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Lords Chamber

Volume 750: debated on Thursday 9 January 2014

House of Lords

Thursday, 9 January 2014.

Prayers—read by the Lord Bishop of Ripon and Leeds.

Thames Garden Bridge


Asked by

To ask Her Majesty’s Government what considerations led them to provide a £30 million contribution towards the cost of the Garden Bridge across the Thames.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and declare an interest as a resident of the Inner Temple.

My Lords, the Treasury will provide £30 million to support the Garden Bridge. This recognises the benefit that the new transport connections will bring to the UK by stimulating development on both sides of the river while reinforcing London’s position as a global visitor destination and creative hub. However, the support will be provided only once the Government have received a business case produced in line with standard guidance to demonstrate that the investment represents value for money for the taxpayer.

—of which I have given prior notice to the noble Lord, so he will not be taken by surprise. First, does he agree that there is no real need for another crossing on this part of the Thames, seeing that there are already two pedestrian bridges within half a mile of the proposed bridge, on either side, not to mention Waterloo Bridge and Blackfriars Bridge? Secondly, supposing that there is a need for another crossing, why not have a simple bridge, such as the Millennium Bridge between St Paul’s and Tate Modern, at a fraction of the £150 million cost? Why waste £30 million of public money on creating the so-called Garden Bridge? Thirdly—

—is the noble Lord aware that there are gardens all along the Embankment, from the Inner Temple garden to Westminster, where trees are growing perfectly well? Why try to plant trees on a bridge, where they will be exposed to all the elements, will be a hazard to river craft once they are fully grown and will, in my view at any rate, look completely ridiculous?

In keeping with the spirit of the House, I will try to give one answer to those three important questions. The key to the Garden Bridge is that it will be two things for the price of one; it will be a garden and a bridge, and will combine the benefits of both.

My Lords, there seems no obvious regular source of ongoing income for this imaginative project, and gardens can be high maintenance. Will the Minister expand on his previous comment by saying what security the Garden Bridge Trust is providing to ensure that it can prune and weed the bridge in perpetuity? Should there be a shortfall, whose responsibility would it be to pick that up?

The issue with a garden bridge is that it is more about gardening than it is about painting, which is the case with the Forth Bridge. The initial plan for maintenance is that it will be assumed by Transport for London along with its ongoing maintenance responsibilities around London. Of course, if, as part of the capital fundraising campaign, the Garden Bridge Trust can also persuade somebody to take on the ongoing maintenance responsibilities, that would be particularly welcome.

My Lords, the House will have noticed that the Treasury is answering this Question because the bridge can scarcely be defined as a means of transport. It is a very expensive piece of public art, a vanity project of the mayor—and we know where his vanity projects have gone and what they have cost the country. The cycle hire scheme is in trouble, his Emirates gondola crossing down at Greenwich carries so few passengers that it is risible, and, of course, the taxpayer will have to pick up the bill. It is true that the Chancellor has committed only £30 million at present. The question is: with a deficit, still, of £60 million, is the Treasury still in the game?

I am not sure what the deficit of £60 million refers to. I will run through, very quickly, the benefits of the project and how its value for money will be assessed. First, there is the pedestrian connectivity that it will give. It will switch people out of cars and on to their feet and make a very important connection. Secondly, it will increase London visitor numbers, which is very important. It will be a great visitor attraction. Thirdly, it will have significant development value, connecting the South Bank and its creative centre to the Aldwych and Covent Garden. The development it will bring on each side will have significant value. Finally, it will be a great showcase for UK expertise. Our brilliant designer, Thomas Heatherwick, is designing it, Arup is engineering it and Dan Pearson is landscaping the garden, so it will generate other future business for London through that showcase.

My Lords, can my noble friend tell me how many people’s entire income tax paid over the whole of their working life would be needed in order to fund this £30 million?

That depends which people you choose. Obviously I take the point of the question. That is why, before we commit the £30 million, we will ensure that it passes a strong business case and why, before we go ahead with the project, the Garden Bridge Trust, under the chairmanship of the noble Lord, Lord Davies of Abersoch, will have to raise £90 million so that there will be no further call on the Treasury.

My Lords, will the Heritage Lottery Fund match the £30 million and will we provide new berthing and facilities for all the shipping currently berthed under the footprint of the bridge?

With respect to the Heritage Lottery Fund, the fundraising programme has not yet begun. That is the job of the noble Lord, Lord Davies, and his team at the Garden Bridge Trust, and I am sure that they will approach every possible potential supply of money. With respect to replacing anything that is displaced by the bridge, I understand that that does not represent a logistical problem—but I do not have a specific answer, frankly, to the berthing question.

Can the Minister assure me that, if this sort of money is available for this project, money will also be available, through one fund or another, to assist with the renovation of places such as Aberystwyth promenade that have been damaged so severely in the past few weeks by the winds, gales and flooding?

The general answer to that question has to be along the same lines. Just as this project still needs to pass the business case to be allocated the £30 million that is pencilled in, similarly we will do our work on other projects in a sensible way and respond to priority needs as they occur. I should just point out that the reason that the Treasury is putting in £30 million is that it is the sensible way to kick-start a fundraising effort. It is much easier to fundraise when people can see that the Government are behind a project and that it the first part of the funding has already been raised.

My Lords, does the Minister agree that Bernard Shaw was right when he said, nearly a century ago, that on the whole the British never want anything? They particularly did not want, for example, the National Theatre. They got it and are now very proud of it. The same thing is true of the London Eye. Does he not agree that the same thing, in time, may be true of the Garden Bridge?

I sympathise with that very insightful point. As someone who has worked on both the Olympics and HS2, I suspect that the Garden Bridge may get a welcome rather sooner than either of those projects did.



Asked by

To ask Her Majesty’s Government what is the outlook for both the number of people in employment and the claimant count in the Office for Budget Responsibility’s latest central economic forecast.

My Lords, in its latest forecast, the Office for Budget Responsibility has revised employment upwards in every year. It now forecasts that the number of people in employment will reach 30.2 million next year—a record—and 31.2 million by the end of the forecast period in 2018. Furthermore, it expects the claimant count to fall from 1.43 million this year to 1.27 million next year, and to 1.1 million in 2018.

My Lords, that is excellent and encouraging news. However, I remind my noble friend that youth unemployment is still worryingly high, although I believe that even that is falling. Can I encourage him, on behalf of the Government, to endorse the work of the non-profit-making organisations that do such effective work in getting young people into work, particularly Tomorrow’s People and the Prince’s Trust—both of which have been endorsed by an unlikely source, a journalist at the Guardian newspaper?

I absolutely agree with my noble friend that the good news on employment leaves us no room for complacency. Of all the segments of unemployment, youth unemployment remains just a little under 1 million, even though it has been coming down in the past quarter. Remember that about one-third of young people who are classified as unemployed are in full-time education. However, I absolutely endorse the point that my noble friend makes that the work done by the voluntary sector—supporting not just the unemployed youth back into jobs but, frankly, anyone for whom it is difficult to get back into the workforce, such as prisoners needing rehabilitation—is enormously valued and will get this Government’s support.

What amount of money has been put in to ensure that apprenticeships provide a way for the employment figures to reduce and for meaningful employment to be the way forward? The current Government’s commitment to apprenticeships is good but the continuation of payment is a real issue for us. Can he assure the House that that will continue?

My Lords, I will apply that question to youth unemployment. In particular, we have tried to get young people into apprenticeships. The youth contract did that by providing additional support for up to 500,000 young people. Jobcentre Plus will provide support for 16 and 17 year-olds who want to find an apprenticeship or traineeship scheme. That is being phased in from this April. We are doing good work on apprenticeships. I spent yesterday in Liverpool talking about how we can use the HS2 project as a way of defining future work opportunities and to line up training and apprenticeship schemes in anticipation of the work that will flow. I absolutely accept the noble Baroness’s points.

Will the Minister give full support to my noble friend Lord Baker’s university technical colleges, which are succeeding in getting young people adequately skilled to get into apprenticeships? In Westminster, something like two-thirds of young people so far have not been skilled enough to qualify for apprenticeships, so it is crucial to get them to that stage.

I absolutely endorse the work of the technical colleges and my noble friend Lord Baker. If we are looking at how to continue to improve the employment situation, on the one hand the recovery of the economy is providing the demand to support it; on the other hand, there are longer-term, structural things that we need to do, which are essentially about investing in people so that the skills they have match the jobs that will be created in the competitive economy that we are developing.

My Lords, although the OBR’s estimate for future employment is clearly very welcome, it slightly exaggerates the picture. I ask the Minister to check why the Government no longer produce employment statistics on a full-time-equivalent basis, which would show some improvement but by no means so much. In that context, can he explain how we rate the employment take of the many young people who are on zero-hours or near-zero-hours contracts? The figures are seriously distorted, particularly at that end of the market.

Employment statistics are not as simple as the headline numbers. I absolutely accept that point. There has clearly been a discussion about how much of the increase in employment is taken up by temporary jobs and how much is taken up by part-time jobs. The simple fact is that the majority is taken up by an improvement in the full-time picture. In the past year, the proportion of full-time jobs making up the increase has substantially increased, and that tells us that the quality of the recovery in the past 12 months is stronger.

My Lords, will the Government consider doing more to encourage schools to develop in pupils the soft skills or interpersonal skills that are so important in many walks of employment, including the retail and leisure industries?

The noble Lord makes an excellent point. A lot of the schemes that we have put in place are focused on helping people to develop basic skills in maths and literacy, which have often been found lacking. However, on a practical level, I could not agree more that in many cases the softer skills make a huge difference, as do the skills involved in what it takes to go to work every day—how to get into a routine and how to behave in the workplace.

My Lords, will the Minister, who has obviously punctiliously studied the ratio between those who are and those who are not in full-time employment, please write to me with the details and the numbers involved, and place a copy of his letter in the Library?

I shall be happy to do that. I could go through the list of numbers now but I know that it is probably something that the noble Baroness will want to look at rather than have me just spout, so I will make sure that we provide that detail.

EU: Balance of Competences Review


Asked by

To ask Her Majesty’s Government what options for change they have so far identified in respect of the United Kingdom’s relationship with the European Union as a result of their balance of competences review; and when they intend to announce their plans for any such change.

My Lords, the balance of competences review provides an informed and objective analysis of what EU membership means for the UK and our national interests. It draws on contributions from a wide spectrum of interested parties, detailing where the EU helps and where it hinders, and it provides a valuable contribution to our national debate. It does not examine alternatives to EU membership and is not tasked with making new policy recommendations.

