House of Lords
Thursday, 24 January 2013.
Prayers—read by the Lord Bishop of Ripon and Leeds.
Education: English Baccalaureate Certificate
To ask Her Majesty’s Government whether they will consider deferring the timetable for the proposed introduction of the English Baccalaureate Certificate in schools in the light of concerns raised by the Confederation of British Industry and other business leaders that the new examination system may not meet the needs of the United Kingdom economy in the 21st century.
My Lords, the CBI recognises that the exam system is in need of a thorough overhaul. We share its view that the new system must meet the needs of business. We are considering all the evidence gathered through our public consultation, which closed in December, and we anticipate reporting the results of that consultation, including the timetable for introduction, early this year.
I thank the Minister for that reply and I welcome him to his new role. Given his extensive business background, does he not share the view of other business leaders that the new exams in 2015 risk causing serious long-term damage to our economy by downgrading skills such as engineering, computing and construction, and neglecting creative learning? Can he also confirm that it is the Government’s intention to issue pupils who do not pass their EBacc certificate with a certificate of attainment which, as anyone with experience in the state sector knows, will have no value at all with employers and universities? Finally, does he accept the overwhelming logic of putting the proposals on hold so that business leaders really can help to develop a respected, work-ready curriculum with exams that will enable young people to be successful in the modern world?
My Lords, the point underlying this Question may be a little confusion about the stimulus to the system we have created through the EBacc and a broad and balanced curriculum. I should like to reassure the noble Baroness that the Government are determined to ensure that all pupils study a broad and balanced curriculum so that they have the cultural capital to be able to compete both in this country and in the modern world. We have had to stimulate some behaviour through the EBacc because all the international evidence we have studied shows that successful international countries include these core academic subjects, and that stimulus has been extremely successful. Over the past two years, the proportion of pupils taking the EBacc has risen from 23% to 49%, and for those schools with a high element of free school meals, it has risen from 10% to 41%. However, we will also be exhorting all schools to teach a broad and balanced curriculum, as they are obliged to do and as Ofsted inspects for.
My Lords, does the Minister agree that the creative industries represent one of the most important sectors of the British economy? However, is he aware of the acute concern across that sector about the way the Government appear to undervalue the teaching and learning of creative skills, not least in the proposals for the EBacc? Further, could he use his considerable influence to persuade the Secretary of State for Education just once to make a public speech that recognises the importance of creative skills?
The Government do recognise the importance of creative skills. As I have said, we are keen for all pupils to have the cultural capital that enables them to compete. As my old friend Sir Peter Lampl at the Sutton Trust has pointed out, 7% of the population of this country go to independent, private, fee-paying schools and get 44% of the top jobs. Some 4.9% go to grammar schools and get 27% of the top jobs, while the rest, 88%, get less than 30% of the top jobs. In order to enable our pupils to compete both in this country and internationally, they need a broad curriculum and they must have that cultural capital. However, I hear what the noble Lord says and I will take these matters away for consideration.
Does my noble friend the Minister accept that assessment only by examination at the end of the course discriminates against girls and some pupils with particular disabilities, who find that they can demonstrate their learning more effectively through coursework? If there is some concern about cheating in coursework, surely there is another way to deal with that problem, rather than just disposing of coursework as an assessment tool.
As well as seeking views through our public consultation, we have also held focus discussions with a number of disability and SEN expert groups and are reviewing a wide range of views covering the proposals for all pupils. The assessment method should be suitable for the knowledge in schools, and be fair and practical. The noble Baroness is right to point out the potential for unfairness with coursework but I know that many schools feel that controlled assessment, which was introduced to combat parents doing their children’s coursework for them, is burdensome and takes up a substantial amount of time that could otherwise be used for teaching.
I will consider the point the noble Baroness raised about girls. Although many people believe anecdotally that coursework favours girls, the evidence is mixed. I know she is not suggesting that it is acceptable to discriminate against boys, who, after all, generally do worse than girls in many subjects.
My Lords, referring back to the question asked by the noble Lord, Lord Bichard, can the noble Lord confirm that the Government received with enthusiasm Darren Henley’s recent excellent report on cultural education? If so, can he say how the Government plan to implement the report’s recommendations?
I think it is the Conservatives’ turn this time.
My Lords, does my noble friend the Minister agree that one of the most common complaints from industry has been about the lack of employability of so many school leavers because of their lack of numeracy and literacy? Does he also agree that in the United States a lot of children are taught computer programming, whereas in this country we tend to teach technology as the use of technology, and that programming would be a great advantage?
My Lords, I come at this from a slightly different angle. Can the Minister assure us that those students who go on to A-levels are no longer in effect forced to specialise either on the arts and humanities or on maths and the sciences, and that they will be required to carry a broader curriculum through their schooling?
There is no requirement for that in this country but we are keen that all children have a broad curriculum through to 16, and that those who have not managed to make the C grade in English and maths who are going on to further education continue with their English and maths.
Welfare: Personal Independence Payment
To ask Her Majesty’s Government what assessment they have made of the effect of the proposed introduction of the Personal Independence Payment on the mobility of sick and disabled people; and of the omission of the words “reliably, safely, repeatedly and in a timely manner” from the text of the Regulations setting out the qualifying criteria for the payment.
My Lords, the mobility component of the personal independence payment is designed to support those disabled people who face the greatest barriers to mobility. The principle that individuals must be able to complete activities safely, reliably, repeatedly and in a timely manner is integral to the assessment. We do not believe that this needs to be dealt with in regulations. However, we are looking urgently at whether it is possible to do this in a way that will achieve the outcomes that noble Lords and the Government want.
My Lords, I thank the Minister for that reply. Does he accept that, with one-third of disabled people living in poverty and an estimated 42% fewer being eligible for mobility support—many fearing that they will become prisoners in their own homes—his admission that under the new regime some disabled people will have their specially adapted vehicles taken away from them or offered to them to buy has caused widespread disbelief and considerable distress? Will he say how many repatriations will be involved and at least ensure that those four words he has referred to—“reliably”, “safely”, “repeatedly” and “timely”—remain in the regulations, as almost every single disability rights organisation in the country have urged him and the Government to do?
My Lords, I recognise the strength of feeling around retaining those words, and we are very actively looking at how to put them into the regulations in a way that works legally. I am planning to update Peers next week, on 31 January, on exactly where we have got to. We are looking to incorporate them in regulations and have a device for doing it in that way.
My Lords, I am encouraged by my noble friend’s words. I am not an expert in anything much at all in this House but I am an expert in not being able to walk very well. I have form in this area because I have been through the DWP tribunal system, so this is one area that I know something about. Does my noble friend accept that if these words are not made statutory in some way or another, the number of appeals will rocket so much, and there will be such a period of uncertainty in so many ways for so many people, that it is not worth not putting in these words?
My noble friend is, as always, much too modest about all her other capabilities. We are looking at this very actively and have clocked that there is great concern. It is not—and was not—our intention for people to be concerned about this particular area, and I hope that I will have a definitive approach to present to Peers in a week’s time, in plenty of time for the debate on the regulations, which will happen on 13 February.
My Lords, the Minister is on record as saying that not every PIP claimant will require a face-to-face assessment. In the case of autism, will the Government ensure that evidence is collected from professionals who know an autistic person well, before a decision is taken on whether a face-to-face assessment is needed? When one is considered necessary, can he confirm that the assessors will be fully trained to understand the communication difficulties associated with autism?
My Lords, autism is, as the noble Lord points out, a really difficult area for people. It is difficult to understand and see sometimes, but we have a comprehensive training set-up for ATOS and Capita, which will be conducting the assessment. Clearly, each of those people will need to be approved by the DWP. Autism is among a group of quite difficult things to assess, and I personally take his point about its importance. The Government take his point and we will make sure that, when we give the approvals for that, it is one of the issues that is dealt with absolutely properly.
My Lords, I am very disappointed that this issue did not come to the Floor of the House for proper debate. At the very least, the change to 20 metres should have been clearly stated in the consultation documents. The lack of consultation with disabled people and all supporting evidence from experts in disability access as to what distance enables practical mobility and participation mean that there is a real risk that this issue will be open to judicial review. Is the Minister willing to take that risk?
My Lords, the change was made because there was great concern among disability organisations about the previous draft. The concern was that only people in wheelchairs would qualify for the higher rate—that was picked up by Parkinson’s UK, the Multiple Sclerosis Society, the Disability Benefits Consortium and the National AIDS Trust, among others. That is why the change was made. I admit that I would have preferred there to have been more consultation on the 20 metres, but there is no effective change in the number of people receiving higher-rate mobility allowance because of this change. I hope that noble Lords will accept my assurances on this. That change has made it clearer and simpler to operate this measure; it has not changed the numbers affected. Before we start reassessing people in 2015, we will have had a full independent review which will have gone through this issue, among others, by the end of 2014.
My Lords, I declare my interest as chairman of Motability, which I co-founded in 1977 with the late Lord Goodman. Today, we have more than 620,000 vehicles on the road, which is probably the largest fleet of its type in the world. I fully support the principle that the welfare state should help those most in need, and government are actively implementing that principle, but we must appreciate that uncertainty about the effect of these changes will cause considerable worry and stress for many disabled people and their families. As my noble friend the Minister is more than aware, and as has been spoken about today, there is concern among disabled people at the recent change from 50 metres to 20 metres as the distance specified in the regulations for higher-rate mobility allowance. As the timetable for PIP implementation has been extended, will the Minister consider providing further information on, and rationale for, this change—through seminars, for example—thereby maintaining the trust and confidence in PIP being developed?
My Lords, I have to accept that there was inadequate discussion of the changes and that there is inadequate understanding of them—just the concerns that I am hearing today underline that. I shall pick up the suggestion of my noble friend about further communication with the relevant parties and look at how best to do that.
Asylum Seekers: Support
To ask Her Majesty’s Government what was the basis for their decision not to increase provision for asylum support under Sections 4 and 95 of the Immigration and Asylum Act 1999 in 2012; and when they will decide on the level of such provision for 2013.
My Lords, there is no statutory obligation to carry out an annual review of asylum support rates and it would be wrong to raise expectations in this area given the current constraints on funding. However, we are committed to an approach to asylum support that is fair, balanced and reasonable. Rightly, no one who has sought our protection need be destitute while waiting for an application to be decided, but, if it is refused and the decision is upheld by the courts, we expect these people to return home.
My Lords, I am grateful for, but somewhat puzzled by, that Answer. If the purpose of the support is to prevent anyone falling into destitution, how can that support be reduced in real terms by 6.2% over two years without redefining destitution? Will the Minister commit himself to studying the evidence for destitution in the cross-party report on asylum support for children to be published next week and to take any action necessary to avoid destitution for all, especially children?
I hope that I can reassure the right reverend Prelate. There is an ongoing review of our approach to asylum support, which I expect to be concluded by the end of the financial year. That review will take into account the views of partners, including any recommendations set out in the report of the Children’s Society inquiry into asylum support for children and young people, due to be published next week, I believe.
I put on record my thanks to the right reverend Prelate for his involvement in the production of the report. As noble Lords might assume, any changes to the arrangements will be reported to Parliament.
My Lords, I declare an interest as a member of the All-Party Group on Children. Is my noble friend aware that it is unreasonable and unfair not to uprate the benefits paid to asylum seekers in common with all other recipients of benefit? With respect to Section 4 support, how much is saved by having a different regime for those people compared to those on Section 95 support? Would it not be better if every asylum seeker was on the same level of benefit, to avoid driving those on Section 4 support into destitution, as has happened?
My noble friend makes a very good point. In the briefing that I had before answering this Question, I was surprised to discover that there were two levels of benefit. It is important to emphasise what I said in answer to the right reverend Prelate’s supplementary question: a review is going on and we should await that to see what recommendations it makes. It must be important to take on board the point that my noble friend makes.
My Lords, as we have heard, children are the most vulnerable and at their most vulnerable in asylum and immigration cases. In the coalition agreement, it was pledged to end all child detention for immigration, and the mid-term review states that that pledge has been kept. Up to October last year, 113 children have been detained, albeit some in the more family-friendly unit at the Cedars, but 41 were detained elsewhere. In October 2012, 16 children were being held in detention; there were eight in the Cedars and another eight in other centres, including Yarl’s Wood and Tinsley House which has not even been approved by Her Majesty’s Inspectorate of Prisons. Can the Minister confirm whether any children are today in detention, including in the Cedars?
No, I cannot confirm that to the noble Baroness; I do not have the up-to-date figures. As she indicated, there is a clear drive by the Government to eliminate situations where children are kept in those settings and to find alternative ways to accommodate families so that children are not separated, if that is possible.
I should point out that the level of support for families in this country is far greater for a family of four, for example, compared with Sweden or Denmark. Indeed, if there is any sector where there is a lesser payment than elsewhere, it tends to be for single adults.
To come from a slightly different angle, so many of those from the European Union who come to the UK find themselves destitute here. What plans have the Government to publicise the availability of accessing national insurance payments that have been made in Poland, Estonia, or wherever, in the United Kingdom?
As my noble friend rightly points out, this is a slightly different question. Indeed, those benefits are payable by the Department for Work and Pensions rather than the Home Office, but I am sure that I can communicate my noble friend’s suggestion to my colleague in that department.
My Lords, we have raised international election monitoring with the Egyptian authorities. They have published guidelines for international observation for the forthcoming parliamentary elections. The Carter Center and the Electoral Institute for Sustainable Democracy in Africa, both of which have been funded from the UK’s Arab Partnership for previous elections in Egypt, have also had constructive discussions with the Egyptian authorities. They expect to be allowed to deploy observers for these elections.
My Lords, I am grateful for the response from the Minister. Tomorrow is the second anniversary of the Egyptian revolution, when the Arab spring arrived in Tahrir Square with people taking to the streets to demand democracy, social justice and equal rights. Does the noble Baroness share my disappointment at the way in which the new constitution was adopted, and does she agree that the flawed process makes it even more important that the elections to the first National Assembly are free, fair and transparent?
Tomorrow is an important anniversary. The noble Baroness is right; it is two years since the start of the revolution. Of course we have some concerns as to how the constitution was adopted. Among other things, although the vote in the end may have been over 60%, the turnout itself was quite low at just over 30%. We also have some specific concerns about contentious elements within the constitution but we are encouraged by the fact that there is now a review process. Like the noble Baroness, I look forward to parliamentary elections later this year.
Does the Minister agree that monitoring elections is insufficient in itself to guarantee democracy? You cannot have a proper election without freedom of speech and freedom of communication, while not locking up journalists and allowing women to participate fully.
The noble Baroness makes an important point. Democracy is not just about going to the ballot box and putting a vote in it. It is about ensuring the whole process around that by making sure that people feel that they can have their say; that political parties can operate freely; that all in the country can feel that they have a right to vote; and that there is commentary about different political opinions. I agree with the noble Baroness.
My noble friend will be aware that last week the Carter Center issued its recommendations for reforms, which are critical to Egypt’s electoral process. It is repeating calls for many of the reforms that it called for after the previous elections in 2011-12. Can my noble friend tell the House how confident or otherwise the Government are that the election observation mission that has now been sanctioned by the Egyptian Government will be any more effective in delivering a free, fair and transparent election process than previously, particularly in regard to the role of women and to voter education and information?
My noble friend is right that concerns have been raised by the Carter institute. It is one of the reasons why our Arab Partnership has been funding that institute. One of the main themes of the Arab Partnership, which was set up by the Government two years ago, is to engage in the democratic process and strengthen civil society to be much more vocal about concerns over forthcoming elections. We continue to engage with all authorities in Egypt. The Foreign Secretary was there in September; the Minister responsible for asset recovery, Jeremy Browne, was in Egypt only last week to speak specifically on that, and I hope to be visiting in February.
My Lords, what is the Minister’s assessment of women’s participation in the forthcoming election process, given the role that the women of Egypt played not only in Tahrir Square but subsequently? What representation can she make to ensure that the observers who come also include women from different parts of the world, so that Egyptian women can take some support from the idea that other women are also with them?
The noble Baroness makes an important point. I can assure her that the Government have been raising the issue of women’s rights both in relation to the election and more widely, such as the way in which the rights of women have been drafted into the current constitution. I also assure her that in my discussions next month, women’s rights will certainly be raised. This Minister certainly does not need prompting to raise them.
I am always cautious when I stand at the Dispatch Box and say that I have absolute confidence that something will happen in another country over which I do not have any control, so I probably cannot give my noble friend that assurance. We were hopeful that those elections would take place within about two months of the constitution, which should have been around the end of February possibly. However, some concerns about electoral law have been raised, which have been passed to the judiciary. We hope that elections for the Majlis Al-Chaab will take place this summer. In relation to the upper house, that is functional.
Will the Minister agree to meet a delegation of the UK Copts, of which I am honorary president, to consider especially the question of the outright, institutionalised discrimination in the constitution against Egyptian Copts, who have faced executions and the burning of their churches?
The noble Lord is aware that this is a subject that is close to my heart. In relation to my human rights brief, I have made it a priority. I hosted a ministerial conference earlier this week that focused specifically on the freedom of religion and belief. This sought to build consensus around the arising issue of religious intolerance. I will meet members of the Coptic church when I visit Egypt and will raise these matters.
Business of the House
Timing of Debates
Tabled By Lord Hill of Oareford
That the debates in the names of the noble Lords Lord Mawson and Lord Ramsbotham, set down for today shall each be limited to two and a half hours.
Olympic Games 2012: Legacy
Motion to Take Note
My Lords, as we enter 2013 we are all conscious that we will remember 2012 as the year of the Olympics and Paralympics, and be thankful for the many men and women from across this country who came together and made the Games the world-class success that they were. But it is now time to move on and focus on the longer-term legacy of this investment and human endeavour. For me, today, that focus on legacy must now be on east London, which hosted the Games and made them possible in the first place.
There is no doubt that the Games accelerated public and private sector investment in east London and inspired a generation of young people and adults. There is a great deal to build on, but to ensure that this positive impact is sustained and to stop our legacy from being the white elephant that it has become for many previous host countries, we now need to focus.
Over the past year, politicians and the media have shown us a carefully co-ordinated view of the Games and our society through the lens of a flattering telescope. Today, I want to share with you the view up the telescope—a perspective whose roots come from working in East London on the ground for the last 30 years; a local perspective, the view of a neighbour from the heart of the lower Lea Valley.
The first thing to say is that for those of us who live and work in the lower Lea Valley, the Olympics are not and never have been the biggest show in town. The Games acted as a very important catalyst and we have hailed them as a significant milestone half way through a 50-year journey in regeneration. This journey began over 25 years ago and was led by the noble Lord, Lord Heseltine, who took the first tentative steps in arresting east London’s decline by creating the London Docklands Development Corporation and later encouraging the development of the Canary Wharf financial district. Through his bold vision the lower Lea Valley once again found its place on the global map.
Today, a new city—a new metropolitan district of London—is emerging in the lower Lea Valley. Many of us locally call it Water City, and here I must declare an interest as chairman of the Water City CIC. This city stretches from the developments in Greenwich and around the O2. It takes in City Airport, which is growing fast, and the accelerating global investment in the Royal Docks—which includes the Abu Dhabi national exhibition and conference centre, the Siemens Crystal and the Emirates Air Line cable car, the £3.7 billion of investment taking place in Canning Town and the business district at Canary Wharf, which may double in size over the next decade.
The scale of international investment in the lower Lea Valley is truly staggering. Ten minutes on the Jubilee line will take you to the Westfield shopping centre, which has had more than 48 million visitors since it opened. The Queen Elizabeth Olympic Park is a stone’s throw to the north-west—and here I must declare an interest as a director of the LLDC, where we plan to build five new villages and connect these communities into the surrounding area. Then, of course, a short distance to the west, in Hackney, you have Tech City: a significant growth area in modern technology whose tentacles are already starting to spread into both the park and the Canary Wharf districts.
Many of us locally call this colossus Water City because of the 6.5 miles of river and canals that surround London Docklands and connect the many pieces of this regeneration jigsaw. Water has driven our economy from the heart of the lower Lea Valley for over a thousand years. The time has come to capture the glorious history of east London’s trading past and to build a new city fit for the future, a city not defined by poverty and dependency, as in east London’s recent past, but by human endeavour and entrepreneurial spirit. We are in the moment: the biggest opportunity which we all must now grasp is to change east London for ever. The question is, how?
A clue lies in the £1 billion regeneration programme of work in Poplar where ground-breaking work has been done by the local housing company and its partners, which are starting to demonstrate in practice how you can work with local residents in housing estates to move us all on from the familiar dependency cultures and create enterprising communities focused on entrepreneurial and business activity, bringing together truly joined-up projects that start to connect health, education, housing and enterprise. This is the future.
For those of us living and working in the lower Lea Valley, the big story for us—barely noticed by the Olympic project—is the entrepreneurial culture that is growing among local people as communities embrace an enterprise culture in its many forms and move on from a dependency culture that is so often driven by the public sector institutions. As one example, when I arrived in east London 30 years ago most charities were suspicious of business. Today, the Bromley by Bow Centre, which I founded, has only 6% of its funding dependent on the public sector; most of our relationships as a local community organisation are with business. A part of this big story is the practical working relationships developing between major businesses and the social enterprise sector.
So, how do we similarly turn the rhetoric of legacy into reality? What needs to happen now to maximise this legacy opportunity and grasp the moment? First, we must start with the people and the place, not with the policy or strategy. The Olympics showcased what can be achieved when this latent energy and talent is harnessed. In my experience, communities and places often reinvent themselves organically from within, and the good news is that the conditions are now right: many local leaders and entrepreneurs are up for this journey in east London. There exists in east London a real opportunity for innovation: to explore, for example, on the first Olympic village what those key words in the Health and Social Care Act “enterprise”, “innovation” and “integration” might actually mean in practice. How do we explore them, and how do we prevent the procurement rules preventing us from doing innovation?
Secondly, we must now take the long-term view. Phase 2 of this 50-year regeneration journey is just beginning, and we have at least 25 years of focused hard work ahead of us. One of our problems in east London is the public sector endlessly restructuring itself around those of us trying to build fully engaged communities. We have too many good people coming and going in the merry-go-round of public sector structures. The recently defunct London Thames Gateway Development Corporation, for example, spent many millions of pounds on policies, strategies and plans, but actually built very little. We need to understand, as the noble Lord, Lord Heseltine, describes in his excellent report No Stone Unturned, that the energy and drive in local communities does not come from Whitehall or necessarily from London government but comes from those already living and working there. But government needs to get behind these people and start showing active and sustained support. The GLA says that there will be no money in 2015, and some people are privately murmuring, “Let’s throw it all in the air!”. No. Let us stick with the project, talk with the private sector and work it out. All our experience tells us that we need consistent leadership in east London over the next quarter of a century. The job is not done: we are simply at the end of the beginning.
We all need to continue to focus hard on attracting business to the area. We need to get the international train stopping at Stratford station; we need to get a proper Thames crossing in place, a tunnel and a bridge; and we need to invest in new schools, university technical colleges and higher education institutions that will enable young east Londoners to grab hold of opportunity. In particular, getting University College London to Stratford will be another game changer for east London.
Thirdly, did you know that the lower Lea Valley is home to the largest artistic and creative community outside New York? I still fail to understand why the BBC did not decide to move a key component of its operation into the middle of this dynamic environment. The noble Baroness, Lady Ford, did so much to try and make this happen, but maybe my noble friend Lord Hall can revisit this opportunity as he takes the wheel of the BBC this year. This is a fantastic opportunity for a key cultural institution to have a base in this new and emerging dynamic area of London. Stop looking west: start looking east.
Fourthly, organic growth and partnership working is key to innovation. If the five Olympic villages are to become thriving and enterprising communities, and not just another group of soulless east London housing estates, then the public sector needs to see this new city landscape as a real opportunity to innovate and experiment on many fronts. It is not the public sector’s job to do everything for us, but it is its job to create enabling conditions.
A key component of the future of the lower Lea Valley is going to be science and technology, just as the valley was in the past the birthplace of modern biotechnology and the place where plastics, petrol refining and bone china were invented, and where perfumes, rockets and airplanes were developed. One project I am working on with Professor Brian Cox—I declare my interest—aims to connect science education to health and business development on the edge of the park, to help make London and the UK the best place in the world to do science. This illustrates the kinds of relationships between science, education and business that are starting to emerge among the next generation of young east Londoners.
There are concerns locally as we look forward as colleagues in the public, business and social enterprise sectors. Will large public sector bodies, which have a track record of missing opportunities in east London and messing up on the detail, kill the entrepreneurial spirit that is in east London today? We worry in the midst of this opportunity that government will not learn the lessons of what actually works on the ground and build on them, but that along the way—that through this 25-year-plus task—new Administrations will come along, reinvent the wheel around us, and the continuity that we now need to build thriving sustainable communities will be lost. This once in a lifetime opportunity in east London now demands that all political parties, whether in or out of office, use the time we now have to understand what works on the ground, build on it and back success.
Over the past three years I have chaired the All-Party Group on Regeneration, Sport and Culture, and during that time we have run a number of visits for Peers and MPs by boat into the lower Lea Valley. I think many colleagues have been surprised by the scale of the investment and the opportunities that now exist there. Sir David Varney, former CEO of Shell and chairman of O2, recognised on his trip that the valley has the potential to be one of the most significant business investment areas in Europe. But let us get the detail right. We need a joined-up narrative for the investment community across the world that has integrity and is deeply connected to the social, economic and demographic realities on the ground.
I hear lots of politicians quoting numbers and statistics on social housing and the like when they talk about legacy. That is all very well, but as those of us who live, work and have to build buildings there know, the key task now is to build sustainable communities which are defined not by ticking boxes but by diversity—by thriving communities who see that they have a life there for themselves and their children, and who will invest wholeheartedly in the place. It is about the detail of how you do this in practice.
Communities are about people like Leanne Doig. Leanne is a 20 year-old woman from Canning Town who has wanted to get into the construction business for as long as she can remember but was always told that she could not because she did not have what it takes—mainly that she was a girl and not a boy. She got her basic qualifications at college but her big opportunity came with an apprenticeship on the Queen Elizabeth Olympic Park for the transformation works. She says:
“I want to own my own Company and have loads and loads of women working for me”.
She also says:
“I’ve been brought up here my whole life and all people ever do is look down on east London … to have the Park will change things because it will give everyone a chance”.
That is the spirit of young east Londoners that we must encourage. Leanne is a young woman who is excited about her part of town. She has spotted the opportunities that the changes in east London are creating for her and her peers, and is grabbing them with both hands with energy and entrepreneurial intent. She understands that the route to equal opportunities is through practical hard work and inspiration. Is that not what the Games were all about? Why should regeneration be anything different? My question to the Minister is: what are the Government now going to do to help us grab hold of this bigger picture in the lower Lea Valley, to connect the dots and to learn from this new city rising like a phoenix in the East End of London?
My Lords, I congratulate the noble Lord, Lord Mawson, on introducing this debate and on the excellent speech that he made in setting out his vision for what needs to happen in the development of east London. Many of your Lordships know that few people know more about that area, or have contributed a greater personal commitment to it, than the noble Lord. I think that the only thing that he got wrong was the time. As he was speaking, I reflected on when I first got involved. In 1979, 34, years ago, Michael Heseltine and I flew over the dockland area. We looked down on 5,000 derelict acres, which were a couple of miles from some of the most valuable real estate in the world—the City of London—and made a great cry that something must be done. I had the privilege of taking through the Local Government, Planning and Land Act 1980, which set up the London Docklands Development Corporation, out of which flowed so much, including Canary Wharf.
I must declare an interest. For the past 18 years, I have been involved in the creation and establishment of ExCeL, which is now a world-class, international convention and exhibition centre. Kindly, the noble Lord, Lord Mawson, referred to it as one of the key growth elements in east London. That is particularly satisfying because I agree very much with what he said about government bodies and public bodies coming and going. I am very proud that we built ExCeL. It was a private sector venture, without any great government subsidy. Most big convention and exhibition centres around the world are owned either by the city or the government. They usually lose money and are a charge on the ratepayer. I am very proud that ExCeL has established itself as a successful and valuable addition to the economy of London.
In our early days, it was a great battle to get recognition for east London. When I first talked about ExCeL, a lot of people thought that it would be somewhere near Southend. There used to be a great bias in favour of west London and the centre of London. In terms of the population and its distribution, the centre of London has now moved: many noble Lords will know that it used be at Hyde Park Corner, is now thought to be at Tower Bridge and is steadily moving east. A lot of people thought that it was rather inaccessible. One of the most valuable legacies of the Olympics has been the recognition by so many people of how easy it now is to get there. There was enormous investment by successive Governments, both the present and previous, in improving communications in east London.
ExCeL is now considered to be probably one of the best connected major venues in the world in terms of its communications given the proximity of the DLR, the Jubilee line and the City airport, not forgetting one of the most amazing attractive new ventures comprising the Emirates AirLine: that is, the cable car which runs from the O2 to ExCeL. I recommend it to any of your Lordships who have not been on it. I took my grandson on it during the Olympics and he insisted on going on it three times as he found it so enjoyable. However, the area has battled to get recognition. In this respect the Olympic legacy to which the noble Lord referred is very important.
During the Olympics, 1.5 million people visited ExCeL. The figure for the Olympic Park is even more substantial. In 2012, 5 million people visited ExCeL. An important element of these major success stories in east London is that we have made people recognise how accessible the area is and the quality of the facilities that now exist there. The area will create enormous economic benefit for London and considerable economic benefit for the United Kingdom.
ExCeL is now in the business of trying to attract major international conventions. London, with all its amazing attractions and facilities, was ranked 20th in the world in market share of big international conventions. I am proud to say that, given the number of bookings taken at ExCeL, we have already moved up to seventh in the world ranking. Given the quality of the other facilities that London offers, I cannot believe that it will not end up in the top four, with all the benefit that that would bring. ExCeL generates £1.8 billion worth of economic benefit a year. A recent PwC report said that 32,000 jobs are derived directly or indirectly from activities at ExCeL. We have latched on to an important industry in the world today: that is, hospitality and tourism. It is a major employer in all sorts of different activities and a major boost for the economies of those countries that can develop it. It offers considerable employment at a time of obvious concern about employment opportunities. I am not talking just about ExCeL but the whole tourism and hospitality industry in which the United Kingdom needs to have a share.
As regards the Olympic legacy, one of the things that people around the world noted was not just the quality of the facilities at the Olympics but the niceness of the people involved in them. The Games makers and the Games ambassadors did a wonderful job for London and for Britain. Until I came to prepare my speech, I did not realise that 40% of London’s population were born overseas. Therefore, whatever country you come from, you will probably find a few of your fellow countrymen in London willing to welcome you to the city, and that was the case with the Games. Indeed, the Games makers were almost as important as the quality of the facilities. That is one of the legacies that will undoubtedly survive and I hope that other parts of the country recognise it.
The noble Lord, Lord Mawson, and I have worked together closely in a number of areas, and we know how good the co-operation is between the different bodies—Newham council, the City airport, Westfield, Canary Wharf, Transport for London and the DLR. We know the people involved in those bodies and are on Christian name terms with one another. This legacy is coming together for the benefit of the people of east London and London as a whole. It is developing and has reached a critical mass. As the noble Lord said, it will take many years to go forward but the only way is up. I congratulate him on the contribution that he has made to help this legacy move forward.
My Lords, I am very grateful indeed for the opportunity that the noble Lord, Lord Mawson, has offered the House to reflect on the legacy of the Olympics. Like the noble Lord, Lord King of Bridgwater, I pay tribute to his extraordinary role, not only over the past 20 years but in the way he has seized the opportunities that the Olympics presented to go forward. That was clear in his excellent speech. He has agreed that I can extend the terminology of the debate very slightly to talk about our physical and cultural heritage, but I can also reflect on what he has said in that context about regeneration and the way in which that heritage not only formed some of the most powerful images of the Olympics but helped to show some of the opportunities available to us.
The Olympic vision gave essentially and crucially a defining and dynamic role to our heritage. I declare an interest as the chair of English Heritage. I was very impressed by the way in which the confidence in our culture, our creativity and our communities came across in those images and what they said to the rest of the world, not least in terms of community engagement. I start with the fabulous opening ceremony, which depicted the extraordinary sweep of history from ancient earthworks to the rural and pastoral scene, to the Industrial Revolution and to the National Health Service. It presented breathtaking imagery, which told us who we are, who we think we are and where we have come from. What I found most stirring was the dramatic demonstration that our present brilliance in the two critical creative industries of design and engineering, in which we have a global lead, is rooted in the genius of the Industrial Revolution, stretching from Brunel to Sir Tim Berners-Lee. We witnessed the extraordinary forging of the rings from the furnaces of the past and the creation of a beautiful, exemplary democratic torch, an illustration that our legacy must lie in our future with intensive investment in innovation, design and engineering, because that is what we are very good at.
The point is that we know how to do it. You have only to walk through St Pancras these days and look at the way in which the Kings Cross quarter is developing to see the extraordinary fusion of three centuries of engineering and architectural genius and the incorporation of the old and the new. We must think not only of London but of the images presented of the rest of the country. They include the mills and weaving sheds; the fragile and rather scarce industrial memories, which are becoming the powerhouses of the future; communities engaged in setting up local technical universities; vibrant arts centres; community enterprise; and high-tech industries. We hear no longer the clacking of the looms but the whizzing and whirring of brains in these places.
One aspect of our community legacy will be to ensure that our heritage is seen as something that serves the future—something to be picked up confidently at local and community levels as part of regeneration and industrial policy, as it is already doing in the East End. Indeed, English Heritage invested £1 million in one project, High Street 2012, which saw the restoration of buildings along Mile End Road and new listings along the route, involving children in identifying the most important buildings and drawing them, showing which meant the most to them in their community. That is an excellent legacy for the protection of the future
Above all, the Olympics connected with the reality of who we are and the diversity of our community—a country used to living in the light and shade of history. Everywhere people saw where they lived in a new light as they saw their reflection in the torch as it went through, whether it was at Stonehenge or in our medieval and historic towns. Who will forget the images of London, the three-day eventing in Greenwich Park or beach volleyball on Horse Guards Parade? Apart from the sheer pride in place— which is beyond price—the community benefits in other ways. First, it benefits, I hope, in the way in which heritage is viewed, valued and will be protected in the future. As the noble Lord, Lord King, said, we have seen the extraordinary phenomenon of joyful volunteerism, which I think, like measles, will spread to places that it may not yet have reached. I know that English Heritage will be taking advantage of that.
I turn specifically to the Cultural Olympiad and one of the projects in which English Heritage was involved, Discovering Places, a grass-roots campaign of live events, performances, online blogs and social media bringing together more than 250,000 people in this country to discover their local built and historic environments. These were pioneering partnerships. Of course, arts and heritage go together. There is no contest; it is not new. But the Cultural Olympiad broke down some of the barriers between culture, the arts, heritage and technologies. It encouraged risk, shoved out the boundaries and engaged on an innovative scale. It showed that there are innovative ways of bringing arts and heritage together in the physical framework, such as, for example, setting fire to Stonehenge. That actually worked all right. I could give many examples, but what I am trying to say is that the Olympics and Paralympics gave us a unique opportunity to showcase the monuments, the buildings and the beautiful places that are our legacy. That legacy would not have existed if our predecessors had not recognised that it was necessary to protect it. Part of the legacy should be to ensure that we understand and care for it, and protect it more effectively, so that it can serve the future more energetically.
I shall end by advising noble Lords that 2013 may be the morning after the party but for our cultural heritage it is the beginning of the party, as we celebrate in 2013 the centenary of the Ancient Monuments Act, introduced in this House by a Private Member’s Bill. The Act recognised for the first time that there are some physical remains of the nation’s history that are so special and so significant that only the nation itself can look after them properly to secure their survival and lay the foundations for a world class heritage protection system. That collection of 850 monuments all over Britain, cared for by the leading cultural institutions—English Heritage, Cadw and Historic Scotland—tell the story of the nation. This year we will be telling the story of the nation in that way, and I hope that noble Lords will enjoy it and join us in doing it. We are celebrating what our predecessors achieved, and we will be inviting those communities to step further into history. One of my hopes is that there will be increasing commitment in local communities to looking after their local heritage. Above all, I want that legacy and the Olympics this year, which made it so much more plausible, to show that we are neither tied to the past nor indifferent to it. We are very comfortable in making the old serve the new. Our heritage is not static; it is not separate from life but dynamic. It is something that we are not afraid to change. It is our competitive edge and we should build on it. That is something that we will owe to the Olympics as well.
My Lords, I join in congratulating the noble Lord, Lord Mawson, on securing this debate.
