, Lord Teverson, for his support and various comments. The noble Lord, Lord Prescott, rightly referred to the Humber estuary with its wonderful deep waters. We were delighted that Siemens decided to move there. I know the area well and looked very carefully at potential sites where more infrastructure buildings could be put. The area of the Humber estuary has a very knowledgeable workforce and I believe that it can become one of the great offshore gateways. Like the noble Lord, I was disappointed that the Statement on Durban was not debated here. Of course, that was an opposition decision. I was rather relieved that I did not have to stand on my feet for another 40 minutes.
The views of the noble Lord, Lord Turnbull, are well known. I will not engage with him on the IPCC. It is not something that we can unilaterally change. It will require international agreement. Some of his points are well known, and quietly we have made our position well known to the IPCC. I am also grateful that he was right on the euro.
The noble Baroness, Lady Worthington, criticised the carbon price floor. I do not know how we will get nuclear power—or even thorium nuclear power—off the ground unless we have a carbon floor price that sets out a very clear pathway and an encouragement to the nuclear industry, as well as a negative view of those who are producing high-carbon electricity. Therefore, I think that the carbon price floor is a very positive step. Of course, we could go on for a long time on the subject of thorium; we have had some good exchanges on that.
We welcome the great knowledge about food shown by the noble Baroness, Lady Miller of Chilthorne Domer —much more knowledge than I was able to deal with. Her main point was about landfill. The Treasury has done the right thing in raising the landfill tax by £80 a tonne by 2015. Capturing methane and turning it into electricity is a positive way forward to make sure that landfill is dealt with properly. Push and shove methods are far better than very prescriptive policies.
The noble Lord, Lord Hunt of Chesterton, gave us a very good overview from his position as an eminent scientist. He complained that we do not have enough quangos. I do not complain about not having enough quangos. I am interested in delivery and do not believe that quangos in general are delivery bodies. Obviously some are, but they often get in the way of delivery, which will be so fundamental to what we must do. I was also grateful for his words about my gusto.
As always, the noble Lord, Lord Judd, made a very intelligent contribution. The work of Oxfam should not be denied; it has been very formative. We are delighted that it is subscribing to the climate change agenda. As he rightly—and often—says, we are all in this climate change thing together. There is no point pretending we are not and it is a fundamentally wise thing to say.
Listening to the noble Viscount, Lord Hanworth, I must say that I thought that I might go out and kill myself. He was so gloomy and in despair over my own great party, and I could not really agree with a single word he said. However, he is right to tell us about the economies and great benefits of the low-carbon technology. It would be interesting to know what Adam Smith himself would have made of it all.
We were grateful for the intervention of the noble Earl, Lord Lytton, with his great knowledge of councils. He quite rightly said, as did the noble Lord, Lord Turnbull, that we should not set up grants where all people end up doing is chasing them. That indeed is what the solar panel FIT became—a grant-chasing product—with disastrous consequences.
The right reverend Prelate the Bishop of Bath and Wells raised a number of items. I have worked very closely with the Church of England on “Shrinking the Footprint” and have attended a number of events. We think it is a remarkably good scheme. It is so good because it shows leadership, and that is what the green agenda is all about: showing leadership, and showing people the reasons for doing it and why they should be doing it. We are very grateful for the leadership—from all churches, actually—on this issue, but I know that he is not expecting me to make special exceptions for his churches, even though I am a great admirer of his wonderful cathedral in Wells.
The noble Lord, Lord Grantchester, asked me questions way beyond my mandate. It is bad enough having to know what is going on in your own brief, let alone other people’s. Fisheries—for heaven’s sake! He has time to withdraw—he can tell me afterwards—but if he really insists on me writing on our fisheries policies, the ecosystem, the natural environment White Paper and our policy on that, I am totally happy to write to him or get someone even cleverer than I to do so. He is quite right that it is about joined-up government.
However, I must rebuke noble Lords. I felt that, as in “Hamlet”, you doth protest too much. You should lift your eyes upwards and not down, navel-gazing. Look up and think of the achievements that you have made and that we have made. I am grateful to the noble Lord, Lord Prescott, because he was so positive in what he had to say about what is going on. He did not bring any party politics into it—which was a bit of a change, actually, I must confess. It was being recorded and may well be on YouTube. The noble Lord was positive, and because he was positive and because my Secretary of State is so positive, we are leading the world in the climate change agenda; and because noble Lords throughout this House have been positive, we have been able to keep the green agenda at the forefront.
To those who criticise this Government for not doing anything—there is only one thing that we have done that is predictably different from what the previous Government had done, and that is stop the feed-in tariffs on solar PVs. Why did we do that? Because we did not think it was fair on taxpayers to spend £8 billion to achieve 0.1 per cent of our electricity demand. There are far better ways of committing that money for heavy lifting—and there was a scam. There is still a scam going on. Last week, my phone went at my home. “Mr Marland”—shows how out of date they are, six years out of date—“I have got a government-backed scheme guaranteeing this for solar panels. Are you interested?”. I said, “I think you have got the wrong man here” and put the phone down pretty quickly. But this scam is still happening and it is not in the best interests of taxpayers. Let us get it off the agenda and let us stop moaning about it. Let us move on to the really big points of nuclear, of clean gas, of all the things that will keep the lights on in this country—and renewables. Let us not run away from renewables. Renewables will be fundamentally important, because they give us security of supply and help us with regard to our agenda.
My Lords, perhaps I may suggest to the Minister that he is being too modest. Although it was a difficult period and a difficult thing to do, we have a solar power industry that will survive into the future, which would not have happened. It could have been done better, but it will still be there and will, I hope, resurge as those prices come down. We are not out of solar. We can actually keep solar because of that decision.
I am grateful. The Whip has just said that it is very rare that I am modest, so it is quite nice of the noble Lord, Lord Teverson, to say that. The fact of the matter is that the solar industry is going on. That is what my story indicates. It is still out there selling and that will go on if people want to do it. Frankly, that is what it should be about.
What have the Government done? The Opposition talk about the green investment bank. We have committed funds to the green investment bank. It is highly technical and difficult to set up a bank. We have committed funds—we set aside £3.1 billion for the investment bank—and that will happen. As I said, we have committed £1 billion of new money for carbon capture and storage. We have the world’s first incentive scheme for heat Nowhere else in the world is that happening. We have put £400 million to support low-emission vehicles. We have a mass rollout of smart meters by 2014, which will allow the consumer—merely by putting on their reading glasses—to see what they are spending on electricity. We are reforming the market to encourage investment, which is absolutely critical, as the noble Lords have said. We have had the fourth carbon budget, which requires us to cut emissions by 50 per cent. We fully subscribe to that and we are on target for it. We have cut our own government emissions by 14 per cent despite the 10 per cent target we set ourselves. We even got No. 10 to cut its emissions by 10 per cent—it was a very close-run thing. We cut our own government emission by 14 per cent last year. It will be 25 per cent by 2015—not a small target.
As I said, Durban was, largely, a triumph. As the noble Lord, Lord Prescott, says, it is rebuilding the mess that happened at Copenhagen; it is rebuilding trust among countries. There is also work towards a legally binding agreement—a fantastic achievement. Twelve per cent of our capacity now comes from renewable electricity. It will be 15 per cent by 2020. We are on target for that commitment and making very good strides. Around 40 per cent of households now recycle their own waste. This is good for the green agenda. Some 3.5 million more homes will be insulated by the end of 2012. We have spent £92 million cleaning up our rivers. We have had the big tree plant campaign, which was launched to plant 100,000 trees. The Green Deal, which we talked about earlier, will unlock about £7 billion of private sector investment. That should generate 100,000 jobs. We are, therefore, doing a lot.
Contrary to what the noble Viscount, Lord Hanworth, was saying, we have increased our grants. Seventeen grants were awarded to separate companies last year—a total of £18 million. We spent another £28 million in 2009-2010 across the Government. We continue the commitment made by the previous Government. We have six wave and tidal companies receiving grants of £22 million through our own good offices. The Opposition are, therefore, wrong to criticise us. By criticising us, the Opposition are criticising themselves—they have been fundamental to this development. We have done this together. I go back to the words of the noble Lord, Lord Judd. We all know that we are in this together—up to our eyeballs—and it is our job to make sure that the consumer is at the heart of our decision-making. We must help to educate consumers that the green agenda is part of the important decision-making that supports them. I am grateful to the noble Baroness, Lady Smith, for this excellent opportunity to respond.
My Lords, as ever, the noble Lord is engaging and entertaining in his responses, and as ever, he has failed to answer the most significant questions that were put to him. I take some exception to his comment that the House doth protest too much because it means that he has misunderstood the nature of today’s debate. He said that noble Lords had been saying that the Government have not done anything. No Member of your Lordships’ House suggested that the Government do not have any achievements. In fact, no one denied those achievements and they were praised. What the debate was around was whether this is the greenest Government ever, as the Prime Minister promised, and if it is not, whether there are areas in which the Government can improve, which the noble Lord seems to have rejected. So I am sorry he has treated the debate in this way.
I put one major question to the Minister which he failed to answer. I hope that he will come back on it. Whatever he says about the decision on feed-in tariffs, there is no doubt that it has had a major impact on businesses and investors. Many business people and investors are now very cynical about the Government’s commitment. That confidence needs to be rebuilt if we are going to achieve the Government’s own targets on investment for green growth. That is why I asked him most specifically whether he could give assurances on green growth and the Government’s commitment. What actions are the Government going to take to improve the perception, which is justified given some of the decisions that have been made, that the Government are not serious about green growth? I am sorry he failed to answer the question. He often promises to write to me, and if he wants to do so on this occasion, I would be grateful. Otherwise, I assume that the Government have no plans to encourage the green growth that is so necessary.
