House of Lords
Thursday, 6 June 2013.
Prayers—read by the Lord Bishop of Derby.
My Lords, in 2012 the Secretary of State instructed the Care Quality Commission to inspect NHS and independent abortion providers to ensure compliance with the Abortion Act 1967. The Chief Medical Officer also wrote to all providers of abortion services, reminding them of their obligations under the Act. All allegations of illegal abortions are taken very seriously and should be reported to the police, who will, if appropriate, conduct a criminal investigation.
My Lords, is it not the case that early last year the Government’s own care quality inspectors found, in a number of abortion clinics, piles of forms signed by doctors authorising abortions for women they had never seen, let alone examined? Was it not also reported that other abortions were being done for non-medical reasons such as that the child coming was a girl? Why has so little been done to stop these happenings when they are so blatantly against the law of the land?
My Lords, the Care Quality Commission has put in place procedures to identify pre-signing or other instances of non-compliance, and they are confident that these would now be picked up during inspections. However, my noble friend is right; there was a concern early last year that this pre-signing was happening. Since then, however, the CQC has been working directly with providers who are registered to provide termination of pregnancy services to ensure that they are complying with the requirements of the Act. It is beginning to explore how it can strengthen the registration process alongside its regular inspection activities. I therefore suggest to my noble friend that it is not a case of nothing having happened.
On sex selection, we have no evidence at all of gender-related abortions in the UK. Again, concerns were expressed about this in the press, but analysis has been done that shows that the UK birth ratio is within normal limits.
My Lords, does the noble Earl accept that some cases were referred to the police last year where gender abortions were identified? Will he welcome the decision of Ranjit Bilkhu and a group of Asian women in this country to set up an organisation to challenge the attitude that it is permissible to take the life of an unborn child merely because of its gender? Has he noted the Private Member’s Bill of the Member of Parliament for Congleton, Mrs Fiona Bruce, and the Early Day Motion, signed by more than 50 Members of another place, drawing attention to the need at least to collect the data where the gender of a child is known so that we can truly know whether or not this phenomenon is occurring in this country as it does in many other parts of the world, where the three most dangerous words are, “It’s a girl.”?
My Lords, I am aware of all the initiatives mentioned by the noble Lord. The issue of the sex selection of foetuses is, of course, extremely serious. However, as I mentioned in my earlier Answer, following extensive investigation and analysis we do not believe that there is any evidence that this is happening in the UK. That is the prime reason why we do not agree with the noble Lord that measures should be put in place to collect data regularly on the sex of the aborted foetus. Were we to do that it would require changes to legislation. It would also require changes to clinical practice, and it has ethical implications. I hope the noble Lord will understand that we have thought about this very carefully.
I thank the Minister for the steps that have been taken to stop abuses of the 1967 Act. Will he confirm that there has been a welcome drop in the total number of abortions recently, but that there is still a problem of what are called repeat abortions, where women present who are clearly using abortion as a form of contraception, which is thoroughly undesirable?
My noble friend is right. The abortion rate across England and Wales has been static since 2009. The good news is that the abortion rate for women under 18 has gone down. There was a 9.6% decrease in the rate between 2010 and 2011. On repeat abortions, the news is not so good. The proportion of repeat abortions for women who had abortions in 2011 was 36%. The figure was higher than it had been the previous year, which is a matter for concern.
My Lords, I very much welcome the figures that the Minister gave on the number of abortions going down for younger women, and regret the figure for repeat abortions. Naturally, we must do everything possible to stop illegal abortions. However, will the Minister confirm that it is important that women who need abortions should not be impeded in any way, and that sex education and education about relationships are terribly important? I hope that the Government will be open to accepting amendments to the forthcoming education Bill on that issue.
I am sure that those issues should be discussed very thoroughly. I agree that young people should be taught about relationships. However, I also believe that access to contraception is very important. Our data show that there has been no decrease in the number of women using contraception, and that more women are turning to extremely effective measures such as long-acting contraception. It is encouraging that the abortion rate for the under-18s is coming down.
The vast majority of abortions are performed at under 13 weeks. The figure was 91% in 2011. There has been a continuing increase in the proportion of abortions that are performed under 10 weeks. Again, that is positive news. I do not have detailed information on the issue which the noble Baroness asked about, but I will write to her.
Order of the Companions of Honour
My Lords, in thanking my noble friend for his reply, I should perhaps make a declaration of non-interest to assure the House that I do not seek to suggest that I should be admitted to this great order. However, since there are no fewer than 24 vacancies, it is rather tempting to propose the names of admired friends—men and women from all parts of the House—although at the moment I would be slightly reluctant to include anyone from the government Front Bench, even my noble friend, for the following reason. Does he agree that anyone looking at the composition of the order today might well think that it is designed primarily for politicians, who constitute no less than half the current membership—21 out of 41? They are, of course, all most worthy recipients, but should not the order reflect more fully the glorious era of British culture and sport in which we are living? Why has no poet been appointed since 1993, no writer since 1999 and no musician since 2000, to help fill the 24 vacancies? As for sport, should not more of its stars be appointed to join its one current representative—my noble friend Lord Coe?
My Lords, the Order of the Companions of Honour is only one of the orders of honour in the British honours system. Service to the state is, after all, one of the central principles under which the various orders have been created. Politicians who belong to the Order of the Companions of Honour have all provided considerable service to the state. Indeed, 16 of them are Members of this House. However, as the noble Lord has also noted, there are a number of people who have made considerable contributions in the fields of music, theatre, fiction writing, history, science and elsewhere. I am happy to say that David Hockney, with his very close connection with Saltaire, is also a member.
My Lords, talking of honour and recognition, I am sure the Minister is aware that, 69 years ago today, some 6,800 warships, auxiliaries and merchant ships landed British, American and Canadian forces in Normandy, and that 5,500 of those ships were British. I have to say we are not quite in that position today. Four years before—some 73 years ago this week—Operation Dynamo finished, in which we had expected to manage to withdraw some 80,000 troops of the beaten British Army from Europe, but ended up taking out more than a third of a million. In the context of honour and recognition, I am sure that the noble Lord would like to give the thanks of the House for all those people who were involved in those two operations.
My Lords, that is a little wide of the mark. It is appropriate to pull the subject back towards the Question by saying that the Order of the Bath has a particularly strong military connection, as the noble Lord well knows. Every time I give a tour of the Abbey, which I do from time to time as a former chorister, I remark that one sees the military banners up in Henry VII’s chapel.
That is an extremely good question. We are very conscious of the imbalance in gender terms of almost all the orders and honours which are awarded. Only four of the 41 members of the Order of the Companions of Honour are women. However, nearly half the honours awarded in the latest New Year Honours List—47%—were awarded to women, although the majority of those were at what one has to call the lower levels of honours, not the higher. That, of course, partly reflects the continuing imbalance in society and the economy. Since John Major’s changes in 1993, it is open to all British citizens to nominate people for honours. There were 3,000 nominations last year. I encourage everyone to think very actively who else, particularly among distinguished women, might be nominated for orders.
My Lords, the Minister will be aware that there is to be a debate later in this Session about making Alan Turing a non-criminal. Despite the fact that he made an enormous contribution to this country’s future, would his criminal conviction, as things stand, prevent him being made a Companion of Honour?
My Lords, my briefing assured me that honours were not to be withdrawn from people who have died, and I think that the awarding of honours to people who have died would also be outwith the honours system as it is currently understood. However, we would all strongly agree that Alan Turing suffered quite appalling discrimination. Both my parents-in-law worked with the noble Baroness at Bletchley Park.
Not entirely. The honours list in recent years has included an ever larger number of people who provide public service, often without reward, at the lower levels. I processed up the Abbey on Tuesday morning behind a lollipop lady who was there because we were demonstrating different forms of public service to the country. I am happy to say that the number of teachers, including head teachers, who receive awards has been increasing in recent years. Eight head teachers received senior honours in the latest honours list.
Amartya Sen, I have to say. The issue of ethnic balance is also one of which the various honours committees are extremely well aware. I think 6% of those in the latest honours list were members of ethnic minorities. We are conscious that we have to look actively at that issue. Again I would say to everyone here and to all those whom noble Lords know outside, we encourage public nominations. Perhaps I may also add, as someone who lives in Yorkshire, the English regions are underrepresented. If you live in London, Scotland, Northern Ireland or Wales, you have a better chance of being honoured than if you live in Yorkshire or the north-east.
My Lords, very large-scale new housing developments are difficult, complex projects that involve long-term investment. This is illustrated by the fact that no developments of more than 10,000 homes have been delivered since the new towns programme. We are working with areas such as Bicester, which have expressed an interest in significant future housing growth that incorporates garden city principles such as high standards of quality and design, varied architecture, and provision of green space and gardens.
May I encourage my noble friend to be a little more specific? The Government promised a prospectus in their housing strategy published in November 2011. Unless the Government publish their prospectus for garden cities this summer or within at least two years of promising to do so, is there not a danger that people will question the Government’s determination to tackle the past decade’s undersupply of housing and avoid the possibility of a house price boom in the next 10 years?
My Lords, the Question is very apt but it relates almost entirely to big developments because garden city developments are not in their nature small. The noble Lord will know that these sites are very complicated. The garden city principles were enumerated by the Deputy Prime Minister in his speech to the National House-building Council last November. He said that we should build places which,
“draw on the best of British architecture and design, which have their own identity and character”,
and have a crucial role in keeping the countryside intact. He said that garden cities enable people to live sustainably and to move easily between work and home. Those are very large principles and demonstrate that a development needs to be large to bring all that in.
My noble friend never misses an opportunity to mention allotments. Of course, if allotments were proposed—and they could be—within these plans, I am sure they would be considered by the local authority. In any case, as my noble friend knows, no allotment ground can be vacated without the Secretary of State’s permission.
Does the Minister agree that some major and new settlements can take place within urban areas, incorporating all the good principles that she has mentioned—the Olympic Village being one such example and, now, even the big King’s Cross redevelopment? Will plenty of encouragement be given in any prospectus that comes out for urban-based new settlements?
My Lords, I readily accept what the noble Lord has said. Housing is not going to be confined to new areas. It will of course take place in conjunction with cities or towns, and indeed I think that Cranbrook and Bicester would fill those requirements. I totally agree with the noble Lord on that point.
I should say that I have various declared interests and draw the House’s attention to them. I have had a long-term belief that creating new communities relieves the pressure to surround existing communities with undesirable development, while still delivering the housing, workplaces and services that people need. The Deputy Prime Minister and the Prime Minister have both promised the prospectus, which would give a lead to organisations and local authorities in understanding what the Government want. Can the Minister explain why that has not yet happened and can she give any indication of when it will?
My Lords, I have indicated that the principles laid out in the prospectus and draft prospectus are already being dealt with and are already being incorporated into the proposals and designs for these larger sites. The local infrastructure fund, which has recently been set up by my department, helps with the sort of matter that the noble Lord has raised—that of the additional pressures placed on local communities—by providing funding for things such as schools and opening up roads.
I have heard what the noble Baroness has said about the issues arising from garden cities, but would it not greatly speed up the provision of houses if major developers were required to develop properly and genuinely the sites for which they already have planning permission?
My Lords, I think that these are all different matters—we have completely different proposals being put forward. Yes, some of the developments will be where planning permission has already been given, some will be where discussions have already taken place and some will be on new sites. We have to ensure that we are flexible but insistent that these are good developments for the future and that we are not just building anonymous estates that do not bring any sense of community.
My Lords, I think that it would be for local authorities to make plans for any refurbishment of that kind within their housing plans. As the noble Lord knows, the Government have a programme to bring back in empty housing and, as I said, the wider programmes for the refurbishment of larger areas are a matter for local authorities.
My Lords, we probably all agree that this is a difficult matter and that it is gratifying to learn from the Minister that the Government have plans to do something about it. I am sure he will agree that it is a pity that we are having this discussion now in the glare of further unwelcome and, on the whole, ill intentioned media attention, particularly as the coalition agreement, as I understand it, committed in 2010 to,
“regulate lobbying through introducing a statutory register of lobbyists”.
Does he further agree, however, that the regulation of lobbying is a separate issue from reforming funding of political parties? Can he confirm that the Government will not conflate these two matters in any legislation they now bring forward?
The Government do not intend to conflate these matters although there is a degree of overlap between the two. The Government intend to look at the question of third-party funding of political activities, including the issue of campaign groups which are not affiliated with political parties spending money during election campaigns. The Electoral Commission has annotated that some £3 million was spent during the last election by a number of organisations with the intention to influence the election.
My Lords, the Minister has indicated that he sees a need, quite rightly so, for the ability to remove from this House people who have been convicted of serious criminal offences. Can we take it that he will now abandon his long-standing opposition to the Steel Bill, which this House has sought to introduce on several occasions and which would have provided for this very measure?
My Lords, discussions are under way on that question and it is likely that a Bill will be introduced in the next Session which will deal with a number of such issues to do with parliamentary behaviour and what is called parliamentary housekeeping.
My Lords, one of the reasons why it has taken much longer than we intended to produce a statutory register of lobbyists is because the definition of who is a lobbyist is extremely difficult. The Labour Government before this Government also struggled with that. As all who have studied this area will know, the issue is whether one simply limits the register to third-party lobbyists—those who are professional lobbyists working on behalf of someone else—extends it to the category of lobbyists for for-profit companies such as the entire public affairs sector of a major company or beyond there to those who lobby for non-profit organisations such as Oxfam, Christian Aid or the RSPCA. That takes one into an extremely wide area which is difficult to define.
Given that it has been over a year since the consultation concluded, we welcome the announcement today that there will be a Bill before the Summer Recess. However, will the Minister now ensure that his department replies to the letter from my honourable friend in the other place, Jon Trickett, asking for immediate cross-party talks on this issue? There is agreement about the need for a register and for a code of conduct. Cross-party talks on those issues in the immediate future would be welcome. Can the Minister confirm that he will do that?
I take the point. Of course, as in all delicate legislation of this kind, the wider the consensus we can get the better. The lobbying area is immensely more complex than I understood before I began to go into it. This is one of the many areas where we need to work together as widely as we can.
On the answer that he has just given, can my noble friend confirm that the Labour Party, which, after all, failed over 13 years to deal with this problem, is prepared to co-operate fully so that we can take the whole issue under consideration? All three parties committed themselves to taking big money out of politics. Can he confirm that the Government’s objective is to have maximum transparency and simplicity so that our fellow citizens can see precisely where influence and access are being bought? In that context, can he also indicate that that should be the objective even if sometimes that big money is being used in a tax-efficient way?
My Lords, every three months I am amazed by the detail in which the Government Whips’ Office on behalf of the Cabinet Office Propriety and Ethics Team goes through my diary and asks me exactly who I met and when. This Government are extremely tight in terms of looking at who has contact with all members of the ministerial team. The problem, of course, is that we meet all sorts of people. I have one or two friends from school or university who are now working in major public affairs organisations. If I meet them as part of that friendship, do we also happen to overlap into other matters? There are many difficult issues around how this can be taken and where to draw the line.
My Lords, does the Minister accept that there is nothing intrinsically wrong in lobbying provided that it is undertaken within a proper framework that is transparent and that, if done properly, it can serve the interests of Members of all parties in both Chambers? One thinks of disability lobbying, for example. Is it not in the interests of lobbyists themselves, as well as Members of both Chambers, that a new framework is introduced?
My Lords, I could not have put it better on behalf of the Government, and I note the consensus on a cross-party basis to that effect. The noble Lord may have seen the story in the Financial Times yesterday to the effect that public affairs consultants are thinking of taking to the European Court of Human Rights the case that to submit them to a statutory register—but only those who are third-party lobbyists—would be an infringement of their human rights. I think that that will be an interesting case to try to get the European Court of Human Rights to take.
I cannot confirm that, but I imagine that it would. Discussions are still under way, but I take the point. Clearly, there are slightly different rules for referendum campaigns, and as I recall from previous referendums, there have been umbrella bodies which have had to declare their funding. We are thinking much more about the sort of campaign groups which we have seen growing up, be they animal welfare groups, low tax groups and so on, trying to intervene. Again, we want to make sure that everything is as transparent as possible in the political process. I will come back to the noble Lord on the referendum issue.
Planning: Onshore Wind
My Lords, with the permission of the House, I would like to repeat the Answer to an Urgent Question asked in the other place.
“The coalition agreement pledged to decentralise power to local people and give local people far more ability to shape the places in which they live. Through a series of reforms, this coalition Government are making the planning process more accessible to local communities, because planning works best when communities themselves have the opportunity to influence the decisions that affect their lives. However, current planning decisions on onshore wind are not always reflecting a locally led planning system.
Following a wide range of representations, including the letter of January 2012 to the Prime Minister from 100 honourable Members, and in light of the Department of Energy and Climate Change’s call for evidence, it has become clear that action is needed to deliver the balance expected by the National Planning Policy Framework on onshore wind. We need to ensure that protecting the local environment is properly considered alongside the broader issues of protecting the global environment.
Today, my right honourable friend the Secretary of State for Energy and Climate Change has published the response to his call for evidence on onshore wind. This sets out how the Government have listened and are responding to what has been said. My right honourable friend the Secretary of State for Communities and Local Government has this morning in support set out our intentions for planning. Let me set these out.
We have set out clearly in the National Planning Policy Framework the importance of early and meaningful engagement with local communities. The submissions to the call for evidence have highlighted the benefits of good quality pre-application discussion for onshore wind development and the improved outcomes that can have for local communities. We will amend secondary legislation to make pre-application consultation with local communities compulsory for the more significant onshore wind applications. This will ensure that in more cases community engagement takes place at an earlier stage and may assist in improving the quality of proposed onshore wind development. This will also complement the community benefits proposals announced by my right honourable friend the Secretary of State for Energy and Climate Change today.
The National Planning Policy Framework we published last year includes strong protections for the natural and historic environment. Yet some local communities have genuine concerns that when it comes to wind farms, insufficient weight is being given to environmental considerations such as landscape, heritage and local amenity. We need to ensure that decisions get the environmental balance right in line with the framework and, as expected by the framework, any adverse impact from a wind farm development is addressed satisfactorily.
We have been equally clear that this means facilitating sustainable development in suitable locations. Meeting our energy goals should not be used to justify the wrong development in the wrong location. We are looking to local councils to include in their local plans policies that ensure that adverse impacts from wind farm developments, including cumulative landscape and visual impact, are addressed satisfactorily. Where councils have identified areas suitable for onshore wind, they should not feel they have to give permission for speculative applications outside those areas when they judge the impact to be unacceptable.
To help ensure planning decisions reflect the balance in the framework, my department will issue new planning practice guidance shortly to assist local authorities and planning inspectors in their consideration of local plans and individual planning applications.
This will set out clearly that: first, the need for renewable energy does not automatically override environmental protections and the planning concerns of local communities; secondly, decisions should take into account the cumulative impact of wind turbines and properly reflect the increasing impact on, first, the landscape and, secondly, local amenity as the number of turbines in the area increases; thirdly, local topography should be a factor in assessing whether wind turbines have a damaging impact on the landscape—that is, recognising that the impact on predominantly flat landscapes can be as great or greater than on hilly or mountainous ones; and that great care should be taken to ensure heritage assets are conserved in a manner appropriate to their significance, including the impact of proposals on views important to their setting.
We will be writing to the Planning Inspectorate and councils to flag up that new guidance will be available shortly”.
That concludes the Statement.
My Lords, I awoke this morning to find out from Twitter that the Secretary of State, Ed Davey, has just made another one of his grand bargains, this time with DCLG on onshore wind. I have to say that my heart sank. Yet again, it is a terrible bargain. In return for changes to planning laws that will undoubtedly make it more difficult to build wind farms, he has won an increase in the amount of money that communities can receive. Can the Minister explain what the benefit of that money will be if this pandering to a vocal minority ensures that planning laws are changed so that none of them gets built? Will these new rules also apply to planning applications for shale gas fracking?
My Lords, the unusual source of the remarks by the noble Baroness took me by surprise. I want to make it clear that this is not a change to the National Policy Planning Framework; it is an underscoring of what that policy has always said about the involvement of local communities in the development of local plans. Wind farms fall into the capacity of local plans and local structures. We are therefore making sure, for any wind farm development, that developers must talk to the local community before they put those plans forward and that the local authority also takes that into account. At present, it is not mandatory, and this will make it mandatory. The rules for fracking are not relevant to this particular Statement.
My Lords, why does my noble friend think that neither the Answer she has repeated nor indeed the commendably brief intervention of the noble Baroness, Lady Worthington, made any mention at all of the impact on the consumer of electricity prices? Fuel poverty is reaching record levels and millions of families are finding present energy costs almost unbearable. The additions implicit in what she is saying must be quite considerable. Why is there no mention at all of cost—what about the consumer?
My Lords, I hesitate. I once got told off because I referred to another department while I was replying for the Government. The cost of electricity and the impact on that is a matter for the Department of Energy and Climate Change, and the Statement from the Secretary of State there will refer to that.
My Lords, have the Government taken into account at the very least the admirable provisions of the Private Member’s Bill from my late and much lamented noble friend Lord Reay, in which there was a correlation between the height of a wind turbine and the distance from human habitation?
My Lords, the Statement referred to the thresholds that will be considered. I have no doubt that that is one of the aspects that will need to be taken into account. Of course, it is something that local communities will be expected to think about in the process of having discussions and deciding whether to oppose strongly any application or to see if it can be amended. With a great sadness that Lord Reay is not here himself to make that point, I think that he might be quite satisfied with the way things are moving.
My Lords, are the Government thinking of doing the same with open-cast coal, which they do not seem to be interested in at all? I would welcome the Minister to Durham, where I am surrounded by wind turbines, which are so much more attractive than the coal mines and the open-cast mines that we had, and still have, in our locality. There are a lot of myths around this. The Government need to show leadership, which will get us cheaper, more effective energy that is long-lasting and sustainable.
My Lords, I do not think that this Government or the previous Government ever pretended or thought that wind power was ever going to provide for all our energy needs. Therefore, this is part and parcel of the package that we need to take us into the future. That also includes nuclear and coal, which are still there. I come from the north-east so I appreciate what impact mines have, but until we are clearer about the need for energy they probably will not be abandoned.
The noble Baroness has assured us that the impact upon aesthetic values and considerations will indeed be very relevant. Can she say whether that will be a peripheral or a central and fundamental consideration? If so, how will these fundamental considerations be valued one against another; in other words, who will come to that almost impossible Solomonic decision?
My Lords, I do not want to get tempted into discussing what the guidance will say. The point the noble Lord has raised is central. However, we have made it clear that the aesthetic as well as the heritage impact will be relevant to what the guidance says. I will make sure that what the noble Lord has asked is taken into account.
My Lords, the Answer referred to the cumulative effect of planning applications for wind turbines. In an area such as the Pennines, where there is quite a dense but dispersed network of farms in many of the great open upland landscapes, if each of these settlements puts in for a couple of large wind turbines—which on their own might be acceptable—at what stage does it turn into a wind farm covering the whole area? Are the Government paying attention to this problem?
My Lords, what estimate has been made of the potential decline in the number of wind farm approvals to be made in the United Kingdom? What form is the public benefit—this buying of local communities—going to take? Can we have some more detail on how that will work?
My Lords, this does not change what the National Planning Policy Framework lays out at the moment. It advises that local people should be consulted about major planning applications. The Statement says that it will be amended so that they must be consulted. That then makes it a material consideration for the decision on planning applications and must be taken into account. Whether that increases or decreases the number of approvals given will become clearer, but, one way or the other, it seems to us essential that local people, who will feel the impact of wind farms—indeed, who already have experience of them—have a proper say on any future proposal.
My Lords, I am sure that my noble friend does not really expect me to say any of that. I can only repeat that we are trying to ensure that they are acceptable, aesthetic and take into account people’s views. I should also make it clear that this guidance and the Statement refer to England, not the whole of the United Kingdom.
My Lords, how much is being allocated for the so-called incentivisation of local communities to accept wind farms? Where is the money coming from? Is it coming from the hidden subsidy on electricity bills—in which case, would we not be bribing people with their own money?
Business of the House
Timing of Debates
Taxation: Evasion and Avoidance
Motion to Take Note
My Lords, I am particularly pleased to have obtained this debate on this subject, which is not just tax evasion and tax avoidance but the social and economic consequences of that tax evasion and avoidance. I must say I am disappointed that no Conservative Members have sought to participate in the debate; it might have added an interesting angle—some spice—to it, although I understand that some of the things that they might try to defend are not easy to defend. Tax is a question of a real moral imperative as well as having profound practical consequences. Those who dodge their legitimate tax obligation commit a severe moral breach, but they also deprive our schools and hospitals of much needed investment and create problems for responsible businesses that pay their full share of taxation.
Tax evasion and avoidance is not new. Plato—I see that the Convenor of the Cross-Benches is looking astonished that I am quoting Plato—said that when there is income tax, the just man will pay more and the unjust less on the same amount of income. How true that is. However, what is new about the current crisis in tax is the scale of the issue and how far out of control we have let it go. The amount that we lose in the United Kingdom in uncollected taxes is a third of the deficit. It dwarfs the personal tax allowance, and it is more than twice the size of the bill for housing benefit—and how often do we hear about all those? That is nearly £40 billion. It is a cash sum the size of the budgets of some government departments, which are being asked to make cuts that are causing tremendous problems. We have heard of them recently in debates on legal aid and defence, and of all the difficulties that are being created for our departments. It is money that could be used to cut the deficit, to build 2,500 new schools or to employ more than 1 million new nurses, teachers and policemen. On its own, tax evasion is costing the average household £530 every year.
These are the real and significant costs of tax evasion and tax avoidance. In responding to them, as well as in talking about the moral principles at stake, I will of course address some of the solutions to the problems, but first we must say that not paying your full and legitimate share of tax is immoral. By making use of our roads or our highly trained workforce, or by breathing our clean air, or even by casting a vote, you are bound by the obligations of society—and one of those key obligations, agreed through our democratic process, is to pay your legitimate share of taxation.
I agree with everything that the noble Lord said in respect of tax evasion, but he has linked that to avoidance as if they were the same thing. Does he think that political parties that receive money from donors should return such donations to those who say that they constructed them in such a way as to avoid paying as much tax?
My remarks are addressed as much to them as they are to other people.
When you fail to pay your fair share of tax, you break that obligation. This results in unfairness. Can we be proud of a country where 500,000 people are forced to rely on food banks while the average rate of income tax paid by the top earners is only 10% of their vast income, or where the high street shops that we are so proud of are closing at 10 times the rate at which they did in 2011, yet Amazon gets away with paying a paltry £2.4 million on sales of £4 billion? Such contrasts make a mockery of our democracy and are shameful. I do not, therefore, apologise for speaking on this issue in moral terms. It is a moral issue. When Roger Carr of the CBI says to us politicians, “Don’t make tax a moral issue”, he sounds like a man who does not want to have an argument that he knows he has already lost.
However, we need to have that argument. The argument against having a moral debate is that morality has no role to play in the solution of the problem. Of course, the solution has to be practical, but I would argue that it will involve making companies and individuals pay more tax—their fair share of tax—rather than persuading them. Yet the will to get to grips with the complex, practical problems and the energy to make people pay tax will come because of moral outrage, so we must continue to highlight the moral issue. It might not provide the solution, but it is how the solution can be achieved. It will provide the momentum or force to get that solution.
I realise that speaking in these terms may get some disapproving looks from powerful chief executives. They dismiss the campaigns of politicians and think tanks such as Progress, which is now running an excellent campaign on this, and respected NGOs such as ActionAid, which has produced some reports—I have one of them here—about the effect on developing countries of tax avoidance. I know that some of my colleagues will touch on that as well. They dismiss these as being anti-business. On the contrary, a fair tax system is about being pro-business but responsible business. In the UK, our bricks and mortar retailers are being driven out of business by online operators, based offshore, that can get away with not paying tax. Reputable companies such as John Lewis are struggling to compete with global firms that can spirit their profits out of the country. The status quo of allowing large-scale tax avoidance and evasion is favouring the large multinationals, which can pour resources into avoidance. That is hurting the growth of small and innovative British business, and it needs to be challenged.
I was glad to get a letter from the noble Lord, Lord Phillips, who unfortunately cannot be here today, in support of what I am arguing. He has given me permission to quote him. He says that,
“the already highly destructive effects of gross disparity in earnings”—
are “dire in the extreme”. He does not have very good writing, by the way. He also says:
“Restoration of some sense of civic duty is also essential”.
I have given the essence of what he says.
So what are the solutions? There is no single solution to the problem. Some of the options require international co-operation, and I welcome, as I did in the European Union Select Committee on Tuesday, the decision that was made at the recent Council of Ministers. However, we cannot allow the fact that some of the decisions have to be made internationally to serve as an excuse for us not taking action here in the United Kingdom, if for no other reason than to set an example. When we speak on this, it would give us greater authority on the international stage.
First, we need an HMRC with more bite. Tax avoidance is itself an industry. The big four accountancy firms make £2 billion a year, In order to challenge that kind of vested interest, HMRC needs to be given significantly more muscle. The £154 million so-called “blitz” that the Chancellor recently announced simply does not match up, especially—and I hope that the Minister will deal with this—against a backdrop of overall cuts to HMRC that will diminish it to its lowest staffing level ever by 2015. For every £1 invested in HMRC, £9 is returned to the Exchequer. That is a real investment. For every 10 cases of tax evasion brought by the Crown Prosecution Service, nine end in a conviction. So we have some of the tools, but we need more and we need to make them tougher.
We also need an HMRC that is more transparent. While HMRC is of necessity a big part of the solution, it is also currently part of the problem. With no proper ministerial oversight, it has become a closed community that cuts deals with big business. Noble Lords will have heard the stories of Vodafone having £8 billion in tax waived, which appear to go largely unchallenged. We need to be able to put a spotlight on HMRC. We need it to disclose the deals that are being done with big business. Every year HMRC writes off £5 billion that it knows that it will not collect. We need to be able to hold it accountable for that and for it to become substantially more transparent.
The chair of the Public Accounts Committee in the Commons, Margaret Hodge—who is doing a terrific job, by the way—has called for the publication of the tax affairs of the FTSE 100, which may be a provocative idea but certainly has great merit.
We need the Government to negotiate a series of new multilateral automatic information exchanges. While the recent agreement signed between our overseas territories and the EU G5 is welcome, it is just a small first step. We need agreements that go further and draw in a greater number of participants. Developing countries in particular, as I have said, need to be brought within the fold. Rampant tax-dodging means that many of them are unable to capture the benefits of the foreign investment occurring within their boundaries. They would be less reliant on aid and therefore less dependent on us developed countries if they received the tax revenues that are due to them from the multinational companies operating within their boundaries.
We also need a public register of beneficial ownership. If we do not act on beneficial ownership and tax, we have not got to the nub of the problem. David Cameron, the Prime Minister, was right to call on our overseas territories to develop a register, but this is an issue on which the UK should lead from the front. At present, we have no formal obligation for companies to register their beneficial owner, so front companies are set up, and it is difficult to know who is the ultimate beneficial owner. We need to pull back the curtain and see who is really benefiting from tax scams. We must change that and set the kind of example that will enable us to speak with authority on this issue at the G8 and then at the G20. I am sure my colleagues around the House who are participating will make other useful suggestions.
Finally, I shall try to anticipate one of the Minister’s defensive responses. He might try the familiar attack on Labour’s 13 years of government, using one of the four or five clichéd images circulated in the memos we have see from government: “Asleep at the wheel”, and so on. I am happy to have a conversation with the noble Lord, Lord Newby, and any other Minister at any other time, but that is not the subject for today. Today we are challenging the present Government, who have been in power for three years, about what they are doing. Therefore I ask the Minister, first, whether he will agree with me, and more importantly with the Public Accounts Committee, that cuts of as much as £2 billion to HMRC have hindered our ability to collect tax, and will the Government think again about those cuts in the coming spending review. Secondly, will he commit the Government to a public register of beneficial ownership? Thirdly, will he encourage the Prime Minister to lead a multilateral automatic information exchange that is much broader and much more ambitious than any that has gone before and that includes, above all, the developing countries? I hope that his answer to each of those questions is positive. Unless he does so, he will not have answered the challenge that I put at the start, and he will have failed the people who are losing because of the tax dodging. I hope that today we can have a positive response from a Minister who I know deep in his heart is sympathetic to the cause that I have been putting. I beg to move.
My Lords, I congratulate my noble friend and my good friend Lord Foulkes of Cumnock on securing this timely and important debate, and on his characteristically robust speech of introduction in which he covered quite a lot of the waterfront. He constantly promised that others would add to it. I am not entirely sure that he has left much room for anybody to add anything, but I shall do my best while trying not to repeat what he has already said in great part.
It is disappointing that so few Members of your Lordships’ House consider this issue important enough to make a contribution to the debate because it is hugely important. The scale is mindboggling in the United Kingdom, as my noble friend has already said. According to Her Majesty’s Revenue and Customs, the tax gap—the difference between what Revenue and Customs believes should have been paid and what it received from the entire economy—amounted to £32 billion in 2011-12. One can disaggregate that, and it is interesting to see that it is not all corporation tax. Quite a substantial part of it is VAT, there is some customs and excise avoidance and a comparatively smaller amount is income tax. It is a significant amount of money. As my noble friend said, it is a third of the deficit for 2012-13. If this money were brought in, it would obviate the necessity for any further spending cuts; it would deal with that issue. While I accept the remonstrations of the noble Lord, Lord Forsyth, that we should be careful not to conflate tax avoidance and tax evasion, I do not think that there are any positive consequences from either of them for our community.
The tax avoidance industry is clearly damaging the interests of developed countries, including our own; there is no question. It is almost certain, however, that the harmful tax practices are an even greater problem for economies in transition and for developing countries. The leader of my party said recently:
“If everyone approaches their tax affairs as some of these companies have approached their tax affairs we wouldn't have a health service, we wouldn’t have an education system”.