The modern Olympic movement was created by Pierre de Coubertin, an amateur boxer, but also a part-time poet. The cornerstone to his vision in reviving the Olympics was to bring sport and culture together in one great festival. That, of course, was precisely what London did in 2012. Its Cultural Olympiad was a triumph, and here I pay tribute to the noble Lord, Lord Hall of Birkenhead, who so brilliantly chaired the Cultural Olympiad board, Ruth Mackenzie, director of the Cultural Olympiad and Dame Tessa Jowell who was so pivotal in its original conception.
Like the noble Baroness, Lady Andrews, I refer back to Danny Boyle’s opening ceremony—a beautiful, brilliant spectacular. It was complex, self-deprecating in its narrative, although not in its conception and execution, and deeply humorous. As well as a celebration of the entity that is the United Kingdom this was a showcase for our creativity and for our creative industries. Take James Bond, which is, first, the product of writer Ian Fleming; then of film makers, actors, special effects creators, costume and set designers, and those who make the costumes and sets. And finally, in Boyle’s dazzling tangle of fiction and fact, the fictional spy gets to meet the factual Queen and her corgis.
The ceremony also celebrated music, television and art, and how art and design come together in such wonderful creations as Thomas Heatherwick’s cauldron and, centre stage, literally, Tim Berners-Lee, the British creator of the world wide web. It was shot through with recognition of our creative accomplishments—and it was a huge accomplishment in its very self.
This debate invites us to take note of the role of communities. The Cultural Olympiad pledged to encompass thousands of local and regional events as part of our nationwide celebration—and it did. Martin Creed’s “Any Bell. Anyone. Anywhere.” was one of the Olympiad’s biggest community projects. At 8.12 pm on 27 July, almost 3 million people across the UK rang bells to celebrate the first day of the Games. They included individuals, communities and organisations; enthusiastic children; change-ringing experts; Big Ben; and the bells of the UK Parliaments and of British embassies across the world.
In all, 621 productions and projects resulted in 13,000 performances and events at 1,270 venues across the UK. There was street art and high art, hip hop and ballet. Everywhere, new audiences were introduced to the arts. LOCOG estimates that 19 million people participated in the Cultural Olympiad, and that 10 million people have been inspired to continue to take part in cultural activity. We are here to talk about legacy, and we must ensure that these people continue to do this. We must ensure that the fact that the strongest interest in the Olympiad came from younger audiences and ethnic minorities is not lost but built upon. We must ensure that the innovative new partnerships that creators forged online, and at local, regional and national level, continue.
We on these Benches welcome the Arts Council’s initiative of a creative employment programme of apprenticeships and paid internships in the cultural sector for unemployed 16 to 24 year-olds. We welcome the setting up of a creative people and places fund that will focus investment on parts of the country where people’s involvement in the arts is significantly below average. However, the most important thing is that we continue to create the creators. In this area we face not a jobs problem but a skills problem. The Next Gen. report published last year drew attention to the fact that our education system was not keeping up with the times, and in particular that the way ICT is taught in schools did not provide the appropriate skills. The good news is that the coalition Government listened. A draft programme of study for ICT, which from 2014 will include a computer programming option, has been developed, and last October the Secretary of State for Education announced bursaries of £20,000 for 50 top graduates to train as computer science teachers.
However central the understanding of technology has become to the creative industries, they are still underpinned by creativity itself. The creative economy needs creative employees—people who are skilled not just in computer science but also in art and other creative subjects. Darren Henley’s report on cultural education is another crucial element in delivering a lasting creative legacy. The Secretary of State for Education greeted the Henley review with huge enthusiasm. The government response to the review, published last February, stated that a national plan for cultural education would follow immediately. The last time I asked when this would happen—because despite the “immediately”, it still has not—I was told that it would be at the beginning of this year. Will the Minister assure me that this is still the case and therefore that publication is imminent?
There is concern about the lack of a sixth strand to the EBacc that would cover creative subjects. It was argued that this was not necessary and that there was plenty of room for them in the curriculum. But it is all about perception. Grayson Perry stated:
“If arts subjects aren’t included in the EBacc, schools won’t stop doing them overnight … By default, resources won’t go into them. With the best will in the world, schools will end up treating arts subjects differently”.
There is evidence that this is already happening. A participant at a recent Westminster Education Forum described how he had,
“spoken to many headteachers who are cutting subjects from their Key Stage 4 curriculum in order to feed into the EBacc … So … now the school is saying, geography is in the EBacc, drama isn't, we really, really recommend you do geography, or in some cases you have to”.
For us to continue to excel we must place creative subjects at the heart of our education system. If a sixth strand to the EBacc is not to be, I am sure that the Minister will agree that action must be taken to ensure that head teachers do not treat creative subjects as second-class. Grayson Perry’s prediction must not be allowed to come true.
Dame Tessa Jowell said in 2008 that the 2012 Olympics presented,
“a rare chance and a real opportunity: to deepen and widen engagement with culture in all its forms”.
The Cultural Olympiad delivered this. We must ensure that the Olympic legacy lasts.
My Lords, I declare my interests: I was involved in LOCOG until the end of the Games and have been recently appointed to the London Legacy Development Corporation alongside the noble Lord, Lord Mawson, who I thank for tabling this debate.
I am delighted to be talking about the legacy of the Games but, for once, not about sport. Sport is still really important and I will still keep campaigning for good school sports, but much effort is expended, not least in the media, on measuring participation figures and debating appropriate levels of physical activity and what elite sport is going to look like in the 1,289 days to the Olympics and 1,322 days to the Paralympics in Rio. That is okay. Through the Games, I was introduced to a much wider constituency of people. I found that people from culture were not different; we had very similar aims of inspiring people to do something different. We must continue this communication.
I was involved in the bid from 10 years ago because I wanted to consolidate the Paralympics in the UK, and I think that we have achieved that. I was in Madrid last year with the Foreign Office, and members of the bid team there told me that they had very strong evidence to prove the economic advantage of just being a candidate city, let alone of winning the Games. There is also strong evidence for that from other cities.
When I went to Stratford for the first time in 2004, I found it almost impossible to imagine how the Games could happen. An integral part of the bid in 2005 was showing the amazing history, culture and art that is the UK. I will never forget the moment when the noble Lord, Lord Coe, stood in front of the IOC and asked the children in the audience who had come from the East End of London to stand, in order to show the world what we meant by diversity.
I asked Kate Allenby, an Olympian as well as a teacher, about the effects that she had seen from the Games. She said, “The linking of arts and culture through the tool of Boyle’s opening ceremony and the torch relay evoked a new, incredible level of interest amongst our school children. It demonstrated the power of being uniquely British—opening a gateway for children to explore and be inquisitive about who WE really are and where WE really come from”.
As I was leaving the presentation after the speeches in 2005, a member of the Paris bid team stopped me and said that we had done one thing that they had never expected from us—show emotion.
Obviously there has been a lot of talk about venues. It was right to build temporary venues; they may have cost more in the first place but will save money in the long term. Now that the Games are over, it is important to consider how Queen Elizabeth Park blends into and defines the local community, and this is what I hope the LLDC will do. I know that the noble Lord, Lord Mawson, is passionate about this, and I strongly support his work. The park cannot be an oasis that isolates or displaces the local community. In the lead-up to the Games, much time and thought was given to the employment of people from the host boroughs, diversity and procurement, involving people from every background. This work is not massively high-profile or of much interest to the media, but it needs to continue now that the Games have moved on.
As an athlete, I moved in and out of cities, often not spending much time there. My first Games were in Seoul, which bid for the Games because it was about showing vitality and that it was a modern city and was technologically up to date. The organising committee sold the Olympic village and media centre a year before the Games for $264 million but the Paralympics had a different village, as there was concern that people would not want to live where all those disabled people had been. However, they did sell the village on. Many disabled people at that time were begging on the streets, and the Games gave them the opportunity to change their lives. It was sad, however, that many of the Paralympians who we saw compete were not able to carry on their career after 1988. This cannot be said of Britain.
Barcelona was more publicly known for its regeneration, but by 1993 33% of the village was not sold. Athens was about reorganisation, and as athletes we were simply grateful that the village was built and finished, or at least nearly finished.
Sydney was about tourism, and was my first experience of bids. I was part of the Manchester bid, and it did not matter that we had years—I think around 60 years—of data to show that in spring Sydney had significantly more rain than Manchester did in summer. All they had to do was hold up a picture of the Sydney Opera House and a beach, and we lost. Actually, possibly they had to do a bit more than that.
The Beijing Games helped to change the city. In 2000 it had 392 hotels and 80,000 hotel rooms. This had risen to 800 hotels and 180,000 hotel rooms by 2008.
These days I am pleased to say that, beyond sport, the Cultural Olympiad is expected to add significantly to the prestige and prosperity of the Games. Through 2012 I was delighted to see projects, funded through Unlimited, that celebrated the work of deaf and disabled artists on an unprecedented scale.
The Women of the World event organised by Jude Kelly at the Southbank had sessions on all aspects of sport for the first time. I met artists who learnt the benefit of being physically active. Unfortunately, the one project that I was not able to be involved in was very interesting—it was using my spinal X-rays to create art.
Much of what I want to highlight could never be described as a creative industry, but it may be the start of inspiring others. After the torch relay, many people have approached me and said that this inspired them to join local groups, to contribute back to the community and to look at culture in a different way. There are several groups of Games makers and London ambassadors but one, the Spirit of London 2012, helps local groups find volunteers for other projects. This is community spirit at its best and what the big society should really be.
In the past 18 months I have visited many schools, either in person or through the power of modern technology on my computer. They embrace not only sport but art. I have been sent pictures, collages, models and boiled eggs dressed as athletes, Games makers and performers; I have been sent essays using the Games as an inspiration. That was not just before the Games, this is happening now. Who knows who will go forward from these people to form an integral part of future creative industries?
I was also reminded by Kate Allenby of the quilting project, where thousands of local organisations joined together to send each and every athlete who came to London 2012 a memento of their time in London. I had a beautiful cushion sent to me by residents of a care home. Who can forget the guerrilla knitters of Saltburn depicting every Olympic and Paralympic sport on the pier? The Games makers were stunning in themselves, but if you looked carefully you could see “knitteds”. Many knitted Games makers were proudly being carried, and I have one on my desk. It was started by Liz Gibson, who made the first one and then made the pattern freely available to anyone who wanted it. I met one young man working at Heathrow Airport as a Games maker who knitted his own, complete with full accreditation. For those who could not knit their own, others helped out. I met many young people who, because they had seen the knitteds, suddenly decided that they wanted to learn to knit so that they could make one of their own. These are not the big projects we associate with the cultural Olympiad, but they are really important.
On a personal note, the Paralympic Games gave me the opportunity to fly through the air on a high wire. “Terrified” is the only word I can use. I have been asked more questions about that than about sport. For me it will never happen again, but it will give inspiration to young people who think it can.
The Games were a magical moment to be celebrated and were so much more than sport. I agree with the noble Lord, Lord Mawson, that this is the start, not the end.
My Lords, the noble Lord, Lord Mawson, has done both this House and the Government a great service by introducing this debate. If one looks at the place of the east end of London in the history of our country over the past 50 years, it would be true to say that, until recent years, no one comes out of it with any great credit. It has been one of the great unobserved areas of our country. Happily, that is changing and will continue to change, as the noble Lord, Lord Mawson, and my noble friend Lord King of Bridgwater made clear.
The second reason I wanted to be here today is to pay a personal tribute to the noble Lord, Lord Mawson. He is the epitome of what has caused the change in the east end of London. He is rightly recognised around the world as one of its foremost social entrepreneurs, and he can point to overwhelming evidence which lends great credence to what he has said to us today.
In the time that is available, I want to concentrate on only one lesson. That does not mean the others are not important but colleagues have already addressed them. I want to look at that part of the Motion which refers to lessons that can be learnt more broadly and concentrate on only one. We can talk about a lasting legacy and occasionally get the feeling that the Government, the public or local government have the responsibility for it. It is none of these. Trust the people. They have the ideas and the aspirations, and in the east end of London they have the multicultural base on which to build and develop.
This is a good forum in which to say that it is a mistake to believe that lasting legacy is solely or, indeed, overwhelmingly guaranteed by the spending of public money. It is much more important than the spending of public money. The lesson I would like to draw from the Games as a foundation for lasting legacy is that which we have learnt from my noble friend Lord Coe and the then Mr Deighton. It is the lesson of leadership. We rightly celebrate the athletes and para-athletes and we rightly celebrate those who worked on the ground to make the Games an enormous and impressive spectacle and such a happy occasion. But there needed to be firm leadership and a broad-based understanding of what constitutes leadership, in that it is not all in the public sector or the private sector. It is a sensitive combination for the common good. That leadership is frequently not as available in our society as many of us would like, so I want to thank the people who had the responsibility for organising and delivering the Games on time and on budget, neither of which is inevitably the consequence of activities in our nation.
However, Government and Ministers have a role to play in all this, but it is not the role of providing exclusive leadership. The noble Lord, Lord Mawson, is perhaps the most sterling example of the fact that you do not have to look to Government to lead renaissance and change. I would like to suggest that the role Ministers should play is that of—if I may use a rather inelegant colloquialism—banging heads together. It is to say to people, “Your mindset is wrong. Your locality cannot move forward unless you address the mindset”. Those who are involved locally find it hard to do that, so they need guidance from outside. Sometimes Ministers need to move in to resolve turf wars which hold up progress on the ground. Sometimes they need to move in and say, “I understand your focus on the detail, but actually the bigger picture is this, and this is what we should be doing”. Sometimes Ministers need to say that the relationship between Government, local government and the private sector is simply not good enough and needs to be changed.
What we have learnt from the Olympics is that change creates challenges. I would say to Ministers and to my noble friend: in case you think there is nothing for you to do, take all of your colleagues down to Bromley-by-Bow and let them see what has emerged from virtually nothing. It is one of the most impressive displays of social entrepreneurship anywhere. We are focusing on the European Union these days and it is more impressive than anywhere in the Union. The question to be asked is this. What head-banging needs to be done to enable Bromley-by-Bow to move even further ahead and to see that being replicated across the whole of the Lower Lea Valley? Stratford station is sitting there. Perhaps my noble friend would like to encourage one or two of his colleagues to ensure that the station is actually used, and used properly. I declare an interest because I was the Secretary of State with responsibility for the Channel Tunnel and the building of Stratford station.
We are talking about how the Olympic stadium might be used in the future. It might get tied in to football. It ought to have some tie-in to athletics, and maybe a little head-banging needs to be contemplated by my ministerial colleagues, and the encouraging of more investment in the facilities. The private sector can provide the money but sometimes it needs a little bit of help from Ministers to clear the ground to enable that money to be spent effectively.
My lesson for the legacy of the Games is that we ought to focus on and encourage real, sensitive, community-led leadership.
My Lords, I, too, thank the noble Lord, Lord Mawson, for introducing this debate. I begin by declaring that I was heavily involved in monitoring the delivery of the 2012 Games on behalf of the London Assembly. Throughout that time, my main concern was the Olympic legacy. The bid promised that,
“the most enduring legacy of the Olympics will be the regeneration of an entire community for the direct benefit of everyone who lives there”.
We must do everything possible to ensure that that promise is kept. However, this regeneration will not happen by itself. It requires proper planning and execution. It also requires some government funding. Without this, we will be at the mercy of private developers.
The focus of the legacy plans is the Olympic Park, the Lower Lea Valley and the surrounding communities, which are set to become an important area for business investment. The regeneration of this area provides an opportunity for innovation and engagement with local people, but the Government must help rather than hinder this process. I say this because, whenever a big idea or large-scale scheme is being launched, all tiers of government have a tendency to reinvent the wheel by setting up a new organisation to deliver it. Time and again, we end up with cumbersome bureaucracy and fail to use the expertise of people on the ground. Ministers and the Mayor of London should not get involved in the detail but should set out a clear vision and then leave the implementation to experienced people who understand the needs of local communities and businesses.
A good example of that principle in practice is the work of the Lee Valley Regional Park Authority, which owns and operates three Olympic venues: the White Water Centre, the VeloPark and the Hockey and Tennis Centre. The authority uses a tried and tested business model for sports venues, which allows it to make profits while remaining focused on the needs of local communities. This business model encourages the widest possible range of visitors, including both grass-roots and elite use. It is a very innovative authority. When it won the bid to build the White Water Centre for the Olympics, it decided also to build an easier course for the general public. This has become a huge commercial, sporting and social success, with visitor numbers and income more than double the original estimates. The authority’s programme for the VeloPark will include a mix of first-timers, schools, major events, leagues, races and sessions for a variety of groups: the over-50s, disabled people and women-only activities, because women are greatly underrepresented in cycling activity.
I have highlighted the Lee Valley Regional Park Authority because it illustrates very well what can be achieved when government sets out a broad strategy and then leaves it to people who know what they are doing to get on with it. This principle should be applied to other legacy projects.
However, there are real challenges. The work done by the Arts Council in developing an arts and cultural legacy is a good example. Some really excellent arts projects were delivered in the run-up to and during the Olympics but, sadly, very little of this was designed to appeal to people living in disadvantaged communities, who are seriously underrepresented in the arts. This is largely because the Arts Council is relying on the usual partners instead of working with people on the ground who understand the kinds of activities that appeal to local people.
The problem is not achieving a legacy but achieving the right kind of legacy. The transformation of the Olympic Park is well under way. But in the present tough economic climate, some major challenges must be addressed to ensure that local people get the range of homes, jobs and business opportunities they were promised. The provision of the right number and type of affordable homes, for example, requires some very difficult decisions by the Government and the Mayor of London. It is essential to maximise the number of affordable homes and to invest in high-quality schools and health facilities for the residents, but these needs will have to be balanced against the availability of grants and the requirement to repay to the National Lottery the funds generated from Olympic Park land sales.
I entirely agree with the noble Lord, Lord Mawson, that we need international trains to stop at Stratford, and we also need a new Thames crossing in east London. The Government must invest in local infrastructure to boost private sector investment in the area. Most importantly, we need government at all levels to lay out a clear and cohesive vision, to stick to that plan and to allow experienced people on the ground to deliver it without undue interference. This will give the private sector the confidence to invest. It will also invigorate the greatest resource in the area: the local people and communities whose entrepreneurial energy has already driven so much change in east London.
William Ewart Gladstone asserted the principle of “trust in the people, qualified by prudence”. I suggest we do the same.
My Lords, I thoroughly enjoyed the Games and felt very proud indeed to be a Londoner. I would question only whether we took seriously enough the commitment to deliver a multilingual Games, and consequently whether we have short-changed ourselves on this aspect of the Olympic legacy. I declare an interest as chair of the All-Party Parliamentary Group on Modern Languages. I thank everybody responsible for the most brilliant staging of Shakespeare in other languages at the Globe as part of the Cultural Olympiad.
My contention is that if, as Olympic hosts, we had made more connections between the official language services during the Games and language teaching in schools, we could have matched young people’s enthusiasm for the Games with an injection of new enthusiasm for learning foreign languages, and perhaps even seen an increase in the number of teenagers sticking with languages after the age of 14.
This is such an important legacy issue because the lack of language skills in the UK is currently damaging our economy and competitiveness. The employability and social mobility of our young people are seriously limited as they compete for jobs in a global labour market. Employers are recruiting from overseas because neither school-leavers nor graduates from the UK have the language skills, and the cultural knowledge that goes with them, to meet the needs of business. Robust evidence shows that lack of language skills is a barrier to export growth.
Of course, the irony is that London is the most multilingual city in the UK and Newham is the UK’s most multilingual borough. Dozens of local schoolchildren could have easily spotted the embarrassing mistake on the sign at the entrance to the Olympic Park, which said “Welcome to London” in various languages but the Arabic section was written back to front. This faux pas in an otherwise hugely successful international event led to Britain’s inability to cope with foreign languages being ridiculed not only in our own media but in press stories in the US, South Africa, China and the Middle East.
I first asked an Oral Question about the steps the Government were taking to prepare for a multilingual Olympics in December 2008. Of course, it was a different Government then, although I do not believe that the present one would have taken a significantly different line. The Minister of the day told me that the Government,
“are working to ensure that the Games leave a lasting legacy of language development”.
He also said that,
“we will need to draw on the vast range of communities that can offer language skills to the wide variety of visitors whom we will receive”.—[Official Report, 16/12/08; col. 731.]
Unfortunately, this proactive attitude was not really followed through. We even had to rely on the French embassy to help to fund a translator for the announcements in French during the Games. Why could that not have been part of the mainstream budget? It would even have been a great challenge for local schools.
There were several language projects but LOCOG seems to have regarded them as marginal. The Welcoming the World programme helped more than 60 companies with translating signage and training staff, but its funding from the LDA ceased in April 2010 and LOCOG declined to pick it up. Similarly, the Routes into Languages programme and the Capital L group worked with schools and colleges on the importance of languages and the opportunities offered by the Games. However, again, their funding ran out and they found very little support from LOCOG.
The Get Set programme might tell a different story, and I should like to ask the Minister specifically whether he can give me an update on the Written Answer that I got on 13 December 2011. I was told that LOCOG’s education programme, Get Set, included a small number of modern foreign language applications and that an annual evaluation was being conducted. I should be interested to know—later in writing if the Minister does not have this with him today—what, if any, positive results were generated.
What I know of the language services during the Games seems to have worked well—for example, the fact that the first tier of drivers for the IOC and Olympic family was allocated according to language skills, and personal observation reported to me suggests that this was effective. On the other hand, it was very difficult to find out what else was being done and whether community resources were being tapped. I was told that the chief interpreter and the head of language services for the Games were too busy to meet the all-party group, even though the noble Lord, Lord Coe—chairman of LOCOG and surely busier than either of them—was kind enough to come to one of our meetings. I am very grateful to him for that.
I hope that both the noble Lord, Lord Coe, and the Government will now ensure that the importance of language skills forms a clear part of the official report on the London Games, as well as featuring in any vision or strategy for their legacy. I fear that an opportunity was missed to showcase London as a richly multilingual venue, even though we know that this is a major factor for global companies deciding where to locate their headquarters. More than 200 languages are spoken by schoolchildren in London, yet most of their languages are not formally taught, examined or accredited, despite being badly needed in the field of public service interpreting in courts, hospitals and police stations. In 2008, the then Minister told me on the Floor of the House that his department wanted,
“to ensure that the Olympic Games provide an opportunity to show young people in the area the advantage of developing language skills. That is what we are seeking to achieve”.—[Official Report, 16/12/08; col. 732.]
Can the Minister tell me today to what extent the Government judge this to have been achieved and how it will be followed up in future?
To conclude on an optimistic note, I spoke to several volunteers in the Olympic Park who told me that they were now off to learn Portuguese so that they could volunteer again in Rio.
My Lords, I congratulate the noble Lord, Lord Mawson, on bringing this debate forward. What attracted me to it was that broad lessons will be learnt from this, one of the primary lessons being that you can bring people from different, often self-defined, groups together and make them work effectively.
The first point at which I really had doubts about the process of doing this, but knew that the challenge was there, was at a dinner I was asked to many years ago, which first brought people from the arts world to speak to people from the sports world, at the start of the planning. A few parliamentarians were there as well. As the discussion got going, after people had swapped pleasantries during the meal itself, I felt that I was looking at a sort of peace conference between the Martians and the Venusians, where they were talking together for the first time. The look of total blank astonishment when it was actually suggested that they might have matters in common was quite comical. However, it was also ridiculous, because they do have very similar attitudes.
At grass-roots level, what is the difference between somebody trying to get a play together—finding the people for it, getting somebody to run the finances, organising it and finding venues—and somebody trying to run a sports team and get people to training and to turn up on time, and get coaches together and run the finances? It is exactly the same dynamic going on. The fact that they were brought together to create one thing that worked well is one of the broad lessons that can be taken on into the future: you do not have to just talk to your own people about your own subject. The noble Lord, Lord Mawson, suggested this in terms of planning: certain people, such as central government and local planning, must learn to understand and trust each other. It is something that must happen.
The Games have shown us how to bring these two together. They have also probably shown us the limitations of this at the moment. The Cultural Olympiad was very important, because something other than just the Olympics had to bring people in. Effectively, I felt that the Cultural Olympiad was a little like a Christmas present: it was that very important, enticing bit around the outside—the wrapping—that made it look good and gave you the buzz and excitement beforehand. The fact that there was something going on was very important: the Olympics were happening and there was something coming. That was so important to the general feel of the Games for such a long time. However, it was not the Olympics themselves. The hard core was the sport. If we can take that model, for instance, when sport provides some wrapping for a cultural event, we will at least have achieved parity between these two worlds. We must look at how we integrate them to bring more of the same process.
We have talked about the creativity of the opening and closing ceremonies for both Games, which was one of the aims of the Cultural Olympiad. However, unless it goes beyond saying, “Wasn’t it great?”, which we have all done and which I did when I saw them, you have failed to work on the initial steps that have been taken here. We learnt to do it in the planning. The political parties had a common goal in the preparation and planning—or rather they learnt and then continued to remember that they had a common goal—which is why the bid was successful and why we were able to take it forward without the normal position in politics of simply opposing and backing, to make sure we had something coherent in the planning stage. That is what allowed us to win in Paris.
Unless those outside the core activities are prepared to buy in, and buy in to something that they do not regard as their own, we will have lost something here. We gained something very important: the chance to say that it is not just somebody’s—ours or yours—but co-operation at various levels. Learning to buy in to something that you do not have control of is probably one of the signs of growing up. I hope that both the arts and sport have done some growing up and seen that the world is slightly bigger than just them. There is always a temptation to say, “Mine” and not talk.
My Lords, I thank the noble Lord, Lord Mawson, for prompting this insightful and multifaceted debate. Every aspect of the 2012 Olympics and Paralympics was a triumph and a tremendous credit to all who led those fine ventures from beginning to end, not least in our House and not least the noble Lord, Lord Hall, who is with us today. The bid itself was hard won—but well won. The gigantic infrastructure and arena construction programme was a model of successful implementation. Once the Games started, the outstanding achievements of our Olympians and Paralympians were a testament to not only individual talent, application and determination but, as we know, to skilful investment choices, to the professionalism of the coaching and to the rigour of the performance management.
The opening and closing events were sublime; Danny Boyle’s opening ceremony was his masterpiece, as the noble Baroness, Lady Bonham-Carter, eloquently expressed earlier. As an event, it was audacious and deeply British. It captured our history and the transition from a picture-postcard, pastoral Britain to the very crucible of the Industrial Revolution. It reminded the world of the sports we have invented and of our writing tradition, from Shakespeare to James Bond to Harry Potter. It conveyed Britain’s unsurpassed contribution to modern popular music.
The opening ceremony held some delicious surprises and two of the best jokes ever, starring Rowan Atkinson and, unforgettably, Her Majesty the Queen. The stage management of the event, with a cast of thousands, was awesome and effortlessly smooth. The design, whether the amazing, inflating industrial chimneys or the use of the lighting tablets, was spellbinding, producing, as the noble Baroness, Lady Andrews, said earlier, breathtaking imagery. All in all, as I said, it was a triumph.
One part of the overall legacy was that these Olympics defined all that is best in Britain at this moment in time; and they bound us all together, unashamedly proud of our Britishness. This very British staging of the Olympics also had, for me, some unexpected consequences. On holiday in Italy a few weeks after the Games, I was struck by the sight of innumerable young Italian men and woman wearing union jack T-shirts. In Sri Lanka recently, I noted exactly the same. In Paris in the autumn, wandering along the Boulevard Saint-Germain, I spied in the window of an upscale shoe shop an array of vastly expensive velvet slippers—not my kind of thing particularly—one pair of which had a beautifully stitched union jack as its main motif. Surprised and curious—I used to be a journalist—I went in and inquired of the manager whether there was any demand for such ostentatiously British wares among the citizens of Paris. He told me, and he insisted on this, that it was by far the hottest-selling item in his shop and that all the buyers were French. President de Gaulle, of whom I have just read an excellent biography, will be turning in his grave.
In Beijing just a few weeks ago, I happened to have lunch with a group of young Chinese journalists who volunteered, unprompted, how much they had enjoyed the opening ceremony—I promise that I did not prompt them in any way. One young woman journalist giggled and observed, “You British, you are gentlemen. And you are funny”. I thought that that was not a bad epitaph. She paused, then declaimed roundly, “Mr Bean!”. At which point, the whole table laughed uproariously, all remembering Mr Bean’s hilariously disruptive, and wholly unexpected, appearance as a London Symphony Orchestra keyboardist during the opening ceremony. We can surmise that every aspect of the Olympics and, above all, its opening, was a powerful statement about Britishness, not just for us but for the rest of the world, and that this statement will bring the United Kingdom many benefits in multiple spheres.
One lesson that I take away from it all is that our extraordinary success as a country in creating and funding national institutions such as the Arts Council, our art schools or the BBC, which husband and nurture our most creative and innovative talents, has a payback well beyond the edification of our citizens. Another lesson is that, with both a challenge and a deadline on the one hand and a governance structure on the other that brings together and unites the political parties, we can be creative, rigorous and disciplined, and achieve extraordinary things.
What a contrast there was between the dizzy heights of the Olympics and the Paralympics that we all remember so well—the unity that we all experienced—and the immediate gloom of a prolonged economic crisis, in some part of our own making, and of a decaying national infrastructure. What a contrast, too, with a reminder of our inability to develop a fit-for-purpose national air hub, one of our main economic lifelines to the rest of the world. The Olympics and the Paralympics showed that if we can find effective ways to combine and assemble our best talents, and if we can set aside our poisonous and disputatious political culture, we truly can as a nation achieve absolutely anything that we set out to do.
My Lords, I want to mention the green legacy of the Games. The big space of the legacy park in east London presents us with an opportunity to create a green lung for that area. It could be a place where urban wildlife thrives and an outdoor classroom for many of the schools in the area. I hope that woven into the design will be the spaces, and even the messy areas, that wildlife needs—for example, along the edges and on the riverbank—and the sort of meadows that the London Wildlife Trust has developed so well. The trust’s membership demonstrates that just as many people who are interested in all these things live in that part of London as anywhere else. In fact, urban wildlife can be more thrilling than rural wildlife because it is often in much greater proximity to us, so we can see it better—indeed, going back to Lambeth the other night, I met a fox not a half a road-width away and it was quite exciting.
The green legacy is important, but I want to talk about one particular aspect of it—one particular community that had to make a big sacrifice for the Olympic park and one very special space that was lost. I shall say why the promises that were made when that sacrifice happened need to be kept. The space that I am talking about is the Manor Garden allotments that used to be beside the River Lea. The land was given before the First World War by Major Arthur Villiers, who bequeathed it for use in perpetuity by East End families, whom he saw as being in great need of allotment space because their diet was so poor. In the Second World War, the allotments became a model for the grow-your-own Dig for Victory campaign. There was some hope at the beginning of the development of the park that perhaps the allotments could be kept, with their 100 year-old apple trees and fig trees, as a model of Englishness—because allotments have a lot to do with what Britishness is. The community that ran the allotments, the Manor Gardening Society, was a very good model of community, being mixed in age, background and ethnicity, but it was brought together by a common interest in growing food. However, the difficulties in keeping the allotments where they were were considered too great and they were relocated temporarily but with a crucial promise that, when the compulsory purchase order was granted, they would be given a space in the legacy park that was equivalent both in size and quality once the Games were over.
Now we are into that period of looking at the legacy. The space that has been offered is split between two different sites. Although the area is exactly equivalent in size to the former allotments, it does not have any of those margins around the edge of the river bank. In theory, this is more provision than the society originally had, but that is only if one counts the actual allotment space and not the surrounding wild land verging on the plots. It is that combination of both allotment land and land for wildlife that can create symbiotic biodiversity, meaning that pollination takes place, that people are concerned about the wildlife and that you can create a very living green lung. We need to ensure that. I hope that the members of the corporation who are here today will take this back and think about it. The Manor Gardening Society has struggled on through its relocation. It has been difficult. Some members gave up because they could not travel as far as their temporary plots. However, its waiting list has grown.
That brings me to another issue that needs to be solved. The offer of replacement allotments now appears to be only to individual plot holders, not to the society as a whole. The society is the embodiment of a particular community interested in growing. It would be a shame if as vibrant and historic a community as the Manor Gardening Society did not have its rightful place in the park. I have talked to Mr Dennis Hone about that, and he was kind enough to write back to me. He said:
“The commitment was to individual plot holders at the time and the LLDC will continue to work with those plot holders who wish to return”.
My question is: why would the LLDC want to micromanage that? Earlier in the same letter, he says:
“The ODA has worked closely with the Society on the detailed design of the legacy allotments which is something the LLDC has continued”.
On the one hand, the LLDC agrees that the society has a role to play and has extended the community space available but, on the other, it wants to deal only with individual plot holders. That may seem a detail but given the effort across London, from bodies such as the London Food Board under the terrific chairmanship of Rosie Boycott, that has gone into spaces where Londoners can grow food, and considering the effort that the Department for Education is putting into the Food for Life initiative so that schoolchildren understand about growing food, that detail must be got right for the legacy of the park. If we are interested in children having an all-round healthy lifestyle and in tackling issues such as obesity, this detail is extremely important.
My Lords, I add my congratulations to the noble Lord, Lord Mawson, on securing this fascinating debate. I also declare interests, as I leave the Royal Opera House and head towards the BBC, as a board member of LOCOG and chair of the Cultural Olympiad board. I should point out that the Cultural Olympiad board has been asked to continue, to guide and draw action from an assessment being carried out by Liverpool University. This is due by Easter, and we will then take recommendations to the Government. However, I want to share what I think are some of the lessons from last year.
First, as has already been mentioned, one of the most striking aspects of the London 2012 festival was the level of participation. At every event, from the spectacular Fire Garden at Stonehenge to the UK’s biggest celebration of dance, the Big Dance to Unlimited, I saw how people of all ages and backgrounds seized the chance to be part of something creative, ambitious and big. We put events outside and in public places, and the audiences, large and diverse, found them. We wanted free events, and it paid off: 19.8 million people took part; 80% came for free.
Here is the rub: overall, 38% of those taking part were under the age of 24. This to my mind shows the immense appetite for culture among the young. One of the legacies must be to secure future opportunities for participation in culture for both young people and those who commonly feel excluded from the arts.
The festival also used the fact of the Games to highlight how good we are at arts and culture. About 40,000 journalists were in the UK to cover the Games, which meant that we could secure publicity for arts and cultural organisations both here and across the world. For example, the Cultural Olympiad programme in the West Midlands alone secured media valued at £11 million. That underlined the huge value of linking large-scale events to the arts and the importance of linking into similar nationwide events in the future, such as the Commonwealth Games in Glasgow. By the way, the arts also need to work in close collaboration with agencies such as VisitBritain, building the importance of the arts and culture in tourism.
As has been said, Britain saw something that it liked about itself during the summer and during the festival. The world saw the strength of our arts and culture and why Britain is such a fantastic place to visit. However, as we all know, the artists and leaders who made it possible, such as Stephen Daldry, Danny Boyle, and many others came originally from the subsidised sector. Indeed, the festival could not have happened without the commitment of the publicly funded organisations—museums, theatres, galleries, opera houses, concert halls, and so on. Their financial strength over a long period gave them the security to create the ambitious commissions that we saw in the festival. Stable investment in the arts must be sustained if we are to maintain that legacy. With every £1 of public subsidy for the arts generating £4 of earned income, it also makes financial sense to do so.
To my mind, the festival underlined the strength and economic value of our cultural industries and the importance of nurturing creative talents in future generations. I am still really impressed by the way that the Tate, working with CBBC and the animators Aardman—the people who produced Wallace and Gromit—offered 34,000 children the chance to learn how to animate and create a film, “The Itch of the Golden Nit”. The film has already won a children’s BAFTA and a place in the Guinness Book of Records for the largest creative team ever. I guess that we will have to wait 20 years to judge its true success: to find out how many lives we changed and how many new animators and filmmakers the project created.
I know that the House has recently debated the EBacc, but I briefly add my view. The arts must remain at the heart of the national curriculum to allow all children, regardless of their background, the chance to develop their creative talents and contribute in future to our world-leading arts and creative industries. One day, we will look to a new generation to create an event of a magnitude to rival London 2012. Let us give them the skills to do so.
The Cultural Olympiad also gave us a chance to show the value of a creative education in helping young people to find jobs. Inspired by the work that we have been doing at the Royal Opera House, where 1% of employees are apprentices, the festival offered unemployed young people in the host boroughs apprenticeships in the arts. Forty per cent of the participants had secured a job by the time the scheme ended. That is why the Arts Council decided to fund a comparable, national creative employment programme. That alone could be an enormous legacy of the Cultural Olympiad, and one that demonstrates how much we achieve by investing in the creative talents of children and young people.