Does my noble friend the Minister agree that, when it comes to negotiating the repatriation of powers, an essential first step will be to rework the acquis communautaire throughout the treaty of Rome?

This is an issue that my noble friend has raised in the past. I think that he will take great comfort from the fact that legislation has been passed to ensure that no further powers pass to the European Union without the say-so of the British people. I think that he will also take great comfort from the fact that, wherever the opportunity has arisen, this Government and this Prime Minister have chosen to try to win back those powers. I am sure that he will also be supportive of the Bill that will come before your Lordships’ House tomorrow in terms of giving the people a right to decide on our future relationship with the EU.

Will the Minister confirm that the first report of the balance of competences review, which, as I recall, covered Defra and food, came to the conclusion that it was to the overwhelming advantage of the United Kingdom that we remained a full member of the European Union in respect of those subjects?

A number of subject areas were dealt with in the first set of reports, which looked at legal competences and how they were being exercised. Many of the areas were non-contentious and it was felt that the balance of competences was right in those areas. However, even where those areas of competences were supported, suggestions were still made by a number of organisations and individuals about how they could be improved. For example, there was much support for a single market but it was felt that that market could be broader and deeper.

My Lords, can the noble Baroness tell us of any area of our national life which the EU administers with competence? Would it not be more honest to describe this exercise as the Government’s EU incompetence review? Now that even the mildly Eurosceptic Mayor of London, Mr Boris Johnson, has come to see that the project of European integration has failed and is outdated, is not the answer to wrap the whole thing up and throw it away?

It is always interesting to hear the noble Lord’s views on the issue of Europe. I am sure that he was pleased that UKIP representatives had an opportunity to feed into the first set of reports. The Government fundamentally believe that we can have a better Europe and that we should have and push for further reform. It is obvious from the first set of reports that have come through in the balance of competences review that many of the issues that have been raised by the Prime Minister’s and the Government’s existing reform agenda came out as part of those reports.

My Lords, following on from the noble Baroness’s talk about the need for a programme of reform to create a better Europe, can she clarify what the Government’s objective is? Is it to put together a comprehensive programme of reform which, on this side of the House, we would be happy to engage in discussion about, or is it to demand, as the noble Lord, Lord Spicer, hinted, special deals on repatriations, opt-outs and derogations, which frankly is a road to nowhere? It is likely to be a set of impossible demands which eventually leads to British exit.

The Government’s position has been clear: reform is an ongoing process and we can have a better Europe. For example, one of things that came out of the balance of competences review is how different competences and different regulations were being implemented by member states. There were concerns about the UK’s gold-plating, for example, of much that was coming out of Europe. We feel that that is an ongoing process. I think that the noble Lord and noble Lords opposite will accept that there is a great democratic deficit at the moment in support for the European Union. Therefore it is not only about making the case for whether we need to be in or out of Europe but about making the case for how we can have a better Europe, renegotiating a new settlement and then going to the people and saying to them, “You have the final decision”.

My Lords, will my noble friend tell the House how many EU partners and which EU institutions have contributed evidence to this review? If the answer is low, as I suspect it is, could that possibly be because it is suspected that the motives of the review are not necessarily to be objective but to be the basis for what the noble Lord, Lord Spicer, has suggested?

There have been a number of contributions: from, in the United Kingdom, PricewaterhouseCoopers, Demos, city councils, the Northern Ireland Executive, UN agencies and the TaxPayers’ Alliance, for example; from countries such as Bulgaria, Macedonia, Switzerland and other countries outside the European Union; and from the House of Commons European Scrutiny Committee and the House of Lords EU Committee. We have had a wide range of contributions in relation to this first set of reports.

My Lords, does not the Minister agree that, as in the wording of her original reply to the noble Lord, Lord Spicer, the key word is “objectivity”? I declare an interest as the chair of a group that has submitted material to the balance of competences review. It was the need to achieve such objectivity that resulted in the extremely negative reaction that the first published documents of this exercise provoked, which has been echoed today by the noble Lord, Lord Pearson. Will she stick to objectivity right the way through the exercise?

I accept the fact that there are strong feelings, passions and views on this subject on all sides of the argument. However, it is important that when the British people get an opportunity to decide—and I sincerely hope that noble Lords will support the Bill tomorrow to allow the people of Britain to have that say—it is done on the basis of objective evidence; on an analysis of where the EU helps and where it hinders, and what is the best deal for Britain.

Businesses: Employee-shareholder Scheme


Asked by

To ask Her Majesty’s Government what assessment they have made of the level of interest from businesses in the United Kingdom in the employee-shareholder scheme, in the light of figures given to the Financial Times in response to a freedom of information request.

My Lords, the employee-shareholder employment status came into force as recently as 1 September 2013. Companies are not required to register or apply to government to use it, and no qualitative assessment of levels of interest has yet been made. However, since 1 September, the online detailed guidance was viewed nearly 15,000 times, with people spending, on average, more than seven minutes on the pages. This clearly shows an initial level of interest in the scheme.

My Lords, last year these Benches argued passionately against the shares for workers’ rights scheme. Last week, the Deputy Prime Minister said that it should be scrapped. According to the freedom of information request, the number of enquires that the BIS has received in respect of the scheme is the magnificent total of 19. Let us be honest; it is a flop. Is it not time for the Government to cut their losses?

My Lords, it was not unexpected that this issue would return to your Lordships’ Chamber, and the noble Lord, Lord Mitchell, has obliged—although perhaps slightly earlier than I might have hoped. The status has only been introduced recently, so the phrase “early days” springs to mind.

In terms of the point that the noble Lord made about the freedom of information response given to the Financial Times, it was on the number of inquiries that the Government had received on the status. I know that the noble Lord submitted a Written Parliamentary Question to me relating to the number of people who had become employee-shareholders. There were two distinct questions that required different answers.

My Lords, I wonder, when the history of this period is written up, whether this rather shoddy episode might not be taken as representative of the very low quality of policy-making by this coalition Government. This policy was commissioned from a party funder—though not, as far as I know, a hairdresser. It was based—by his own admission—on his private views and published without supporting evidence. It was announced by the Chancellor as the centrepiece of an otherwise empty and vacuous Budget, foisted on the Business Department and pushed through this House by the plucky noble Lord. It is widely derided in this Chamber and openly rubbished by the deputy leader of the coalition, but—and people will remember this—it was voted through by these people on a whipped vote. So I ask the Minister: what is his next trick?

It was interesting to listen to the noble Lord opposite on that. We are doing more than the previous Government did to encourage employee-stakeholders in businesses. This particular scheme is one of several that are geared towards helping, and giving some flexibility to, young, innovative companies starting up. I am pleased to say that there were 270,000 business start-ups in the UK in 2012, the highest annual figure since 2007. In 2012, there were 15,000 more business start-ups than business closures—the second year in succession that this has occurred. Clearly, there is some success coming through, so I do not agree with the tenet of the argument.

My Lords, on the Government’s successes in employee-share extensions, will my noble friend tell us the number of Post Office employees who took up the offer of shares in the recent privatisation? On employee rights, will my noble friend tell us when the initiative of the Secretary of State for Business to have a more generous award on minimum wage rates will come to a conclusion?

First, my noble friend is probably referring to the Royal Mail rather than the Post Office. I can say that around 150,000 eligible Royal Mail employees have been given shares under the free shares offer. Only 372 employees opted out of the scheme, which means that approximately 99.75% of eligible employees received the free shares that they were offered. This is the largest employee-share scheme of any major privatisation for 30 years.

On my noble friend’s second point, the national minimum wage is a vital safety net in protecting the low paid. We have already said that we need to do more to make sure that the benefits of growth are shared fairly. My right honourable friend in the other place, Vince Cable, has asked the Low Pay Commission to extend its expertise to look at what economic conditions would be needed to allow the national minimum wage to rise. The convention is that if there is a rise, it will commence in October, and that the report will be in the spring of 2014.

My Lords, will my noble friend indicate whether the Government are happy that the private equity industry is using the employee-shareholder scheme to create incentives for highly paid executives that will enable them to be awarded shares and avoid capital gains tax?

My noble friend would expect—and will not be surprised—to hear me say that it is not my department’s responsibility to formulate tax policy, and that the figures that were given during the course of discussions on the Bill were very much estimates.

My Lords, while employee share schemes may be less than perfect, and we have heard some negative remarks about them, does the Minister accept that the concept of spreading ownership as widely as possible in our society, turning earners into owners and enabling all parts of society to share fully in the asset growth of the nation is a very good theme that all parties, and their leaders, should strongly encourage, as we have sought to do in the past?

My noble friend makes a very important point. Indeed, it is true that businesses where employees have a stake in the company have been seen to perform better than those where that is not the case. The employee ownership index has outperformed the FTSE all-share by an average of 10% since 1992, so successful employee-owned businesses do see the engagement of the workforce as an integral feature of how the business is run.

My Lords, will the Minister confirm that Ministers in this House, when they answer Questions, answer on behalf of the Government, not on behalf of their departments?

Business of the House

Timing of Debates

Moved by

That the debates on the Motions in the names of Baroness Massey of Darwen and Lord Smith of Leigh set down for today shall each be limited to two and a half hours.

Motion agreed.

Procedure of the House Committee Report: Private Members’ Bill

Motion to Agree

Moved by

That the 3rd Report from the Select Committee (Private Members’ Bills; debates on Select Committee reports) (HL Paper 63) be agreed to.

My Lords, in moving this Motion, I will speak also to the fourth report of the committee.

The third report proposes the introduction of a ballot to determine the order in which Private Members’ Bills handed in on the day of State Opening receive their First Readings on subsequent days. At present, the Legislation Office organises the order of First Readings on a first come, first served basis. This proposal will establish a more formal and transparent mechanism for determining the order in which Private Members’ Bills receive their First Readings.

The fourth report is very short and simply proposes that speakers lists should close slightly earlier than at present in order to give Members greater notice of expected speaking times in debate. I beg to move.

My Lords, I will say a few words about the fourth report—not the third one, but the one about speakers lists. I welcome the recognition by the Chairman of Committees and the Procedure Committee that there is a serious problem here, which is exacerbated by the increased number of Members of this House who quite reasonably and rightly wish to participate in its debates. The problem has reached critical proportions. As the Chairman of Committees knows, we do not bring much credit on ourselves when—for example, in the debate on the Middle East originated by my noble and gallant friend Lord Boyce—we give a couple of minutes to everyone to discuss a problem that is not, frankly, susceptible to being properly dealt with in that amount of time.