We have had a very worthwhile and interesting debate. It was tabled with the intention of putting forward suggestions, recognising successes and looking at where improvements can be made. I had hoped that the Minister would respond a bit more positively by saying that changes can be made. Finally, I would add that I am proud to be a native of Essex. I suspect that my accent is more Essex than that of the noble Lord, Lord Dixon-Smith. It is not something I regard as derogatory, but with some pride.
Financial Supervisory Framework: EUC Report
Motion to Take Note
My Lords, I present the report entitled the EU Financial Supervisory Framework: An Update produced by the European Union Sub-committee on Economic and Financial Affairs and International Trade which I have the honour to chair. The global financial crisis has demonstrated that the existing structures for supervising financial institutions and monitoring systemic risks are inadequate. This in turn has triggered a debate on how best to redesign the financial supervisory architecture of the European Union. Consequently, in September 2010, the EU passed legislation which laid the foundation for a new EU supervisory architecture. The new framework has two strands. The first is the overarching European Systemic Risk Board, which has responsibility for macroprudential oversight of the EU financial system and for assessing and proposing ways to reduce systemic risks in the financial sector. Below the ESRB are the three European Supervisory Authorities: the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. These ESAs strive to harmonise and co-ordinate the work of member states’ national regulatory bodies. They draft and implement technical regulatory standards, and mediate between national supervisors where conflicts arise. When an emergency situation is declared by the Council, the ESAs have enhanced powers to co-ordinate member states’ responses and, if necessary, to make binding decisions on national supervisory authorities or indeed on individual financial institutions. In general, however, financial institutions continue to be supervised by national authorities.
The committee examined the proposed legislation setting up the new EU financial supervisory system in its 2009 inquiry on the future of financial regulation and supervision. After the new ESAs were established on 1 January last year, we decided to return to the topic by taking evidence from the UK national regulator, the Financial Services Authority as well as from the European Banking Authority. We wanted to discuss how matters had progressed and to explore key issues that we had previously raised with the Government in our area report. This report was published in July and the Government’s response, for which we are grateful, was received in September.
The committee’s key conclusions were as follows. First, we affirmed support for the single rule book, operable across the member states. Given the cross-border nature of many financial services, it is important that national supervisors apply the same regulatory standards enforced with the same powers across all the member states. However, the financial sector is a global industry and we asserted that global co-operation is also essential to ensure that risks are minimised rather than simply relocated. The committee was anxious to enshrine the principle that day-to-day supervision of financial institutions should remain at the national level and we stressed that this should be reflected in any new legislation proposed at the EU level. However, we noted that there were some situations in which the ESAs could and should override national supervisors, especially in response to an EU-wide crisis or emergency. Our witnesses sought to assure us that there were safeguards in place to prevent such powers being used routinely or inappropriately, and we expressed the hope that this will indeed be the case. Furthermore, we expressed the wish to be consulted if the Government were ever to envisage asking the Council to declare an emergency and, similarly, to be informed forthwith if they detected that another member state or ESA was likely to request that an emergency be declared.
We also endorsed the principle that national supervisory authorities should occasionally intervene in exceptional circumstances to impose temporary restrictions on certain financial activities in order to ensure general financial stability. We welcomed the co-ordinating role of the ESAs to ensure that such actions take place in a uniform and co-ordinated way across the European Union. However, in our view ESAs should only have the power to temporarily ban certain activities or products in a crisis when an emergency has been declared by the Council. Where the legislation setting up the ESAs allows for the ESAs to be granted enhanced powers in certain areas without the need for the Council to declare an emergency, we argued that future sectoral legislation should only confer such powers as the exception, not as the rule.
One such exception to the principle, in our view, related to short selling and credit default swaps. Given the highly cross-border nature of this trade, we argued that giving ESMA such intervention powers might be necessary to preserve financial stability in the European Union. I wonder whether the Minister has pondered the far-reaching consequences of this ban on CDSs and on short selling. In relation to contributing to macroeconomic stability, the committee stressed the importance of information-sharing among the supervisors. We also welcomed assurances by the EBA that bank stress tests would be strengthened in the light of the failure of these tests in 2010. Indeed, we concluded that the rigour of the stress tests would be an important measure of the independence of the EBA.
Finally, we reflected on the United Kingdom’s influence. The UK is the centre of financial services in the European Union and we emphasised the importance of the United Kingdom Government and the FSA taking leadership roles. We commended the FSA for its constructive approach in seeking to engage with the ESAs. Yet we were concerned that the Government’s proposal to abolish the FSA and replace it with the Financial Conduct Authority, the Prudential Regulatory Authority and the Financial Policy Committee could compromise the UK’s leadership role. We called on the Government to explain what structures and mechanisms they planned to put in place to ensure that the new bodies work together effectively to present a cohesive and unified face as well as ensuring that the residual task of the seceding FSA should be covered by the United Kingdom’s new national supervisory structure.
Although the Government’s response broadly reflected the committee’s point of view, there were some differences of emphasis. The Government continued to express concern about the use of the triggers for ESMA’s intervention powers in relation to short selling and credit default swaps. On the question of keeping the committee informed about any such emergency, the Government stated that they would inform it as far as is possible about a Council declaration of an emergency, or of subsequent use of emergency powers by the ESAs, in a form consistent with any restrictions resulting from the possible confidential nature of such decisions—perhaps that could be elaborated. On the domestic supervisory role of the United Kingdom, the Government stated that they would legislate to require establishment of a statutory memorandum of understanding between the Treasury, the Bank of England, the PRA and the FSA, and would support the further use of memoranda of understanding to frame the new regulators’ relationships with other UK authorities. I look forward to the Minister’s reply, which I am sure will explain the Government’s position in more detail.
So where do we stand today? Events have moved on since the report was published, in particular as the euro area crisis has deepened, and the new bodies have played a high-profile role. For instance, the European Banking Authority’s December assessment that European banks needed €115 billion of funding to withstand financial shocks underlined not only how serious the crisis had become but also the EBA’s active and interventionist role. Moreover, the UK Government’s reported demand, in negotiations at the Brussels summit in December, that the EBA remain in London demonstrated not only how important this body has become to the Government but also the potential isolation that they face as a result of not joining in with the other 26 member states. However, the collapse of Dexia in October, in spite of the fact that it had comprehensively passed the EBA’s stress tests as recently as July, once again called into question the effectiveness of its system of bank stress tests. ESMA’s role in the regulation of high-frequency trading, over-the-counter derivatives and credit rating agencies, as well as its power to ban certain activities or products, continues to be subject to intense debate, as does EIOPA’s controversial assessment of the solvency of pension funds.
Are the Government sure that British experts are available for use with the new structures? Do we have sufficient resources accorded to the new supervisory authorities to ensure that they do their work?
ESMA has had responsibility for credit rating agencies since 1 June of last year. This forms a new and important departure, and I would welcome the Government’s response to this development within the single market in financial services.
My Lords, I pay tribute to the noble Lord, Lord Harrison. It is not just that he made a very good speech on our report; he has also been a very good chairman of Sub-Committee A, a committee which is quite tough to guide because there is such a diversity of view on the EU among its membership. That diversity is thrown into ever sharper focus as one EU crisis develops into the next.
I suppose that in your Lordships’ House and in the country as a whole the views can be seen as stretching from the totally disillusioned, who now feel that the whole enterprise should be abandoned—at least by the UK, to those whose tribal loyalty to the EU leads them to feel that we have to stick with it come what may.
I am not saying that either of those persuasions is directly represented on the committee. But inevitably, as events unfold, we are aware of those positions even if neither of them is actually an option. Incidentally, I should say that I do not regard myself as either a euroenthusiast or a eurosceptic. I suppose if I am anything at all, I am a eurochallenger.
The second reason it is a tough committee is that there is a very high technical content to many of the issues we seek to address. What makes it particularly hard is that factual information is often either deliberately concealed by the parties or simply not available.
This has, of course, been the case since the world financial crisis first started to unfold back in May 2007, when the depth and breadth of the toxicity of financial instruments, initially mainly inside the United States, started to emerge.
What a far cry it is since the American state-sponsored mortgage-granting agencies, Freddie Mac and Fannie Mae, appeared to be a brilliant concept for increasing home ownership, an objective that the now shrunken giant of American banking, Alan Greenspan, so enthusiastically and unwisely espoused. But the lesson in all this is that, to quote the NKVD man in Kravchenko's I Chose Freedom:
“Comrade Stalin has taught us to trust one another but at the same time to check and recheck”.
I make no apology for saying once again that it is now recognised, as it was by many at the time that, conceptually, the euro was flawed from the start, based as it was on a single monetary policy but independent fiscal policies. From that emerged the myth, peddled over the past 10 years, that the sovereign debt of all euro countries was equally safe. This suggestion on its own has created a moral hazard of the ECB having a potential liability which it could only meet by switching its printing machines onto constant. And we all know where that leads.
To state that the necessary change for the system to work is the establishment of a euro-area ministry of finance is futile, as the people of Europe show no signs of wanting it. We therefore have this plethora of new supervisory bodies: ESRB, three ESAs, EBA, ESMA, EIOPA—which the noble Lord, Lord Harrison, and our report have described very clearly. The whole question of these bodies being able to override national supervisors is a central issue. It has been suggested that this should only be done in emergencies but who defines an emergency? If the existence of an emergency is seen as too sensitive to be revealed, what then?
There is the crucial question of whether the European Banking Authority has the capacity to carry out the stress tests which are intended to give early warning that banks are in danger of going bust. As banks spend a great deal of their time concealing the reality of their financial positions, I would put my money on the bankers hiding what they wish to hide.
I have for some years been concerned about credit card debt in this country, the £60 billion debt on which interest is being paid, currently at a rate of 17 per cent. It amounts to nearly £1,000 for every man, woman and child in Britain. At my instigation, the noble Lord, Lord Myners, when he was the Minister responsible in the last Government, wrote to the banks, asking them at what level they were valuing these assets. Only one of them even replied. One thing on which I warmly congratulate the Government is their decision to separate high-street banking from the much more risky investment banking. This is being done in the teeth of opposition from the banks.