The festival also highlighted something key about the role of the BBC and the media more broadly. From the beginning, it was vital that the BBC, as a public broadcaster, was at the heart of the Cultural Olympiad. It delivered collaborations and coverage of exceptional scale and quality. It built, for example, on the World Shakespeare Festival, which was an extraordinary achievement, to create its largest ever education project. In the Radio 1 Big Weekend, it gave young people from Hackney and the East End the chance to work with their musical heroes and learn production and backstage skills. By the way, as I found out, it was a fantastic, exhilarating weekend.
The Cultural Olympiad showed how the BBC, working with cultural organisations, world-class artists and public and private funders can teach creative skills and transform the life chances of young people. It also underlined how important the media—in particular the BBC—are in fuelling public appetite for the arts.
One amazing example of that from last summer was The Space. This digital platform, funded jointly by the Arts Council and the BBC, gives people wherever they are a chance to experience the arts directly online. You could enjoy a private view of the Goldsmith College degree show or hear, if you wanted to, the Stockhausen helicopter string quartet as it played above Birmingham. There were many other rich, amazing events. It is clear to me that The Space and other digital innovations like it have immense potential for promoting the arts and giving people direct access to artists, performances and art. It is a profoundly important development, which comes out of the cultural festival.
I have always believed strongly that world-class art and culture should be available to everyone. Out of the many excellent things that the Cultural Olympiad did, fulfilling that goal is by far the team’s proudest achievement. I shall pick up on something that the noble Lord, Lord Addington, said by remembering that, as we proved in that summer, if we bring everyone together—whether it is through sports, arts, tourism or whatever—we can achieve great things.
My Lords, I first declare my interests as a council member of University College London and a trustee of the Barbican Centre Trust. I congratulate the noble Lord, Lord Mawson, along with other noble Lords, on not only initiating this debate but constructing one that can be so wide-ranging in its subject matter. I also congratulate the noble Lord on his passion for regeneration in east London.
My second motive is to say how delightful it is to follow the noble Lord, Lord Hall, who gave us such an interesting description of his work as chairman of the Cultural Olympiad board. I congratulate him and Ruth Mackenzie on all the work they did in constructing the London 2012 festival, which was so well captured in the book of photographs that many of us have received thanks to the noble Lord. I think the last time that I saw the noble Lord, Lord Hall, was at the aquatics centre when he was giving out medals and I was giving out flowers—there is a job for everyone in this world. I wanted to congratulate also Danny Boyle. I have a whole list of other really fantastic people, such as Stephen Daldry and Mark Tildesley, who were all involved in the various opening and closing ceremonies for the Olympics and Paralympics. Many of us have spoken about those ceremonies today but their impact on us all, nationally and internationally, has really been quite phenomenal. They will be memories that we have for all time.
As far as the festival is concerned, it had nearly 20 million visitors and there were more than 25,000 artists from all competing nations—what an achievement. One of the most inspiring occasions, which my noble friend Lady Bonham-Carter mentioned, was in being part of the 3 million taking part in Martin Creed’s work when we all stood there at 8.12 am on the opening day, ringing whatever bell we could find to hand. That was participation writ large. We all look forward to the evaluation, which the noble Lord, Lord Hall, mentioned of the festival and the Cultural Olympiad but there can be no doubt that the evaluation’s conclusions will be extremely positive.
Ruth Mackenzie was quoted as saying after the festival:
“All of our partners want to know what happens next in economic and cultural terms”.
There are promising signs in terms of local legacy. The Arts Council said that from 2012 to 2015 it plans to invest more than £49 million into national portfolio organisations in east London; I note the caveats of my noble friend Lady Doocey there. The London Legacy Development Corporation has agreed an arts and cultural strategy, due to be launched this year, which uses Olympic and Paralympic momentum to motivate, raise aspirations and promote cultural activity. There is also the new Legacy List, of which the noble Lord, Lord Mawson, is a trustee. It is a charity,
“dedicated to making creative connections between people and the future Queen Elizabeth Olympic Park”.
During the festival, of course, an incredible number of diverse and potentially competing interests were brought together to create a phenomenal cultural menu for audiences around the country. It is this legacy of creating partnerships which we need to maintain in the future, particularly in east London.
The Barbican Centre was able to provide an unparalleled variety of events during the London 2012 festival. These were not just for the City of London. The organisation has worked for a long time in east London and the Olympic events took the City beyond its boundaries to work with communities in Hackney, Shoreditch, Tower Hamlets, Bethnal Green and beyond. In recognition of that commitment the Barbican has been asked to mount, with the east London artistic partnership Create, the weekend to celebrate the public reopening of the Olympic park in July. That work continues as part of the Olympic legacy. The Barbican Centre and the Guildhall School are now working closely with the east London boroughs to discuss the formation of a partnership which could drive forward an integrated, comprehensive programme of creative learning.
There are many other positive developments on a national level, especially in the skills area. My noble friend Lady Bonham-Carter mentioned those. The Big Lottery Fund is establishing a trust to build on the social and community aspects of the Games legacy. There is the extension of the creative employment programme that the noble Lord, Lord Hall, did so much to create at the Royal Opera House. There is the creative people and places fund and the creative apprentices programme. We have also had funding announced in the Autumn Statement for creative skills through Skillset.
Local and national aspects are important but there is a global dimension here, too, as the mayor’s cultural strategy recognises. The UK has the largest cultural economy in Europe and the creative and cultural industries represent one of our economy’s greatest success stories. We must take advantage of the opportunities provided by cultural tourism. As the noble Lord, Lord King, mentioned the arts, museums and galleries are a vital part of the UK’s offer to tourists. Then there are the overseas trade opportunities. As the DCMS said in its recent evidence to the Culture, Media and Sport Select Committee:
“The success of the 2012 London Olympic and Paralympic Games has focused the world’s attention on the UK’s creativity. UK Trade & Investment … plan to build on this by helping UK companies, including those involved in the delivery of the London Games”.
I welcome all this but it needs to be put together effectively. There needs to be co-operation between VisitBritain, the Arts Council and the British Council to pull that together.
What are the additional challenges? There is the continuing question of access to finance. The Creative Industries Council recently produced a report by Ian Livingstone. This excellent report highlights the scale of the challenge. How are the Government going to take those recommendations forward? We also have the EBacc, which my noble friend mentioned extensively. I entirely agree; we had a debate on that subject only last week and the feeling within this House was quite unanimous. Then we have the issue of the resourcing of the DCMS and the budget of the Arts Council. The DCMS co-ordinated the successful bid for the 2012 Olympics and oversaw the Olympic Delivery Authority and the Paralympics, but its funding has been cut.
Meanwhile, businesses must be able to capitalise on their involvement in the games. Suppliers must be allowed to promote their work for the Olympics or similar events but, at the moment, the terms and conditions do not allow the businesses in those creative industries to publicise that. All those suppliers were promised a long time ago that that would be settled. Finally, there is, I hope, the great prospect of another London 2012 festival if the Cultural Olympiad board recommends that to the Secretary of State, which I very much hope it will.
My Lords, I, too, salute the noble Lord, Lord Mawson, and commend his consistent leadership and advocacy for all the communities in the East End of London. I also congratulate the noble Lord, Lord Hall, on the Cultural Olympiad.
The London 2012 Olympic and Paralympic Games were won with the promise to promote inclusion, with a vision to deliver new opportunities for some of the poorest and most socially excluded neighbourhoods in the capital, transforming the heart of east London. London’s five legacy commitments included increasing opportunities in sports and jobs, to showcase the diverse communities and transform the East End. In the end, the UK spent £9.3 billion of public funds on the 2012 Olympics. A majority of the public quite rightly believe that this has been a worthwhile cause. Had the Government not intervened, the Games would certainly not have happened.
Of that £9.3 billion, £1.7 billion has been used for regeneration and infrastructure, opening up London to the world. Five villages—4,000 homes—will be built in the vicinity of the Olympic park, relieving pressures on local housing and providing more jobs in the area. We need to allay fears that local residents may be forced out of east London, as happened to many living on the edges of the River Thames and in Canary Wharf during the Olympics development. Here, dreams of access to good-quality and plentiful low-cost housing and local jobs, promoted at the time by the noble Lord, Lord Heseltine, remain unfulfilled for most local graduates.
In Tower Hamlets we welcomed the Olympics with an open heart. There has been a dramatic improvement to the infrastructure of London and the East End. I welcome the Games’ legacy and its reflection of Danny Boyle’s extremely energising and imaginative vision. Its inclusivity embraced our health service and innovations. It saluted our music, and his tribute to our creativity was inspiring and gracious. Olympic flames beamed our joy and expectations across our country and the world. Yet the prospect for the citizens of the five boroughs was not just that we were hosting greatest show on earth, as it was regarded by some, but also that its legacy would be more than just the park, a few thousand homes, and some jobs in the service and construction sectors.
Our expectation was that the legacy, addressing severe inequalities in one of the richest cities in the world, would be transformational for jobs, and increase skills and opportunities, so much so that there would be a reverse in the inequalities that have separated east London from the rest of the city for perhaps a century. Tower Hamlets has one of the highest rates of youth and graduate unemployment in London. Bethnal Green and Bow has the highest level of child poverty in the UK, with more than 50% living in poverty. From the bottom of my heart I welcome the promise of the legacy to boost long-term employment and improve skills in our boroughs. This should not be just for jobs in the hospitality and security sectors but also for the broader development of jobs in the IT industry. Most importantly, the management structures of the institution delivering that legacy should visibly reflect these boroughs’ populations.
The populations of the five boroughs are blessed with countless entrepreneurial men and women, whose talents make east London a vibrant community, contributing silently to the creation of this new city in the East End about which we are proudly talking. The East End is often reported as having some rough edges, with immigrants having settled in waves among the white working-class locals who have been living there for generations, but Bangladeshi communities in Shadwell and Whitechapel, the African and Caribbean communities in Hackney, and the Turkish, Kurdish and orthodox Jewish communities in Dalston have all contributed to creating strong identities, championed by the bid itself. The curry capital and Banglatown are as much loved as the 24-hour bagel shop, with the Shoreditch yuppies bringing with them, of late, new outdoor cafes, night clubs and little boutiques, now dotted around Spitalfields market, enlivening the area in the spirit of Danny Boyle’s depiction.
The shooting in August 2011 of a young black man by police in north London triggered the worst rioting across the capital for 30 years. Chaos raged between rioters and police in Hackney. Many people looted shops shamelessly. Experts have reminded us that the riots are a reminder of the deep-seated prejudice and division in many parts of our cities, and I accept that the Games could not have an impact on many of those who over decades have felt most marginalised; nor will a few cultural events and projects engage those who have suffered the long-standing effects of racism, and are at the bottom of the pile in the education system—unemployed, disengaged and alienated. The disfranchised from Bethnal Green, Dalston and Stratford are witnessing the developments and seeing outsiders moving into new houses, claiming jobs that they are not qualified to take.
The legacy board has a tough job in aligning some of its strategies to the needs of those in the community who have been born and live within the reach of the park, and who may feel that they have no place or sense of ownership in their institutions. I hope that in building the legacy, the board will ensure the proper and serious involvement of a wide range of individuals and organisations, so that the final outcome reflects the culture, aspirations and experiences of those who understand, and live in, the broad cultural diversity of our communities. These include Mary Swenham, a local businesswoman, Shamim Azad, a local poet, and Joleeda Ali, a film maker. These are women who have contributed to making the communities what they are. What is the Minister’s assessment of such women and of their contribution to making a real legacy for the community?
The noble Lord, Lord Mawson, asked for consistent leadership. I agree. A narrative that speaks the language of our young men and women, and a vision that translates and reflects their experience and culture, are a must for a successful legacy. The Games have conquered the imagination of our communities and inspired the whole nation. The legacy must do so too.
My Lords, I too congratulate the noble Lord, Lord Mawson, on securing this important debate and his comprehensive opening speech.
Any consideration of an Olympic legacy that does not give a high priority to children will be seriously flawed. Childhood lasts a lifetime and what we deliver for them today at the early stages will influence their lives for ever. In the Government’s legacy plan, one of its five aims is to inspire a generation of young people to take part in local volunteering and in cultural and physical activities. The role of the arts and creative industries in delivering a lasting Olympic legacy should be to inspire a generation of children, as well as young people, to take part in the arts.
Every child should be able to take part in the same artistic activities that we enjoy as adults, but truly to share in that same experience and reap the benefits they need not only their own books but plays, films and music, created for them by artists who know how to fire up their imaginations. This is a vital part of their growing up and a preparation for their adult lives. The arts and creative industries must do more for children than they do for adults. Children should not just be expected to sit and watch. The creative industries have to put on plays for them but also give them opportunities to put on their own plays. They should not just publish books for them but also encourage them to write their own stories and poems through competitions and campaigns, such as the ones set up by Booktrust.
The creative arts have to bring children into museums and art galleries, and let them paint, draw and have hands-on participation. They should be brought into concert halls, where they can make music and dance. Children need twice as much to stimulate their fresh, impressionable minds and to create that wonderful feeling of experiencing things for the first time. But more often than not that is not the case.
In a debate last year, I spoke about the freedom of information request made by the charity Action for Children’s Arts. I am a patron of this charity and declare an interest. It showed that most of the UK’s major arts organisations spend far less on producing work aimed specifically at children—in most cases only around 1% of their total budget—than they do on work for adults. With a heavy heart I say that today, of the £337 million in grants that Arts Council England will give next year to the 688 organisations that it supports, just over 2% will go to organisations producing work specifically for children. Fifty-one organisations will receive grants ranging from £1 million to £25 million but only one of them, London’s fantastic Unicorn Theatre, produces work exclusively for children. What kind of legacy will this type of policy produce?
Children need more, yet we give them less. They depend more than any other population group on services in their local community, services provided by charities as well as local authorities. That includes after-school clubs, nurseries, parks which offer sporting activities, such as those provided by the Mappin Group’s parks and community project, music clubs, such as the World Heart Beat Music Academy, and of course libraries, many of which are being threatened by cuts.
“Please sir, I want some more”, but Oliver’s plea was turned down, and that is when the real problems started. In the current economic climate, asking for more is particularly difficult. Where is it to come from? Children’s arts organisations are often underfunded and understaffed. They lack the time and expertise to go in search of funds from the private sector. They are wholly dependent on public funding and, like Oliver, are apt to find themselves at the mercy of the beadle.
Last year, the Action for Children’s Arts conference called for arts organisations and the arts funding system to put children first. I am making that plea once again. For if we really want to secure a lasting legacy from the Olympics, we have no choice but to put children first. Action for Children’s Arts has two proposals to make: first, to create an Olympic legacy working group, made up of leaders from the arts and creative industries, with a brief to identify ways of integrating work for children into the output of their organisations; and secondly, that arts funding bodies be asked to evaluate the extent to which their existing policies for children encourage artists and arts organisations to create original works for this age group. So I ask my noble friend: will the Government support these proposals and, if so, what practical steps will they take to facilitate them?
All children need beauty around them, but those from disadvantaged backgrounds, whose lives revolve around gang and drug culture, do not have any exposure to creativity, so they need it more than ever. They need to be able to channel their energy creatively, artistically and positively to feel that they belong and have a part to play in their community and their society, giving them the opportunity to create a legacy that they can pass on to their own children. Surely this is what we all want for all children, so let us make sure it happens and that we do not miss this opportunity that the successful London Olympics have given our great country. A nation is judged by the way it provides for its children, the future. We must not let them down, so let us give children more.
My Lords, the noble Lord, Lord Mawson, is to be thanked for and congratulated on bringing this topic to the House for debate today. When we look back at last summer, we remember Britain transformed from passive to active in both sport and culture. It became ever more evident that the pledge made when London won the bid was a promise that the nation demanded that we keep. It subsequently became more evident that it could be achieved only if key players worked in collaboration with each other. That is why this debate is so crucial. Are we satisfied that the collaboration is working? Are we confident that the legacy will be delivered?
I began by thanking the noble Lord, Lord Mawson, for his initiative. Now I thank him for the way he began this debate. His personal statement laid down a blueprint for all other contributors to follow. He was positive, critical and creative. His experience and expertise were there for all to see. We are incredibly fortunate to have others here with us today who have shared their knowledge, world-class expertise and vision of the cultural future with us. A galaxy of stars has brought us a shimmering debate. As a footnote, I must also acknowledge the contribution made by outside contributors; the briefings came thick and fast. They were all helpful and significant, and we are most grateful. I learnt an enormous amount from them.
The role of the Arts Council is important in the realisation of the legacy and for Britain’s international reputation. It pledged to invest in the arts and cultural experiences that will enrich people’s lives. Between 2011 and 2015, £1.4 billion of public money from the Government will be invested in the project, and a further £1 billion has been pledged by the lottery. In March 2013, there will be a full evaluation of the London festival—other noble Lords have mentioned this—and we await that publication with enormous interest.
East London has been debated here very fully today, and it remains a strategic priority for the Arts Council. The noble Lords, Lord King and Lord Mawson, and many other noble Lords reminded us that the transformation would not have happened without the Olympiad. It is all the more welcome as east London was a deprived area that was desperately in need of regeneration. The noble Baroness, Lady Doocey, shared with us her unique engagement and regeneration experiences and demanded the right kind of legacy. How we agree with her. We also welcome the apprenticeships and paid internships in the arts sector, which were mentioned by many noble Lords. They are invaluable at a time of such high unemployment. Innovations in music and dance schemes offer great opportunities. Many areas are committed to this initiative, and foremost among them are the Royal Opera House and the London Symphony Orchestra. The noble Baroness, Lady Bonham-Carter, spoke about educational opportunities, and she was quite right. With such internationally renowned contributors, many others will surely follow. My noble friend Lady Andrews and the noble Baroness, Lady Bonham-Carter, spoke inspiringly about the opening ceremony, as did other noble Lords. I hope that the noble Lord, Lord Hall, who is to be congratulated on his new appointment, will ensure that it is screened regularly, just to keep in our minds what a wonderful moment it was when we looked in disbelief at those great nurses dancing around and all the other things that we witnessed and identified with as we retaught ourselves a history lesson that all of us should remember. This debate has been unique in the all-star line-up who have spoken today. They have shown us what is being done and what can be done. It is a message that must be widely spread.
So why I am still left with a sinking heart? Why does the political cynic in me have misgivings about the legacy? Why, even after today’s uplifting debate, do I feel a bit like Ruth amid the alien corn? Quite simply, it is because the Government’s ill considered actions with regard to local authority funding and the inexplicable actions of Michael Gove put all these things in doubt. As to the first, local authority funding has been slashed. Clearly, at a time of economic stress that would not be unlikely, but what is clear is that the funding reductions have been cynically targeted at Labour councils, often in areas of high deprivation, to such an extent that libraries, theatres and museums are under threat. Much has been said about the fine city of Newcastle. We await with trepidation the outcome of those negotiations. These are people centres. We have talked about them this morning, and it is vital that people have access to cultural activities all over Britain. All the good work being done, as we have heard today, will be undermined by unfair funding, and the legacy should be felt by everyone in Britain, not just by those in east London.
As for Michael Gove, much has been said already in this Chamber and in the press. His proposals, yet to be finally published, could totally dismantle grass-roots sport and culture in our state schools. I remind noble Lords that these schools educate 94% of our young people, but Michael Gove’s proposals threaten to tear the heart out of primary and secondary schools. His curriculum proposals spell doomsday for our next generation of young people, and for the hopes that the legacy so clearly brought us. The noble Baroness, Lady Benjamin, reminded us in a powerful speech that we must put children first. Children must be introduced to sport and the arts at the earliest opportunity. We must ask why Michael Gove is ignoring that fact. No amount of outside enrichment can compensate for state schools devoid of ring-fenced funding and the provision of properly trained teachers. Michael Gove chooses to ignore all this.
Though I regret those negative observations, I am convinced that the legacy is literally a once-in-a-lifetime opportunity; others have said that. All of us must demand a review of national policies that would deny us the rightful outcome. By working together, we can indeed succeed.
Finally, thanks are due to all participants. All have shown their commitment. It has indeed been an outstanding debate.
My Lords, it is a privilege to thank the noble Lord, Lord Mawson, and particularly to acknowledge his pioneering work in east London. He was one of the earliest proponents of bringing the Olympic Games and Paralympic Games to east London. How grateful we all are.
We are also fortunate to have in their places today in your Lordships’ House Members who have made outstanding contributions to the Games and their legacy. I thank the noble Baroness, Lady Grey-Thompson, for her continued inspirational work on sport, disability and the planning and legacy of the Games, the noble Lord, Lord Hall of Birkenhead, for his leadership on the Cultural Olympiad, and my noble friend Lady Doocey for her work in ensuring a legacy for London. It would also be most remiss of me not to acknowledge the supreme efforts of my noble friends Lord Coe and Lord Deighton in masterminding the Games, which made their country so proud.
This debate allows us to maintain attention on securing the most enduring legacy from the Olympic Games and Paralympic Games. The legacy is wide ranging. Indeed, the International Olympic Committee president has already said that London provided a legacy blueprint for future Games hosts. The Government are committed to its delivery.
On communities, the Games provided a focus for people across the United Kingdom to come together, reinforcing so much that we all share. The torch relay was the first indication that people in every part of the British Isles were taking the Olympic spirit to their hearts. That was raised very movingly by the noble Baroness, Lady Grey-Thompson. Alongside the staff, the organising committee and its partner organisations, legions of volunteers and our superb Armed Forces ensured that the Games ran like clockwork. From July to September, up and down the country, communities came together to cheer on their sporting heroes.
London 2012 made people proud to be British and to be part of their local community. We want to ensure that people continue to have opportunities to come together. I echo what the noble Lord, Lord Mawson, said: collective activity, involving the public, private and voluntary sectors, and leadership and decision-making at the local level create the conditions for people to live in vibrant and successful communities.
My noble friend Lord King of Bridgwater raised London regeneration in terms of ExCeL and the contribution to the economy. I am particularly mindful of the comments raised by my noble friend Lady Doocey on bureaucracy. However, the noble Lord, Lord Mawson, spoke most powerfully about what has happened and will happen in east London. The redevelopment of the Queen Elizabeth Olympic Park will offer iconic visitor attractions alongside new homes, schools, businesses and open spaces. I say to my noble friend Lady Miller of Chilthorne Domer that green lungs are vital; I speak as a very keen gardener.
I say to the noble Baroness, Lady Uddin, that of course business enterprise is important. It is important that business men and women play their absolutely essential part in economic recovery and regeneration.
The Government are committed to improving sport participation figures, which are encouraging. Sport plays a key role in bringing communities together and there are many initiatives. Sport England’s Places People Play programme has already provided local sports clubs with grants to improve and upgrade facilities. I say to my noble friend Lady Benjamin that children are of course absolutely key, and sport of is one of the great joys of being a child. Nearly 60,000 people have signed up to volunteer in their communities to help fellow local residents to get involved in sport. The Government and the Mayor of London’s office have set up the Paralympic Legacy Advisory Group to ensure that the Paralympic legacy is strong. Through Sport England, £1 billion will be invested over the next five years in the youth and community sports strategy to encourage all to take up sport.
In response to the noble Baroness, Lady Billingham, the Government will shortly be announcing plans which acknowledge the important role that sport plays in our schools. Physical education will remain a compulsory part of the curriculum at all four key stages of education.
On volunteering, I shall never forget the spirit and humour of the volunteers last summer. The Games have shown what a huge impact volunteering can have and how personally rewarding it can be. Volunteering is inspiring, contemporary and exciting, and a key part of community life. The noble Baroness, Lady Grey-Thompson, in her inimitable way, referred to knitting.
It is important that those who are new to volunteering or inspired by the Games are given similar encouragement and opportunity. Since the Games, Team London ambassadors have continued to provide a warm welcome to visitors during major cultural and sporting events. The charity Join In is aiming to build on its achievements in 2012 with a new programme for 2013. The decision by the Big Lottery Fund to use its share of funds generated by the sale of the Olympic village to set up a UK-wide Spirit of 2012 Trust is very welcome. It is no surprise that the Commonwealth Games 2014 in Glasgow received more than 10,000 volunteer applications within the first hours of advertising its own plans.
Married to a sculptor on the council of the Society of Portrait Sculptors, I need no rehearsing as to the importance of the arts to our culture and our nation. The UK delivered the largest nationwide cultural festival ever staged and the most ambitious of any Olympic Games. The noble Lord, Lord Hall of Birkenhead, with the Cultural Olympiad board and its director Ruth Mackenzie and her team, led this celebration of the UK as a centre for cultural innovation and creativity. The many public and private sponsors and supporters who worked together to ensure its success deserve our considerable thanks. As the noble Lord, Lord Hall, observed, nearly 20 million people attended events across the country, from Big Dance to Bandstand Marathon and bell-ringing.
The noble Baroness, Lady Andrews, drew attention to heritage. The noble Baroness, Lady Coussins, drew attention to languages and skills and, indeed, Shakespeare—but I fear I will have to write to her about her earlier Parliamentary Question. Of course, foreign languages are one of the core academic subjects of the English baccalaureate.
Public awareness of the festival was high, particularly among younger age groups and minority ethnic groups. The “Unlimited” series of commissions—29 commissions of work by deaf and disabled artists—ensured that the shift in the UK’s perceptions of disability was seen in culture as well as in sport. As with the delivery of the Cultural Olympiad, the cultural legacy of the Games is one that the Government want the sector to lead, with support from government. They have asked the Cultural Olympiad board to look at further options to maximise the legacy of the Cultural Olympiad. As the noble Lord, Lord Hall, said, these proposals will be received in March.
As regards the importance of arts and culture within education, which was raised by the noble Lord, Lord Hall, and my noble friends Lady Bonham-Carter and Lord Clement-Jones, the English baccalaureate is a core set of academic subjects that gives students the broadest possible opportunities to progress. It is designed to leave around 20% to 30% of time in the curriculum for pupils to take other subjects. The importance of creative subjects such as art, drama and music is fully recognised as part of a broad curriculum. The Department for Education is currently considering how to ensure that high-quality qualifications are available in these subjects. I know that my noble friend Lady Bonham-Carter mentioned the word “imminent” but I am told that the word I can say is “soon”.
The noble Baroness, Lady Billingham, referred to arts funding. Protecting all arts funding while cutting public spending in other areas is simply not an option. None the less, the Government are committed to supporting art and culture. Overall, £2.9 billion will go to the arts over the life of this Parliament; £1.9 billion will be in direct government funding and more than £1 billion in lottery funding.
Our country has the largest creative industry sector in the world on a per capita basis. The sector exports almost £9 billion-worth of services. The artistic and cultural success of the Games offered a very specific opportunity to promote the UK’s excellence across the creative industries internationally and at home. The coverage of the Games delivered a worldwide advertising campaign for the creative industries of the UK.
As was highlighted by many noble Lords—although I particularly want to mention what was said by the noble Baroness, Lady Andrews, my noble friends Lady Bonham-Carter and Lord Clement-Jones, and the noble Lord, Lord Birt—900 million people watched the opening ceremony. They witnessed our excellence in theatre, music, screen, art, heritage and storytelling. I shall never forget Thomas Heatherwick’s spectacular Olympic cauldron, which was magnificent. How proud we were to see its assembly and its fulfilment during the ceremony.
The challenge now is to translate that into more international business and growth for the UK. We aim to generate £13 billion of benefit to the UK over the next four years from additional sales and inward investment, and from attracting 4.6 million extra visitors. The GREAT campaign promotes Britain and British business as part of Creativity is GREAT in key markets around the world. UKTI will continue to champion our industries and help them to secure global opportunities.
We had some intriguing suggestions on lessons learnt from noble Lords, including the noble Lord, Lord Birt. The suggestion made by the noble Lord, Lord Mawhinney, of banging heads together is particularly fine—perhaps, I should say, by Ministers. However, the success of the Games was not by chance. It was due to stable and consistent leadership, meticulous planning, cross-party support, as the noble Baroness, Lady Billingham, so rightly advised us, and the public and private sectors working together. The thoughtful speech made by my noble friend Lord Addington dealt with that very well and powerfully. What we have learnt from the Games will be embedded as we take the legacy forward.
We should not lose sight of the fact that London 2012 was, from the outset of the bid, the first legacy Games. We should be proud of what has already been achieved. We are at the beginning of the legacy journey. We must focus on delivering an enduring legacy nationwide. The Games will be remembered as a summer of excellence for Great Britain. They should also be remembered for helping to shape and foster our future communities and culture for the national good. That means inspiring a generation to contribute to their communities in innovative ways. My noble friend Lady Benjamin rightly highlighted the importance of children. Clearly, they are the future of our country and it is our responsibility to ensure that what happened last summer is part of their legacy and that they gain considerable benefit from it.
It also means building on the United Kingdom’s identity as a centre for cultural innovation and the new audiences engaged by the Games. It means capturing the success of creative companies in delivering the Games and translating this into new business at home and abroad. A great deal of work will be going on in Brazil but it is encouraging that British companies to date have won 60 contracts for the Sochi Winter Olympic Games and already £7 million-worth of deals in Rio. We must now build on these successes and I am sure that there will be many more opportunities.
We have made an excellent start. I hope that we will ensure that the noble Baroness, Lady Billingham, will not have her heart sinking. I believe that many people across the piece are working extremely hard and effectively to ensure that the legacy is as strong as our nation deserves. As many of your Lordships have said today, it means continuing to work in partnerships in all sectors—public and private—and within communities. Those are the places where our goals can be achieved.
We have learnt that the world thinks more positively of us as a nation after the Games. The noble Lord, Lord Birt, took us through some interesting country and territory as to where the union flag is now placed, but I think that what he said has very much been reflected across the globe; namely, that we are seen as a warmer country, a friendlier country, a country that came together and a country that is at ease with itself. I also suspect—one can be quite moved about this—that we feel rather differently about ourselves because of the Games, which is one of the most powerful legacies that I have picked up. The Games have taught us once again that we can, as has been said, deliver great things of national importance and beyond when we, the British people, come together.
My Lords, I thank all noble Lords for their contributions to this debate. We are at the beginning of the next stage of the Olympic project when legacy must be our focus. The contributions today have helpfully opened up the issues that we must now all grasp. I cannot possibly respond to all the points that have been made and some of them are not in my area of expertise but perhaps I may offer a few thoughts.
I very much agree with the comments made by the noble Lord, Lord King. ExCel is a clue to what needs to happen more widely in east London. I agree with him that east Londoners are very nice people. I welcome the point made by the noble Baroness, Lady Andrews, about the importance of culture and heritage, and that it needs to be a living culture. It is good to have the noble Baroness, Lady Grey-Thompson, on the legacy board with me and I very much look forward to working with her. In due course, she will become clear about how little I know about sport. I welcome the comments made by the noble Lord, Lord Mawhinney, and his point that legacy is not just a government responsibility. Legacy is more important than just spending public money. I agree with him on the need for leadership and careful thought about what constitutes leadership. We will always be thankful to the noble Lord for his leadership when he intervened nearly 20 years ago in a turf war in Bromley-by-Bow. As a direct result, 1,000 flowers have bloomed.
I agree with the noble Baroness, Lady Doocey, that government should not constantly reinvent the wheel and I agree with her comments about the Arts Council. In my view there is a major problem as regards the mindset of the Arts Council. I welcome the comment of the noble Lord, Lord Birt. My daughter tells me that people all over Cuba are now wearing union jack shirts. I also welcome the comments of the noble Baroness, Lady Miller. I agree that we need to encourage wildlife in the park and I will look into the allotments issue.
We welcome the comments of the noble Lord, Lord Hall. East London is a creative hub of international significance and I know that he understands that. I also welcome the challenge that the noble Baroness, Lady Billingham, set for the noble Lord, Lord Hall, to ensure that the BBC keeps reminding us of this important moment in time.
I thank the Minister, the noble Lord, Lord Gardiner of Kimble, for his response to the debate and I look forward to working with him as we move forward in east London. I thank him for meeting me before the debate and for taking such a keen interest in the issues we face in east London.
The opportunities to extend and deepen the legacy in east London and to stimulate further investment are considerable. The opportunity to create thriving and sustainable communities is very real but this will not happen by magic. If the present procurement systems are left unchallenged, they are quite capable of simply repeating past mistakes in east London and wrecking many more people’s lives. Let us together grasp the moment. The Games have left us with an opportunity to create a world-class legacy that countries hosting the Games in future will all want to come to see.
Arrangement of Business
Motion to Take Note
My Lords, at the start of this debate I would like to beg your indulgence if I break with tradition. Today is a sad day for the House because, during this debate, my noble and gallant friend Field Marshal Lord Bramall, with whom I had the privilege of serving in the Royal Green Jackets, having both originally joined the Rifle Brigade, although at different times, will make his final speech on its Floor. Few people have contributed more, in so many ways, to the life of the nation than my noble and gallant friend as Chief of the Defence Staff, Lord Lieutenant of London, President of the MCC and, for the past 26 years, an active Member of this House. He made his maiden speech on this subject and I look forward to hearing again the views that we share, and which he has long and consistently expressed with his customary vigour and clarity.
I hope I may also share a personal memory that I suspect he may have long forgotten. Almost 53 years ago, I first played cricket under his captaincy on our regimental ground at Winchester. Towards the end of the match, I hit the biggest six of my life, and, if I shut my eyes, I can still see the ball soaring over the trees at the edge of the ground. However, as I walked towards the pavilion, not out, I was taken aback not to be welcomed by my captain but rocketed for playing such an irresponsible shot when we were fighting for the draw that we had achieved. With such commitment to the cause, it is no wonder that he became Chief of the Defence Staff. I am sure that the whole House will join me in thanking him for his many contributions and wishing him and Averil every good fortune in the future.
In 1998, General Lee Butler, one time commander of the United States Strategic Command, said:
“I see with painful clarity that from the very beginnings of the nuclear era, the objective scrutiny and searching debate essential to adequate comprehension and responsible oversight of its vast enterprises were foreshortened or foregone”.
The reason why my noble friend Lord Hannay and I tabled this debate was precisely because,
“objective scrutiny and searching debate”,
on both the prospects for multilateral nuclear disarmament and the contribution that Britain could make have, for too long, been conspicuous by their absence from the agendas of successive Governments and both Houses of Parliament. This unwillingness to encourage both was exemplified by the Answer to the Written Question asked by the noble Lord, Lord Lea of Crondall, on whether the Government,
“will publish their Trident review; and, if so, when”?
The Written Answer states:
“The Trident Alternatives Review will report to the Prime Minister and Deputy Prime Minister in the first half of 2013. There are no plans to publish either the report itself or the information it draws upon due to its highly classified nature. It remains too early to speculate about what it might be possible to say publicly about the conclusions when the review has been completed”.—[Official Report, 19/12/12; col. WA 301.]
Yesterday, the chairman of the Cabinet Office Trident review committee, Douglas Alexander, in an interview in the Guardian, lifted the veil somewhat by confirming that the main factors being considered, far from being highly classified, were very much ones that deserved scrutiny and debate. Furthermore, if noble Lords read the debate on the nuclear deterrent held in the other place on 17 January, they will find not only open discussion of the factors for and against the need for, or possible alternatives to, Trident, to which I will return later, but mention, by a former soldier, Crispin Blunt MP, that:
“We owe it to ourselves to think rather more deeply about this matter than we have done in the past … to review the policy properly, and as openly as we can”.
He refers to the lack of an undertaking to publish meaning that,
“there will therefore be no opportunity for us to examine the costings”.—[Official Report, Commons, 17/1/13; col. 1118.]
Of course, some details of every weapon system must remain classified and there is more to replacing a so-called independent nuclear deterrent than cost alone. However, what concerns me and many others is the reluctance of successive Governments to examine the criteria that should guide the choice of any nuclear weapon system. Our original deterrent was procured during the Cold War and, given the capability of our then presumed opponent, Trident was a credible replacement for Polaris in the late 1970s, if we were to convince the Russian Politburo that a pre-emptive attack on the United Kingdom would risk a nuclear response involving unacceptable damage to the territory and people of the Soviet Union. However, we are not at war now, except in the eyes of those who accept the assertions of George W Bush and Tony Blair that we are involved in a “war on terror” and a “war on drugs”, whatever those two terms mean. No one in their right mind can think that Trident is a usable or appropriate weapon against the Taliban or al-Qaeda, so why the unwillingness to allow scrutiny and debate on an issue that affects us all?
These criteria, as with any weapon procurement, must begin with the operational requirement and include two questions of national self-interest. First, who is it that we are seeking to deter from doing what? Secondly, what level of capability is required to achieve that effect? Military choices alone cannot provide the answers to these because nuclear weapons with the destructive power of Trident are instruments for influencing the behaviour of political leaderships, not for achieving results on the battlefield.