I fear that that is where the good news ends, because the change introduced by the Chairman of Committees, to which I have no objection at all, is simply tinkering and is unlikely to produce any major change to the problem that the Procedure Committee has identified. I hope that when the noble Lord replies to this point, and to any others that are made, he will assure the House that the door is not closed to a more radical look at this.

There are plenty of ways in which the problems associated with speakers lists and limited-duration debates could be ameliorated. You could have a system whereby the list was closed when the number of people down to speak reached the point where each of them would have a reasonable amount of time needed for that sort of debate. That could be agreed through the usual channels or in some other way. I am not asking for a debate about that now; I am merely asking whether the Chairman of Committees will say that the door is not closed. I fear that this will have to be looked at again when it turns out that this bit of tinkering does not make much difference.

My Lords, I offer my support to the third report, which is the subject of the Motion moved by the Chairman. I fully support the idea that we should end the mad scramble for Private Members’ Bills after the State Opening of Parliament, which I was involved in at the start of this Session. I take the opportunity to inform the House that a particular Bill, in which noble Lords know I have an interest, has gone to the other place and has had a successful Second Reading. It is due to have its Committee stage as the Byles Bill on Wednesday and, with any luck, will be back here in time for us to turn it into law, four years later.

My Lords, I congratulate the noble Lord, Lord Steel of Aikwood, on his little commercial, which is much appreciated by the House. Returning to the point made by the noble Lord, Lord Hannay, I think it is important to understand that we have made great strides recently in increasing the opportunity for Back-Bench debates and contributions in your Lordships’ House. Cutting off a speakers list at a particular time was considered by the committee before it reached its current recommendation, but the difficulty is—dare I say?—that it creates the opportunity for rather mischievous behaviour in terms of flooding the list. That is one of the reservations that we had.

However, I recognise, and have some sympathy with, the general point that the noble Lord made. Having a very short speaking time is not a pleasant arrangement at all but is a product, in part, of the increase in the size of the active House. One thing that is happening is that the active House is getting larger and larger, and the proportion of our membership that is relatively inactive is declining. On the whole, it is a very good thing to have an active House rather than a largely inactive one—but, from time to time, we come close to the point where the House can operate only if a significant proportion of its membership is inactive. That is not a happy position to be in.

Motion agreed.

Procedure of the House Committee Report: Speakers’ Lists

Motion to Agree

Moved by

Motion agreed.

Children: Affordable Childcare

Motion to Take Note

Moved by

My Lords, I am very pleased to have secured this important and timely debate and am delighted to see so many speakers here today with a variety of expertise and experience. I thank colleagues from the Library for their excellent briefing and those in the voluntary sector who work tirelessly on behalf of families and children. I hope that we can deliver a wake-up call today not just to this Government but also to future Governments. Like many other issues, this should not be a party-political issue—it is too important for families. I believe that with the issue of affordable childcare, we have a situation that is out of hand.

Healthy child development should surely be at the heart of this discussion. It is an issue that often gets lost, yet research is clear about what children need to thrive—security, attention to physical, emotional and intellectual needs, and love. The long-term impact of early years care is well known. In today’s world, parents may be caught in the conflicts of what is best for their child. The situation has certainly changed from when I had young children, where it was usual for one parent—usually the mother—to be at home looking after the child or children until they went to school. I was fortunate in being able to do and enjoy that. Some women said that they were better mothers for having their children looked after by others for at least part of the day and being able to work.

Pressures on my—our—children’s generation are different and more complex. The pressures of the cost of living, the workplace environment and taking time out have increased, even though maternal and paternal leave after birth has thankfully improved. Parents want an alternative to the family situation where their child or children will be well looked after. As I and I am sure others have seen, most parents go to great lengths, whatever the cost, to decide what that care will be, whether it is with a childminder, including a relative, a nursery—either private or local authority—or other arrangements. I know many young parents feel guilty about this but for many reasons childcare has to be the way forward for them. How does that work out? Is high-quality childcare affordable? Governments—any Governments—need to ensure that parents have affordable, high-quality choices about what happens to their children at a key stage of life.

Some facts are clear. Since the last election, the cost of nursery places has risen by 30%—five times faster than pay. The average cost for a part-time nursery place of 25 hours a week has gone up to £107. There are 576 fewer Sure Start centres with three lost every week. There are 35,000 fewer childcare places. The Government offer of childcare for disadvantaged two year-olds is struggling because one in three councils do not have enough places. Some 60% of local authorities in England have sufficient childcare for working parents and in 36% of local authorities parents have reported lack of childcare to their family information service. Only 30% of English local authorities—16% in Wales—can provide sufficient holiday care for working parents, despite the obligation to do so under the Childcare Act 2006. Six local authorities report an average cost of holiday childcare exceeding £175—the maximum amount of help that a parent on low income can claim through working tax credit support for childcare costs, leaving many parents out of pocket.

Some 91% of nursery care, 94% of sessional and pre-school care, and 67% of after-school care is delivered by the private and not-for-profit sector. It has been estimated that 7% of childcare costs in group settings is due to rent or mortgage costs. A parent buying 50 hours of childcare per week for a child under two now faces an annual bill of almost £11,000 per year—£14,000 in London. Many colleagues will know such parents and how they struggle to make ends meet.

The Every Disabled Child Matters coalition is concerned that access to high-quality, affordable childcare is seriously problematic for these parents. The cost of childcare for a disabled child is prohibitive and discourages or prevents parents of these children from working. Policy developments are failing to recognise this.

Since 2007-08, local authorities in England and Wales have been required to carry out childcare sufficiency assessments and identify gaps in the provision of childcare. In 2010, only 23% of local authorities said that they had sufficient childcare for disabled children. By 2013, the situation was worse with only 14% of local authorities reporting sufficient provision.

Where childcare is available for disabled children, it is costly. Thirteen per cent of respondents to a survey by Working Families stated that they were paying £10 an hour more for childcare for a disabled child, and 66% complained of extra costs. In addition to costs, parents of disabled children are also concerned that the care for their child should be of good quality—a very significant issue. As Every Disabled Child Matters states:

“It is vital that we remind ourselves that childcare is not only about enabling parents to work but ensuring that children benefit from it.

Recently, Ed Miliband has set out plans to extend free childcare for three and four year-olds from 15 to 25 hours a week for working parents, funded by an increase in the bank levy, and to increase the legal guarantee of access to wraparound care from 8 am to 6 pm in primary schools. He has said that parents are facing a childcare crunch as they seek to balance work and family life. Does the Minister agree?

A Resolution Foundation report has acknowledged that the Government announced in the Budget last year that they will spend an extra £1 billion per year on two types of childcare support: 600,000 working families eligible for universal credit will potentially be eligible for extra childcare support from 2016, and 2.5 million higher income families not eligible for universal credit will be able to claim tax-free childcare through a new system of vouchers worth up to £1,200 a year per child. A higher level of childcare support is welcome for those families on universal credit who will be eligible for more help. However, the proposed extra support will not benefit the majority of families with children, particularly those on low wages, who struggle most with the increasing cost of childcare. Low-paid second earners who work part time will be worse off if they increase their hours than if they did not work at all.

The Joseph Rowntree Foundation highlighted late last year that more than half of families living in poverty are in work. The cost of childcare is a significant contributor to their problems, particularly due to the way that income support works, with a taper sharply reducing support as parents enter work and childcare costs increase. Sadly, the report concludes that parents are no happier with their work-life balance and attitudes to family-friendly working appear to have gone backwards among employers during the recession.

At a recent conference of the Family and Childcare Trust, issues of childcare were discussed in depth and many questions asked. The keynote address states that it must be remembered that only one-third of children attending formal childcare are aged three or four and therefore qualify for the universal element of the free early education offer. Although the number of childcare places has risen, parents still have difficulty finding affordable childcare at the times they need it. More staff are qualified, but childcare is still a low-wage profession and the annual turnover of staff is three times the average of that of a good school. That will clearly impact on quality and availability. Quality of staff in early years settings and recognition of the profession’s impact and importance is an issue that has often been raised in your Lordships’ House and needs to be an ongoing concern.

I turn to some of the responses to the issue of affordable childcare. Many professionals in the field of child and family welfare have raised several key points. First, childcare is a fragmented sector, with the expansion in the private and voluntary sectors. In a fragmented sector, there are challenges in achieving profitability without an impact on quality. There is potential for isolation and there are weak links to quality support.

Secondly, vision, direction and long-term strategy from political parties must not be lost in competing on policy, whether it be from the expansion of the free offer or tax-free childcare. Thirdly, the free offer is at the heart of childcare and hugely popular with parents, but problems remain. Many parents are not in control of when and where they access free childcare. Around 20% of parents are not happy about being able to access a good provider.

The key to affordable success, it has been suggested, lies in a simpler funding system. Multiple funding streams directed separately into a market environment lacking coherence will not achieve high-quality and flexible access for parents. Such a system also leads to administrative deficiencies. Those funding streams must be brought together. The Scandinavian model gives power and funding to local authorities to plan local provision and gives parents legal access to services. Interestingly, the Institute for Public Policy Research has produced an interim report on childcare as a strategic national priority. This report states that a wide-ranging expansion of childcare would pay for itself over time. It estimated that attracting 280,000 mothers back into the workforce would generate an extra £1.5 billion in tax revenues and make savings in benefit payments. We await the final report of the IPPR, which will indicate possible ways forward. I hope that they will be noted by policymakers.

I have tried to show that this is a complex area and needs simplifying. What is clear to me is that the Government do not seem to have policies on long-term strategies which are compatible with providing quality, accessible and affordable childcare for the majority of working parents, particularly those on lower incomes. I hope the Minister will reassure us that this is being thought through with all parents in mind and that we shall see greater clarity, simplification and understanding about the welfare of children and parents.

My Lords, I thank the noble Baroness, Lady Massey, who speaks with so much experience and expertise, for providing us with the opportunity to debate this important topic. In thinking about this debate, like the noble Baroness I inevitably cast my mind back to my own experiences, 20 years ago, and to how we coped and managed with two small children. My sister, who lived nearby, stayed at home and was a fantastic support. My sons had two loving and committed grandmothers who lived close enough to help and did more than their fair share. The children went to a great nursery and later I was lucky enough to have a flexible job. Housing costs were considerably lower, with a decent family home costing three times a salary. Many parents today have to work longer hours for what I, at least, took for granted. I now appreciate more than I did at the time how easy I had it compared to many parents today but even then I felt guilty, and at times stressed and under pressure.