Thankfully, everyone does not, but he makes a very important point. This is exactly the case in many of the world’s poorest countries. Because of the way in which businesses approach their tax affairs, many of these countries do not have these basic services that we can continue to sustain. It is estimated that countries in the developing world lose three times more money—three times more—to tax dodging than they receive in aid every year. The estimate is that they lose about £160 billion a year through tax dodging. If that money stayed in those countries, rather than being spirited away to the offshore accounts of multinational companies, it could be transformative. These tax havens—to which I will come back in a moment—are the life support system for that tax dodging, and the plug needs to be pulled on them. They play no useful role in the global economic system.
In 2004—I cannot find any more recent statistics but perhaps the Minister can—half of the world’s trade appeared to pass through tax havens. That is 50% that at some stage passed through a tax haven, even though these jurisdictions contributed then only 3% of the global GDP. Recent ActionAid research—which I believe is the research that my noble friend held in his hand while making his speech—reveals among other things that the taxes lost to Zambia from tax haven transactions from just one United Kingdom Company, Associated British Foods, was a sum 19 times greater than the United Kingdom’s aid to Zambia for hunger—19 times more from the activity of one British company. That would be enough, ActionAid estimated, to send 48,000 Zambian children to school each year. This is a scandal, which needs to be addressed. I will accept the remonstrations of the Minister, which no doubt we will receive, that nothing was done about this for a significant time when we were in power, and we have to live with that. However, we are learning much more about this now and there is much more understanding of the effect of these issues. What is now necessary is collective action, to which we on these Benches and across this House should contribute.
I turn for a minute to the issue of morality. Frankly, I am fed up with being lectured to by chief executives of industry, who tell me that they have some kind of moral duty to minimise taxation. I will address that point in this way. In September 2012, writing in the context of the revelation that the then presidential candidate Mitt Romney revealed—or was forced to reveal—that he had been subject to an income tax rate of “at least 13%” for the previous 10 years, Joseph Stiglitz, the US economist and celebrated professor at Columbia University, wrote on his blog:
“Democracies rely on a spirit of trust and co-operation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme”.
He goes on to say:
“Both alternatives are unacceptable … More broadly, a market economy could not work if every contract had to be enforced through legal action. But trust and co-operation can survive only if there is a belief that the system is fair. Recent research has shown that a belief that the economic system is unfair undermines both co-operation and effort. Yet, increasingly, Americans are coming to believe that their economic system is unfair; and the tax system is emblematic of that sense of injustice”.
In concluding, he wrote that,
“tax avoidance on Romney’s scale undermines belief in the system’s fundamental fairness, and thus weakens the bonds that hold a society together”.
That is my first point about morality—and I rely on Joseph Stiglitz, who put it better than I could.
I have already said that all the economic and social consequences of tax avoidance and tax evasion, which we are debating today, are corrosive, and none of them is positive. Paying tax is one of the fundamental ways in which private and corporate citizens engage with each other and with broader society. Tax revenues are the life blood of that social contract—and, dare I say it, the life-blood of the big society. They are vital to the development and maintenance of physical infrastructure and to sustaining the infrastructure of justice that almost all the people who operate in this system rely on to underpin liberty and their market economy. Why is it, therefore, that tax minimisation through elaborate and frequently aggressive tax avoidance strategies has come to be regarded as one of the prime duties that directors are required to perform on behalf of their shareholders? Why has it been elevated to a moral imperative, when not paying fair taxes is not?
My noble friend made reference to the observations of Sir Roger Carr, the CBI chairman. This man’s views on the issue deeply worry me. He is the representative of British industry. Speaking at the University of Oxford’s Said Business School on 19 May, he said:
“It is only in recent times that tax has become an issue on the public agenda”.
I have to say that I do not know where he has been living, but certainly all my adult life tax has been an issue on the public agenda. He goes on to refer to,
“Starbucks, Google, Amazon—businesses that the general public know and believe they understand”.
I do not understand that part of the sentence. I think he is trying to give an impression that somehow these organisations are a good in themselves and that understanding them somehow means that we like them. We may use them, but I do not have that relationship with those organisations. He continues,
“businesses with a brand that become a perfect political football, the facts difficult to digest; public passions easy to inflame”.
He goes on, in what is clearly a criticism of rhetoric from our Prime Minister. He says that tax avoidance,
“cannot be about morality—there are no absolutes”.
I do not think I need to go much further than that; not many people in your Lordships’ House would not understand why I am disturbed that the man who represents our industry at its very pinnacle holds these views. I would like the opportunity to engage with him about them, but I cannot have that opportunity here. I do not really understand why he feels compelled to make that argument, particularly in the face of the fact that, in January, our Prime Minister said in a speech to the World Economic Forum in Davos:
“Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues”.
I agree with him. He urged multinational members to wake up and smell the coffee, obviously taking advantage of what was in the public domain.
Not entirely but relatively unusually for me, I am on the side of the Prime Minister on this issue. It is necessary for us to spend some time engaging with the view that has permeated our businesses, at least at one level of representation although not universally, about why they think their obligation is to avoid paying fair taxes and to challenge that directly. I ask the Minister, and I am sure that he will find it easy to answer this, whether he agrees with the Prime Minister or with the chairman of the CBI that this is a moral issue. If it is a moral issue, does the Minister agree that we in the United Kingdom, because of the position that we occupy in the world and our relationship with many of these tax havens, have a moral obligation to engage with them in a way that helps to solve this problem and undermines their activity?
While I am at it, can the Minister give some indication of how the Government intend, in the process of putting pressure on these tax havens—as they are— which I commend, to ensure that we do not replicate the situation that we allowed to happen in the first place? That situation put these communities in the position of finding some way to sustain themselves in the absence of natural resources and opportunities for the economy, which forced them into the hands of clever people who showed them a way of making large amounts of money in a parasitic fashion so that they were not a burden on us. We have to accept that part of this deal must be that we accept our responsibility to ensure that people can live in these places at the standard of living that they have achieved—maybe beyond that, in some cases—which does not rely on them having to perform these functions in the world at such a disproportionate rate in order to keep body and soul together.
I commend to noble Lords the briefing I have in my hands from the co-ordinator of the All-Party Parliamentary Group on Anti-Corruption, and the one that was sent to all of us by Action Aid. These are excellent documents. I cannot, in my last minute, do any of them justice, but they have a list of arguments and questions that go to nub of this issue. If others who speak after me can engage with these issues in the way that these briefings deserve, I commend the briefings to them.
I make one final point to the Minister. There is a deeply corrosive effect of the structures that have been created by tax avoiders and tax evaders which we need to interdict: they have created a set of structures of which the crooks of this world are taking advantage. We discovered recently, because of the uncovering of money-laundering through a legitimate process of international banking in cyberspace, exactly what crooks are able to do. That is exactly what is happening in this environment. If the Minister wants evidence for that, he should look at the World Bank’s recent report, which showed that there were 800 corporations involved in the 150 examples of serious money-laundering and crooked use of money, all of them taking advantage of structures that were otherwise legitimately created. We are allowing crooks and deeply tainted money to get into our legitimate exercises and economy.
My Lords, I, too, congratulate the noble Lord, Lord Foulkes, on bringing forward an important issue, and on giving us an opportunity to discuss it, as it were, in the general. I suspect that there will be many discussions in this House about many specific measures in this area of enormous complexity.
I say to the noble Lord, Lord Foulkes, however, that when I started to make some notes for this debate I had little intention of making more than a passing reference to the history of Labour Governments in this. However, his comments have forced me to do so. This kind of amnesia, wherein what happened in the past is irrelevant, is a very uncomfortable position from which to pass. He talked about “new in scale” as if we are suddenly coming across problems which had not existed in the past, and had now forced themselves on to our attention. I remind him that even his own Labour Party was in 1997 sufficiently aware of tax evasion on the domestic scale to look at a GAAR—a general anti-avoidance rule or anti-abuse rule—which it rejected. This Government have now brought that back into the frame; I will talk about it in a minute. Also, however, the US Senate thought this was such a crucial issue that it started its major hearings in 2001. That put into the public arena so much of the information now being used by all the parties that it is impossible that it was not going across Ministers’ desks and had not been drawn to government attention.
The noble Lord, Lord Browne, drew attention to the culture in which businesses, and those such as the CBI who speak as the trade bodies for businesses, work from the assumption that this issue should not be challenged. I think we all find that offensive. However, surely that grew out of what they saw as a very long period of complacency and a rejection by Government, who had the power to intervene, to make those interventions. Those years of neglect have played a very significant role in the culture that we now have to turn around. In the end, we have to get businesses, as well as government, to take responsibility.
I come from a party that, in conference after conference, debated these issues, put them on the agenda, introduced them into manifestos, and was treated as though it just did not understand the ways of the world and, as a consequence, business. I take some satisfaction in reading, in the coalition agreement in 2010:
“We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals”.
It is right that people should be aware that there has been a loud and pressed voice, but that it has been ignored.
I will talk very briefly about the GAAR. I had the privilege of being on the Finance Bill’s sub-committee, which took a look at the general anti-abuse rule. It is a toe in the water—a first step at looking at a principles-based approach to sit alongside a rules-based approach. I suspect that in future years we will have to look at whether or not anti-abuse is sufficient, and whether we need to move into anti-avoidance. However, I will bring to your Lordships’ attention the first of the conclusions in the summary of the report from that sub-committee. It says:
“Given resource constraints and the need to provide certainty for business and to promote UK competitiveness, we regard the narrowly focused GAAR as a reasonable starting point. However, we think it important that the scope of the GAAR should be reviewed in the light of practical experience of its operation as part of the wider review that we recommend elsewhere in this report. Such a review should consider, in particular, how the double reasonableness test”—
the most constraining part of the GAAR—is impacting on the GAAR’s deterrent capacity.
It is also crucial that we understand that the measures we take that affect our domestic tax framework do not tackle the international, multinational tax issues. I sometimes think that when people talk about GAARs and anti-avoidance measures that can be taken domestically, they create an impression among the public that those measures can deal with the multinational and international problems. This report also reminds us of that, saying:
“We are fully persuaded that the GAAR will not apply to issues involving the taxation of multinational groups or the deferral of bonuses from one tax year to another”.
It is, therefore, reminding us that even approaching anti-abuse in this country does not deal with the wider set of problems.
My frustration, particularly with the capacity of multinational companies to use their offshore reach to avoid or minimise their tax—effectively, not to pay tax—is in part because of the impact on public spending. Other noble Lords have talked about that. It is also because of the way in which it destroys the level playing field for many of our businesses, and in particular our domestic and small businesses. I note that in my own community, Qbookshop, which is one of a chain of three, has a notice in its window reminding the public that the taxes it pays support at least one nurse in the local hospital. The reality is that Amazon, for all its reach, does not do a lot more than that with the corporate taxes that it pays.
As I look for ways to do my purchasing from companies that have a proper approach to tax—as others do—I find that it is extraordinary how few exist. There are times when you are simply forced back to Amazon to carry out a transaction. This basically shows that the advantage of being able to avoid tax payments has subsidised those players in growing and squeezing out the competition that otherwise would naturally occur. We as a country are suffering from the destruction of that kind of level, competitive playing field.
I also note that when small businesses in the UK begin to grow, they are frequently sold to a foreign owner, and sometimes the owner is essentially a Luxembourg-based shell. Once again, it is almost impossible for a company to continue to compete unless it tries to enjoy the tax advantages that others in its field can access. One can see the temptation of many an investor to buy a company and move its activities or quasi-activities simply from a tax motive. I wonder how much the issue that we have often addressed, which is why we cannot get our small companies to grow into medium-sized and large companies based in this country, has a tax motive somewhere at the bottom of it.
I, like many people, have a real frustration that the kinds of rules of which these large companies take advantage were written by Governments on the understanding that it was unfair for companies to pay tax on the same economic activity in one, two or three locations. It is an entirely fair request for a company to say that it should pay tax only once. However, to take advantage of that, to work around it and to use it in order to create an environment where tax payment is in effect zero strikes me as the most extraordinary abuse and contempt, and it is absolutely necessary that we should bring it back under control.
I am looking very much at the G8 to begin to make strides in that direction. We have to advocate the principle that tax is paid essentially where economic activity takes place. There are complexities around that, but it is the principal basis on which we should expect to proceed. We have to look very differently at online companies, which can move their profits, domicile and activities in such a significant way. I wonder whether we should look at whether online companies should pay tax on the basis of revenue rather than profits. We may have to be as radical as that.
Before I finish—I am not going to use my full time—I will say one thing quickly to the Government. I was struck by the fact that one of the important instruments that the United States uses is the Foreign Account Tax Compliance Act, which requires individuals, or corporations as individuals, to report the financial accounts that they hold overseas. It also requires foreign financial institutions to report to the IRS on American clients. The UK is one of the countries that are co-operating with FATCA. It was designed primarily to combat offshore tax evasion and to recoup federal tax revenues. I would like to know whether we could have a UK version of this, because transparency—the kind of exposure that comes with FATCA—can be a very important basis for trying to challenge both tax avoidance and tax evasion.
Finally, I will say that many people, like me, would like to shift their economic activities—their business, their trade—to companies that play by the rules, but it is very difficult to find out which they are. I wonder whether there is any way that the Government could assist us: a way that would enable us to understand, when we walk into a shop, deal online, or, through our corporate lives, look at setting up relationships, whether we are working with a company that, as it were, has the kitemark of paying its taxes in an appropriate way. I admit that my ingenuity on this issue is limited, but it would be very helpful, and it would allow the public to do what they have done on many other occasions, which is to use their spending power. In that way, the Government would not have to deal with the issue simply through legislation and through enforcement by HMRC, but would have the public on their side. I note that Starbucks at least decided to make a voluntary tax payment—I think that we all agree that taxes should not be voluntary—in large part because when it was exposed as a company that paid virtually no corporate tax in the United Kingdom, its customers decided that they could go to a very nice coffee shop just down the road that did actually pay tax.
My Lords, I, too, congratulate my noble friend on this very topical Motion. Tax avoidance has really captured the public’s attention. I am very sorry to see that there are no speakers on the Conservative Benches, because all of us have to shine a light on these practices. It is only in that way that we will be able to test their credibility and acceptability. I hope that this debate will be part of shining the light on these practices.
I will speak about corporate tax avoidance. We need to shine a light on this because, in this age of austerity, not only do we need the money—as other noble Lords said—but the products, services, jobs, innovations and all the good things in our lives and in the economy that these companies bring. If we get it wrong, all of us will be the losers.
What is the key test? It seems to me that it is credibility. Businesses, especially publicly owned ones, must be credible. They go to great lengths and great expense to appear so. Yes, it is credible to locate production where skills are available. Yes, it is credible to locate services where costs are lower. But is it credible to sell, package and ship a book—not an e-book—from a UK warehouse, and for it to arrive at my house with a UK stamp on the parcel, and then to say that really the transaction took place in Luxembourg—where, incidentally, many of our roaming telephone charges are located? Is it credible that the intellectual property rights for a product should lie in the Cayman Islands, when the science, engineering, design and technology, and all the brain work were done in Europe, Asia and the USA? The Cayman Islands played no part in generating the value, and nor does it provide the patent protection that is so highly valued in these circumstances. Is the transfer pricing credible that goes on with coffee, metal ore and minerals? As the American Senate committee asked, is it credible for a company to have no domicile at all? In the FT, Robert Shrimsley put it rather well when he said that these companies were domiciled somewhere on a cloud. Equally, it is not credible that HMRC should accept these activities as lawful. Is this really what Parliament intended? Is this really the law? I do not think that it is.
The executives of these companies tell us that they pay all the taxes that are legally required. Amazingly, Ministers and HMRC seem to accept this. But, surely, what is legally required is that these companies pay corporation tax on the profits earned in this country, less any allowances that the Government think fit and less any incentives, such as the rather successful patent box for R&D. Routing profits through a low-tax jurisdiction is not a legal requirement. As my noble friend Lord Browne reminded us, it is a matter of choice—a choice made by company executives. John Kay made this very point in his column yesterday.
Some executives say they act in this way because of their fiduciary responsibility to shareholders. Yes, they have a legal fiduciary responsibility but it does not include avoiding tax, particularly avoiding tax by non-credible means which brings the company into disrepute. Again, this is a matter of choice—a choice by the directors. When directors claim that they are paying all the taxes they are legally required to pay, I hope that the Minister will respond by saying that this is just not credible. It is not credible because they pay the tax they choose to pay. I hope that such a statement will encourage HMRC to be more credible as well.
In reality, we know that most large corporations make this choice. ActionAid reported that 98 of the FTSE 100 companies use tax havens. Indeed, the Finance Bill 2012 relaxed the controlled foreign companies rules to facilitate the use of tax havens, presumably because regulation was too strong for this Government. Do we really want to go down this path? We learnt that lesson from the banks. Weak regulation produced weak banks and contempt for bankers. We do not want contempt for our major businesses. We are all losers if that happens.
My noble friend asks what are the social and economic consequences of all this. Many noble Lords have spoken of the less developed countries and aid. On 11 December last year, your Lordships debated the impact of this activity on developing countries. In moving the Motion, the right reverend Prelate the Bishop of Derby explained how the use of tax havens enabled multinational corporations to shift profits from developing countries into tax havens. We have heard about the detrimental effect on the revenues of these countries. Indeed, my noble friend Lord Browne gave us some extraordinary figures regarding Zambia. These same countries are often in receipt of development aid from us, aid which makes up for the shortfall in tax revenue. So that is a social and an economic consequence for us, the taxpayers of this country.
This gaming of the system is available only to well resourced, well advised, powerful companies, as my noble friend reminded us. The noble Baroness, Lady Kramer, told us that this activity helps big firms squeeze out their smaller rivals and she gave as an example the book trade. We hear plenty of fine words from the Government about open markets, fair competition and encouraging SMEs, so here is another economic consequence. What are the Government going to do about it? This is particularly important for our economy now that digital technology has opened up so many new possibilities, markets and opportunities for business and it is the ICT firms that are at the forefront of these new opportunities. How ironic that they should be at risk of losing credibility through their tax avoidance activities. That is another reason why we should not allow this to happen.
What is the solution? One answer is, of course, international co-operation and, yes, the G8 meeting next month provides an opportunity. The G8 may not have the power to impose its will, but it certainly has the authority to persuade. This is a chance not to be missed and I welcome the Government’s efforts in this regard. Meanwhile, we can do other things on our own. The noble Baroness, Lady Kramer, spoke of the general anti-avoidance rule—GAAR, as she put it. Will this enable HMRC to be more assertive and aggressive in challenging these arrangements, which are just not credible? I found what the noble Baroness said rather disappointing because I expected it to be much more powerful. I join other noble Lords in asking whether there is the expertise, staff and will within HMRC to fight the tax avoidance industry and bring more prosecutions. Naming and shaming is helpful, but it is not enough. For instance, will the Government deny public sector contracts to any company which is named and shamed? A solution which I find rather attractive is being investigated by the Oxford University Centre for Business Taxation. This focuses on the residence of the customer rather than on the residence of the supplier or where the click takes place for online business. This kind of sales tax would at least ensure that companies selling here would also make a contribution towards the infrastructure, services and facilities which enable that business to be carried out.
It is also partly the complexity of our tax system which enables companies to game it. There is an Office of Tax Simplification. It obviously needs a much greater sense of urgency injected into its work and probably needs to be given a lot more resources. Are the Government up for this? The current level of public anger over this matter should offer every encouragement for the Government to act. Ministers tell us that they are committed to transparency but they should act on this and require much more transparency showing beneficial ownership in the accounts filed in Companies House. The Government are absolutely right to make more transparent the activities of the UK dependencies which act as tax havens. Showing the beneficial ownership of companies and limited liability partnerships there will expose not only tax avoidance but money laundering. I wish the Prime Minister every success in his forthcoming conference with representatives of the dependencies prior to the G8 meeting and I hope that the outcome will be an automatic information exchange system. The EU has transparency rules for banks and important resources companies. This is now being extended to all large companies, both public and private, and a law requiring companies to break down tax, profits, revenues and staff numbers by country should be passed by the European Parliament within months. I hope that the Government will support this.
“The times they are a-changin’” and I hope that this debate will be instrumental in catching the spirit of these changing times—a more challenging spirit, which means that nowadays business plans have to stand up to scrutiny socially, ethically, morally and environmentally as well as commercially and financially. I think this is what the current Lord Mayor of the City of London meant when he spoke about his year in office being directed towards a City,
“reaching towards a newer, healthier capitalism”.
The new Archbishop of Canterbury expressed similar views. My noble friend spoke of a moral imperative. They are expressing the values that many of us share. Let us therefore encourage our business leaders to join in and make the appropriate choices.
My Lords, I, too, congratulate my noble friend Lord Foulkes, who is my friend, on achieving this important debate. It is a matter of some regret that only one Back-Bench Member from the coalition parties felt that they had anything useful to say on the subject. Perhaps that tells its own story.
Between 1999 and 2011, British companies’ profits increased by 58% but revenues from corporation tax increased by just 5%. Finally, political leaders are beginning to question that gap. That is to be welcomed. Last month, an EU summit pledged to clamp down through the sharing of information on the assets and gains of nationals banking in other countries. The Prime Minister expressed his belief that there was real momentum growing on the issue of tax and that is why he intended place it high on the agenda at the G8 summit, which he will chair in two weeks’ time.
The EU summit was the first time that European leaders had grappled with the increasingly important issue of tax evasion and avoidance. Some high-profile cases in various countries recently assisted in that process. Everyone, whether they are a football fan or not, will be aware that Bayern Munich has swept everything in front of it this season, both domestically and in Europe. However, a spoke in the club’s wheel was when its president, Uli Hoeness, was recently exposed, to much shock in Germany, over serious discrepancies in his tax affairs. Meanwhile, in France, the Cabinet Minister responsible for tax collection had to resign after admitting to having a secret account in Switzerland. You could not make that up.
It is encouraging to note that the intense debate in Britain over the tax behaviour of multinationals such as Amazon, Apple, Google and Starbucks has put the issue at the top of the political agenda. It seems that the catalyst for action at an international level has been the Obama Administration, to which the noble Baroness, Lady Kramer, referred. It will be interesting to see how effective that will prove to be in terms of obtaining information on US nationals’ assets and earnings in other countries.
The savings directive makes it compulsory for EU member states automatically to share details about other EU citizens’ bank accounts. Proponents argue that this allows Governments to detect irregular payments and other signs of tax evasion. The directive does not, however, deal with corporations, and an example would be Google, which has been much publicised and criticised in the UK for outsourcing its advertising sales to Ireland.
It is to be welcomed that Ministers, too many of whom have fixated on austerity plans and deficit reduction as the only answer to the financial crisis, are now coming to accept that there are other ways to balance the books. The campaign group UK Uncut began campaigning on the issue in 2010, and its legal challenge revealed how HMRC had waived a £20 million bill to Goldman Sachs, as well as a £6 billion bill to Vodafone. Journalists, tax experts and campaigners have been exposing some of the tax chicanery perpetrated by big business for far longer. My noble friend Lord Foulkes highlighted the fact that Amazon’s company accounts reveal that its corporation tax bill amounts to less than it gets in grants. It appears that most of those grants are for the company’s new operation in Dunfermline. How can the Government clamp down on the likes of Amazon and Google when the accounting firms used by these companies actually second staff to advise the Treasury on new tax legislation? To be blunt, the more that you can afford to pay a financial adviser, the less you will pay in tax. Figures of course vary and are open to interpretation, but tax evasion is said to cost the Treasury about £14 billion a year.
Yet, while multinationals legally avoid paying millions of pounds, it seems that HMRC concentrates more of its efforts on aggressively targeting small businesses and publishing lists of builders, clothing manufacturers, tradesmen and hairdressers who owe relatively small sums, nearly all less than £50,000. Of course, anyone avoiding or evading the payment of tax should be pursued but there should be consistency in that, not a concentration on picking off the small fry, the easy targets. If all the small fry were rolled into one, they would not stand comparison with the internet giants.
Many of us will have been taken aback by the evidence given last month to the Public Accounts Committee by the head of Google in Europe, Matt Brittin, who denied that the company’s tax operations were unethical. He defended the arrangement whereby most of Google’s taxes on money earned in Britain are channelled through Ireland to Bermuda, with the company paying an effective rate of less than 1%. However, those comments have been destroyed by a former Google employee, who told the Sunday Times:
“Google has pulled the wool over the eyes of HMRC and the British population”.
The PAC chair, Margaret Hodge MP, whom I commend on doing a first-class job, confronted Mr Brittin with Mr Jones’s evidence, but Mr Brittin denied it. Mr Jones’s information, which he says he has taken to HMRC, includes thousands of e-mails in support of what he had to say and must be taken seriously by HMRC. I hope that in due course we will hear some positive response. The revenue from Google’s deals in the UK is sent to Google Ireland Ltd, which in turn pays dividends to its parent companies in Bermuda.
Interestingly, Bermuda is one of a number of overseas territories whose leaders have been invited to meet the Prime Minister in London on the eve of this month’s G8 summit. Mr Cameron apparently plans to urge them to root out the multi-billion pound evasion industry by signing up to agreements to share tax information. His letter calling for action on tax information exchange and beneficial ownership was also sent to leaders in many territories. It is to be hoped that when the Prime Minister meets them, he will have a stick as well as a carrot to hand because it is not just the developed world that stands to benefit if the situation were to be improved. As others have mentioned, the charity ActionAid has demonstrated that nearly one in every two dollars of large corporate investment in developing countries is routed through a tax haven and says that 98% of the FTSE 100 multinational groups have companies in tax havens.
However, it is not just multinationals that employ every trick in the book—and, it is not unreasonable to assume, a few companies that have not yet made the book—to deprive exchequers of tax revenues. More than 100 of Britain’s richest people have been caught hiding billions of pounds in secretive offshore havens, thereby sparking an unprecedented global tax evasion investigation. In April this year, HMRC warned those involved, who were named in offshore data first offered to the authorities by a whistleblower in 2009, that they will face criminal prosecution or significant penalties if they do not voluntarily disclose their tax irregularities. HMRC was quoted as saying that the data,
“reveals extensive use of complex offshore structures to conceal assets by wealthy individuals and companies”.
HMRC is also investigating more than 200 UK accountants, lawyers and other professional advisers named in the data as advising the wealthy on setting up the elaborate offshore tax arrangements. These revelations may be shocking but are surely not surprising. They demonstrate the extraordinary lengths to which some of the wealthiest Britons are prepared to go to avoid making their fair contribution to the resources required to run our country and provide public services for its people.
If only there were more rich Brits with a social conscience such as John Caudwell who built the Phones4u empire. Mr Caudwell has personally paid more than £250 million in tax since 2008; that is 66 times more than Google paid in the same period. Mr Caudwell has called for tax avoiders to be “named and shamed” and for consumers to boycott what he called “serial offenders”. He went further and asserted that unless the Government got to grips with the problem of rich individuals and powerful corporations dodging the taxman, Britain was facing a period of social unrest. It is not sustainable, Caudwell argues, to have mega-millionaires and billionaires increasing their wealth, often by avoiding tax, while other people struggle to get by in the face of rising inflation and the severe reduction in public services over recent years.
One of the recurring issues is of course the role played by HMRC in pursuing those who refuse to make their contribution to tax revenues. We are told that there is to be new funding for HMRC, with the Government handing it almost £1 billion more to secure an additional £7 billion of revenue a year, thereby taking HMRC’s total compliance revenues to £20 billion in 2014-15. The Revenue in this spending review period wants further to expand anti-avoidance and evasion activity focused on offshore evasion, and this investment, it is claimed, will secure a further £2 billion in that period. Yet, as the noble Lord, Lord Foulkes, mentioned, there are hundreds fewer HMRC staff now than there were in 2011 due to total cuts of around £2 billion. How are these two positions to be reconciled? Surely HMRC must have more staff—and more highly paid staff to prevent them being poached by the big accountancy firms—to ensure that HMRC has the tools to make a better fist of reducing tax avoidance and evasion.
The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government, according to Margaret Hodge. They second staff to the Treasury to advise on formulating tax legislation. When those staff return to their firms, they have the very inside knowledge and insight to be able to identify loopholes in the new legislation and advise their clients on how to take advantage of them. As Ms Hodge said:
“The poacher, turned gamekeeper for a time, then returns to poaching. This is a ridiculous conflict of interest which should be banned in a code of conduct for tax advisers”.
I certainly second that. The idea could perhaps be turned on its head, with HMRC staff seconded to accountancy firms, sitting in on their meetings at which intricate plans to subvert legislation are discussed. Now I suggest that that would concentrate a few minds in a slightly different way.
The moral case on tax avoidance is overwhelming. That is why Margaret Hodge was right to be so forthright in her criticism of those individuals and corporations that route their cash through low-tax regimes at a massive cost to the UK Exchequer. Although it was encouraging that the recent Finance Bill contained the introduction of the general anti-abuse rule—again, referred to by the noble Baroness, Lady Kramer—it remains to be seen what deterrent the GAAR will have. I certainly agree with her comment that this is just a dipping of toes in water and that much more needs to be done. The rule is to be reviewed after two years, and I certainly hope that the information gained in that period will be used to ensure that it is extended.
As has been stated, changes to the international tax system will be high on the agenda at the G8 summit and there has probably never been a better time to crack down on tax havens, aggressive tax planning and transfer-pricing schemes. At least in part, this is because Governments are badly in need of tax revenue in a time of weak growth. Tax could become to the 2010s what debt relief was to the 1990s—the focus of a global campaign for reform, and I very much hope that it is.
Part of the way in which this can be undertaken is surely by the Government introducing legislation containing clear and unambiguous anti-avoidance rules. One way would be to charge corporation tax on a definable estimate of the profits generated by all UK sales to other UK companies or individuals, whether in shops or online. Where the head office is based or where the profits are declared would then be of no importance, so the tax could not be evaded by channelling the business, or by claiming to have done so, to a country with a lower tax rate.
In the end, though, the success of any campaign will depend on how the public behave. If the Government cannot, or will not, act, ordinary people should vote with their wallets by boycotting the worst offenders. That might mean higher prices and less choice, but why should we support businesses that exploit loopholes in the tax system to siphon off tax money from Britain that is so desperately needed to provide the services that maintain the fabric of society? On a personal level, in the past year I have stopped using Google as my search engine, I drink my coffee anywhere but at Starbucks and I no longer order goods through Amazon. I am certainly not alone in that but it will take a huge wave before these and other companies notice and give their conscience a makeover.
In the mean time, we have the right to look to political leaders and urge them to fasten on the shin-pads to demonstrate to the corporate giants that, when it comes to paying tax, they are finally determined to take the issue as seriously as business has for many years. We are hearing some encouraging words but those words must be translated into action—action on an international scale—if it is to be of any sustainable value.
My Lords, with the leave of the House, I appreciate the magnanimity of the noble Lord, Lord Davies of Oldham, in not grudging me four minutes out of the 40 minutes in today’s gap before he rises for the Official Opposition.
In his opening, the noble Lord, Lord Foulkes, regretted my party’s lack of participation, but I have been in the Chamber throughout, just as I was for all but 40 minutes of the 12 hours we devoted to the same-sex marriage Bill this week, which diminished temporarily my appetite for argument. I did think of speaking because of having participated in the debate on the Second Reading of the Finance Bill, following the Question for Short Debate last December on international tax implications, in which the noble Lord, Lord Browne, also took part. Unlike the noble Lord, I do not think that I received a briefing from ActionAid this time, so I make a plea, which no doubt will be read outside, to the charities and lobbyists on this subject that they keep a full list of the usual suspects in this area and send us a briefing on future occasions, even if we have not put our names down to speak, as we might thus be encouraged to do so.
The noble Lord, Lord Foulkes, said that the debate concerned the present Administration and not the 13 years before. I intervene to express a hope that the Minister will be prepared to say a word or two about the Charity Commission and its willingness to challenge the charitable credentials of a handful of black sheep where the charities have spent far less on charitable purposes than they have received in tax compensation, as has recently been reported in the press. This Government have taken some actions in this area already, whereas I think that the previous Government were less involved. It would also help if the Minister would indicate whether the Charity Commission needs any technical help with which the Treasury or Inland Revenue would be able to furnish it.
On a final, more light-hearted word, when my late noble kinsman was the Financial Secretary to the Treasury between 1954 and 1957 and was thus responsible to the other place for the Inland Revenue, he alleged that he once received a large anonymous banker’s draft from an equally anonymous taxpayer accompanied by a brief note, which said:
“I have not been sleeping well. I hope the enclosed tax contribution will cause me to sleep better. If it fails to do so, I shall send you some more”.
My Lords, I am quite sure that the House does not begrudge the noble Lord, Lord Brooke, his late intervention in the debate, if only because he is the only Conservative speaker. However, we all very much appreciated the particular point that he made about charities and I hope that the Minister will respond to it.
It is normal at this stage to congratulate the noble Lord who has secured the debate on doing so and on his introductory speech. On this occasion, I do so with exceptional enthusiasm. We heard an outstanding speech from my noble friend Lord Foulkes. As my noble friend Lord Browne indicated as the second speaker, everything that needed to be said had at least been referred to by my noble friend Lord Foulkes in his all-encompassing speech, in which he made the points that were emphasised in subsequent speeches. We have of course all found other emphases to make and develop out of the original contribution.
I want to return to the opening point. My noble friend Lord Foulkes indicated that he sought this debate because society is suffering at present from grossly irresponsible conduct by people with enormous power. That was reflected, first, in the financial sector and the collapse of revenues for the Government—something that all significant nations suffered. That is why every nation has been looking at how to boost returns to their finance departments or treasuries. One thing that has stood out in every review has been that the capacity to raise taxation, certainly against declining production and the dip in production that all countries have suffered—and this country significantly so—has meant that government revenues have been under stress. Therefore, it is not surprising that the emphasis has shifted somewhat to who is making a contribution to those revenues and to whether everything is being done to see that fairness obtains. It is clear that a great deal has been revealed about the immoral conduct of a large number of our major companies, particularly multinationals. It is immoral not to make a contribution to a society that provides all the necessary infrastructure for successful operations and yet seek to deny to that society the resources that sustain these essential services.