I am worried about the way in which some of the senior eurocrats are suggesting that they might be able to suppress inconvenient facts. I am thinking of course of Commissioner Barnier, who is keen to ensure that the credit-rating agencies do not publish inconvenient truths about the value of sovereign debt in euro-area countries. Having realised that his edict would not be enough to get what he wants, the Commission is now putting together a complicated set of procedures which credit rating agencies would have to comply with before the European Securities and Markets Authority allowed them to publish their credit rating. There was an interesting piece in yesterday’s FT by Martin Fridson, in which he expresses considerable doubt as to the merits of such proposals. I certainly share those doubts. I have absolutely no brief for the credit rating agencies—which Sub-committee A has also recently studied—which failed investors and savers deplorably with their absurd endorsement of doubtful financial instruments of debt.
Finally, to illustrate my readiness to see the merit of regulatory action in financial matters on a European level when it is appropriate, I would like to make a specific proposal, which I hope the Minister will communicate to his Treasury colleagues. There has been much fully justified criticism of the way in which overseas entities and individuals have been able to avoid paying stamp duty on transfers of expensive houses in the UK. This could be dealt with at an EU level by simply requiring full compliance with national law, including tax, before any transfer of real estate is accepted as having taken place. In the UK, the courts would simply refuse to recognise title unless the proper stamp duty had been paid on a change of ownership. That, I think, would fix it.
In conclusion, I am rather doubtful that Humpty Dumpty can be put together again. I hope that he can, because I am a strong supporter of the EU single market and even the EU as a global political player. Sadly, the debacle over the eurozone has diverted a vast amount of the time—some say as much as 80 per cent—that Europe’s top leaders have been able to apply to world problems of peace and stability. I fear that that means that EU influence has greatly diminished over that period. As Britain is probably the most financially sophisticated and experienced country in the world, it is crucial that we play a full part in offering our expertise to help the euro-area put together the best financial supervisory framework possible. I hope that the House of Lords Sub-committee A can play some small part in that.
My Lords, this is a very timely debate given the state of play in the development of both the EU financial supervisory framework and our own financial services architecture. Nobody could accuse the EU or the British Government of not acting to put in place new structures which aim to stand a better chance than their predecessors of preventing another bubble-based banking crisis. As the noble Lord, Lord Harrison, pointed out, at the EU level we have the ESRB and three sectoral regulatory bodies. Here in the UK we will soon have a new Financial Policy Committee, a Financial Conduct Authority and a Prudential Regulation Authority, along with the Treasury and the court of the Bank of England involved in setting and implementing financial regulatory strategies.
All these bodies are new or in gestation so there is a considerable degree of uncertainty about how well they will work, both individually and—possibly more importantly—in relation to each other, particularly at times of financial crisis. The noble Lords, Lord Harrison and Lord Marlesford, talked about how the European bodies would operate, what constitutes an emergency and what powers they would exercise in those circumstances. The truth is that, at the moment, we do not quite know because they are so new that they have not yet had to invoke those powers. From the evidence that the sub-committee took, it is clear that they are still feeling their way in some respects on how those powers would actually be used.
I have had the privilege of serving on the Joint Committee on the Financial Services Bill and as part of our work we looked at how the new UK bodies would relate to their European counterparts and how the UK interest would be best represented. It is on this area of the sub-committee’s report that I would like to concentrate my remarks this afternoon.
There are several obvious problems. First, the structures of the European and British bodies are quite dissimilar in that at the European level, we have three sectoral bodies covering banking, insurance and markets and at the UK level, we have two: one covering prudential regulation and one covering conduct of business regulation. These clearly are not equivalent bodies. When those involved in the FSA or the EBA have been asked whether this matters not, it has been pointed out that across the EU, there are many forms of regulatory structure and the twin-peaks approach that we are going to be adopting is by no means unique. As a matter of principle, however, I do not think one could argue that three bodies playing two bodies with completely different remits is an ideal starting point. It is an issue that we have to address.
Secondly, as has been mentioned, the European bodies are very lightly resourced for potentially a very big job, particularly at a time of emergency. The European Banking Authority will have 120 staff; if there is an emergency tomorrow, it could be asked or expected to wield powers across the whole of the EU and it will clearly struggle to do it. There is no prospect in the foreseeable future of these bodies getting any additional resources, which is a bit of a worry. There is also a more general worry that its 120 staff are playing 3,500 staff of the FSA; no doubt, staffing will increase in the equivalent bodies across the EU. Therefore, it is going to be hemmed in as regards what it can do simply through the paucity of its own resources.
The third problem is obviously Britain’s relationship more generally with the EU. At the ill fated recent summit, it was regulation of the financial services sector that was cited as the reason for the UK Government refusing to go along with the rest of the EU. Some of the arguments that were advanced seemed to me quite bizarre. It was suggested that we should have, as a matter of principle, a declaration that there would be no moving of the European Banking Authority out of London. No one was suggesting that it would be moved out of London, so why was that a big issue? It was suggested that there was a huge problem in that the EU was going to stop us increasing the capital requirements in our banks beyond a certain level, when it was absolutely clear from both the EBA and Commissioner Barnier that, whatever they originally thought in this area, they were not going to push this as an issue. Therefore, we have been pursuing lines of argument related to the management of financial services regulations which seem to me to be bizarre. Whether they are or not, however, they have undoubtedly caused major difficulties in our short-term relations with at least some of the principal member states. However, it seems to me—I am sure everybody would agree, whatever their views on the euro, the eurozone and the Prime Minister’s strategy—that it is absolutely key for the UK to be in a position to maximise its influence in EU financial services regulation. Therefore, we now need to think about how we can best achieve this.
First, there is our role within the EU and, in particular, the supervisory bodies. I gather that, despite the screaming headlines, the attitude of many of those involved in managing the process in member states and EU institutions has not undergone a revolution; and that there is still a residual willingness to work closely with the UK on these matters, which is almost surprising in some cases. This is particularly true given, first, the small size of the resource at the European level; and, secondly, the even smaller resource and aptitude for involvement in detailed negotiations on many of the technical issues in many smaller member states with small financial services sectors. There still seems to be a very big opportunity for the UK to play a major part in those bodies. We have not been frozen out and we must make sure that we remain as active as possible.
Secondly, there is a problem with the new architecture throughout financial services regulation and how it relates to the European bodies. According to the draft Bill, the PRA will exercise the UK vote on the European Banking Authority and the insurance authority, while the FCA will exercise the UK vote on the European Securities and Markets Authority. However, substantial areas of the ESA’s work that are not the primary responsibility of the institution that holds the voting seat apply, so there will be a real problem there with the relationship between the UK and the European bodies. That can be dealt with only through good co-ordination at the UK end.
As the noble Lord, Lord Harrison, pointed out, the Government plan to have an MoU involving all our bodies here that are related to this. However, as we saw with the tripartite agreement, MoUs on their own are not worth the paper they are written on if the participants in the MoU never meet or if they have fundamentally different views about what to do. It seems that although an MoU is no doubt necessary, it is not sufficient in this area. In their evidence to our Joint Committee, a number of bodies—including the CBI and Nationwide, for example—suggested that a way of dealing with this would be to establish an international regulatory committee of the various bodies of the Bank and the Treasury here in the UK. It would be responsible for co-ordinating British involvement in the European regulatory activities. This seems to me to be an extremely sensible suggestion.
The Joint Committee suggested that this committee should, because of its importance, report to the Chancellor and be chaired by the Treasury. I agree, although I might add, in parenthesis, that it should be chaired by someone from the Treasury with a sophisticated understanding of how the EU institutions and authorities work and what is realistically achievable in both the short and medium term. This may be a big ask but it is the best chance that we have. These are sensible suggestions, which I hope the Government will adopt. I also hope that the Treasury and the Bank will encourage their brightest people to work with the EU bodies, either as UK reps on their various committees, or as permanent or seconded members of staff. British voices around the table need to be as numerous and as resonant as possible.
I realise that the Government are still considering our committee’s recommendations and it may be slightly premature for the Minister to give a definitive response on this issue. However, I hope he will urge those of our recommendations that relate to EU co-ordination on his colleagues.
The noble Lord, Lord Marlesford, was quite right to start with a tribute to the noble Lord, Lord Harrison, the chairman of Sub-Committee A. As a fellow member of Sub-Committee A, I strongly endorse these plaudits.
I want to commend our little report and to put three questions arising from it to the Minister. The questions follow, quite neatly, the logic of the remarks of the noble Lord, Lord Newby.
The City of London, as one of the three great global financial markets, is recognised in most, though perhaps not all, EU capitals as a major EU asset. In most other EU capitals, with perhaps one significant exception, the health of the City is seen as important to the Union. The City’s voice is being given due weight, so witnesses told the committee, as the EU’s financial supervisory framework develops. This seems to be developing in ways in which the committee, certainly, and, we understood, the Government, supported. That was the message of the admirably clear and positive reply to the committee which the Financial Secretary sent on 21 September. I am grateful for that reply.
The UK is playing a leading role in setting up the new structure, as one would expect, given the pre-eminence of the London market. Of course, qualified majority voting applies, so we cannot be sure of getting our own way on every issue, but so far, so good. The City is pretty relaxed, the committee’s report is pretty reassuring and the Government’s response is equally reassuring and supportive. So far so good, or so I thought. Here I come to my first question to the Government. Is it the case, as reported in the press, that one of the safeguards sought by the Prime Minister in the middle of the night of 9 December was a carve-out from qualified majority voting and a return to unanimity specifically for decisions on the scope of the new ESAs; and, if so, why?