A quick trawl through the Mumsnet forums on this subject shows no change and no agreement. From the comments of stay-at-home parents who feel that they have to justify their choice to working parents who feel guilty for working long hours to keep on top of their careers, it is clear that whatever it is, there is no silver bullet or one-size-fits-all solution. However, without flexibility, affordability and good-quality childcare what is really quite a short period of one’s life can, instead of being a fulfilling and exciting time filled with love and adventure, become a stressful and miserable experience for both parents and children. Needs change for babies and pre-schoolers, of course, compared with school-age children. Families are different and, obviously, childcare needs should be as flexible as possible to cater to the many individual circumstances and challenges that families face. All these families need to be supported in the choices that they make and I welcome the introduction of flexible parental leave so that parents, not government, can decide how to manage their lives when they have a baby.

Whether it is the ability to find a childminder, a nursery in the right location with available places, a work-based creche or a school that can offer after-hours care, we know that too many parents cannot get that mix of childcare that they need. It is lack of flexibility that can lock many parents out of the workplace. This is why affordable and accessible childcare is so important in our society, not just for the well-being and success of future generations but for the well-being and success of parents. Data suggest that more than half of stay-at-home mothers, one-third of the total, would prefer to be in paid employment, but in the UK one-quarter of women who go on maternity leave do not return to work, resulting in a significant cost to companies in recruiting and training their replacements, as well as the loss of knowledge, skills and expertise.

Let us look for a moment at the costs. The UK has reached Nordic levels of public expenditure on childcare but has come nowhere near reaching Nordic levels of coverage among low earners. Public childcare subsidies, at 1.1% of GDP, are among the highest in the world, yet the average cost of childcare is still 28% of household income. In Sweden, where they also spend 1.1% of GDP, childcare costs are 6% of household income while in Germany, where they spend 0.4% of GDP, the out-of-pocket cost of childcare is 14% of household income. As I read those figures, even though I know I have checked them, I still find them very hard to come to terms with.

So we spend more than the OECD average on childcare, yet British parents are still paying some of the highest costs in Europe. Clearly, neither taxpayer nor parent is getting value for money. The limited options available to parents for such high costs are due in large part to overcomplex funding systems and unnecessary bureaucracy, which are stopping childcare providers from growing and flourishing, thus preventing many parents and children from taking advantage of the excellent childcare that exists across the country. Let us take a quick look at the most common options available to parents— childminders, nurseries and school nurseries.

Childminders are popular, flexible and local. Many parents prefer home-based care, especially for the younger children. They also suit parents who work shifts; I used one myself when my elder son was small, and it worked well. Despite this, though, as the noble Baroness has pointed out, the number of childminders has almost halved over the past decade, to the point where just 1% of funded early-year places are provided by childminders. This appears to be due to two issues: difficulty in accessing funding and the mass of paperwork involved in registration. Childminders have to register with Ofsted. They have to spend about £80 on a medical check, £100 on a preregistration course, up to £100 on paediatric first aid training and more on public liability, car and home insurance, a website, professional membership, DBS checks, buying equipment, toys and books and sorting out marketing and accountancy. The whole process costs around £800, clearly contributing to high costs for users of the service.

Since September, any good or outstanding childminder can automatically offer funded places for two to four year-olds. Previously, fewer than 4,000 childminders were accessing funding but now 32,000 are automatically eligible. To help to reduce the bureaucracy, childminder agencies are being set up to help with admin and to simplify the process. They could spread the costs, reduce the hassle and use economies of scale to make it cheaper, and for parents they should make it easier to find an employer childminder. In France, where creches familiales have similar functions to agencies, they have five times as many childminders per person than England. I welcome the new childcare business grant scheme that has been introduced to boost the provision of childcare and to incentivise entrepreneurship. It will encourage and support the starting up of new childcare businesses by providing a flat-rate start-up grant of up to £500.

Nurseries, which provide about one-quarter of all childcare, are equally essential, providing a valued and trusted service to parents. Their funding should be simple and accessible. Any good or outstanding nursery will be able to access money just like childminders, without jumping through further bureaucratic hoops. Through this measure, the Government estimate that about 80% of nurseries would automatically get funding. They should be encouraged to expand and grow, just like any other business. Planning rules should be more straightforward so that premises can be converted without requiring additional planning permission, allowing nurseries to grow and flourish.

School nurseries are perhaps an underappreciated part of childcare yet they make up one-third of the national childcare market, with some 800,000 early-year places. However, the hours that they offer can be inflexible; most do only 9 am to 3 pm, if parents are lucky. An extra four hours a day would change many parents’ options. More school nurseries could look to the model of a mixture of funded and fee-paying care, which in turn helps local government funding to go further. Such schools can generate income from the nursery and by good, flexible timing of their sessions they can fill the spaces.

Of course, availability is not the only problem that many families face when looking for suitable childcare. Even when many families find the perfect solution for them, they are locked out of the market due to the high cost. Parents are locked out of the workplace and children are left out of sociable learning environments.

The average annual cost of a part-time nursery place for a young child is now more than £5,000. At an hourly rate, this is about two-thirds of the minimum wage. Even as the economy is picking up, with nursery costs in some parts of the UK rising more than twice as fast as family incomes, childcare is a big item on tight family budgets.

Every three and four year-old gets 15 hours of free childcare a week. This is now much more flexible so that parents can take it in blocks. Funding has been increased for low-income two year-olds and just one month after launching the scheme, 92,000 children benefitted, reaching an estimated 70% of the deprived children who most need help. On top of this basic entitlement, low-income working families can get help for up to 70% of their additional childcare costs.

Are we missing other innovative ideas? Should the Government revisit some of yesteryear’s solutions for inspiration? In World War II, shipyards in the United States established pioneering company-sponsored childcare centres. They were in operation 24 hours a day, had a nurse on site for any ill children and provided hot meals during the day. They were opened to ensure the company had the workforce to build ships and were closed after the war ended, but could this large-scale, open-all-hours creche be a possible option?

In the past, communities came together to look after children if their parents were not available. Could the Government look at childcare collectives put together by volunteers? Sweden, for example, has a long history of parental co-operatives run by many pre-schools. They are organised and staffed by the parents who use the service. The idea has echoes of the big society agenda where regulatory barriers are removed to encourage voluntary groups and communities to take action. This might also provide an opportunity for another resource we may not be using effectively.

We hear much about loneliness in old age. Could we not look to lonely older people, some of whom are already grandparents and some whom would love to be, to assist in supervising after-school homework clubs and other after-school clubs? Obviously they would need some training and checking, but need it really be prohibitively bureaucratic and expensive?

I welcome the fact that the Government are committed to ensuring that all families in the UK, of whatever size or income level, have access to a variety of flexible childcare options. We are improving the quality of childcare options by clarifying standards and taking the focus off of red tape and paperwork so that childcare professionals can focus on the children. Surely we can all agree with the Minister’s aspiration, included in a recent speech to the Family and Childcare Trust, which was referred to by the noble Baroness:

“Our vision is of childcare where families want it, at the time they need it, provided by people they trust, at a cost they can afford”.

For the sake of parents and children everywhere, let us hope that this vision can be realised.

My Lords, I, too, thank the noble Baroness, Lady Massey, for providing us with the opportunity to debate this important issue. It is important to children, to parents and to the economy of the country. However, this discussion gives me a very gloomy sense of déjà vu. The question of good quality affordable childcare for those parents who want or need it has been a rallying cry from women’s groups and individual women for at least the past 40 years. Back in the 1970s we had childcare campaigns organised and working in different parts of the country. I became the secretary of the Southwark childcare campaign. There were London and national umbrella campaigns. In Southwark, we had virtually reached agreement with the then GLC for the provision of a childcare centre in Bermondsey when the GLC was abolished. That was very disappointing at the time.

A number of these campaigns, including ours in Southwark, grew out of the trade union movement. My old union, the Transport and General Workers’ Union, put resolutions to the TUC women’s conference. One such resolution in the early 1980s called for a parents’ charter which itself called for not only good quality affordable childcare but for parental leave for mothers and fathers. Yes, there were and are examples of the trade union movement being in the vanguard of debate.

In the 1990s, I went to Sweden and Denmark looking at their childcare policies. The provision of affordable childcare was something of a given. Interestingly, leave for fathers was available, but was not being well used at that time. Acceptance of such provision requires a cultural shift, which takes time and effort to bring about. Hopefully, in this country, we will continue both to encourage fathers to take leave but also, crucially, to campaign for better financial compensation to enable the person who earns the most within the household to be able to afford to take advantage of the leave offer.

Also in the 1990s, the Equal Opportunities Commission produced a research report on the value to society of affordable childcare. One of the possibilities proposed was to embrace the then French system which spread the cost between parents, local government and central government, the burden therefore not falling too heavily on any one partner. Needless to say, this was not embraced by the UK Government.

Then came the debate on nursery provision in the workplace. While I accept the case for a contribution from employers, I can also see that this can hardly be described as core business. Also, of course, it does nothing to ensure that there is an overall strategy towards working parents, so some will be lucky enough to have this benefit provided by the employer and many others will not.

Finally, on the workplace nursery front, it is not always easy or even possible for parents to cart their children to the workplace, plus it takes children away from their local environment, meaning that when they start at primary school they are unlikely to know the other children because they have not been associating in that area.

The Labour Government of 1997 to 2010 introduced the Sure Start programme, providing care and support for thousands of children and families. In the run-up to the 2010 election, David Cameron accused Labour of scaremongering about the Conservative Party’s negative intentions. “Sure Start will stay”, he said. Well, as we heard from my noble friend Lady Massey, as of today there are 576 fewer Sure Start centres. So much for the validity of that statement of commitment.

In 2010, the Equality and Human Rights Commission produced a report entitled Working Better: Childcare Matters. The report found strong evidence of the importance of quality, flexible and affordable childcare for improving life chances and social mobility for parents, children and families. Yes, the economic case for investment in childcare has been well made.

The Women and Work Commission report, Shaping a Fairer Future, which I chaired, sat for 18 months inquiring into the reasons for the gender pay and opportunities gap. We reported in March 2006 and noted in our conclusions that:

“Women are crowded into a narrow range of … occupations, mainly those available part time, that do not make the best use of their skills”.

This crowding or job segregation is most prevalent among women who have children. These are generally the women who have started off in decent jobs with career options and reasonable pay. The main reason they leave the jobs for which they have been trained—many, for example, from the health service—is that unless the woman is earning a considerably good wage she will not be able to afford to stay in that job and pay for childcare. Some women manage with the first child but, for certain, once two children have to be paid for then it is financially impossible to balance the books.