As my noble friend Lord Foulkes emphasised, it is ordinary people who have been paying the price of these collapses, not those who have awarded themselves huge bonuses in both the financial sector and at the top of industry. This has created such a disparity in income as to produce an unfair society in very dramatic forms over these past few years. It is essential, therefore, that we seek to recreate a fair society, and that means the Government need to act. If ordinary people are paying the price in lower wages, in lost jobs, in reduced public support for people on low income and in young people having great difficulty in obtaining a start in life with a job, it is essential that we ensure fairness in society, not only in the burdens but in the contributions. There has been a significant failure in that regard.
My noble friend Lord Browne identified one dimension of the unfairness. It is not only advanced countries that are suffering because of the gross levels of tax evasion by major companies; it has a crippling impact on underdeveloped countries such as Zambia when companies evade taxes which are vastly higher than any aid we offer to such countries.
The multinational companies have come to the fore. There has been not only a series of revelations at a parliamentary level in this country but, as the noble Baroness, Lady Kramer—the only speaker until the last intervention from the coalition Benches—emphasised, the Americans have taken a clear lead in this field. Not only is there the examination that has been going on in Congress for more than a decade, to which the noble Baroness referred, but, as is now appreciated, President Obama has been effective in taking an early lead in striking bilateral arrangements with countries to ensure the essential information flows which alone give the opportunity for people to respond effectively to the way in which big companies operate.
The Americans were greatly concerned about Apple when they discovered the extraordinary amount of taxation that was avoided by the location of its main body in Ireland. With all the advantages that it derived there, it could avoid significant taxation on its activities which raised revenue in the United States, Europe and the wider world.
The noble Baroness, Lady Kramer, also referred to Starbucks, as did a number of my noble friends. Companies want to sustain their reputation—they make their sales on the basis of how they are thought to provide services by the public—and we know the assiduous amount of effort and colossal resources that companies put in to burnishing their reputations. That is why Starbucks felt obliged to make a belated contribution. However, this is tokenism: it is not the response of a major company to the obligations it has. As my noble friend Lord Browne emphasised, given the obligations that it has, it will not do for it to make a token contribution when it has been exposed and therefore fears that there has been damage to its reputation.
We need a structure of identification and enforcement with regard to tax to ensure that these matters are dealt with fairly. My noble friend Lord Watson referred to the progress that is being made in Europe on this front and he mentioned the German example. So he should, because it was the German identification of what was going on in the Liechtenstein bank accounts of German citizens that alerted policymakers to the enormous potential loss to government revenues because of these strategies.
We have certainly got an obligation here; the Germans are concerned about Liechtenstein and the Americans are concerned about Ireland and the advantages it offers multinationals, and the United Kingdom, as we all know, has a string of Crown dependencies and tax havens. It is essential that we make progress there. Some progress is being made and we congratulate the Government on seeking more openness about their operation.
I hope this point will be accepted by the Minister. This debate is taking place a week and a half before the G8 summit. The Prime Minister will be president of the G8 when the meeting takes place. Can we be assured that an emphatic lead will be taken on these issues because it is quite clear that a great deal needs to be done? Will he seek to ensure that the G8 commits itself to securing country-by-country reporting in order to get essential information into the public arena and to make obligations on companies effective?
We need to see whether the Prime Minister will be able to extend the disclosure of tax avoidance schemes on an international scale. The Government are making some progress in the domestic scene but we want to see more breadth to this because disclosure of information is key to the issues. We certainly need to make sure that the Prime Minister is able to emphasise that Britain is taking key action with regard to the tax havens over which we have some jurisdiction. We expect, therefore, that considerable progress on these matters will be made at the G8. The Prime Minister will surely recognise that this is a unique opportunity, not least because key powers have clearly identified and expressed anxiety about these issues in recent months.
We also need action at home. We need to reform our corporate tax system, which clearly does not cope adequately with the issue at the present time. As several of my noble friends have emphasised, including my noble friend Lord Haskel, we need to ensure that Her Majesty’s Revenue has the resources to pursue people effectively. It is extraordinary that there have been cut backs even in the revenue collection department of HMRC in the years since the coalition came to power when it has been identified on all sides how cost-effective the allocation of resources are to that department in securing the taxation to which the country is entitled.
This has been an extremely illuminating debate and one to which I know the Minister will have some constructive response to make. I certainly hope he has, because I want to emphasise one point from the Opposition Benches—I am aware that this debate has been rather laden with speakers from the Opposition, with scant contributions by the Conservative Party. The noble Lord will recognise that the nation has a common interest in effective action at this time, and the Prime Minister has been vouchsafed a particularly unique opportunity, which we hope he will seize.
My Lords, I begin by thanking the noble Lord, Lord Foulkes, for initiating this debate. It is a very important subject and this is a timely point at which to be discussing it. I reassure noble Lords that despite the tenor of the debate, the vast majority of UK taxpayers do not avoid or evade tax. They pay the tax that is due and they pay it on time. However, some do not, and that is what we have been discussing today. The economic and social consequences of tax avoidance and evasion are not insignificant. A number of noble Lords referred to the tax gap, which is estimated to be around £32 billion, in total of which the amount due to avoidance and evasion was estimated in 2010-11 at £19 billion. This tax gap exists everywhere, and it is rather lower in the UK than it is in most other countries. Furthermore, it has been falling over a period both before and since this Government came to office, but it is still significant and too big.
As a number of noble Lords have said, the money that we are not collecting in taxes is money that we could be spending on services, something that I am sure we all wish we were able to do. The social consequences of failure to collect the right amount of tax are in many ways as significant as the economic ones. Many individuals and companies up and down the country are honest and pay the tax they owe on time, and it is not right that they should shoulder the burden for those who dodge or completely evade their responsibilities. It generates a huge sense of unfairness and anger, and erodes confidence in the tax system. At a time when the Government are facing tough spending decisions, it is even more important that the right amount is collected.
I agree that this issue has a moral dimension. Failure to pay tax that is reasonably due weakens the bonds that hold society together. I also accept that while there is a moral element to this, there are some companies whose moral compass is, by common consent, lacking. This has been attacked in a number of ways. The Companies Act 2006 lays on directors a range of duties that go beyond fiduciary ones. It is a statutory obligation for directors to have regard to the impact of their company on society as a whole. In my view, sometimes they put less emphasis on that than they do on some of their other duties. However, they already have this requirement.
The question is how we translate our moral outrage into effective action. Before coming on to what the Government are doing, I will take up a comment made by my noble friend Lady Kramer about a potential kite mark, and the remarks made by a number of noble Lords about the effect of consumers. There are some things that consumers can do more effectively and quickly than government, and it seems that some of the actions that have been taken against some well-known companies have had more of an impact in a matter of days or weeks than anything that government, with the best will in the world, could do in the same length of time. I do not have a suggested kite certification body, and I do not think that such a body should come from government, but it is a good idea that should be pursued.
We believe that this Government have a strong track record on tackling both tax avoidance and evasion. That is demonstrated, for example, in the 33 changes to tax law that have been made since 2010 to close down numerous tax avoidance loopholes, and illustrated by the 1,560 individuals who have been prosecuted for tax crimes by HMRC since then. We have shown a similar willingness to confront those who try to hide their money offshore. Some 50,000 taxpayers have already come forward in response to all the offshore disclosure facilities, of which Liechtenstein disclosure facility was the first. To date, these have generated over £1 billion of tax in penalties and interest, and in the years to come there are many billions more to come from that relatively narrow source. That activity reflects a wider transformation in the way HMRC now tackles avoidance and evasion.
Since 2010, some 1,000 additional staff have been deployed to tackle avoidance, evasion and criminal attack, and to cut back on tax debt. I shall deal head-on with the issue of how cuts to the overall HMRC budget have reduced the focus and effort being put into this area. Nothing could be further from the truth. One of the main reasons it has been possible to cut both the budget and the staff at HMRC while increasing effort and resource in this area is that the way people pay their taxes has changed. A huge number of companies and individuals used to pay their taxes using paper tax forms, but now virtually no one does. That has enabled HMRC greatly to reduce the number of people whose job was essentially to manage bits of paper. I do not know if there is a figure for it, but the amount of paper that goes through HMRC is a very small fraction of what it used to be. It means that we have already been able to allocate around an extra £1 billion to this area. So in answer to the first of the questions the noble Lord put to me, I can say that I am pretty confident, indeed very confident, that HMRC has the resources to tackle this issue more effectively than it did in the past, and we have said that we shall look at whether there is scope for putting more resource into it in the future. However, there is something to consider with regard to further resource: you cannot do it too quickly because we are talking about highly trained staff if they are going to be effective. We have put in a lot more and we are keeping the position under review.
In connection with HMRC, the noble Lord asked about it cutting deals with big business. He was concerned about that. The settlements he referred to were reviewed independently by a judge and found to be satisfactory. However, HMRC has put in place robust new assurance and governance rules for settling large cases, so I think that some lessons might have been learnt.
In the Budget, we vowed to do more to tackle avoidance and evasion. We announced the signing of major new automatic exchange agreements and disclosure facilities with the Isle of Man, Jersey and Guernsey, and I shall come back to that later. We also announced the introduction of the first general anti-abuse rule, which will shortly be legislated for through the Finance Bill. This will target effectively the most abusive forms of avoidance and provide a strong deterrent against using such schemes in the first place. Is it strong enough? We shall see when we review it. Is it something against which the last Government set their face? Yes, it is. I would not want to get into too much retrospection, so let us leave it at this: having made the case in your Lordships’ House for an anti-abuse and an anti-avoidance rule for many years, I am very pleased that at long last it is now happening.
For those who choose to contrive complex mechanisms to disguise their employment status and thus avoid employment taxes, we have published a consultation to review two areas of the partnership tax rules, while just last week we published a consultation on the use of offshore employment intermediaries. Our focus on tackling avoidance and evasion will continue, but as a result of the investment that we have already made, HMRC is now set to raise total additional compliance revenues of £22 billion per year by 2014-15.
The noble Lord, Lord Foulkes, asked me three questions, the second of which had to do with beneficial ownership. The Financial Action Task Force on Money Laundering sets standards on anti-money laundering and these issues. The FATF standards are at a high level and are implemented at EU level. EU action is driven by the money laundering directives, a new one of which will be negotiated this year. The standards on beneficial ownership place the requirement on countries to ensure that there is adequate, accurate and timely information on the beneficial ownership of companies, which can be obtained or accessed by competent authorities. Member states are now implementing those standards. The Treasury is working with BIS, and BIS is currently drafting a discussion paper on corporate transparency, which includes beneficial ownership. This will be published over the summer. The measures agreed to through the G8 in this area will, as I say, be implemented in the UK through the EU money laundering directive, as well as by UK money laundering regulations and changes to the Companies Act.
Those concerned with these matters have been promoting the multilateral information exchange for a long time. There has been the most extraordinary acceleration of activity in this area in recent months. The key starting point—the stone, if you like, that started the avalanche—was, as noble Lords have pointed out, the US Foreign Account Tax Compliance Act, which requires non-US financial institutions to report extensive information on US customers with accounts overseas to the US authorities. The US is saying, “We want to know from you what our companies and citizens have in your back accounts”. This has been in operation for only a relatively short time.
As an example of how that standard has really become an international norm, I will go through the following year. In June last year, the UK, France, Germany, Italy and Spain agreed a model information exchange agreement with the US to implement FATCA. In September, the UK and the US signed an agreement on that model. In December, the UK announced that we saw it as a new standard and would look to build on it ourselves and internationally. In January, the Prime Minister announced that tax transparency, including this, would be a priority for the G8. I confirm that it is. In February, the Isle of Man agreed to a FATCA-type regime with the UK. In March, Jersey and Guernsey agreed to the same thing. In April, France, Germany, Italy, Spain and the UK agreed to develop and pilot multinational tax information exchange based on the FATCA model and we made it clear that that was our priority for the May council. Last month, the overseas territories and Crown dependencies made a commitment to join the pilot: that is, to join the FATCA approach.
That is hugely significant. It means that, for the first time, places that have become a byword for tax avoidance will be required to make information available to other tax authorities. Also in May, another 12 European member states agreed to join the same process, while the European Council supported the creation of what it calls a new global standard for automatic exchange of information: that is, a FATCA-type approach. All this has happened in a year. It is an extraordinary acceleration of events but is all to the good. It is our intention that it should be pursued even more rigorously in the future.
The noble Lord, Lord Browne of Ladyton, asked about developing countries and the problems that they face in not being able to collect the tax revenues that they are due. There are two elements to how you deal with that. One is that we do our bit to make clear what is happening in those countries in relation to multinational companies. That is why we support the extractive industry transparency initiative and why the EU accounting directive will require country-by-country reporting for the extractive industries, so that at least you can see what is happening in those places.
We have also realised, in recent years, that we can play a major part by helping those countries themselves improve the efficiency of their tax collection. HMRC has been putting money into support for the tax administrations in those countries. In Ethiopia, where we have been doing it for a number of years, tax revenues have risen by as much as 40% in a year. In Zambia, to which the noble Lord referred, although we are committed to spending £235 million between 2011 and 2015 on reducing poverty, we are also committed to building their tax collection capacity, and HMRC has been supporting the Zambia Revenue Authority to build its own tax collection. Obviously, the quicker they can raise their own proportion of tax, the less reliant they will be on aid. In the Budget, we announced a programme of capacity building, which DfID and HMRC were going to promote in many of those countries. I think that is a very important move.
The noble Lord also referred to the future of tax havens and what they are going to do if they do not have a financial services sector. That is an extremely pressing issue but it must not be the principal issue. We cannot delay action in this area because some tax accountants in the Cayman Islands might find themselves slightly shorter of work.
My noble friend Lady Kramer and the noble Lord, Lord Haskel, in particular, talked about the problem of multinationals not paying tax and asked what we were going to do about it. There is a major push via the OECD, in which we have taken a lead, to change the rules. A lot of the accounting rules have been in place for nearly a century, so it is not surprising that they do not deal very well with the current situation. I assure the noble Lord, Lord Davies, that the Prime Minister will take a lead and will push this very hard at the G8 later this month. Next month, the OECD will present proposals to the G20 on how exactly it proposes to revise the rules. There is a huge amount of work going on in this area—I gather there are 15 work streams—so we should not think that this is being taken at all lightly.
The noble Lord, Lord Haskel, asked whether the Government would deny contracts to tax avoiders. In the Budget, the Government announced that businesses must certify their tax compliance if they want to bid for government contracts. That is new, and we hope and think that it will be effective.
The noble Lord, Lord Watson, questioned whether employees of accountancy firms should be able to spend time on secondment with HMRC. We realise that there can be perceived conflicts of interest. At the moment, secondees have to sign an agreement with the host department and their permanent employer to ensure that there is no conflict of interest when they return. On balance, we value such secondments and think that HMRC gains an advantage by taking employees from the big accountancy companies to help with its work and to help bridge what used to be a complete silo between the accountancy firms and the department. It is a bit of a caricature to think that all accountants are necessarily evil-minded and are going to use the information they get to their clients’ advantage. My experience of accountants is that they are part of a very fine profession and are often unjustly criticised.
The noble Lord, Lord Brooke, asked a specific question on the charity tax. I assure him that HMRC is working closely with the Charity Commission to make sure that charities comply. It conducted 10 joint inquiries with the Charity Commission in 2012-13. There are about 20 exchanges of information every month about charities where it appears that there might be a problem. To go back to an earlier point, HMRC has doubled the staff working on charity compliance since 2012.
I hope I have gone some way to answering the points that have been made in the debate this afternoon and to reassuring noble Lords that tax compliance is an issue that the Government take extremely seriously and will continue to prioritise, both domestically and internationally.
My Lords, I have found this a really encouraging debate, with such well informed contributions. It was also notable for one of the most helpful and sympathetic responses by a Minister that I have heard for a very long time. I really am most grateful to him, and I will return to that in a moment.
I also thank all those who have contributed. My dear friend, the noble Lord, Lord Browne of Ladyton, echoed the description of the tax avoidance “industry”, which it has become, and underlined that very effectively. I say to the noble Baroness, Lady Kramer, that I accept her scolding, gentle as it was. I was only saying, “Hands up” to our lack of action. But now it is the present and the future that we have to concentrate on. I will return to the noble Baroness, Lady Kramer, in a moment because she made a contribution, which was echoed, that was perhaps the most important new thing to come out of this debate.
Perhaps I might also say how pleased I am to see the noble Lord, Lord Haskel, back, not just in good health but, as we heard, in his robust, powerful and informed debating style. We really are very pleased to see him and we know that on this issue he is one of our noted experts. He talked about Luxembourg, and others talked about Liechtenstein and the Cayman Islands. It is interesting that over the past few years Ireland has been developing itself and organising its affairs to become a tax haven. That is something that has crept up on us. Perhaps we ought to be discussing this with the Irish, since they are so close to us.
When the noble Lord, Lord Watson, intervened, I realised that, along with my noble friend Lord Browne and myself, we have got three football fanatics from Scotland. He pointed out the fankle, if I may use the Scots word, that the chairman of Bayern Munich had got himself in. Sometimes the owners of football clubs, as I have found recently—not in my own personal case but in the case of my club—get themselves into these kinds of difficulties. He also picked up the suggestion made by the noble Baroness, Lady Kramer, which I will come back to.
Perhaps the most welcome of all interventions was from the noble Lord, Lord Brooke. His interventions are always welcome and sometimes the funniest things I ever hear in this Chamber, which is a relief sometimes through the long tedium of some of the debates that we have. I hope that his anonymous rich insomniac is now sleeping well, having paid the money that was due. If there are any more rich insomniacs who think they have not paid enough tax, I am sure that the Revenue would welcome their contributions.
I also thank the noble Lord, Lord Davies, for his very kind remarks, and his very perceptive points. He made the important point that if these taxes are paid properly, ordinary people become better off and the companies benefit because they have more consumers, purchasers and people involved. He summarised the points I was making about identification and enforcement very well, and echoed the call for the lead to be taken at the G8 meeting, which I am glad to say is going to be held in Northern Ireland.
The noble Lord, Lord Newby, answered my questions. It is good to come and have questions that are posed specifically being given an answer. I hope that other Ministers will learn from the excellent example of the noble Lord, Lord Newby. To echo the debate by saying that the moral compass of some companies is clearly lacking is a strong point for a Minister to make.
The one new point that I want to finish on, for which I give credit to the noble Baroness, Lady Kramer, was this idea of consumer power, of having some kind of boycott so that we can show our dissatisfaction with and distaste for the great tax avoiders. The noble Lord, Lord Watson, mentioned this as well and went through some of them: Google, which he is no longer using; he will go anywhere but Starbucks for coffee; and Amazon. There are competitors. I am glad to see that the right reverend Prelate the Bishop of Derby is nodding. That gives me great comfort. I remember the great apartheid debates we had and how the boycotts really had an effect in South Africa. The noble Lord, Lord Brooke, made a plea to NGOs to keep us briefed. Perhaps a collective of NGOs could get together and produce a list of companies that they feel are the most outrageous and that we ought to avoid. That was very encouraging. We will call it the “Kramer coefficient” or the “Kramer list” and give credit to the noble Baroness.
It has been a very good debate. Once again, I thank everyone who contributed, particularly the Minister for his helpful responses.
Motion to Take Note
My Lords, I am delighted to have this opportunity to open this debate on what is in effect the whole range of housing policy. Unmet need means people without homes, as I shall develop. Far too many of our people are badly housed, homeless or struggling to pay their high rents and avoid becoming homeless.
We have a real housing crisis in this country. There are currently more than 1.8 million households on waiting lists in England. There are currently more than half a million households living in overcrowded conditions. In 2012-13, 108,000 homes were completed in England. The evidence from Shelter, which has been very helpful in providing information for this debate, is that we have an annual need of 240,000 new homes to meet current and future demand. We are building at less than half that rate so the problem is going to get worse.
For far too many people in our country, their housing situation leads to misery and damage to health; it holds back the education of children, damages family cohesion and generally causes a great deal of human unhappiness. Anybody who has been a Member of Parliament or local councillor and has had a constituency surgery will know about the number of people who come along seeking help on one aspect or another of their housing difficulties.
I will turn briefly to private rented housing, which has had to increase. One-third of private renters are now families with children. What is alarming is that for so many of them, short-term tenancies are the norm and they keep having to move. Government research shows that renting families are nine times as likely to have moved in the past year as families who own their own homes. We know what sort of dislocation there can be for families with children if they have to move, and how it affects their schooling and their general well-being. Rents in the private sector are rising and eating savagely into household finances. Perhaps even more damaging, one-third of privately rented homes fail to meet the Government’s own decent homes standard.
Surveys of public opinion show that the public would welcome more borrowing if it led to better housing and more housing being built. The surveys I have seen say that supporters of all parties believe that this would be a good idea. Of course, more building has other economic benefits, which I shall come on to. At the moment we have too few housing starts and virtually no social housing. There has to be a better way of managing our affairs.
I was given a number of examples. Let me just cite one. Oxford City Council is a Labour council and an example of good practice. It has a planning application for the development of about 900 homes at Barton West, which is in the Oxford City Council area. That will produce much-needed housing in an area where there are housing shortages. However, Oxford City Council has also identified land outside the local authority area in adjacent local authorities, which are mainly Conservative-controlled. It is finding it very hard to get the go-ahead to develop the land because the Conservative authorities do not want more housing there. Perhaps the Minister will have more information on that, but that is a rather sad state of affairs.
Although some people say that there are shortages of land, there are also allegations that developers in this country have large land banks which they are holding off until they can make more money than they can at the moment. Does the Minister know the extent of the land banks? I am not talking about developing the green belt, I am talking about land banks that the developers have, on which they could legitimately build if they decided to go ahead.
I want briefly to mention the difficulties of under-occupation. Yes, of course, there are people who are under-occupying their homes. For owner-occupiers, it is easy. They sell and move to a smaller property, make money in the process and someone else gets a larger property. That is easy for owner-occupiers, but we have an entirely different system for those who are in public housing. Now that they have the bedroom tax, families will have to move, but they have nowhere to move to because there are not enough smaller units available for them to move to—at least, not without a move, let us say, out of London into the suburbs or even further. That is hardly a humane way of dealing with under-occupation. There has to be a method to deal with that.
I remind the House of the dislocation to families and children if they have to move to different areas and different schools and have to make different friends. It can be very upsetting and can damage schooling and the happiness of the family. It is not surprising that there has been a rise in homelessness. Statutory homelessness is increasing, and local authorities are under pressure to find temporary accommodation to stop families having to sleep on the streets. Of course, that is a temporary measure, and councils have had to put homeless families in hotels and bed and breakfast accommodation. We know that a number of them are breaking the law because they are leaving families there for longer than the six-week legal limit. A large proportion of local authorities are now in that position.
Of course, the benefits cap is aggravating that. Without getting into a long debate about social welfare at the moment, the benefits cap should surely take account of differences in housing costs from one region to another. We know the enormous differences between London and the south-east and other parts of the country. Shelter has demonstrated that local authorities which cannot source emergency housing in their areas are increasingly having to send homeless families further away.
I turn briefly to the situation of young people looking for housing. It is bleak for them. There is a massive housing shortage in properties that would be suitable for young people. They are increasingly priced out of buying or renting a home of their own. That is a struggle for people from all walks of life and particularly difficult in London and the south-east. From personal experience, I talk about mortgages and easy or difficult lending. Many years ago, when I got a mortgage before the first house that I bought, my wife and I had to demonstrate that I was asking to borrow only two and a half times my salary, I could borrow up to only 70% of the equity of the house and I had to produce an employers’ reference that I was good for my salary and was not likely to be fired quickly.
What has happened in more recent years? Mortgages went up to 120% of equity and 10 times the salary. It is no wonder that we had the terrible crash and the housing bubble. The danger is that we are moving back again. If borrowing money to buy houses is too easy and there is no increase in housing stock, it does not take an idiot to realise that prices will go up. That is what has happened in Britain over many years. Unless there is an increase in supply, making borrowing easier does not help. It may help the lenders of the money, but it does not help the people who want to be housed. That is why I am worried that the Chancellor of the Exchequer’s Help to Buy scheme—it has gone through a number of different names—will be no help at all if there is no significant increase in supply, but it will help some people who want to be second-home buyers. That is a sign of inequity.
In a more general sense, I say this about owner-occupation. Owner-occupiers in our country have managed to make enormous capital gains through holding a property. I have benefited in that way. It is quite unfair that the process of owner-occupation in our housing market has led to an enormous increase in inequality in this country. Okay, I cannot sell my house and move into a tent, but, at some point, somebody—a family or whoever—will benefit from that. It seems quite unfair that that has happened. It has happened partly because financial services have made it so easy to borrow, and the danger is that we are going back there. Of course I want people to be able to borrow money for their homes, so there has to be a balance, but the danger is that if the money is too easy to come by, there must be more houses, otherwise prices will rise.
Of course, we all know that on top of that there are significant north-south differences in this country. We have much greater housing stress in London and the south-east than elsewhere. The trouble is that in the parts of the country where houses are incredibly inexpensive, there are no jobs. There is no economic base, so there is no demand to live there because people cannot earn money. I know that because I am lucky enough to have a home in Cumbria, but looking at the property prices on the Cumbria coast in places such as Workington and Maryport, I can get you a three-bedroom house for less than £100,000—in fact, for quite a lot less than that, but there are no jobs.
The north-south differences are important because they affect our perception of housing and what should be done to help. There is another problem, particularly in London and the south-east. If it will be increasingly difficult for relatively poor or not very well paid people to live—I am talking about the C2s and Ds; about people who keep many of our public services going; about local authority workers, cleaners, nurses, other NHS staff and teachers—or they cannot find anywhere to live, how are those services to be continued? It will be very damaging. It is all very well saying that you can get these people at the moment, but it is getting harder and harder for them to find somewhere to live. They do not earn enough to buy into the housing market, and they cannot get accommodation. I find that a very serious situation indeed.
The future for London and the south-east will be even bleaker if we do not do something to make more housing available so that we have a proper social mix, and so that various jobs can be filled. I know that we have people from other EU countries who come here, but some of their housing conditions are intolerable and they do it only temporarily while they try to keep their families going in their home country. That does not mean that the housing is there; it means that they are willing to accept standards in which one would hope that they did not have to live.
We have to build more homes. I do not believe that doing nothing is an option. We have to change our policies dramatically. The lack of housing construction is holding the whole economy back. We know that an active construction programme has knock-on benefits throughout the economy in jobs, further investment and so on. However, at the same time, we are seeing a generation who are finding a decent home of their own out of reach. As I said earlier, we are building about half of what we need.
Lending more and more is not the answer unless there is an increase in supply. Whereas I welcome, up to a point, making the planning system more efficient—there are arguments against it as well—that will not open the doors to a great deal of building. We need to look forward. Fundamentally, I believe that we need to get local authorities building again—and if not local authorities, then local authorities in tandem with housing associations. We need to ensure that we can develop a proper public housebuilding programme. That would give people an opportunity and boost the economy. I am afraid that I missed some of the discussion in Questions today about garden cities—I apologise, but I was working on this speech and I did not switch my screen on in time to hear what the Minister said about it—but that certainly has to be an option when looking at ways in which we can deal with the desperate housing situation.
To cite a well-known Conservative to support my argument, in the 1950s Harold Macmillan said that he would build 300,000 homes a year. He said he would ensure that there were that many built in the country, and he did it. If he could do it, that is a lesson to us all. Mind you, he is a different sort of Conservative from the ones that they have nowadays but he knew that housebuilding was important. It was important then and it is important now in terms of the economy, jobs and human happiness.
I believe that we need real political will on housing. Frankly, if the coalition will not provide that political will, the next Labour Government will. I very much hope that housebuilding and increasing housing will be a key feature of Labour’s manifesto, with which we shall win the next general election.
My Lords, I am delighted to be part of this debate. There was a very impassioned debate earlier this week in this House. When 538 people voted on Tuesday, I was not able to because I had to attend a rather important and long-standing event in the north of England. However, the passion that I heard on Monday and the sense of urgency expressed again and again from all the Benches around this House is something that I would wish to conjure up for the issue before us. I wish that we could sense the passion that is invested in this question of housing and feel the urgency for meeting the needs that are undoubtedly there.
I am aware that in speaking in such a debate, I am surrounded by people who are experts in their field, who have been or are in government and who have run big organisations and the rest of it. I come to most of the debates in which I speak in this House simply as a hands-on operator—a street-level worker. I work in communities with people; in their surgeries, Members of Parliament frequently refer some of the cases to which the noble Lord, Lord Dubs, has just mentioned to people like me. I must thank the noble Lord for bringing this matter to our attention today on two grounds. The first is that he gave me a respectable excuse for leaving the conference for which I was in the north of England, since I prioritised being here, and the second is the importance of the issue before us.
Over the years, I have been involved in meeting housing need in a variety of ways. I have served as director of two or three housing associations. For a while, I was responsible for a day centre in west London at the time when, as some Members of the House may remember, local authority housing was being exchanged and dealt with for political purposes in the City of Westminster. An awfully long shadow fell from that. I was also part of the London homelessness network of organisations meeting housing needs, largely but not entirely for the street homeless. One-to-one referrals have also been part of what I have done.
The economy, they say, is starting to build up again. What do I see in the part of London where I live? There is lots and lots of building going on. From the roof of my house, I think I have counted eight large cranes, busily building for the future. Someone is investing in the future, which they think is rather rosier than the present. What kind of building am I talking about? First, obviously, there are premises to house the burgeoning businesses coming to what they call Silicon Roundabout. It is happening all around us with the start-up companies and their technology, and it is good to see that business in this sector will bring new life to the community I live in. Then there is student accommodation. There are large amounts of it with, we have to say, its limited usefulness. Nevertheless, I am glad for the students. Then there are hotels of various kinds. The final category is that of luxury flats.
I am the chair of an education foundation. We sold a piece of land at Old Street roundabout and could not believe the figure. We thought that if we got £20 million, we would really be doing well; we got £41 million. There have sprung up these great big sails—that is what they look like—on the roundabout, with these luxury flats in them boasting at street level that their prices started at £750,000. A building that once belonged to the Methodist church just the other side of the roundabout, and which we sold in 1989, is selling its luxury flats at roughly the same price. I see all that building and none of it would I really object to as long as there were certain other things happening in the world of construction. What I do not see is a real and systematic programme to build affordable and social housing, although there are some units. Do not get me wrong: there is a policy in the inner city to make it a requirement on developers to put a certain percentage of the units into what are called affordable categories. However, even that does not begin to scratch the surface of the need of which I am aware.
Within the church community that I look after, we have some truly outstanding young people. They are all British-born and mainly from ethnic minority backgrounds. Our work is intended to widen their horizons and raise their aspirations to help them see that one day they might become the Chancellor of the Exchequer, a leading journalist or barrister or, indeed, a Member of your Lordships’ House. Why not? We find scholarships and financial help for them at university. We try to open up some kind of new future for them. Sometimes, when I push them, asking them to consider things they had not even imagined before, they come back to me and say, “Why should I bother? Even if you help us with £1,000 or £2,000, we will still have to incur serious debts—and when we come out, how can we hope to live in these neighbourhoods where we have grown up, where our friends are and where our lives have been lived?”, and they are right.
It is impossible to imagine young people having a realistic hope of achieving that simple objective of continuing to live in a part of the world that suits them. Even if they get a job there, it will not lead easily to them getting a mortgage or an opportunity to live there and get their property. Yesterday’s Evening Standard indicated that the average price of a home in London is £421,395 and that if you took out an 85% mortgage on that, you would have to earn £96,000 per annum. Let me say that since I have never earned more than £25,000 in my life, if it were not for the fact that the church provides me with what I have to admit is a very nice house, I do not know how I would be able to cope at all. How can these children whose horizons we are widening, whose hopes we are raising and whose gifts we want to value stand a hope of getting into that sort of league when they do not have any capital behind them, or any parental wealth or clout? It really is serious.
Let me tell your Lordships about the conversations that I have had since the riots in Tottenham two years ago with these very same young people. Mercifully, they were not involved in what happened then but they are able to tell me very eloquently about the degree of alienation they feel, about the “outsideness” of their experience and about the difficulty of getting through certain doors of opportunity to which they might aspire. There is a tinderbox building up in the city centre in London. I do not want to be alarmist or dramatic but I think that there is. We saw an outburst of it two years ago. We simply have to address the needs of poor, aspiring, able and competent young people whose only difficulty is that they want to live in London.
There is some social housing, as I have said, and the Government’s Help to Buy scheme, which the noble Lord, Lord Dubs, mentioned. I do not deplore that, but these do not address the area of primary need and will not get near meeting the demand. When I left this Chamber on Monday to return home and listen to Radio 4, as I always do, a serious discussion programme was going on about how the economic circumstances in our country are leading to joblessness in the north and certain regions and provinces around the land, while there might be the prospect of jobs in London. So we can anticipate a population drift from the north-east and the north-west, where the noble Lord, Lord Dubs, has his nice home in Cumbria—all those areas where, as he said, there is no housing—towards London, which the programme said would become a megacity, with all that that does to complicate a regional social development programme in which the regions, as well as London, can enjoy their proper life as part of our society.
While the qualified jobless from around the country are coming to London, certain boroughs in London are buying cheap property as far away from London as they can in order to meet their obligations to house homeless people by, basically, exporting them. That is what in cricket you call a “reverse swing”. It is moving people against the climate. I invest a lot of my time in the needs of Haiti. We have become accustomed since the earthquake of three years ago to seeing pictures of people living in tented villages; there were 1.5 million of them at one time, although there are now only 250,000. We call them IDPs—internally displaced people. There are going to be an awful lot of IDPs in the United Kingdom if present trends continue.
I shall tell noble Lords what one of my young people who dropped out of university, although he got three As at A-level, said when I asked him, “Why on earth have you done that?”. He told me the usual things that I have already shared with your Lordships about the burden of debt and the inability to get into the housing market and start a life properly and with dignity, but went on to say that at street level the talk was that you did not go down the conventional routes to career-building but looked for quick money in order to bypass a lot of the painstaking work that normally goes into building a career and the shaping of the future. What are those quick paths? Crime, drugs, music, football and fame—all of them, according to the argument, capable of producing quick fixes and rapid promotion into the world of haves, as opposed to have-nots.