The City of London has benefited enormously from Mrs Thatcher’s success in securing qualified majority voting for the internal market in the Single European Act by persuading her colleagues in other European capitals, and, in particular, her colleague in a particular European capital, to drop the unanimity requirement for single market legislation—it had protected only protectionism. The City as a result grew much stronger, absolutely and relative to other EU markets, as a result of pan-European liberalisation made possible by the Single European Act. As a result, the whole EU economy became more competitive. The task is by no means yet complete, but there has been considerable net gain, and, in particular, a net gain for the UK as well as the EU. For that, we all owe a great debt to Mrs Thatcher.
Why would we want a carve-out now? Why would we want a return to unanimity, turning the clock back 25 years? Did we consider what use others, who are less keen than us on liberalisation, might make of the precedent that we were setting if we succeeded? Did we think we could maximise our chances of success by raising this arcane matter—if indeed we did, as I am asking a factual question—in the middle of the night with no prior warning or preparation of the ground? What were we on about, specifically with regard to the ESAs?
That is question one. Question two follows, and is pretty obvious. What is plan B? If, on the issue of the ESAs, there is a lurking threat, which the committee of the noble Lord, Lord Harrison, the witnesses who gave evidence to it and the Government, in their reply to the Select Committee, all failed to identify, and if the Government despair of finding sufficient allies to create a blocking minority to oppose this threat, how, following the failure of their proposal in the night of 9 December, do the Government intend to counter it? What, please, is plan B?
My third question is much more general. We know that new treaty articles, the provisions of which would apply only to the eurozone member states, are now being drafted. We know that their aim is to reinforce budgetary discipline, enhance economic convergence and thereby improve financial stability. My understanding is that they will spell out that this closer co-operation among the 17, which would be meeting much more frequently, must not encroach on the competencies of the union of 27 or undermine the single market, and specifically spell out that EU law will take precedence over these new provisions. Furthermore, provided no one tries to stop it, the Commission will be present in the room to ensure that there is no encroachment on the rights and no conflict with the laws of the EU of 27, because that is of course the Commission’s job as guardian of the treaties. Provided that no one tries to stop it, the Court of Justice will be watching to make sure that that is observed.
On the face of it, that is okay. Yet I am very uneasy. Eurozone meetings will be about financial stability. It seems implausible that they will not, in some informal way, touch on financial regulation and supervision, because they are, after all, the means by which financial stability is assured. The meetings will not of course reach decisions because the Commission, provided no one stops it from attending, will be there to ensure that no decisions are reached and to remind the 17 of the rules of the game. However, suppose that members reach an informal consensus on a regulatory or supervisory issue. For example, suppose the issue raised by the noble Lord, Lord Marlesford, the case for declaring an emergency and imposing bans on matters such as short selling, was discussed—and it is for the Council to define an emergency. Suppose that there is informal consensus that the Council should define an emergency and state that there is an emergency situation. It seems to be highly likely that the 17, having reached such an informal consensus, could find a qualified majority for it in the subsequent ECOFIN council—perhaps on the following day. Even if we strongly disagreed, even if the proposed decision was unwelcome to the City and even if the Government opposed it with all their customary eloquence in the Council the following day, the die would have been cast the night before. That is my worry.
To that extent, I understand why the Prime Minister wanted safeguards. I do not know what specifically he wanted—none of us does—and a number of us, including the noble Lord, Lord Lawson of Blaby, judging by his question before the Recess, are a little surprised about that. It surely would have been a normal courtesy to inform Parliament, and I rather think—although I will not say so in definitive terms in the presence of the noble Lord, Lord Roper, who is, as always, in his place—it may be a requirement for the scrutiny committees to be informed of a legislative proposal. However, so far, we have not been informed of what safeguards were sought. I am relying purely on press reports that one of them concerned the ESAs and the subject of our debate.
Nor do I begin to understand the tactics followed by the Government. Indeed, I find it hard to resist the unworthy suspicion that they may, for domestic reasons, have wanted to make impossible demands. That is quite unworthy, so I will not pursue it. I am anxious to be constructive. My final question is whether the Government will now adopt the course that seems to be the one most likely to provide the safeguard that the Prime Minister may have wanted, if I am right in defining the unease that may have led him to want safeguards. It is a course that would guarantee that the City’s voice was always heard from the start of any relevant eurozone debate and before any unwelcome informal consensus of 17 could emerge.
I again urge the Government to reflect on Article 136, the first of the articles in that section of the TFEU that comes under the title:
“Provisions specific to member states whose currency is the euro”.
Article 136 empowers the eurozone countries to consider and adopt measures applying only to them provided such measures are compatible with those adopted by the Union as a whole. It makes clear that all member states may participate in all such discussions, though of course only the eurozone member states may vote since the resultant measures will apply only to them.
My question to the Government is obvious. Does Article 136 not provide us with the precedent we need and the model we want? Is not the strongest safeguard we could have the right to be there, to be in the room, when—as I think they will—eurozone discussions stray informally on to matters which are, or should be, for the 27 members of the Union as a whole? Would not the best safeguard be to enshrine that right to be there by embedding the new articles in the existing treaties even though their provisions would apply only to the 17? There would of course be no question of triggering a referendum requirement under the European Union Act 2011 because no powers would have been transferred. Should we not be suggesting that the right course for all 27 countries is to expand the provisions of the title specific to member states whose currency is the euro, provided only that the crucial Article 136 survives?
Do the Government agree that this course would be likely, in practice, to be saleable? In my judgment it would be saleable, instantly, to most of our partners. It would be strongly supported by many of them, I know, precisely because so many of them see healthy competition and a strong City as important for the EU as a whole. I hope the noble Lord will ask Whitehall to reflect very carefully on this point and on Article 136. I do not press for an immediate answer now. I do not expect that. Indeed I would prefer a considered one and would be very happy if the noble Lord would agree to reflect and arrange a letter to come to me and to the rest of us taking part in this debate.
On a personal level, when I was lucky enough to be sent by Prime Minister Thatcher to Brussels as her negotiator, her parting instructions to me were quite simple and rather in line with the worried mother’s instruction, “Go and find out what they are doing and tell them to stop it”. I recall her explaining with some force why an empty chair policy is always wrong, and why we must always be there. I agree with her. It did not work for the French under de Gaulle. So I am very glad, as we were reassured at Questions this week, that we are participating in the discussions in Brussels, and not just as an observer but as a full participant. My concern is about the longer term and about the need to ensure that the outcome of these negotiations when it comes into force is not a two-tier Europe with the interests of the City and the country damaged by what happens in an inner tier from which we have excluded ourselves. I really think we should seek to avoid that outcome. I believe that outcome is still avoidable and I really hope that we are actively seeking in Brussels to ensure that it is avoided.
My Lords, first may I add my voice to the congratulations to the noble Lord, Lord Harrison, on his chairmanship of EU Sub-Committee A and the way in which he has managed to take the committee to a unanimously agreed report. It is a pleasure to follow the noble Lord, Lord Kerr, and I will be truncating some of my remarks at the end as a result, because that was the second theme on which I was going to remark.
I would like to start by making some observations on the operations of the three supervisory authorities, although I recognise that the Systemic Risk Board itself is of course of enormous importance. In your Lordships’ House I chaired the relevant Select Committee that examined the Lamfalussy proposals at the time, so I have always had a very close interest in them. Although there are successors to the level 3 Lamfalussy committees, they are very different animals. I should like to remark on a few of those differences.
First, the authorities have the power to create a single European Union rulebook in financial services. That gives them the power to issue binding technical standards, effectively secondary legislation. Secondly, they are in some cases being given market-moving responsibilities—that is, responsibilities which, when they exercise them, have the power to move markets immediately: for example the stress testing of banks; the endorsement and regulation of credit rating agencies; third-party recognition of CCPs; and other examples that noble Lords will think of. The nature of the legislation and the exercise of powers of the supervisory authorities needs to reflect that, because it would clearly be very market sensitive.
Thirdly, they have an enhanced ability to ensure harmonised implementation of supervisory practice in all member states. I will look with great interest at the extent to which they have managed to achieve that over 27 member states, but they are certainly pursuing it with some vigour. Fourthly—this has been remarked upon already, and I will return to it—all key decisions will be by majority vote, on policy matters by qualified majority voting, and on other matters by a simple majority. Finally, the link between regulation and financial stability has been strengthened by the establishment of the stability board but also by the contribution of the supervisory authorities to the work of the European stability board.
Now that these authorities have been established, increasing pressure on their workload has emerged. The financial crisis followed by the eurozone problem put a spotlight on financial services. There is a strong political sense, not only in this country but even more so in Europe and the European Parliament, that more regulation is urgently needed. There is mistrust of light-touch regulation and, to a degree, mistrust in some parts of the European Parliament of the position of the United Kingdom. In the face of this, the resources of these supervisory agencies are indeed very limited, as the noble Lord remarked earlier. They depend heavily on financial regulators and other member states. I regard this as a good thing. It certainly should be a very good thing for the United Kingdom because, in order to function at all, they need an enormous input of resources and expertise from member states. That should place the United Kingdom in a very strong position.
It is important that the supervisory agencies have proper time to develop proposals for legally binding standards, time to consult fully, time to undertake impact assessments, time to draft legislation rigorously and time to consult further on such draft legislation. On 11 October, the executive director of ESMA—the European Securities and Markets Authority—remarked that the authority is,
“extremely committed to stakeholder consultation but we are concerned that tight legislative deadlines for ESMA’s work on technical standards and advice will restrict our ability to consult as extensively as we would ideally like”.