According to the Family and Childcare Trust, the average cost of care for a child under two years old is now £4.26 per hour. For a parent working full time, this adds up to £11,000 a year. In London, that bill scoots up to £14,000. Since the general election in 2010, the cost of childcare has risen by 30% and the number of available places has gone down by 35,000. We therefore have the situation where business and/or the taxpayer has paid good money to train a female employee. The woman herself has put effort into her career and is mentally satisfied and financially sound. Then down the ladder she goes. The shameful fact of the matter is that, in almost all cases, that is where she stays. Once a worker is out of the mainstream, how does she get back in?

The Women and Work Commission estimated that enabling women to participate in the Labour market at their full capacity could be worth between £15 billion and £23 billion a year to the Exchequer. Partly in recognition of this, the then Chancellor provided funding for retraining and upskilling of women to help them get back out of the rut into which so many of them had fallen. The UK Commission for Employment and Skills ran the scheme from 2006 until 2011, when it was cancelled by the current Government. During that five-year period, the scheme improved the chances of more than 25,000 women, but how much better would it have been not to have lost those trained and capable women in the first place?

Not only have we not moved forward in recent years, we are going backwards. Lack of opportunities for women to get back into better paid jobs coupled with the reduction in available childcare places makes matters worse for mothers and puts pressure on the whole family. We could do so much better. Investment in our people and of course in our children—the very future of our society—should be a major priority for Governments. We need a simple and fair system of financial support towards childcare costs. We need more places to be made available and more employers to be encouraged or persuaded to provide genuinely flexible options so that parents of young children can continue to contribute both to the business within which they are engaged and to society more generally.

Good quality childcare is good for children’s development and good for families, enabling them to participate in society and the world of work in the way that is most suitable to them, and it is good for the economy, bringing, as it would, greater contributions in tax and national insurance and of course in spending power. Please tell me that this debate is not to be based on the same old arguments for the next 40 years.

My Lords, I, too, congratulate the noble Baroness, Lady Massey, on securing this very welcome and timely debate. The issue of affordable childcare is so important that it is high time we addressed it directly in your Lordships’ House.

Affordable childcare is central to the current cost of living debate and concern about living standards. According to a Joseph Rowntree Foundation report, the cost of childcare has risen by 37% since 2008, more than double the rate of inflation, and at a time when real wages have been stagnant or falling. In short, any attempt to alleviate the pressure on family budgets will be incomplete if it fails to offer credible solutions to the current lack of affordable childcare.

Last year I had the privilege of chairing a Liberal Democrat policy working group that looked at the problems of people on low to middle incomes who try to juggle work and family responsibilities. The report we produced, A Balanced Working Life, looked in particular at childcare and benefited hugely from the experience of my noble friend Lady Walmsley. We sought to emphasise in our report not just the financial burden of expensive childcare and its impact on household budgets but its implications for the participation of women in the jobs market, child development and social mobility. I want to emphasise today the importance of looking at childcare in the round.

The loss of female employment after childbirth due to the current lack of flexible and affordable childcare is a serious loss of skills to the economy. Of course, some mothers choose to stay at home and look after their children, and that must always be a matter of individual choice based on their own circumstances. However, some people are denied that choice because the childcare simply is not there.

It is worth noting that the Institute for Fiscal Studies has shown female employment to be the key driver for increased income among low to middle-income families in the past 50 years. Not only is the lack of affordable childcare a limit on women’s job prospects and professional development, it can also leave some women in a more vulnerable situation if they find that they are unable to support themselves; for example, if a relationship breaks down or a partner dies. It does not have to be this way. Findings from the OECD show that employment among women with children is eight percentage points lower in the UK than in the top five performers in the OECD. If our competitors can establish policies that enable women to return to work, surely we can, too.

From a social mobility perspective, the importance of early years is unequivocal. We have heard many times in debates in this Chamber that, by the age of three, large disparities in child development have already become apparent between children from low-income backgrounds and their relatively wealthier peers, with these gaps widening further over time. If we are serious about ensuring that children from disadvantaged backgrounds reach their potential, guaranteeing access to high-quality and affordable childcare from a young age is the place to start.

The A Balanced Working Life report, to which I referred earlier, set four criteria against which we should judge the childcare market and how effectively it is working: affordability; quality; convenience and flexibility; and the adequacy of provision. Looking at the evidence, the childcare market does not stand up particularly well on any of these counts.

Let us take affordability, which is our prime concern today, and imagine that we are the parent of a one year-old child who has returned to work, five days a week, from 8 am to 6 pm, from financial necessity, just to help make ends meet. The 50 hours of childcare you require per week will set you back on average £11,000 per year, or £14,000 if you live in London. The burden is not eased once you child reaches school age. If your job requires working longer hours and your child attends a daily after-school club, you could be faced with a weekly bill of almost £50.

It is no surprise that two-thirds of parents say that the cost and inflexible nature of childcare has meant that they have been unable either to take up a job or to work longer hours. Once again, as we heard from the noble Baroness, Lady Jenkin, the comparisons with the rest of the OECD are unfavourable. The average British family spends 27% of their earnings on childcare, which is higher than every OECD nation, bar Switzerland.

I mention briefly a point made eloquently by the noble Baroness, Lady Massey: the position facing parents of disabled children who look for affordable, high-quality childcare. Even when that childcare is available, and in many places it is not, it is often available only at a substantial premium. A survey by Working Families found that around 13% of respondents were paying more than £10 per hour for childcare for their disabled child. With the huge personal toll that providing such intensive care takes on individuals and family life, the need for affordable, reliable care is acute.

On convenience and flexibility, it is clear that, for many parents, the availability of childcare is simply not compatible with their working hours. This is particularly pronounced for parents working atypical hours. Just 9% of local authorities in England reported having sufficient places for these children. More generally, with the typical school day finishing at 3 pm, the question of who will care for school-age children becomes particularly pronounced.

I have spent some time describing the challenges that we face, because I think it is important to be clear about the nature of the issue, but I want to finish by focusing on some of the good things that are already happening and what I would like to see happen in the future. I should like to highlight the community childcare hub model developed by the charity 4Children and currently being piloted in nine locations, with very welcome funding from government. The purpose of these hubs is to integrate local childcare services, increasing their accessibility. Whereas formerly parents have had to plan and co-ordinate their own childcare, working around fixed opening times and making independent arrangements with childminders to cover irregular working patterns, hubs bring together the full range of childcare options, including nurseries, childminders and after-school clubs. Working with the hub, parents are able to establish a complete, co-ordinated pattern of care for their children, and change that when their family or working hours change. Early feedback from these pilots is encouraging; they provide a promising model for shaping and co-ordinating the local childcare market.

I am proud that Liberal Democrats have given the issue of childcare real priority in difficult economic times. Thanks to Liberal Democrat policies, implemented through the coalition Government, three and four year-olds are now entitled to 15 free hours at Ofsted-inspected early-years settings which offer the early years foundation stage. Moreover, that entitlement has already been extended to 20% of two year-olds from the most deprived backgrounds, rising to 40% as of September.

Our A Balanced Working Life report focuses on ways of reducing the cost of childcare by building on that free entitlement, which I think is at the very heart of the matter. I am pleased to say that its recommendations were adopted as party policy at our party conference last September. Therefore, as a party we are committed, as resources allow, to increasing the free childcare entitlement on a stepped basis to: 10 hours per week for all babies between the ages of one and two; 15 hours for all two year-olds; 20 hours for children between three and four; and 25 hours for four to five year-olds.

I believe that those additional hours should be targeted at those families whose joint household income is below £100,000 per year. It is worth noting that that very small provision of 10 hours of free childcare for one to two year-olds will not only help mothers to keep in touch with the jobs market, which is crucial, but provide a bridge, which does not currently exist, between parental leave and the current free entitlement for two year-olds.

Speaking in a personal capacity, I hope that such policies will feature prominently in all party manifestos, including my own, as we move to the next election, but of course mine will not be the final voice on the issue. I simply end by saying that I observe, and note with much interest, the parallels between the Liberal Democrat party policies that I have just described and those that the Labour Party announced in late September, which also aim to extend free childcare for three to four year-olds from 15 hours to 25 hours. Perhaps a cross-party consensus is about to emerge—who knows?

My Lords, I am very grateful indeed to the noble Baroness, Lady Massey of Darwen, for initiating this debate and for expressing so clearly the issues involved and, indeed still more, for her determined advocacy in this House and elsewhere of the rights and needs of children, especially those children who are most at risk within our society.

Childcare provision in this country has grown like Topsy. As we have heard from a number of examples comparing our own experiences when we were young parents with those of our children as parents now, the need for childcare has become more and more crucial to both parents and children, and as a mainstay of our culture as well of our economy. However, there is such a complex system, which is part universal and part not, with childcare vouchers in their varied forms as an additional complication. Rather strangely, there is also the danger that universal credit will actually make the situation more, rather than less, complex.

There is indeed a very strong case for extending access to affordable childcare, but there is also a case for starting again to provide a coherent system. I wonder whether there ought to be something along the lines of an all-party commission—we have heard a good deal about how the parties are coming together on some of these issues—which could stand back a bit from the immense detail with which we can get involved and consider whether there is a more coherent long-term strategy for looking at childcare.

Within that context, I should like to stress two particular points. First is the need for childcare to be not only affordable but of high quality. There are some welcome signs. The increase in the proportion of paid daycare staff who hold at least a level 3 early years qualification from 54% in 2003 to 84% now is a very encouraging marker. Nevertheless, childcare remains a low-wage profession, and the point made by the noble Baroness, Lady Jenkin, that we have here a system that is at the same time expensive and low-wage, needs looking at carefully.

The noble Baroness, Lady Massey, cited the statistic that turnover of childcare staff is as much as three times that of a good school. This must have an effect on quality. I know from my own experience how much my own grandchildren value the particular relationships that they establish through the childcare that is provided for them, and how difficult it can be for them and their friends when there are changes in that childcare. That turnover of staff is something that needs to be combated. What strategy do the Government have for improving the status of the childcare profession and the requirement for adequate training and qualifications so that it is comparable, for example, to teaching or nursing?

Secondly, despite the increase in free provision, childcare is taking an increasing proportion of the income of our poorest families, especially of those in work. More than half the families living in poverty are in work. We need to ensure that the main beneficiary of childcare is the child. Children in poverty need the high-quality childcare that enables their parents to work and so contributes to the well-being of the whole family. It is perhaps particularly important for lone mothers. Gingerbread has recently published startling evidence of the improvement in the mental health of lone mothers when they enter employment.

The Government need to be careful in the financial arrangements they make to support lone mothers and others who are unemployed in accessing affordable, high-quality childcare to enable them to return to work. Yet the current proposal for a childcare element of universal credit provides 85% of costs from 2016 only if both parents earn above the income tax threshold. The lowest-income working parents will receive only 70% of childcare costs. If earnings fluctuate, as they do in so many of these families, it will be unclear to them whether they are entitled to 70% or 85%.