We sit at nuclear disarmament tables not least because of our possession of nuclear weapons. However, as with France and China during the Cold War and other states that have acquired them later, we do so conscious that we are a bit player compared with the two nuclear giants, the United States and Russia. Like many others, I am absolutely at one with President Obama’s commitment in his famous Prague speech of April 2009,
“to seek the peace and security of a world without nuclear weapons”,
in other words, global zero. Like him, I do not pretend that that can happen overnight and accept that the road to that end is paved not only with good intentions but with the opposite as some states without nuclear weapons contemplate changing their status. Like him, too, I recognise that although global zero requires those with nuclear weapons to give them up, achievement requires nations without them to play their part by encouraging those contemplating acquiring them not to do so.
One reason why my noble friend Lord Hannay and I sought this debate now and not earlier was that we hoped that we would have some indication of the nuclear disarmament intentions of the recently elected President of the United States. Sadly, we will have to wait for his State of the Union address on 12 February to hear more than a speech about fiscal cliffs and gun law. However, because the prospects for multinational nuclear disarmament are so inextricably linked with the position of the United States, I propose to comment briefly on the current framework within which any chances of their being realised are debated, conscious that others, including my noble friend, who are more expert than I will expand on individual aspects in more detail. Here I thank and commend Ian Cruse for his excellent Library note, which I am confident noble Lords will find useful, not just in this debate but in what I hope will be subsequent debates.
Leaving out the efforts to achieve a weapons-of-mass-destruction-free zone in the Middle East, which is a separate although related subject, I echo the hopes that others have expressed that the president will move quickly to make progress on the new Strategic Arms Reduction Treaty without waiting for Russia to respond; that he will re-energise focus on the United States disarmaments commitment contained in the 2010 non-proliferation treaty action plan, conscious that the 2015 review conference is getting ever nearer; that he will take an active lead of the P5 plus one negotiations over Iran's intentions, conscious that opportunities for compromise are draining away and Israel's position remains crucial; that he will use a commitment to nuclear disarmament to unblock the stalemate over agreeing a programme for the current United Nations Conference on Disarmament, particularly over the Fissile Material Cut-Off Treaty; and finally, that he will encourage the Senate to ratify the Comprehensive Test Ban Treaty, originally negotiated by the Conference on Disarmament in the 1990s. Inevitably the prospects for achieving multilateral nuclear disarmament, to which all these have important contributions to make, will depend on every nation, whether it possesses, is thinking of possessing or does not possess nuclear weapons, agreeing to that aim after careful assessment of national self-interest.
As far as Britain's contribution is concerned, the credibility of its position depends as much on our past record as on our perceived intentions. For example, I have no doubt that our role in banning cluster munitions had a decisive influence in encouraging other nations to refuse to ratify a United States attempt to modify that treaty for entirely the wrong reasons, or that that influence could also be applied to making progress with the Fissile Material Cut-Off Treaty.
I suggest that it is on our decision on whether to replace Trident with a similar system capable of taking out Moscow that our real credibility in the eyes of the world will rest—a credibility that is bound to include appreciation of the thoroughness of our decision-taking. Although the 1970s decision to replace Polaris with Trident was based on careful examination of the criteria, the same was not true of either the Labour Government's 2006 White Paper, The Future of the United Kingdom's Nuclear Deterrent, or the coalition Government's 2010 Strategic Defence and Security Review or, as far as we can determine, the current Trident alternatives review. The 2006 review resulted in the decision to retain the minimum deterrent capability necessary to provide effective deterrence and work multilaterally for nuclear disarmament, while acknowledging uncertainty about possible future threats that included a major direct nuclear threat to the United Kingdom, threats from states with more limited nuclear capabilities, or threats from nuclear terrorism. Proof that all the criteria had not been properly assessed was provided by the declarations that no distinction would be made,
“‘between the means by which a state might choose to deliver a nuclear warhead … whether by missile or sponsored terrorists’”,
“a state identified as the source of the material could expect a proportionate response”.—[Official Report, Commons, 17/1/13; col. 1106.]
However, there was no specification either of how that state would be identified or what was meant by “proportionate response”. The Strategic Defence and Security Review, endorsing that decision, added that use of nuclear weapons would only be considered,
“in extreme circumstances of self defence, including the defence of our NATO allies”.
What do I conclude from all this? In terms of the context in which multinational nuclear disarmament is being debated, there is no doubt that 9/11 changed the nature of warfare in a way that is likely to shape the demands on every national defence strategy for years to come. The task of a defence strategist includes determining whether military force should be used at all, and, if so, with what weapons. Nuclear weapons, with the potency of Trident, were appropriate weapons in Cold War strategy but are not appropriate in the post 9/11 world. Defence strategists also have to consider current circumstances that may affect the achievement of any national aim. In this case, I believe that insufficient attention is being paid to the ever-increasing threat of cyber warfare. Cyber weapons can not only disarm an adversary before he has even begun to fight, but render sophisticated armouries and even nuclear deterrence obsolete. Furthermore, as has been proved in Estonia and Georgia, cyber weapons threaten every aspect of a nation's existence, and therefore defence against such attack must be a major requirement of every Government. As an aside, just I regret that the cost of what is essentially a political weapon—the nuclear deterrent—is now laid on the defence budget, because of its inevitable impact on required military expenditure, I hope that the same mistake will not be made with cyber, which affects not only the governance but the economy of the country.
Therefore, if progress is to be made with the United Kingdom's published position with regard to multilateral nuclear disarmament, and if Britain is to make a credible contribution to achieving that aim, my plea to the Minister is that she will recognise the unease and suspicion created by the Government's apparent reluctance or refusal to examine all the criteria associated with continuing our possession of nuclear weapons and denial of objective scrutiny and searching debate, and undertake to enable a proper debate on the conclusions of the Trident alternatives review, in government time, when those are published. I beg to move.
My Lords, as, for various reasons, this is my last speech in your Lordships’ House—the last, I believe, of close on 200 personal contributions over the past 26 years—I hope that noble Lords will be indulgent over my being given dispensation to deliver most of this speech sitting down because of my difficulty in standing without full back support for more than a few moments.
I have selected this most timely debate—moved by my noble friend Lord Ramsbotham, whom I thank for his very kind and generous remarks—to make a final contribution for two reasons: first, because there can be no more important question facing this country than the vexed one of nuclear weapons, and in particular our country’s own nuclear deterrent; and secondly, because in my maiden speech, made in March 1987, I reminded noble Lords of the positive contribution that the possession of nuclear weapons had made to Europe in terms of its stability and an unusually long period of peace, for the simple reason that no prize that might have been gained by military means would have been worth the risk of possible nuclear retaliation.
In those days of the Cold War I therefore fully supported the generally accepted philosophy—I might almost say theology—of the deterrent, and believed that because the prize was no less than the domination of Europe, it was—just—a credible faith. On this I disagreed with my more distinguished predecessor as Chief of the Defence Staff, the late Lord Carver, who I then thought was ahead of his time. I say this because, not having had any emotional antipathy to the useful possession of such weapons, it gives me, I hope, slightly greater credibility if now, a quarter of a century later when things have moved on, I want to deal with the practicalities of nuclear weapons and their future rather differently.
For now, with the Cold War over, the world has changed significantly, both politically and in terms of its conflicts, and is likely to continue to do so. I now feel that it is possible—indeed, I would say essential—to look at the whole question from an entirely different point of view. I shall therefore ask three different but closely related questions. Perhaps I might now be allowed to continue while sitting down.
The first question, from a military point of view, is whether we still need the successor to Trident which the Government presently seem to have in mind. Will it be able to go on doing the job it is supposed to do under any relevant circumstances? To this I believe the answer is unquestionably no. For all practical purposes it has not and, indeed, would not deter any of the threats and challenges—now more economic than military—likely to face this country in the foreseeable or even longer-term future. It has not stopped any terrorist outrage in this country nor, despite America’s omnipotent deterrent, did it prevent the very traumatic 9/11. It did not stop the Argentines trying to take over the Falklands, nor did any nuclear deterrent stop Saddam Hussein marching into Kuwait or firing missiles into Israel. Nor indeed, in a now intensely globalised and interlocked world, could our deterrent ever conceivably be used—not even after a serious hostile incident which it had presumably failed to deter—without making the whole situation in the world infinitely worse for ourselves as well as for everybody else.
For all practical purposes our deterrent has never been truly independent, and if this country had not had a national deterrent over the years dominated by the formidable balance of terror between the USA and the old Soviet Union, it would certainly not be seeking to acquire one now. I see no reason why these circumstances should change, because conflict is moving inexorably in an entirely different direction. Indeed, even that often-quoted justification for such a status symbol—a seat at the top table—has worn a bit thin, with prestige and influence more likely to be achieved by economic strength, wise counsel and peacemaking than by an ability to destroy en masse. Against that background, this country does not need and really cannot afford the very large extra expenditure needed to set up and maintain an ever ready, invulnerable successor to Trident, particularly when all the really usable and frequently needed forces and agencies, so vital for the real security of our country, are still deprived of the resources they require.
Secondly—and particularly as in the gracious Speech the first of only three small, rather opaque references to defence was a determination to reduce the threat of nuclear proliferation—I ask how we could possibly make any positive contribution to the current dialogue, and ultimately, one hopes, to a widespread reduction of nuclear weapons, if the only example we set is to be a wholly negative one, by going ahead with possessing for ourselves such an excessive capability for at least another 40 years, and at the same time claiming, however fallaciously, that for a country like ours it is the only way that we can guarantee our security in all circumstances. I imagine that that line of argument is not lost on those who may now wish to acquire such weapons for themselves.
Other countries may not necessarily follow our example if we were to start to run down our own white elephant and be seen to be stepping further down the nuclear ladder. However, to encourage them in the completely opposite direction, to follow our particular stance, seems to me to be very irresponsible for a country such as ours, which rightly has aspirations to be a leader in international affairs.
However, my third and final question is whether, in the real political world we live in, can this Government politically afford not to be seen to have the best nuclear weapon that money can buy? Even if they were mindful to take a rational step, could they really defy any populist feeling which could so easily, and certainly would be, whipped up by those ever keen on contriving a row on key issues—and there could be no issue more key than this—that somehow the Government, however inaccurately, were giving away Britain’s ultimate guarantee of homeland security, while at the same time, heaven forbid, the French may be—probably would be—holding on to theirs? It may therefore be politically easier to let a successor to Trident go ahead despite the many and considerable down sides.
Nevertheless, ever an optimist, I believe that there can be a sensible way of getting round this impasse and giving the Government the opportunity to get off the hook. For instance, they should give urgent consideration to adopting a more practical, realistic and, I hope, cheaper way of keeping at bay or warding off any likely threats to the integrity of our nation and the safety of our citizens, which at the same time would be seen to be giving a lead in the active non-proliferation dialogue. I believe that there are a number of convincing and capable ways of achieving this, some of which may be expanded on by other noble Lords.
To begin with, we should recognise that in today’s world we do not need to have a nuclear-firing submarine at all times to demonstrate an effective deterrent capability. Periodically one boat would have to be at sea for training purposes, and at others a submarine could be put to sea at short notice if the threat to us or our vital interest was perceived to have increased. This variable state of readiness would still maintain some useful sense of uncertainty and could even, at times of particular tension, actually appear to enhance our commitment and resolve. Some useful economies would arise from a system of reduced readiness which might even, by adding to the time span of the existing Trident, go some way to assuaging any lingering electoral doubters. Even more importantly, it would allow a breathing space in which to perfect—hand in hand with improved intelligence, both satellite and terrestrial—a more relevant, economical and useable system, and therefore to allow work on the replacement submarines exclusively for Trident’s successor to be cancelled or at least reviewed.
I would hope that this stepping down from the no-longer-credible immediate response nature of our current nuclear stance could be implemented in a way that persuaded people that it was both a sound and progressive step, designed not quixotically to re-prepare for the last war, but to present a better balanced, more relevant defence programme. Moreover, by making a further and significant contribution to the general dialogue for multinational nuclear disarmament, which everyone seems to approve of, it could even enhance the value of our counsel in international affairs and as a key member of the Security Council.
My Lords, I do not think that I can say anything more strongly than the speech we have just heard from the noble and gallant Lord, Lord Bramall. It shows how great will be our loss in not having his company and advice on this most important of issues. We are all deeply in his debt for once again so frankly speaking truth to power, as he has done all his life, and for his illustrious and remarkable military career, starting with the Military Cross and going all the way up to becoming Commander-in-Chief of the British Land Forces and also—something which I want to mention on personal grounds—his distinguished action as Colonel of the 2nd Gurkha Rifles. I mention that because my son-in-law, who died earlier this year, was a junior officer in the 2nd Gurkha Rifles. He served in Hong Kong and in that neighbourhood, including Malaya. Over many years he told me that nobody was more admired by the Gurkhas than the Field Marshal, the noble and gallant Lord, Lord Bramall, who did so much to help and assist them in their deep dependence on this country and their deep service to it.
I thank the noble Lord, Lord Ramsbotham, for whom I have immense respect, for initiating this debate. I hope that I will show not excessive trepidation in drawing attention to two things that he said with which, with the greatest respect, I cannot agree. First, he said that there had been no willingness to review or publish thoughts about, and details of the work being done on, the review of Trident. That is not true. I have in my hand the mid-term review of the coalition. It states:
“We will complete and publish the review of alternatives to Trident”.
That statement cost some members of the coalition quite a lot. It was quite a battle to get those words in—but they are in, they are part of the mid-term review and they will be respected.
My second point to the noble Lord is that the person who was the subject of a long interview in the Guardian on Monday was not the shadow Secretary of State for Foreign Affairs, the distinguished Mr Douglas Alexander, but Mr Danny Alexander, the Chief Secretary to the Treasury. Few people in the Government could know more about the cost of Trident and, if I may say so, could have made as acute, perceptive and distinguished a contribution to the debate as he did. Anybody who reads it will know why I say that. It was an extraordinarily candid piece.
Thirdly, I refer to another contribution in the Guardian. It was made by a former Minister for the Armed Forces, my friend Nicholas Harvey. He was an excellent Minister and he wrote a very candid and frank article in which he cast as much doubt on whether it was wise to go ahead with Trident as a former Minister possibly could. He spoke in terms as eloquent and forceful as those of the noble Lord, Lord Ramsbotham.
I will turn quickly to some of the issues. First, the structure of control and governance over nuclear weapons has essentially rested on treaties signed by the so-called P5—the recognised, official nuclear powers. One of the first treaties set up the IAEA, which is a major inspector of nuclear weapons developments. The second, which sadly has never been ratified by the United States, was the Comprehensive Nuclear Test-Ban Treaty. The third was the attempt to get a fissile material treaty that would cut off fissile materials. That would mean in effect that it would become almost impossible to develop further nuclear weapons because no fissile materials would be fed into the process. The final one, which I mention in passing, was the attempt to bring about a tougher inspection system, of which the additional protocol is at the heart.
I believe very strongly that the President of the United States, in his re-elected second term, will be determined to proceed further, and as far as he possibly can, with these crucial treaties. Already there is evidence from members of the President’s staff that he is utterly determined to do that. There is also stronger evidence in his remarkable appointment of a new Secretary of State, Senator Kerry, to succeed the excellent Mrs Clinton; and, secondly and perhaps even more significantly, in his appointment of Senator Hagel as Defence Secretary. It was a most unexpected appointment. Senator Hagel has had the courage to speak out against any military action against Iran, and to say quite a few things that echo what the noble and gallant Lord, Lord Bramall, said about the destructive capacity of nuclear weapons, and the fact that therefore they should not be used except in the most extreme circumstances. The appointment of these two gentlemen, both of them highly controversial in American politics and not likely to be totally welcomed by all members of Congress, is clear evidence of what the President intends to do. I believe that he will take matters as far as he possibly can, with the support of his allies—that is important—in the next four years of his presidency.
I will go back for a moment to say something about each of the treaties. The CTBT has long been resisted by the United States, and equally by other countries including China. It is critical that we should try to pass it now. Secondly, the START agreement was passed by a very narrow majority in the US Congress. It opens up the prospect of major reductions in nuclear arsenals. The treaty has been passed but not yet implemented. If it were implemented, we would see a dramatic decline in the arsenals of nuclear weapons that—here I agree completely with the noble Lord, Lord Ramsbotham—serve no useful purpose at all and tend to decline in effectiveness over the years.
The Fissile Material Cut-Off Treaty has been blocked for the past few years at the conference on disarmament in Geneva by one country: Pakistan. That is very serious and we need to think very hard about ways to get around that. Since Pakistan’s major fear is not Russia or China but India, I will say that the whole world owes a huge debt to the present Prime Minister of India, Mr Manmohan Singh, for flatly refusing to retaliate after the Mumbai and Delhi terror attacks. It is one of those moments in history when one has to be grateful, for the safety of the whole world, to just one brave politician. He was exactly that in refusing to retaliate against a major attack on Mumbai. Nobody knows who made it, but many people suspected a body in Pakistan. Thirdly in the list of treaties, there is a real chance that we may be able to move ahead also on the additional protocol now signed by a number of member states of the IAEA. This is absolutely critical if we are to have effective inspection.
If there were time, I would love to turn to a number of other, very serious issues: for example, China’s commitment to the no-first-use doctrine, which although helpful has acted as a block to much of the thinking about nuclear weapons and about the way in which we might develop an effective system of controlling them. However, I will echo the noble Lord, Lord Ramsbotham, and the noble and gallant Lord, Lord Bramall, in saying that we live and move in a very different world from that of 30 years ago. As the noble and gallant Lord eloquently said, there is very little point in having nuclear weapons, and certainly in having nuclear weapons continuously at sea. Our main fears are of terrorism or possibly a serious accident—to both of which a nuclear deterrent is irrelevant.
The other main point to make about the new developments, many of them in the laboratories of the United States armed forces, is that, as the noble Lord, Lord Ramsbotham, said, they are moving towards cyberwarfare and increasingly precisely targeted weapons, including some of the conventional weapons that today terrify Russia. Russia is scared stiff that the United States is rapidly overtaking it in terms of conventional warfare. Therefore, it depends increasingly on nuclear deterrence, which in many ways is becoming irrelevant.
I will end my remarks by saying that for many years between the wars—this is relevant to the discussions we will have in the coming year about the First World War—there was a deep belief in France that the Maginot Line was an unassailable and invulnerable defence. Right up to the beginning of the Second World War, the French military continued to believe in the Maginot Line, which lasted a matter of days and was then gone. Like the Great Wall of China, it was a deterrent that did not work. I suggest strongly that we should look to the developments in cyberwarfare, which are terrifying, and at developments in robot warfare, of which we have the example of the drone, which is used increasingly in Pakistan and Afghanistan and is likely now to be used in west Africa, in countries such as Somalia and other out-of-control states, and ask whether Trident is relevant, and whether nuclear weapons are relevant.
I will conclude with a final thank you that deserves to be part of this debate. One of the listed speakers is the noble Lord, Lord Wood. For some time he was an adviser to the previous Prime Minister, Gordon Brown. Mr Brown gets a lot of criticism, but with the help of the noble Lord, Lord Wood, he probably took greater steps in reducing to its bare, effective minimum the British nuclear deterrent, in working on verification and in seeking to get wider agreements to reduce the power of nuclear weapons, as far as this could be done. It is appropriate and right that we should remember that we owe him something for that substantial contribution.
My Lords, I very much appreciate the initiative of the noble Lord, Lord Ramsbotham, in tabling this debate. It has attracted the attention of the noble and gallant Lord, Lord Bramall, who is making his final speech, as, we find with some regret, he described it. I, too, would like to mention not only the noble and learned Lord’s distinguished record from the D-Day landings through to being Chief of the General Staff at the time of the Falklands, but the fact that he is a neighbour in Crondall. One day he said to me, “I don’t know. You’re called Lord Lea of Crondall. Why aren’t I Lord Bramall of Crondall?”. I think the answer is that no one else around the place has a name like “Bramall” but there are plenty of Leas around, and that makes me Lord Lea Crondall, so I am sorry about that.
The noble and gallant Lord, Lord Bramall, has been on a sort of odyssey, if I may call it that. I will not say that it was a conversion on the road to Damascus, because Odysseus had to deal with new changes in the climate on his way back to Troy or wherever he was trying to get to. It is interesting how someone can be a senior serviceman and Member of this House for 25 years and still be fresh for new analysis. We all know the relevant quote from John Maynard Keynes in the economic field: “When the facts change, I reconsider. What do you do?”.
In many ways the noble and gallant Lord’s odyssey was paralleled by someone who influenced me very much. I refer to Lord Garden, a former nuclear bomber pilot and the author of a book on nuclear strategy, who sadly died some years ago. He made an analysis in a publication by the Royal United Services Institute when he was Liberal Democrat defence spokesman in the Lords. He was arguing for leaving the decision on replacing Trident as late as possible. Incidentally, he attracted me to become involved in the group that he set up and chaired for some years, the All-Party Group on Global Security and Non-Proliferation, which is now chaired by the noble Lord, Lord Hannay, who we look forward to hearing from later in this debate.
I shall refer to three points made by Lord Garden. First, he noted rather ruefully that the UK retains some leverage in the process of non-proliferation while it has some weapons, so you have to have some weapons to be involved in non-proliferation. I say “ruefully” because he was more than hinting at the Alice in Wonderland quality of the logic that we are all trying to grapple with.
Secondly, he noted that the opportunity costs of other conventional capabilities are considerable and that the lack of knowledge about conventional needs and available resources so far in advance argues for decisions at the latest possible stage. In a week when we have seen what has happened in Algeria, I think that the truth of the trade-off of conventional, non-nuclear ways of dealing with threats could not be better put.
Thirdly, he noted:
“Nor is it clear that such systems could contribute to our security needs beyond deterring indeterminate future nuclear threats. The constraints of the NPT would cause further complications”.
I find it hard to disagree with that and I cannot think of anyone in this House who would disagree with that. That shows that we have come a long way in the thinking of two very distinguished former military people from the rationale that we bomb Moscow and kill 10 million people as long as they bomb London and can kill 10 million people here.
The Trident replacement study clearly has to be distinguished from the main gate study. Sometimes I wonder whether there is confusion in some minds over what the Trident replacement study is. It certainly does not mean, “Do we replace Trident?”. I think that people are confused about what it means, but it just means looking at what the alternative ways are of delivering nuclear missiles. I can put both the noble Baroness, Lady Williams, and the noble Lord, Lord Ramsbotham, right. It is partly my fault that I did not draw this to the noble Lord’s attention. There is nothing wrong with what the noble Lord said about the Written Answer in December but it was only late last week that ordinary mortals saw the text of the coalition agreement, which refers to a decision to publish the report of the alternative review. It was not in the public domain before then. It was announced separately in the House of Commons, even later than the coalition mid-term review at the end of last week, that the review will be published in May this year.
We know that there is a double meaning of “alternatives to Trident”, but at some point we must turn to seeing how this relates not just to alternative ways of using a nuclear warhead but to alternatives to Trident itself. The question arises of how this fits in with multilateral disarmament or a multinational contribution to the non-proliferation process. Common sense would suggest that a contribution to a multilateral process would be along the lines of, “If we do this, will you do that?” That is what normally happens, from being at school onwards. That is what a trade-off is. However, I have not seen any sign of such a proposition, let alone a trade-off in practice. We are told that it is perfectly logical for there to be twin tracks: the track of the nuclear powers looking at their weapons systems and the track of non-proliferation. The trouble is that the non-proliferation industry has become exactly that—it is self-perpetuating and could quite happily go on without anything much being done.
The noble Baroness, Lady Williams, tried to make the case for saying that quite a lot was being done under the treaty and that it was not just a question of people flying around to conferences. The fact is that there is a great danger in letting the present position drift. I refer to the case of Brazil, which has forgone nuclear weapons on the grounds that it believed what it was being told—that we would respect our commitments under article 6 of the non-proliferation treaty. If it thinks that it has been duped and that its agreement was not worth the paper it was written on, that will be very bad for world relationships.
Then there is the argument that we cannot really do anything much of substance. That means that we independently put our nuclear weapons system on the table but the French will not do anything at the same time. This is tantamount to saying, “If the French have got one, we’ve got to have one too”. I can understand our friends across the Channel needing a Gallic symbol—I nearly said a phallic symbol, although it may be that as well. As with two tribes in the South Sea Islands some years ago, it is there to be worshipped. It is never to be used, of course, but it is nice to be seen dangling from the long room roof. However, that is not satisfactory in the present world as a rationale for having Trident.
The noble Lord, Lord Hannay, who is the chairman of the All-Party Group on Global Security and Non-Proliferation, is a great expert on this issue. He will no doubt tell us about the non-nuclear zone in the Middle East. In all of this, that is where I would put my finger on something being very urgent. Huge importance should be attached to the problem of inspection within the regime and the role of the IAEA. When some of us were in Vienna—I have got a long history of being involved with the IAEA for various reasons—and were discussing Iran, it seemed to me that the nuclear powers wanted to push the IAEA procedures to one side. However, we have to recognise the use of the proper procedures in the treaty obligations to which we have signed up and not make things up as we go along.
I look forward to consultation on the main gate decision. Can the Minister say what kind of timescale for consultation there will be on that decision? I do not think anyone in the Chamber would happily contemplate that decision being taken by default.
My Lords, as your Lordships will recognise, this topic has its periods of interests and enthusiasm, but there is an inevitable disconnect— perhaps not unintended—between being an advocate for multilateral disarmament while actively planning to remain in the nuclear club.
I have never doubted that the interests of this country are best served by remaining a member of that nuclear club and being a nuclear power of credibility. Many arguments have been put forward from the original decision immediately after World War II to become a nuclear power; to retain and, as required, update the credibility of that power. I also never doubt that the primary purpose is not for war fighting but for deterrence, although the worth of that deterrent posture and power have to be maintained and reinforced, particularly in times of stress.
Some may argue that when budgets are tight, and conventional defence means are underfunded, expenditure on the nuclear deterrent, both in capital and in running cost, could be of greater value to the national interest if devoted to conventional requirements. Nevertheless, legacy nuclear costs will still have to be met, and these will not be small. However, virtually all experience of the initial funding of the national deterrent is that it would be financed outside the defence budget, though for convenience and oversight it soon became a part of the overall defence vote.
Were a Government ever to undertake to match defence funding to some outside measure—for example, as a percentage of GDP—and to stick to that undertaking over a period of years, then perhaps the relative values of nuclear or conventional capabilities could be more fairly related to each other in financial terms. Lacking that commitment, the arguments for a deterrent posture have to be related not so much to the funding but to the widest possible interests of the country.
That is not merely to the deterrent threat which it might pose to putative opponents but to the influence it has in the field of friends and supporters. It is noteworthy that the arguments against our deterrent seem to rely on foreseen events, many of which have been mentioned today, rather than on the unforeseen, which all of us will recognise happen from time to time. Speeches and diplomacy—worthy and as important as they may be—lack the same punch that comes from a country with the ability, if required, to defend its interests vigorously or to mount expeditionary effort in the national interest.
If this analysis is accepted, or even only partially accepted, then what real credibility do a British Government have to take the lead in any renewed effort on multilateral nuclear disarmament? That is not to dismiss as worthless the efforts of many who try to gain momentum for this topic. It is important that the alternative view is heard and debated and tested against the current, shall I call it “wisdom”, of today’s leaders.
I congratulate the noble Lord, Lord Ramsbotham, on his initiative in launching this debate. I join him in congratulating the noble and gallant Lord, Lord Bramall, on his trenchant and well argued views on this and many other defence topics. The noble and gallant Lord has not been averse, after deep thought and consideration, to coming out of the nuclear closet into the conventional cauldron. It is a penchant for some Field Marshals and I, for one, think no less of them for their revisionist stance. However, I remain a nuclear champion for this country.
My Lords, I remind the House of my entry in the register of Lords’ interests. I am honoured to follow the cogent and well argued speech of the noble and gallant Lord, Lord Craig of Radley. Much what he said I agree with, but in a qualified way. I pay tribute to the noble Lords, Lord Ramsbotham and Lord Hannay of Chiswick, for securing the debate and congratulate the noble Lord, Lord Ramsbotham, on introducing it with such an interesting and comprehensive speech. I associate myself fully with the tributes to the noble and gallant Lord, Lord Bramall. As I was listening to him, it reminded me of my time as the Secretary of State for Defence, when I was not nearly as happy sometimes to hear him speak in your Lordships’ House as I have been today.
As we await the State of the Union address it is relevant to remind ourselves that some progress has been made since President Obama’s speech in Prague in 2009. Arguably the new START treaty and the nuclear security summits are the high points of this progress. However, it is undoubtedly the case that the steam has gone out of this agenda, which we all espoused and cheered to the echo at the time of Prague, and we watch US/Russia relationships sour, for a number of reasons, with some worry.
Although global stockpiles of nuclear weapons are down dramatically since the end of the Cold War, today there are more nuclear-armed states and some of the weapons are in the hands of the most unstable regimes and regions in the world. Today Iran appears to be on track for a nuclear weapon, and it was announced yesterday that North Korea is planning a nuclear test. Pakistan is increasing the size of its nuclear arsenal and its plutonium production and appears to be pursuing smaller warheads for missiles aimed at India. Despite Fukushima, plans for expanded civil use of nuclear power remain. Widespread dispersal of enrichment technologies will make it more, not less, difficult to secure and control nuclear materials in the future.
Some say the dangers of the current environment and their uncertainties strengthen the case for our continued reliance on nuclear weapons. In the short term, I agree with them. I was partly responsible for the decision to renew the UK nuclear deterrent in 2006 and I still do not support the unilateral abandonment of an independent UK deterrent. However, this is not 2006 and relevant factors have changed even since then, as has their significance. It is becoming clear that deterrence as a cornerstone of our defence strategy is decreasingly effective and increasingly risky. As nuclear technologies spread, it will be more difficult, not easier, to prevent acts of nuclear terrorism. In 2006 I believed that our deterrent could play a role in deterring nuclear terrorism by threatening any state known to support it, but as the sources of material used for terrorism multiply, it will be more difficult to pinpoint the state responsible. If one cannot do that, one has no target for a credible threat of retaliation.
Cyber attacks are more commonplace today and they will grow both in number and in intensity. Attribution of the source is difficult, if not impossible. Where one cannot attribute an attack to a source, again one cannot deter with a threat of massive retaliation. That is not to say that nuclear weapons are irrelevant to all 21st century challenges, but it is to say that they offer less of an insurance policy against the challenges we will face in the future.
Further, I invite noble Lords to reflect on recent research into the climate change impacts of even a small nuclear exchange, let alone the effects of one between superpowers. Since 2006, new scientific research has revisited the nuclear winter theme. The research, employing more sophisticated climate models, stresses the devastating climate effects that would follow the use of nuclear weapons. A major use would be suicidal. It would so alter the climate and, as a consequence, our agriculture that the attacker’s population would starve to death, even without any nuclear retaliation. Even a smaller nuclear exchange, for example, between India and Pakistan, would produce global temperatures colder than any experienced in the last millennium, with massive impacts on agriculture affecting up to 1 billion people, particularly in China and the United States, causing economic damage and huge political instability around the world.
If we want to be secure against nuclear and other threats, we have to think more creatively than our current reliance on deterrence implies. We have to shift the emphasis away from the threat of massive retaliation to prevention of nuclear catastrophe and resilience in the face of any attacks. On the nuclear side, we must plan for the unthinkable, but prevention is our main route to safety. Fewer nuclear weapons and materials in the world must be better than more of both. Those who argue the opposite are dangerously overconfident about our ability to keep control of nuclear weapons and materials, particularly in the face of terrorists’ ambitions. Prevention means a number of things. First, we have to get and keep better control of the world’s nuclear weapons and materials. It is essential that the nuclear security summit in the Netherlands is ambitious. This is an issue for continued leadership attention. It is important that world leaders reaffirm their commitment to continue this process, and talk of the meeting in the Netherlands being the last of the series is foolish.
Secondly, we have to cap the problem by making progress towards a fissile material cut-off treaty. The issue of such a treaty cannot be allowed to languish in the conference on disarmament any longer; it has been there for far too long. Thirdly, it is essential that President Obama and President Putin meet and pursue a follow-on deal to the new START treaty as soon as possible. The US needs to show flexibility on missile defence, agreeing to share more details because that is the key to unlocking the door to further nuclear reductions and a deal in which the US could agree to reduce the warheads it holds in reserve and Russia could agree to cuts and more transparency about its non-strategic nuclear weapons. Fourthly, we must never miss an opportunity to tell both the US and China that they have a solemn international responsibility to ratify the Comprehensive Nuclear Test-Ban Treaty.
Fifthly, we have to work harder to strengthen the grand bargain at the heart of the non-proliferation treaty or risk losing it. We are becoming dangerously complacent about it. All states have a responsibility here, but the nuclear weapons states bear a special responsibility. Successive Governments have reduced the number of warheads in the UK arsenal, but we need to do more. Formally, we are committed to the like-for-like renewal of Trident and the operational posture of continuous at-sea deterrence. The Government and all Members of this House need to reflect further on this position. Are we telling the countries of the rest of the world that we cannot feel secure without nuclear weapons on continuous at-sea deployment while at the same time telling the vast majority of them that they must forgo indefinitely any nuclear option for their own security? Is that really our policy? If so, do we expect the double standard that it implies and indeed contains, to stick in a world of rising powers?
The non-nuclear weapon states signatories to the NPT committed themselves to non-nuclear status only in the face of a commitment by the nuclear weapon states to pursue disarmament. Some of that disarmament must come through multilateral negotiation and agreement, but some of it can come through independent action, as in the case of several rounds of announced reductions in the size of the UK nuclear warhead stockpile, none of which we negotiated with anyone else. The time is now right, in my view, to change our posture and to step down from continuous at-sea deterrence. This would demonstrate that nuclear weapons are playing less and less of a role in our national security strategy, and along with the reductions in stockpile numbers we have made, it would strengthen our ability to argue internationally for the kinds of measures I have outlined in this speech.
There are those, I know, who will argue that we have already done enough, that it is time for others to act and that, in any case, such measures will have no impact on the actions of the Irans and North Koreas of this world. They may well be right. Certainly, some states must be confronted with firm international action and other states must also step up and take their responsibilities more seriously if we are to avoid the worst. If a disastrous nuclear incident does occur, it will not be all or even partially the fault of this country, but what consolation will there be in the blame game the morning after London has been devastated by a terrorist nuclear attack? What consolation will there be when we cannot secure incontrovertible evidence of the source of the attack and therefore cannot use the nuclear weapons we have on continuous deployment, even should we wish to? What will the value of our insurance policy be then? Where will the consolation be if even a small nuclear exchange between India and Pakistan has the kind of climatic effect I described earlier? The choice is not between one risky and one risk-free future. There are no risk-free futures on offer.
The primary purpose of our policy must be to ensure that we never suffer the consequences of a nuclear attack. At this stage in our history, nuclear deterrence still has a residual role to play in achieving this objective, but the character of 21st-century threats means that its shelf life is eroding. To achieve our objective, we now need to shift the emphasis to the kinds of measures I have talked about—on to reducing the chances of any nuclear weapon ever being used anywhere. That means the relentless pursuit of nuclear weapons reductions, a relentless strengthening of nuclear security and non-proliferation regimes, and a decreased reliance on nuclear weapons for national security by all, including ourselves.
My Lords, earlier this week I asked myself why a debate of this importance has attracted relatively few noble Lords to speak in it. Is it because the debate is seen as one really for the big boys with military, defence or diplomatic experience, who can easily examine these complex issues and get their minds around the treaties? Having heard the quality of the speeches in the debate, I would have to say yes, and I am sure that the speeches to follow my own will doubly prove the point. However, I am afraid that it is also because many of your Lordships are stuck in a time from before that at which the noble and gallant Lord, Lord Bramall, has arrived. I explored this view anecdotally at the Long Table on Tuesday, when I asked many of my neighbours why they were not going to speak today. The answer volunteered was that nuclear weapons have kept the peace since World War Two and there is nothing more to say on the subject. I am glad that the noble and gallant Lord has again made such a powerful speech today and I hope that Members of the House will read it. In a way, I wish he could have done a warm-up to encourage more debate. I am sure that the Trident debate will help as it progresses, because it will force people to engage with the issue.