A few weeks later, the chair of the authority commented as follows:
“writing … technical standards … is important for achieving a single rule book … The quality of technical standards is crucial for the proper implementation of Directives and Standards. ESMA has made it clear that on average it takes about 12 months to accomplish all steps required for good technical standards. A shorter period negatively affects, for example, the possibility to consult with stakeholders like you”—
he was talking to investment managers. He continued:
“In that perspective it is very unfortunate that the recently agreed Short Selling Regulation requires us to deliver technical standards by the end of March 2012”—
that is, in six months rather than 12. I make this point because there is enormous pressure from level 1 legislation on the supervisory agencies. The legislators, whether the Commission, the Council or the European Parliament, need to be realistic about the timetables for implementation that this means if we are to have effective regulation implementation by the supervisory agencies.
My question to the Minister is whether the Government believe that the supervisory agencies have the capacity to deliver what is expected of them. When I looked at the workloads in the 2012 work programmes for the three agencies, they looked to be extremely busy. Who in the Government—or is the FSA?—assesses the viability of the workloads of the supervisory agencies? What is the process within the UK for considering and endorsing the proposed workloads and priorities of the supervisory agencies? What is the political input into these?
I welcome the report in today’s Financial Times confirming the point made by the noble Lord, Lord Kerr, that the latest draft eurozone treaty omits a commitment to closer co-operation towards a single market, recognising that that is a province of the European treaties of the 27 member states. I share the noble Lord’s concern that in practice it is unlikely that the 17 eurozone member states will not indeed look carefully at and discuss the operations, priorities and actions of the supervisory agencies, including the stability of this board, when they meet. I add my support for the question that the noble Lord asked: how do the Government intend to respond to this situation? The constructive suggestion that the noble Lord proposed might be pursued seems an excellent idea.
The United Kingdom ought to continue to be welcomed as a major player in the development and implementation of financial services regulation in the European Union. We are indeed an asset to the Union, and it is simply in the interests not only of the UK but of the EU that the UK continues to be a major financial centre in global terms. I hope that the Government, in all their thinking and in how they address the political and diplomatic relationships and dynamics of the EU, will seek to ensure that that remains the case. I hope that the proposal of the noble Lord, Lord Kerr, meets with the Minister’s approval.
My Lords, the noble Lord’s remarks indicated quite rightly that a lot of water has flowed under the bridge since those original days when it was in the Lamfalussy territory. Those were early days indeed, pre-crisis, before the world financial crisis started in 2007. I think that we are very grateful in this House not only for the debate today, initiated by the noble Lord, Lord Harrison, but for his chairmanship of this particular sub-committee. It has been going for some time and it has taken a long time, but all these complicated matters are bound to do so, as they do in the discussions between the member states. There is no need to criticise that severely, as the press often do. First of all they want it always to be done in a hurry, and then when it is done in a hurry they say that it was done wrongly and superficially and a lot of mistakes were made. These are very complex, technical matters of procedural co-operation, which take a long time to work out.
The noble Lord, Lord Roper, in this place has given excellent leadership in this matter, which is one of the most important subjects that we have discussed in the last 12 months, both on the European Union Select Committee and indeed in the particular sub-committee. The credit rating agencies report, too, has a place in this whole subject, and I will refer to that briefly in a moment. I, too, thank very much the noble Lord, Lord Kerr, for the very shrewd analysis that he gave and for the help that he gave us in framing those three excellent questions. I would like to be tagging along behind him, if he would allow me to do so, and also ask exactly those three questions, but couched probably in less elegant and precise Parnassian language than he is able to muster. There are indeed two procedural positions for the noble Lord, Lord Kerr; I call one Lord Kerr above the table, and the other Lord Kerr below the table. Both are equally valid, depending on the different circumstances of incredibly complex negotiations. His work as the secretary—I do not think the word “scribe” is adequate—of the convention on the constitution meant that he knew an awful lot about those various clauses that are now in the Lisbon treaty.
Once again it has been a period of education for people in this country about the need for us to really keep in step with the rest of the European Union on these matters and not to fall behind. That is not to say that in this case the particular sector that we are discussing is behind in any way. Indeed, the City of London is a leader in this field and all of us are very proud of the leading role that it plays in financial matters, investment business and banking. It is a leader not just for the United Kingdom, one has to stress, but for the whole of the European Union and, indeed, the whole of the world. The single market has mostly been developing with material things and retail rather than financial transactions so far, but now we are coming more and more into the field of financial transactions.
I suppose that one of the leading sectors in Germany would be the motor industry, a gigantic motor industry of which Mercedes and BMW are probably—I hope the Japanese will forgive me for saying—the two leading motor car manufacturers in the world. However, in no sense does that just belong to Germany. That belongs not only to the whole of Europe but the whole of the world. The effect of the German motor car production industry has huge ramifications in the whole world and indeed particularly in the European Union, not least in the new eastern European member states. When there are major sectors in each country, they belong to the whole Union, and the City of London does as well.
I declare my historical interest as a former member of the Stock Exchange from 1965 to 2000, a partner in a major institutional stock-broking firm in London for 10 years, from 1968 to 1978, and then, when politics was taking its sinister grip more and more, an associate of a very famous firm chaired by the then chairman of the Stock Exchange. One saw the attitudes there of the special feeling of apartheid and separation psychologically: the City was unique, nowhere else was like it, and how dare these continental chappies tell us what to do? That feeling persisted until quite recently.
Subsequently, the City began to realise that you do need Europe-wide regulation of all these matters, because if the City is a dominant market, the only way to make it really effective is to have the single rule book, as advocated in this excellent report—I agree with virtually all its contents—and have that imposed on all the others, which may be smaller market entities physically, although growing relatively much bigger all the time. Indeed, with the stock exchanges also merging together in other European capitals, they themselves become more significant. These things are international. I would say that the City of London is now populated mostly by originally non-British banks, and other investment institutions are often originally foreign-owned in the City and elsewhere. This is international. That feeling has now faded away. The general feeling in the City is much better and much more up to date. When one meets colleagues from yesteryear and colleagues nowadays at the rather nostalgic gatherings that we still have—City reunion dinners and lunches occasionally —usually nowadays they are dry, which I think is a very good idea because there is far too much to be discussed to have it over a glass of port, as was the norm in the old days. That feeling is now more modern and harmonised. There is a single market. Thank goodness we are the leaders; it provides a surplus for our non-trade, financial services balance that gives us an overall surplus on our current account. We have seen yet another increase in the trade deficit of this country because we always import far too much, particularly from other advanced countries.
The recent change in the Conservative Party took the clock back. The noble Lord, Lord Kerr, did not mention it; he referred only to the late-night summit discussions of 9 December. There was a similar manifestation from our Prime Minister—accidentally, as far as I can tell. I am not sure what happened; no one really is, because there was no proper record. The UK representative at the time, and the Foreign Office, were discomfited by the lack of any preparation for what happened. There has been a manifestation in the Conservative Party of a combination of Bullingdon Club, old-fashioned nationalism and anti-European stuff. It has come out again and again in recent years since the coalition was formed, and has been getting stronger and stronger. The Prime Minister is rightly resisting it but not being successful in so doing.
The sudden, last-minute request caused a crisis and once again there was a ratcheting up of that feeling among the other member states—rightly and understandably, but tragically and sadly for this country—that, “Britain isn’t one of us; it's not a normative member of the Union; it always wants to stay on one side with exclusions, derogations and exceptions; it doesn't want to join the euro; its Prime Minister now says it will never join the euro”—although it has always been the official intention of this country to join the euro, which remains a strong currency despite the problems of one or two overindebted countries. That feeling caused major consternation and needs to be answered by the Government to reassure opinion not only in the other member states but here.
That feeds into the question of our national regulatory authorities rightly being the main agents of the new European structure of overall supervision under the ESA. They will have the power to guide the Europeans, some of whom will be relatively inexperienced in these matters. The situation is complicated by the fact that stock exchanges have only recently got together. That, too, is a very complicated matrix, against the bizarre background of the international debt crisis, which is not only in Europe but elsewhere. Japan is the most overindebted country in the world, with the highest debt ratio. International bond purchasers are now buying Japanese debt, so bizarre has the situation become. The second most overindebted country is the United States. The federal Government could be described as technically bankrupt, and most states are in the same position, although in most cases they can default.
Bringing the two aspects together will mean that we need new, strict and strong Europe-wide financial regulation for the markets, and the outlawing of certain practices that have certainly damaged industry. Speculative business, too, must be regulated properly. It is no good just saying that there must be a free market and a single rulebook that allows businesses to do what they like. They must be properly authorised and regulated. I have anxieties about folding back the FSA structure into the Treasury and the Bank of England. Their record over the years of controlling and supervising correctly and efficiently both the British economy and financial and banking matters has not been wonderful; I say that with sadness. We must get this right. The Government must recover from the mistake made on 9 December, fold in all the new provisions to the Lisbon treaty and come back to sanity so that we can have a proper single European market in financial matters.
My Lords, now that the clouds have belatedly lifted from that Mount Olympus where the gods known to us as “the usual channels” meet, and a debate on the outcome of the European Council of 9 December has been scheduled for 31 January, we can treat the report before your Lordships' House—which, as other speakers said, covers matters that were at the heart of the discussions at that Council meeting—as an opportunity for a kind of hors d'oeuvre to that wider debate. For that reason, and also because this report is a thoroughly useful and professional look at an arcane and complex subject, I add my thanks to the noble Lord, Lord Harrison, and his committee for making such a valuable contribution. I cannot leave the issue of the timing of that wider debate on 31 January without commenting—not for the first time, I fear—that the way debates are scheduled in this House sometimes seems to be carefully designed to minimise the extent to which any views expressed are still valid and topical. Holding the debate on the day after the next European Council seems a miraculous piece of sleight of hand of that kind—surely a perfect example of what I am describing.