I agree with the noble Lord, Lord Dubs, that as our economy needs a lift, a serious attempt should be made to prioritise the creation of infrastructure for the building of homes. It just seems to make sense. The construction industry gets on with things, homes are built and, within homes, security, well-being and health automatically flow. I do not see why we cannot see that; it is a no-brainer. The eight millennium development goals have preoccupied me for the past 15 years or so, and I have always wondered why housing—a shelter, a roof over your head, somewhere you can raise your family with dignity and create an environment that is yours—was not one of them. The noble Lord does us a great favour by bringing this matter to our attention just now.
I began by referring to Monday and Tuesday’s debate, when 538 people went through the Lobbies. I might have been the 539th if my wretched conference had not got in the way. However, the words that I heard repeated most frequently in the speeches that I was party to while in the Chamber were “justice” and “equality”. If ever there was a subject where those ringing words needed to be heard again, it is on the question of addressing the housing needs of ordinary people, whose only hope is that they have somewhere to live their lives with dignity with their families and contribute to the society around them. It does not seem much to ask. Where, ask I with no political background at all, is the will of Governments to address this in a focused and systematic way?
My Lords, I, too, thank the noble Lord, Lord Dubs, for this debate and the way in which he introduced it. It is so easy sometimes to fall into the trap of partisan politics, when indeed I think we will learn through the debate today that many of us actually share concerns and indeed many views about how to address them. I know that the noble Lord has long had an interest in and concern about housing issues, not least, I believe, when he was Member of Parliament for Battersea during the gentrification of Wandsworth. Perhaps that should be the subject of a debate at another time.
We are now a little further down the road, and throughout that period I have been a councillor in a town centre ward for 39 years. When I started, housing issues were of considerable concern at our weekly surgeries. We then went through a period when that was perhaps of less concern, but now it is rising again at our weekly surgeries—not particularly because of the welfare reform changes, which I suspect are yet to bite really seriously, but more because of the economic situation in which many people find ourselves. In my ward we have, for an outer London borough, a relatively high proportion of social housing. Much of the ward’s housing was built in late Victorian times. When I first became a councillor in 1974, much of that was privately rented, by predominantly older people. As they moved on, they were replaced by first-time buyers buying from landlords who were getting out of the rented sector. Now it has a fairly mixed population.
I think that we will hear today quite a lot about the causes of the housing crisis, but I hope that we will spend some of our time on the solutions. The simple facts on which we can all agree are that, for each of the last 30 years at least, not enough new homes have been provided to meet the demand. I was struck when the noble Lord, Lord Dubs, referred to Harold Macmillan’s commitment in 1950 to build 300,000 houses a year—obviously as part of the post-war recovery. Remarkably, although I am not sure why, I still have a boyhood memory from the 1950s of hearing the annual announcement of how many new houses had been provided. I do not know why, but clearly it was of far greater significance then than it is now, otherwise as a child I would not have been aware of such things.
We can probably also agree that, on coming into power in 2010, the coalition Government faced both a housing crisis and a financial crisis—not really the best circumstances in which to reverse a trend of 30 years or more. For the Liberal Democrat part of the coalition, tackling that crisis is a very high priority. I am sure that that is equally true for our coalition partners. Our priorities in tackling it may be slightly different but nevertheless the determination to tackle it is the same, and perhaps the combination of the two different priorities may turn out to be more effective. I assume that the Minister will elaborate on the many measures that the coalition Government have already taken to tackle the crisis—investment in affordable homes, investment to support the increasingly important private rented sector, tackling the scandal of so many empty homes, Help to Buy and so on. Much has been done, in spite of the very difficult financial circumstances, but there is much more that we could and should be doing if we are to get anywhere near succeeding in reaching the target of 240,000 new homes that we need each year.
I make no apology for returning yet again to the need to remove, or at least raise, the borrowing cap to allow local authorities to increase investment in new homes. The LGA estimates that that alone could deliver 60,000 new homes over the next five years as well as a boost to the nation’s GDP. This is a measure strongly supported by pretty well every organisation involved in any way with housing as well as by all political parties in local government. Indeed, most recently the leader of the largest local authority in Europe, Labour-run Birmingham, has made exactly that call, illustrating what it could mean for his city alone.
I know that I do not need to convince the Minister, nor indeed her ministerial colleagues in the CLG; it is really the Treasury to which I am speaking. Why is the UK the only EU member state not to adopt internationally recognised rules to measure government borrowing that regard extra housing investment as a trading activity that does not count as adding to government borrowing levels? Indeed, financial market players have confirmed that the increase in public sector borrowing which would result from the removal of the cap is insignificant in the wider financial picture and the sums involved fall well below the size of the OBR’s forecasting errors on local government debt. I understand very well that the Minister will not be able to make any commitment today in advance of the comprehensive spending review announcements to be made on 26 June, but the lifting of this cap would do more than any other single measure to demonstrate the coalition Government’s strong commitment to tackling the housing crisis.
While we all understand we will have to wait another three weeks for the Government’s view, I remain unclear about the view of the Opposition. I know it is strongly supported by my Labour colleagues in local government and personally supported by many Labour parliamentarians in both Houses. I hope that in replying to the debate today for the Labour Opposition the noble Lord, Lord Collins of Highbury, will be able to say that the Official Opposition would support the lifting of this cap. That might give some encouragement to the coalition Government and even to the Treasury.
There are, of course, other measures that the Government could and should be taking. The speedier release of land by the Government themselves, by government agencies and, indeed, by local government, is one of them, but we must recognise that housebuilders will not build unless they know they can sell what they build.
The planning system is often quoted as an inhibitor of development, in my view usually incorrectly. It would be helpful if the Minister could give us an update on the progress being made in the review of planning guidance being led by my noble friend Lord Taylor of Goss Moor. Similarly, I hear that the problem is not so much the speed of decision-making on planning applications, which is probably now taken care of anyway by the provisions of the Growth and Infrastructure Act. The delays come subsequently in the setting of planning conditions and the determination of Section 106 agreements.
The other complaint I heard yesterday evening when I met a number of the larger housebuilders, which I must admit was new to me, was about the widely differing building standards set by local authorities, which inhibit standard design for bigger builders. For instance, they told me that there are 32 different standards in London alone, presumably for each of the 32 London boroughs. As I heard this only last night, I do not know to what extent it is correct, but it is what the big housebuilders believe. As a localist, I am clearly not calling for central government intervention, but it seems to me that local government should be talking with the bigger builders about this issue, especially in London where London Councils plays such a useful role in representing all the London boroughs. It is right that local authorities should be able to decide for themselves but, speaking as a London borough councillor for 39 years and a council leader for 13 of those years, I very much doubt that each London borough knowingly and deliberately decides to adopt different standards from its neighbouring boroughs.
Next, I feel strongly, as I am sure we all do, that we must not sacrifice quality for quantity. We need well designed, energy-efficient homes fit for the 21st century and more needs to be done to help the public to value such energy efficiency.
We also need to be providing homes that meet needs. Here I will single out specifically the needs of young people and older people. Young people are increasingly being priced out of not only the buying market but the renting market, particularly in London. Local authorities and housing associations could and should be doing more to provide new or adapted homes suitable for young people, who are sometimes a transient population. I am not talking about student accommodation but about accommodation perhaps on similar lines for those who simply do not want to buy or simply cannot buy or who do not want or need a long lease because their tenancy is likely to be short. I may be wrong, but the only authority I know of in the country that has such a scheme is the City of Westminster, and we should look at it and learn from it.
I particularly want to make some reference to older people in the time available to me. I have the privilege of being a member of your Lordships’ Select Committee on Public Service and Demographic Change which in March published its report Ready for Ageing?, which I commend to noble Lords, if they have not already read it. Annexe 16 deals with housing provision for older people. I shall not deal with this at any length as I hope later speakers may do so.
Paragraph 270 of the report states:
“Despite growing demand for specialist housing and the substantial wealth held by some older people … there is a gap in the market. There are just 106,000 units of specialist housing for home ownership and 400,000 units for rent in the UK as a whole … In 2010, just 6,000 units for rent and 1,000 for ownership were built, whereas in 1989, 17,500 units for rent were built as well as 13,000 for ownership”.
The report goes on to recommend that:
“Central and local government, housing associations and house builders need urgently to plan how to ensure that the housing needs of the older population are better addressed and to give as much priority to promoting an adequate market and social housing for older people as is given to housing for younger people”.
The conclusion was:
“Central and local government should jointly review how the National Planning Policy Framework’s suggestions might be clarified and tightened to do more to ensure sufficient housing provision for older people”.
I hope that when the Minister comes to reply, no doubt with very many points to reply to, she will be able to give us some indication of how the Government are responding to that useful report.
I have said very little about the private rented sector, and now I have not left myself time to do so. It is clearly increasingly important and receiving increasing attention, but much more needs to be done.
I shall end not by predicting the green shoots of recovery, as I am neither that wise nor that foolish, but I was encouraged to hear last night at a meeting with a number of the bigger housebuilders that they are seeing signs—perhaps faint signs, but some signs—of improvement in the supply. The NHBC reported that it had seen a 35% increase in registrations year on year. It rightly made the point that registrations are not completions, but nevertheless, it is an encouraging sign. We all know that we face a crisis. It is not a new crisis, but a long developed crisis that this Government, and certainly my party, are determined to tackle long before the next Labour Government get an opportunity to do so.
My Lords, I declare an interest as I have just taken over the chairmanship of a large housing association. I am the chairman of the Orbit Group board.
We face a worsening housing crisis due to a very serious lack of public investment over recent years, the absence of a long-term strategy and, more recently, the financial crisis. As my noble friend Lord Dubs said in his excellent speech, around 230,000 new households form annually, but in the 12 months to March 2013 there were fewer than 102,000 new home starts. Housebuilding has dropped to its lowest level since the 1920s. Housing completions in England fell from 175,000 in 2007 to 115,000 in 2012, an astonishing 34% drop. Instead of proposing credible ways of reversing this decline, the coalition Government reduced the budget for the provision of affordable housing by 63% in the 2010 comprehensive spending review. That is the biggest single cut to any capital budget right across the Government.
We need to consider the social and economic effects of the housing crisis that we now face. Millions of people are being priced out of owning or renting a home. House prices increased from 3.6 to 6.5 times the average salary between 1997 and 2011. Home ownership is in decline. It now takes 22 years for the average low to middle income family to save for a deposit. Some 1.3 million families are struggling to pay their mortgage or rent, spending over 35% of their net income on housing costs.
There are 1.8 million families on waiting lists for social housing. In 2011-12, more than 643,000 households were living in overcrowded accommodation, and a quarter of homes—5.4 million—failed to meet the decent homes standard. Poor housing conditions have a direct impact on residents’ health outcomes and on their educational attainment, particularly for children and young people but also for older people, limiting access to lifelong learning.
In 2011-12, 108,720 households in England applied to their local authorities for homelessness assistance, a 22% rise from just two years earlier. Last autumn there were 2,300 rough sleepers on any one night in England, a rise of 31% from 2010. This is utterly deplorable. One of the measures of a civilised society is that it provides decent accommodation for people, somewhere they can be proud to call home. A failure to do so is deeply damaging to the quality of life of those affected and it is inexcusable in a country as rich as ours.
Despite all the main political parties acknowledging this housing crisis, the lack of a political solution suggests that the Government have not fully grasped its scale. The first fundamental policy change that is needed is a shift from subsidising rents to capital spending. Housing benefit is currently costing £23 billion a year. That is unsustainable and does nothing to address the root cause of the housing crisis, which is that demand for housing far outstrips supply. In 1975, more than 80p in every £1 of public spending on housing was on supply-side capital funding, with only about 20p going on cash benefits to help people pay their rent. The composition of spending has changed dramatically since then. At present, for every £1 spent on housing, only 5p is spent on capital funding, while 95p goes on housing benefit. This is a ridiculously inefficient use of public resources. Without a rebalance, the Government risk fundamentally undermining their own aspirations, which I fully acknowledge, for a housebuilding-led recovery. Perhaps the Minister will comment on how the Government intend to reach a more sensible balance between capital and revenue expenditure.
So far, their main solution—perhaps the Minister will say that it is not their main solution—looks pretty inept. Help to Buy allows anyone, not just first-time buyers, to access a government loan of up to 20% of the value of a property and is available for existing properties, not just new-build ones. The IMF has raised concerns that, by boosting demand without addressing the supply side, Help to Buy may actually drive up prices and put home ownership further out of the reach of most renters. One high-profile City strategist, quoted in yesterday’s Guardian, said that the scheme will artificially prop up the market and prevent prices falling to affordable levels. He said that buyers need cheaper homes, not just available debt to inflate house prices even further. His quip was, “This is madness”, and I cannot disagree.
Moreover, many commentators have questioned why this scheme has a cap as high as £600,000. Perhaps the Minister can tell your Lordships’ House why there is not a much lower cap, consistent with helping first-time buyers from middle and lower income groups who will never be able to afford mortgage repayments on such expensive housing. Does the Minister accept that this scheme will do very little to create additional affordable housing? After all, the NewBuy scheme, which preceded it, led to only 1,500 completions in its first nine months of operation. Have we learnt anything from the housing bubble that helped to create the financial crisis? The Governor of the Bank of England clearly thinks not. The £3.5 billion invested in Help to Buy could have been much better spent delivering 175,000 affordable homes and creating £19 billion gross value added to the economy. Will the Government therefore now look at how they could develop new schemes to support the delivery of affordable housing rather than just home ownership?
While I accept that there is a need to find ways of reducing the large bill for housing benefit, there has also been justifiable criticism of the so-called bedroom tax. This was referred to by my noble friend Lord Dubs but I want to underline what he said. There is concern over the impact and likely hardship that some households will suffer as a result due to no fault of their own. Even if a household wants to move, as my noble friend said, there is often very little prospect of doing so due to the unavailability of suitable smaller properties. Where people move into the privately rented sector, the cost to the Government in housing benefits is simply likely to go up because of higher rents there. Does the Minister accept that a full evaluation of this policy is needed, and that, if it confirms that not only are the savings from it negligible but it is causing hardship to households that are unable to access alternative accommodation and cannot meet their additional costs, the Government should then withdraw the scheme?
Tinkering around in this way does not address the real causes of the vast increase in spending on housing benefit. While unemployment and low incomes clearly contribute, the root of the problem lies in the failure to increase the supply of affordable housing, which drives people into the more expensive privately rented sector. What is needed is a new commitment to a long-term housing strategy, which focuses on at least a five-year programme, giving both local authorities and housing associations a chance to plan their capital expenditure. The IPPR’s recent paper proposes a new affordable housing grant for local authorities, with a legal duty to use these resources to improve access to affordable homes. Its goal would be to increase local authority scope to get housebuilding going, with a longer term outcome of keeping rents more affordable, which would, in turn, reduce the cost of housing benefit. I do not know whether the noble Lord, Lord Tope, who is a great advocate for local authorities, and has just demonstrated that in his speech, has seen this report, but I recommend it to him and other Members of your Lordships’ House.
Nick Pearce is the director of IPPR, and I want to quote him because, although I cannot go into the detail of what is proposed, what it is suggesting is a very interesting solution. He says:
“Combined with local control over planning, social housing allocation and regulation of the private rented sector, this new strategy would be a far more ambitious institutional reform than the coalition’s half-hearted localism. Councils would be required to forge a consensus for their spending plans and housing strategy among a balance of local interests represented on an affordable housing panel—made up of providers, landlords, tenants and owners”.
I hope that the Government, too, if they are not yet aware of that report, will consider it.
Investing in affordable housing is not just socially necessary but, as my noble friend Lord Dubs said, economically sensible. The Centre for Economics and Business Research has calculated that every affordable home built creates 2.3 jobs in England and generates an additional £108,000 in the wider economy. For every £1 of gross value added as a result of investment in new affordable homes, an additional £1.41 of gross value added is generated in the wider UK economy. The IMF and the OECD have both recently called on the Government to boost infrastructure investment and drive economic growth in doing so. The coalition seems hell-bent on ignoring this advice.
My criticisms are not just of current housing policy. I do not simply want to be politically partisan. Many of the problems go back a very long time. They are deeply embedded, with demand outstripping supply for many years. There needs to be some radical new thinking in Whitehall to get away from the lack of a joined-up approach across several departments. We need a medium to long-term strategy with a very strong focus on supply. For too long, central government has believed that it holds all the keys—and noble Lords will forgive me the metaphor. Can we now move towards more local solutions as proposed by the IPPR and touched on by the noble Lord, Lord Tope, while focusing on making home ownership a real possibility for the many who aspire to it but currently cannot attain it? We need to be careful not to neglect those who rent, whether in an under-regulated private sector or in social housing, which should be seen as a genuine alternative and not just a fallback for those who cannot own. Above all, we must now focus on increasing supply to reduce the unmet need to which my noble friend Lord Dubs has so rightly drawn attention.
My Lords, I, too, thank my noble friend Lord Dubs for securing this very important and timely debate. As chair of Midland Heart housing association, I declare an interest.
In any introduction, formal or informal, the first two questions are nearly always the same: “What do you do?” and “Where do you live?”. Sadly, for an increasing number of our fellow citizens, the answer to those two questions is very simple: “I do nothing, I am unemployed, and I live nowhere because I am homeless. I can’t get a job because I don’t have a home, and I can’t get a home because I haven’t got a job”. We can therefore conclude that the unmet needs of housing and indeed employment are the twin barriers to social and economic progress for many.
Housing and employment defines the individual. Those two essentials of life influence where we live, the choice of schools for our children, access to public transport and, of course, access to good healthcare. But I accept that we cannot all move to Chipping Warden. They would not let me in anyway. Perhaps they think that I would frighten the horses.
A recent report from Shelter and KPMG established that we are simply failing to build enough houses to meet demand. The House will forgive me for any repetition; a lot of the figures that we have heard from the noble Baroness, Lady Blackstone, are also available to me, because we both chair housing associations and our source of information is broadly common. We know from our individual experience that house prices almost doubled between 1995 and 2007. In recent years, we have seen no significant increase in new-build housing. While I note the Government’s Funding for Lending scheme, the only visible outcome is the incentive for lenders and the creation of a possible financial bubble in the housing market. Indeed, the noble Baroness drew attention to the comments of the Governor of the Bank of England, who warned against making policies designed to boost the housing market artificially. Boosting the housing market is important, but we also want to boost housing build.
Everyone except the Government accepts that social housing providers have a critical role to play, particularly at a time of austerity when demand continues to outstrip supply. Reports of homelessness have increased, and the Department for Communities and Local Government recently recorded that in 2011 there were more than 48,000 homeless families, with the number of households in temporary accommodation standing in excess of some 60,000. Social housing providers accept that they have a role to play, but why are they unable to meet the demands of their customers? The DCLG report shows that nearly 2 million families and more than 4 million individuals were sitting on waiting lists.
In 2012, the National Housing Federation estimated that in the West Midlands metropolitan region alone waiting lists stood at nearly 99,000. In my organisation, Midland Heart, there are more than 20,000 on our waiting list, with our lettings at no more than 2,000 per annum. The problem for social housing providers is insurmountable unless we get real action and a positive and active partnership with government.
Among housing professionals it is common ground that the Government have not taken any real, effective measures to satisfy the increase in demand in the social housing sector. Indeed, the building of new social housing has dropped during the past 12 months. The magazine Inside Housing quotes the DCLG as showing that between January and March the associations built only about 4,800 houses. That is a fall of approximately 9% on the previous quarter. However, the really bad news for those on the waiting list is that completions have decreased. The reality is that families and individuals are simply unable to access affordable housing, and existing tenants are unable to move. To cap it all, the recent welfare reforms will bring more instability and fear to thousands of families.
My organisation works with some of the most deprived and financially excluded families in the country. Unlike many other social housing providers, it knows that the welfare reform cuts will bring real hardship to many of the people we serve. While providers are taking measures to help people through changes, many of those we serve are struggling to maintain their existing tenancies due to the rise in housing costs, which has been exacerbated by the bedroom tax, as well by the increases in the cost of living due to austerity.
The latest figures available to us indicate that we are seeing a possible 2% increase in homelessness, and indeed overcrowding, for the year ahead. There is no argument or debate on current trends: overcrowding and homelessness can go only one way, and that is upwards. The housing crisis is not coming—it is here; it has arrived—and because of the bedroom tax there is no room to which Cathy can come home.
My Lords, I thank the noble Lord, Lord Dubs, and all the speakers who have preceded me, because many of us are covering the same ground and have similar statistics—if I repeat any, please forgive me. However, all of us who are speaking care about this issue, otherwise we would not be speaking here today. I also declare an interest as a long-term councillor on the London Borough of Barnet. Unlike my noble friend Lord Tope, who has been a councillor since 1974, I am a much more recent addition, having been a councillor for only 27 years.
I will talk first about the supply of council housing. Council housing demand was outstripping supply towards the end of the 1990s. Even the hardest to let high-rise properties were taken by families in desperate circumstances. The national figures bear this out. By 1997 the number of families on housing waiting lists had reached just over 1 million. Sadly, in the years of the previous Labour Government—which the noble Lord, Lord Dubs, referred to as the next Labour Government—the waiting lists rose to around 1.8 million while the number of affordable homes fell by some 420,000.
A big help towards solving this will be the housing investment programme promised by the coalition Government. Over the lifetime of this Parliament, the coalition Government are investing to build some 170,000 affordable homes—a much needed increase that will benefit those most in need. Overall, if this is met—and I believe it will be—this will be the first Government in more than 30 years to deliver a net increase in social housing stock.
With regard to investment in social housing, investment in the condition of stock was linked arbitrarily by the Labour Government to ownership and management models instead of need. Decent Homes funding was restricted to boroughs able to persuade their tenants to transfer out of direct council ownership and management, either to other stock transfer or to an arm’s-length management organisation, or ALMO. I was a founder member of Barnet Homes and for many years a director of that company. Barnet Council took the money and improved the property under the Decent Homes schedule. Many other local authorities did not want to do this and kept their housing, so by the end of the Decent Homes programme, more than a quarter of national council housing had not been improved to meet government standards.
Large transfers of council housing to housing associations, together with a programme of mergers, have led to much larger housing associations in recent years. The best of them have developed their governance to engage and involve their tenants and residents, and this good practice must be spread across the whole sector. Many of us perhaps come across housing associations where the governance is not as good as that. When I, as a local councillor, seek to speak to someone in some of these local housing associations, the staff have all changed from top to bottom, and I cannot use the contacts I used when just talking to the borough housing department.
One of the biggest problems faced at the end of the 2000s was the grinding to a halt of the housing market and the building of new homes. Some estimates say that there has been an annual shortfall of more than 100,000 properties being built despite the growing number of households in Britain. Turning around the mortgage market has been a challenge to reversing this crisis. This was referred to by other noble Lords. The Government have been innovative in promoting schemes to kick-start mortgage lending. However, I worry about this policy. It will increase the prices of homes because the money will be chasing fewer properties, and this will mean that the properties are more expensive in London—more expensive than anyone at the lower end of the scale can afford. It will also mean that if the housing market does not keep rising, the owners of those properties will have negative equity and find it difficult to sell them. If there is a shortfall—of 20%, or the 120% referred to by noble Lords—that risk will be covered by the Government rather than by the banks, because that part of the loan has been financed by the Government. That is not a sensible policy, and I ask the Minister to comment on how we can ensure that this boost to mortgages does not mean a big rise to existing properties without any security if there is a downturn in the housing market.
I turn to what is called a bedroom tax, which seems to be what we have to call it nowadays, although it is the extra bedroom in people’s properties. While there are understandable concerns from tenants—which I have heard from tenants in my own ward who are affected by the changes in housing benefit—the debate about subsidies for spare rooms might be improved, or better understood, if we were prepared to accept that the Labour Government first introduced this measure for private sector tenants claiming housing benefit as far back as 2007. You got the benefit for only the number of rooms that you needed, so that concept was there before. They did not make any exceptions to that policy, for example for disability, carers, military families and so on, which are at least in the present policy. However, that policy is not quite right and, in particular, while it is all very well to introduce the policy, it is completely wrong to say, as my Government did, that it should all come in on 1 April, which it did, when there are no one-bedroom properties for those people to transfer into. Such a policy should have been graded in and we should try to make some exceptions for people who would be willing to live in a one-bedroom property, if only there was such a property to which they should be transferred.
On the impact of universal credit, it is understandable that people, while welcoming the principles behind universal credit, are nervous about some aspects of the detail. However, I think I speak for many people who support the aim of making work pay and making the transition from benefit to work manageable. Converting benefits to a monthly payment from which we will ask people to budget sensibly would seem to be a necessary conclusion. However, if housing landlords cannot continue to collect housing benefit directly from the Government, we will see that some tenants, strangely, will decide that their priorities are buying food and other things rather than paying their rent, and we will get back to a stage where there are large underpayments of rent because the money is being paid directly to tenants.
As I said, we are building 100,000 fewer homes than we need each year. Over the next 10 years, approximately 230,000 more households a year will need properties, and we are not meeting demand. As my noble friend Lord Tope said, there is a housing crisis—but it is not new. There has been a crisis for a long time, and we have to build our way out of it. All noble Lords have said this in one way or another. However, the proposed reforms to planning law to permit sizeable extensions without planning restrictions are a recipe for neighbour strife. The idea that you can build over the larger part of your garden and not have to go through the normal planning regulations, and that your neighbour will have only a certain amount of time to object, is a recipe for disaster. Under the present planning system, in my borough the majority of planning decisions for houses—we are not talking about big developments—are delegated to officers, so the resident who needs an extension is already dealt with pretty swiftly. Very few applications come to the housing committee.
I have not found a record of a single new development of more than 13,500 homes in the UK since the 1970s. In the latter part of last year, the Deputy Prime Minister said that we should re-examine garden cities. I was somewhat pre-empted earlier today by the Question about garden cities that was asked, but I will develop the subject a bit more than one can do in a Question and Answer. Letchworth was the first garden city in 1903. Then came Welwyn, and in 1946 the New Towns Act was passed. As a very young chartered accountant, I decided on my own initiative to go and audit Basildon new town development. It was a rude shock to the developers and contractors when the young accountant came up and said that he was from the external auditors. I thought that they were going to die on the spot. They fed me very well as they gave me a tour. This massive Basildon development was built during my professional career. It was not that long ago.
Do we continue to try to satisfy housing need by building higher and denser, and by permitting haphazard urban sprawl? Apparently we already build the smallest homes in western Europe. My noble friend Lord Tope talked about the 32 standards in London. In my early involvement in housing, we talked always about the Parker Morris standards. We should have a uniform system of housing so that everybody knows the minimum—not the maximum—standards. That system has long been forgotten. We should ask where the next Milton Keynes will be. People there do not just live in the city but commute into it, which is a sign of its success.
Other noble Lords talked about acquiring more land for building, both from local authorities and from government, but the big issue is how developers hold land banks because they increase in value. There should be a penalty system, however one describes it, so that if you hold land for a longish period and do not develop it, you should be taxed in some way on the holding of that land, to encourage you to build properties that people can live in. The Government should promote or encourage this way forward, which will take longer to achieve but will be needed to tackle the deficit in housing.
We need to pursue the proposal for further garden cities. I hope that the Minister will say how this will proceed in a proper, organised manner—not piecemeal, by looking at one possibility and then perhaps taking a long time over it—with a national plan so that we can decide where the new towns and cities will be. Without large-scale development we will not satisfy the deficit in housing from which this country suffers.
My Lords, I, too, thank my noble friend Lord Dubs for initiating this important debate. I was prompted to speak by reading Alan Johnson’s book about his childhood in Notting Hill, and the poor housing conditions that he and his family had to suffer. I remembered my own childhood, too. We might think that things are a lot better now, but, sadly, for many people that is not the case. Today there are still families living in one room, or sharing a kitchen and bathroom, or perhaps living in bed and breakfast accommodation, or a hostel, or in the unregulated private sector. On reading Alan’s book, I thought: I hope that we as a Parliament do not forget, from our privileged position on the red or green Benches, that there are still many thousands of people not adequately housed and living in very poor circumstances. We must never forget that in our deliberations.
There are still unscrupulous landlords who know that people on poor incomes will put up with squalor, damp and disrepair, and so it goes on. My noble friend Lord Morris said that the days of “Cathy Come Home” are still here and he is absolutely right. Although it is 50 years since that programme was made, in some parts of our country we are still no closer to making sure that everyone has a decent place to live, let alone a place to live in a garden city. We need to remember that.
As many noble Lords have said, things are generally getting more difficult for people as regards housing. As if things were not bad enough, the Government have decided to insist that poor people who are adequately housed should give up their rights and privileges and that those with a spare bedroom, possibly measuring eight feet by 10 feet—which is probably smaller than the people who frame their legislation would keep their dogs in—should give it up to a lodger or another family or pay extra for it. Stephanie Bottrill was so upset that she would be charged £80 a month for her two spare rooms that she walked into the path of a lorry and was killed.
Notting Hill Housing, of which I was the chairman for a number of years, has drawn my attention to the impact of universal credit on some of its larger families who are particularly hard hit. In one case, a single mother with eight children will lose over £350 a week. She is desperately worried about what will happen to her and her family. Housing associations, such as Notting Hill, and councils want to do more but the cuts in capital funding for new build restrict what can be built. There are 1.8 million households on the waiting list. Many private landlords are exploiting the situation by raising their rents or neglecting to do repairs. Often tenants have to compete with sealed bids over the asking rent just to get into a home, or have to offer to take a much longer contract to get occupancy of a flat or house. Can noble Lords believe that? I did not know about it myself until this week.
Noble Lords have asked what can be done. It is right that we talk about what can be done, with the caveat I mentioned earlier that we never forget what it is like for people today planning for their future. We need to be aware of this big problem and be motivated to tackle it. We have all talked about the housing shortage. That must be a given, particularly in London and the south-east. In Brighton—where I have cause to live on occasion—the council is using shipping containers to house the homeless. That may be considered a solution by some people but it is not really a solution at all. What is really needed is a unifying national campaign. We do not need a strategy but a campaign which will unite all parties and all sectors of society to build enough homes to meet the need.
I have taken part in many housing debates in the House where we have talked about Parker Morris standards, garden cities, quality versus quantity, high rise versus low rise and green belt versus brown belt. These are debates that have to be had but sometimes in the past we have become bogged down in the arguments and missed the big picture. The picture people care about out there is getting homes. If there was a drive to house people adequately, there would be diversity of provision. People who love quality might be disappointed and people who want quantity might be disappointed and the various interest groups might not always agree but we need to cut through some of this stuff and get on to build the homes that people need. If we do not do so, we will be standing here in 15 years’ time talking, as I have done, about the same issues and making slight amendments and improvements here and there but not actually tackling the big picture. We need a big picture approach and to pull people in who have new ideas. We need to get outside the box and think about converting shops and offices into housing and encourage development through the planning and tax systems. We need to think about new towns, garden cities and new cities. However, none of this will happen unless we have strong political will.
The deep conservatism of many communities against new homes should be challenged by those of us who want to build more housing for the people who need it. The homeless, the badly housed, the priced-out people, the overcrowded families, the oppressed immigrants at the mercy of disreputable landlords, the frightened council tenant with a spare room, all these people—who are mostly in London and the south-east, but wherever they may be—need us in Parliament to raise our voices and heads and say that we must build more homes, and we must have the political will to do it.
There is also another group of people who may not be in that category, who had it very easy 50 years ago, as I did. These are people with a steady job earning a good wage, such as teachers and nurses; although today the problem affects even accountants and highly paid professional people, unlike in my time. Without parental help it is just about impossible for these people to buy in London or in some of our more expensive cities. Those from ordinary backgrounds with university debt and other commitments struggle to afford a big deposit and huge monthly mortgages. This group needs government help. Schemes like shared ownership help quite a few families, and some other initiatives might help, but I am afraid that for many their only option for the foreseeable future is long-term renting in the private sector. These people will not get mortgages or on the house-buying ladder, as did their parents and grandparents. They will be in the private rented sector for a long time. Sometimes the private sector is good but sometimes housing in it is badly maintained with insecure homes, managed by buy-to-let landlords, which are not good enough.
All parties when in power must drive up standards in the private rented sector as more and more people will come to depend on it. We need houses in that sector with economic rents. We could achieve this through planning and tax incentives rather than rent control, which would probably reduce supply. I would like civil society and the wider community to get involved in this sector. I would like trade unions, building societies, local authorities, churches and all kinds of people to get involved and ask themselves, “Can we make a contribution to the private housing sector? Can we build something? Can we club together with others to build something? What can we do to make this a better place to live in for the people who have to live in it?”.
Finally, I should like to say something about my generation. We are the generation who had it all. We have heard about the increases in house prices and the cheap university education that I did not personally have but many colleagues and friends did. Many of those who had the financial capital decided to become private landlords. I hope that there will be new thinking in a world where we can create a more viable private rented sector whereby individuals who want to invest in the sector join others in doing so. Some of those in my generation who invest in buy-to-let properties are not investing in properties for people but in investment vehicles and are looking to realise their capital gains and rental benefits from private houses. They do not care about the young people, even their own children, who have to pay these rents. We have to talk about that question. Why is our generation charging our children such enormous rents to live in houses because we have been so lucky? I am not saying that such people are bad or immoral but there ought to be other ways to make sure that people who want to invest in the private rented sector join others in doing so.
We must get across to all our friends, colleagues and close associates in this society that houses are not for capital gain or vehicles for profit; they are homes, and we do not have enough of them for people to live in. We cannot afford to turn them into vehicles for capital accumulation, and we should talk about this much more.
My Lords, I am grateful to my noble friend for introducing a debate on this important subject and for the comprehensive manner in which he did so.