I want to spend a little time talking about why parliamentarians really must get more involved in the debate. In this House we have tended to put nuclear matters rather in a silo. We have had debates on the strategic defence and security review, but there is no real place for these issues to be discussed in those. We barely mention them in debates on European defence matters because, of course, they are not a European competence. However, today is the day and I congratulate the noble Lord, Lord Ramsbotham, on securing the debate. It is one in which, as parliamentarians, we all need to engage because traditional nuclear deterrence means targeting major centres and aiming to destroy cities and civilian populations. That is one of the reasons why the organisation Mayors for Peace has such a vibrant and growing world-wide membership.
The legality of the nuclear deterrent is now highly questionable and is exactly the sort of issue that the legal minds in your Lordships’ House should start to examine. In the rest of the world, the non-nuclear states are becoming more convinced that nuclear weapons are contrary to international law. The International Court of Justice ruling in 1996 said that,
“the threat or use of nuclear weapons would generally be contrary to the rules of international law applicable in armed conflict, and in particular the principles and rules of humanitarian law”.
Since 1996, that argument has been gaining ground. Already whole regions of the world are declaring themselves nuclear-free zones—regions that are likely to be future forces in development and growth and therefore much more powerful, such as Latin America. The noble Lord, Lord Lea of Crondall, mentioned Brazil in particular. He is right. Countries in these nuclear-free zones are going to start questioning why the P5+1 are not taking seriously their obligations under the NPT. Other nuclear-free zones include south-east Asia, central Asia and Africa.
I meet many parliamentarians from these regions through the international organisation Parliamentarians for Nuclear Non-proliferation and Disarmament—PNND—which exists to facilitate dialogue on these issues. It has just published a handbook. The handbook is not a route map or a document espousing one particular policy or solution any more than a recipe book is a definitive guide to what you must eat, but it is a toolkit of what parliamentarians can do within the scope of international treaties and in their own domestic situations to make a nuclear world safer step by step. If those steps lead to a nuclear convention and nuclear zero that will be terrific, but there are many steps we can—and should—take before that.
The handbook aims to enable us as legislators and scrutinisers of our Governments to do a better job with regard to the nuclear weapons debate. I welcome it because it is quite intimidating to speak in a debate where everyone else is such an expert, but I feel that we have an obligation to get more involved. As the UN Secretary-General Ban Ki-Moon says in his introduction to the PNND handbook:
“The rule of law is coming to nuclear disarmament, and parliamentarians have important contributions to make in advancing this historic process … Yet disarmament and non-proliferation can also appear to legislators as remote from daily concerns”.
I hope that as the debate advances on whether to renew Trident—and whether nuclear weapon possession is even legal under international law—the next debate of this sort in your Lordships’ House will attract speakers to the point where it is a two-day debate.
My Lords, I congratulate the noble Lord, Lord Ramsbotham, on bringing this debate to the House today and the way in which he introduced it, not least because he gave us the opportunity to hear the noble and gallant Lord, Lord Bramall, as well—I am appalled if it is to be the last time; I certainly hope it is not—in what I think impressed the whole House as a deeply felt and most impressive contribution to the debate.
Having said that, and while some have some background in this area, I hope that my noble friend Lady Miller will not feel the least bit inhibited. She is absolutely right that a lot more Members should take part in this very important debate. As the noble Lord, Lord Ramsbotham, said, the whole issue should be examined more deeply.
By virtue of the office I once held, I was faced with what seemed at the time to be a pretty unrealistic situation, as I was shown a target map of the Soviet cities that were to be taken out in total annihilation. It never seemed very credible at the time. We are discussing something that there has been no occasion to use in the past 65 years, since it was invented. As my noble friend Lady Williams said, one should not underestimate the significance of the end of the Cold War.
I remember a meeting in No. 10 when John Major was Prime Minister, when President Yeltsin came over and we talked about how we could help the Russians recover their nuclear weapons that were scattered around different parts of the Soviet Union, which they did not have any adequate way of recovering. We made various secure containers available to help them in that.
At the same time I received some very interesting advice in my brief about the work that was being done to enable nuclear material suitable for warheads to be turned into fuel for nuclear power stations. I am delighted to see, in the excellent brief that was referred to by the noble Lord, Lord Ramsbotham, the very real US-Russian co-operation that is going on. The US is spending $1 billion on helping the Russians to combat the spread of nuclear materials from the former Soviet Union. In their joint Megatons to Megawatts programme, they are turning highly enriched uranium into lightly enriched uranium for use in power stations. They have already converted nearly 20,000 warheads’ worth of nuclear material into fuel, making it unavailable for use in warheads. I understand that there is a bit of a freeze and some tension in the US-Russian relationship at the moment, and in the interests of the whole world I hope that that is not too long-lasting.
It is against that background that one looks at the future as vividly described by the noble and gallant Lord, Lord Bramall. It is of course an extraordinarily dangerous world, and we can only be reminded of that by the upheavals that have happened, all so rapidly, barely in the past couple of years. The whole of the Middle East has gone into spasm: Libya; the appalling carnage in Syria at present; the issue of whether Iran is developing a nuclear weapon; Israel, with the CIA assessment that it has 300 to 400 warheads, and the question, after its election, of whether it may or may not decide to make any use of them; and obviously the situation in Yemen, Somalia and, now, Mali. The issues that we face include terrorism, Islamic fundamentalism, piracy and cyber threats. However, against none of those do nuclear weapons look like God’s gift to solving the problem. It is against that background that I look on the present situation. It is certainly not obvious to me that there is any longer a need for a major nuclear system based on 24-hours-a-day, seven-days-a-week availability. None the less, it is an unstable world and my judgment is that we would be wise not to abandon totally some nuclear capability, not least because one looks at Iran, North Korea and the development by Russia, and I think by Pakistan as well, of non-strategic nuclear weapons, which is obviously a very dangerous development.
As the noble and gallant Lord, Lord Bramall, said, the blockage to this has really been the political judgment. Can any political party in this country go to the electors and say, “We have dismantled the basic, fundamental, ultimate defence of our country”? That is the challenge that we face and that has to be addressed. As to whether it ultimately gives us top-table credibility, in the current world we live in, top-table credibility comes from being available to help with peacekeeping and conflict resolution, and in having Armed Forces that are able to exist, co-ordinate and co-operate with the new high-technology and highly sophisticated systems. We know that, in any co-operation with the United States, there are very few countries now that can do that.
Against that background, the cash pressures are very much an issue here. I think that our place at the top table would be more threatened by committing ourselves to a system for 40 years or more that may mean, in what are likely to be pretty stringent economic times for the foreseeable future, that we are less able to contribute in the United Nations and under United Nations leadership in some of those other roles than by whether we can say that we have these very substantial weapons, which we have never had occasion to use. Our position and the need to play our part in the world means we must now review this very carefully as it comes forward—I am glad it is Danny Alexander and not Douglas Alexander who is leading this particular exercise—to see whether we can find an alternative way forward that preserves our defences adequately but not at quite such an appalling expense.
My Lords, first, I declare an interest as a trustee of Saferworld. Along with others, I am deeply grateful to the noble Lord, Lord Ramsbotham, for having made this debate possible. It is always particularly telling when people with such a strong military background speak out in the way that he has spoken out today. I also want to say how moved I was by the speech of the noble and gallant Lord, Lord Bramall. Ever since coming into this House, over 20 years ago, I have admired his contribution almost without limit. He speaks with the firm authority of a former Chief of the General Staff but he also speaks with great enlightenment. I shall never forget his speeches before we went into Afghanistan and before the Iraq war, and I wish they had been taken more seriously. The House will miss his wisdom and experience.
Disarmament and arms control are essential elements in an effective defence policy. So-called irregular, and indeed terrorist, activities underline this, and Afghanistan, Mali and Algeria are all recent examples. The easy availability of dangerous and lethal arms makes arms control all the more imperative. Light arms, vehicles, spare parts and, more sinisterly, the biological, chemical and crude nuclear possibilities are all part of this. Nuclear waste from civil industry is highly relevant. The international arms trade must be under constant scrutiny. Sadly, the prevailing culture seems still too often to be that arms exports are an important part of our export drive and should be debarred only when there is some overriding reason for doing so. Surely, the culture should be that, in our highly turbulent and unstable world, arms and ancillary equipment are highly dangerous and lethal exports which should be permitted only to the closest firm allies in whom we have total confidence or for very specific controllable reasons of international security and defence. Confidence about end-use and potential end-use is essential.
Because of the introduction of the nuclear, biological and chemical dimension of all this, I hope that noble Lords will permit me to say a word on the arms trade treaty negotiations. The final conference, after failure to agree in July 2012, will be in less than two months’ time. If that conference again fails to deliver a treaty, the issue will return to the UN General Assembly in its current session, where the assembly as a whole will take over, with the possibility of voting a treaty through. The methodology in negotiations has been to proceed by consensus. However, this must not be allowed to become a treaty at any cost. That would not be a success—quite the reverse. It must be effective and curb irresponsible transfers. In other words, it must uphold the original purpose of the ATT; it has to cover a comprehensive range of arms and ancillary equipment; and it has to include ammunition. Upholding human rights must be a key part of it all. The Government, like their predecessor, have played a dynamic lead role in emphasising all this and in taking the conference forward. It would be tragic if they were to weaken and fall at the last fence. A treaty must of course meet the challenges of Syria.
Specifically on multilateral nuclear disarmament, the need is urgent. There is growing evidence of pressure for still more proliferation. There are the issues of Iran and Israel. The non-proliferation treaty has as a cornerstone the firm commitment of existing nuclear powers to pursue nuclear disarmament themselves. Our nuclear policy must at all times be, and be seen to be, consistent with that. How do we influence constructively if we are perceived to be moving in the opposite direction? To argue that our own nuclear weapons are essential to the defence of the realm can be provocative and positively encourage others to use exactly the same argument. It has been powerfully argued that nothing would better promote nuclear disarmament than for us to announce the intention not to replace the Trident system, to abandon continuous at-sea deterrence, to mothball our submarines and to put them on the negotiating table as a challenge for all to abandon nuclear weapons. I strongly believe that the case and need for, and relevance of, a new Trident have never been established.
There are other practical steps that we can take. We can reduce patrols, thereby lengthening the life expectancy of submarines and pushing off the need for replacement. We can further reduce warheads, demonstrating that numbers can be very small but still effective. We can step up our proactive diplomacy and technical co-operation around the P5 process. It is going slowly at present. The Chinese are blamed, but more could be done to find out from them what they require in order to have confidence in the process. We could take Russian concern and apparent paranoia more seriously. This paranoia harms our own security as well as the prospects for arms control. We have to address more convincingly their concerns. We could open up Britain to inspections that mirror the US-Russian transparency in the new START process. Why do we have to be more secretive than the US and the Russians? Indeed, we could have our own bilateral arrangements with Russia. Central to the current considerations by the Prime Minister and Deputy Prime Minister on all this is which systems will provide more flexibility to move further forward on disarmament and which will not.
It is essential to remember that the UK has said it believes that a nuclear abolition treaty will one day be necessary and is desirable. Surely now is the time to go beyond William Hague’s May 2010 declaratory posture; for example, by adopting a policy of no first use—that is, negative assurances—Trident is then for use only in deterring a nuclear strike. We could then recommend to the P5, alongside China, that they agree a no-first-use treaty. No first use would be an important confidence-building measure for the wider community of non-nuclear armed states. It would enhance the spirit of the NPT and be an important and concrete step along the long road to nuclear disarmament.
We could also build on the UK-Norway warhead dismantlement initiative by commissioning studies on how the UK could in practice move from being a nuclear weapons state to a non-nuclear weapons state. We could then share these studies with others in the P5 and encourage similar studies by them. The transition to being a non-nuclear weapons state would of course require extraordinary legal, political and practical measures. The international community would need high levels of evidence and confidence to be convinced not only that the UK had disarmed but that the change was genuine and absolute and that it would not reconfigure its nuclear arsenal in future.
Long ago, when I was Minister of State for the Foreign Office, I had some responsibilities in the sphere of disarmament. One of the issues that always concerned me—and I do not think that it concerns me any less now than it did then—was that, because of the complexity of the issues, there was a great temptation to get involved in an intellectualised process in which good minds, as it were, played chess with each other. I am a crude politician when it comes down to the point. The issue is: do we believe that a disarmed world would be safer or more dangerous? Do we believe that a nuclear disarmed world would be safer or more dangerous? Clearly, a nuclear disarmed world would be a much safer place in which to live. Our job is to think about how we do it, not to prevaricate and look at all the difficulties.
My Lords, the topicality of the subject we are debating today can surely not be doubted. The re-election for a second term of President Obama, who so electrified a global audience with the vision he set out in his Prague speech of a world eventually free of nuclear weapons, together with the changes in the top leadership of three of the other four officially recognised nuclear weapons states—China, France and Russia—present an opportunity as well as a challenge to those who wish for progress along the road towards multilateral nuclear disarmament.
However, we need to recognise that the landscape of 2012 was pretty bleak. There, I entirely share the analysis of the noble Lord, Lord Browne of Ladyton. The euphoria provoked by the Prague speech and the new START agreement between Russia and the US faded. Neither NATO nor Russia made any meaningful progress towards reducing and eventually removing tactical nuclear weapons from the front line in Europe. The failure at the end of the year to implement the agreement to convoke a conference on a weapons-of-mass-destruction-free zone in the Middle East has merely stored up problems for the future. We are entering a new and extremely dangerous phase in the efforts to handle the attempts by North Korea and Iran to break out from their obligations under the non-proliferation regime.
There are lots more causes for alarm and concern than there are for complacency, which makes the initiative of my noble friend Lord Ramsbotham in obtaining this debate—I shared a little in the effort to get that agreed by our fellow Cross-Benchers— the more laudable. I also take this opportunity to thank the noble and gallant Lord, Lord Bramall, for his contribution to this debate and to so many other debates in this House.
As has invariably been the case so far, any further moves towards multilateral nuclear disarmament have to begin with the United States and Russia, whose arsenals still far exceed those of all other nuclear weapons states—both recognised and unrecognised—put together, and which also still far exceed any conceivable requirements to ensure their security.
The initial auguries are not good. The Russians, in particular, show little appetite for further reductions. Much, I feel, will depend on the first meetings—let us say, the next meetings—between Presidents Obama and Putin and whether they can find a way out of the impasse on ballistic missile defence, where the Russian position has often appeared to be as intransigent as it is unconvincing; but where President Obama was rather hamstrung on handling this matter in the period leading up to his re-election.
If those US-Russian difficulties can be overcome, the stage will have been set for a widening of the multilateral effort to include the other weapons states, including us. It is surely, therefore, high time now to prepare for that stage. In that context, the now regular series of meetings between the five recognised weapons states will surely need to assume a more operational significance and scope. I hope that the Minister can say something about the Government’s plans and aspirations in respect of the next P5 meeting. Surely the P5 offers the ideal forum in which to discuss the content of a fissile material cut-off treaty, which all five of those present have publicly supported. The P5 could also seek ways to get around the deadlock in the conference on disarmament over even starting negotiations on such a treaty, for which Pakistan alone is responsible.
The postponement of the Middle East conference on a weapons-of-mass-destruction-free zone may have been understandable, but simply to drift towards the next Nuclear Non-Proliferation Treaty review conference in 2015 without holding such a Middle East conference is surely a thoroughly bad option, likely to please only those who covertly wish to see collapse of the NPT regime. Since such a collapse is very much contrary to our own national security interests, I hope that the Minister will be able to say how we, as one of the joint conveners of that middle eastern conference, are planning to proceed from now onwards.
The greatest immediate challenges in the nuclear field lie, of course, in the handling of the cases of Iran and North Korea. Neither presents any particular cause for optimism. The negative consequences of taking pre-emptive military action against either country still seem far to outweigh any conceivable benefits, whatever one’s view of the morality or international legitimacy of so doing. That points to major efforts being required to revive the search for diplomatic solutions, which will also require some willingness to compromise on both sides of the very tense relationships over those two countries. In the case of North Korea, the search for compromise would seem to require some meeting of minds between China and the United States. In the case of Iran, it seems that what is lacking is some direct channel of communication between the Iranian leadership and the US Administration. Do the Government share that analysis and, if they do, are they conveying those thoughts to those most directly concerned?
I wish I felt that the handling of these vital issues of nuclear policy came a little higher up the Government’s foreign policy agenda than they seem to do. When, for example, did the Prime Minister last address them in a major speech? I think the answer is that he has not ever done so. When did the Foreign Secretary last address them in a major speech? I think the answer is: when the Government published their Nuclear Posture Review in the summer of 2010. It surely is high time that that gap was filled.
It is of course quite correct to underline the fact that Britain has the smallest arsenal among the nuclear weapons states, but that is not an excuse for inertia. What thought are we giving not just to the size and configuration of our nuclear deterrent, but to its alert posture in the very different international circumstances from those for which it was originally designed? Here I join with all those in this debate who have questioned the validity of the “continuous at sea deterrence” doctrine, which so far has governed our nuclear policy. I, too, was dismayed when I saw the Government’s reply to the Written Question from the noble Lord, Lord Lea of Crondall, about the Trident review that is being undertaken and their intention not to publish any part of it. I was therefore delighted to hear the noble Baroness, Lady Williams, drawing my attention to the fact that in the coalition’s mid-term agreement it seems to have moved on from that. I hope that the Minister will be able to make that very clear in her reply.
I have to say that for people like myself who support a continuing British nuclear deterrent, although not necessarily of the same nature and scope as the existing one, it is very disheartening if we are told that we are not grown-up enough to have a serious debate about this and to see what underpins the Government’s decision-making on it. Of course I understand that aspects of that will not be suitable for publication, but that is not to say that the broad strategic considerations cannot be set out on the table and debated among us without words such as “unilateralist” being flung around.
Finally, because this has been mentioned by several other noble Lords, I would like to say a word about the false argument that Britain’s permanent membership of the Security Council of the UN somehow depends crucially on our possession of nuclear weapons. That is simply not the case; it is totally unhistorical to suggest that it is. When the five permanent members of the Security Council were established under the UN charter, only one had nuclear weapons. China, the last of them to join, did not have them for another three decades. The link is really not there. The noble Lord, Lord King of Bridgwater, put his finger on it when he said that the sustaining of our permanent membership depends infinitely more on the role that we play in peacemaking, peacekeeping and conflict prevention, and matters such as that, than it does on making this false linkage with nuclear weapons. As I have said, I am not a unilateral disarmer. I am not suggesting that we should give up our nuclear weapons, but is important that we keep them for the right reasons and not for the wrong ones.
My Lords, like other noble Lords I regard it as a privilege to be present at the last speech of the noble and gallant Lord, Lord Bramall. His presence here, like that of the noble Lord, Lord Ramsbotham, and the noble and gallant Lord, Lord Craig, reminds us of the contribution that Chiefs of Staff and other soldiers, or people of military training, make to this House. For that reason a chamber like this is not easily found in any other legislature.
In this debate I speak as a dinosaur. I became interested in the question of disarmament and nuclear weapons in 1954, when I was briefly the secretary of the British delegation to the sub-committee of the Disarmament Commission. How optimistic we were in those days. We were led brilliantly by a lost leader, Sir Anthony Nutting. We had with us M Jules Moch, one of the most brilliant and eloquent French socialists. We also had Governor Harold Stassen, who had been a presidential candidate in the previous United States election. We also had the spiky and bureaucratic presence of Mr Gromyko and Mr Malik for the Soviet Union, but they were not as bad as they are sometimes cracked up to be—or, rather, cracked down to be. On one occasion, in May 1955, when I was there, the Soviet Union accepted the British and western disarmament proposals. This was an alarming moment for us. We had to reconsider everything about which we had been talking for a long time.
The Soviet Union also made the interesting observation that there were circumstances beyond international control that could not be guaranteed by any imaginable inspection agency. We had suspected this since an article on the subject had been written in the Spectator the previous autumn by the distinguished physicist Sir George Thomson. No one took much notice of it and we continued our deliberations.
I remember those occasions in the mid-1950s for several other reasons. There was a preoccupation with interweaving the question of nuclear disarmament with that of conventional disarmament. We put forward the idea that before we took any nuclear disarmament steps of our own, we would insist on a one-third cut in Soviet conventional forces. That was one important element. Another was that we talked a great deal about a control and inspection agency, which, even if it was not perfect, would be a great deal better than anything that we had at the time. If there were ever to be the kind of nuclear catastrophe that the noble Lord, Lord Browne, mentioned, our minds would come round immediately to the idea of something similar.
The United States began the Cold War with a proposal for the complete international ownership and management of nuclear activities. There was to be no distinction between peaceful and military uses. Both would be organised and owned by an international control agency that would have the unique capacity to deal with nuclear possibilities. That seems a very idealistic and improbable concept now, but I think that if there were to be a catastrophe, we would probably find ourselves going back to all sorts of interesting ideas that were rejected because they were considered impractical in the past.
What happened—I make no bones about citing something that happened over 60 years ago—was that at the end of the world war, there was a great deal of pressure among United States scientists to devise some method of putting the genie that they had unleashed back in the bottle. First, Dr Oppenheimer devised a scheme that was made political by two distinguished United States politicians, Mr Dean Acheson and the head of the Tennessee Valley Authority, Mr David Lilienthal. The scheme was for complete international ownership of nuclear weapons. It was thought that the controllers would remain happy because they would have something to do. They would not just be checking that people were not making mistakes but helping to develop the nuclear industry of the world. That was put forward as a United States proposal by Mr Truman in May 1946, and the spokesman was the improbable figure of a businessman called Bernard Baruch, who was a great friend of Winston Churchill, as was Mr Truman. This scheme was considered to be the best way of scientists making up for what they had done by creating such a dangerous world with nuclear weapons.
It is not certain, fortunately, that there will be any kind of breakdown that would justify such extreme reconsideration. After all, gas was not used in the Second World War, although when people talked about war in the 1930s, it was thought likely that it would be used. Indeed, the self-control of states in not using nuclear weapons has been one of the striking elements of international politics since 1945. Nevertheless, it may happen. There may be a catastrophe and, if so, we should be prepared to take extreme measures afterwards to organise a method of survival.
My Lords, I start by thanking the noble and gallant Lord, Lord Bramall, for a provocative and quite brilliant contribution today. It makes me wish I had heard all his contributions over the previous 25 years or so. I offer him my best wishes for the future.
There was a time when the ambition to make progress in disarmament was considered a sign of naivety in international affairs. I am pleased to say, as this excellent debate initiated by the noble Lord, Lord Ramsbotham, has demonstrated, that this is no longer true and that the commitment to multilateral disarmament is shared by those of all parties and no party.
This is as true internationally as it is of the debate in Britain. To quote President Obama, the ambition,
“to seek the peace and security of a world without nuclear weapons”,
has in the past few years come to enjoy support from American Administrations, both Republican and Democrat, Presidents of the Soviet Union and of Russia and the Global Zero campaign’s advocates, who include a roll call of distinguished figures from dozens of countries.
It is worth reminding ourselves why multilateral disarmament is so vital to the world’s safety and security. First, the end of the Cold War marked the expiry of Cold War security doctrines that relied so heavily on nuclear weapons, in particular the American-Soviet deterrence doctrines. Deterrence of course remains crucial, but relying excessively on nuclear weapons to do the deterring is not only more hazardous, but less effective in a world where the threats we face are changing in character, where states still threaten but, increasingly, not only states threaten.
Secondly, the international community’s commitment to multilateral disarmament is the corollary of its determination to prevent nuclear proliferation. Maintaining minimally sufficient arsenals, inside an international legal framework that has verified constraints on nuclear weapons, is the only way to combine national security needs with a minimisation of the risks of proliferation. Reversing our reliance on nuclear weapons globally is integral to preventing their proliferation into dangerous hands. However, there is a moral pressure point here, too. If we demand that states without nuclear weapons commit to never having them, possessor states have a duty and self-interest to take the necessary steps towards co-ordinated disarmament. It is the bargain at the heart of the non-proliferation treaty, and as concerns about North Korea, Iran and nuclear terrorism increase, its logic becomes more, not less, compelling.
Over the past 25 years, I am proud to say that Britain has been a leader both in its own unilateral actions and internationally. We have eliminated two complete weapons systems. We are the only possessor country to have a deterrent based on just one system. We have reduced the number of warheads by 75% since the end of the Cold War, so that we now have less than 1% of the global stockpile. We have led the way on nuclear security through our global threat reduction programme, which has helped nearly 20 beneficiary countries so far. We are world leaders in innovation in the development of proliferation-resistant nuclear fuel cycles and in proposals such as a generalisable nuclear fuel guarantee. I pay tribute to this Government for continuing our leadership on reducing dependence on nuclear weapons with their decision to reduce the number of operational warheads and reducing our overall stockpile.
That is a strong moral lead, and it puts the UK in a position to be a demandeur with our allies and beyond, and to make real and continuing progress in multilateral disarmament. As Malcolm Rifkind said last year at the Munich Security Conference, momentum is everything. 2009-10 was, as many speakers have said, in many respects a period of optimism. There was the innovation of the nuclear security summit cycle; a new START treaty and the NPT Review Conference in 2010. However, that momentum has now stalled. Optimism about further progress in US-Russia disarmament discussions is hard to find. Progress on the outcomes of the 2010 NPT conference has been limited at best. The attention of the possessor states is rightly focused on the dangers posed by Iran, North Korea and others, but the price has been a further detachment between the twin goals of non-proliferation and multilateral disarmament. Meanwhile, there is the continuing backdrop of China, India and Pakistan focusing more on expanding and modernising their nuclear weapons capacity than seeking to limit it.
It is not our responsibility alone to prioritise regaining this momentum, but it is our responsibility. With the start of the second term of President Obama’s Administration, we have a chance to try to restore American focus on this issue, too.
What needs to be done? I think the challenges lie in four different areas, and I ask for the Minister’s view on the Government’s plans in each. First, we need to restore energy to building the architecture of treaties and regimes that breed confidence, and that attempt to bring as many states as possible into the net of international legal obligations around nuclear weapons, nuclear material and nuclear security.
Specifically, we have slightly less than two years to show concrete progress on the range of commitments under the NPT Treaty before the 2014 PrepCom meeting. What are the UK’s priorities? The Comprehensive Nuclear Test-Ban Treaty still awaits the signatures of eight countries that hold nuclear technology. Key to this is the United States. President Obama has said that he will pursue ratification with the Senate. Can the Minister reassure us that we are using our relationship with the White House and State Department to ensure that he lives up to this commitment?
I also ask the Minister for her assessment of the prospects of two other initiatives. As the noble Lord, Lord Hannay, mentioned, the postponement of the Helsinki conference for a Middle East zone free of nuclear weapons suggests bleak prospects, but I hope that she can provide some silver lining. What are the prospects for the elusive fissile material cut-off treaty? They should have improved since President Obama reversed the Americans’ long-standing problem with verification methods. As the noble Baroness, Lady Williams, pointed out, Pakistan is a stumbling block here. Will the Minister say what pressure is being brought to bear on the Pakistani Government?
Secondly, we need to continue momentum in measures to increase nuclear security. This is crucial to confidence-building, perhaps more than anything else, and is key to unlocking progress on both the non-proliferation and the disarmament fronts. The nuclear security summits cycle has been one of the best developments in recent years. The summits have led to important first steps in areas such as safe disposal of highly enriched uranium. Britain has led the way in this area—in research work, in international assistance to other states, and in transparency by opening up to review missions from the IAEA. Will the Minister confirm that the UK is on course to meet its commitments for the next nuclear security summit in Holland and outline its agenda for that summit?
Thirdly, we need to build on the real achievements of the START treaty signed in 2010 by Russia and the USA in significantly reducing the numbers of deployed strategic warheads and missile launchers, and in achieving some progress on monitoring and inspections. That treaty looked for a while as though it would be the prelude to further milestones on US-Russia co-operation on disarmament. As many speakers have said, sadly, that has not materialised. What does the Minister think is a realistic ambition for phase 2 of the START process? How can the UK play a supporting role in helping to bring that about?
There is one area in particular where I believe there exists widespread support for a major breakthrough; namely, the goal of NATO and Russia removing all tactical nuclear weapons from combat bases on the European continent. Attachments to legacies of the Cold War with little or no credible deterrence capability drains valuable resources from an alliance facing up to new kinds of threats, such as those potentially in north Africa. The Global Zero Commission, which the noble Lord, Lord Ramsbotham, along with Malcolm Rifkind, David Miliband and others, has supported so vigorously, has called for the withdrawal of tactical nuclear weapons from Europe to be the next disarmament priority. Do the Government share that view?
I am listening very closely to the noble Lord’s setting out of the policy of the Opposition. Given that the British nuclear deterrent, as has already been pointed out, is about the smallest of any of the nuclear powers, does he believe that the next step for this country would be to look again at continuous-at-sea?
The noble Baroness has interrupted just as I was about to come to that issue. There are also issues around Britain’s own deterrent which have been widely discussed today. We must ensure that disarmament activity is conducted in a transparent and verifiable manner. That is why the previous Government initiated their work with Norway on verifiable warhead dismantlement, as mentioned by the noble Lord, Lord Judd, and hosted the first P5 consultations on disarmament in London in September 2009. The dangers of nuclear proliferation, nuclear terrorism and insecurity around nuclear materials should make us more determined than ever to achieve co-ordinated disarmament but they also continue to justify our retention of the minimum capacity needed to achieve our deterrence objectives. Coming to the noble Baroness’s point, we in this party have said that we are open to examining any new evidence since our review of Britain’s nuclear weapons arsenal in 2006 and we will consider its findings alongside other studies, such as the cross-party BASIC Trident Commission, which is chaired by my noble friend Lord Browne, to see if there are credible alternatives.
In our view, that examination should have two priorities—capability and cost. With that in mind, we look forward to the publication of the Trident Alternatives Review, which Danny Alexander tantalisingly said this week,
“will set out a clear, credible, compelling, set of arguments for alternatives”.
He flagged up that there may be seven or eight alternatives in the mix. Will the Minister clarify how open her part of the Government is to the alternatives that might arise from that?
Lastly, there is a group of more conceptual although equally crucial issues around the doctrines that make up our security concepts. I appreciate that there are limits to what the Minister can say on UK thinking on these issues but perhaps she will say whether the Government are alive to making progress on defence concepts that are less dependent on nuclear weapons and whether NATO is planning to address this issue in any way.
John F Kennedy remarked:
“The world was not meant to be a prison in which man awaits his execution”.
He also said:
“Every man, woman and child lives under a nuclear sword of Damocles, hanging by the slenderest of threads, capable of being cut at any moment … The weapons of war must be abolished before they abolish us”.
That was more than 50 years ago at a time in history that now seems a world away. But it was a time that was, if anything, more ordered in terms of nuclear security than the one we live in now. The nuclear era in the wake of the Cold War is much more hazardous and more economically burdensome. The goal of a world free of nuclear weapons may seem a dim prospect at the moment. But just as the difficulty of preventing nuclear proliferation should inspire us to redouble our efforts to contain the spread of nuclear technology, so the difficulty of maintaining momentum on multilateral disarmament should inspire us to be leaders among nuclear weapons states in the future.
My Lords, I congratulate the noble Lord, Lord Ramsbotham, on securing this debate on a hugely important issue. We have benefited greatly from the noble Lord’s expertise and, indeed, from that of all those who have spoken today, and none more so than the noble and gallant Lord, Lord Bramall. I take this opportunity to express my sadness at his announcement that today is the last time he will speak in the Chamber. However, I hope we will continue to see him. I am privileged to respond to him in his final debate.
I must admit that I feel very much like my noble friend Lady Miller in responding to a debate surrounded by many speakers with so much expertise, some of whom have been involved in negotiating many of the treaties about which we have spoken and in preparing many of the documents that have been referred to today, and who have great expertise on the battlefield. My own lack of expertise in this area made me question my ability to respond to noble Lords today, but I will try to do so. I thank the noble Lord, Lord Wood, for the work that he has done in government in moving down this path and for acknowledging the role played by this Government in that area.
The UK has long been committed to the goal of a world without nuclear weapons. Successive Governments have played, and continue to play, an active role in helping to build an international environment in which no state feels the need to possess nuclear weapons, but, sadly, we are not there yet. While there continue to be significant risks of further proliferation and other states retain much larger nuclear weapons arsenals, successive Governments have been clear that the UK will retain a minimum credible nuclear deterrent as the ultimate guarantee of our security. I thank the noble and gallant Lord, Lord Craig of Radley, for his supportive words, and my noble friend Lord King for his wise words.
In 2007, Parliament debated, and approved by a clear majority, the decision to continue with the programme to renew the UK’s nuclear deterrent. We set out in the 2010 strategic defence and security review that the Government will,
“maintain a continuous submarine-based deterrent and begin the work of replacing its existing submarines”,
which are due to leave service in the 2020s. This remains the Government’s policy. The Trident Alternatives Study referred to by my right honourable friend the Chief Secretary to the Treasury is intended to help the Liberal Democrats to make the case for alternatives to this system, as agreed in the coalition programme for government. The noble and gallant Lord, Lord Bramall, asked whether we needed a successor to Trident. It is too early to speculate about the conclusions of The Trident Alternatives Study. The study is ongoing and is due to report to the Prime Minister and the Deputy Prime Minister in the first half of this year. As we announced in the Government’s mid-term review, an unclassified document will be published in due course.
The current international environment raises—
I am sorry to have to ask the Minister to clarify a point, but the interchange with the noble and gallant Lord, Lord Bramall, was not based on the supposition that the review was a review of alternatives to having Trident at all but was, rather, a review of alternative ways of delivering a nuclear warhead. The noble Baroness has just implied to the noble and gallant Lord, Lord Bramall, that it is also open to looking at alternatives to having a nuclear capability. I do not think that that is quite right. Perhaps she will consider that part of a later consultation on the main-gate decision as to whether we will go ahead at this point with a total replacement of Trident.
I think those considerations will probably take place after the next election.
The current international environment raises significant challenges for global disarmament. The greatest barriers remain insecurity and uncertainty, both of which, sadly, there is no shortage of in many parts of the world today. The risk of proliferation, in particular—in North Korea and Iran, of course, but there are also the implications of the technological and information advances that make the spread of knowledge and materials easier—has been a growing concern.
We have heard during this debate some grounds for pessimism but also, I hope, some grounds for optimism. We have moved from living in a world of tens of thousands of nuclear warheads, standing to fire at a moment’s notice during the Cold War, to a world in which the major nuclear weapons states have significantly reduced their arsenals, have stopped targeting them at anyone and have reduced their operational readiness. More recently, in 2010 we saw the signing of the new START agreement between the United States and Russia, holders of the largest nuclear stockpiles by far. Under that treaty, both countries agreed to reduce the number of strategic nuclear missile launchers by half and to limit the number of deployed strategic nuclear warheads to a figure nearly two-thirds lower than that agreed in 1991.
In the same year we saw the agreement of the first ever Nuclear Non-Proliferation Treaty action plan, in which all 189 signatories reaffirmed their commitment to the treaty and committed to making tangible progress towards our shared goal of a world without nuclear weapons. Under that plan, nuclear weapons states all committed to making concrete progress on the steps leading to nuclear disarmament, including reducing the overall global stockpile and reducing further the role and significance of nuclear weapons in our military doctrines. Next year we will set out publicly how we have made progress on this action plan.
The UK continues to lead from the front. We take this issue extremely seriously. First, having led by example through our own actions, we are working to help build the trust and mutual confidence between states needed to achieve multilateral disarmament. We play a leading role across efforts to put in place the practical building blocks that will support that disarmament. Secondly, we are working with the international community to make it as hard as possible for others to develop, produce or acquire nuclear weapons. The UK’s own record on nuclear disarmament is strong.
The noble Lord, Lord Browne of Ladyton, is right to say that fewer nuclear weapons must surely be better for all. We have greatly reduced the number of our nuclear weapons since the end of the Cold War. For almost 20 years now, our nuclear weapons have been de-targeted and placed on several days’ notice to fire. We have built on that strong record, announcing in our 2010 strategic defence and security review that we are reducing our requirements for operationally available warheads from fewer than 160 to no more than 120, reducing our overall stockpile to no more than 180 and reducing the number of warheads on board our submarines from 48 to 40 and the number of operational missiles to no more than eight. I can assure the noble Lord, Lord Judd, that our policy is to have the minimum credible deterrent and that the UK would consider using nuclear weapons only in extreme circumstances of self-defence, including the defence of our NATO allies.
We have shown considerable leadership in reducing our nuclear weapon holdings and in increasing the transparency around them. We have demonstrated what is possible. This is a key part of our contribution towards building the right environment for multilateral disarmament. But of course unilateral actions will not produce the results that the world expects and demands. It is only through moving forward together, through balanced and reciprocal disarmament, that we will achieve a world without nuclear weapons. We can achieve this only by building trust between states that will convince all of them that they can safely disarm.