Today’s debate is also a serious case of “Hamlet” without the Prince of Denmark, for reasons that my noble friend Lord Kerr has explained. Why is this so? At no stage have the Government brought to the attention of either House of Parliament, or of either House’s scrutiny committee, the text of the protocol on financial regulation that they are widely reported to have tabled at the December European Council, and which appears to have been rejected on that occasion by 26 out of the 27 member states. I can understand why the Government should not be particularly keen to draw attention to that lamentable fiasco. What I cannot understand is by what procedural sleight of hand they can possibly justify failing to convey to Parliament the text of an instrument that was clearly intended to be a piece of EU legislation, and which, had it been adopted, would have altered in a number of respects the further development of the financial regulatory framework which is the object of today’s debate.
I very much hope that the Minister will be able to fill this lacuna in our evidential base and perhaps he might place in the Library of the House tomorrow the text of this famous protocol, which clanks in and out of our debate rather like the ghost of Hamlet’s father. I very much hope that he will also be able to explain to the House why this lacuna has been allowed to occur in the first place. I really cannot see how the House can be expected to perform its required function of overseeing and scrutinising EU legislation if our own Government do not convey to it the text of a piece of EU legislation which it tabled itself. There are plenty of words to describe that action, some of which are not of a very parliamentary kind. “Respect for Parliament” is not an epithet that could be applied to it.
The report before us has some wise things to say about the financial industry being highly mobile, and about global co-operation being essential to ensure that parts of that industry do not relocate outside the EU. This consideration is highly germane to the proposed financial transactions tax, which I appreciate is not covered by this report. Am I correct in assuming that the proposed Tobin tax will be discussed at the next meeting of the G20 finance ministers in February and, if so, that that should provide a clear indication of whether there is any prospect of such a tax being adopted globally? If there is no such prospect—and the chances of the present US Congress enacting a new tax in an election year must be remarkably slender—the risks for the EU, the eurozone or any of its members that decide to go ahead on their own will become very clear, and would bring the rather unworldly debate on this issue down to earth.
Chapter 4 of the report before us is devoted to the UK’s influence on EU legislation in the field of financial services. As other noble Lords have said, Britain is the EU’s centre of this major industry and it is therefore clearly of the utmost importance that Britain’s influence should be deployed both wisely and effectively. Shortly before the December European Council, one of the Government’s supporters in the other place, Mr Jo Johnson, argued in an article in the Financial Times that the last thing London’s financial services industry should want was to be wrapped in the union jack—how wise he was.
If only the Government had paid attention to him—but they did not. The least that can be said about the manoeuvring at the December European Council is that it does not make the task of deploying that influence any easier. But it could be a good deal worse than that. The risks of marginalisation are very real, and the Government have yet to explain convincingly how they propose to avoid them. Perhaps the Minister will either do that when he replies to this debate or will take the matter away and reflect—I have no doubt that we will return to this on 31 January.
Altogether it is not easy to be optimistic about the developments in this field of financial regulation and supervision. The earlier unity of purpose in the G20 seems to be ebbing away—taking with it the prospects for strengthening the world’s defences against the next crisis when it comes along. There is a widely perceived leadership vacuum which is sapping the chances of restoring confidence in the financial markets. The people who cheered the loudest at the lamentably inadequate outcomes of the G20 summit in Cannes, and of the December European Council, actively want the eurozone to collapse and want Britain out of the European Union—either of which courses would have extraordinarily damaging consequences both for this country and for London’s financial services industry. It is surely time that the Government recognise that their mantra “we are all in this together” applies beyond the boundaries of this nation.
I declare that I am chief executive of London First, a not-for-profit business membership organisation which includes financial institutions among its membership. I am also a board member of a Triple Point venture capital trust.
It is very easy when discussing complex regulatory matters to focus disproportionately on the detail of the regulations themselves. The risk is that we lose sight of the purpose of the regulatory regime and whether it is fit for that purpose. For that reason, I greatly welcome today's debate.
The regulation of the financial system—globally, in Europe and here in the UK—is going through tremendous change. This is an understandable reaction to the banking crisis of 2008, and it is necessary to restore public confidence in the system. However, the impact is doubled in the UK thanks to the fact that we are simultaneously implementing a wholesale restructuring of our own regulatory regime little more than a decade after the last such major change.
In my contribution today, I would like to touch briefly on three issues that arise from the UK's changing regulatory structure and its relationship with its European counterparts: first, the importance of protecting the international competitiveness of our financial services sector and, therefore, our potential for growth; secondly, the need to ensure optimal co-ordination and collaboration between the new domestic supervisors and their European counterparts; and, thirdly, the need to resource all these regulators appropriately.
First, on ensuring that the UK is globally competitive, while the financial sector has been the unloved one since the credit crisis, emotion should be superseded by good economic sense when determining how it is policed in the future. This is important because the financial sector in the UK employs around 1 million people directly—and many more indirectly. It is also a major contributor of income and corporate tax revenue. Finally, as we attempt to increase exports to compensate for stagnant domestic demand, financial services are a vital source of future growth as one of our primary export industries.
Across the piece, the financial sector exists to provide essential services to Governments, businesses and individuals. The more effectively it can provide those services, the better for us all. In this context, I am surprised that the Government have failed to include the international competitiveness of UK financial services within the objectives of the successor bodies to the FSA. It seems wholly inconsistent for the Prime Minister to wield a veto in Brussels, at great political expense—ostensibly to defend the City from uncompetitive EU regulation—only then to exclude competitiveness from the remit of our domestic regulators. Margaret Cole, the interim managing director at the FSA, which will form the core of the new FCA, has publicly supported the inclusion of such an objective, and I would urge the Government to take note.
Secondly, on ensuring UK influence in Europe, if the UK’s interests are to be given due consideration as the new European regime develops, we need to ensure that we have the right people in the right meetings saying the right things. Staff at the new UK regulators will have a key role to play in contributing to Europe-wide decision making through, for instance, regulatory colleges. I share the concern of the noble Lord, Lord Newby, that there is a potential risk here in that the UK’s new “twin peaks” model does not mirror the structure at the EU level. Consideration of retail banking regulation, for example, may well require insights from both the prudential and conduct of business perspective. As a result, when seeking UK representatives for ESA meetings, the UK may find itself trying to fit square pegs into round holes.
It is vital that our new agencies are joined up in their approach and that there is effective dialogue and information-sharing between them. I welcome the Government’s promise to legislate to require memoranda of understanding between the major players—the Treasury, the FCA, the PRA and the Bank of England. However, I join the noble Lord, Lord Newby, in supporting the suggestion in the draft report of the Joint Committee on the draft Financial Services Bill. It recommends the establishment of a committee to ensure that the UK authorities agree consistent objectives and exercise their functions accordingly. This further safeguard would give significant reassurance to the industry. Presenting a single, coherent voice with maximum influence in the international context is vital and should not be left to chance.
Thirdly, on resourcing our regulators properly, let me turn to the quality of regulatory staff. All of the new European supervisory agencies, the successor bodies to the FSA, the Treasury and the Bank of England need high-quality staff to deal with the extraordinary challenges that this sector faces. It is therefore vital that the new supervisors at both the UK and European level are not only adequately resourced in terms of numbers, but also offer sufficient remuneration to attract and retain the brightest and the best. In many cases, the best way of achieving this is to bring in employees who have worked or are working within the industry, and a more flexible approach to secondments from industry would be welcome.
I am heartened by the report’s recognition of the contribution that UK regulators, as supervisors of the largest and most sophisticated markets, have historically made within the European supervisory context. I hope that the expertise and experience of our regulators will continue to play an important role within the ESAs, and I encourage the FSA and its successors to provide more experienced staff to assist the new supervisors as widely as possible. We and our European partners have a common interest in ensuring their success, and such engagement can help to ensure that we achieve a co-ordinated and committed European approach rather than one in which individual member states operate unilaterally.
To conclude, over centuries and through many crises the UK has built a competitive advantage, a global reputation for being a safe and honest place in which to do business, and offers a deep pool of knowledge and expertise that has made it at least one of the world’s leading financial centres, if not the number one. It is right to review our regulatory arrangements in view of the recent economic turmoil, but one is left to wonder whether there is a limit to the number of times we need to reinvent this particular wheel. What is paramount is a stable and successful financial system that supports the country’s continuing economic growth.
My Lords, in taking advantage of the gap I know that I must be brief, but I hope that noble Lords will forgive me if, as a member of the sub-committee on financial services, I underline the point that has now been made several times that it is very important that we have a single organisation to represent the UK’s thoughts on financial regulation in Europe, and a committee to do that seems to be imperative. My second point concerns the use of the emergency powers that could see European organisations overriding national regulators. This should occur only in extremis. The noble Lord, Lord Harrison, has acknowledged that there are restrictions on when these powers could be used, but quite rightly his report also noted the comment by the FSA that,
“only time will tell whether in practice those restrictions prove to be sufficient”.
Given the EU’s constant efforts to extend its reach, a degree of wariness on this point seems justified. The Government, in their response to the committee’s report, said their expectation was that the calling of an emergency would not be a common event. Well, emergencies seem to have been quite common of late so we should not rest our guard on the principle that national regulators must remain in the driving seat.
That takes me to my next point concerning the current arguments over the capital requirements directive. This is the EU legislation intended to bring in the higher capital requirements detailed in Basel III. At the height of the financial crisis, when the G20 was trying to map out a route to greater financial stability, those requirements appeared to be setting a limit below which banks should not be allowed to go. Now, however, there are some in Europe who take another line. They are of the view that the capital requirements directive should be seen as declaring a maximum level of capital requirement. This would scupper Britain’s plans for implementing the Vickers report and so Britain is holding out against maximum harmonisation. The noble Lord, Lord Newby, tells us that we have nothing to fear on this front; that the argument is won already. Personally, I feel that we should remain vigilant until we know that the argument is won. Would it be entirely surprising if that thought had influenced the Prime Minister when he wielded the veto? I believe that separation of the banks is something worth fighting for. We are now all too well aware of the havoc that can be caused by a cavalier financial sector. If the UK judges that it needs more caution from our banks than some countries wish to impose on theirs, it should be our right to do so.