We are facing a housing crisis for poorer people, not only in London but more generally. On 4 March, I asked the Minister in this House what the Government would do to assist families who face homelessness as a result of the housing benefit changes introduced last April. I said that it had been reported that 600,000 households would be affected by the changes, and those unable to meet the requirements under the changes would get into arrears and face eviction. The changes involved the so-called bedroom tax. The Minister, however, insisted that there should not be an increase in homelessness as a result and that local authorities could make discretionary payments to deal with any serious cases. It would now seem that the worries that many of us had were quite justified.
All over the country, tenants in social housing have been receiving letters threatening them with eviction. This has happened to tenants in Brighton and Leeds. In Nottingham, Bradford, Portsmouth and other cities, notices of arrears have been sent to tenants. Housing associations in Manchester and Glasgow say that large numbers of tenants cannot pay the increases required. The discretionary fund that the Government have said would cover the more extreme cases of deprivation was insufficient to cover the shortfall.
Tenants recognised as disabled have also been affected by this change in benefits. The National Housing Federation has said that if £30 million of discretionary housing payments were to be distributed equally among the claimants of disability living allowance who are affected, they would receive only £2.51 per week. Of course, the increases required, I understand, are £14 extra for an additional room and £25 a week for more than one room. The sizes of the rent increases are large for very poor people.
Of course the Government will say that people who cannot afford the increase should downsize and leave the accommodation freer for a family needing it. Unfortunately, as we have heard in this debate, insufficient smaller properties are available. The introduction of the so-called bedroom tax has created a new set of problems and does little to deal with the present problem of a lack of sufficient social housing.
This is occurring at a time when benefit changes are already beginning to affect many poor and vulnerable people. As a result of the current fiscal policies, Citizens Advice is obliged to close some offices, resulting in massive queues at the offices that remain available. I am told that in my area, people have to wait for two or three hours before they can get in to get the advice they need. This applies to disabled people who have been reassessed by Atos and are seeking advice. In addition, legal aid is not available, as we know from when recently we discussed the LASPO Bill in this House.
The right to buy was fine for some people but social housing that became privatised as a result of that policy was not replaced. Nor will the Government’s new policy in that area assist in large parts of London. Private sector rents are too high and salaries too low. One problem—in my opinion as a former trade union official—is that in the private sector trade union organisation has been weakened as a result of successive government policies and therefore people are not paid enough for the jobs they do. There is also the awful shortage of social housing.
We have been told by the Mayor of London that he intends to build some affordable housing within the next few years. However, that of course is in the future and there should be plans to deal with the present crisis. If there is an expectation that the private sector will provide housing, there has to be some form of regulation—some means of controlling rents—as existed in the years following the last war. In the mean time, the Government should rethink their policy on the so-called bedroom tax. I understand that a review is to be published in 2015. However, that is too long to wait for vulnerable disabled people who are facing possible downsizing or further impoverishment. As for the right-to-buy policy, as has already been indicated by a number of contributors to this most interesting debate, this is unlikely to get poorer, younger people on to the housing ladder; it will simply add to debt. Cheaper housing is required, not more young people in debt. In an era of insecure employment, it is likely to leave us with yet more problems.
The Government need to rethink the policies along the lines suggested by a number of contributors to this debate and ensure that, somehow or other, we manage to work our way out of the appalling situation that now faces many poorer and vulnerable people, who simply cannot afford somewhere to live. That is a disgrace in a country as wealthy as ours.
My Lords, I, too, thank my noble friend Lord Dubs for initiating this debate. He has a terrific and proud record of raising housing issues and developing housing policy.
We face the biggest housing crisis in a generation, and the Government’s housing and economic policies are not helping. The first priority must be to address, by building more homes, the housing shortages that are the underlying cause of homelessness, overcrowding, high rents and low standards of accommodation.
Housebuilding is crucial to economic recovery and to helping families to get on to the housing ladder. Young people today are increasingly being priced out of buying or renting a home of their own. People from all walks of life struggle to get the housing they need or want, and it holds them back in life. Meanwhile, our economy is held back by the lack of construction.
History tells us that a major programme of housebuilding has always been at the heart of economic recovery in our country—public and private—and that it is not possible to have a sustainable economic recovery without a major programme of housebuilding. The CBI rightly makes the point that the 100,000 affordable homes will see 1% added to GDP. As has been highlighted in this debate, housebuilding fell by 11% in 2012, the number of housing completions has fallen in both years since the general election, and homelessness is up by a third. As my noble friend Lord Dubs reminded us, in 2012-13 a total of 108,000 homes were completed in England, yet Shelter’s report, Homes for the Future, identified an annual need for 242,000 new homes to meet current demand.
I am the first to acknowledge that the biggest housing crisis in a generation does not date back to May 2010. Having said that, I should point out that in 2010 we warned what the consequences of the crisis would be. The £4 billion cut in affordable housing investment in the Chancellor’s first Budget resulted in a 68% collapse in affordable house building and a 97% collapse in council house building at the worst possible time.
The impact of these cuts in public investment has been extremely serious. The number of housing association starts has fallen by 23% to 19,500 in the past year, and the uncertainty created by changes in the planning system has not helped. As noble Lords have pointed out, it is not necessarily a problem of planning.
Currently there are more than 1.8 million households on waiting lists and more than 500,000 households living in overcrowded conditions in England, as highlighted by my noble friends Lord Morris and Lord Sawyer.
There is no doubt that the planning system was in need of reform but it is clear that it was never as big a problem as some have pretended. Indeed, there is land with existing planning permission capable of sustaining 470,000 homes. Those homes are simply not being built. The Government have launched four major housing schemes in three years and made more than 300 announcements on housing, yet all of these schemes have so far completely failed to tackle the housing crisis. By simply stimulating demand through plans for Help to Buy, mortgage guarantees and equity loans rather than directly boosting supply, there is a danger, as my noble friend Lady Blackstone has pointed out, that it will simply push up prices.
As my noble friend Lord Griffiths put so well, the property market is becoming out of reach for many renters. Research in a Scottish Widows report published last month found that at people’s current saving rates a first-time buyer will take almost 13 years to save the £27,984 required for the average deposit. With property ownership seeming a distant dream, its research suggests that many renters may have given up on property ownership, with only 29% actively saving to put a deposit on a home.
Although I accept that we may have a small positive sign with the news from Nationwide a few weeks ago that first-time buyers are beginning to get on to the housing market, we also need subsidised housing for those who cannot afford to purchase or to pay full market rents. Action on affordable housing is needed and the announcement that an extra £225 million will be available is welcome news. However, only £125 million will be spent before 2015, according to the OBR, and that is dwarfed, as I have said, by the £4 billion cut in funding for affordable housing.
As my noble friend Lady Turner has said, and many noble Lords in today’s debate have highlighted, while one government department introduces measures to support housing another exacerbates the problem. The bedroom tax, the levy on housing association and council tenants deemed to have a spare room, penalises those in work as well as those who must find money from their other benefits by cutting back on essentials.
Not only does it have a human impact, as highlighted by many noble Lords in the debate, it will also have other perverse outcomes. If people are pushed into the private rented sector, there is the potential for rents to be higher, which increases the housing benefit bill and the potential for greater homelessness. There is growing and disturbing evidence of the potential of this now to have an impact on new builds—on supply—because of the write-off of bad debt and the burden of cost being imposed on housing associations and local authorities. As chair of a credit union myself, and as the noble Lord, Lord Palmer, highlighted, I am only too aware that many housing associations whose tenants are being hit by the welfare changes anticipate major problems with rent arrears.
While scrapping this measure would be best, can the Minister say whether, when the Government review its impact, they will consider the current discretionary housing payment that local authorities need to deploy in the many cases of hardship where tenants cannot be offered a suitable smaller property? All of this means that housing bodies must cut back on spending on new housing investment just when the Government need them to do more. Also, they will be less able to undertake broader community work such as addressing those with special needs, tackling anti-social behaviour and supporting young people into training and jobs.
With the huge squeeze on living standards and a faltering economy, the Government’s failure to provide affordable housing means that millions of families are being priced out of living in a decent home. Not only have affordable housing starts collapsed from 49,363 in 2010-11 to only 15,698 in 2011-12, we have the added problem that many of the homes under the Government’s affordable homes programme, let at 80% of the market rent, are not affordable in many parts of the country. I would also point out to the noble Lord, Lord Palmer, that it is a bit cheeky to claim that the proposal to provide 170,000 affordable homes was realised as a consequence of this Government’s actions when the National Audit Office has made the very good point that 70,000 of those homes were commissioned and paid for by the previous Government.
Statutory homelessness rose from 10,000 at the end of 2010 to 13,570 by the end of 2012. As a result, as has been highlighted by some of my noble friends, local authorities are placing a worrying number of families in temporary accommodation. Some 53,130 households were living in temporary accommodation at the end of 2012, 9% higher than the previous year. The failure to tackle this problem is devastating for many families and, according to new research by the Bureau of Investigative Journalism, it is proving to be incredibly costly. Over the past four years, the UK has spent almost £4 billion housing vulnerable homeless families in short-term temporary accommodation. Again, in the past four years, £1.88 billion—enough to build 72,000 homes in London and house all 53,000 households that are currently homeless—has gone on renting temporary accommodation in 12 of Britain’s biggest cities.
I hear what the noble Lord, Lord Tope, says and I will not be tempted by his kind offer to make a spending commitment. Like the Minister, I am not in a position to do so. However, the noble Lord is absolutely right to recognise that over and above what we commit by way of grant and investment, we need innovatory forms of funding the housing supply. The Communities and Local Government Select Committee of the other place was right to advance a debate that we badly need to have about a housing investment bank. Last summer, the leader of my party proposed a British investment bank with a focus on manufacturing and housing. Labour has previously called on the Chancellor to use the money raised by the 4G mobile spectrum auction to build 100,000 affordable homes. Ed Miliband has also called for an immediate tax on bankers’ bonuses to fund 25,000 affordable homes.
My noble friend Lady Blackstone highlighted the issue of housing benefit—the rising cost and the proportion of costs accounted for by benefits. Today, Ed Miliband, in tackling the rising cost of housing benefit, committed the Labour Government to giving councils the power to negotiate over housing benefit on behalf of tenants, to get greater savings than an individual can get on their own. Ed Miliband said that not only would they be able to create those savings but to retain some of them, as long as the money was used to build new homes.
People should have a decent home at a price they can afford to rent or buy. The crucial point is how we locate that in the context of economic recovery in our country. Sustainable economic recovery will not happen unless we have a major programme of public and private housebuilding. We have the biggest housing crisis in a generation and an economy that is bumping along the bottom. As my noble friend Lady Blackstone said, the Government badly need to come forward with a serious long-term strategy for getting Britain building.
My Lords, the contributions to housing debates in this House always come from experienced people. It has been an extremely wide-ranging debate and I thank the noble Lord, Lord Dubs, for having introduced it because it is good for us, every so often, to be able to rehearse the issues. I do not think there is any disagreement between us that we need more houses and more housebuilding. We are all in accord with that. It would also be fair to say that it is recognised that this did not start in 2010 and that this is a long, historical problem. It may even go back as far as Harold Macmillan and his 300,000 houses following the war. We have never seriously caught up in all that time. We are not going to reverse history within a decade but there is a general expectation and understanding that we need to make solid progress where we can.
I recognise at once that housing is inextricably linked to the wider health of the country. We know that it is linked to the economy and the financial markets, and leads to confidence in the economy and the confidence of housebuilders. There is a huge pot here of things that need to be done to get the bricks built on the ground. This Government are committed to seeing a major increase in the supply of new homes where they are needed and wanted. We all recognise that this is a local problem in many respects. Local authorities know where they need housing and have in their hands—through their housing strategies, their local development plans and the arrangements they come to with developers on what affordable housing is provided under Section 106 requirements—a certain amount of power.
We need also to provide the confidence that housebuilders need, which is very gradually coming to fruition. We are beginning to see that housebuilders are more confident about moving forward. I accept that the economy has held some of this back but, once again, that did not start in 2010. I also recognise that the hopes and plans of young people, families and older households across the country are affected by all of this. Our aim is also to help people achieve their aspiration to live in a home that gives them security to plan for their future. I agree with the noble Lord, Lord Griffiths, that there is a particular problem in London. We are all seeing investment in very expensive properties that are not immediately available to other people. But I go back to my point about Section 106: where permission is given for these rather grand glass buildings, which are then sold off for horrific sums of money, within that there has to be a Section 106 agreement that recognises that affordable housing is required.
The Government are already committed to investing more than £11 billion in housing programmes during this spending review period. Concerns have been raised about a bubble being created by giving help to the private sector—if only. If there were a bubble of anything we would be quite grateful. We have to ensure that the movement is there and that housing continues to be provided in all sectors: social housing, affordable housing, the private rented sector and assistance with mortgages. The Government are doing all of that. One noble Lord said that we had made 300 announcements over the past three years. That ought to indicate that we are doing a very great deal to try to ensure that this sector is motivated and action is generated.
We believe that this action is starting to have an effect. As noble Lords have said, we have reformed the planning system to support the delivery of new housing. There are early signs of progress; for example, 20% more new homes were given the green light in 2012-13 compared to the previous year. We are all trading figures here. They may come from slightly different angles. I am going to give noble Lords mine and if they do not totally accord we can argue that out afterwards. Housebuilding starts in England were 15% higher in the March quarter of 2013 than in the same period of the previous year. As the noble Lord, Lord Palmer, said, in the first 18 months of this affordable homes programme, we have delivered almost 63,000 affordable homes of the 170,000 we expect to provide within the spending review period.
Our large sites programme is already being successful, with investments of £76.7 million of recoverable loans to accelerate developments, contributing to bringing forward up to 42,000 new homes, boosting the construction industry and stimulating local growth. Several noble Lords referred to the lack of land. I will just draw attention to something that I have spoken about in this House before, which is that public sector land is being released, pretty quickly now, to enable more than 100,000 new houses to be built on that land. Work is starting on large sites. I drew attention earlier today to Cranbrook in Devon but there are other examples across the country of larger-scale developments taking place. Some of those developments, particularly in Cranbrook, are already completed and people are moving in. So there is an expectation not only of small developments but large developments of much needed homes.
It may be a good moment to say to the noble Lord, Lord Palmer, that we had a Question on garden cities this morning. He may not have heard me say so but the principles of garden cities are being built in to these large new developments so that they do not all end up as amorphous and uninteresting new developments.
Mention has been made of the Help to Buy equity loan scheme launched in April. It has already boosted 1,500 reservations on new homes in the first month alone. That demonstrates that there is not only an appetite to go forward—the money is available—but there are now people making clear that they want to use it. No one has mentioned today the new homes bonus. More than £1.3 billion has already been allocated through the new homes bonus. That demonstrates that there are either houses built or empty homes brought back into use, because the money is not paid unless there is evidence of that. We know that more than 400,000 homes have been provided as a result of the new homes bonus and that 55,000 long-term empty homes have been brought back into use.
We have tried to help not only homes to own but the private rented sector. We appreciate that the private rented sector has a big role to play. We have the Build to Rent fund, announced last September, which was so oversubscribed that in Budget 2013 we were allocated a further £800 million on top of the original £200 million, so that we could support as many projects as possible.
We are committed to tackling the long-standing gap between housing supply and demand and addressing market failures where intervention is needed. It is important that we do not step in where the market can do it itself, but where it needs a nudge or help, we must find the policies to do that. We all have to recognise that this approach will require patience at times, but also a bit of ingenuity and an ability to move where necessary when we see that things need to be given a bit of a push.
Things are moving in the right direction. Housebuilding starts in the quarter to March were 4% higher than in the previous quarter, but there is a long way to go before we reach the levels of growth that we need. We recognise that. On affordable housing investment supply, there has been a £19.5 billion investment—that includes investment from the private sector and, as I said, 170,000 new homes will be built by March 2015. The noble Lord, Lord Tope, asked about the housing cap. We have had discussions on the housing cap before when he, his noble friend Lord Palmer and the noble Lord, Lord Shipley, have promoted the removal of the cap from local authorities to give them the head room to provide social housing. It is worth remembering that local authorities already have £2.8 billion head room within the cap, much of which they could use to help those housing needs. Many local authorities have land that they could use already.
The noble Lord, Lord Tope, referred to the expansion of the rented sector. We have provided funding to support that. We have also commissioned and received the report from Sir Adrian Montague identifying barriers to institutional investment in the private rented sector. That is being considered at present. As a result of that report, we set up the Build to Rent fund to stimulate building in the rental market.
The large sites programme, to which I have already referred, is beginning to demonstrate that lots of housing can be built on those sites and can be supported by both public and private finance. The empty homes policy and the decent homes policy have been successful. There is much evidence for that.
A number of noble Lords raised what they call the bedroom tax, and what I call the spare room subsidy. The noble Lords, Lord Tope and Lord Palmer, and the noble Baronesses, Lady Blackstone and Lady Turner, all referred to this. Public housing is not something where we can be cavalier about ensuring that it is properly used. The situation is that there are more than 1 million spare bedrooms in the social housing sector at present. Housing benefit for the social rented sector is being paid for accommodation regardless of its size, even when considered too large for a household’s need. This is really about the fairness of the use of social housing stock and fairness to people. It is not expected that they should be forced to move. We expect that some people may want to move. They may get a job or increase the hours that they are working, while some may, for example, take in a lodger. However, by and large we do not think that this will displace a huge number of people. As I say, additional affordable homes are being built.
However, there are exemptions and we ought to be clear about them. The additional room is allowed for foster carers and for an adult child in the Armed Forces who is living at home but on deployment. It does not apply to supported exempt accommodation. Children unable to share due to disability may also be allowed the extra room at the local authority’s discretion. In addition, as noble Lords have said, the discretionary housing payment is available to help support it.
In his introduction the noble Lord, Lord Dubs, talked about homelessness. This is where I worry that we trade figures as our estimate is that homelessness still remains low. Despite all the economic challenges we face, it is still less than half the level that it reached under the previous Administration. There are strong safety nets in place. There is the No Second Night Out project in Greater London, which is being extended, while all local authorities are required to ensure that they do not have homeless people for any length of time.
We have committed to tackling homelessness and rough sleeping. More than £400 million is being invested in homelessness prevention, which is extremely important. On top of that, we announced an additional £70 million to tackle and prevent homelessness in 2011-12. That includes the homelessness transition fund to support No Second Night Out, £20 million to help ensure that single homeless people get access to good housing advice, the preventing repossessions fund to enable local authorities to intervene early, £5 million to boost the homelessness change programme, and £5 million for the social impact fund. We do not expect temporary accommodation figures to go up very much. The bed-and-breakfast rate is a challenge but there should be no reason for any local authority to leave people in bed and breakfast, or indeed for having to use temporary out-of-area accommodation.
If I may, I will briefly go through some of the questions. I think I have covered some of the points that the noble Lord, Lord Dubs, raised in his excellent introduction. He said that the welfare benefit cap should take account of different rent levels in different parts of the country. Average earnings, by definition, determine the level of the cap. People receive benefit according to the cost of the property they are in. We think that there has to be a maximum level of support which benefits will pay. Indeed, it is good to note that in the past couple of days the party in opposition has at last been able to recognise that welfare payments have to be controlled in some way.
The noble Lord, Lord Dubs, also raised the issue of Oxford City Council. This is a matter between local authorities, but it is perfectly possible now for local authorities to have developments that go across boundaries. The Growth and Infrastructure Act enables developers to submit major planning applications and, as I say, they can straddle local boundaries if the will is there. It may be that there is a bit of a problem about the will, but there is nothing to stop them.
I hope that I have dealt with most of what the noble Lord, Lord Griffiths, said. I agree with quite a lot of it, including the concern about young people. That is at the bottom of what we are all worried about—the future and future generations. Even if we can manage, they are finding it very hard. That is why we are working hard with all these policies to try to ensure that we get over this terrible difficulty in the not too distant future.
The noble Lord, Lord Tope, asked about the planning review of the noble Lord, Lord Taylor. We accept the key recommendations in the main and our response to both the review and the subsequent consultation has just been published. The noble Lord, Lord Tope, highlighted the European Union and the prudential borrowing regime. We agree that that regime has proved an effective control on council borrowing, but that is really all I can say. Most particularly, the noble Lord, Lord Tope, referred to housing for older people. I know that a number of very influential reports have been issued recently. The National Planning Policy Framework requires local authorities to plan for a mix of housing based on demographic trends, and that includes people of different ages. The reports that have been issued recently are being taken into account. The Government have announced a housing care and support fund of up to £350 million to promote more specialist housing.
There were other matters that I do not think I can cover by name in my reply, although I hope I have covered them by topic. I am just about to go over time. Again, I thank noble Lords for this extremely interesting debate, and I hope that I have managed to convince them that the Government are fully aware of the problems and are investing large sums of money to try to bring about change to that situation, with our policies and our commitment to finance.
My Lords, I thank all Members of the House who have contributed to the debate. It has been characterised by contributions made on the basis of knowledge and experience. I thought that it was a particularly well informed debate, and I hope that it has added to the thinking about and understanding of the housing difficulties that we face. I do not want to take time in mentioning individual colleagues. That would not be appropriate in what should be a very short contribution at the end of a debate.
I will just say this: the tone of the debate has been utterly reasonable, and the Minister has been utterly reasonable in the way that she has sounded. I always feel that the harder the policy is to defend, the more reasonable the Minister you put forward to defend it, and the Government have chosen just the right Minister on this occasion. I felt that, with one of two minor exceptions, everyone who spoke agreed. All of us, even the Minister, agreed on the difficulties and the problems. The Minister also put forward some solutions but they were very small solutions, couched in the most moderate and reasonable language—almost persuasive but not quite.
We face a serious housing crisis, and the Government have a bit of a policy for each bit of the housing difficulty, but the trouble is that they are not going to make enough difference. My fear is that in two or three years’ time we will be having a similar debate with the same absolutely charming and reasonable contribution from the Minister and will not be any further forward. I fear that the Government have a policy for this, but there is not enough of it and it does not have enough impetus, commitment or money.
I hope I have not added too discordant a note to what has been a very even-tempered debate. I thank the Minister for her reasonable way of putting it over. All I would say is this: if I were in her position—it sounds arrogant of me—I would go back to the department and say, “Go through this debate. There must be more we can do”.
Global Migration and Mobility (EUC Report)
Motion to Take Note
My Lords, the report of the European Union Committee, The EU’s Global Approach to Migration and Mobility, otherwise known as “the GAMM”, which is how I shall refer to it during this debate, was published as long ago as 18 December 2012. It would be normal to deplore the long delay in bringing this report forward for debate and, indeed, it is deplorable as a general proposition, but in this case the overall context of the public discussion of migration issues has changed so much in the intervening period that one could regard a debate now as of greater topicality and value that it would have been earlier. I am bringing the report to your Lordships’ House for debate in my capacity as chair of the EU Sub-Committee on Home Affairs, Health and Education which conducted the inquiry.
The debates taking place in this country and across Europe on illegal and legal immigration, the global competition for talent and access to social welfare and other benefits by migrants are, rather like migration itself, not new. They have been taking place for decades, if not centuries, and Europe in the early 21st century is no exception. But recently, the tone has sharpened and there is a risk that a rational and measured discussion of complex issues will be drowned out by cries of populist outrage riding on the back of the stress caused by recession.
Our report highlighted that the EU today is home to approximately 23% of the world’s estimated 214 million international migrants. This makes it second only to North America as a destination region. Within the EU, however, there is a mixed picture. More than 75% of non-EU nationals living in the EU are in one of the five largest member states: Germany, Spain, Italy, France and the UK. What proportion of these migration flows is made up of illegal migrants is, of course, difficult to determine. Estimates in 2008 placed the figure at between 1.9 million and 3.8 million in the EU 27.
The catalyst for our report was the publication by the European Commission in September 2011 of a communication setting out the EU’s general approach to migration and mobility in the period ahead and proposing four pillars of activity: on legal migration; on irregular migration; on asylum; and on development. Our report emphasised that the EU has limited legal competence to act in this area, although many of the decisions continue to be the responsibility of member states. The treaties of Maastricht, Amsterdam and Lisbon and the incorporation of the border-control-free Schengen area into the EU framework support this shared responsibility. None of the witnesses—I emphasise “none”—nor our report itself pressed for any change in that division of responsibility. The committee’s view was that, given the current and prospective demographic challenges facing Europe—and they are really quite severe—EU member states, particularly those with skills shortages, need to be flexible in the operation of legal migration from third countries in order to secure economic growth and competitiveness. For the EU, or for any of its member states, to lock itself into a long-term, restrictive posture on immigration could be a costly error.
I emphasise the role of the member states here because, as I said a moment ago and as the report says, they,
“should continue to have the right to choose the number of migrants from third countries they wish to admit to their labour markets, depending on their needs”.
Transfer of responsibility to the EU of the management of the scale of legal migration is beyond any political horizon I can envisage. It was interesting that neither the Commission officials from whom the committee took evidence nor the members of the relevant committee of the European Parliament had a different view. This conclusion is borne out by the current varied situation, with very high levels of unemployment in some member states, but signs of skills shortages in the EU’s largest economy, Germany.
Perhaps the biggest preoccupation in the UK is with stopping irregular migrants from reaching these shores in the first place. Although the UK, as an island nation, has opted out of the Schengen area and many aspects of its legislation, it plays an active role in the work of FRONTEX, the EU’s external borders agency, and in the development of EUROSUR, a networked border surveillance system. Our report concluded that it is in the UK’s national interest that these operations are efficient, effective and well resourced; that was, in fact, the conclusion of the national security strategy that the coalition Government brought forward shortly after they took office.
It is important to note that the majority of irregular migrants in the EU actually enter with authorisation—that is to say, they enter legally—and they then overstay their visas. With this in mind, EU member states should consider, we believe, a more balanced and comprehensive approach to overstayers, including the selective encouragement of legal migration channels. One example is that of EU mobility partnerships. These are voluntary agreements where the third countries in question discourage irregular migration and improve their border controls in exchange for EU financial and technical assistance. Another example is that of EU readmission agreements. These are also voluntary agreements where third countries help to facilitate the orderly return of irregular migrants in exchange for assistance and possibly better visa facilitation arrangements for their nationals. In the committee’s view, it is regrettable that the Government, in their response to our recommendation that they should opt in to all these EU readmission agreements, stated that they prefer to,
“weigh up the benefits of participation in each EU Readmission Agreement (EURA)”,
on a case-by-case basis. However, if bilateral nations were ever to weaken between the UK and a particular third country, and thus to undermine any bilateral readmission arrangements we might have, an EU readmission agreement could well provide a useful safety net. We therefore call on the Minister to consider joining the EU readmission agreements with Belarus and Armenia and all the subsequent ones that may be negotiated—there are quite a few under negotiation now.
The GAMM is not just about stopping economic migrants from coming to the EU; it is also about improving the economies in the source countries of migration. As one of the witnesses in our inquiry put it, “It is about buying more Tunisian tomatoes”; and reducing the EU’s trade barriers against non-EU countries could assist the EU’s aims in the migration context. Furthermore, the EU could use the GAMM as a framework to carry out projects and programmes to promote development and mitigate the effects of the brain drain on countries of origin—for example, by facilitating the cheaper, more secure and more rapid transfer of remittances from the diaspora, by supporting microfinance schemes and by engaging with and assisting diasporas to transfer skills to their country of origin. To carry out the activities that I have just mentioned, our report suggested that a more integrated approach to migration should be adopted, both at national and at EU levels. Migration policy cannot and should not be the sole responsibility of an interior ministry, or the Home Secretary in this country, or of the Commission’s Directorate-General for Home Affairs. A more holistic approach is highly desirable.
Previous and current British Governments have chosen to exercise the British opt-out with regard to the majority of both legal and irregular migration measures brought forward by the Commission in recent years. So while the GAMM had its genesis in a UK initiative, frequently forgotten, and enjoyed a lot of early support, the UK’s participation is looking increasingly patchy. For example, the UK participated in the first phase of measures to create a Common European Asylum System, but participated in only two of the five measures proposed in the second phase. We believe that this partial participation risks undermining the UK’s influence in shaping these important areas of EU policy without bringing any commensurate benefit.
Looking to the future, our report called for a full and detailed evaluation of the GAMM’s different pillars and the EU funding instruments that support their objectives as part of any continuing effort. Over time, the committee believes that the GAMM will need to adopt a more focused approach, concentrating on the EU’s geographical and strategic priorities, as well as focusing on a smaller number of key objectives and instruments, which have a sound evidence base. We believe Turkey to be one of these priorities, especially in terms of tackling irregular migration, but also alongside more general engagement in tackling terrorism, transnational organised crime and promoting judicial co-operation on civil and criminal matters. The recent signs of a cautious thaw in the EU’s often troubled relationship with Turkey could provide a mutually beneficial opportunity to make progress.
The final chapter of our GAMM report focused on a specifically UK policy choice, the Government’s inclusion of international students in their current policy objective of reducing net migration to the UK to the tens of thousands per year. My committee was one of the five Select Committees of this House and the other place that have now concluded that that policy is mistaken and whose chairs wrote to the Prime Minister last January to argue that this has created the perception that overseas students are not welcome in the UK and risks serious damage to what is, after all, one of the UK’s most valuable and successful invisible exports. The latest figures from Universities UK for 2011-12 admissions validate that concern, with sharp drops in figures from undergraduates coming from one of Britain’s main higher education markets, the Indian sub-continent, and a major overall drop in postgraduate overseas enrolments, one of the most lucrative features of our industry. I could not put it better than it was put in a letter recently written by an academic leader in this country, Professor Malcolm Grant of UCL, who said:
“The flow of overseas students and highly talented staff has been the life blood of British universities, which are one of the great success stories still of the UK, and that is a matter which we all hope to be able to continue to foster”.
Whatever the statistical rights and wrongs of treating university students as economic migrants, and this debate is not principally about statistics, it surely makes no sense for the Government to be handicapping what should be a major growth industry for us—and it is globally a rapidly expanding market—in comparison with our main competitors. Again, the latest figures point towards us losing market share to our major competitors, in particular to the US. The Government frequently remind us that we are competing in a global race. Why then are they entering the British education sector for the sack race?
The committee’s report contains a number of other pertinent conclusions and recommendations. We hope that the Government will continue to give appropriate consideration to those recommendations. We look forward to comparing our report’s findings with those of the Government’s review of the balance of competences regarding asylum and immigration, for which a call for evidence was published by the Home Office recently. The Home Office at the same time published a call for evidence on the free movement of persons. While this concerns migration from within rather than from outside the EU, it is touched upon in our GAMM report, which notes the ending of transitional controls on migration from Romania and Bulgaria at the end of this year. We concluded that the free movement of persons is fundamental to the structure of the EU and an integral part of the single market. We also concluded that it would be neither desirable nor feasible to seek to revise its terms. However, we did support efforts by the Government to tackle benefit fraud as long as they comply with our obligations under the treaties. I note that, in part, the immigration Bill announced in the gracious Speech will aim to achieve this. No doubt this House will scrutinise that Bill carefully in due course.
I conclude with one plea to the Government. In drawing up the detail of that immigration Bill, particular care surely needs to be taken to not accentuate further the chilling effects on the recruitment of university students. This cannot be an empty risk, frankly, since the sort of issues that will be addressed—access to health provision and housing—are just the ones that concern students, researchers, academic staff and their parents in the countries of origin. I hope that the Government will take very careful steps to avoid any further damage to the higher education sector. I beg to move.
My Lords, I congratulate the noble Lord, Lord Hannay, on his speech and on the comprehensive nature of his report. I will refer to only one subject, which he almost finished on: international students and net migration targets, which is covered in the last section of the report, particularly the recommendations and the government response.
In doing so, I will follow up on the debate we had in this House on 31 January this year, when the subject was well covered. We had 26 speakers, nearly all with very impressive backgrounds, in one way or another, in the university world. All were unanimously critical of the impact of the Government’s immigration and visa policies on non-EU students. As the noble Lord has just said, there have been five Select Committees of both Houses which have published their criticisms, along the same lines, and proposed changes. There is a debate in the other place this afternoon, of which I was able to watch a bit: all the messages seemed to be the same.
My starting point is the widespread understanding, fully recognised in government, of the huge benefits that international students bring to this country. I will touch on them very briefly, because they were well covered in our earlier debate. The economic benefits are not only the contribution to the wider economy, but to local economies; I understand that the Mayor of London has estimated that the economic benefit is £2.5 billion in London alone. There are various local estimates in other university towns. In particular, there are benefits to universities from the fees and other income brought in at a time when university finances are under considerable pressure. There is the major export contribution that this sector brings to this country. It gives our own campuses an international dimension for our own students. The soft power aspect was well delineated in the previous debate. Particularly important is the aspect that non-EU students bring to the postgraduate sector, to which the noble Lord has just referred.
While, overall, 12% of students enrolled in UK universities in 2011-12 came from outside the EU, in that year the figure rises to an astonishing 49% for postgraduate courses in engineering, mathematics and computer science, and 31% in postgraduate courses in technology. Indeed, in that year, 27% of postgraduate students in these subjects were non-EU students. A diminution in the flow of students to these courses would have a serious effect on many of them.
I briefly stress all these points because the public concern about immigration has nothing to do with postgraduate students coming to this country, contributing to our economy and spreading the good word about the United Kingdom when they leave. I do not believe that the public are concerned about that at all. In so far as they were concerned about some abuses in the university and further education sector, that has rightly been well tackled by the Government.
Our debates reflected two particular concerns: the impact of some of the actions and procedures of the United Kingdom Border Agency and the increased impact of the Government’s net migration target on international student enrolments—the particular point that this report refers to. I make the point about enrolment, rather than applications, because the signs are particularly worrying concerning enrolments.
From this flow the two points I ask my noble friend to respond to this afternoon. He very kindly arranged for a small delegation of those who spoke in the debate to meet him and Mark Harper, the Minister of State for Immigration, in mid-April. It was a most helpful and constructive meeting. The Minister outlined to us the initiatives he was taking with David Willetts on the many complaints about UKBA—complaints which were well indicated in the debate we had in January—and we discussed in particular the resources of UKBA, the feedback it gives to universities and training.