That is why the UK instigated a dialogue among the P5 states in London in 2009, when we reaffirmed our unconditional support for the non-proliferation treaty and engaged in meaningful dialogue—as mentioned by the noble Lord opposite—aimed at building the mutual understanding needed to help us take forward our shared disarmament commitments. Since then, we have held further dialogues, in Paris in 2011 and Washington last year, and met in between to discuss disarmament issues.
The noble Lord, Lord Hannay, asked what future plans we have. The P5 will hold a fourth conference, hosted by Russia, in April this year. In the NPT preparatory committee, discussions as to its format are ongoing. In order to maximise the value of this ongoing dialogue, it will be important to maintain momentum at that next conference. We will need to be able to demonstrate progress across a range of issues, especially on our plans to report on the commitments we all made in the 2010 NPT action plan. It is an issue on which the international community is looking to the P5 to provide a lead, and the UK will be at the heart of the efforts to achieve this.
The noble Lord, Lord Hannay, also asked what Her Majesty’s Government were doing to help achieve the Middle East weapons of mass destruction free zone. The Foreign Office Minister, Alistair Burt, made a statement on this issue on 24 November last year, in which he said:
“The British Government supports the objective of a Weapons of Mass Destruction Free Zone in the Middle East. We regret that it will not be possible to convene a successful conference to be attended by all states of the region as planned in 2012. More preparation and direct engagement between states of the region will be necessary to secure arrangements that are satisfactory to all”.
“We support the convening of a conference as soon as possible. We endorse fully the work of the Conference Facilitator … to build consensus on next steps ... We will continue to work with our fellow convenors (the US, Russia, and the UN), with the Facilitator, and with countries of the region, to meet our undertakings to convene a conference on this important issue, as soon as possible”.
Building confidence between nuclear weapons states and non-nuclear weapon states is equally important if we are to find a realistic route towards global disarmament. To that end, we have been conducting groundbreaking work with Norway on the verification of warhead dismantlement, which will be a crucial aspect of any future global disarmament regime. This initiative has been the first time that a nuclear weapons state has engaged in such an open way with a non-nuclear weapons state on such a sensitive issue.
Both we and Norway have learnt a huge amount through this initiative about how nuclear and non-nuclear weapons states can work together effectively in pursuit of our shared goal. We have shared what we have learnt so far with the P5, and with a range of non-nuclear weapons states, and we will continue to share developments as we move forward. Building on this first, we are also working with Brazil to develop a disarmament-focused dialogue. The UK is unique among the P5 in launching such initiatives with non-nuclear weapon states. It is a crucial part of our contribution towards building the right environment for multilateral disarmament.
As well as improving collective trust and understanding, we need to continue our efforts to make it as difficult as possible to develop and produce nuclear weapons, particularly by those who pose a threat to global security. On this the UK is making a strong contribution. We have signed and ratified the comprehensive test ban treaty. Indeed, we were, along with France, the first to do so. We are vocal campaigners for the entry into force of the treaty, and we will continue to take every opportunity to urge all those who have not yet signed and ratified it to do so. We continue to actively support the need to negotiate an international fissile material cut-off treaty, which would put an end to the future production of the material needed to make nuclear weapons. We are firm supporters, too, of nuclear weapons free zones, which literally shrink the geographical space within which nuclear weapons can exist.
The UK has signed and ratified the protocols to three nuclear weapons free zones, in South America and the Caribbean, in Africa and in the South Pacific. We support the objective of a weapons of mass destruction free zone in the Middle East, as I have already mentioned, and we continue to push for the convening of that conference. The UK is also active in seeking to reduce the risk of proliferation from the civil nuclear sector, and strongly supports a universal safeguards system to uphold the NPT’s non-proliferation regime. The IAEA’s comprehensive safeguards agreement and additional protocol should be the universal verification standard for all NPT state parties. We continue to urge all those who have not yet done so to sign and ratify it.
The risks of proliferation are all too real. The international community was reminded of this following North Korea’s most recent satellite launch on 13 December, which enabled it to test ballistic missile technology and violated two UN Security Council Resolutions. Its continuing efforts to sell dangerous proliferation-sensitive technology to other countries must also be a focus for our efforts. We, with our E3+3 partners, continue to pursue negotiations with Iran. We remain fully committed to the ongoing diplomatic process and to finding a peaceful, negotiated solution that leads to full compliance by Iran with UN Security Council and International Atomic Energy Agency Board of Governors’ resolutions. Urgent, concrete steps need to be taken by Iran to allow progress. In 2012, the E3+3 met Iran four times to discuss its nuclear programme. Despite frank and lengthy discussions, significant differences remain and the Iranian position remains intransigent. We hope that Iran comes to the next round of talks ready and willing to take the steps needed to address the international community’s serious concerns.
The risk of new states acquiring nuclear weapons is grave—but so, too, is the risk of sensitive knowledge and materials falling into the hands of non-state actors. The UK played a key role at last year’s Seoul nuclear security summit and remains committed to shaping the direction of global nuclear security. Our G8 presidency will see us chair the Global Partnership Against the Spread of Weapons and Materials of Mass Destruction. This 25-country partnership channels around $2 billion per year to programmes to counter proliferation risks. In 2012, UK contributions helped secure 775 bombs’ worth of fissile material in Kazakhstan; create new jobs for 3,000 former Soviet Union weapon scientists; and, through collaboration with the IAEA, deliver physical protection upgrades and nuclear and biological security training around the world.
The noble Lord, Lord Wood, referred to the CTBT and asked about our campaign for the entry into force of the treaty. We will continue to take every opportunity to urge all those who have not yet signed and ratified it to do so. We continue actively to support the need to negotiate an international fissile material cut-off treaty that would put an end to the future production of the material needed to make nuclear weapons.
The noble Lord, and my noble friend Lady Williams, referred to Pakistan. I assure them both that we continue to press Pakistan to end its block on the start of negotiations in the conference on disarmament, and will continue to work with partners in the conference to find a solution that will allow us to take forward our commitments under the 2010 action plan. The UK remains committed to shaping the direction of global security. We fully recognise the importance of the nuclear security summit process and are working closely with local partners in laying the groundwork for what we want: an ambitious 2014 summit.
The noble Lord, Lord Wood, also asked about CASD. The Prime Minister made it clear that CASD remains the backbone of our deterrence posture. It ensures a constant, credible and capable deterrent against threats to the UK’s vital interests and to our NATO allies. As my honourable friend Philip Dunne stated in the Commons last week, by being continuously at sea the deterrent maximises our political freedom of manoeuvre in a crisis.
The noble Lord, Lord Lea, asked about the main-gate decision. I note his point, but a decision on this has not been made. I will write to him if we have any further information.
The noble and gallant Lord, Lord Bramall, asked about the relevance of a post-Cold War nuclear deterrent. There are still substantial nuclear arsenals, the number of nuclear-armed states has increased rather than decreased, and there is a significant risk of new nuclear-armed states emerging. Several countries that either have nuclear weapons or are trying to acquire them are in regions that suffer from serious instability or are subject to significant regional tensions, so there is still the potential for a new nuclear threat to emerge despite the end of the Cold War.
We have never claimed that our nuclear capability is an all-purpose deterrent. The UK has a wide range of policies and capabilities to deter the range of potential threats that it might face, including terrorism and cyberattacks. Not all capabilities are relevant to all threats.
The UK strongly supports the goal of a world without nuclear weapons and is active in helping to build the international environment that we hope will deliver this. We have shown considerable leadership in reducing our own nuclear weapons capabilities and in offering reassurances about the very limited and discrete circumstances in which we may contemplate their use. We have been instrumental in efforts to build the trust needed between nuclear weapons states to make progress multilaterally; we have led the way among nuclear weapons states in engaging with non-nuclear weapons states to try to take positive, concrete steps forward; and we are firmly committed to putting in place the practical building blocks that will support multilateral disarmament by making it as difficult as possible to develop and produce nuclear weapons. The CTBT, a fissile material cut-off treaty and the strengthening of non-proliferation and nuclear security regimes are all areas in which we work. Our contribution towards the goal of multilateral disarmament is and will continue to be strong. We will take every opportunity to pursue our resolute commitment to a world without nuclear weapons.
My Lords, I thank the Minister for her reply and I thank most warmly all those who have taken part in the debate. Anyone coming here and listening would have realised that this House gives the lie to the suggestion that we are not grown-up enough to be able to take part in this debate. The quality, content and understanding in what has been said show me conclusively why it is so important that the expertise in this House is deployed during this consideration of one of the most important questions that we face. It is clear that everyone in this House is committed to the cause of multilateral nuclear disarmament. I did not hear anyone suggest that the first thing to do was just to wipe all nuclear weapons off the map and take a unilateralist line. That is not practical politics and it is not sensible.
However, I was glad that a number of issues were raised during the course of the debate, which covered many points that are concerned with the review of alternatives to Trident as well as with the current position. For example, I am glad that the issue of continuous at-sea deployment was questioned, which is not just a question of practicality but also must be included in any question of the cost and development of the future weapon, quite apart from its efficacy. I am glad that the possibility of more precision weapons was represented. I am also glad that the question of cost came up, because in this connection I have always been a follower of the advice given to me by my late master, Field Marshal Lord Carver, that there are two definitions of affordability. One is, “Can you afford it?”, and the other is, “Can you afford to give up what you’ve got to give up to afford it?”. That has extreme relevance in this situation when we are considering what we need to conduct ourselves in today’s world rather than the Cold War world, compared with what we have to spend on the Trident replacement.
I was particularly grateful to the noble Lord, Lord King, for reminding us of why we have our seat at the table and what is actually needed to have a seat at the top table tomorrow. I am grateful to the noble Baroness, Lady Williams, for correcting me. I have to admit that I have not read the coalition mid-term agreement, and I am very sorry that I got the wrong Alexander. I will apologise personally. I shall remember the connection with the Maginot line with considerable interest.
I think that I will be reflecting the mood of the House if I conclude by paying tribute to my noble and gallant friend Lord Bramall, whose last speech was memorable for the verve and clarity to which I referred at the start. We are going to miss him, and his contribution was tremendous. I know that his influence will live on.
As I say, I am grateful for what I have found an enormously interesting, instructive and, as I hope the Minister will agree, very valuable debate. I hope that she will follow this up by allowing us to have a further debate, particularly when the alternative review is published.
European Banking Union: EUC Report
Motion to Take Note
My Lords, some 20 years ago I led a vote in the European Parliament for the Monetary Sub-Committee, and included among my group was Pierre Moscovici, who is now the Finance Minister of France. It was a vote to approve Alexandre Lamfalussy as the new president of the European Monetary Institute, the forerunner of the European Central Bank, of which Mario Draghi is now the distinguished head. In my middle-aged enthusiasm, I then issued a press release that declared, “Europe’s new bank manager elected”. It met with a quiet voice in the world urbi et orbi.
Now, however, I am delighted to have the opportunity to introduce this debate on the report of the European Union Committee entitled European Banking Union: Key Issues and Challenges, and I wonder whether I was right. The report is based on work undertaken by the EU Sub-Committee on Economic and Financial Affairs, which I chair. The report was published in December, immediately before the banking union proposals were discussed at the European Council, and we were pleased to have the opportunity to inform the Government of our views as negotiations commenced. I thank Greg Clark, the Financial Secretary to the Treasury, not only for listening to us beforehand but for reporting to us immediately afterwards.
Our report was based on evidence received from a stellar cast, including representatives of the banking sector, economic experts, think tanks, the German ambassador to the UK, the vice-president of the European Central Bank and the Financial Secretary to the Treasury. On a visit to Brussels in October, the committee also met with senior MEPs, the chairman of the European Banking Authority, the European Commissioner for Internal Market and Services, Michel Barnier, and the President of the European Council, Herman Van Rompuy. The committee was also assisted in its work by Professor Eilis Ferran of the University of Cambridge, who acted as our specialist adviser for the inquiry. I thank all our witnesses, who contributed so richly to the inquiry, as well as Stuart Stoner, our clerk, and Rose Crabtree, the policy adviser to the committee.
One of the characteristics of the euro area crisis has been its oscillation between periods of relative calm and moments of febrile crisis. One such crisis happened in June last year. Concerns over the systemic link between struggling banks and indebted sovereign states came to a head. Spanish 10-year bond yields had reached a euro-era high and recapitalisation of its seriously indebted banking sector seemed inevitable.
European leaders, so often criticised during the crisis for their lamentable lumbering tardiness, at last sprang into action. At that month’s European summit, they agreed that the European stability mechanism rescue fund could recapitalise banks directly rather than via sovereign states. The only proviso was that an effective single supervisory mechanism of euro area banks had to have been established under the authority of the European Central Bank. At the same time, President Van Rompuy was asked to take forward,
“a specific and time-bound road map for the achievement of a genuine Economic and Monetary Union”.
That was the genesis of the so-called “banking union”, by which European leaders sought to restore much-needed credibility and stability to the euro area banking system.
The single supervisory mechanism proposals were duly published by the Commission in September, but the further steps towards banking union initially envisaged by President Van Rompuy—a single European resolution scheme and, in particular, a single European deposit insurance scheme—were quickly put on the back burner because of the fears of Germany and some others that they would mark a too pronounced step towards debt mutualisation. Our committee expressed regret that the Van Rompuy model was so quickly undermined.
In the light of this change, our report necessarily focused on the first element of banking union—the single supervisory mechanism. We sought to address a number of the key questions. Was it appropriate for the European Central Bank to take on a supervisory role? What would be the impact on its governance structure? Which banks should be directly supervised by the ECB? What accountability mechanisms were needed? What would be the impact on non-euro area member states, and when could such reforms be realistically and reasonably introduced?
Our conclusions were as follows. We noted the worldwide trends, including here in the UK, towards combining supervisory and monetary policy functions in one institution. In our view, giving supervisory responsibility to the ECB was indeed the only viable option. Yet this would create a significant concentration of power in one institution. Again, it was vital to ensure that there was no conflict of interest between the ECB’s twin tasks of exercising monetary policy and the supervision of the banks. The ECB needed to be fully accountable for its supervisory role, including to national Parliaments, and I am pleased that the vice-president of the ECB came before my committee to report on the proposals.
We believed that it was unrealistic to expect the ECB to engage in intensive supervision of all 6,000 euro area banks, yet the crisis has demonstrated that it is not just the largest institutions that can pose a systemic risk, as exemplified by Northern Rock in this country. We concluded that, while the ECB would concentrate on the day-to-day supervision of only the largest and most systemically important banks, it should retain the power quickly to assume responsibility for the supervision of smaller banks as and when required. However, this model could work only if there was close and positive co-operation between the ECB and national supervisors, and I would ask the Minister whether he could comment on that necessity.
One of the key features of the banking union proposal is that non-euro area member states should have the right to participate, but this presented significant dilemmas. How could non-euro area participating member states enjoy equality with euro area member states within the ECB decision-making process, and how would all this impact on those member states that wished to remain outside the banking union, of which of course the United Kingdom has declared through the Prime Minister that it will be one? He has said that,
“you do not need a banking union because you have a single market; you need it because you have a single currency—so Britain should not, and will not, be part of that banking union”.—[Official Report, Commons, 22/10/12; col. 699.]
Yet banking union has profound implications for the UK. We were particularly concerned about the impact on the European Banking Authority, the regulatory agency tasked with developing the single rulebook for financial services throughout the European Union. We feared that a dominant ECB could undermine the EBA’s authority in defending the EU-27 and the single market—in particular, given the likelihood that banking union participants would caucus around a single position advocated by the ECB inside the European Banking Authority’s decision-making process. This raised the spectre of the United Kingdom being consistently outvoted in setting the rules by which the financial sector operates. Given this threat of marginalisation, we urged the Government to do all that was necessary to ensure that the City of London’s leading position was not imperilled and that the integrity of the single market was not compromised. At the very least, the European Banking Authority’s voting arrangements had to ensure that it was able to defend the interests of the single market as a whole.
The Commission’s proposals as originally drafted failed sufficiently to address several of these concerns and it was clear that it had been constrained in its drafting by the need to avoid treaty change. The original plan had been to reach agreement on the package by the end of 2012. In light of the weakness of the legislation, this struck us as wholly unrealistic. Even the revised aim of agreeing a legislative framework by the end of 2012 seemed extremely ambitious.
We were therefore pleasantly surprised when the news broke after our report was published that a deal had been struck, which, the Government assure us, “will preserve the EU’s single market and protect the interests of those remaining outside the banking union”. The commitment to break the vicious cycle between banks and sovereigns was reasserted, as was the intention to bring forward in 2013 a single resolution mechanism proposal. A “double majority voting” principle was agreed whereby decisions in the EBA will be subject to a majority of both participating and non-participating member states in the banking union. The Government have also pointed to the so-called “non-discrimination clause”, which, they argue, “guards against any restriction of the UK’s role as a financial centre in the single market”. That is all very promising but, as ever, the devil is in the detail, and I would ask the Minister to respond to a number of questions.
In recent days, Mario Draghi, Christine Lagarde and Barroso himself have all suggested that the euro area may have turned a corner and the worst of the crisis may be over. Yet we have seen in the past that when the crisis appears to ease, the foot can all too easily come off the accelerator of improved supervision. Last week the Financial Times reported that the commitment in Brussels to break the vicious circle between banks and sovereigns and to take forward proposals for the single resolution mechanism may be weakening. Can the Minister confirm this? What update can he give us on the deal agreed in December? Is everything on track? When will the single supervisory mechanism be operational? What is the likelihood of the further steps towards banking union coming to fruition in the near future?
I also have some questions on the detail of the December deal. The new voting rules in the EBA will be subject to a review only if and when four member states remain outside the banking union. What update can the Minister give us on the position of the other nine non-euro area member states? How likely is it that they will choose to participate, thus triggering a review of the voting mechanisms? What will the UK do in such an eventuality? How does the Minister respond to the scepticism about the double-voting mechanism expressed to my committee only last week by Martin Wolf, chief economics commentator at the Financial Times? In his view:
“The idea that the entire eurozone could agree that this is how we are going to handle the banking industry in order to preserve the currency union and the UK then pipes up and says, ‘We do not like it because it will affect the City’ … in polite terms they are going to say, ‘Go away’”.
The consequences of all this for the UK will be profound, and we warn the Government against undue complacency. Pleased with the deal they may be, but they must continue to be vigilant to the risk of these steps towards integration for the single market and the UK’s place within it.
Finally, it would be remiss of me not to comment on the Prime Minister’s speech yesterday. He said that the single market was the core and the “essential foundation” of the European Union—which I very much agree with—and that Britain must remain at the heart of the single market. He also cited the December deal on banking union as illustrative of the sort of safeguard needed to ensure that the UK’s access to the single market is not compromised.
However, the question of a referendum, which has been dangled in front of us, worries me considerably. In the case of the 1975 referendum, the then Prime Minister, Harold Wilson, asked the then Foreign Secretary, James Callaghan, to go round and get the assurances of other capitals in the community that that was all right. The second problem is that referendums are a newfangled way of dealing with the assessment of public opinion in this country. It begins to take away from the tried and true parliamentary approach that we have had for so long in this country—an example of which is the very report that is before your Lordships this evening—when those who have some expertise assess the matter to be presented before the British people. We need to be very cautious about changing what are tried and true parliamentary approaches.
I look forward to the speeches that are to come and I am sure that all sides of the House look forward to the reply of the noble Lord, Lord Newby. I beg to move.
My Lords, it is a pleasure to follow the noble Lord, Lord Harrison, and his admirable presentation of his sub-committee’s report. I also want to congratulate him on the way in which he has handled his chairmanship of that sub-committee.
I want to focus initially on two of the major issues in the sub-committee’s report. The first relates to what the noble Lord has already referred to as the incomplete nature of the EU proposals for a banking union. The committee had pointed to the need for the single supervisory mechanism, proposals for which were published in September 2012, to be joined by a common resolution mechanism and a common deposit insurance scheme.
The single supervisory mechanism was agreed by heads of government at the December European Council meeting but will not, as I read it, be operational until some time in 2014. The Council also called for work on proposals for directives on recovery and resolution and on a deposit guarantee to be accelerated so that the directives could be agreed by the end of March 2013, enabling the Commission to bring forward a proposal for a single resolution mechanism in the course of 2013. I must say that that timetable seems remarkably optimistic and I look forward to what the Minister has to say on that point. Parenthetically, I suspect that the two different timetables were deliberately chosen so that the German voter would not be scared off.
Another major concern of the Select Committee was that the UK should secure a mechanism that would ensure that the eurozone members would not be able to dominate the non-euro members. Initially, there was understandable scepticism about the Government’s prospects of achieving this, so we should congratulate the Government on having achieved substantial progress on it. As Commissioner Barnier said in a speech just after the December Council meeting:
“According to the new voting modalities, any EBA decisions will have to be approved by a majority of countries outside the Banking Union”.
I am always fascinated by the use of this term “modalities” in a European context because it does not really tell you anything about what the mechanism actually is. However, looking at other material, it would appear that this requirement for approval by a majority of countries outside the European banking union will be contained in amendments to the European Banking Authority’s regulations, so that there is a clear legal basis for it there.
That is just the key decisions in the EBA. What about other decisions? The Financial Secretary to the Treasury, Mr Greg Clark, in his letter to my noble friend Lord Boswell, said that the double majority, “will also apply to key decisions including those relating to binding technical standards that will apply to firms across the single market”. He says that this is a, “supplementary requirement to existing voting arrangements”. Can the Minister clarify this? I have not seen anything that indicates how this supplementary requirement is actually inserted: what is the legal mechanism that brings this supplementary requirement into place? Furthermore, Greg Clark says that this will not be a permanent arrangement because the requirement will be reviewed if there are four or fewer euro states.
Commissioner Barnier’s speech says that it was the UK, the Swedes and the Czechs who sought a level playing field in the December meeting. That puzzles me slightly. Is Barnier’s list complete? I would have thought that we had more than three supporters on that and am particularly curious about the position of Denmark.
Our committee, in accordance with its usual practice, confined itself strictly to the banking union and considered that in a consensual manner. It did not go into other developments and related matters that might be slightly more controversial, but I shall tiptoe into those areas where the committee refrained from treading. Banking union itself will not be enough; it will need a fiscal union and an economic policy union. These matters are coyly mentioned in the December Council conclusions as,
“further integration of the fiscal and economic policy frameworks”.
Eventually, these will require treaty change. However, probably at an earlier stage, by one means or another, it will require what the Germans call a transfer union. At the moment, how and when that will kick in is shrouded in mystery, but it will have to. Some of us had the pleasure of meeting the Bundestag’s EU committee here a few weeks ago. Its chairman emphasised to us that Germany was prepared to accept the burdens that would flow from the banking union and, in response to a question from my noble friend Lord Flight, said that he recognised the balances that had accrued through the “target” system.
On all these matters, my doubt is principally whether the safeguards that our Government have achieved can be sustained. For those who believe in “ever closer union”, the achievement of that goal must now be focused on the eurozone, with the non-euro countries either a temporary expedient or a long-term aggravation.
If the euro survives and if the “outs” move to being “ins”, as most of them are obliged to do, it is probable that the views and interests of the ins will dominate the operation of the single market. Unless our safeguards are embodied at treaty level, it is difficult to see them surviving generally—and certainly when the review kicks in after the number drops to four. How we then respond will depend on what we think is the value of the single market, a market with which we have an adverse trade balance, which takes a minority and declining share of our exports while imposing costs on our global business activity, and which, we must remember, is even now a social market rather than what most of us in the UK would call a free market.
My other doubt is whether the Council and the Commission are heading in the right direction. Many years ago, when I had the pleasure of being a member of Sub-Committee A, we did a report on the euro 10 years on. This was before the credit crunch struck. In preparation for that report, we spent a fair amount of time with witnesses on the possible vulnerabilities of the euro—of course, very little of this went into the report because it was essentially speculative. Those who gave opinions to us generally agreed that the eurozone could be vulnerable if struck by a serious, asymmetric shock. The crisis which followed was such a shock. I remember one witness who mentioned this possibility also saying that we must remember that a country can take a lot of hurting. He explained this by reference to Italy, where, in the 1860s, the Mezzogiorno, or the Kingdom of the Two Sicilies which it was before that, was rapidly integrated into the new Italian state on terms which left it locked into poverty and low development in contrast to the prosperous north. Even 150 years after that integration, there is no sign of that uneven relationship changing. Today, there is the prospect of the European Union’s Mediterranean countries becoming effectively an enlarged Mezzogiornio, in a crisis which was caused partly by the euro but from which the euro prevents escape.
I would say to those pressing for banking union and the other unions that flow from it, “Don’t reinforce failure. Don't subject the social fabric of the Mediterranean countries to this awful strain”. They, and maybe some others, too, need a better model for the future.
My Lords, I, too, thank the noble Lord, Lord Harrison, and his committee for this excellent report on the European banking union. In doing so, I make one or two observations in general about the European Union Committee and its reports. I can see in the Chamber five brave people who were not involved in the report of the committee, when our debates can attract, as we know, an attendance of perhaps 450 a day. It saddens me to see debates on reports of such significance to the lives of people, both men and women, in this country so poorly attended. I am extremely glad that the chairman of the European Union Committee is in his place, because I wonder whether the House might consider debating reports from Select Committees on scrutiny days so that they attract wider dissemination, wider knowledge sharing and greater attendances. My gender, which represents more than 50% of the people of this country, is equally affected by the implications of banking union and the financial crisis, and it saddens me that we do not seem to have in this Chamber the interest in these issues that we might have. I spoke to the noble Baroness, Lady Vadera, last night, who has all the expertise to be able to add to debates of this kind. Of course, she is on leave of absence. I was meant to speak in the earlier debate on nuclear non-proliferation until I noticed the composition of the speakers list for this debate and decided that it was important that I bring my non-expert knowledge, but some voice, to it as a priority.
Roughly a year ago, we were debating the break-up of the eurozone in this Chamber. At that point, it appeared possible that the scale of the problem, the lack of its recognition among some eurozone members and political inertia, combined with institutional sclerosis, would lead to a Greek exit, with the potential for Portugal, Spain, and Italy to follow. In this Chamber, we were divided between those who believed that the demise of the eurozone altogether was nigh and those who, such as us on these Benches, could imagine a winding road ahead but recognised the determination within the leaders of the eurozone countries to avoid that catastrophic outcome.
We are still on that winding road, but the pointers for the way ahead for the eurozone are clearer. What has been less clear this afternoon is where the United Kingdom is going. While a significant part of the European Union is negotiating deeper integration, the result of which is not yet evident, I find it difficult, apropos the Prime Minister’s landmark speech yesterday, to consider a referendum in response to a treaty that may not happen and may not ask anything of the United Kingdom.
Within the eurozone, the landmark event was last year here in London, when the Governor of the European Central Bank, Mario Draghi, spelt out the message that the ECB would do “whatever it takes” to save the euro. The outright monetary transactions bond-buying programme saw immediate reductions in bond yields to which Spain and Italy were subject, and signalled that the institutional changes so badly needed were finally to be addressed.
The committee’s report highlights the important areas for change before a single currency zone can be stabilised. It is also clear that the United Kingdom’s vital interests are at stake, irrespective of whether we are in or out.
The first and overarching priority is to address the so-called death spiral born of the interdependence of banks and sovereigns within the single currency. For those participating in the eurozone, the price of stability will be the loss of sovereignty, with all the political implications that that brings. So although progress towards creating a federal structure in banking has been kicked off with the creation of a single supervisory mechanism, there is, nevertheless, a loss of momentum on a common resolution authority, or indeed a common deposit protection scheme, as the noble Lord, Lord Harrison, mentioned. That impasse has been attributed to the German electoral timetable; and people suggest that we will not see moves to resolve other institutional questions until after September 2013. I am a little pessimistic as to the pace of progress even after that. I fear that the emergence of slow growth in late 2013 and the relief that the crisis is abating, will act as a drag on action necessary for stability to be consolidated.
Let me address why it is so important to proceed with a complete federal settlement to underpin the single currency. At the time of the Maastricht treaty, serious academic work was undertaken in the UK on the experience of the United States in the early operation of a single currency there. The American example still stands us in good stead today, and suggests why, if the eurozone is to succeed, it will have to become more like the United States. In doing so, I draw on an excellent paper from the Centre for European Reform, What a Banking Union Means for Europe, which I was very glad to see this morning included in the Library briefing pack for this debate.
As the paper points out, the US has undoubtedly had a faster and stronger recovery from the 2008 financial crisis than that seen in the eurozone economies. Part of the reason for that is that the decentralised state-level institutions in the eurozone states have actually served to amplify the initial shock from 2008, transforming a financial crisis into an existential crisis for the single currency. Without a federal budget, fiscal forbearance for banks is made on the basis of national considerations and political risks. The mutualisation of deposit protection makes free-riding more likely, so it does not exist, and the bonds of solidarity between states are naturally weaker than they are in the US, despite its federal diversity.
Significant key functions are now recognised across the board, even here in the UK, as being necessary if we get a banking union and then, eventually, fiscal and political union within the eurozone. The first, as the committee recognises, is to break the death spirals within the eurozone whereby individual states are pushed towards insolvency by bank rescues, being completely at the mercy of financial markets with higher and higher borrowing costs. Ireland knows the lessons of this well, which is why it is so keen to use the European stability mechanism’s funds for direct recapitalisation of its banks’ legacy debts. It will be interesting to see how this argument sits with the German taxpayer.
The other unresolved issue is the lack of a eurozone authority to restructure or wind up banks that run into difficulties. In the US, the Federal Deposit Insurance Corporation does this; since 2008, it has wound up more than 450 insolvent banks in an orderly manner. Within the eurozone framework, zombie banks continue—thanks to cheap ECB funding—so while we have a road map for single currency stability, there is still much detail to be worked on.
Let me turn to some of the issues that engage United Kingdom interests more directly. It was instructive to read the response from the Financial Secretary to the Treasury, Mr Greg Clark, to the letter from the noble Lord, Lord Boswell, regarding the committee’s concerns. The Government should undoubtedly be congratulated on their success in negotiations at the December Council. We have progress on the institutional relationship between the ECB and the EBA and, significantly, we have achieved solid protections in respect of the voting rights between the “ins” and “outs” when decisions are taken in the EBA. I recognise the concerns of the noble Lord, Lord Trimble, and I note that Mr Clark does not give complete reassurance, as there is still no clarity about what will happen if and when there are four or fewer “outs” left in the system. However, that is some way away and, in my view, we could not have got a better outcome at that point last month. We also did well to gain agreement on the memorandum of understanding securing the co-ordination of cross-border banking supervision.
However, we in the UK will also be affected by events beyond our control as we go forward. Just this week, we have seen moves towards the establishment of a financial transaction tax for 11 of the eurozone members. This came about as a result of the enhanced co-operation, which will now leave us without a say at the table as the shape of this tax is negotiated—with significant implications for eurozone banks that operate out of the City of London. While some Eurosceptics might be pleased at the potential gains for the City of London, particularly if the actual proposals result in driving trading in shares, foreign currency or derivatives out of Frankfurt and Paris into London, I would warn that there are dangers, too.
It is entirely feasible that the regulation might be sufficiently light touch, with a very narrow focus on individual share transactions, not to result in any greater business for the City. What is seen now as an obstacle to growth—the FTT—might have no adverse impact at all but bring revenue gains to the participating countries. Alongside this, we would have the scenario of the UK being seen as an uncertain bet, with the spectre of its referendum. City institutions may well consider it more worth while to be based within a recovering and more stable eurozone.
The overarching issues for both the United Kingdom and other EU and eurozone countries are the looming recession in most eurozone states, the seemingly never-ending austerity, with its record unemployment—never experienced before—and, most urgently, the loss of competitiveness in relation to emerging markets. These problems on their own, if taking place against the kind of recessions that we have experienced before, would have significant effects. However, taking place as they are against a backdrop of political uncertainty and shaky political resolve about seeing the thing through to its conclusion, they do not augur well for a speedy resolution to the eurozone crisis. That does not remove the responsibility for the UK to play a positive, engaged and compromising role if we are to see it though.
My Lords, I spoke about the noble Lord, Lord Harrison’s, committee’s report—I am a member of the committee—on 17 December, immediately after the European Council that discussed banking union. The noble Lord, Lord Harrison, himself could not take part in the debate in this Chamber. I paid a well deserved tribute to his chairmanship, and also to the role played in the committee by the noble Lord, Lord Hamilton. In the light of the remarks by the noble Baroness, Lady Falkner, I should also have paid tribute to the role played by the noble Baronesses, Lady Hooper, Lady Maddock and Lady Prosser, in what is an extremely strong committee in which I feel privileged to serve.
In what I said then I spoke of general issues concerning banking union and the European Council’s ratification of the decisions reached in ECOFIN. I do not intend to talk about that any more, because I know that the noble Lord, Lord Newby, spent Christmas with the relevant Hansard entry of 17 December, cols. 1388 to 1391, at his bedside, and that every time that he had difficulty falling asleep he read my limpid language. I want to talk this time only about the impact on the United Kingdom and the United Kingdom financial services industry.
The Government declared victory in the European Council on 12 December and the Prime Minister referred again to that victory yesterday, when he talked in his speech about his success in,
“securing protections on banking union”—
protection, that is, for member states that choose not to be members of the European banking union. My concern today is to try to establish just how secure these protections are. I want to make a couple of general points first, and then I want to put three specific questions to the Minister. They are questions which are pretty obvious really, and they cover exactly the same territory as the noble Lords, Lord Harrison and Lord Trimble, and the noble Baroness, Lady Falkner, took us into. So there will not be any shock or surprise.
I shall take my general points first. First, if we were to leave the European Union, the sort of protections that the Prime Minister was talking about are written on water. We would have no say in EU legislation, regulation and supervision if we were not members of the EU. I entirely agree with what the Prime Minister said yesterday about the impossibility of seeing the United Kingdom in a Norway or Switzerland situation. I think it is very important to recognise that the sort of protections that you get in the single market require you to be a member of the European Union as well as the single market.
Secondly, I worry that the possibility of our leaving the European Union could have a chilling effect on the City. The City has critical mass, of course, in a way that no other European financial centre does. We have not seen entities flee the City because we are not in the eurozone—at least I have not; I do not believe that there has been much—but nor have we seen, until yesterday, a British Prime Minister raise the possibility that he might, in a referendum, recommend our leaving the European Union. That is the logic of what he said yesterday—that it is conceivable that he might. The new settlement he seeks depends on our convincing every other member state either that they buy our prescription for “fundamental, far-reaching change”, or that they agree that we may have carve-outs, specific to the UK, from existing EU treaties to which we have previously signed up. Either of these is quite a tall order.
Therefore it is at a minimum conceivable that the new settlement will not be available, or that it will be so small and so trivial that the Prime Minister’s party will mock him if he says, “This is a new settlement”. Where then does he go? He was not prepared to acknowledge the logic of his position yesterday when Nick Robinson put the question to him. My worry is that foreign investors may draw their own conclusion. I do not know how big this effect will be, and I may be exaggerating the risk; but in this House we have all, when talking about Scotland, agreed with the Government in their criticism of Mr Salmond for delaying his referendum until October 2014, because of the chilling effect on inward investment of the uncertainty created and prolonged for two years. We have now created for the United Kingdom as a whole a precisely similar uncertainty, which is actually more existential for the financial services industry which we are talking about in this debate. I do not know how valid the point was when it was made about Scotland, but to the extent that it had validity when the Government made it about Scotland, they should be acknowledging it when it is now made about the United Kingdom as a whole.
The protections that the Government secured seem to be threefold. First, the non-discrimination clause states that,
“no action, proposal or policy of the ECB shall directly or indirectly discriminate against any member state or group of member states as a venue for the provision of banking or financial services in any currency”.
I think that that is an achievement. I agree with that. I think that what the Government said about it is correct. It is worth having, although it says nothing more than is in the treaty. It is worth having because we have cases in the European Court of Justice on precisely this point. It will have some beneficial effect in those cases. What goes without saying is often best said. So I regard that as an achievement.
Secondly, we have established the principle of,
“symmetry of treatment between the ECB”—[Official Report, Commons, 19/12/12; col. 102WS]—
and other supervisors. I am not really sure what that is worth. I do not think that it is worth very much, because whatever the principle, the ECB will be a very big beast on this stage. It is going to be a very big supervisor. There will be only one other very big supervisor, and that is the Bank of England. I think that the text that we have not seen—that has not been drafted, that does not yet exist—of the proposed memorandum of understanding between the Bank of England and the ECB is probably much more important than a European Council text enshrining this principle.