Through tax credits and housing benefit, families can now receive up to 90% of their childcare costs. Those in most need will see help reduced to 70% in 2016. How will the Government ensure that support for childcare costs is given to the families in most need? This is a key part of the weft and woof of our society in these days. It is something that needs and deserves the attention that we are paying to it in this debate today, but this needs to be extended to serious consideration in all our parties and in this House as a whole. I hope that this debate will be a developing part of a concentration on childcare that will stress its importance for families, for parents, for our society and, above all, for the children themselves.

My Lords, I thought I would start with a reflection on what a strange breed working mothers are. All you really need to know about us is that we never sleep and continually stress over childcare. Between 1 am last night, when I gave the baby his last feed and started jotting down a few notes for this speech, and 5 am this morning, when my husband got up to feed him, I was woken six times. I have four children so I have no one else to blame but myself. It is my bed and I made it; I just wish I could lie in it, but that is a problem entirely of my own making.

What is not a problem of my own making is that when I drag myself out of said bed and complete several school runs, as I did this morning, and when I finally arrive at my two year-old’s nursery, I find that I must pay £1,100 per month if I want her to go full-time, five days a week. Despite the fact that I am, by definition, extraordinarily privileged because—look—I am standing in this gilded Chamber as a Member of Britain’s most prestigious LinkedIn group, the fact remains that I cannot afford £1,100 a month. So my daughter does not go full time; she goes half time—two and a half days a week. For that I pay £660 a month.

When I previously had two pre-school children, the cost for me to place them in the local children’s centre was £880 per child, or £1,760 per month. That is why, as my noble friend Lady Prosser said, once you have two pre-school kids it is simply impossible for most people to afford that childcare. At the time I had what most people would consider to be a really good job. I was senior policy adviser to the Prime Minister but still I could not afford to spend £1,760 a month on childcare. So I left Downing Street and got a job where I could afford more childcare. So what? Who cares? My point is this: if you are a woman working in the Prime Minister’s Office and your employment choices are governed by the lack of affordable childcare, then you know that women with fewer resources and fewer networks have no chance at all of being able to pay for childcare out of their salary. They are forced to stay at home or make arrangements for their children that put those children at risk and do not take care of them.

Many others can hold down a job only if they have a sympathetic boss. Working mothers and working parents, therefore, often become unfairly beholden to the individual views of their boss. I was in a situation—a lot of us have been—in which I had a sympathetic boss. My boss in Downing Street was, after all, the first Chancellor and then Prime Minister to recognise the importance of massively increasing funding for childcare. He recognised that it was a national investment, as important in terms of infrastructure—certainly to women—as, say, transport.

Notwithstanding that, when I arrived at the local childcare centre that I mentioned and found a sign on the gate saying, “Closed due to staff sickness”, I felt sick in my stomach because I was due to have my first one-to-one briefing with the Prime Minister on my policy area. It was Sod’s law. I arrived in Downing Street with a 16 month-old on my hip and was shown in to see Gordon Brown, who had a face like thunder. To be fair, he often has a face like thunder, so I was not entirely sure if it was because I had a baby on my hip. However, I knew that I would not be pleased if a member of my staff turned up with a baby on their hip for a meeting. The baby started to cry, I was jiggling him and when I turned back, Gordon had disappeared. I thought, “Oh my God! He’s just walked out and is going to sack me. He is outraged and I do not really blame him that much”. Then his head popped out from the side of his desk. He was on his hands and knees and he said, “Maybe your son will like this little train set. My sons play with it”. He pushed it round and round for 10 minutes, and then said, “I think he’s settled now; we can get down to business”.

The point is that even though he was a sympathetic boss, let me get away with bringing the baby into the office, presided over a sea change in funding for childcare, and created and funded Sure Start, the fact is that now we see the gains falling back. Too often we see Sure Start being used as a political football or, indeed, not being used at all. When Labour was in power, Michael Gove said, “The Tories may well be wary of Sure Start because they believe it is the nationalisation of childcare”. If childcare is affordable and of high quality, I frankly do not mind who provides it, whether it is the voluntary sector, the private sector or the state. In reality, it is only the Government who can ensure that affordable, quality childcare is available to all children who need it. I thought that the point made by my noble friend Lady Prosser about the role that trade unions have played in providing childcare was important. I am reminded of the school run that I do each morning. Every day I pass a small blue plaque at the bottom of my street saying that this is where Sylvia Pankhurst set up the first crèche for working women—those otherwise known as the matchstick girls. Of course, times have changed since then, but not enough. Although we have poured in that money—and I recognise some of the very important points made by the noble Baroness, Lady Jenkin—we need to be smarter about how we invest it. We need to do as well as or better than our European competitors. However, I imagine that as well as spending the money more smartly, if we are to deal with all those children—and parents—who need childcare we are also going to have to bite the bullet and invest more.

This is where we come to the nub of this debate. What is the case for increasing access to affordable childcare? We have the economic case and we know that it is worth £15 billion to £23 billion per annum to the Exchequer, but what is the social case? In my few remaining minutes, I want to talk about how childcare impacts on tackling inequality and on improving social mobility, and how it can also improve parenting across social classes. I hope that we will also take note of the early intervention debate and how we can improve outcomes.

Let us remember that childcare is first and foremost about care of the child, and the best way to take care of children who would otherwise be at risk is to invest in their early years. I want to quote briefly from the Social Mobility and Child Poverty Commission, which has already been mentioned by the noble Baroness, Lady Tyler. It says that,

“by age 3, there are already large gaps in cognitive and other areas of development between children with high-income or well educated parents and those with low-income or less well educated parents. These gaps get harder and more expensive to tackle as children get older”.

The point is that if we cannot come to a political consensus in this country that we need to invest in this area then we will just spend more and more of our money at the other end of the system in crisis, and that is not an intelligent way for us to spend our money. The OECD has stated that greater spend and higher enrolment in early education is correlated with increased social mobility. Universal, affordable and high-quality childcare helps in two ways. First, it lifts maternal employment rates and, secondly, it improves child development for the most disadvantaged children. I hope that we will note the report of the Early Action Task Force, entitled The Deciding Time—Prevent Today, or Pay Tomorrow, which reinforces those points.

In summary, investment in early years education and childcare is possibly the single most effective policy that government can implement. That is why I am proud of Labour’s vision on this issue, and I am glad to hear that we may have cross-party consensus here. However, over the long term what we need is more radical than what we have heard mentioned. Over the long term, we need free universal pre-school childcare. As Labour’s shadow Minister for Childcare, Lucy Powell MP, has stated, there is a clear economic argument for it: it will pay for itself over time.

Therefore, my only question for the Minister is a big, overarching one: does she agree with Labour—and, by the sound of it, the Liberal Democrats—that in the long term we must deliver free universal pre-school childcare? I hope that she does. I would certainly get a bit more sleep at night if she were able to consider that.

My Lords, it is, as always, a pleasure to follow the noble Baroness, Lady King of Bow, and her very powerful contribution. The vignette of the former Prime Minister playing with a train set in Downing Street goes a long way to explain a lot of the paralysis that occurred in the Labour Government. I also want to say to her that she is very welcome in bringing the younger members of her family into this House. If I knew more about it, I would do more to help her, but she sets a very good example and I hope that she will feel at home in blending her important work here with her important family duties. She has made an important speech and her personal experience illuminates the issues in this debate very well.

I am pleased to be sandwiched on these Benches between my noble friends Lady Tyler and Lady Walmsley, who both know a great deal more about this issue than I do. I can therefore indulge some of my more esoteric interests, which focus on the contribution that childcare can make to in-work poverty in this country. We are going to have to face up to in-work poverty much more squarely in the middle to longer term in this country and I am convinced that childcare can contribute to strengthening work incentives and getting families in a position to trade themselves out of the indebtedness and the poverty that we all see.

There have been some powerful speeches, one or two of which have mentioned issues relating to the long term as opposed to the short term. In the long term, if we do not have a qualified workforce coming through to generate wealth, then the dependency ratios that we face in this country will cost an enormous amount of public resource to deal with properly. If we do not increase the life chances of people at all levels of the current income distribution in our nation, we will be storing up enormous problems for ourselves in the long term.

Childcare increases, as I say, the opportunities to work; it increases the life chances of children and adds to their potential. I am not thinking of young people merely as economic units but, if they have better qualifications and a better start in life, they will carry more weight in generating the wealth that will, it is to be hoped, pay my pension in due course. I therefore declare an interest to that extent.

Childcare also reduces child poverty. However, the current Government have next to no chance of achieving the 2010-20 child poverty targets, and that is a matter of concern. I was interested to read the important work that has just been carried out by the Commission on Social Mobility and Child Poverty, to which I shall return in a moment. Mr Alan Milburn, the distinguished chair of that important organisation, pointed out in his recent report that two-thirds of children in poverty in 2010-11 lived in working homes. That is completely new. I have been interested in these issues for more than 30 years and we have never before been in a position where that is the case. It is not going to get better any time soon unless we address it with some urgency.

I pay tribute to the noble Baroness, Lady Massey, who is an acknowledged expert, and compliment her on the tone in which she introduced the debate, which was very useful. We are striking allegiances as we go along, which shows viability, and the way in which we approach these matters is important. My noble friends Lady Tyler and Lady Walmsley did an enormous amount of work in our Liberal Democrat working group, which produced a viable document. I hope that other colleagues across the party divide will take the time to look at it because I certainly found it valuable.

I wish to make a point about co-ordination, which perhaps will come more easily from me because I come from Scotland. We need to remember that tax rates are set, rather obviously, on a UK basis but that childcare policy is now largely—certainly in Scotland—a devolved matter. We need to be careful, therefore, that the context in which some of these policy changes are being made has been properly thought through. I should like an assurance from the Treasury Bench —I know my noble friend understands these issues perfectly well—that the necessary steps are being taken to make sure that there are no surprises in the different tax positions being taken at a national United Kingdom level and in the devolved legislatures. It is important to make sure that the interface is kept as efficient as it can be.

Turning to the short term, I was struck by the evidence that was submitted by the Commission on Social Mobility and Child Poverty in response to the Government’s current plans on childcare. I know that this is a cross-departmental issue and that the Treasury has an obvious interest in all of this, but I would really like, more than anything else, to take away from this debate an assurance from the Minister that that report, submitted by Mr Alan Milburn and his distinguished group of commissioners, will be absolutely and thoroughly studied. He has made a number of recommendations, two of which I think deserve particular attention. It would be possible to switch some of the resources— £750 million, £800 million, whatever was announced in the Budget earlier this year—to some of the lower echelons, particularly for low-income families who may be able to take advantage of universal credit, whenever that happens; I am not holding my breath for it to happen any time soon.