Finally, I would like to make a point about bank accounts. Bank accounts, as far as I am concerned, have become so complicated that they serve to mask the true situation rather than to unveil it. That is why, although we have already had comment on the ratings agencies, it is worth remembering that the banks were all given a clean bill of health in this country by their accountants and auditors. It seems to me that one of the useful things the new EU regulatory organisations could do is take another look at bank accounts and accounting standards and the auditors who police them because they probably are no longer fit for purpose.
My Lords, I declare an interest in that I chair the think tank, Policy Network, which has written a report for the City of London Corporation on the challenges of managing European financial regulation.
This has been an interesting debate, as most debates on the report of your Lordships’ European Select Committee are. The noble Lord, Lord Harrison, has produced an excellent report. It shows an admirable balance and expresses sensible and proportionate views on financial regulation. If I might use an F word in this Chamber, I think the system being developed is one of pragmatic federalism. I agree with the noble Baroness, Lady Wheatcroft, that the national bodies which are closest to the financial institutions should remain in day-to-day control. However, if we are going to have a single financial market at EU level, we need a single rulebook and a power for the European agencies to override national agencies in circumstances of crisis.
I rather agree with the noble Lord, Lord Harrison, and from this side of the House share his concern that the institutional upheaval which our domestic financial regulatory system is going through may lead to some loss of influence in Brussels. I know that the noble Lord, Lord Newby, has put in much effort on the Joint Committee on domestic financial regulation. On the basis of the little work that I have done in this area, I believe that how we manage the Brussels relationship will be as important as, if not far more important than, the structure of British domestic regulation. There is a risk that we will become obsessed with the question of how we shift the furniture around at home when the real issues affecting financial regulation will be to do with what happens in Brussels.
There are grounds for concern about the way in which this relationship with Brussels is being addressed. I agree with the many noble Lords in this debate who have taken issue with the stance taken by the Prime Minister at the Brussels summit in December. It seems to us that, in place of the sensible, proportionate and balanced approach that the Select Committee here has adopted, the Prime Minister has portrayed what is happening in Europe as a torrent of EU regulation which threatens the City of London. This position is both exaggerated in substance and profoundly unhelpful to the City’s ability to secure its interests in Brussels. It is a profound mistake for the British Government to define the City of London as primarily a British interest that we need to protect against the European hordes. Rather, the way to win the argument in Brussels is to point out, accurately, that the City of London is a great global financial centre, the financial centre of the biggest single market in the world, and is an asset to the whole European Union. That should be the starting point of our attitude to Brussels.
The need for these European regulatory agencies has not just come out of the blue; it is not just some Brussels plot. It is due to our having had the most enormous banking crisis since the 1930s. I think that all sides of the House recognise that financial services need reregulation. There was colossal market failure. This involved a massive cost to the taxpayer. Frankly, our public finances are now in such a fragile state that we cannot afford to see it happen again, so we have to have much tighter regulation of the financial sector. It was obvious that that reregulation had to be done at European level because so much had been done to advance the integration of the European financial market. Indeed the much derided Lisbon strategy had a financial services action plan which greatly took forward the liberalisation of wholesale markets, so that when we got to the crisis and in its aftermath, the chairman of the FSA, the noble Lord, Lord Turner, was quite right to pose the choice that either we renationalised financial markets and abandoned integration across Europe or we accepted the need for reregulation at EU level. We must stick firm to that principle.
It is also what the majority of the City of London thinks. Of course there are people who will be quite happy in the City to see London as some kind of offshore centre from the rest of Europe. There would be people who would like to see that, but I think the majority view is that one wants to see sensible European reregulation of financial services. That would be particularly true of the American banks which have come to London because it is the route into the European single market. The fact that we are part of an integrated financial market in Europe is crucial to the presence of a number of European banks that have located here. We need to be part of a European market that is properly regulated and we need to secure a level playing field across the EU.
The attitude of mind towards the new agencies and structures has to be positive. We have to stop trying to fight old battles about retaining the national independence of our agencies. We have to make the new system work in all our interests. The City of London recognises that we have to make this new system work. However, there are bound to be concerns. The track record of the European Commission in the way it has put forward financial services regulations in the past has not always been the best. In a way, the existence of these new agencies is a source of strength, because they should be a source of expertise which understands the markets better than the European Commission might. This should be seen as an opportunity for London to influence regulation in a sensible way.
Many noble Lords, such as my noble friend Lord Woolmer and the noble Baroness, Lady Valentine, made the point that we need to bolster the capacities of the new agencies. That is evident from the story of the bank stress tests. The problem with the tests has been that national regulators have been too defensive about their own banks and too unwilling to share information about them with the EBA. We need to break out of that mentality. There needs to be more information-sharing. That is an important UK interest.
There is a real problem for the UK in deciding on regulation. Sixty per cent to 70 per cent of the business in Europe is done in London but we have fewer than 10 per cent of the votes in the Council on issues that are decided by majority voting. There is a real asymmetry. We have to recognise that, in the aftermath of the banking crisis, there is a rise in hostility to the financial sector across Europe. I was recently at a seminar in Sweden where a former Minister said to me, “I always used to support you lot in Britain when you argued for light-touch regulation, but don’t think we are ever going to be taken in by all that load of baloney again”, or in some similar words in Swedish. We have to understand that the mood of the times is difficult. But the way to overcome this is to stress that just as the German car and capital goods industries are there because they specialise in the single market and are a great asset to Europe, and Italian shoes and French luxury goods are part of the specialisation of the European single market, so is the City of London. It is an asset for the whole of Europe.
In conclusion, I will just say two things about how we can be successful in ensuring that the regulation of the City is sensible. First, I agree so much with what the noble Lord, Lord Hannay, said about not putting a union jack all over the City. That is not the way to defend it. Jo Johnson MP was absolutely right about that. Secondly, as the noble Lord, Lord Kerr, said, let us make sure that we are in the room. We look forward to the Government’s reply in due course about the points he made on Article 136.
This has been an excellent debate. It is of vital national interest that the new arrangements work well from a UK point of view. The risk is that we mishandle this and, in doing so, destroy one of our great national assets.
My Lords, I am grateful to all noble Lords who have participated today in—as the noble Lord, Lord Liddle, said—a thorough and insightful debate on the new EU supervisory framework. I particularly pay tribute to the noble Lord, Lord Harrison, and the members of the EU Sub-committee on Economic and Financial Affairs and International Trade for their report. It is of considerable interest as we seek to strengthen supervision following the recent financial crisis, both domestically and internationally.
In the United Kingdom, through the Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority, we are bringing greater judgment and foresight to micro and macrosupervision, ensuring that we put greater focus on the key links between the two. Likewise, as your Lordships have made clear, it is vital that we reform at the European level to ensure effective and consistent supervision of financial services, to realise the full potential of a single and stable market in European financial services. Noble Lords have also today referred to the very real threats that face us. That is why the Government—along with, I am pleased to say, the noble Lord, Lord Liddle, and all other noble Lords today—welcome and fully support the establishment of the three new European supervisory authorities as well as the European Systemic Risk Board. Indeed, we are very pleased to have the European Banking Committee here in London.
Together, this new framework has the potential fundamentally to improve the quality and consistency of supervision, to ensure more effective rule-making and enforcement, and to improve identification of risks in the system. I welcome the fact that the committee’s report shares those objectives and, along with its recommendations, supports the Government’s position on the European supervisory authorities. Of course, there is still much work to do to improve and refine supervision through this new framework to allow the new institutions to build a reputation for their independence and quality of rule-making. It is a substantial task and the drive by some to grant even more power and responsibility would in our view merely add to the challenges they already face and risk undermining the success that we expect them to deliver between now and the 2014 review. Several noble Lords have referred to resourcing issues. I will come to those in a moment.
The Government believe that there are three key priorities for the new EU authorities. First, as the committee has argued, it is vital to build a single rulebook and ensure the implementation of robust, internationally consistent regulatory standards in order to minimise the risks of regulatory arbitrage. That work needs to be based on open consultation and a rigorous assessment of the effects on growth and the competitiveness of EU business, balanced with the need to protect financial stability and users of financial services. Secondly, the actions of the ESAs should not undermine national supervision. Here again, the committee was very clear. The ESAs, when mandated by legislation, have rule-making powers and are required to ensure that those rules are implemented, mediating if disputes between supervisors arise. Day-to-day supervision and the exercise of judgment within the law are not within the ESAs’ remit.
Finally, we support greater co-ordination and the valuable role that the ESAs can bring in providing consistency of supervision across the EU. We see this as spreading best practice rather than forcing all supervisors to take the same approach. The business models, size and structures of firms—some very local, some global—require different approaches. It is vital that regulators have the capacity to deal with issues unique to their markets.
I would like to take the opportunity to comment on two further themes in the report. The Government strongly agree with the committee that UK influence in the ESAs is important. We have many talented people in the UK authorities and our history of consultation and impact assessments means that we have both the evidence and the experience to play a leadership role. I will return to this, if I may, in a moment.
The regulated community will also have an important role to play—not just in providing evidence of the cost, but also in assessing the potential benefits of effective regulation. We also agree with the committee’s assessment of the ESA’s powers and its wish to be consulted prior to an emergency being called. I will also come back to that point. Where emergencies are called, we will always endeavour to provide information in a timely manner.
The noble Lord, Lord Harrison, raised a number of specific issues. He was not entirely satisfied with the Government’s response to the committee’s request to be consulted if the Government envisage asking the Council to declare an emergency or detect that another member state is likely to do so. Given the rapidly moving nature of such situations—often outside normal business hours—there may be practical considerations. Perhaps more importantly, there is often a great deal of uncertainty in these periods: sometimes markets and commentators overreact, so absolute confidentiality is of paramount importance. There will, therefore, be the key issue of market sensitivity and so on. Within those constraints, I can confirm the Government’s intent to inform the committee as far as is possible about a Council declaration of an emergency.