The third protection—the really big protection, the one that has been spoken about by every other speaker in this debate—is the double majority, the requirement for 50% or more both of participants in banking union and of non-participants in banking union, subject to review if the number not participating falls below five.
Hence I come to my specific questions to the Minister, and there are three. First, how many member states have, like the United Kingdom, declared that they definitely will not be part of a banking union? I think that it is only the Czechs so far. Is that right? Secondly, how many of the non-eurozone 10 have declared that they definitely will join? I think that it is four. Is that right? Thirdly, what view do the Government take of the likely decisions of the others—four, if I am right, but I do not know whether I am or not?
It is really very important for reasons that previous speakers have given and because we know that the ECB intends to ensure that the majority group in the EBA speaks with one voice. That is what the ECB’s opinion says, so retaining a viable minority group matters, and if the review clause is triggered, we all know what will happen. The matter will then go into the Council where, by definition, we will not have a blocking minority. I ask because, given the risk that the only strong protection secured in December—this one—falls away, it really is important for the City to know how many friends we have. Is the number going to fall below five or not?
Lastly, and briefly, market practitioners will make their own decisions about all these things. European Council and ECOFIN conclusions and ECJ cases are all very important and keep people like me very happy, but they do not actually determine what the market does. As, us apart, the eurozone becomes over time more coterminous with the European Union, we need to think about what perceptions market practitioners will have. Will they believe that it is plausible that the majority eurozone group, plus the extra members of the banking union who are not members of the eurozone but are candidates and postulants—pre-ins—to the eurozone, will conclude for all time that their major financial centre should still be offshore, in our country? Will they believe that the ECB will be willing to allow non-euro-area resident entities here in Britain to have free access to its free discount facilities? Will practitioners believe that they might be wise to reduce their counterparty risk by relocating into the eurozone? I do not know, but I am speaking of the possible perceptions of market practitioners.
Insisting on our rights in the single market is absolutely correct. Going to the Court when we think that these rights are under attack is absolutely correct. I am sure that we can play a good defensive game. But markets will make their own judgments. Financial services can relocate very fast, far faster than any other industry. That is one reason why I am so worried about our increasing isolation in Brussels, and about the signal that we have sent this week. The Channel is getting wider so quickly that I fear the movement may be visible from Tokyo, Beijing and New York. We already know that our friends in Washington have seen it and worry about it. I think that we should all worry about it.
Like the noble Lord, Lord Kerr, I pay tribute to our chairman, the noble Lord, Lord Harrison. He has always been a very genial and capable chairman. I am particularly grateful to him for the fact that we now seem to be getting before our committee rather more representative witnesses, who on occasions represent the majority of the British people. Unlike the noble Lord, Lord Kerr, who I enjoy having on our committee—we have our differences but they are always agreeable ones—I am not going to speak too much about the Prime Minister’s speech as my noble friend Lady Noakes has a debate on it next Thursday, to which I hope to contribute. All I would say is that it is a very clever speech. Rather like the Old Testament, there are bits in it which suit absolutely everybody. It does not really matter whether you are a Europhile or a Europhobe. There is something in the speech to keep everybody happy.
On our report, I do not know how many people have actually read it; certainly not an awful lot of action has been taken on it. We must be well aware that the single supervisory mechanism has been adopted, but an awful lot of other things that were heavily recommended in our report have not. I refer particularly to the recovery and resolution directive, which is possibly equally important, if not more so. Of course, the intention was that it would be introduced at the beginning of this year. I now gather that the Dutch and others who see themselves as picking up the tab for ECB intervention into banks have backed off. They do not want to get involved in that anymore. They are going back on earlier undertakings, which is rather typical of how the EU operates most of the time. It takes two steps forward and one step back, and if everything gets rather difficult or if things, as it seems to believe today, are looking rather better, it is a wonderful excuse to do nothing. If that is the EU of which we all want to be part, that is fine, but it certainly does not seem to be the answer for the United Kingdom. Earlier this week, we had some witnesses who described the state of European banks as they now are: they are European in life but still remain national in death.
We are now in a very significant situation. The problem with the EU is that it does things, with enormous reluctance, only when faced with a very major economic crisis. You merely have to lurch from one crisis to another before any difficult measures are taken. There may be people in this House who are dreaming of the day when Europe moves towards much greater integration but it is quite difficult to see how that will happen. It also seems quite clear that it will happen only when there has been one crisis after another.
In 2011, the Prime Minister called for the “big bazooka”. He wanted a major move made that would stabilise the sovereign debt crisis in the EU. What happened? Absolutely nothing happened and things got worse and worse. Interest rates on Club Med debt went through the roof. It became such a crisis that eventually the Germans agreed that Mario Draghi should make his statement that he would do anything necessary to stabilise the eurozone. At that stage, the markets calmed down. It was only because it took that long for German agreement to come through and, by that time, confidence had been undermined all over the eurozone. Sovereign debt was getting completely out of control. Investment decisions were being put on hold. When you get that across a large economic area such as the eurozone, you see the economy moving into recession and things getting very much worse.
I always get a wonderful narrative from my son-in-law, who is German and works for a German bank in London. He says that Merkel is playing a fantastically clever game. She is delaying like mad and restructuring the economies of countries in the eurozone. But what she has actually done is bring recession across the whole of the eurozone. Germany itself is now in recession. That does not strike me as being statesmanship. It comes as no surprise to me that she has just lost some Länder elections in Germany. I will be quite surprised if she wins the general election in September of this year. I do not think that there is much to be happy about with the way in which the eurozone is performing at the moment.
Earlier this week, our witnesses said that eurozone bank indebtedness would disappear like the snow in the sunshine once we had economic growth in the eurozone. There are two problems with that. First, we have absolutely no idea of the scale of bank indebtedness in the Club Med countries in the eurozone. However, we know that we are reaching a situation where a number of countries—because they are faced by serious social problems—have said that their banks cannot repossess properties and throw people on to the street. That means that people in those houses stop paying their mortgages because they cannot afford to do so. The next thing you have is moral hazard when someone says, “Well, hold on, my neighbour is not paying his mortgage repayments because he can’t. But I think I won’t pay mine either, although I can”. That leads to a very major problem in the banking sector because all the mortgages are going wrong and you are talking about sliding property prices anyway.
I agree that economic forecasting seems to have gone a bit wobbly right across the board, but if there is any consensus it is that there will be absolutely minimal growth in the eurozone for the next two years. I do not think there is any point in looking much beyond that. However, two years is a long time to have no growth and no relief on this side of things. For that reason, the banking crisis is certainly not over. If the ECB is not going to make itself liable for bank debt, another banking crisis will lead to a sovereign debt crisis and we will be back in much the same situation we were in a few months ago.
There are also serious questions about how much freedom the ECB has to buy sovereign debt. Officially, it is not allowed to print money and the Germans are desperate to try to keep a hold on how much money the ECB spends. They want to pass resolutions in Parliament before very much more money is extended to the ECB. We must accept that, although the recovery and resolution directive has not gone through, there probably will be a crisis which will eventually force it through. Then we will have a very interesting situation. There has been a lot of comment in this debate already about whether we are covered by a double lock voting system in the European Banking Authority. But, come on, let us live in the real world. In the real world, the executive arm will be the ECB, which will make up the rules as it goes along. I do not think that it will constantly refer back and say, “We have a crisis on our hands. Is the EBA happy that we can do this, that or the other?”. I think that the guidance that will come from the EBA will be extremely broad in anybody’s language and that the ECB will become very much more powerful as it goes along.
We also have the problem of what on earth we do about democratic accountability. It is not going to be a very satisfactory situation when the ECB moves in on a large bank and says, “This thing is going absolutely nowhere. Its liabilities are appalling. We must lay off half the people, break it down and get it into a more sensible state”. That will not be a popular move when thousands of people are put on the street. You can imagine that at that point the local politicians will all say, “This is nothing to do with us, you know. It is the ECB that is doing this. We don’t like to mention it but it is the Germans standing behind them”. That is the sort of situation you are going to get. If you have no democratic accountability—there is absolutely none as regards the ECB—you will have some very serious problems when things start to go wrong with banks. This is all far from being satisfactory and does not bode well at all for those eurozone countries which desire this great process of integration.
The problem of democratic accountability is very real, as described, but I think that everybody is well aware of it. Certainly the European Parliament is extremely well aware of it, which is why it is linking the two texts. The ECB text is nothing to do with the European Parliament but it will not agree it until it has agreed the EBA text, which is to do with it. I am sure that it will insist on some sort of democratic accountability provision being built in.
I wish that I shared the noble Lord’s confidence, but I do not. I cannot see where this democratic accountability is going to come from because at the end of the day the EBA is the only thing that has any democratic accountability, and if it is laying down broad policies and the executive action is being taken by the ECB, that is where the rub is going to come—with the executive action being taken by the ECB. Perhaps something will happen, but there does not seem to be much sign of it at the moment.
We will face crisis after crisis, which will merely prolong the uncertainty and the general conditions that we have in the eurozone today whereby people are still very reluctant to invest in this area and stagnation seems to be continuing. Resentment will increase. Everybody says that we need a completely integrated fiscal union in the eurozone. Well, come on. You will have a growing problem with the Germans resenting massive transfers of money to the Greeks—to talk in extremes. The Germans will not allow those transfers of money to take place without enormous conditions being placed on the Greeks. The Greeks will all riot in the streets because they will say that the terms under which the money is being transferred are too stringent, and the Germans resent giving the money. Is this the sort of Europe we want to live in? Already we are beginning to see very extreme parties appearing in Greece. Everybody goes on about the fascists in Greece, but you have to bear in mind that the communists are much bigger than the fascists and much more likely to win the next election. Either way, we are seeing very extreme parties emerging.
Then we have the Prime Minister’s speech and the idea that we should have a referendum in 2017-18 on whether we should be in or out of the European Union. If the eurozone is going absolutely nowhere and is no better than it is today, as many people think will be the case, I cannot see this country ever voting to stay within the European Union.
My Lords, it has happened more times than I can recall since I have been in this House, nearly two and a half years, that I have had the pleasure of following the noble Lord, Lord Hamilton, or he has had the task of following me. Although I rarely agree with him about very much, it is a great pleasure to debate with him. However, I did agree with two things that he said this afternoon. First, I share his view that the ECB, in practice, is likely to have a dominating and increasing intellectual influence on the EBA. Secondly, I very much agree with his characterisation of the way the European Union makes progress as two steps forward, one step back. Although he probably would not agree, I think that is a very sensible, sound and prudent way of advancing in difficult territory, and I am very content that that has been and continues to be the process. Had he put the order the other way around, I would have very much disagreed with him, but his judgment and mine are very much the same in that way.
I want to add my own word of tribute to the noble Lord, Lord Harrison, and to everyone on the committee for having brought forward a very interesting and timely report. I want to address just two of the issues on which the committee focused in drawing up that report, and then to say a few words about the position of the British Government. First, I recognise that the testimony that the committee received was rather conflicting. A very important and fundamental issue is whether it is right to have the monetary authority—in this case, the European Central Bank—as the supervisory authority for the banking system. It seems to me that it is right. There is often said to be a conflict of interest between financial stability and monetary policy. I see it not so much as a conflict of interest but of objectives. It is not the sort of conflict that can be eased or solved by separation of responsibilities. On the contrary, it is the sort of conflict that can be made a great deal worse by the excessive separation of responsibilities, because if there is a problem and in difficult times the supervisory authority feels it necessary in the interests of financial stability to provide more liquidity to the market, for example, or to support a particular bank by replacing deposits that may be fleeing elsewhere, or otherwise, that decision would immediately have monetary consequences and could be implemented anyway only by the central bank.
The central bank needs to be brought in—inevitably, it must be brought in—and the earlier the better. What is more, the central bank is in a very good position because of its open market operations, because it can see to what extent banks are varying their levels of deposit with itself, and because it knows about any drawings through the back door by banks in its area of responsibility. It is in a very good position to see whether liquidity problems are emerging for institutions in their area. Therefore it seems to me extremely important that the supervisory authority and the central bank should work together anyway. The idea of having two different directorates within one institution—the ECB—responsible for stability and for monetary policy seems to me a very good solution. I personally have the greatest confidence that, if there is a difficult decision to be made—as there will be, inevitably—it should be Mario Draghi, a person in whom I have the greatest confidence, who has the responsibility of making that decision.
The other issue that I want to address, which was dealt with in the committee’s report at some length, is whether it is desirable or acceptable for the banking industry come in in stages. Only the first stage so far has been agreed. Of course, it cannot be certain that there can be any agreement with the second or third stages, the first stage being the supervision regime and the second and third stages being retail deposit insurance and resolution procedure and mechanism. Clearly, it is not ideal; it is not the way one would wish these things to be, but I think it is a reasonably acceptable situation on a temporary basis, and a good deal better than nothing. I am glad that we have the process going.
I have to say that I think the Germans are not being rational. Maybe the Germans, and the Dutch, are resisting a European Union-wide resolution and retail deposit insurance system simply because if there were a problem and a run on the banks in one member state because in that particular context depositors no longer had confidence in the credibility of the retail deposit insurance system, and if that confidence depended entirely on the credibility of the national Government, unsupported elsewhere in the EU, there would inevitably be a systemic crisis. Similarly, if it was necessary for a particular member state to recapitalise the banks, and that task was out of proportion to the financial resources of that particular member state, that would engender immediately a sovereign debt crisis for that country.
What is more, such a crisis would never be limited to one member state. There would be knock-on and systemic effects for the whole of the European Union. If Greece went down, we know that there would be effects elsewhere, or if Portugal went down again there would no doubt be strong effects in Spain. The consequences of that would be that German and Dutch banks—to take the examples of the two countries that are resisting the logic of the banking union, which I think they are—would find that they are making great write-offs of their assets that were exposed to these particular markets and deposits with those banks, and so on. They could be supported only by their own banks, which would have to be recapitalised by their own national Governments.
The cost of such a bailout would be enormous and vastly greater than any credible drawing in respect of one, two or three particular institutions on a retail deposit insurance scheme. I think that the Germans are being quite illogical about this. They are not looking at the matter in the long term or in the round. No doubt intellectually they might agree with me, but they find themselves under political constraints. I hope that with the various events that are in the pipeline in the coming months they will find that it is politically possible to do what I think is the rational thing to do.
I now want to say something about the position of the British Government in all this, which seems to be perfectly ludicrous, if I may say so. I understand that they see the banking union as a good thing for others but not for us. That immediately is a slightly suspect argument, and one wonders why it is the case. I looked at the committee report to see what the British Government’s analysis of the national interest was, and why it was not in our interests to join the banking union if it made sense for other people. There is no such explanation in the whole document. I shall read what passes for an explanation to the House. Paragraph 129 states:
“The Government have repeatedly stated that the UK will not participate in the banking union proposals, on the grounds that the measures logically flow from monetary union and are designed to secure the success of the single currency”.
That is a quite unconvincing argument. If someone buys a car, a pharmaceutical product or a piece or electronic gadgetry, he is not worried about who the product was originally designed for; he is worried about whether it is suitable for him, and whether it will work for him. That is the argument that needs to be addressed, but it has not been addressed by the Government at all.
Surely what the noble Lord has just been saying is precisely the reason why the British Government do not want to join the banking union. They are saying that there must be mutualisation through the European Central Bank and the banking union of the debt of banks in the euro area. Is he really suggesting that it would be sensible for the British Government to share in that liability, and that if, as he described graphically, there were to be a run on one of the banks in Greece, we, too, should have our share in picking up the pieces?
Indeed, I am suggesting exactly that to the noble Lord and to the House. It would be very much in our interests to do so, for the reason that I thought I had explained. Perhaps the noble Lord did not follow my argument, which was that if there were a run on the banks in a member state, left to itself it could engender a systemic crisis that would be far more costly to us, because British banks would write off a very large portion of their assets as a result of collapses elsewhere. In order to restore those banks to financial viability, we would need to recapitalise and support them in ways that would be much more expensive than the likely cost of any contribution to the system. I do not want to detain the House for too long, but I believe that we should have interventions such as this, so I will give way to the noble Lord.
It is obviously necessary, if we are going to get involved in any kind of obligation of this kind, to make sure that we come under the same supervisory authority and that everybody works according to the same rules. That is palpably not the case with us and the United States.
The position of the British Government is clearly that they are not interested in making a dispassionate and functional analysis of the national interest in this area. If they were interested in doing so, it would have been quoted in the report and we would all know about it. They have simply decided that on party political grounds, because of the need to conciliate the Eurosceptics in the Tory party—we know that this is the way the country’s foreign policy is now being run; it is being bear-led by the Eurosceptics—it is impossible to do the rational and sensible thing, so they have simply excluded a priori any possibility of our joining the banking union, even as a participant that is not a member of the euro. A large number of countries will join on that basis—almost certainly a good deal more than the four that have already announced they will. I expect that every east European country other than the Czech Republic to come into that category. As the noble Lord, Lord Kerr, very convincingly argued, that would cause great problems for us. It is absurd for the British Government to say that one of the major difficulties here is the voting system, because the problem would be resolved if we were part of the system, and at least one of a minority of nine or 10.
If we do not join the banking union, there are only three logical possibilities. I do not think that any Member of the House will want to argue with my logic, which is very basic and elementary. The first is that we have a supervisory system that in practice simply tracks that of the ECB; we will do exactly what the ECB does in its area of responsibility, for example in matters of licensing, authorisation, intervention and guidance to banks. That would mean that we were de facto part of the system, with the important difference that we would not be part of the decision-making mechanism and would not have the kind of influence within the system that otherwise we would have had.
The second possibility is that we adopt a supervisory system that is somehow stricter and more severe than that adopted on the continent by, for example, the Republic of Ireland under the ECB. That would mean that banks here would find that they were at a competitive disadvantage doing their business out of London as opposed to doing it out of Paris, Frankfurt or somewhere else. That would not be a very intelligent thing to do.
The third possibility is that we adopt a regime of supervision that is lighter and more complacent than that adopted by the ECB. In the short term, that might attract institutions that do not like the stricter regime on the continent, but in a crisis we would be much more exposed because we would have a lesser degree of credibility. It would be considered that our institutions and banks were less safe and sound than those across the Channel, or indeed across the Irish Sea. That, too, would be a bad day’s work for the country. We would face a situation in which either we would have no advantage at all, but the disadvantage of not having the influence that we ought to have and that is commensurate with the importance of the City, or we would be otherwise disadvantaged either in competitive terms or in our ability to withstand crises. That would be a profoundly bad day’s work for the country—and it is exactly the day’s work that this Government have done. I deprecate it very strongly indeed.
My Lords, it is always a pleasure to follow the noble Lord, Lord Davies of Stamford, because, whatever other interests and policies he has in his mind, he is always a very robust, fervent and positive European. We need more of that in this country. I am glad, too, that in recent years the Labour Party has become much more positive on Europe following the passage of the Lisbon treaty. That is a very good development for this country. It can emulate the good example of the Liberal Democrat party as being always in the vanguard of the pro-European position—patriotic Britishers, of course, but also enthusiastic Europeans, and those two things can go closely together.
Yesterday the Prime Minister made his sad speech—actually, it was not a sad speech but a sad occasion. One has to acknowledge that there were some good bits in the speech and, as my noble friend Lord Hamilton of Epsom said, he tried to appeal to everyone, and in that sense was quite clever. However, it was a sad occasion because he has unleashed for himself a number of very disturbing things, depending on how they develop in future, that are going to destabilise British politics significantly. I will return to those themes in my concluding remarks.
Many good things have been said so far about the EBU report. I shall refer to it briefly but that is not to decry its quality. In fact, we in this House are used to having reports of high quality from the European Union Select Committee and its sub-committees. I am going to embarrass the noble Lord, Lord Harrison, deliberately by saying that this report is outstanding. I thank him and his sub-committee members for having created this excellent report.
It highlights, in a disturbing and worrying way, the acute complexities of the architecture of the system. A number of significant members, led, I suppose, by the United Kingdom, which, in a way, is the largest of them, are not going to be involved in this important developing system and framework. That is a matter of great concern, and the sooner we have the courage to align ourselves with these proposals, the better. That may take some time, and of course nationalism raises its ugly head all the time and we have to contend with that. My noble friend Lord Hamilton of Epsom would not admit this or agree with me but, as a result of being driven out of the exchange rate mechanism in 1992—that hugely humiliating moment under a Conservative Government—the United Kingdom was subsequently very scared of the euro, afraid of the single currency, nervous as hell about what it might develop into and always looking for things to go wrong.
The fact that the report looks at the way in which this new system will control the banks—the clearing banks, the joint stock banks, the commercial banks and the other banks—in the eurozone area is an outstanding achievement. I want to quote from what was said by President Van Rompuy, but first I will give way to my noble friend.
I do not agree with that, and anyway it is too theoretical even to consider. By the way, our deficit is £100 billion and we have a free-floating currency that has now been devalued about eight times since the war, either formally in the marketplace or informally. It is interesting to measure and to see where that got us when we were kicked out of the exchange rate mechanism by market forces, when the Treasury was for a moment probably the worst ministry of finance in Western Europe. It has not carried on being like that—it recovered and has produced some very good decisions since then—but that was the lamentable position at the time.
President Van Rompuy, who met the committee, is quoted in the third paragraph on page 57 of the report as saying that,
“the EU was in a better place than a few months ago. No-one was now speaking about imminent eurozone collapse. Although the problems had not disappeared, things were ‘on the right track’ but the EU might ultimately need to give Greece more time”,
which is a very fair point. In the preceding paragraph, he also said that he had to remind the committee that these member states—sovereign member states, all of them—are very lively democracies, so it takes time to reach these decisions. So, although people complained about the process being slow, the slower it was, the better the structure that was emerging, as I hope the Minister will agree.
In the third paragraph of the summary, the committee states,
“we welcome the publication of the Single Supervisory Mechanism proposals as a significant first step towards banking union. We agree that the European Central Bank, to be given ultimate supervisory responsibility for every euro area bank, is the only organisation with the necessary credibility and authority to take on this role”.
When the Minister comes to sum up, will he deal with that matter and the concern that the committee expressed about the concentration of so much power and its practical effects on the institutional banking market place?
In paragraph 3 on page 7, the report states:
“Although the Government have made clear that the UK will not participate in a banking union … the UK’s decision not to participate, should not and need not adversely affect London’s position as the leading financial centre in Europe, nor undermine the single market. The strength of this argument may soon be tested”.
That is quite an ominous point and I would welcome the Minister’s reassurance on that matter.
I repeat my warm thanks for a truly excellent report. It has helped a great deal in taking an immensely complicated subject further. In his distinguished opening speech, the noble Lord, Lord Harrison, set an admirable precedent by referring to yesterday’s referendum decision and so on. I should like to conclude by making a few points on that in this debate.
It was a sad day for the reasons that I have suggested and the effects will be very disturbing as time goes on. I am very glad to see that the Deputy Prime Minister, quite rightly, established a different position—that there might in future be a need for a referendum depending on the outcome of any negotiations, but to threaten one now, when no negotiating posture is being created and there are many years to go before we reach the end year of this decision-making suggestion, will create a great many difficulties and uncertainty, particularly in the business world. There have been many comments to that effect.
It is sad that we have got ourselves into the position of being the bad member of the club. It is a great pity. It is rather foolish of this country to lecture other countries on the crucial importance of competitiveness and efficiency in their economies when we have a terrible statistical deficit in our own trading and do not have a very strong economy. To suggest to the Germans that they need to improve their economy in comparison with English examples is going too far. I wish I did not have to say that, but that is the reality of the situation. The Germans remain modest about their economic achievements.
The sheer awkwardness of examining the subjects in this report while not being in the eurozone will come out more and more as time goes on. If we could only restore our courage and become a mature and enthusiastic member of the European Union, it would be very good for this country.
There were some interesting points made in the press yesterday about Mr Cameron’s speech. In an article today in the best newspaper in the country—the Guardian, of course—Martin Kettle states:
“Cameron’s speech was not brave. It was reckless. The brave stance yesterday was Ed Miliband’s, sticking to Labour’s practical pro-Europeanism and refusing to follow suit. Instead, yesterday marks the moment when Cameron’s pragmatic centre-right political project finally bent the knee to the ideological fantasy about Europe that still grips the Tory party”.
Anthony Hilton, who has been a long-standing supporter of the euro and the eurozone and now feels that the eurozone has passed the danger point—after all, it has never been a weak currency; it has always remained a strong currency despite the crisis and it is only that there were four or five weak members of that currency which had to have assistance provided by collective action—says in today’s Evening Standard:
“If Cameron thinks these concessions”—
to what I believe he used to call the head-bangers—
“are going to appease his lunatic fringe and calm things down, he might equally consider applying to be Prime Minister of the planet Zog. The sad reality of his capitulation to Eurosceptic pressure is it virtually guarantees that Tory backbenchers and their media acolytes will talk about nothing else between now and an election which is still two years off”.
Of course, they might be tempted to cite the Irish as saying that it will be a good occasion, they are quite relaxed and will go along with it, but that is not true either. I quote the Irish reaction in today’s Irish Times, where Arthur Beesley says that,
“it is readily acknowledged in official circles that the British debate and uncertainty over its EU membership have clear potential to destabilise European politics and create friction with other member states”.
Finally, I shall quote my right honourable friend in the other place, Sir Menzies Campbell:
“This was never about the UK; it was always about Ukip. The declarations of satisfaction which came from the Tory right immediately following Mr Cameron’s speech were disturbing for those of us who are supporters of European engagement. Mr Cameron’s speech had nothing to do with Britain’s place in Europe and everything to do with his leadership of a bickering and divided party. Tory leaders of the past who have had to fight sections of their party over Europe have found it an unrewarding experience. Mr Cameron is fated to be among their number”.
I regret that because I think that in many ways Mr Cameron has been an excellent Prime Minister and a very personable senior political colleague, so it is a great shame that he has allowed himself to be put in that position.
As my noble friend Lord Hamilton of Epsom said, there is to be a major debate in this House next week on the decisions that were announced yesterday and the future outlook, in which I hope to take part. I shall therefore leave it at that for the moment, but it is part and parcel of everything that we will examine in our Select Committee and its sub-committees. It is all about the huge complexities of Britain remaining a bad member of the club and refusing to co-operate in these matters when co-operation is absolutely essential.
My Lords, perhaps I may take the House back to the European banking union proposals and start with my own tribute to the noble Lord, Lord Harrison, as an enormously courteous and conscientious chairman of our committee. At least for me, I allowed myself to go to Brussels, feeling slightly worried as to whether I might be contaminated by doing so. Two things struck me during the visit. The first was that President Van Rompuy is a much more impressive and determined person than I had perceived previously and, to my mind, he will have had considerable influence in persuading Germany at a crucial time that it was not a good idea to allow, encourage or force Greece to leave the euro. Secondly, I cannot resist teasing the noble Lord, Lord Kerr. While we were wandering around the buildings he said to me, “The trouble is that none of the young people in the Foreign Office want to come here any longer because they know we will not be members in five years’ time”. I thought that that was quite an interesting little judgment.
I want to make two further general points. The first is that while the single market sounds wonderful, what we really want, please, is single market free trade. I know from my own commercial career that a great deal of the single market serves the interests of the large players in their sectors and is highly uncompetitive. Wide access is a fair point, but to my mind the single market needs a really good dose of free trade if it is to achieve what it is supposed to achieve. Secondly, I want to make a point about the City of London and its business. It is becoming increasingly global and is not just an adjunct of Europe. The impression I am being given by various European operations in the City is that you would have to have an EU that was very protectionist and was even threatening to impose capital controls for it to be uncomfortable for people in London. If you had an EU which was doing that, I think that people would not want to put money there anyway. I am not complacent about the position of the City of London and I well remember many people warning that if the UK did not join the euro the City of London would collapse. But, of course, nothing like that actually happened.
On the European banking union, the first question to ask is: how important are these proposals, what are they about and what has given rise to them? I have to say that they do not address the real underlying problem, which is that of different levels of competitiveness, or the point made by my noble friend Lord Trimble, the risk of locking less competitive areas into permanent depression, which has happened in the deep south of America as well as in the south of Italy. The solution to that is not necessarily internal devaluation, when that is what I call gold standard austerity. In the big debate about what to do about the competitiveness issue, common banking supervision is somewhat peripheral.
To the extent that banking supervision is important and relevant, I thought it was supposed to be getting banks better regulated, with a view to the ECB managing the extent to which the ESM fund was used to bail out banks where necessary. Now it seems we are being told by Germany that that is not wanted and it has to be sovereign states that bail out their banks when they are in trouble and maybe the sovereign states will be helped by the ESM fund. That is entirely contrary to the principle of trying to separate the problem of the banks and the state rather than compounding the two problems. It is pretty important in terms of the underlying objective as to how this is going to be resolved.
I have two more points about supervision. First, I am not entirely clear how much of the banking system it is going to cover. It looks as if it will be only the large banks. There is a slight danger of moral hazard there. The German Landesbanken, the savings banks that control about €2,500 billion, seem not to be part of it, and lots of other smaller banks will be left to their local central banks. I make the point that I think others have made: Credit Anstalt, which started some rather nasty banking developments in the past, was a small bank. It is almost as important that small banks are regulated well as for large banks to be regulated well.
When it comes to deposit insurance, as Martin Wolf said when we interviewed him, Germany does not want to have to pay a penny more than it absolutely has to. I am rather doubtful that deposit insurance will develop if there is a free-riding risk. You may have similar principles as to how it operates but I think it extremely unlikely that you are going to get a system where each country in the eurozone is there to cover the risks of the others.
What about the UK and banking union? As we were considering the first point, I was struck by how considerably it reminded me of the Financial Services Bill, which we were debating here in Committee, and there was a quite extraordinary similarity between the proposals for the PRA as a sensible supervisor rather than regulator of the banking system and the proposals for what the ECB would be responsible for. Indeed, to whatever extent there was open discussion, it is absolutely clear to me that the two go hand in hand—nothing wrong with that at all—and that the Bank of England will be sensibly collaborating with the ECB, as it has for a long time, in trying to get the best of banking supervision both in London and on a pan-EU basis.
The point has been made, but it is important, about the extent to which the Government did a good deal in terms of the voting powers for the EBA. It is the EBA that lays down the rules so it is pretty important. I think it is probably reasonable. We have to have only four countries left that are not participating, which is fairly unlikely, and three have already indicated that they are unlikely to participate.
Others have made the point—in particular, the noble Lord, Lord Hamilton—about the lack of ECB accountability, which is crucial in a world of gold standard austerity. Rather cynically I make the point that when people in southern Europe find that the funds from Germany are not flowing in transfer payments in the way that is expected as the quid pro quo, that is going to become extremely difficult politically. The ECB will have to make a real effort to make itself accountable. Then you have the big issue as to whether it is going to be accountable to national parliaments or to the European Parliament. I think that citizens still look much more to their national parliaments.
I have not got a grain of criticism of the proposals, which seem pretty sensible in the main. I see them, in the future, rowing quite sensibly and practically—not negatively—in tandem with what we hope will be much better banking supervision by the Bank of England than we have had from the FSA. However, the real underlying purpose does not look as if it is being addressed. It should provide a mechanism for managing bailout funds from the ESM for the banking system but it does not look as if that is going to be on the agenda.
My Lords, I, too, join other noble Lords in thanking my noble friend Lord Harrison for an excellent report. I shall not talk about either Mr Cameron or the UK but want to concentrate on the banking union. One question I want to pose is why the eurozone members thought, in the middle of the crisis, that a solution to the problem was a banking union. If you think about the financial crisis, both the US and the UK had a banking union—they were each a single banking union—but it did not prevent a collapse. Having a single banking regulatory authority, in our case the FSA, did not prevent the collapse. It is very good that structures are created but we ought to ask whether those structures actually do the job they are supposed to do.
I remember in your Lordships’ House about two years ago, or maybe more, sitting in a discussion about the European system of financial supervision. A huge structure was set up for a banking authority, an insurance and occupational pensions authority, and a securities and market authority. It is obvious that none of those things helped when the crisis came—or they certainly did not make any impact in preventing anything that happened. We are now adding another institution and, as noble Lords have pointed out, there will be problems in respect of the overlap between the EBA and the ECB.
The basic problem here is that we are only slowly understanding the nature of the euro, which, in a sense, is a private currency. It is not a national currency, such as sterling or the dollar, where Governments have more control over money creation. Euros can be created only if the ECB is approached by a commercial bank that gives collateral, sovereign debt or something else, and counterpart money is created. As the noble Lord, Lord Flight, said, it is like a gold standard but without the Californian or Australian mines suddenly adding more gold to the total supply. In particular, the strong deflationary character of the euro was understood only when the crisis started. Until then, nobody quite understood what the euro was all about. It is a currency for which there can be no democratic accountability, because the whole Maastricht treaty was designed, on the lines of the Bundesbank’s authority, to have the central bank immune from any democratic control, which was thought to be the standard of monetary responsibility.
I think the ECB is a marvellous institution—right now it is the only institution which is working at the eurozone level, and it did a splendid thing by having its outright monetary transactions authority save Spain from seizing up. However, we have to understand that we have created a currency in the eurozone which will be permanently deflationary. Unless you break the Maastricht treaty and allow the ECB to directly monetise sovereign debt, it will remain deflationary.
As far as I can see, something miraculous will happen to our competitiveness, but, by and large for the next 10 years or so, the eurozone will be stagnant. It will be more or less a 0%-to-1% growth-rate economy. Let us remember that Napoleon looked at a map and said, “There is China; there’s a sleeping giant; let it sleep”. Well, that is going to happen to the eurozone. I am not a Eurosceptic—I am a great admirer of the EU—but this is what we have constructed for ourselves. Let us remember that, in the gold standard, you could thrive only with extremely flexible labour and commodity markets; now, you cannot.
As many noble Lords know, the EU is not a genuine single market as yet and we are still waiting for the Lisbon treaty recommendations on flexible markets to be implemented. In that context, a deflationary currency has a problem. One of the problems facing the banking union, as the report quite properly points out, is that you cannot envisage the ECB looking after 6,000 banks. The ECB will look after the big players, especially those which have cross-border operations. It will be like the Premier League—I think the previous speaker said something about the Premier League council. The problem here is that you will have to be the national supervisory authority of those banks to concede power to the ECB. There will also be macroprudential problems. Those large banks will also have connections with smaller banks within their own territory, which will then be supervised by their national authorities. It is not clear that co-ordination between national authorities, which will be guarding the smaller banks, and the ECB, which will be guarding the larger banks—the hub-and-spoke idea that people are talking about—has been worked out as yet. You will therefore have to devise a set of engagement rules between the various national regulators and the ECB, because, as far as I know, the national regulators need not legally be subservient to the ECB—they may be, but they will not be. That is going to be a substantial problem.
Along the way, in a deflationary climate, there might also be mergers and consolidation. Those 6,000 banks will not remain 6,000 banks; we will probably see consolidation. I wish that we had fewer banks in Europe than we have right now, because if you have got a single currency, why do you need so many different banks? It is not clear to me how the ECB will deal with the trickier problem of the dynamics of consolidation, mergers and acquisition and still maintain its authority as a regulator.
Where the issue will finally come to a head is in whether banking union will help the recapitalisation of banks which could possibly fail. When in June 2012 the proposal was made to speed up banking union, the idea was that it would somehow make it easier to recapitalise banks. As the noble Lord, Lord Flight, pointed out, there are difficulties about that, because we lack in the eurozone a genuine pooling of risk. Governments are not willing, so far, genuinely to pool risks. They would rather that each Government look after their local failing banks and recapitalise through issuing more sovereign debt, which the market may not want to buy at any reasonable price.
If so, what happens to the larger banks which are being directly supported by the ECB? Who will bail out the larger banks? We then go back to the national rule. I do not think that Deutsche Bank will fail, but if it was about to, would that be Germany’s or the ECB’s responsibility? Would the money come from the European stability mechanism? How will that be done?
The banking union throws up a number of interesting issues. We are still in the early days. It is not at all clear to me that, having said, “Let us have a banking union”, all problems are solved. The problems of the banking union are just beginning.
As I do not want to speak for more than 10 minutes, all I can say is that I hope that the noble Lord, Lord Harrison, is there to give us the next report when things get worse—or better.
My Lords, I begin with two personal points. First, I declare an interest in that the think tank that I chair, Policy Network, has in the past received support from the City of London Corporation. Secondly, it is a pleasure to welcome the noble Lord, my brother-in-law, to the Front Bench opposite. Therefore, there will not be an excess of partisanship on this occasion on my part.