Mr Alan Milburn has suggested that rather than having a ceiling of £150, 000 you could make it £120,000, save some money and switch it into putting an 85% support level within universal credit. That makes perfect sense. It would cost no extra money at all—the money is already in the plan, and from a social justice point of view, that is an incontrovertible idea that needs to be addressed. If it is rejected, then I, for one, would like to hear the reasons why.

The second thing that Mr Milburn said, and I agree with him, is that within universal credit the current plans have got a split, a 70% or 80% cliff edge. He makes some valid criticisms which I absolutely associate myself with, and that deserves an answer as well. The right reverend Prelate the Bishop of Ripon and Leeds also made some important points, and Barnardos has made some valid criticisms, with options for change which are entirely reasonable and need to be studied to help us understand how we can deal with some of these issues going forward.

I remind the House that the current tax credit levels of childcare were originally set in 2005 at £175 for one child and £300 for more than one child. If the current plans hold, they will exist all the way through to 2016 at that level. The Commission on Social Mobility and Child Poverty estimates that by the time we get to 2016—there have been various estimates about the increases in childcare that have occurred and are obviously evident—childcare costs will increase by 80%. All the powerful points that have been made earlier by colleagues indicate that it will get worse between now and 2016 rather than better.

My final point, which I have mentioned glancingly, is that I am very concerned that universal credit will not now be available to low-income households until the end of the next Parliament. That might be a slightly pessimistic view but I am well known for my pessimism, especially when it comes to IT projects and central government. Will my noble friend go back to the department and say “Have we got some contingency planning for some of this?”. I agree with universal credit, I think the architecture is perfectly good and I have been a stout supporter of the principle. However, if we are really thinking of a 2017 introduction and a 2018 rollout for everybody, we really need to make contingency plans now to deal with this issue if that is what actually happens.

In the long term, we need to engender the concept that this should be a core public service available to everyone, and I agree with everything that has been said in that regard. In the short term, we need to seriously consider switching resources from some of the money that has already been allocated to support the needs of low-income families in work in the United Kingdom.

My Lords, I welcome this debate enormously and pay tribute to the noble Baroness, Lady Massey, for initiating it. I agree with what has been said so far, that this is a core undertaking for our society at this time.

I pay tribute to the previous speakers for their detailed knowledge of the complexity and sheer bureaucracy involved in trying to acquire childcare at all. However, I thought that I would take a longer view and look at how we got into this mess in the first place—of patchy, expensive and unsatisfactory provision, which must be addressed. I go back a long way. For the generation before mine there was no childcare. My mother left school at 13 to help look after her seven siblings. The women of my generation who went to university and certainly wanted to have jobs made do with au pairs—untrained, unchecked young students from abroad who had to be given time to study and who “babyminded” for a few hours each day. They were not always satisfactory. One of them filled the wastepaper baskets in my home with syringes, another started to wear my clothes when I was not there and a third set the house on fire. This form of childcare is not recommended.

However, in the 1960s, John Bowlby developed his attachment theory, which was an extremely important part of the research into childcare. He wrote Separation: Anxiety—what a phrase. This enormously important research seeded a sense of guilt across the whole female population about their responsibilities to their children. Before then we had not realised how guilty we should feel about the way we treated our children.

From another direction came Dr Spock and Penelope Leach, who told us how important it was for children to be at the centre of family life. They became the focus of attention and concern to a far greater extent than they had ever been in the past—indeed, that was certainly not the case in Victorian times—so we have a collision course between child-focused families and guilty parents.

Women will rush into the workplace more and more; there is no going back on that social trend, which is the most important one for women that has occurred in my lifetime, but public policy is slow in catching up with that trend. Eventually, flexible parental leave and maternity leave were introduced, so progress has been made. We now have job sharing, LA funding and the provision of childcare places. Progress is slow and, for historical reasons, is patchy. No one has really taken on board the fact that this is a large-scale, ongoing social change that cannot be defied. We have to go forward. However, in some regards we appear to be going backwards. It is amazing that that could happen after a history of some 50 or 60 years of progress.

I am glad to see that a plaque has been unveiled to Mrs Pankhurst and acknowledge her achievements in the area of childcare, but that occurred a long time ago. There are now 575 fewer Sure Start establishments than was the case previously. That serious and important loss will increase the anxiety and guilt felt by mothers looking after children. We are seeing the costs go up all the time. That, again, creates anxiety for women. I hope that it also creates anxiety for fathers. It is interesting to note that this debate is dominated by women recounting their experiences, anxieties and guilt. Can we make this a social issue which needs to be resolved for everyone?

We have heard about the importance of this issue in terms of social mobility and its value to the economy. There is no doubt that the direction of travel must be sustained. I simply ask the Government to endorse the fact that this major social change has to go forward. Will they please resume the progress that has been made so far, take on board the status of this issue, pledge resources and planning to it and remove the bureaucracy and problems that have stood in the way of women and which continue to make them feel anxious and guilty? They should not feel that way.

My Lords, I congratulate the noble Baroness, Lady Massey—who I would also call my noble friend—on introducing this debate. At a time when the country needs all those who wish to work and are capable of working to be enabled to do so, there is a very hard-headed argument for providing families with high-quality childcare when and where they need it. Working parents juggle the demands of work and family life precisely because they know that poverty will hold their children back and will not contribute to their welfare and happiness. Although enabling both parents to work if they wish is a good thing, the main issue for me is the development, physical and mental health, and happiness of the children. This comes first. As the noble Baroness, Lady Massey, said, there is a good child-development argument for enabling children to come together under the guidance of properly trained people to learn to socialise, to make decisions, to speak and listen, and to concentrate, as well as to develop their physical skills and enhance their emotional and cultural development. This is usually done by childminders or in groups in early years settings run by other professionals, but let us not forget that it can also be done informally in community playgroups and parent-led co-operative childcare groups, as mentioned by the noble Baroness, Lady Jenkin of Kennington.

Research has shown that children benefit from high-quality settings where the staff are well trained but can be harmed by spending long periods in poor-quality settings. Sadly, the poorest-quality settings are to be found in the most deprived areas, where the children desperately need the stimulus and care that is found in a good setting to compensate for their poverty of experience at home. However, research also shows emphatically that infants with secure attachment histories become better adjusted and more skilled at solving problems, seeking assistance, dealing with difficulties and tolerating frustration in later life. I am sure that the noble Baroness, Lady Bakewell, would agree with that. I also agree with her that a happy mother means a happy baby—we need to achieve both. We need to balance the child’s need to spend enough time with its principal carer, with the opportunity for loving, touching and interaction, with the child’s need to socialise with other children and receive the stimulation he needs to develop, as well as with the family’s need for sufficient income to keep them out of poverty. This is quite a difficult balancing act.

One has to accept the statistics which that show that, despite the large amounts of public subsidy that are, rightly, put into providing early years education, the cost of childcare to some parents in this country is relatively high. I say “some parents” because many of them solve the problem by using loving grandparents and other family members, who generously give up their freedom in later life in order to look after their grandchildren for nothing. Of course, most of them love doing it and provide love as well as care to the children.

I also use the word “some” because there are—we have to accept this—thousands of families in this country who benefit from the 15 hours of free entitlement and also receive a subsidy of 70% or more on any additional hours purchased or receive a tax refund on what they spend. I welcome all that. When you look at those facts you have to realise that this Government, and the previous one, have done an awful lot to help families to enable both parents to go out to work. So how is it that costs are so high? Some believe that it is because the mandatory ratios of adults to children are low compared to other countries, apart from the Nordic ones. I do not agree with that. I am one of those who believe that we have got the ratios right and they should not be changed. It is interesting that the sector feels that too, despite the fact that it would stand to gain if the ratios were to be increased. Indeed, many in the sector choose not to use the higher ratios which the law currently allows them to use in the interests of providing a high-quality service.

I have a theory about why costs are high. It is because a large number of parents are unable to resist the lure of 25 hours of free childcare in a primary school, so they send the child to school as soon as he turns four rather than keeping him in a nursery setting, where the free entitlement is only 15 hours. One can hardly blame them but the result is that nursery settings have lost all the children for whom they were legally allowed to use higher ratios and are left to make their money only from the younger children, to care for whom they need to employ more staff. Whatever the reason, we need to do something to help hard-pressed families afford good childcare if both parents wish to work and can find a job. The danger of providing additional cash benefits or tax vouchers is that the costs will simply spiral to take up the new money and there will be no improvement either in quality or affordability. So what do we do to keep costs down without compromising quality?

From these Benches, our solution, as outlined by my noble friend Lady Tyler of Enfield, is to increase the number of free-hours entitlement, thereby decreasing the number of hours for which a family needs to pay. This would soon pay for itself, as the noble Baroness, Lady Prosser, has pointed out, through the greater economic activity of both parents. It would also bring down costs because nurseries could get back the four year-olds, for whom the adult-child ratios are higher. We and the Labour Party are both proposing that, at four years-old, the child would get 25 hours of free nursery entitlement. We believe that under-fives—indeed, under-sixes—thrive best in a play-based environment, in which their healthy and happy development is the main objective, rather than whether they can read and write at four, and where their development is supervised by trained early years professionals. There is much evidence that children who start formal education at seven catch up with others who started at five by the time they reach nine and overtake them by the time they reach 11. This is because their development and their learning have gone hand in hand so that what they learn is more firmly embedded. As to those families who rely on two incomes to survive the child’s first couple of years, I would like to see an increase in the parental leave benefits to prevent mothers feeling that they have to go back to full-time work too soon for the good of their own health and the well-being of their child.

The other major issue is, of course, the quality of provision and the qualifications of the staff in early years settings. I share the concerns of the right reverend Prelate the Bishop of Ripon and Leeds—we will miss him in this House when he comes to retire in about a month’s time, and I am sure the rest of the House will share my wishes for him to have a very happy retirement. I therefore welcome the proposals for a new simplified system of qualifications bringing in the level 3 early educator and the graduate early years teacher, although I regret the proposal that the latter should not have qualified teacher status and conditions like other teachers. However, I am not clear how the Government plan to ensure that these well qualified people work in areas of high deprivation where their skills are most needed. Funding through the different schemes is weighted towards very low-income households, who can receive the vast majority of the approximate £9,000 per year cost of an average childcare place while families in the middle, on an average income of approximately £32,000, receive only £2,500. Although lower-income families receive a great deal more funding, there is no clear way of ensuring that those children are getting the best-quality care. Perhaps my noble friend can say how that is to be achieved.