First, will my noble friend give us an update this afternoon on progress on these issues? Undoubtedly the Government are now trying to be in the right place on these issues, and are making quite an impact on the perceptions of those from overseas in relation to applications to UK universities. Secondly, and much less satisfactorily, we stress that the step that would make the greatest difference to overseas perceptions would be to remove non-EU students from the net migration targets in exactly the way recommended by the report we are discussing this afternoon. This is where the Government’s response to the Select Committee’s report is so disappointing. Effectively, their response is that,
“we welcome all genuine students, coming to attend any university or college that meets our requirements”.
In December, the Home Secretary affirmed that,
“we will place no cap on the number of genuine students coming from across the world to study in this country”.
That is a very clear quote, but the Government’s response sidesteps the recommendation and simply makes a bland statement instead.
That pledge that there will not be a cap is not the perception in many countries. There are clear signs from many of them that, as the noble Lord has said, at a time when other countries, such as the United States, Germany, Australia, Canada and many others, are very actively promoting and expanding their intake of such students, we risk having a diminishing share of that growing market because of the overall net migration target. The total number of non-EU students has dropped for the first time in 10 years. Overall, demand is sustained by rapid growth in the number of Chinese students, but numbers from elsewhere are declining. One small indication has just come to my attention of the sort of way in which actions by the Government, or by UKBA, affect very considerably the perceptions of individual countries. This relates to Brazil.
The Brazilian Government’s student exchange scheme, Science Without Borders, fully funds high-achieving Brazilian undergraduate and postgraduate students to study at the best universities around the world, including in the UK. A group of 2,143 Brazilian students who wanted to come to the UK to study as part of this scheme have been prevented from doing so by inflexible visa rules. These are high-achieving students who want to study undergraduate STEM courses, but they needed to improve their English before starting their degrees. The current rules prevent their staying in the UK after completing an English language course. These students would have been required to return to Brazil and reapply for a new visa before starting their degree courses. As a result of these rules, and the refusal of the Home Office to change them, 1,100 of those students are now going to the United States and 600 to Australia, which are happy to let them come to study English and then stay for their degree course. Of the original 2,143 students, approximately 43 have applied to come to the UK for September, and approximately 400 to come to the UK in March 2014. The value to the UK of the entire cohort was about £66 million, but as well as lost earnings there is probably a perception that the UK is not worth applying to among many who otherwise could have been very successfully received here. I do not expect a response this afternoon from my noble friend, but I urge him to look into this case.
Why, therefore, despite the Government’s pledges, is a different perception growing in so many non-EU countries? Is it perhaps because the Government have not tackled head-on, or responded to, the well argued and well publicised case that in order to meet their target of reducing net migration to the tens of thousands by 2015, somehow a reduction in non-EU student numbers of 87,600 between 2012 and 2015 will be required? My noble friend did not respond to that point in the debate in January. The Government did not respond to it in their response to this Select Committee report. They bypassed it and somewhat dodged it.
I hope that we can have at least a more direct and well argued response to this charge. I suspect that there is no such response, in which case it is clear that we have a self-inflicted wound that is harming our universities, despite our good intentions of “no annual limit on numbers” and so on. It would be much better to make it clear that there is no annual limit by accepting the Select Committee’s recommendation. The Government’s statement that there is no cap on the number of students coming from across the world to study in this country will be widely believed and totally credible if the Select Committee’s recommendation is accepted.
My Lords, this is one of the best reports that I have read since I have been in your Lordships’ House. It is very good indeed. I read it with great interest, and I enjoyed its width of comments. It is also an excellent example of the work that the House does, which is not always recognised outside the Chamber.
I apologise that I, too, will speak in particular on issues around international students. I support the view of the report, mentioned by the noble Lord, Lord Hannay, that the Government’s policy creates the perception that overseas students are not welcome in the UK. This harms both the quality of the UK’s higher education sector, as the noble Lord, Lord MacGregor, pointed out, and its ability to compete in an increasingly competitive global market for international students, especially when we are competing with other English-speaking countries.
The demand for graduates is growing, and many of our economy’s promising areas rely on the research output, ideas and highly skilled workforce generated by universities. However, the UK invests only 1.3% of GDP in universities, compared with the OECD average of 1.6%. Canada, Japan, Korea, Norway and Ireland all have a higher proportion of 35 to 34 year-olds with a higher educational qualification than the UK.
The Government’s current proposals will result in reducing income for our universities from tuition fees. They would also damage the international influence of the UK in the longer term. As a Peer living in the east of England, on the coast near Colchester, and as a graduate of Essex University, which is just one of the highly regarded universities in the region, with a worldwide reputation for excellence both in teaching and research, I agree with the report that the Government’s target of reducing net migration to the tens of thousands per annum by 2015 can be achieved only by making considerable cuts to the numbers of international students coming to the UK. Again, the noble Lord gave us much more information about that.
Changes to visa policy to date have already impacted on the number of international students hoping to study in the UK. Some universities have experienced problems with numbers. I am pleased to say that so far Essex University has not. However, across the sector, visa applications for study are flat and evidence suggests that the UK is already becoming less attractive as a destination for study. Universities UK has called on the Government to remove university-sponsored international students from net migration targets. I support that call, as do others in the Chamber.
In most cases, international students are temporary, not permanent, migrants, with strong visa compliance. They are enormously important to UK universities. One of my most pleasant memories of my university days was the joy of the international campus. Essex has always had a very good Latin American campus. This is where my love of Latin America began and it remains with me today, partly because of the friendships forged on that international campus.
Students are extremely important to the economy, especially the local one, and to the towns and cities in which they study. A recent report on the University of Exeter estimated that GDP generated by international students directly supported 2,480 jobs in the city of Exeter. Overall, universities create more than 670,000 jobs, directly and indirectly, and are often major local employers, as is the case in Colchester. Our universities are efficient and deliver an impressive return on public investment. In recent years they have adjusted to significant changes in funding and absorbed real-terms cuts in research funding of approximately £600 million. They are responsible for 13.8% of the most highly cited papers worldwide, despite having just 4% of the world’s researchers.
Additionally, the economy benefits from the extra tax and social contributions made by graduates and the £3.3 billion of income the sector attracts from business and other users. Our higher education system is world class but competitor countries are investing more than we are in the sector. Strong universities create jobs, attract investment and are vital to the future competitiveness of the UK. Here I place on record my thanks to the vice-chancellor of Essex University, who has provided me with some of the statistics.
Finally, speaking as a proud grandmother, whose eldest granddaughter, Rachel, is in her first year as a university student, I strongly believe that this is a sector in which the Government should invest, building on our position of strength to ensure the future competitiveness of the UK. I urge the Government to take the report’s recommendations on international students very seriously indeed.
My Lords, I would like to begin by expressing my thanks to the noble Lord, Lord Hannay, for the way that he guided our committee through our inquiry into the EU’s global approach to migration and mobility, and to the clerks who so ably assisted us all.
I would also like, in a general way, to thank the Government for their response to our report, which contained 43 conclusions and recommendations. The Government agreed with most of these. It was disappointing, however, that they did not agree with our recommendation to opt in to the family reunification directive, simply asserting that it is not in the UK’s interest to do so. It would be very helpful if, in the Minister’s response today, he were able to enlarge on this and deal with the moral as well as the practical issues that will inevitably arise from the differences in family admissions policies across the member states.
It was the committee’s view that when it came to the integration of migrants, language learning had an important role to play. The Government agreed with this and went on to say that,
“the Government believes that communities, businesses and voluntary bodies should be enabled to lead integration in their local area. The Localism Act introduces new rights for communities to take greater control in their local areas, for example by challenging local authorities to contract out services where they feel they could do a better job of running them”.
This suggests three questions: what services do the Government have in mind; do they know what local authorities are actually doing; and what plans have they got to assess the use of the Localism Act in promoting migrant integration? I hope that the Minister can address some of these questions now or later.
Our report also recommended that member states and the EU consider a more balanced and comprehensive approach to those who overstay their visas, including by the selective encouragement of legal migration channels, as the noble Lord, Lord Hannay, mentioned. The Government simply did not respond to this recommendation, although I know from the Home Secretary’s comments yesterday that the Government are very much aware of the problem of overstaying. Can the Minister give his views on the approach to handling this problem, both in terms of those migrants here now and those who will arrive in the future? I was sorry that the Government did not agree with our recommendation that they participate in all EU readmission agreements, but I was glad that they agree that there should be continued evaluation of existing agreements.
In any discussion of mobility and migration and the opportunities and problems that they may present, it and is vital to have accurate and reliable data and robust evaluations of programs and tools. The committee considered that the current iteration of the GAMM has not effectively evaluated the EU’s progress to date in achieving its objectives, and we called for more rigour and for full and detailed evaluations. The Government agreed with this and agreed, I think, that there is much work to be done.
The mobility partnerships, again mentioned by the noble Lord, Lord Hannay, illustrate the point. These partnerships are set to become the main tools for the EU’s external migration policies. Yet, so far, only one of these partnerships has been evaluated and that evaluation was close to worthless. In my long experience of evaluation reports, I have rarely seen one that was so inadequate, so amateur and so directly misleading. The evaluation’s conclusion that the Moldova mobility partnership had been “a clear success” was not supported by the evidence adduced and was directly contradicted by the evaluation’s account of its own shortcomings. The general sloppiness, lack of rigour and misleading conclusions regarding the Moldova mobility partnership evaluation matter. The EU proposes these partnerships as the key mobility and migration tools. If they are to be the key tools, they should not be progressed without a grown-up evaluation framework being built in to them from the very start. The Government surely have a role to play here, if only to prevent a further waste of taxpayers’ money.
However, none of the Government’s disagreements or qualifications in their response to the committee’s report is as disappointing as their response to the recommendations on international students and net migration targets. Noble Lords have already spoken eloquently and forcefully on this matter and I am sure we will hear more from other speakers. The Government rejected the recommendation that international students be removed from the public policy implications of the Government’s policy of reducing net migration. The reason given in their response is that the UK will continue to comply with the international definition of net migration. That is not in itself an obviously compelling reason for anything at all. It is also a very odd response.
The Government say that there is no cap on qualified student numbers. Their response states that,
“any student with the right qualifications, sufficient funds and a good level of English can come with no annual limit on numbers”.
Unless there is some implication that I have not spotted in the phrase “no annual limit”, this is a liberal and sensible approach. After all, the Government acknowledge that they are committed to the sustainable growth of a sector in which the UK excels and which is worth huge sums to the UK economy. In other words, we want this sector to grow. That means attracting more suitably qualified students. It also means maintaining—or, even better, growing—our market share.
The Government are not trying to cut the numbers of qualified students coming here, so why on earth include their numbers in the gross number of migrants presented for policy purposes? What possible harm could it do to exclude them? The answer is surely that it would do no harm at all. However, it is easy to see that leaving the situation as it is may well be causing us current and future damage, and that is because, as the committee’s report says, it helps to create the perception that overseas students are not welcome in the UK.
Noble Lords have already referred to the briefing produced yesterday by Universities UK. The Higher Education Statistics Agency data in this briefing show a decline in non-EU postgraduate entry to our universities and only a small increase in undergraduate entry. The data also show that demand from India has absolutely plummeted. Universities UK concludes that,
“in the context of a rapidly growing and highly competitive international market, the low overall growth over recent years is likely to equate to a loss of market share”,
which means, of course, a loss of revenue for the UK, but it also means a loss of future cultural influence and soft power. Much of this is caused by problems of perception: the perception that the UK does not welcome foreign students and that the UK is making itself deliberately difficult for students to get into. Unless we change that perception, things will get worse.
With the very dramatic fall in Indian students coming to the UK, the numbers are increasingly propped up by the Chinese. However, there are signs that the Chinese numbers may themselves soon decline. A recent survey of Chinese high school students revealed that over the past 12 months only 60% of those high school students who had previously preferred the UK as a destination for university still did so. I repeat: only 60%.
We need to reverse the perception of the UK as unwelcoming to students. We need to reflect the truth of “no cap”. We need to make entry easier and for it to be seen to be easier. We can make a good start in doing this and send out a powerful signal by removing students from the public policy implications of the Government’s policy of reducing net migration. The Government’s refusal so far to do this looks much more like stubbornness than it looks like principle or even electoral calculation, and I hope that the Minister may feel able to ask his colleagues to reconsider.
My Lords, the noble Lord, Lord Dubs, said earlier that the most sympathetic Ministers seemed to get the difficult briefs. I am not sure that that was true of the Labour Government but it may be true of this Minister.
I congratulate my noble friend and the committee on the report, and particularly on Chapter 6 on the development impact because I think that that is the most difficult area of all. However, I, too, shall concentrate today on students, which although last on the list of contents is perhaps the most urgent topic and therefore justifies a second or third debate.
As we have heard, the Government are sticking to their view that they must tighten their grip on immigration but that genuine students continue to be welcome. I shall examine that paradoxical statement again in a moment, but I recommend the Government’s response to the Commons BIS Committee report, which is a good summary of the position. It says:
“The Government’s success in reducing abuse of student visas … means that we can now look forward to a period of policy stability on student migration policy”.
A policy of stability may be welcome as a statement of intent but it hardly corresponds to the situation at present and it shows that wishful thinking is being permanently built into the Government’s plans.
In answer to the noble Lord, Lord Sharkey, I think that Universities UK may have lost the narrow technical argument on definition, because the international UN definition has to apply. Nevertheless, it should go on making the case that students are not migrants but visitors, and that they must, as far as UK policy is concerned, be treated entirely separately. The words of the committee on this are:
“We recommend the removal of international students from the public policy implications of the Government’s policy of reducing net migration”.
Our image overseas as a favoured destination—remembering that we start with a huge advantage as the home of the English language—has already taken a blow and we have to redress the balance. Relatively few students become overstayers and the number who reside permanently is negligible, perhaps 1%. I urge the Government, yet again, to recognise the importance of foreign students to our future international diplomacy as well as to a business which has been valued at at least £8 billion.
As the noble Lord, Lord MacGregor, has said, one area of disagreement is the discrepancy between the HESA figures for applicants versus those for entrants. The Government cannot claim that the numbers of non-EU students are going up because while the HESA figures show an overall increase, Universities UK has shown that these are inflated by new entrants from previous years. The noble Lord, Lord Hannay, has also made that point.
At another level, there is the difference between universities on the one hand and colleges and language schools on the other. UKBA understandably came heavily down on the colleges because most bogus students came from that sector but, having eliminated the bogus colleges, they are continuing to come down on the genuine ones which have proper accreditation. A high proportion of non-UK students used to come from these colleges and this number is fast decreasing.
As the noble Lord, Lord MacGregor, added, language schools are also an important sector feeding in to higher education. We want to keep those students but they are also suffering. Language students who want to pursue their courses are told to go home and reapply, which of course drives many of them elsewhere because there are plenty of welcoming arms. The Home Office must surely by now have seen the knock-on effects of its tier 4 visa policy.
The Minister already knows that I intend to raise some of these concerns with him next week. He has kindly agreed to see me in relation to the position of South London College, which has suffered no less than an 80% fall in its tier 4 recruitment in the past 18 months, including a 100% loss of all its Indian students. I mentioned in our previous debate that I am on the advisory panel of a related college in Nepal which has several links with colleges in the UK, and I am well aware of the drastic effects of visa control on applications all over the sub-continent.
After the number of Indian students fell drastically last year by 23%, the Prime Minister had to make what one might call a coalition statement during his India trip in February. Perhaps he was prompted by the Mayor of London, who regularly has strong views on this subject. He said that this country welcomes Indian students, even though on the evidence we were turning them away. I am not denying that the majority of these in the past had failed the new tests but, judging by the evidence I have, it seems that many more genuine students are being turned away.
I can understand the Fresh Start group and others raising concerns about immigration—it is a big concern—and the Prime Minister is steadily moving towards their position. The latest Conservative Party bulletin that I have seen shows how hard it is working to avoid becoming a “soft touch” among its supporters. I accept that the UK, in this as in its foreign policy, is punching above its weight because it is a net importer of migrants and we have a high number in proportion to our population. However, this must be seen as a positive and not a negative. Britain has built up an international reputation for receiving migrants. What would have happened to so many of our Nobel prize winners who came here destitute in the 1930s and since if they had been turned away, refused visas or denied benefits?
Certainly we have to reduce absolute numbers and the events in Sweden are a current warning to all of us as to what could happen in the EU. However, I repeat, we must not make students and our reputation suffer because of our immigration policy.
I said last time that colleges which had passed all the eligibility tests and had acquired the correct certificates were still being harassed, and this remains the case. The UKBA or its successor even requires them to act as agents and informers, opening files and reporting on the movements of students as though they were potential enemies of the state. The BIS Committee, Boris Johnson and many others have already made the point that current controls on student migration are hitting our exports hard, and we cannot afford to lose our status internationally when so many other countries are increasing their numbers of students. However, it is good news that the Chinese are sending more students, and it is also good that completing PhD students are being allowed to stay for up to 12 months after graduation, and that more MBA graduates will be allowed to remain. The Minister may well be able to give us more examples of how the present trend can be reversed.
I turn briefly to the committee’s other conclusions, although this is a vast subject that we cannot cover today. I agree that while the Government make obeisance to the wisdom of the EU’s global approach, the report describes it as “too diffuse” and recommends that the Government should co-operate still more closely with Schengen and some of the useful European agencies such as FRONTEX. Again, the threat of opting out, as in the European arrest warrant and the whole of the justice sector, seems to be an important part of the Conservative Party’s solution to its internal troubles. One wonders what price it ultimately will pay within the coalition. Many people would like to see more genuine participation in Europe and less of what the Government call “exercising influence on decisions” of other EU members. We cannot get away with that attitude. I urge the Government to pay more attention, for example, to implementing as well as signing and ratifying the trafficking and domestic worker conventions.
On the EU resettlement programme and the gateway programmes, I recall that the UK was one of the slowest to co-operate with UNHCR’s excellent resettlement work. Can the Minister tell us what the current position is? What is the annual UK resettlement quota, and will the Government use one of the UN or EU programmes to accommodate the 600 Afghan interpreters, to whom we owe such a lot?
My Lords, I, too, welcome the opportunity to debate this report and I thank the noble Lord, Lord Hannay, and his colleagues for their work and insights. I want to shift the focus away from education a little and draw on my local knowledge in Derby and Derbyshire to look at what paragraph 71 of the report refers to as the “valuable role” played by “voluntary and private sector” in what it calls “civil society” in helping to formulate and implement policies of integration. As we know from other debates in the House this week, integration is the great issue of our time. It needs careful work both face to face and on the ground as well as a policy framework. For migration, the issue of integration is the great litmus test.
The Government state in their response that,
“the Government believes that communities, businesses and voluntary bodies should be enabled to lead integration in their local area”.
I welcome that, and I want to give an example of what I am involved in in Derby, with voluntary groups and civil society trying to lead integration—some of the good things and some of the problems we face—and ask whether the report might point in directions that could be helpful to us. With colleagues, I have been involved in initiating something we call “Growing Communities” in Derby. As the provision of welfare and local authority investment in care systems and the social fabric of our city have been withdrawn through the cuts, I have convened a group of faith leaders, voluntary groups and the local authority to see how citizens can work together to grow communities in the city, using our various resources, initiative and ingenuity. As the report recognises, we bring to this good local knowledge, face-to-face contacts and a realistic assessment of what might be done so that integration is acted out between real people.
Let me give two examples of things we are doing that are particularly affected by migration into our city and our need to handle it creatively. Tomorrow, we will hold in Derby Cathedral a food summit, as part of the preparations for the G8 meeting. This is not just about the IF campaign and global hunger, it is about hunger in our own city. One of the things that will happen at this food summit is the launch of an integrated and co-ordinated approach to food banks. Over the past year, there has been an enormous increase in the demand for them. This is not just from the normal homeless people on the street, this is from families who, by the end of the week, do not have enough money to buy food to feed the children. Many of these families are from migrant communities. We are trying to create a co-ordinated response around food banks from voluntary and faith groups, to include a proper integration strategy, which will involve many needy migrant people.
There is a second thing that we are trying to do. We have a great influx of people from eastern Europe, especially Roma people. Their young people not only have language problems but also find it very difficult to integrate. It has been the faith groups, especially the churches, that have set up youth and evening activities and provided resources and space for young people, first to get integrated among themselves as Roma and then to begin to connect with others in the community—local, face-to-face and on-the-spot integration.
I could give lots of other examples but those are just two: hungry people—migrants who have no work and no resources—and young people who are finding it very hard to not just seek security in their own little grouping. However, what we are trying to do is essentially reactive. There is no clear frame for us. We are trying to work with the local authority, and it is trying to work with us, but grants are given and they end after the year. There is a lot of confusion. A lot of good work is done and then does not bear the fruit that it might.
All this is exacerbated by what I am afraid is a frighteningly buoyant and developing industry in our city, which the report mentions, that of human trafficking. Sadly, we were in the papers for a case last year. There is an enormous demand for prostitution, not just in our city but in many cities. This is an issue for government as well as for those on the ground. This is not a nice, free sexual market for consenting adults, it is women and girls being traded in an oppressive, abusive and wicked way. Just in the past two weeks, my colleagues on the ground have told me that a busload of women have come down from Manchester. They are not put on the streets anymore, they go into brothels, because it is below the radar. After a few months, they will probably be bussed on somewhere else. It is seriously and highly organised crime, which is abusing migrant people and women—most of them brought in illegally, I suspect—as part of a terrible industry that many migrants get drawn into, including as pimps and organisers of this kind of work. That creates an atmosphere in cities such as Derby and others that makes it very hard for us in those areas trying to create integration and good healthy relationships. It creates a dark side, especially to the night-time economy.
Through our efforts in civil society, we can deal with the surface issues, such as people who are hungry or young people on the streets plainly needing to be better integrated. However, we cannot deal with the highly organised professional international crime of trafficking, with rogue landlords or with the pressures on schools that come and go. Roma people, especially, keep moving and you cannot make very good calculations. There needs to be a bigger frame for those kind of things. Although civil society is a very neat phrase in the report, in my experience on the ground, civil society means really a ragbag of resources struggling just to make some little impression on integrating legal and illegal migrants into a human kind of society. Civil society has to be recognised as needing to be involved in a much richer and more detailed framework locally. We are trying to work on that, but Governments must take a lead in requiring local authorities to work at these frames and tap the resources of people, money and energy that are there to deal with some of these problems.
I want to end by asking the Minister about a couple of things. First, do the Government have any further thoughts about access to public funds for vulnerable people such as trafficked women and those who are perhaps below the radar of official migration? It is very hard to draw these girls and women out through our support groups if no public funding is available. Our resources are very limited.
Secondly, in my experience of working with these oppressed women, the police and border agencies tend to crack down on them, the victims, because they can get hold of them, and not on the pimps and perpetrators. We have to be much more energetic in trying to crack down on the people who organise this terrible crime.
Lastly, there is a macro issue, which we see in Rochdale and all over the place, about prostitution becoming a highly organised and profitable industry for many people, and migrants being drawn into that and trafficked into it across Europe. Certainly, the great majority of the people drawn into trafficking in our city in the past two or three years are from eastern Europe. We have to work across the European Union on this, and we must take a bolder stand and not just allow a kind of free market in this kind of behaviour from which so many people suffer and are oppressed.
My Lords, it is always a privilege to follow Members of the Bishops’ Bench and I agree very much with what the right reverend Prelate said about human trafficking—the dark industry.
I was impressed by the number of speakers who put their names down for this debate. It says a lot, both for the concern of Members of your Lordships’ House about this issue and the value of the report, which I was fascinated to read. I join with others in thanking the noble Lord, Lord Hannay, and the committee for producing a fascinating report.
I realise that to say that we live in a global world is tautologous, but it is certainly an internationally connected world and needs more than a national approach. This is acknowledged both by the report, which says:
“The UK’s migration policy … should not be formulated and implemented in a vacuum”,
and by the Government, who say that,
“Member States’ needs differ greatly, so a ‘one size fits all’ approach to migration and growth would be counter-productive”.
Of course, each state has its own characteristics and needs. There are differing needs even within the UK. We are used to hearing explanations for our migration policy that point to highly skilled people who are so desirable for our country and our economy, but I always think that we should be grateful for the not necessarily technical skills that people from different cultures bring to our country, in particular from those cultures that are very good at caring. My goodness, our society needs people who are good at caring as well as the high-tech end of social care and medicine.
Having spent a lot of my political life in London, I tend to look at a lot of what we do from a London perspective. Yesterday at a lunch I sat next to a retired Permanent Secretary, who was reminiscing that when he was working as a civil servant, London’s population was 8 million. The population now is 8 million, approximately the same as it was in 1961, and indeed in 1931, but as he recalled, when the population was falling in the 1960s and 1970s, we thought the world was going to come to an end; now we think the world might come to an end because it is getting too big.
Of course, concerns about London reflect concerns about students. I am not surprised that other Members of your Lordships’ House have chosen to focus on this issue. The university sector is not short of champions here. As we know, the Government tell us in their response that the anti-abuse reforms have been targeted at the non-university sector.
Concerns about reputation—about our country not being welcoming, as my noble friend Lord Sharkey said, and the feeling that this country does not really want to do business with some other countries—has a knock-on. There are economic effects as well as the reputational ones and effects on business in the widest sense. That involves more than just universities. Perception is very important, and the quicker that the Government can recover ground in this area—the perception about this is unhappy and uncomfortable—the better.
The confidence of our business community is affected by the difficulties in this area to do with process. The concerns among people to whom I talk about immigration are often as much about process as they are about policy. One hears examples such as, “My clients decided not even to bother to try to get visas for particular people to come to work in this country. They are just going straight to Frankfurt”. I think that my noble friend Lord Clement-Jones will speak about tourist visas. That is one concern that the London business community has drawn to my attention and, no doubt, to that of other noble Lords. It mentions that the UK has improved its position in its overall competitiveness as a tourist destination from seventh to fifth in the recent WEF rankings, but we have dropped 24 places in the competitiveness of our visa requirements. We have slipped from 22nd to 46th. London First comments that competitor destinations are doing better at forging relations with new high-value tourism markets, such as China, with Paris, for example, attracting between five and eight times as many Chinese visitors as London.
It is clear to me that a lot of policy is driven by the effectiveness or otherwise—the competence, if you like—of the process, particularly the entry clearance process. It is of course very difficult to suggest that discretion should be applied to immigration applications. I am not going anywhere near that, but the ability to assess information is very important and does not seem to be in oversupply in the entry clearance system. I have no idea of the result when one is faced with an irritating tinkly version of Vivaldi when trying to get through on the telephone to follow up visa inquiries, but I know of considerable frustration that it is simply impossible to talk to a real person.
As I said, process as well as policy is important to build and retain trust among more than the business community, to which I have referred. I was interested that one of the four thematic priorities of the GAMM is organizing and facilitating—I stress the word facilitating—legal migration and mobility. Obviously, that begs the question of what is legal, but, like my noble friend, I took particular note of the paragraphs on family reunification. There was the recommendation that,
“there could be problems with a situation that admits spouses and children more readily to one Member State than another, considering that, once admitted they may eventually acquire the right to freedom of movement throughout the EU. We repeat our view that the Government should seek to opt-in to the Family Reunification Directive”.
British citizens who marry non-EEA nationals and then find that they cannot live in their own country with their partner and children as a family unit or be with elderly parents in the UK because they cannot meet the requirements—which are among the toughest in Europe—regard this, to use a mild term, as unfair. It is puzzling to them. It will not have crossed their minds that this might be a problem. The sense of hurt, betrayal, anger and so on is not reduced when they find that the UK is out of line with the rest of the EU.
The Minister is aware of a piece of work with which I have been concerned. We will be launching our report about family migration on Monday, but I want in this context to share one small piece of evidence received by the group which looked at this. The submission went as follows:
“I served in the British Army for 9 and a half years, have a First Class Honours degree and my husband is also degree educated and currently earning more than I do [overseas] … I am antagonised by the fact that citizens of the EEA face none of these obstacles when bringing their non-EEA spouse to the UK, yet I, a British citizen and former member of the British Army, am not entitled to the same rights in my own country”.
Several noble Lords remarked on integration being of the highest importance. I was impressed that my noble friend Lord Sharkey was able to ask questions about the paragraph in the Government’s response on that because, frankly, I found it quite difficult to understand. As for localisation, yes, local organisations have an important role to play, but that did not seem to be an answer to the point. The right reverend Prelate talked about a ragbag of resources in this context. I would prefer that we find a toolbox, not a set of leftovers, to address it. I do not think that he meant to suggest that. Like him, however, I regard this as an overwhelmingly important issue.
My Lords, I begin by congratulating the members of Sub-Committee F on this very interesting and challenging report. Until a year ago, I had the privilege of being a member of the Sub-Committee so should have known that a committee chaired by the noble Lord, Lord Hannay, and with Michael Torrance as his clerk would produce a report that was rigorous, evidence-based and clear. I found myself applauding much of it, particularly the actions that could be taken to help speed up the economic development and increase the political stability of source countries. Yet as I read the report, an element of doubt crept into my mind and it is that element which forms the basis of my remarks today.
I want to focus on three statements in the report. First, there is the second to last paragraph of the summary, which reads, as the noble Lord, Lord Hannay, pointed out:
“The EU’s Single Market is predicated on the free movement of its own citizens between Member States. This freedom is fundamental to the United Kingdom’s continued membership of the EU”.
Secondly, there is the conclusion in paragraph 46, which, while encouraging migration to meet specific skills shortages, goes on:
“However, such an approach is not a panacea, and should form part of a comprehensive approach which also tackles the development of skills among the existing workforce”.
Thirdly and finally, there is the sentence in paragraph 2 which reads:
“Population density in the United Kingdom, which is roughly twice that of Germany and four times that of France, means that migration policy is a matter of keen political debate”.
“Keen political debate” is an appropriately measured phrase. In my remarks today I am seeking to be similarly measured because this is an issue that, as the noble Lord, Lord Hannay, said in his introduction, can all too easily be hijacked by groups for their own purposes, some of which are not altogether pleasant.
Here are a couple of statistics. Today the population of the United Kingdom is just over 63 million. For the record, England, with a population density of 383 people per square kilometre, has just overtaken the Netherlands to be the most densely populated country in Europe, leaving aside city states such as Monaco. England is now the sixth most densely populated country in the world after Bangladesh, Taiwan, South Korea, Lebanon and Rwanda.
I am afraid that that is just the beginning of the challenge that we face. As I said, our population is just over 63 million, but the mid-range projections from our Office for National Statistics suggest that the UK’s population will reach 70 million by 2027, 15 years from now. That is an increase of 7 million people. What do 7 million people look like? The city of Manchester has 500,000 people in it, so think 14 Manchesters. The larger Manchester conurbation, including Bolton, Bury, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford and Wigan, has a population of just over 2 million. So, to house this increase in population we may have to build the equivalent of three Greater Manchesters by 2027. This increase in population will surely not be spread evenly across the country. The bulk of the increase may well take place in the south-east, where we may have to build two of those three Greater Manchesters to which I am referring. It will be something of challenge for future government Ministers to explain all this, not least to those who live in shires and leafy suburbs.
At this point, some noble Lords may be tempted to reach for the exemplar of Thomas Malthus, who in the late 18th century said that at some date in the future a global famine would take us because of a rising population. Such noble Lords are inclined to say that Malthus has so far been proved wrong, and we should not worry about these issues now. However, we are not talking about Malthus or about some date in the future but about the output of a respected government agency giving predictions for only 15 years from now, well within the lifetime of people in your Lordships’ House today.
Should we worry about this? I have already referred to our present population density of 383 people per square kilometre. Bangladesh has about 1,400 people per square kilometre, 3.5 or four times as dense, so we can certainly fit the people in—but at what cost to the quality of life? Sir John Sulston, who recently chaired a Royal Society inquiry on people and the planet, said that our target should not be to cram as many people as possible on to the planet. He went on to say:
“We have to look at what will allow humankind to flourish. We want to aim for a high quality of life and not just to scrape along”.
What gives this issue a particular edge in the context of this debate on the EU is the unique position of the United Kingdom in this regard. The report rightly points out that France, with 102 people per square kilometre, is about 25% as densely populated as we are while Germany, with 226 people per square kilometre, is about two-thirds as densely populated. No less importantly, though, both those countries and Italy have falling populations. Germany’s population today is 83 million, compared with our 63 million. On present German trends, that will fall to between 70 million and 74 million by mid-century. At some point in the 2030s, the UK’s population will overtake Germany’s, and we will become the most populous country in Europe.
The question that I have to pose today is this: if these current trends persist, can we continue to allow the completely untrammelled movement of labour within the EU without imposing increasing and unwelcome strains on our civil society? The right reverend Prelate the Bishop of Derby touched on some of the first signs of how this issue may pan out. At the heart of this debate, which is faced by all EU member states, is the moral significance attached to a particular birthplace. In other words, does a country or any aspect of it belong to its inhabitants, no matter what their colour or creed? Do we follow what has been called the “cruise liner” theory of the nation, in which people come together temporarily and have no ongoing relationship, or should the fact of being born in Britain—the accident, if you prefer to use that phrase—automatically entitle you to your country’s collective heritage? These are deep philosophical waters and beyond the terms of our debate today, but they none the less provide the background against which this report has to be considered.
On a more practical level, it is perhaps worth reflecting on why the UK’s population might be growing so fast. Some may say that it is about the social security system, which is universal and means-tested, as opposed to being primarily contributory as on the continent. It may be, but I rather think that is only a minor feature. I think there are two more potent forces at work. The first is the point made by my noble friend Lord MacGregor of Pulham Market about the ability to learn English. For better or worse, English has become the world’s lingua franca and, in particular, it has become the lingua franca of technology, so how better to fit yourself for the modern world than by coming to the UK to learn English?