As always, it has been an interesting debate, not least because of the final contribution from my noble friend Lord Desai, which I am still trying to absorb. My noble friend Lord Harrison began the debate with an admirable summary of his report. As usual, one wishes that the country was governed by the committees of your Lordships’ House rather than by the prejudices of its Executive, because we would be much better governed. It is an admirable report.
An interesting, rather off-the-wall point was made by the noble Baroness, Lady Falkner. It is something on which I have long reflected: why is discussion of Europe such a male-dominated subject? That is not something that we should discuss at length today, but we have to take it very seriously if the pro-Europeans want any chance of winning a referendum, so thank you to the noble Baroness for raising that issue.
I want to make three points. First, on the state of the euro itself, I believe that adjustment is on the way. Things are a lot better than they were. The question is whether what is occurring is socially and politically sustainable. I do not think that it will be without more fiscal flexibility. Nor do I think that it will be sustainable without considerable debt write-offs, particularly after the German elections in September. There will have to be an element of a transfer union to make the position of the mezzogiorno of the south, which the noble Lord, Lord Trimble, mentioned, sustainable. That will require further steps towards banking union, particularly in the case of Spain, because there is such an obvious link between bank debts and the sovereign debt position.
My second point is on the Britain in Europe debate. Banking union is the fourth major institutional development since the euro crisis started from which the United Kingdom has stood aside. There was the European stability mechanism, the euro-plus pact, the fiscal compact and now the banking union, which was agreed in principle in June 2012, and which the British urged the eurozone to get on with. Indeed, I think George Osborne first recommended it as long ago as January 2011. He was very foresighted about that, but it is something from which we have chosen to stand aside.
If you read what this is about, while in the British debate it is presented as a measure to rescue the single currency, in the continental debate it is about the creation of what is called a financial market union. I think the noble Lord, Lord Kerr, pointed that out. In the British Government’s view, this is all part of a clear narrative in which the eurozone is integrating and we have to establish a new kind of settlement and relationship with the members outside it; that is the British Government's narrative. However, the real question is: to whom does this narrative apply, other than the United Kingdom? How many other euro-outs share this conception of the British narrative? I might ask the Government what their view of that is.
That is a crucial point, first, in informing a view about the sustainability of the safeguards that the Government obtained on the banking union in the December 2012 summit. Secondly, it is fundamental to whether David Cameron’s essential assertion in his speech yesterday—that the core of Europe is the single market—is right. For most members, however, will it actually be the single currency? This point is fundamental because it is a question of whether we are going along with the support of other euro-outs, to try to negotiate a balanced relationship between outs and ins, or whether we are just making a case for special treatment for Britain, which will be far more difficult to negotiate.
The third point I want to make is about the position of the City of London. These are not just intellectual exercises; we are talking about something that is fundamental to our national interests. I have long believed that the UK is overdependent on financial services and I support the whole concept of rebalancing the economy towards manufacturing. My noble friend Lord Mandelson’s comment was right; there has been too much financial engineering and not enough real engineering. I agree with all that. However, the City is a crucial national interest and the financial centre of the single market. I also agree with the noble Lord, Lord Flight, that it is global and very resilient but it has benefited a lot from the single market in Europe—particularly from the opening-up of the financial single market, a lot of which occurred under the previous Labour Government.
Of course, no one worried about this at the time because it was the era of light-touch regulation. No one worried about the financial imbalances that were building up between countries and the lack of cross-border regulation. Well, the banking crisis changed all that and the Government recognised the need for regulation at EU level. It was a good thing that the Conservative Government, including Chancellor Osborne, accepted when they came in what Chancellor Darling had already agreed to: the establishment of European regulatory agencies.
Could I just make this point to the noble Lord? The investment management industry, in which I spent 40 years of my career, has still failed to penetrate the EU. There are a variety of cultural and other barriers, but a lot of American firms came over thinking that Europe was like America and that all they had to do was have offices. If one looks at how much money the London retail funds business has got from the EU, it is still pitifully small.
I agree that things vary from sector to sector but one of the reasons why so many foreign-based banks are in London is because it is the financial centre of the single market.
The point is that the banking crisis has changed the way that we thought about the City. It has made regulation absolutely essential. The euro crisis has made banking union essential in order to break the link between sovereign debt and the fact that nation states have had to underwrite their banks. It raises difficult issues for us in the UK. As long as we see ourselves as being outside the single currency, the centre of the European financial market will be remote from the core of the banking union. There is also the block vote problem: if regulation is concentrated through the ECB, we could be outvoted.
The UK made a disastrous attempt in 2011 to try to tackle this problem of what to do. This was at that year’s December summit, where a paper was circulated late at night without prior consultation with anyone. Full of complex detail, it had at the top the horrible word “unanimity”. Basically it was asking for unanimity on questions of financial services. Not only was this tactically maladroit, it was strategically misguided. If the sincere wish of the British Government is to deepen the single market in the European Union, we cannot go around demanding unanimity on a specific UK interest, because every other member state will demand unanimity on an interest specific to it.
That is why the proposals of, for instance, the Fresh Start group are extremely worrying. They do not demand unanimity but in cases of financial services they do demand use of the Luxembourg compromise and they talk about emergency brakes. If you believe in the single market, you cannot put forward such things in the European Union. I should like to hear from the Government that they have no intention of pressing for the Luxembourg compromise or emergency brakes in this area. This would be so damaging to Britain’s interests in pressing forward to the single market.
However, the Government achieved a notable success in December with the acceptance of the double majority principle. I agree with my noble friend Lord Davies of Stamford that, for protecting our position, this is a lot better than nothing. Yet I also agree with the noble Lord, Lord Kerr, who asks how robust this is and whether it will last.
First, this double majority applies only to the banking agency, which is about the implementing regulations, and not to ECOFIN, which draws up the legislation. So we do not have a special position there. Secondly, the noble Lord, Lord Hamilton, is right that the ECB will be the big player in this and the EBA a weakly staffed and resourced organisation. How do the Government intend to deal with that? Thirdly, there is the question of time limitation. How many euro-outs, which are actually banking union-ins, will there be? If there are a significant number of euro-outs who will be banking union-ins, how long do we think that this special double majority arrangement will last?
There are alternatives. I am not saying that this is what the Labour Party would propose but, as my noble friend Lord Davies said, we have not had from the Government a proper cost-benefit analysis of what the alternatives might be. Did they look at how, as a euro-out, we might be a member of the banking union and whether it could be made to work? Could we have built on the model of the European Systemic Risk Board, of which the president of the European Central Bank is chair and the Governor of the Bank of England is vice-chair? Could we have used that as an umbrella? The Government have a duty to look at all the possible alternatives here because this is an issue of such vital importance to the future of the City. The fear that a lot of us have is that for reasons of ideology and prejudice, the UK has opted for very much a second-best, possibly a third-best, solution that would be gravely damaging to our interests in the long run. I will be grateful to the Minister if he can deal with some of these points.
My Lords, I thank the noble Lord, Lord Harrison, and the European Union Committee for the report and for the typically thorough work they undertook before they drew up their proposals and thoughts on the European banking union. As we made clear before, we believe it is vital for the UK that financial stability is restored to the eurozone, and these proposals set out ambitious reforms to help achieve that. Their potential impact is significant in the UK as well as in the eurozone, and it is important that they are properly scrutinised and that the issues they give rise to are properly debated. So I am grateful for the committee’s efforts and for the chance to do just that today.
As noble Lords are aware, the Government support proposals to establish a comprehensive banking union in the eurozone and have been engaging positively in the negotiations. Achieving a genuine economic and monetary union and restoring stability within the eurozone will require a comprehensive set of measures, including a single supervisory mechanism, risk mutualisation plans, such as mutualised deposit guarantees, a common fiscal backstop and a common framework for rescuing eurozone banks. These measures together will help to break the dangerous, and mutually destructive, link between indebted countries and unstable eurozone banks by mutualising financial risk across eurozone countries.
The December Council meeting marked a significant point in the negotiations to establish a single supervisory mechanism and, importantly, as we have been discussing, the Council agreed a number of safeguards for the single market which will ensure that neither the City nor the UK will be marginalised. A number of noble Lords have referred to some of them, but I hope the House will not mind if I set out some of these protections.
First, the ECB will have a duty to have regard to the unity and integrity of the internal market in performing its supervisory tasks. The noble Lord, Lord Kerr, said that that may not be a new duty, but it is quite helpful to have it reiterated. Not only that, it will also be subject to an obligation to ensure that no action, proposal or policy of the ECB shall directly or indirectly discriminate against any member state or group of member states as a venue for the provision of banking or financial services in any currency. The ECB will be required to agree a bilateral memorandum of understanding with the UK—by which we mean the PRA—setting out how it will co-operate in discharging its supervisory tasks, so we can look forward to a constructive and collaborative supervisory dialogue underpinning the robust supervision of cross-border firms and activities throughout the EU. The way in which the supervisory authorities in the UK and the EU work together now, not least the ECB and EBA, is through close, professional working. It is not done in the spirit of two mutually opposed forces coming together on a day-to-day basis with different views. They are technicians, very often, trying to deal with common, difficult, technical problems, and that has infused the discussions to date.
In December, there were two important decisions on parity within the single market, which mean that the PRA and ECB will be operating on equal terms. The Council agreed the principle that the ECB’s supervisory powers should be analogous to those available under Union law to national supervisors in non-participating member states. Powers and decisions of the EBA, for example in cases of binding mediation in the event of disputes between supervisors, will apply equally to the ECB and other supervisors. So the ECB has no special status.
Perhaps most importantly, as a number of noble Lords have pointed out, the Council agreed that key decisions in the EBA will be made by a double-majority voting system. Therefore, although we hope that the EBA will continue to be driven by consensus, with votes very much the exception, the voting arrangements will ensure that all member states, whether or not participating in the banking union, will continue to have a meaningful voice. In practical terms, where the EBA votes on a standard which applies to firms throughout Europe, this will require the support of those in the banking union and those outside it. Not only will the usual qualified majority apply, but a majority of the group of non-participating member states—which, of course, includes the UK—will also have to support any proposal.
A number of noble Lords have expressed support for these protections. It is fair to say that even if the Council had not actually read the report of the committee of the noble Lord, Lord Harrison, it did address a number of the other issues raised in it. First, it clarifies the scope of ECB supervision. It establishes robust governance arrangements in the ECB which separate the performance of the ECB’s monetary policy and supervision tasks. These arrangements will also ensure that those non-eurozone member states which choose to participate in the SSM will have a voice in decision-making. We should not think that separating those two elements of what the ECB does is too difficult a job. That is, broadly speaking, what we are going to be doing with the Bank of England, the PRA and the other bodies that we have just established here. It is eminently doable. The way in which the EU and the ECB are setting about doing it looks perfectly reasonable.
The Council decision also confirmed that the EBA will ensure a geographical balance in its appointments. On this point I need hardly remind noble Lords that the UK plays a leading role in the EBA and currently holds one of the six seats on its management board, which is based in London.
While the Government are broadly content with the outcome of the December meeting, noble Lords will be aware that negotiations are ongoing. However, I assure you that we are working hard to ensure that the final agreement continues to reflect these points. As for the next steps, negotiations concerning the recovery and resolution directive are similarly active. I will come back to those shortly.
However, proposals relating to the second and third pillars of the banking union—the common resolution mechanism and the common deposit insurance scheme—have not yet been issued. We recognise that the decisions relating to the funding of any resolution mechanism and deposit insurance scheme are politically difficult, particularly within participating member states, and decisions relating to debt mutualisation and common fiscal backstops are more difficult still. None the less, in the context of a banking union for participating member states, the UK supports these concepts in principle. Having said that, we cannot provide more detailed views until the proposals have been published, although of course we take note of the points that members of the committee have raised in their report and today.
On the specific points raised by noble Lords in their speeches, the noble Lord, Lord Harrison, was the first to raise the question of the concentration of power in the ECB, which I have spoken about in part. As I have said, there is an analogy with the Bank of England to a certain extent. For clarity, although there are 6,000 banks within the eurozone area, the ECB proposes to directly supervise on a continuing basis probably a couple of hundred of them. However, it will retain the power to go in if there is a particular problem, where a national supervisory body may be thought by the ECB not to be dealing with an issue adequately.
In that respect the noble Lord, Lord Flight, used the analogy of the ECB’s role being a bit like the PRA as opposed to the FCA in the UK. It is not a direct analogy but there are some relevant comparisons. We think that the system we have set up will be robust. If that is the case, in principle, the one being envisaged here also should be. The problem is that it is a multiplication of the kind of problems that we had here when the crisis struck. When everything is going well, you can make things work. But, here, we had a real problem with managing a financial crisis because two or three individuals could not make the system work.
We hope that we have changed the system to make it less dependent on individuals but when you have a system involving a minimum of 17 national supervisors and a super-supervisor, as it were, no one in their right mind would think that dealing with a crisis will be easy. In particular, by definition, no one will have been through it before, so they will be learning on the job. That is an inevitable consequence of doing anything new. The ECB is working very hard to put in place systems which it hopes will be very robust in stressful times.
The noble Lords, Lord Flight and Lord Trimble, asked about what is happening next and whether the steam has gone out of the negotiations. We are very confident that the steam has not gone out of the negotiations in terms of the SSM. The Irish have got this as one of their top priorities during their presidency. We are hoping that relatively soon there will be the final agreement on the regulation which will underpin these changes. We hope that the SSM will be operational by March 2014, which, in anyone’s view, is as quick as one could reasonably expect.
The noble Lord, Lord Harrison, was the first to raise the dread word “referendum”. He described it as new-fangled. I have very fond memories of the 1975 referendum. However, I remind him that the Government have legislated for referendums to take place on European matters in the UK when significant changes are due to take place. That was before the Prime Minister’s speech yesterday. I am delighted that next week the House will have the chance to spend considerable time talking about this matter; not least because it enables me to say today that I am not going to talk about it because the House will have considerable time to talk about it next week. As noble Lords can imagine, that is a considerable relief.
Among other things, the noble Lord, Lord Trimble, asked about the timetable on the recovery and resolution directive, which is obviously of huge importance for the whole of the EU. Again, these are one of the priorities of the Irish presidency, which is looking for an agreed approach in the first quarter of this year. Member states, including ourselves, are actively and positively engaged in these negotiations. We strongly support this timetable as it is essential that all member states need to get a common set of credible tools and powers to deal with resolution and recovery as soon as possible.
The noble Baroness, Lady Falkner, was worried about the male-dominated nature of the debate. I think that this gets back, in part, to the male-dominated nature of the financial services sector, which will take a long time to sort out. However, as other noble Lords have pointed out, on this subject, we have some extremely eminent female economists and knowledgeable women in your Lordships’ House. I hope that they will speak in future debates.
The noble Baroness referred to bond yields and breaking the debt spiral. I think that I can give her more than a glimmer of hope in terms of bond yields. The bond yields of Greece, Spain and other countries under stress have fallen significantly. In Greece, they have fallen by one-third over the past two months. This is a very big shift in the right direction as far as they are concerned. Bond yields now in the vast bulk of the eurozone, even among the difficult economies on the periphery, are at a sustainable level.
The noble Baroness referred to the financial transactions tax and asked whether this could damage London. The Government’s view is that we have no intention of joining the FTT. We do not believe that it will have a deleterious effect on London, quite the opposite; however, I have severe doubts as to whether the FTT will ever raise anything like the funding that is envisaged for it. I remind noble Lords that we already have our FTT in the City on shares; it is known as stamp duty, so this concept is not totally unknown to us. However, it has to be said that the City is very keen for us to abolish it and believes that there would be significant economic benefits if we did so.
The noble Lord, Lord Kerr, as always, asked a number of very specific and penetrating questions. He asked how many countries will remain with us in our “out” group, and what they have said so far. Their attitudes are, like ours, dictated by their domestic debates. Some have confirmed that they will not join for now, some have confirmed that they are unlikely to join in the long term and others have said that they intend to join at some point. However, given that the eventual package is not known, we do not think that it is wise for us to give names at this stage because it would be unfair to say that all those countries have formed an absolutely settled view about what they are going to do. As noble Lords say, if the number of “outs” falls, there will have to be a review and we are confident that we will be able to secure a sensible voting arrangement going forward. However, we do not envisage that we will be in that position for some considerable time, if at all.
I am very grateful to the noble Lord for giving way. Can he help me? In the cases where countries have declared a position, will he write to me and set out what that position is? I drop my third question, which is: what is the Government’s assessment of where those who have not declared are likely to go? However, my first two factual questions are the following. What are the public positions? Where there are public positions, will the noble Lord write and let me know what they are?
Yes, of course. It will not be a comprehensive letter in the sense that not all the countries have expressed a position, as I said, but one or two have and we can collate those relatively easily.
The noble Lord referred, as I did in my introductory remarks, to the importance of the MoU between the Bank and the ECB. We agree with him that it is crucial in setting the tone for the supervisory relationship. The Bank and the FSA are already working with their ECB counterparts and both sides, as it were, are keen to ensure that we have a robust approach to supervision of cross-border banks and cross-border financial services activities.
The noble Lord, Lord Hamilton, was the gloomiest voice in the debate. I would like to comment on two of the points that he raised. The first was about accountability and the extent to which there is a democratic deficit. The ECB is accountable to the European Parliament and the European Council. National parliaments of participating member states will be able to hold it to account through questions. I think that for the foreseeable future national parliaments will play a larger role in terms of the profile of the accountability than does the European Parliament, given its low profile. This debate here is an example of the kind of thing that one hopes would be happening across the EU.
The noble Lord, Lord Davies of Stamford, raised a number of issues and came up with three logical outcomes in terms of our supervision compared with that of the ECB: either we do what it says or it will be more or less strict—I paraphrase the noble Lord. That is slightly misleading, given that we are working towards a common rulebook. So the supervisory approach will be broadly common. For example, the recovery directive is one way in which there will be a broadly similar approach across the EU, with or without the banking union.
I am very grateful for the Minister’s comments. Of course, the rules themselves—such as those relating to liquidity ratio, capital ratios, capital adequacy and so forth—will be set up by the EBA, and there will be a common rulebook. However, supervision is about how strictly the banks’ activities are looked at, and that affects authorisation, licensing and review of the asset quality of the banks concerned. In these areas potentially there will be very considerable scope for a difference of approach by different supervisors. That is exactly what I meant by more and less strict approaches.
To the extent that there will be, in effect, two major supervisors—ourselves and the ECB—I think that the MoU will help in that respect.
The noble Lords, Lord Dykes, Lord Flight and Lord Liddle, all talked about the role of London and what the impact of this will be. Undoubtedly for many companies, particularly financial services companies, the City is their entry point to Europe and to capital markets more generally. Regardless of whether they are successful in actually trading in Europe to the extent that they want, that is undoubtedly the way it is seen. It is very important that we work extremely hard, as we go forward, to make sure that the single market is embedded and strengthened and that we protect the City at the same time. I would love to have a long debate with the noble Lord, Lord Desai, about the future of the eurozone economy, but I fear today is not for that.
The noble Lord, Lord Liddle, asked whether we had looked at being a member of the banking union. The truth is that once we had decided that we were not going to join the euro, that was off the table. All parties have agreed in recent years that joining the euro is not for the UK at this time; sadly, that is where we find ourselves. I agree with the noble Lord that there is a real problem about social and political consent for the austerity packages across the EU. Nevertheless, in some countries—Ireland is probably the best example—there is a real sense of a corner having been turned and major new foreign investment in that country, which suggests that foreign investors also think so.
The Government support comprehensive banking union in the eurozone, and we will do what we can to promote its development while safeguarding the UK’s role as a regional and global banking centre. We look forward to being informed and influenced by the noble Lord, Lord Harrison, and his committee.
My Lords, I thank all Members who have spoken this evening in what I think has been a stimulating and enlightening debate. I am very grateful to the Minister for promising to write to us on those points that he has not had time to take up. At one point I began to worry when I was accused of being “genial” and “courteous”; but, on a lighter note, I must say that I began to think of the power and persuasiveness of our report when one noted Eurosceptic wandered into the Chamber and, so persuaded by what he heard, came and joined the Labour Benches.
I will finish on two comments made by the noble Baroness, Lady Falkner, which the noble Lord, Lord Liddle, identified. The first is the, perhaps, paucity of contributions from the distaff side of the House. I can tell the noble Baroness that the austerity seminar that our committee is holding next week will feature Vicky Pryce, not only to speak on financial services but also to report on Greece. The other point made by the noble Baroness that the noble Lord, Lord Liddle, identified, which is hugely important, is that these matters are not European; they are British and European. Every report we ever write has a large section on how the United Kingdom will be affected by what is going on within the European Union. It is time that we in this House took these matters seriously and that we had debates at appropriate times for all Members of the House to respond. I close with that hope and thank everyone for contributing tonight.
Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2013
Motion to Approve
My Lords, the Government are today bringing before the House amendments to the Green Deal framework regulations. We have been further developing the framework over the past few months, in readiness for the full launch later this month. This has resulted in a number of SIs being developed and laid before the House. These changes are necessary to optimise the legal framework and are taking advantage of learning we have already gained.
However, before we begin to debate, I would like to take the opportunity to speak about the Green Deal—the transformational energy efficiency programme. I am delighted that it will be going live next week, unlocking unprecedented opportunities for both consumers and businesses alike. The Green Deal will provide a stable, transparent and long-term policy framework which consumers can trust and in which businesses can invest. It will allow consumers to pay for some or all of the cost of energy-saving property improvements through savings on their energy bills. The Green Deal can be used to lever in billions of pounds of private investment to improve the energy efficiency of UK properties. It will empower small and medium-sized businesses to enter a new market as well as offer consumers more choice and innovation than before. There has already been interest from industry in getting involved in the Green Deal and it is exciting to see a steady stream of participants becoming approved and using the Green Deal quality mark prior to launch on 28 January.
We already have 462 installer organisations registered, and 2013 is already off to a flying start with local authorities playing an active role in helping to kick-start our “go-early” initiative. The Government have supported this by providing £22 million to stimulate early demand for the Green Deal in seven core cities and to help other local authorities drive energy efficiency-boosting initiatives. Our cash-back scheme, worth £125 million, launched on 14 January will reward households taking early action to improve their properties through the Green Deal. Households making a number of improvements could receive more than £1,000, and £2.9 million will be spent on a communication campaign that will help to build understanding and trust in the Green Deal.
I will now introduce the statutory instrument that will form the basis of our discussion. We are making a small number of amendments to the Green Deal framework regulations which, subject to the outcome of today’s debate, will come fully into force on 28 January 2013. The framework regulations create an authorisation regime to regulate the conduct of Green Deal market participants and ensure that consumers are protected. They cover conditions that must be met when a Green Deal plan is established and how it should be disclosed. The amendments we propose will make enhancements to the Green Deal framework. We have increased the frequency of some reporting requirements from annually to monthly for all Green Deal participants. These include the number and value of plans, cancelled plans, and the number of resolved and outstanding complaints. This is to ensure that we can monitor compliance to protect customers without imposing undue burdens on business and to protect the reputation of the Green Deal itself.
Other changes enable us to streamline key processes. We are improving the clarity of our complaints system by defining when a complaint should be directed to Green Deal assessors and when to the providers. Further to ensure effective policing of activity in the market, Green Deal accreditation bodies have been added to the list of organisations that can report a breach of regulations by a participant to the Secretary of State.
In addition, an important technical update is being made to the circumstances under which an energy performance certificate must be updated by the Green Deal provider or customer. These include where an energy efficiency measure has been removed, where the provider has changed and where the liability of the bill payer to make payments has changed. This update will ensure that customers and businesses have access to up-to-date energy efficiency information for their property.
The regulations will help to improve the energy efficiency of homes across Great Britain, reduce our carbon emissions and, crucially, help households to manage their energy bills. I commend them to the House.
My Lords, I thank the Minister for her explanation of the regulations. As we have said on previous occasions, Labour continues to support the objectives of the Green Deal as a vital part of energy demand reduction and energy efficiency improvements for meeting greenhouse gas emission targets and achieving energy security and climate change mitigation.
With little time before next Monday’s launch of the Green Deal, the Government must react swiftly to urgent criticisms of the costs of the scheme to potential consumers. Up-front charges, high interest rates for finance, and penalties, are all increasing the reluctance of households to take up Green Deal plans. At a time of rising energy prices, falling living standards and stretched budgets, the Government must not allow scheme charges to undermine the confidence of consumers in going ahead with very necessary home improvements. Not only would a successful Green Deal cut long-term energy bills for households, it would reduce the nation’s energy demand and save the planet from excessive carbon emissions.
The amending framework regulations are accepted as part of the refining process to improve the operation of the Green Deal, with provisions regarding energy performance of buildings certificates, reporting requirements for the progress of the Green Deal and provisions regarding enforcement. We expect further amending regulations—I hope they will be few in number—as the Green Deal rolls out and experience is gained. The Green Deal has been a long time in gestation, and we will all welcome the official launch next week on 28 January. After raising a few points on the regulations, perhaps it would be an opportune time to reflect on the Green Deal and ask the Minister for her forecasts and assessments, and for us to pass comments, with constructive criticisms, on the likely uptake outcome.
The regulations regarding the energy performance of buildings certificates are largely technical and non-controversial. They will help to make sure that information following Green Deal plans is up-to-date and accurate. Schedule 2 of the regulations lists the new monthly reporting of information requirement for Green Deal providers. This will greatly assist in monitoring the progress of the Green Deal and will provide necessary statistics for analysis. However, one of the most controversial aspects of the Green Deal concerns cancellation charges and penalty charges for early repayment. It is generally regarded as one of the key parameters influencing the consumer’s final decision on whether to go ahead with a Green Deal plan. If these charges are disliked completely or labelled disagreeable, it may well be that the Green Deal plan may not be taken up. Why are reports regarding these questions not part of the monthly requirements? Will the Minister clarify that paragraph 1(g) of Schedule 2, on page 7 of the regulations, which specifies,
“the total number of green deal plans cancelled in the previous month”,
refers to plans already started?
Perhaps I might suggest some additional reports, for example of the total number of Green Deal plans proposed but not taken up. Another report could be of the total number of cancellation charges levied, together with the average fee. On the issue of amounts repaid early, covered in paragraph 1(f), could a requirement be included to monitor the number of early repayments bearing charges, and the average charge?
On the cancellations, it would also be useful to know what element or measures in a Green Deal plan of many actions were not going to be proceeded with. Does the Minister agree that this information may be critical in assessing consumer confidence? Will she look at how this could be added to the regulations, which, by convention, are not amendable? If she rejects this requirement, how does she propose that this controversial aspect will be monitored? Information must not just be for business-gathering purposes; it must also inform policy and help corrective action.
The Minister in the other place, in response to my honourable friend Luciana Berger, said that penalty charges could happen only when a Green Deal provider would make a loss as a result, and that the onus is on the provider to prove the case. Where is this in the regulations? How will the provider make the case? To whom will the current consumer have a course?
Another controversial aspect concerns up-front fees. When Labour raised the cost of assessments with Ministers during the passage of the Energy Act in 2011, Ministers replied that it was expected that companies would not charge for assessments. However, from a Guardian newspaper report, it appears that Ministers are wrong. Consumers will face charges of up to £150 as an assessment fee, whether or not they take out Green Deal plans. The report states that British Gas will charge £99 for its experts to go into homes and judge what measures, such as fitting cavity wall insulation, would be most appropriate for each property. Two of the companies contacted by the Guardian say that they would refund the full assessment fee or part of it if works were carried out by them. Does the Minister accept the YouGov poll that found that 51% of consumers concerned about up-front costs rated them the biggest obstacle to making energy-efficiency improvements to their homes?
The third element of the regulations concerns improving the clarity of the complaints process by imposing sanctions and including the Secretary of State in the process, yet the regulations do not say what the sanctions are. Will the Minister clarify whether they have been included elsewhere and that it has escaped me? It is important to know and agree what powers and sanctions are being given to the Secretary of State. In a debate on these regulations in the other place, the Minister stated that he believed the expected cost to be £335 per complainant to the ombudsman, and that the costs would be borne by the Green Deal provider. Will the Minister confirm this figure and say whether there would be any judgments at all whereby the cost or some part of it ended up being paid by the complainant?
Will the Minister clarify the process of consultation? Were the measures in the regulations consulted on with the public in a discrete fashion and in a discrete consultation process? I have read the Explanatory Memorandum, which seems to suggest that the regulations have arisen from consultations and events generally from November 2011, closing a year ago on 18 January 2012. Will the Minister please clarify?
A few further considerations arise from the debate on these regulations last Monday in the other place, and indeed the Minister has echoed those remarks. In his opening remarks, Greg Barker, the Minister in the other place, said that things had already got off to a flying start in October with the Go Early initiative. Is this the initiative that resulted in just five assessments? Is this the initiative that highlighted problems in the software for assessments? Will the Minister confirm whether the Minister in the other place was correct to state, as she indeed has done today, that £22 million had been provided to stimulate early demand in seven core cities? In the press release a figure of £12 million was put forward. While a test or pilot is to be recommended, this seems to be a soft launch. Was there a reason why the important city of Liverpool was excluded from this list?
The Minister in the other place went on to speak about the cashback scheme, worth £125 million, launched on 14 January. I am surprised that this is a government scheme when, according to Ministers, “the market will provide”, and other matters seem to be a commercial matter for the Green Deal Finance Company. Already this scheme seems to have been amended. Can the noble Baroness confirm whether the £1,000 maximum level referred to has indeed been lifted and that, with a budget of £125 million, it really is the early-bird scheme? Will Liverpool be excluded from this?
A third element in the opening remarks of the Minister in the other place and of the noble Baroness concerned the £2.9 million budget for a communication campaign about public relations. The Minister in the other place admitted that it was not a huge amount in the scheme of things as it would be used in a focused way. Can the Minister clarify what will be its focus?
The Minister in the other place mentioned that the firm Freud had been retained. Does this mean that the Government did not go out to open tender for this contract?
In previous debates we have all acknowledged the ambitious plan and the huge difficulties that the Green Deal faces. Unlike a commercial operation, the Government have to do their thinking aloud as they make the regulations to set out the parameters on which commercial companies must make this a success. However, this allows the Government to hear when we offer advice and give warnings. I am not sure that they are listening well enough when it comes to the influence of certain aspects of the take-up of the Green Deal plans on consumers. We have debated previously the influence of the interest rate on whether consumers assess the Green Deal as a good deal. Against a bank rate of only 0.5%, 7%, or even 6.9%, does not seem a good deal, especially when it will, in effect, double the amount of repayment over a 25-year period. This is a completely different circumstance to a short-term payday loan and, like a mortgage, there is the security of the loan being advanced to improve property on a state-sponsored scheme.
In a debate on Monday, the Minister acknowledged that my honourable friend Luciana Berger was right: we need a competitive interest rate. Today the Sun has badged the scheme “Green plight—Flagship eco loans a ‘rip off’”. The Minister said that DECC and the Green Investment Bank are putting money into the Green Deal Finance Company. Can the noble Baroness tell the House how much the department is putting in and what this amount is being spent on? Can she confirm that the Green Deal Finance Company is a not-for-profit body in response to government encouragement, and that the interest rate is subject to government approval and will not be available elsewhere on the high street? Am I correct to expect confirmation of the interest rate tonight?
I have taken up a great deal of the House’s time but, just prior to the launch of the Green Deal, perhaps I may mention that there are further features still causing anxiety, such as the interplay between the Green Deal and the ECO, whereby any lack of uptake in the Green Deal could become compulsory under the ECO. There are still also questions over the golden rule and possible mis-selling fears.
I would like the Minister to answer as many as possible of the questions raised and not be sidetracked instead into further reflections if her time is pressing. Can she commit that her department will look at these issues and place any missing answers in the Library of the House? If she has further time, it would be a useful moment just before launch to get the Minister’s future expectations on her department’s figures for take-up over the coming years, the number of future job creations and what will constitute success in her eyes for the Green Deal.
I am sure we will return again to these points and others, such as the role smart meters could play, but I wish the Minister a successful launch next Monday.
My Lords, I thank the noble Lord for his very warm welcome of the Green Deal. I expect he will be by my side when the launch goes ahead next Monday. The invitation is there for the noble Lord to join me, as it is for the noble Baroness.
The noble Lord has posed a huge number of questions and I have tried to note down as many as possible. However, the likelihood is that I may have to write to him on some of them.
I shall start by responding to the noble Lord’s point about high interest rates. As he will be aware, the rate is to be set by the Green Deal Finance Company and no doubt will reflect a safe and competitive level. The rate has not yet been confirmed, but I expect that to be done in the next day or so. The noble Lord will have to wait just a little longer for a response to that question. However, I take on board his point that the rate has to be competitive. That fits in with our wish to try to ensure that we meet the golden rule, which he rightly raised—namely, that no bill payer should pay more than what he or she is currently paying. That is absolutely the right way to look at this.
The noble Lord asked about early repayment penalties. Perhaps I can reassure him that we have also looked closely at these. I can tell him that the repayment formula and the penalty compensation payback are based on the consumer credit legislation that is in place, and we are not doing anything different from what is already in the marketplace.
The noble Lord asked about the forecast for take-up rates of the Green Deal. I would say to him that it has been very promising and there is a great deal of interest in it. However, as he recognises, we are proceeding with a soft launch because we want to ensure that people understand what the Green Deal is and that all the systems needed to deliver it are fully tested and in place. The noble Lord is right to say that when the Green Deal is taken up, many households will see a great difference in their energy consumption and it will impact on their energy bills—something which I know, like me, he is keen to see come down.
The noble Lord asked about monthly reporting, and we agree that this is an important element. The industry and providers have also welcomed it. He listed a number of other things that he would like to see included on the monitoring list. I may have to take those queries away simply because I was not able to write down all his points quickly enough. I shall read the report and come back to him with details of what is already part of the monitoring that has been put in place.
On the point about whether a householder who takes up a case will have their costs attached, I can assure the noble Lord that that will not be the case. If a complaint is lodged, it will be dealt with by the providers, and through DECC we will find ways of ensuring that a householder is not penalised.
The noble Lord mentioned the £125 million provision for early take-up; the cashback facility. We are expecting keen interest and we think that the £125 million for early take-up is a good way of encouraging people to take advantage of the scheme very early on. Perhaps I can link the rest of the work that we have been doing with our core cities to the £22 million referred to by the noble Lord. He referred to the fact that a newspaper had reported that it was £12 million. We have given out £12 million to seven core cities; we expect Liverpool to be added to the list of core cities. That is the £12 million, but another £10 million was also provided to local authorities outside the core cities to promote demand—hence the £22 million.
The noble Lord spoke about the expectation of job creation. We are very positive that this will generate up to 60,000 jobs in this sector, up from the 26,000 that are in place at the moment. We see this as a very positive scheme. I have listened very carefully to the noble Lord, who has, by and large, welcomed what we are doing with the Green Deal.
The noble Lord asked about the assessment costs. This is a market-based mechanism and we expect a range of models to develop. Some providers may offer assessments that have no upfront costs; others may charge, but it will be up to individuals whether to go with the first assessment or to shop around. This is something that all consumers do anyway. We encourage shopping around so that the consumer gets the best deal possible.
The noble Lord asked about the sanctions that the Secretary of State could impose. Of course, this very much depends on the circumstances. There could be a financial penalty on the provider, a compliance notice, or the withdrawal or suspension of authorisations for providers, assessors or installers. There are a number of safeguards that the Secretary of State has the power to use.
The noble Lord also asked whether Freud Communications was appointed through competition. The simple answer is yes, there was a competition. Freud was the preferred bidder.
The noble Lord asked a number of other questions that I physically was not able to note down. I am sure that the officials in the Box will have taken note of them. On those, I ask the noble Lord to allow me to write to him and put a copy in the Library. Overall, going through my own list of what I was able to note down, many of the points the noble Lord raised have been answered. I thank the noble Lord for his warm welcome of this SI and I commend—
I thank the noble Baroness for attempting to answer so many quite detailed questions at very short notice. While we have this opportunity before the Green Deal is launched, perhaps I can tempt her to reflect and share with us how her department views success—what does success of the Green Deal look like? That would be really interesting to understand before it starts on Monday.
My Lords, if I had a crystal ball I would be able to tell the noble Lord lots of things. My own view is that, having talked to consumer groups and the industries within the sector, this is going to revolutionise the way in which people think about how to make their homes much more energy-efficient. It is about raising awareness. While we are rolling this out, we are very keen to ensure that consumers take control and have responsibility over what happens in their own properties. This approach is much more holistic. It is not just about short-term planning on, say, loft insulation; it is about looking at the whole property. I think consumers will be quite encouraged that this will be a long-term gain for them and their properties, and of course on their bills.
On that note, if I have satisfied the noble Lord, I commend these regulations to the House.
House adjourned at 7.19 pm.