Regarding short selling and credit default swaps, as an exception to a general rule about ESAs not having enhanced powers without the need to declare an emergency, the noble Lord referred to the committee’s argument that giving ESMA intervention powers might be necessary. Indeed, there was quite a lot of debate about short selling. The Government believe that there is a case for giving national regulators a reserve power to impose a temporary ban on certain asset classes where there is a threat to the stability of the market. This would probably be in the context of an emergency situation, but could be confined to one or more local markets where a ban may be appropriate and there is a need to respect that national decision. In these cases, ESMA should have a significant role in co-ordinating the response and ensuring that any decisions are implemented and enforced.
The noble Lord, Lord Harrison, mentioned that the committee had expressed a concern that the Government’s decision to abolish the FSA and replace it with the new regulatory authorities could compromise the UK’s leadership role in engaging with the ESAs. I understand the concern. The Government are fully committed to ensuring that the UK authorities continue to take a leadership role in European reforms, working both with one another and with the wider stakeholder community to deliver sound reform. This complements changes proposed to the UK framework. Given the relatively small size of the staff in each ESA, the ESAs will rely heavily on their members. We will expect the FSA—and, in due course, the PRA and the FCA—to put significant time and effort into ensuring that the UK’s voice is heard and that the ESA’s decisions are appropriate. The UK regulatory authorities will be well placed to influence and take part in the technical work of the ESAs—for example, the development of binding technical standards and the production of guidance and advice.
Alongside this, the FSA—and, again, in due course, the PRA and the FCA—will have a significant formal role in representing the UK’s competent authorities in the ESA board of supervisors and voting in the board on ESA decisions. Similarly, the Governor of the Bank of England will be represented in the ESRB and vote on any warnings and recommendations. Finally, it will also be very important that the UK regulatory authorities encourage their staff to take up temporary secondments in the new ESAs. I think the noble Baroness, Lady Valentine, referred to that. The FSA is currently reviewing its staffing and deployment policies to ensure that they promote such participation in the new ESA. We will expect the Bank of England to take a similar approach to the ESRB. Therefore, I generally agree with the comments of my noble friend Lord Newby in this regard.
On macroeconomic stability, the noble Lord, Lord Harrison, spoke about the sharing of information. A memorandum of understanding that fully respects the confidentiality of individual firms has now been drawn up by the agencies and is in the public domain. I hope noble Lords will accept that we are moving in the right direction on that.
The noble Lord, Lord Harrison, referred to the Government’s proposal to legislate to require the establishment of a statutory MoU between Her Majesty’s Treasury, the Bank of England, the PRA and the FCA, and the further use of MoUs to frame relationships between regulators. I accept my noble friend Lord Newby’s point that an MoU on its own is not enough, but I agree with the noble Lord, Lord Harrison, that the draft legislation provides for the UK regulators to include in the MoU provisions relating to co-operation between any of them and a body exercising functions relating to the stability of the UK financial system or the regulation of financial services.
Perhaps I should also say that legislation can go only so far in setting down how a wide range of functions are to be conducted. Therefore, it is entirely reasonable and, indeed, vital that it is planned and conducted carefully, set down in detail and agreed and understood by all. There will of course be ample opportunity to debate the legislation over the forthcoming months.
The noble Lords, Lord Harrison and Lord Woolmer, the noble Baroness, Lady Valentine, and my noble friend Lord Newby asked about the resourcing of the ESAs, especially the EBA. They are right: the ESAs, including the EBA, have limited resources in the sense of the number of officials directly employed. However, they can and do call on the resources of the national regulators. This enables them to secure the necessary expertise and experience. If an emergency were to be called, that co-operation from national regulators—including, importantly, those in the United Kingdom—would ensure that the necessary work could be undertaken. As I say, we are committed to providing that assistance.
I am grateful to my noble friend Lord Marlesford for his suggestion about stamp duty, which I will certainly pass to my colleagues at the Treasury.
The noble Baroness, Lady Valentine, and my noble friend Lord Newby referred to the recommendation of the Joint Committee on an international co-ordination committee. The Government welcome all the work that the Joint Committee has done. We are considering its recommendations and will respond in due course.
My noble friend Lord Newby specifically asked whether the capital requirements directive could limit our ability to implement the Independent Commission on Banking. My noble friend Lady Wheatcroft also referred to this. The CRD is designed as maximum harmonisation legislation. This could indeed restrict our ability to impose higher standards but others agree with us, including the ESRB. Therefore, in discussions in the Council and the European Parliament we will work hard with like-minded member states to ensure that the CRD, when adopted, will include flexibility to implement the ICB recommendations and, more generally, to impose higher standards.
The noble Lord, Lord Kerr, asked three questions, which my noble friend Lord Dykes echoed. Both noble Lords have given me much food for thought. I assure them that the United Kingdom will continue to use all avenues available to it to press its case, suitably evidenced by facts and examples of the costs and benefits of the UK’s thinking on the key issues. We do not expect to be outvoted by our European partners, but we have recently experienced Commission proposals that are not evidence-based, and could have a negative effect on growth and harm the EU’s global financial centre in London. Securing safeguards would have been helpful in ensuring that these concerns could not be ignored. The consequence of raising these concerns has been beneficial in focusing minds across Europe on the need to ensure that legislation is evidence-based and that the ESAs are not overburdened with new powers before they have built a reputation prior to the 2014 review. The noble Lord, Lord Kerr, gracefully offered me the opportunity to respond further in writing, and I shall take advantage of that offer.
The noble Lord, Lord Woolmer, asked several questions. He asked whether the Government believe that the ESAs have a capacity to deliver what they are mandated to deliver. Yes, we do. The ESAs were established with a view to undertaking certain tasks and were resourced accordingly. Their operation and success was to be reviewed, as I have said, in 2014. However, if additional tasks are given, they will not have sufficient resources, nor are they likely to be able to procure the expertise or experienced supervisors. That is a matter that we need to keep a very careful eye on. He also asked whether we agree that engagement with the EU is important. Of course we do. Ministers and senior officials are engaging with our European partners on a daily basis, either in meetings, bilaterals, or through other means.
I agree with the noble Lord, Lord Hannay, that a financial transaction tax, the so-called Tobin tax, would need to be agreed globally. I note the continuing interest in the intervention of the Prime Minister in the European Council on 9 December. I am afraid that I am going to disappoint him on the matter of Hamlet’s father. I do not think that he will be surprised to hear that we do not publish informal draft text proposals. This has been government practice for a long time and continues to be so, particularly when those taking part are in the middle of negotiations.
Am I to understand that the reason the Government give for not conveying the text of a proposal for European legislation to both Houses is because they were entering into negotiations on it? Can I deduce from that that they would have been willing to compromise on the text they put forward, and if so, why did they walk away from the table?
My Lords, to answer that in detail would be way above my pay grade. I will see what I can find for the noble Lord by way of an answer, but I cannot promise anything.
The noble Baroness, Lady Valentine, spoke about the importance of UK competitiveness of financial services to the UK economy. I agree with her. Financial stability supported by an effective regulatory framework provides a strong platform for the growth of the financial services sector. She asked how we will ensure the UK’s influence in the ESAs. I have covered a lot of this in earlier answers, but I shall just say once again that the Government are fully committed to ensuring that the United Kingdom authorities continue to take a leadership role in European reforms, working both with one another and the wider community to deliver sound reform which complements the changes proposed to the UK framework. She asked a specific question about staff remuneration to attract and retain the best people. I agree that the ESAs need the best and most qualified staff.
The noble Lord, Lord Liddle, questioned our commitment to Europe. We remain a full member of the European Union, and this membership is—I am agreeing with him—vital to our national interests. It makes us the gateway to the largest single market in the world, which secures half of our exports and underpins millions of British jobs. I assure him that Ministers from all departments continue to engage actively in defence of UK interests in meetings in Brussels and bilaterally with their member-state counterparts. We will continue actively to engage on all financial services legislation and secure our national interests.
I am conscious of the time. If I have not answered any questions from noble Lords, I will, if I may, write to them. Today’s debate takes place a year after the new EU supervisory framework came into force. The European Stability Risk Board and the ESAs are now established. They have agreed their working procedures and recruited staff to support their tasks. The ESAs in particular face a challenging time in delivering a large number of technical standards in banking, securities and insurance. In doing so, we believe they will build their reputation if they concentrate on quality rather than quantity. The Government are committed to supporting the ESRB and the ESAs as they move forward. We will seek to resist overburdening them with new tasks and prioritise work and limited resources towards their core tasks—namely, improving the quality and consistency of supervision, delivering high-quality rule-making, ensuring effective enforcement and identifying risks to the financial system. The Government will continue our close engagement with our European partners to achieve these objectives.
My Lords, social commentators often identify a dank dark day in January after the Christmas celebrations, before the summer, as the time when the nation becomes its most despondent. I rather feel, along with the pathetic fallacy articulated by the romantic poets, that in bringing this debate before Parliament I might identify and echo a mood that is consonant with such depression.
What I am very pleased to say is that this has been an important debate and I welcome the contributions offered by each and every Member—particularly the late contribution of the noble Baroness, Lady Wheatcroft, who listened patiently to what was said. In contrast, I feel stimulated about the debate and I am quite sure that we will have to return to it in our examinations of these new and important authorities that will have such importance to the United Kingdom, the European Union and more widely.
Noble Lords should forgive me if I do not comment on every contribution, each of which was valuable. However, perhaps on a lighter note, I congratulate the noble Lord, Lord Hannay, on the subtle welcome he gave to the six-month Danish presidency of the EU by his reference to “Hamlet”. Perhaps he might provide such ingenuity on 1 July later this year, when the Cypriots take over the presidency, with a simple reference to “Othello”.
House adjourned at 6.41 pm.