The second is the anecdotal issue of EU citizens coming quite legally to this country to undertake work that our fellow citizens appear unwilling to do. Every Member of your Lordships’ House will have anecdotes about this and the challenges it presents: this is mine. I have a house on the Shropshire-Herefordshire border. Every year, thousands of eastern European citizens perfectly legally come to pick fruit, yet there are many unemployed people in the city of Hereford and in Herefordshire. The special and specific challenge that we face is to see what we can do in Hereford and elsewhere to encourage people to take responsibility for their financial future and so to give them the self-respect that will follow. That is why I so strongly support the conclusion of paragraph 46 that immigration can be no panacea. If it is seen as one, we risk creating a disaffected, disengaged, sullen minority of what the late Lord Dahrendorf christened the underclass. If this is true in this country, how much more pertinent must it be on the continent in Spain, Greece, Portugal, Italy and even France, where unemployment among young people seems to range between 20% and 45%?
To conclude, I congratulate Sub-Committee F on addressing this issue. The challenges of absolute population size, age balance, equality of access to economic opportunity and the extent to which the UK and the EU open their doors to all comers are great. As my noble friend on the Front Bench prepares his reply, he will no doubt be thinking with relief that this all goes well beyond his brief and pass swiftly on. That is part of the problem. These challenges affect every aspect of government and every government department, but they are the responsibility of no government department. David Goodhart, the director of the think tank Demos and previously a senior correspondent for the Financial Times, has recently published a fascinating book on this topic called The British Dream. He describes himself as a public schoolboy leftie with an instinctive sympathy for those seeking a better life for themselves, but he none the less concludes that Britain has had too much immigration too quickly, that its economic benefits have been oversold, that it has demoralised the indigenous working-class population and, most importantly, that it threatens to undermine the contract between the generations and the consensus on which our entire welfare state rests. He is writing about Britain, but looking at his book and hearing on the news about other EU countries, one cannot help but be drawn to the read-across from the situation here to that elsewhere on the continent.
These remarks may seem uncompromising, unwelcome and unfriendly, and no doubt some noble Lords may wish to criticise me for making them, but Dean Acheson, the US Secretary of State, once famously remarked that in a democracy policies do not trickle down, they well up. This is an issue that is welling up fast.
My Lords, first, I want to say—and I know I speak for others on the committee—that once again it has been a real privilege to work on this report under the leadership and chairmanship of the noble Lord, Lord Hannay. It really has been a good experience to be there with him on that committee. The second thing I want to say is that I passionately believe that we in this House, whenever we discuss the issues of immigration, should never miss an opportunity to say thank you to all those immigrants who have made such a fine, positive and desperately important contribution to our life in Britain and to the life we take for granted. It is true that all of us, every day, experience it in our families and with our friends when using the health service and it is true every day when we take our trains up and down the country. We know that we have received tremendous benefits in this country from immigration. That is why so many of us are ashamed of the myopic, cheap opportunism—that comes from educated people who should know better—of trying to seize negative emotion and work up passions, where we should be emphasising the importance of reason and analysis.
I found the speech of the noble Lord, Lord Hodgson of Astley Abbotts, very powerful, very analytical and very challenging. When he was speaking, I could not help reflecting on paragraph 13 of our report, in which we state:
“There are approximately 214 million international migrants worldwide”.
So we are faced not only with the pressures within our own society but with the pressures of migration for the global community as a whole. That is why it is crucial for those of us in this House, who have the space in this House to look at things in perspective, always to emphasise that, if ever there was an issue that requires international collaboration and international policies to deal with the huge issues that arise from it, it is the issue of migration. We simply cannot solve the issues of migration as a nation on our own. European co-operation is vital. The noble Lord was right to say that we should never consider these matters in our own country without looking at the experiences of others in Europe. But, of course, it is in the management of the issue that co-operation is so important.
That is why the European debate going on in Britain at the moment is very significant. To me, it flies in the face of reason to envisage in any way a future in which somehow we will do better on these issues if we operate as an island on our own, offshore from the mainland of Europe. We need to work with those in Europe if we are to be effective in handling the situation. Of course, it is important not just in Europe but worldwide as well.
That brings me to the issue of higher education, which has been fully debated today. As we debated it, I could not help feeling that if the sub-committee was looking for allies in the House, it could not have had a better ally than the noble Lord, Lord MacGregor of Pulham Market. That was an amazingly penetrating analysis and speech, and I just hope that his noble friends on the Front Bench have listened to every word of it and will recognise its significance.
There is one other point that I want to make, and I declare an interest because I am involved on a voluntary basis in three universities in this country—the London School of Economics, Lancaster and Newcastle. We talk about the economic consequences of policy towards overseas students, for the universities themselves immediately and the long-term consequences for the country as a whole. These are very central issues for our debate. There is one other point that needs to be emphasised. The first reality of existence for all of us on planet earth is that we are totally interdependent, and how history—if history is there to judge us—will judge political leaders of the time in which we live is on the success or failure that we make of handling that reality of international interdependence. I simply do not understand how you can approach education, let alone higher education, without that international reality being central to the deliberation in virtually every discipline being studied.
It is absolutely crucial that in our fine universities—we have some very fine universities in this country—there is a real, living community of scholars, not just from these islands but from the world as a whole. It is going to be the interplay of cultural experience and of different perspectives that will help students to become educated, as distinct from trained, and to understand the nature of the world in which they live and the scale of the issues that confront them. I know that when I was an undergraduate I was learning all the time from people who came from very different backgrounds from my own. I greatly appreciated that. It is true of Britain, but it is much truer of the world as a whole. What we do not emphasise enough in our considerations about higher education is that the quality of our universities is related to the presence of an international community central to their activities. Whenever that is diminished, the quality of education itself is being diminished. It is disturbing that current policies are leading to a decline in the number of students wanting to come to study here, because it is perceived that it is not a welcoming place and it is not a good place to spend a lot of time trying to get to when you can get elsewhere. That point has to be taken very seriously.
There are a couple of other points in the report on which I want to dwell for a moment. They have been referred to in the debate. One is the issue of integration. I was very impressed by what the right reverend Prelate said about his work and experiences in Derby. It is clear that civil society is crucial to making a success of integration, but not just civil society in terms of the NGOs, although they are very important, but even in the more established parts of civil society, if that is not a contradiction in terms. The chambers of commerce have a very important part to play and trade unions have an absolutely crucial part to play in the issue of integration. But then the NGOs themselves are vital. As someone who has spent a great deal of my life in NGOs, I worry that we are slipping into an era in which they are seen as an extension of public administration to deliver policy. I want good quality public service and I am sure, therefore, that NGOs will have an important contribution to make, but that is to miss the point. In a vibrant society, NGOs are there to contribute to the debate. They are there to learn from their engagement and experience and to bring to the quality of the public debate the depth of their experience and what they are discovering every day, on the front line, with real people. I do not get the feeling, under any Government in recent times, that the views, attitudes and experience of the NGOs have been central to the development of policy on integration in immigration matters. There is a lot of work to be done on that.
It is also important to realise that, if we are talking about successful integration, we must face up to the pressures on many of our relatively deprived communities which find themselves grappling with the largest elements of immigration and the movement of people. This is why we must make sure that, in areas where immigration is more concentrated than others, the schooling, hospitals, public services, housing and employment are given real priority. It is in these areas that the frustrations build up and the idiots who demean the whole quality of public debate start deploying their opportunism.
On the opportunism, I say to all our political leaders, please realise that you are never going to buy off that kind of opportunism. It has to be challenged and confronted. One has to talk about the values which are central to our society and in which we believe, and about why, with rational analysis, we must make a success of this interdependence about which I am talking and the inevitable movement of people. How can you talk about free and open markets if there is not to be the movement of people? It is a fundamental contradiction if you say you have a free and open market but people cannot move about to follow the investment. However, we know that it is not currently possible for that to happen, so we have issues. Theoretical and ideological solutions like open and free markets will not provide a total answer. We must have pragmatism at work, based upon real experience, real issues and how we handle them.
I have been heartened by the seriousness of this debate today. Again, I offer warmest thanks to our chair for having led us in preparing the report. I hope that we may have many opportunities to go on discussing this issue, but not just as a sort of Greek chorus wringing our hands about it but as part of a process that is making sure that we are doing the things that are necessary to meet the challenges.
My Lords, I was quite encouraged by the direction of government policy on migration last week. I remember landing a couple of years ago at Stansted Airport; I was coming from somewhere in Europe—I cannot remember where. It was soon after the UK Border Agency was formed. I came into the immigration hall, which had black and white signs saying, “You are about to cross the border of the UK”. It was menacing. I was afraid. I was very afraid. It was as if we were there, whether we were British citizens, visitors or—heaven forbid—“irregular” migrants trying to come in, and we were going to be found out and that would be it.
Last week, I came back from Estonia, a country that is suffering from net migration of much of its population. However, we would not want to stop that because, during its Soviet occupation, the one thing Estonia’s citizens could never do was to get out. Their great freedom is that they now have mobility. I came back to Gatwick Airport and, as I came into the passport hall, there was a pull-up sign that said, “Welcome, international students”. The only trouble was that I walked past it without noticing and my wife, who is also interested in these affairs, had to draw it to my attention.
I congratulate the Minister. We have at least changed the tone of how we enter the UK, and are on occasions welcomed rather than seen as a threat, even coming back to our own homes, families and houses.
Like many fellow noble Lords, I thought this was a very good report, mostly because it is very factual—it is a myth-buster—and brings out a number of issues that are important to understand. A couple of them were what we think of as problems we have with migration; the noble Lord, Lord Hodgson, was absolutely right in certain areas of his analysis. However, if we think in terms of refugees and that Pakistan has 1.7 million within its borders, that may put some things into perspective.
We must understand that most irregular migration is the result of overstays rather than people coming in clandestinely in boats, aeroplanes or in similar sorts of ways. However, I was quite astounded by the figure of what the report calls the dependency ratio, which effectively is the number of retired people in relation to the workforce, and by the fact that in 2008 that was some 25%—hardly anything at all—but by 2060 it will have risen to 53%, as predicted in the UK and elsewhere. I say to the noble Lord, Lord Hodgson, that perhaps one problem is that without migration we would be building old people’s homes but with absolutely no one to help us in our dotage and old age. The way in which that dependency ratio threatens our future and that of the next generation is a real issue.
I will concentrate on a couple of areas. First, something that is often forgotten but, I was delighted to see, is mentioned in the report, is the fact that we have two travel-free areas within the European Union—and indeed they creep outside it. One of them, of course, is Schengen, but we also have the common travel area which includes not only the UK and the Republic of Ireland but the islands which are not part of the EU—although we should remember that Schengen includes a number of non-EU states as well.
Something I had not thought about before, but which would be very sensible in terms of future government policy, would be to try to align the policies of those two travel areas far more carefully. Whether you are a tourist, a visitor, in business, a business manager or director, a high roller or whatever, you have to go through two visa procedures to visit a country in the Schengen area and the UK and the Republic of Ireland. That is understandable, but if those visa procedures were similar or pretty well the same, it would solve many issues.
The other issue was on the readmissions agreements and treaties with third countries. Again, we as the United Kingdom—whether we just give the impression that we do it or whether as I believe we actually do it—try to cut off our nose to spite our face to prove something in terms of being distinctly non-core EU, while prejudicing and harming our own national interests.
I will speak very briefly on the issue that I feel is most important from an ethical point of view. That issue of the reunification of families is in the report. I, like my noble friend Lady Hamwee, have received a certain amount of correspondence about British citizens who are unable to do three major things these days. First, they are unable to bring their proper spouse—not one from an arranged marriage—to join them in the UK. Secondly, UK citizens living abroad who have been married abroad are unable to come back to their home country, and the rest of their wider family are unable to enjoy their marriage together because the partner, who may be non-EEA, cannot come back. Then there is even the not unusual situation where the spouse outside the UK, without UK or EEA citizenship, is the person who primarily looks after the children, who are probably British citizens as well, who are then also unable to come to the UK.
Is it not part of our fundamental British DNA that, as regards a real marriage, under no circumstances should the state be able to determine that a husband and wife—or a wife and wife, or husband and husband, or wherever we get to with the other Bill—should not be able to live together in family life? That to me is a fundamental, English—probably British, but certainly English—principle of life that we must protect, yet we are now failing to do so. That problem will get worse, as I know from my own extended family. In the next generation, some members of my extended family are married to Singaporeans, while others live and work in Argentina. They travel abroad and often meet their future spouses abroad, and these multinational families and marriages will happen more and more. What we are doing through our migration policy is saying to them, “I am sorry, you cannot live together in your country of birth”. All sorts of people are able to do that, but the thresholds are far more difficult than often we believe.
My ancestors migrated from, I think, Denmark around the first millennium into what is now the county of Suffolk. I do not know whether my ancestor was invited or whether he made his way across the North Sea uninvited and unwelcome. However, I surely know that when he or she married a spouse of their choice, they were able to reside in Suffolk for however long they wanted to, and consequently I was able to migrate to the Celtic nation of Cornwall, where there are no such divisions. This is absolutely fundamental to the DNA and principles of our national life.
My Lords, I thank my noble friend Lord Hannay for securing this important debate. If he will forgive me, I, like other noble Lords, will concentrate on one facet of the GAMM report: the section that deals with international students and net migration targets, covered by paragraphs 181 to 188 of the report. I am absolutely in agreement with the broad spirit of these paragraphs. It is vital that our universities should retain their open stance and international aspect, and that they remain competitive and attractive on a world scale.
When I was a student in Cambridge in 1968, the most influential essay among left-wing students was an article in the New Left Review by Perry Anderson called Components of the National Culture. The article demonstrated magnificently that a high percentage of the leading figures responsible for the crucial high-water marks and components of our culture, to whom we owe an enormous debt, were penniless migrants from Europe during a very troubled century. That essay was recently reprinted in a book called English Questions. It is a reminder that what we often think of as an English question is constructed from much more complex and heterogeneous roots.
I absolutely stand by the broad spirit of the GAAM report. It is not just a matter of soft power. Higher education contributed £8 billion to the UK economy in 2009. Paragraph 231 of the report suggests, in effect, that students should be excluded from the Government’s net migration targets. To no one’s great surprise, the reply of the Minister, Mark Harper, to my noble friend Lord Boswell, chair of the EU Committee, was less than enthusiastic. He concluded:
“The net migration statistics are produced by the Independent Office for National Statistics, and they have historically included students. The UK will continue to comply with the international definition of net migration, which covers all those coming for more than 12 months”—
“regardless of any intention to leave”.
I think that the noble Lord, Lord MacGregor, used the word “dodgy” to describe the Government’s reply. Indeed, there is a certain evasiveness about it. Technically, it is a perfectly logical reply, which faces up to one of the great objections of the university sector—that we do know that the vast majority of people who come to this country to study courses leave once they have completed those courses. As I say, technically, there is nothing wrong with the reply, but I fully accept that it is slightly evasive. It is abstracted from what we all know to be the tensions in British politics around these questions of immigration, particularly this year.
There is another aspect of this issue that we in the university sector have to take into account. The media exposure to bogus colleges has been a crucial development in the past couple of years, whereby one saw basically a vast network of Potemkin villages revealed to the dismay, I think, of the British public. Even the university sector itself has not been immune to practices which appear to be not particularly impressive. I remind your Lordships of the Daily Telegraph sting in Peking about a year ago, which seemed to show that one of our most respected business schools was offering in China diluted qualifications for entry. All these things have an impact. Within the university sector people will say, “Actually, if you look at the qualifications of people coming in, they are on average higher than those of more locally based candidates”. One could say that the Chinese sting is unrepresentative, but I speak in your Lordships’ House on a day when we await the “Panorama” coverage of a sting of Members of this House. Once these things come out in this way, it is not enough to say, “We all know that this is unrepresentative and not typical”. The truth of the matter is that a public interest is established to which we have to respond more decisively than by saying that these stings are unrepresentative and give an unfair picture of the overall pattern in this area.
Although I think that the Government’s response is evasive in a sense, there are reasons why any Government would have concerns in this area. Those of us who like to speak in this House and argue on behalf of the university sector have to take those reasons into account. However, in paragraph 188, the GAMM report goes on to say something else of considerable importance. It says:
“If the Government genuinely favour an increase in bona fide students from outside the EU they should make this clearer”.
I could not agree more. In this respect, I am slightly more confident than the noble Earl, Lord Sandwich, was about the Prime Minister’s remarks in India when he addressed this question very directly. A lot of the statistics in this area are a little unclear. The exact extent to which students are discouraged by the fact that they are included in net migration figures is not clear. There seems to be a slight falling off of enthusiasm to come to the United Kingdom, but it is pretty small. What is not in doubt is the very significant drop of 24% in the number of those coming from India. This was pointed out by the noble Earl, Lord Sandwich, and the noble Lord, Lord Hannay. That is the one figure which is not in dispute. There are reasons for it but it is a serious drop and something which has to be addressed. It is a very regrettable phenomenon. That is why it was important that the Prime Minister made it clear in India that genuine prospective international students are welcome and that there is no cap on numbers. He also made the very important point that there are opportunities to work for a period during and after study and that the UK wants and values international students. It was very important that he spoke in that way in India.
The truth is that the vast majority of students from outside this country will make their decisions not on the basis of whether students are included in the government target but on the quality of the course. All the evidence shows that. This country is second in the world in terms of its attractiveness to international students. There is no reason to believe that that will be challenged but we have to be vigilant. That is why I was particularly disturbed by the example of the Brazilian students mentioned by the noble Lord, Lord MacGregor, towards the end of his speech. That was a disturbing case that did not indicate the open attitude that we should have to able and well qualified students.
I return to GAMM report, which states:
“If the Government genuinely favour an increase in bona fide students from outside the EU they should make this clearer and ensure that all policy instruments support this objective”.
I ask the Minister to give the noble Lord, Lord MacGregor, and myself a little comfort on this matter.
My Lords, I, too, thank the noble Lord, Lord Hannay, for initiating this debate. It is a privilege to serve on his committee. I also pay tribute to Michael Torrance and Paul Dowling, who have given us magnificent support.
As the noble Lord, Lord Hannay, said at the beginning of his speech, migration will be always with us. Anyone who doubts this—they will not include any Member of your Lordships’ House taking part in this debate—should be familiar with a study by Felipe Gonzalez, a former Spanish Prime Minister, who forecast that by 2050 the European labour force would decline by 68 million and that this gap would need to be filled by the immigration of some 100 million people, including dependants. This statistic should be read alongside my noble friend Lord Hodgson’s comments about the impact of population growth in the United Kingdom.
Immigration into the EU is not out of control, as some commentators would have us believe. In 2008, for instance, legal migrants into the EU numbered 3.8 million. In the same period, those emigrating numbered 2.3 million. More tellingly, between 2006 and 2007, immigration decreased by 6% while emigration increased by 13%. It is another popular myth that illegal immigration forms a large part of total immigration into the EU—a point made by the noble Lord, Lord Hannay, and others. In fact, the largest proportion of illegal immigration is by individuals who outstay their visa entitlement. Nevertheless, irregular immigration cannot be ignored. Over the past few years, considerable progress has been made in tightening the EU’s borders. The so-called weak point has in recent years been the land border between Greece and Turkey. However, following intensive diplomatic contact with Turkey, this has been brought largely under control. However, I visited Greece recently and was made aware of considerable illegal landings along Greece’s long coastline. This problem is of course shared with Italy. In Greece, which has so many problems of its own, there are distressing scenes at Patras, where immigrants are violently and desperately seeking to get out of the country.
What, then, is the way forward? The report emphasises that the control of immigration from third countries should continue to be the responsibility of individual member states. However, as the report states that,
“a coordinated approach by the EU and its Member States to deal with the external dimension of migration is not only desirable but also imperative”,
and goes on to refer to the four pillars of the GAMM—legal migration, irregular migration, asylum and development. The report also highlights the need for the European Union to reach out to third countries to enable both sides to work towards a consensus on numbers and skills of immigrants from those countries.
The establishment of mobility partnerships—the agreement between the EU and individual third countries—is a constructive first step in that direction. We must, however, recognise that existing mobility partnerships are not at present with major third countries. These partnerships are an evolving process, and much valuable work can be done with looser, more informal forms of co-operation. These should be developed with important third countries, leading on to more formal agreements. My noble friend Lord Sharkey gave us an account of the evaluation process, and I hope that it is not too frivolous to say that the department might cut its teeth on the evaluation of the smaller countries before moving on to the more important ones, which I hope in the not too distant future will include Turkey. Indeed, the report makes important recommendations that Turkey and Pakistan, as major corridors for irregular migration into the EU, should be priorities for future mobility partnerships.
Perhaps I may just say a few words about readmission agreements. These are negotiated between the EU and third countries to facilitate the return to their country of origin persons who are illegal immigrants. The UK Government have not participated in all such agreements, and it is the recommendation of the committee, ably reinforced by the noble Lord, Lord Hannay, that the UK will opt in to as many of these as possible at a later stage. The opt-in with Turkey is particularly important, and it is seriously to be hoped that the current unrest in Turkey will not prejudice the effectiveness of the EU’s current relations with Turkey regarding migration.
The island geographies of the United Kingdom and Ireland put them apart from mainland Europe, and their absence from the Schengen agreement reflects this—a point made by my noble friend Lord Teverson. However, we must not lose sight of the important common practical benefits that we enjoy through membership of the EU, and here I particularly mention those relating to law and order. The European arrest warrant and Europol have produced results which I suggest to your Lordships are not fully appreciated in this country, particularly by those advocating unconditional withdrawal from the European Union.
Europol’s database is of huge benefit in fighting international crime, while under the European arrest warrant the speed with which international criminals can now be arrested and extradited is also of great benefit to this country. I shall give two examples. It took 10 years to extradite from the United Kingdom a man wanted by French police in connection with the Paris metro bombings, while in the past few weeks Andrew Moran, a notorious escapee from justice in the UK, was arrested in Spain, immediate extradition proceedings were instituted, and the extradition has been postponed only because Moran faces criminal charges in Spain. Therefore, these aspects of law and order are of huge value to the United Kingdom. I understand that both are subject to negotiation between the Commission and member states. Your Lordships may be aware that Sub-Committee F is currently engaged in examining the implications of the opt-out provisions available to the UK under the treaty of Lisbon. Therefore, and I would welcome the Minister’s assurance of the absolute need to keep the law and order provisions under the Lisbon treaty, in so far as they affect the United Kingdom, substantially in their present form.
Much has been said about student visas and I would just add a point about the competitiveness of higher education in the UK. It is faced by increasing competition not only from English-speaking third countries, such as Australia, New Zealand, Canada and the United States, but from other EU member states, where an increasing number of universities are offering courses in English at prices significantly undercutting their counterparts in the UK. I should not like to give the impression that on reading the excellent report from Universities UK one should go straight to the visuals, but there is a significant graph produced by ICEF in that document which shows that, in a survey by ICEF education agents rating countries as attractive, in 2008 the UK was top at 71%, followed by the United States at 68%. By 2012, only four years later, these percentages were 73% for the United States and 64% for the United Kingdom, with Canada, incidentally, showing the fastest growth, from 49% to a position exactly matching the UK’s of 64%.
The sharp fall in the satisfaction rating of the United Kingdom’s higher education bodies should be a cause of no little concern to the Government. I would welcome an assurance from the Minister that, whether or not students are included in the net migration figures, no bar will be placed on appropriately qualified students to study in the United Kingdom. My noble friend Lord MacGregor referred to no cap and this must mean actions, not words, and it must be clear. If this means an increasing commitment in time and effort by those universities in the UK that are defined as “highly trusted sponsors”, so be it. No effort must be spared to safeguard the outstanding reputation of the United Kingdom in higher education.
My Lords, I, too, thank the noble Lord, Lord Hannay of Chiswick, and EU Sub-Committee F for an excellent report and strong and clear recommendations on the specific issues. I declare a past interest as an alumna of Churchill College, Cambridge; I worked at Cambridge University for 10 years and subsequently ran the Association of Universities in the East of England until I joined your Lordships’ House. Interestingly, that last organisation did an impact assessment on universities in the regional economy. It found that the contribution of international students was significant, and higher than that of domestic students, because they had to find accommodation, travel more and remain in the holidays. That is certainly a point worth noting.
Noble Lords will have gathered that I am yet another speaker who wants to focus on paragraphs 181 to 189 of the report, on international students and the net migration targets. I start by thanking the Government for the small step forward in the publication of the disaggregated numbers from the student target. However, as the report says, that does not address the heart of the problem, which is not purely statistical.
The report refers to the perception that overseas students are not welcome in the UK. This time a year ago I was talking to a professor at a highly trusted sponsor university—a member of the Russell group, not Oxbridge—who had recruited a PhD student in his speciality in biology, one of the best students, he felt, in the world. The student had complied with all the university’s requirements and he had created a financial package that included teaching within that university. For some bizarre reason, UKBA suddenly decided that that did not constitute a financial guarantee. There was then a four-month debate, during which time the professor lost that PhD student to America. The PhD’s undergraduate university has said that that is the last time it will recommend that one of its top students applies to the UK. The professor was absolutely furious. I have raised this matter in your Lordships’ House before and I know that UUK and other bodies have been chasing it. However, this is the kind of soft influence issue that is doing real damage. As we all know, you need only one bad incident in the past to change some of the technical details. The word has gone round that there is a problem.
The recruitment of international students is a highly competitive business and UK universities have the world-leading teaching and research credentials that are essential to compete in this market. This perception is beginning to have an impact. Earlier in the year, statistics showed that numbers were holding up. However, the position now being reported by universities is beginning to look worrying.
I spent the recent Whitsun Recess in France and it was evident that the French Government had realised that they had not been able to attract the best international students because all university courses are taught in French. There is therefore now a proposal that some courses should now be taught in English for at least the first year, alongside French language courses, to help France get back into this competitive market. Unsurprisingly, the Académie Francaise was outraged, but in newspapers and on TV, academics and politicians lined up to say that this market was not open to France while it failed to use English as the teaching base language for at least the first year. After all, they said, English is the lingua franca. A French academic friend told me that this move has been sparked in part by the recognition that international students are saying loud and clear that they believe that the UK does not welcome them. So a country like France, which does not automatically teach in English, is now fighting for a corner of the market.
The lesson for us is that all these other nations are jumping on the bandwagon. It is not even a matter of being content with present numbers or stability, as referred to by the Government. The worry is that this is rather like a football league table. We will plummet from the premiership down to the championship simply because other countries will suddenly start to move ahead.
A recent survey of 537 Chinese high school students revealed that over the past 12 months, only 60% of those who had previously said that they preferred the UK as a destination still do so. The reasons they gave included recent changes to the visa regulations and the weak economic outlook in the UK. This is important because China alone was responsible for the modest increase in international students in Scotland between 2010-11 and 2011-12.
The largest fall in international students is at the postgraduate level, and the timing suggests that the removal of the post-study work route may have been a significant factor, as postgraduate studies were very popular before. Staff at universities regard the closure of the tier 1 post-study work route to be the single biggest factor in reducing demand from international students. While the UK Government have highlighted that working in this country after graduation is still a possibility for students able to meet the criteria, there is real confusion regarding the new schemes because of their complexity. This has resulted in some of them being undersubscribed, despite high demand. I return to my earlier theme about perception. Whether it is true or not, if the word is going around that the schemes are not attractive, we will be shooting ourselves in the foot once again.
Postgraduate students, whether domestic or international, play a key role in research, and we ignore at our peril their contribution to science, innovation, and growth and productivity in the UK. Sir Andre Geim, the Nobel prize-winner from the University of Manchester, has said that the identification of graphene,
“would probably not have happened if I had been unable to employ great non-EU PhD students and post-docs”.
These same students have helped to contribute to the UK success in the academic ranking of world universities. In 2012 we had two in the top 10 and five in the top 50. These rankings include Nobel prize-winners, Fields prize winners, publications and so on. That is extremely significant to students when they are considering top universities to come to.
Our higher education system is a major source of our soft power and influence in the world, which help to secure economic and foreign policy objectives for the UK. For how much longer will that be the case if we remove ourselves from consideration by prospective students? The Government keep saying that they are using international figures for data aggregation. Surely in the much more mobile 21st century it is time for the UK to return to the international community and reopen the debate about whether it is appropriate to keep these figures in, especially as it is now much easier to track students as they leave university and either return home or work for a limited period.
Perhaps I may conclude by asking the Minister if he will endorse the statement made earlier today by the Immigration Minister, Mark Harper, in the debate in another place. He committed to work in partnership with our universities to continue increasing the number of international students who come to our excellent universities from around the globe. He is right, because if that is correct and if we are right that the numbers are beginning to decline, we will need to extend a strong and positive welcome, principally through the visa process, to signal that the UK is still open to international students. Welcome as pop-ups at Gatwick Airport are—it is a start—it is far too late in the process for international students who are considering coming to the UK for their education.
My Lords, I, too, join in congratulating the noble Lord, Lord Hannay, on having secured this important debate and on having led Sub-Committee F in the production of this exceedingly important report on migration.
I will confine my remarks to the dependence that we have in Europe on the migration of those professionals involved in the delivery of healthcare. In so doing, I declare my own interest as professor of surgery at University College London and a member of the General Medical Council, the regulator for medical professionals in the United Kingdom.
In our own country, it is clear that we have been absolutely dependent over the past four or five decades on the migration of skilled workers in healthcare—doctors, nurses and other healthcare professionals—to ensure the delivery of a successful National Health Service. I myself am the son of two medical practitioners who came to the United Kingdom in the 1960s to continue their own postgraduate education and were given the chance to develop their careers here, both as academics and clinical practitioners.
The ability of practitioners from other countries to come and settle in the United Kingdom before our accession to the European Union required their ability to demonstrate to the General Medical Council that they had a base of undergraduate medical education and training that justified their registration with the GMC. Similar requirements existed for nursing practitioners and others who decided to come and settle in the United Kingdom and contribute to the delivery of healthcare. Without that substantial contribution to our workforce, it is well recognised that we would not have been able to deliver a successful health service.
Many thousands of students from third countries have come, not only to the United Kingdom but to other member states in the European Union, to pursue their postgraduate education in medicine and other medical specialities. They make a tremendous contribution academically in many of the courses in which they participate. If they come for clinical training, they make a very important contribution to the delivery of healthcare to our fellow citizens. On completing their training, many of these postgraduate students will return to their own countries and go on to have substantial influence in their own healthcare systems, for example leading hospitals, leading academic institutions or developing services. They will rely on what they were able to learn during their period of training in our country to inform the decisions that they take. Those decisions will, very frequently, involve the procurement of technology, disposables or the products of our pharma industry, which are vitally important in driving exports from our country to those other nations.
We must not underestimate the vital importance that the participation of foreign medical graduates—both those who have decided to remain in our country and those who have decided to return to their own after a period of training—make to our vital life sciences industry, which is considered second only to the financial services industry in the impact it has in financial and economic terms and on the potential for growth in our country.
Recently, important questions have been raised about the requirements and, indeed, about the consistency of the requirements for registration in our country for medical practitioners and other healthcare professionals. This is a vital issue, where there is substantial opportunity for misunderstanding among the general public if they lose confidence in the consistency of registration requirements for all medical practitioners who they might come across, particularly in acute situations, when they are most vulnerable and most anxious.
At the moment, the General Medical Council is able to provide registration for all undergraduates—those graduating after receiving a primary medical qualification from any of the 32 recognised medical schools in our country. Those individuals have a right and entitlement to be registered by the GMC after completing their first year following qualification. There are about 160,000 such individuals on the GMC register at the moment.
The second category of doctors entitled to register are those who come from the European Economic Area. There are some 25,500 such individuals on the register at the moment. They must demonstrate that they have a qualification from a recognised institution in the European Union; they can then register without the General Medical Council testing their language skills or their professional competence. In general, that has worked reasonably well, although there have been incidents where language skills have been wanting and patient safety has been jeopardised. Her Majesty’s Government have agreed that under forthcoming legislation it will be possible in future for the General Medical Council to test the language skills of doctors who have qualified and who are registered in the European Economic Area if there are concerns at the time of registration, or afterwards, about their language skills—but not their other professional skills, which I still think is an area of concern.
The third category of registrants are known as international medical graduates, of which there are 67,000 on the General Medical Council register, and they come from outside the European Economic Area. They have to demonstrate to the council that their primary medical qualification is satisfactory and that the content of their postgraduate training meets requirements in the United Kingdom. The GMC is able to make very careful assessment of both their language skills and their professional skills with the PLAB examination.
However, concerns have been raised recently about this category of clinician, specifically those coming from a third nation outside the EEA who have settled in an EEA country and then choose to come and work in our country. There the situation is much more confused because it relates to enforceable community rights that exist for these individuals. They may have the right to remain in the European Economic Area but the ability of the General Medical Council to have clarity in terms of testing their language and professional skills with regard to registration if they wish to come and work in our own country is much less clear.
For those individuals from outside the European Union without an enforceable community right, the General Medical Council is still able to treat them as international medical graduates and look at both their language and professional skills. However, for those third-country nationals with an enforceable community right, where their qualification has been recognised elsewhere in the European Economic Area, that right for the General Medical Council to test language and professional skills no longer exists. For third-country nationals who have an enforceable community right but no recognition of their qualification, those individuals are still able to seek registration by the General Medical Council, and the GMC is not able to test language and professional skills.
As we have seen in this important report, the changing demographics in the European Union may require us to have to count upon larger numbers of healthcare professionals from third nations to come and work in the European Union and in our own country if our healthcare system is going to be able to continue to meet the demands of an ageing population with chronic disease. To ensure that the people of our country enjoy the confidence, at times of anxiety and vulnerability, that the medical practitioner in front of them, whoever it may be and from whatever background, has the same skills as any other doctor that they may come across, there needs to be a single and clear process for the registration of all doctors in our country and indeed in all other European nations. It will be important for all member states in the European Union to be able to satisfy these requirements for their own people, bearing in mind that the delivery of healthcare is as much a technical business as it is extremely sensitive to local culture and values.
Is the Minister in a position to provide some further information on how far discussions with European partners around the question of language and skills testing have progressed? In particular, how will the movement of individuals from third countries across European countries, and individual member states recognising their qualifications, be addressed?
My Lords, first, I declare an interest as a member of the council of University College London and, yes, I will join the queue. My main purpose today is to speak briefly on and commend the recommendations of the committee on international students, in particular the recommendation that international students should be removed from the public policy implications of the Government’s policy, as so widely known, of reducing net migration to the tens of thousands by 2015. We now know well that higher education students really are temporary migrants. Home Office evidence shows that of those students who entered in 2006, only 1% had settled permanently by 2011. It would give us all a great deal more confidence if the e-borders system was fully up and running and if the exit checks promised by 2015 were already in place. I hope that the Minister can confirm that we are at least on target for those exit checks to be in place by 2015.
Many noble Lords have, over the past few years, asked a great many Questions relevant to international students with the aim of removing students from the Government’s net migration target. We have had debates in both Houses. In a superb speech, the noble Lord, Lord MacGregor, mentioned the debate that took place in another place today. The noble Lord, Lord Hannay, referred to five Select Committee reports, including a report of the Home Affairs Select Committee in 2011. We have had letters from chancellors of universities to the Prime Minister last May. We had an open letter last July from senior business people as part of a major campaign by London First. However, disappointingly, we have seen little progress or change in the Government’s thinking on the issue.
I sincerely hope, although I am not optimistic in the light of the Government’s response, that the Home Secretary will finally sit up and take notice this time. As the committee states, if the Government genuinely support an increase in bona fide students from outside the EU, they should make that clearer and ensure that all policy instruments support that objective. The committee rightly states that the current policy creates the perception that overseas students are not welcome in the UK. From a recent education agent survey, we appear to be becoming a less attractive destination in which to study. From a briefing which several of us have received from Universities UK, there are worrying signs that some of the numbers from the Higher Education Statistics Agency, particularly for postgraduate courses, seem to show a decline in non-EU students.
As many noble Lords have mentioned, we have already seen a dramatic fall in the number of Indian students coming to study in Britain—24%. That may well spread to China, with which I am extremely familiar. The Government seem to believe that they will provide an inexhaustible supply of higher educational students, but, as my noble friends Lord Sharkey and Lady Brinton said, the recent survey demonstrates that there is a growing lack of confidence there as well.
I hope that the Government are not tempted to put all their eggs in a Chinese basket. At the least, it looks as though we are suffering a fall in market share. The committee rightly believes that such a policy harms both the quality of the UK’s higher education sector and its ability to compete in an increasingly competitive global market for international students.
Noble Lords have mentioned the competitors in this field. Canada and Australia, in particular, are making concerted efforts to increase their share of the international market and, as we know, Australia has lifted certain visa restrictions and introduced a much more generous post-study work option. All in all, the 300,000 overseas students represent more than 11% of our higher education numbers. There have been various estimates of their contribution to the UK economy, but none of them seems to go below £8.5 billion. The inclusion of these students as temporary migrants in the target is not only a risk to much-needed income from tuition fees for our universities but is threatening our eighth largest export market. The Government’s response is that they insist that they welcome international students; nevertheless, they state that they will continue to include them in their figures on the grounds that they “have historically included students”. That seems a somewhat circular argument.
The sub-committee also says, rightly, that current policies risk damaging the UK’s international reputation and influence in the longer term. Educational links are a vital part of so-called soft power, as a number of noble Lords have said. The UK is currently the second most popular destination globally for students. I strongly believe that the sub-committee is entirely right in supporting the exclusion of international students from the public policy implications of the Government’s policy of reducing net migration. They should be removed from the migration reduction target. I believe that the growth in overseas student numbers has already been much less than it would have been, were it not for the withdrawal of post-study work route visas.
The Government could still learn from their European counterparts on their approach to post-study working routes in order to retain the skills and knowledge that international graduates have gained in the UK. Holland, for example, operates two processes specifically designed to retain educated foreign graduates: a residence permit for the purpose of seeking employment after graduation, and a residence permit for recently graduated highly skilled migrants. The Government, and indeed the Minister, may think that we are all a bunch of Cassandras but may I remind my noble friend that her predictions came true?
Moving briefly on to tourism, improving the tourist visa application process is absolutely vital. My noble friend Lady Hamwee mentioned our position having moved from seventh to fifth in terms of our overall competitiveness, but set against that we have to look, as she said, at the fact that we have slipped from 22nd to 46th in the competitiveness of our visa requirements. A recent report by the UK Chinese Visa Alliance revealed that the vast majority of Chinese visitors to Europe are discouraged by needing to apply for two visas—one for the UK and one for the 26 Schengen countries—and that only one Chinese visitor in 10 applies for both visas.
This is estimated to cost the UK £1.2 billion in lost revenue. I think that figure is an underestimate but it is set to rise to £3.1 biIlion by 2020, when China is forecast to be the world’s largest outbound tourism market. While the Government have tentatively begun to look at measures to streamline the UK application process in isolation, the biggest improvement would be felt by working more closely with our European counterparts to encourage more Chinese visitors to include the UK on their European tour. In this context, I very strongly agree with my noble friend Lord Teverson on the absolute imperative to work closely on the administration of the visa process together with the Schengen countries. That would make a huge difference.
The Government must be clear that the UK still wants to attract genuine students, high-spending tourists and skilled workers. A refrain from many wishing to visit the UK is that they no longer feel welcome. The Government must change course if they are to avoid deterring many of those whom we should be welcoming.
My Lords, I thank the noble Lord, Lord Hannay, for introducing this debate so comprehensively. It is an absolute privilege to work on the sub-committee under his leadership, along with other colleagues who I worked with on this report. This is a very important report because it is measured and has come at a time when there is a great need for a rational debate on issues of migration—a debate which is well informed and well considered. In that sense, I hope that it will make a constructive contribution to the debate on immigration.
The difficulty of coming at this stage of the speakers list is that most of the points I wanted to make have been made. As I listened to the noble Lord, Lord MacGregor, I thought, “Well, my speech is redundant”. Then I thought that there was some merit in the fact that so many of the speakers had spoken about international students and had made such strong points that it was worth repeating some of those points.
My knowledge of what is happening on the ground comes from my capacity as president of UKCISA, the United Kingdom Council for International Student Affairs, and as deputy chair of the British Council, both organisations being involved with international students.
As the Minister is aware, the question of international students has received considerable attention in both Houses and of course elsewhere. Indeed, following the previous debate in January he wrote to us and confirmed the Government’s commitment to the sustainable growth of the higher education sector. In the intervening months, however, as we have heard, not much has changed. The recommendation in the Select Committee’s report is worth dwelling on. It says that the committee recommends,
“the removal of international students from the public policy implications of the Government’s policy of reducing net migration”.
The report also says that if the Government genuinely favour an increase in bona fide students from outside the EU, they should make this clearer and ensure that all policy instruments support that objective. Unfortunately, however, not all policy instruments do so. Despite the pronouncements that the UK continues to welcome well qualified students and that there is no cap on their numbers, processes and procedures remain complex. The absence of post-study work entitlements for the vast majority puts the UK at a considerable disadvantage. While we have seen some changes, concerns remain.
One concern that has not yet been mentioned is that since April there is now an additional imposition of 100,000 video-conference interviews for students as part of the visa process, in which carefully developed, robust and objective criteria could be overruled on the basis of a subjective judgment. This is another disincentive.
We have heard a great deal about the extended and far more confusing and complex process for obtaining a student visa. This was clearly stated in a report by the Independent Chief Inspector of Borders and Immigration. Furthermore, for those who are successful in reaching the UK, intrusive attendance monitoring systems have been heavily criticised and have the potential to divide cohorts on campuses between British/EU students and others. This has a detrimental impact on the student experience while they are here, and the additional requirements for students from over 40 countries to register with the police is seen by many as one more example of the UK no longer wishing to encourage even well qualified students to come to the UK.
For those who need to extend their visas, moving from one course to a higher one, the process now takes at least three months from the point of submission to the return of the passport and other documents, with extensive stories of students unable to travel home for Christmas and, in some cases, not even for Easter.
Yesterday, Universities UK drew my attention to the example of the Brazilian students that the noble Lord, Lord MacGregor, referred to. That is a graphic illustration of how we have lost not only £66 million in revenue but good will. Negative perceptions mount.
We have also heard in today’s debate that the impact and consequences of these messages and complex processes is very evident. A survey of agents in 2012 by the international Agent Barometer has shown a drop of 8% in UK attractiveness as a destination for students while other countries have benefited, with New Zealand’s attractiveness increasing by 4%, Australia’s by 6% and Canada’s by 16%. As we have also heard, the Higher Education Statistics Agency has shown that the number of Indian students is down by 23%, including 28% fewer postgraduates, the number of Pakistani students is down by 13%, including 19% fewer postgraduates, while the total number of postgraduate students is down for the first time in 10 years.
Non-EU students support the provision of many key subjects, especially in science, technology and engineering, so this decline is worrying. A thriving postgraduate sector, supported by international students, is vital for ensuring that the UK remains at the forefront of international research. The Government could argue that visa applications for study at higher education institutions are up by 4.7% in the year to March 2013, but they are still lower than their peak in 2011, and they are applications rather than enrolments. More importantly, in the recent context of a rapidly growing and highly competitive international market, the low overall growth over recent years is likely to equate to a loss of market share.
The UK is becoming less attractive as a destination of study, while our competitors are making concerted efforts to increase their market share. Issues of economic benefits, international students as a source of soft power and our influence in the world have been well argued in debates on this subject in this House and elsewhere. In this context, I underline the Select Committee’s recommendation that migration policy cannot and should not be the sole concern of the Home Office and that a more integrated approach to migration should be adopted and should involve ministries such as the Department for Business, Innovation and Skills and the Foreign Office. In his response to our report, the Minister said that that is the case, but that does not ring true when you see how different policies are pulling in different directions.
In our debate in January this year, I said that now that the Government have dealt with so-called bogus students, the time has come to move on. Does the Minister agree that we need to work with partners, such as Universities UK, the British Council, the border agency and others to make sure that we get positive messages across and begin to take some constructive steps because turning perceptions takes much longer than good stories? In his response to this debate, will the Minister tell us whether the Government will commit to support growth in the higher education sector, set clear targets for growth in international university students, remove barriers to study in the UK and review current visa arrangements?
My Lords, I am not sure how I have offended the powers that be but I speak today as the 17th of 19 speakers, and on Monday night I was the 90th of 91. It does not leave a superabundance of points to make, but I can make one without any fear—which is to thank the committee for the work that it has done. This is an unyielding subject and the report of the committee, under the chairmanship of the noble Lord, Lord Hannay, is extremely useful.
I must declare an interest as having for the past 10 years been chancellor of the University of Essex, and I will say a word or two about that later. My noble friend Lady Gibson of Market Rasen is a distinguished graduate of the university and referred to it. The other interest that I need to declare is that my firm, Bates Wells Braithwaite, is heavily involved in the immigration and asylum field; it has a team of lawyers who do nothing but. Long past are the days when I could—as I did over 30 years ago—dabble in immigration. It has now become an absolute forest, a jungle of regulation, law, precedents and guidance. Indeed, one of the things that I would like the Minister to contemplate is whether there is any prospect of clarifying the bureaucracy surrounding immigration. I do not for a minute underestimate the difficulties. The myriad circumstances with which the immigration and asylum laws have to contend make certain that the matter will be complicated, but, believe me, it is now extraordinarily complex. Of course, it is also extraordinarily expensive for an ordinary citizen to find out where they or incoming relatives may stand with regard to it.
I shall say a word about my noble friend Lord Hodgson’s speech. He said that he was brave. I think that he was in a way, because it is very easy to be misunderstood in talking the way that he did. I thought that some of the statistics he produced were totally germane to this subject and reminded us, if we needed reminding, that there is no more politically hypersensitive subject than immigration in the country at large. The sensitivity is to some extent built on misunderstanding, but sensitivity there is. For my own part, I tend to underestimate the consequences to some peoples and communities of the downside of immigration. We have heard of the upsides, which are great and considerable—the noble Lord, Lord Judd, with whom I always agree, made that point very forcefully—but there is a downside. When people are competing for scarce, cheap housing and for jobs, we must not underestimate the potential there for difficulty and worse. So again, I sympathise with my noble friend the Minister and his colleagues in all of this.
Education has been this afternoon’s principal theme, which is a measure of how strongly represented this Chamber is in the higher education and university world. I will make a few remarks in that regard, although I will steer well clear of the economic benefits of our universities, which have been well discussed. I hope not to repeat any statistics, but I will give a couple that have not been given. One is the striking statistic that in the Times Educational Supplement world table of universities we have three of the top 10 and seven of the top 50. That is an astonishing record when you consider that France has not even one in the top 50. Similarly, in terms of world university education, of those who study abroad, the United States has 30%, while we have 18%—although, as a proportion of the size of those two countries, we should be top of the pile. Then you have Germany with 13% and France with 11%.
I will just say a word about the cultural, or invisible, benefits of the university sector, to which virtually everybody has referred. I am proud to say that at the University of Essex we have a higher proportion of overseas students than any other university in the United Kingdom except the London School of Economics, which has the advantage of being in the middle of this great capital city. More than 130 nationalities are represented on our campus. That has been a permanent feature of the university and I am happy to say that our numbers have not fallen in the recent two years that we have been talking about particularly, although there is no complacency about that—I will say a word about that in a moment. I emphasise to the Minister—if it needs emphasising—that it really is an astonishing own goal for us to do anything that impedes incoming students.
The economic advantages are patently abundant, but I think that we underestimate the invisible advantages. The fact that we have on our campuses a disproportionate number of brilliant academics from abroad is hugely advantageous to our students and to overseas students. The fact that we have a massive enrichment of both educative and social life by having a large number of foreign students cannot be underestimated. It adds considerably to the enjoyment—the fun factor. We must never forget that fun is important in higher education. If people enjoy their universities, they go away and say, “I had a hell of a time” at wherever it was. They go back to Greece, Hong Kong or wherever they are from and say, “I had a wonderful time at the University of Essex”. That is far more important than saying that the professor of gynaecology—no, I must not say that with my good friend, the noble Lord, Lord Kakkar, sitting there. We all know what I am trying to say. The impression of the life that they led, the fun that they had and the friendships that they made, is, I suggest, as important as the purely academic side of university life. So let us hang on to that and, as far as we can, enhance it.
I shall say a word, if I may, about the brain drain. There is an important section of the report on that issue. It is an extremely difficult tension to negotiate in attracting more and more students to our own shores while not damaging the countries from which they come. I wonder whether my noble friend the Minister might take away the thought that he should consult universities to think through whether we can do both things at once—that is, to have the advantage ourselves of having incoming bright, if not brilliant, students, often from extremely disadvantaged countries, and at the same time to give something back. There may be programmes as yet unformed that could do that.
Lastly, I utter a word of caution. Whatever difficulties we have faced over the past couple of years, the challenges have scarcely begun. The prospect for recruiting overseas students to our wonderful universities will get relentlessly more challenging and difficult, because the number of universities being formed in every country is growing, in some of them exponentially. In the University of Essex 20 years ago, we had a huge number of students from Greece. The primary reason was that there were few Greek universities and there are now many more, and we have many fewer students coming. That pattern will be reproduced throughout Africa, South America and the whole wide world. The universities that exist will get keener themselves on attracting more foreign students to their shores, for all the reasons we want—economic, cultural, and so on.
Then we need to face the fact, mentioned by some noble Lords, that English is being deployed even in some French universities. Can noble Lords imagine what a crisis that must be for France? Teaching in English offends every French scruple—but they are doing it, and they know why they are doing it. Every other university in the world will start to teach in English, if they are not already doing so, for the same reason. I was in Tunisia in the spring and went to the biggest business school there, which is going to open elsewhere in Africa. They are deciding to teach their African courses in English. All those things make life more difficult.
I hope that my noble friend the Minister will be sure to persuade those who need persuading that he must and we must disaggregate students from net immigration figures. It is a farce that they are a part of that figure, and everybody has said so.
If it has not already been made plain to our embassies abroad, they should have someone who really blows the trumpet for our universities. There may be a well developed programme of promotion of our universities in our embassies and consulates—but, if not, that must be done.
Lastly, more and more of our universities are going to want to open overseas campuses, partly to counteract some of the challenges to which I have just referred. If the Government are not already doing that, they should look at that, talk to the universities and, potentially, give some financial support for opening overseas campuses, which is going on fairly steadily. That would be a useful step.
My Lords, like so many other speakers, I thank the noble Lord, Lord Hannay of Chiswick, and his colleagues for the work they have undertaken in producing this informative and thoughtful report. Migration and mobility is an issue that sometimes arouses heat and passion and not much else. However, as one would expect, the approach of this report to the issue is calm and measured.
The noble Lord, Lord Hannay, spoke about the four pillars of the global approach to migration and mobility and stressed the significance for addressing migration of improving the economies of the source countries outside Europe. He also drew attention to the fact that most irregular migrants in Europe are visa over-stayers. The Government have given their written responses to the recommendations in the report. During the course of this debate, questions have been raised about those responses, and one response in particular, including by the noble Lord, Lord Hannay of Chiswick, in opening the debate and introducing the report. It is of course for the Minister to respond to points made about the Government’s responses. It took the Government a couple of months to respond to the committee’s recommendations. It is a pity that it has taken just under twice that time since then to have this debate, although I noted the view of the noble Lord, Lord Hannay, that the delay might well be an example of every cloud having a silver lining in terms of topicality.
Our nation has benefited over a great many years from the contribution of immigrants, whether through building some of our major companies or, as has already been pointed out, sustaining our National Health Service and winning us Noble prizes. In a globalised economy, the importance of immigration will certainly not diminish, but it needs to be controlled and its impact needs to be fair for all. Diversity makes our country stronger, but we need to build common bonds, including more emphasis on speaking English and effective integration policies and approaches for communities. We need effective action to tackle exploitation of migrant workers, which also undercuts local people. That means stronger national minimum wage regulations, more enforcement with heavier penalties, and a register to tackle rogue landlords. Proper training programmes are required to help the young unemployed from the sectors that are recruiting most from abroad and should be doing more to train local people: programmes such as Care First, which the Government abolished.
We accept that the pace of migration, particularly low-skilled migration, has been too fast. We support policies to bring it down, such as stronger controls on people coming to do low-skilled jobs and action against bogus colleges. Pulling out of the Social Chapter and out of co-operation on policing and justice, as the Government appear to want to do, would, however, make it harder to manage European migration. We need proper co-operation with other European countries to make sure that migration is not abused. The new Schengen information system will share information on migrants travelling within the EU and will help to guarantee the authenticity of documents and help to identify illegal residents. So far, it seems that the Government are declining to sign up.
There is immigration that works for Britain and immigration that does not. More needs to be done to cut illegal immigration and more needs to be done, as has been said on umpteen occasions already today, to support universities recruiting international students who contribute to our economy. Legitimate higher education students should not be adversely targeted in government action to bring immigration down.
Real concerns have been expressed by parliamentary committees that government policy is putting at risk the benefits that university students bring to the economy, benefits which it is estimated run to some £8 billion with the potential to more than double in value by 2025. The concerns are that the growth in university students is being held back by government policies and the impression given out by those polices. Figures from the Higher Education Statistics Authority show that the number of non-EU first-year students at UK universities is down from 2010-2011. There is also a drop in postgraduate enrolments. One suspects that these reductions also reflect a drop in market share in this highly competitive field.
The Government’s net migration target is not targeting many of the right things. Well over 50% of the drop since 2010 comes from British citizens: more leaving the country and fewer coming home. Much of the rest is falling numbers of foreign students and entrepreneurs. Yet illegal immigration is outside the target, with fewer people stopped, more absconding, fewer deported and backlogs of information on cases not pursued. On top of that, student visitor visas have increased considerably under this Government, and the independent borders inspectorate has warned that they are open to abuse by bogus students actually coming here to work. Unlike full, tier 4 student visas, these visitor visas are not used by university students and are not counted in the net migration figures. However, I understand that they have increased by 30,000 in just two years.
Things such as illegal immigration and student visitor visas, which are excluded from the net migration figures, appear to be being overlooked by the Government as far as effective action and control are concerned even if they cause serious problems. Everything included in the net migration figures is treated the same, as the Government seek to bring the figure down, even though it is leading to a squeeze on university students to the potential detriment of Britain, and highly skilled global experts and entrepreneurs are adversely affected by the visa delays that deter or hold them back from coming—visa delays which certainly do not impede progress in bringing down the declared net migration figure. The system for legal migration needs addressing as it is subject to significant delays, including doubling visa delays and long waits for businesses, asylum seekers, spouses and families.
In its report the EU Committee says that it considers that flexibility by member states in the operation of the European labour market to legal migration from third countries, particularly in those with skills shortages, could be essential to securing economic growth and competitiveness. The report says that member states should continue to have the right to choose the number of migrants from third countries they wish to admit to their labour markets, depending on their needs. I do not think that that view will be contested, but it highlights the importance of our having fair, coherent and effective policies, processes and procedures for addressing the issues surrounding migration. Those policies, processes and procedures should not, in their application, have some continuing consequences contrary to Britain’s interests and they should address all the relevant issues, not just those aspects of migration and mobility which impact on a net migration target figure that has been set, while effectively ignoring or failing to address equally important aspects of migration and mobility which are not reflected in the net migration target figure. On the basis of those not unreasonable criteria, the Government are still some way short of where they ought to be.
My Lords, this has been an interesting afternoon—indeed, evening—spent in discussing a high-quality report. It forms another chapter in this House’s dialogue with the Government on migration policy, and if most of the paragraphs have been on international students, so be it. My honourable friend Mark Harper has been dealing with a debate on this subject in another place today. The Government are very aware of the points being made by noble Lords on the subject.
I will begin by congratulating the noble Lord, Lord Hannay, both on the report and on getting the debate today. As I said, it is a high-quality report, and I congratulate all those noble Lords who participated in its production. I thank all noble Lords for the strong contributions made in today’s debates. I have spoken to the noble Lord, Lord Hannay, about this, and I will, if I may, do as I did in the previous debate and give a commentary on the debate, taking points made by noble Lords and giving a proper answer. It is very difficult at the end of a debate like this to give proper consideration of all the points made. Of course, in cases where I do not have the information that noble Lords would want, I will make sure that an answer is sent to all noble Lords who participated, and a copy put in the Library. I hope that this will enable me to concentrate my words in the main on the report and on the reasons we welcome it.
There were some key insights in our debate. One important one came from the right reverend Prelate the Bishop of Derby, who showed us the consequences of this policy on local communities. It is one of those important aspects that we have to bear in mind when we discuss systems and processes: that at the end of the day, policy impacts on people and on communities. It was good to hear not only of the work that is being done in his diocese but of the way in which he is aware, and has made us aware, of the problems that can arise.
I was pleased that my noble friend Lady Hamwee was able to give us a promotional trailer for her forthcoming report. I look forward to having a debate on family unification policy. It will be very helpful. Our noble friend Lord Teverson pointed to the importance of the issue.
One of the most interesting speeches came, rather out of the blue, from my noble friend Lord Hodgson of Astley Abbotts. We have to accept that we have a consensus. We are all badged with different political beliefs and party allegiances, but I felt that my noble friend’s speech was sobering. The noble Lord, Lord Judd, referred to it as a challenging speech. It made us realise that there is no room for complacency in this area, that our policies have to be addressed to the real anxieties of our fellow citizens, and that we have to draft policy with that in mind.
I turn to the report. The EU’s renewed Global Approach to Migration and Mobility, which was the principal focus of the inquiry, was published in 2011. It provided a welcome renewal of the EU’s external migration policy framework, which was established in 2005 under the UK presidency. As my noble friend Lord Sharkey made clear, the Government welcomed many of the proposals set out in the Commission’s communication on the GAMM, including the incorporation of international protection, alongside existing priorities, in order to broaden the geographical coverage of the global approach. The intention is to ensure a more strategic and coherent approach, to work with third-party countries in the area of migration, and to enhance links to wider development and foreign policy efforts. Alongside other member states, we agreed the Council’s conclusions on the renewed global approach in May 2012.
Unlike the EU’s more general approach to migration policy, which perhaps has placed too much emphasis on legislation and on a common approach—some noble Lords supported that approach today, but it is not the Government’s position—the GAMM is centred on a framework for practical co-operation between the EU’s member states and third countries. The Government particularly welcome this focus on practical co-operation; the pragmatic approach is perhaps part of our political tradition. Alongside the GAMM’s non-binding and voluntary character is an approach that allows member states to decide how they can best contribute to joint initiatives in this area, in their own national interests and in those of the EU as a whole.
Following the Council’s agreement, this flexible, practically-oriented approach has allowed the UK to explore possibilities for working with our EU and third-country partners under the renewed GAMM, assessing whether and how we will participate in line with the UK’s broader immigration policy. The national interest is at the heart of this decision-making process and, alongside our migration objectives, the Home Office works closely with other government departments, in particular the Foreign and Commonwealth Office and DfID, to ensure that wider home affairs, security, foreign policy and development implications are given due weight in deciding when and where to participate in GAMM initiatives. I think that the noble Lord, Lord Hannay, emphasised that the responsibility for these initiatives is not just for the Home Office but is pan-government. Indeed, noble Lords have pointed to the implications of immigration policy for a number of other aspects of government policy.
Given the range of factors involved and the specific considerations with regard to any given country or region, we make these decisions on a case-by-case basis, albeit that our decisions are informed by a set of overarching principles and principally by the Government’s objectives with regard to controlling migration. Following such considerations, we have announced our intention to take part in a number of new initiatives under the GAMM. For example, the Home Secretary will tomorrow join her counterparts from a number of EU member states in signing a new EU mobility partnership with Morocco. The flexibility afforded by the GAMM has allowed us to offer to work with Morocco in the area of border management, where we feel we have useful experience to share, rather than needing to participate across the whole of the proposed partnership. This includes areas such as legal migration or the portability of social security benefits, where other EU partners are better placed to lead, or where proposed initiatives would not be in line with our national policy.
Indeed, the UK has remained a leading voice in the development and implementation of the renewed global approach. We have played a leading role in the development of the new Silk Routes Partnership, identified in the Council conclusions on the GAMM as a key strategic requirement in the EU’s work with key countries of transit and origin. At April’s ministerial conference in Istanbul, which launched the Silk Routes Partnership, my colleague the Minister of State for Immigration, Mark Harper, announced the UK’s financing of a bridging project for the new partnership, ensuring that momentum will be maintained on concrete, practically-oriented initiatives in the silk routes countries ahead of the commencement of EU funding for these projects in 2014.
However, it will not always be in the UK’s interests or, given limited resources, within our abilities, to participate in GAMM initiatives. Therefore, while we continue to maintain good working relationships with other member states and the EU institutions in this area, and while we welcome the increased capacity and added leverage provided by working alongside our EU partners, the Government will always consider whether it might be more appropriate, or more effective, to work bilaterally with third countries. For example, the Government’s policy is not to opt in automatically to EU readmission agreements, which are increasingly linked to mobility partnerships and other negotiations under the GAMM. Rather, we will weigh up the benefits of participation in each agreement, including an assessment of the impact of such decisions on wider bilateral relationships, exercising our opt-in where we believe participation will benefit the UK, or where the UK’s participation will strengthen the readmission agreement overall. I assure the noble Lord, Lord Hannay, that these decisions are carefully considered. This is consistent with the UK’s case-by-case approach to the application of our JHA opt-in. We believe that this is right. The noble Lord, Lord Sharkey, mentioned this issue, as did the noble Lord, Lord Teverson.
We believe that it is right to consider our relationship on a case-by-case basis. We make very few enforced returns to either Belarus or Armenia and we are happy with our existing bilateral arrangements with those two countries. That is why we are not participating collectively in that agreement.
We will have an opportunity to talk about family reunification, and my noble friend Lady Hamwee has clearly worked hard at producing her report, which will be a subject for debate. The UK did not opt into the directive because we wanted the ability to set our own family migration policy. The UK is concerned about the potential for abuse of the right to family reunification, in particular by third-country nationals. In view of that, we maintain the view that it is not in the UK’s interest to be part of the directive.
I can assure my noble friend Lord Phillips of Sudbury, who talked about the need to make sense of regulations in this area and make the procedures as straightforward as possible, that I am the Minister for Deregulation within the Home Office and I have an extremely good and productive relationship with Mark Harper, the Minister for Immigration. We are working as one to make sure that the immigration Bill, which will be presented later in this Session of Parliament, contains measures that will make this area much more straightforward.
The noble Lord, Lord Kakkar, rightly reminded us of another subject, the contribution of migrant medical professions to the healthcare of this country. He was right to mention the debt that we owe to migrants in this country, to which a number of noble Lords alluded. That is why we do not have closed borders. We have not turned our back on the talent of the world, nor do we want to cut ourselves off from the ability to share our talent through soft diplomacy throughout the world.
Perhaps the whole debate has been dominated by international students. Scarcely a noble Lord has failed to mention them in some way or another. That board at Gatwick stating, “Welcome international students”, summed up the Government’s policy. The noble Baroness, Lady Prashar, is shaking her head. Noble Lords have asked for reassurance on what the government policy is. I am giving that policy. There is no limit on numbers. We want to work in partnership with the universities of this country to build our student population.
The whole issue of where the statistics lie is, to my mind, a red herring. The task is not about the compilation of statistics or even their interpretation. What matters is the partnership between the Government and the universities themselves, and going out there in an increasingly competitive world to get the students from which this country can prosper here to our universities. The noble Lord, Lord Bew, was honest on this point. He turned the argument towards the universities to make them aware of the need to take a positive role in this. It is not enough to wait for students to arrive. If I may say so, I sometimes wonder how much the negative talk on this issue by universities has become self-fulfilling. I wonder about the extent to which the campaign to get these statistics removed, the use of the association of student numbers as part of the immigration policy of this country, and the suggestion that the Government are seeking to reduce those numbers and that that is part of our migration policy are all false. I think that in many cases those things have added to the impression that this Government do not take a positive view of university students.
I know that Mark Harper’s commitment is genuine, and it was repeated today in the House of Commons. I share his enthusiasm for advocating international students as being of enormous importance to our universities. Yesterday, I went to a celebration in the Speaker’s residence, where it was announced that 11 new universities have been recognised by this Government. We have a valuable—if I may say so, it is incapable of being valued sufficiently—resource in our universities, and I think that we make a mistake in arguing that the way we are presenting our statistics is the reason that people are not coming to this country.
Noble Lords will know that we have a commitment to present our statistics in a consistent fashion. David Willetts has made it quite clear that student numbers are disaggregated from the net migration figures. The figures are available. We are all aware of the student numbers—we can all calculate the figures for ourselves. However, in terms of public presentation—and, if I may say so, in terms of resource allocation within this country—we need to recognise that students, as migrant numbers, in communities need resources. They need adequate provision in public services and in financial resourcing.
The possibility of the presentation of these numbers being changed has been discussed in government but I cannot offer any comfort on that. I think that we need to change the tone of the argument to one which makes it clear that this Government have no limit on numbers and that they welcome international students, and they want the universities of this country to make that absolutely clear throughout the world.
Perhaps I may interrupt briefly not on a question of statistics but on another point raised by several noble Lords concerning the Brazilian high-achieving language students who were told that they would have to leave this country in order to get another visa to study in the UK. Will the Minister comment on that?
When that point was being made, my noble friend Lord Wallace of Saltaire was sitting next to me and he said, “My son is studying in the States and he has just had to come back to the UK to renew his visa to go back to the States for a second course there”. If I may say so, that is not unusual. However, I have a note here on the Brazilian students. I am very conscious of the hour but am very happy to reply in detail. The noble Baroness has been sitting in her place and I have been very conscious of her position, but it is perhaps a pity that she was not able to participate in the debate. I am pleased that she has come in at this late hour and I will include her in the circulation of the commentary that I make on this debate.
In conclusion, this has been a worthwhile debate but it is no use for me, as a Minister, to say things to noble Lords about how the Government are going to present immigration statistics which I cannot then follow up. I can say that international student numbers will indeed be disaggregated in the presentation of those figures. More importantly, let us turn what we know we all want to do into positive action—selling our universities around the world. I thank the noble Lord, Lord Hannay, for bringing this debate to us.
My Lords, it would be invidious to mention by name any who have contributed to this valuable debate. It is late enough on a Thursday to make that an extremely unpopular thing to do and I will not do it.
I thank the Minister. I often think that in debates on this subject he resembles St Sebastian, riddled with arrows which come from all directions. However, like St Sebastian in the best Renaissance paintings, he continues to smile as the arrows go through. I was grateful to him the last time for the comprehensive letter that he wrote, and I am grateful to him for his commitment to that now.
Perhaps I may leave the debate with two or three short points on student matters. It was a little unwise of the Minister to suggest that the universities are bringing this down on themselves by making such a fuss. I do not think that the Economist is normally considered to be the mouthpiece for special interests, yet it contained an extremely powerful leader some months ago saying that the Government’s policies were completely misconceived. That paper is read all around the world and so it is not sensible to blame the universities. After all, they need to speak up to the Government if they think that a vital British interest—the health of our higher education establishment—is being damaged.
Secondly, this is an expanding world market, both in undergraduates and, above all, postgraduates. So if we are only in a holding level, which is what the statistics show—although some of them show very sharp drops—it is, frankly, nothing like good enough. We are the second in the world in this market and we have got to maintain our market share. If it is an expanding market, that means an expanding figure, and we are not getting that at the moment.
Mark Harper was very patient when we had a lengthy meeting some time back at the noble Lord’s initiative, for which I am very grateful, and I hope that the noble Lord and his colleagues will think yet again about this issue. This is not a matter of statistics. We all understand the point being made about the statistics and we are not asking the Government to change them—although I have noticed that the Government have been a little less emphatic in their support of United Nations rulings of a non-binding nature in many other fields and seem to be clutching on to this one as though they are drowning in the middle of a sea. This is a substantive problem of public policy.
We will come later this year to the immigration Bill. I repeat my plea: will the Government, when considering that Bill, be careful not to introduce measures which will cause a further chilling in the atmosphere surrounding the recruitment and enrolment of students, postgraduates and researchers?
I thank all who have participated in the debate. I would like to place on record my committee’s thanks to our special adviser, Dr James Hampshire of Sussex University, who provided us with a mass of useful work and research and from whom all the statistical material was derived.
House adjourned at 7.30 pm.