I am also concerned about inspection. Last year, Ofsted spent £21.1 million visiting and inspecting around 55,000 childminders, at a cost of nearly £400 per year per childminder. Sir Michael Wilshaw admitted at the House of Commons Education Select Committee that,

“we need to think about the future and how we inspect childminding institutions. I do not think we can carry on doing it as we are doing it at the moment: every time a youngster goes into a childminding setting, we have to inspect. That is unsustainable”.

He also admitted, in my hearing at a meeting of the APPG for Education, that the current inspections of childminders are a desultory and tick-box event and have little to do with the quality of care being provided as long as it is above the minimum the law requires. Perhaps this is the real reason why the Government do not plan to insist that Ofsted inspects all childminders signed up to one of the new agencies. I would therefore be very interested in how quality is to be guaranteed.

I share the concerns of others about disabled children. It is common knowledge that many parents of disabled children are unable to find appropriate childcare at all. Even when they do so, they have to pay a premium for it. I am aware that local authorities receive additional money for disabled children, but that does not seem to filter through to the right places to ensure that parents pay no more than any other family. I suspect that it is not the legislation that is going wrong but the practice. I would be interested to know whether the Government have any proposals to ensure that that money does what it is supposed to do.

My Lords, it is a joy and a pleasure to follow the noble Baroness. Our Thursday debates are very precious to me because one hears more about the background of Members of this House—which, quite frankly, is a counterargument to those who talk disparagingly about the make-up of this House. I thoroughly enjoyed the last speech. When I reflect on all the speeches I have heard today, first, I very much want to congratulate my noble friend Lady Massey for providing the peg that allowed so many noble Lords to get these issues off their chests and to recognise, as I do, that no Bench in this House is entitled to say, “This is our issue”. I made the point in my notes that everything that could have been said has been, but not by everybody. The more one hears of contributions from colleagues around the House, the more respect one has for the fact that they have made it to this place, which is of course a great achievement.

I can speak of childcare in the 1920s and 1930s because I was there. My mam and dad had five children. I was the eldest. Dad was on the dole from 1930 to 1939, when war broke out. In fact, it was not the dole but worse—the means test. The means that you had were tested to see if they were right. In 1937, I remember speaking to mam and dad after that test. They had 37 shillings a week to look after seven people. A factor in that was that the princely sum of two shillings—that is, 10 pence—was allocated to each child. I come from a background that was not poverty stricken but where we managed because everybody else was in the same boat where I lived in Newcastle-upon-Tyne. I survived and had a very interesting life. I am proud now to have this platform here.

The Minister who will reply to this debate—whom I respect very much—will have her own contribution to make, but I have learnt from my experience and that of other people of the enormous difference in circumstances now. When my mam had to look after seven people, the question of her going out to work never figured. The way it was, if you had five children and seven in the house, your place was there to look after them. One reflects upon the opportunities now, and my noble friend Lady King of Bow was able to illustrate just how wide the gap has grown from my circumstances to hers. That means that, as in the very first words of my noble friend Lady Massey, it is the responsibility not just of this but of every Government to take seriously what has been said here.

When I moved on into the 1950s, I married and had two children. We were not hard up, but the vogue of going out to work certainly came about and was there. That vogue has grown and grown. I read of the circumstances of young married women who try to do what the Government urge them to: get a job, and get out and work. Then one looks at what is available to enable them to do that. All parties are guilty of not looking at the two ends of that spectrum. We are very good at recognising the concerns of the elderly—pensions, grants and so on—but not this sector for one reason or other, bearing in mind that we are talking about flesh and blood, and the future of our society. As my noble friend Lady Bakewell said very well, how did we get into this mess? The priorities need to be readjusted. The Minister has a responsibility to do that because she will speak to her colleagues and be briefed by civil servants. She has her own experience to bring to the House, but she has a major job to take from this debate the fact that priorities need to be readjusted. There need to be opportunities like that.

When I looked at the marvellous brief produced for this debate by the Library, I was interested by the words of the Minister, Elizabeth Truss. She said:

“Every parent wants the best for their child. They expect childcare to be safe and of good quality, because high quality childcare promotes children’s development in the early years. The availability of affordable, safe and stimulating care is crucial in supporting families by enabling parents to work. It is equally crucial to the development of babies and young children as the foundation for their future success at school and in life”.

How many people could argue against that as a statement of aspiration? She goes on:

“That is why this Government is determined to ensure that the system delivers high quality and good value for children, parents and the tax-payer. I am clear that we can do better. We need consistently high quality nursery education and childcare that attracts the best possible staff”.

No one would disagree with that but only the Minister—that is, the Government, with their priorities—has the opportunity to do something about it. We can stand here, preach, reminisce and urge, but the power to reorder the priorities in the Budget is not in our hands.

At the bottom of the briefing, there is a statement by a journalist, Kathy Gyngell, who states:

“High quality affordable universal child care is a myth and Elizabeth Truss has, unwittingly, exploded it. That’s why her deregulation proposals have offended our sensibilities”.

She goes on to make her case, stating:

“It’s hardly worth a typical second earner going out to work more than a couple of days a week, because the family will be barely better off”.

One has reached the stage where exhortations to work are made by Ministers, policies are created and rules and regulations refashioned, yet the wherewithal to do it is—I will not say denied, because it is acknowledged, but it is not made available.

The debate today has sent a powerful message: first, that Members of this House have their feet on the ground; they have experience and a contribution to make. I hope that when the Minister reports to her colleagues on the value of this debate, she will be successful in reorganising the Government’s priorities. I repeat that we are not talking about bankers, journalists, police or anyone else, but about our own flesh and blood. They have the opportunity to make progress, but they need the Government to take initiatives in this matter. I rest my case.

I begin by thanking my noble friend Lady Massey for securing this important debate on a matter which is having an effect on families up and down the country. I have just returned from two weeks of looking after my 10 year-old and my 12 year-old for the holidays. I am utterly exhausted and have come back to work for a little rest, so I cannot begin to imagine what my noble friend Lady King is going through with her three children and her brand-new baby. I welcome TJ to the world, and I am sure that noble Lords will all join me in congratulating her on the birth of her new child.

I therefore start by paying tribute to all the mums and dads throughout the country and the armies of childminders and pre-school teachers, who are crucial in the early years of a child’s development. Having a child is an expensive business, but under this Government it is a more expensive business than ever. The decision as to whether to stay at home is of course an individual one, and rightly so, but it is based on a number of factors. Today, I fear that that choice is curtailed for many who have often been highly trained and highly educated by the state—people who were making a valuable contribution to the workplace—but for whom the cost of childcare simply does not make it worth their while to go back to work. They drop out of the workforce, they lose their opportunities for promotion and they often lose confidence, and so do not go back into the workforce at the level that they came from.

I reflect on the point made by my noble friend Lady Bakewell about the guilt that mums have to carry when they work. This was brought home to me very clearly when I was an MEP. One day I came home on a beautiful summer’s day, I had my three year-old and one year-old in the garden and I saw a wasp lying on the ground. The wasp was in trouble; he had hurt his wing, or something. I moved the wasp so that my daughter would not put it in her mouth and my son said, “What are you doing?”. I said, “Look, he has hurt his wing”. “Oh yes, he has hurt his wing, he wants his mother”, he said. So I said, “You go and look for his mother”. Two minutes later he came back. He said, “Mum, I have looked everywhere for the wasp’s mother. I think she has gone to work”. That is when you feel bad.

Many people with young families who are already contending with higher fuel bills and transport costs are really struggling now with these rocketing prices—30% up, as we have heard, five times more than pay since the coalition Government came to power. It is worth spelling that out in financial terms. As we have heard, the average cost of a full-time nursery place for a child under two is £11,000, £211 a week. Let us not forget that the average salary in this country is £23,000 before tax, so half the money is supposed to go on childcare. That is double the amount that people spend on a mortgage. That is just for one child. We need women to engage in the workforce to increase economic activity, because this is not just a massive financial burden for parents, it is a burden for the wider economy, which is dragged down by the fact, according to the Resolution Foundation, as we have heard, that fewer women with children work in the UK than in many of our competitor countries. In a survey of mothers carried out for Asda, 70% of stay-at-home mums said that they would like to go back to work but they would be worse off in the current climate because of the cost of childcare.

We need to use the talents of everyone if we are to succeed as an economy and keep social security bills down. Making it easy for women to combine work and family is essential to the nation’s standard of living. The OECD states that there is a need for fertility rates to reach 2.1 births on average if we are to remain economically stable. Studies have proved that women have fewer babies in countries where it is too difficult to combine childcare with work.

In the late 1990s, birth rates in Britain were at an all-time low, with 1.6 babies per woman in 2001, but by 2010, the birth rate had risen to its highest level in 40 years, reaching two per woman. More British-born mothers had more children, in addition to immigrant mothers. Why? Because every signal that the Labour Government sent out was that babies and children are welcome in our society. Government childcare and tax credits were a key factor. Maternity leave doubled under the Labour Government, paternity leave was introduced and mothers were for the first time able to request flexible working hours. Child benefit rose and child tax credits added greatly to family incomes. Childcare costs for the poorest were covered up to 80% by credits, with free nurseries for three and four year-olds and 3,500 Sure Start children centres. Let us not forget that the child trust fund gave new babies a nest egg.

A lot of that has changed. We have recently had a triple whammy combination that has formed a crisis. We have fewer places available, despite an increase in demand, a cut in support to parents and an increase in costs. That has led to an economic burden which, of course, has hit the poorest hardest. As we have heard from my noble friend Lady Prosser, the Government’s cuts have led to the closure of 576 Sure Start Centres, a key plank in giving support to those mothers from the poorest communities.

According to Ofsted, there are 35,000 fewer childcare places, despite the increase in demand. The basic rules of economics suggest that to bring prices down you need to increase supply, but this Government are doing exactly the opposite. There is evidence to suggest that the Government’s proposed agency approach to childminders will push prices up even further. Can the Minister give us a guarantee that it will not?

The squeezed middle are also carrying an enormous burden. The average person earning £23,000 would be left with less than £100 a week to pay for everything, if they had already paid for their essentials of housing, fuel, transport and food—no holidays, no treats and not enough to cover one child’s weekly nursery bill. That is the reality of the working poor; it is the cost of living crisis. If a mother decided to work part-time on an average wage, she would have to work from Monday to Thursday to pay off the weekly childcare cost; it is hardly worth going to work.

The problem does not stop when the child starts school. Many parents are now willing their children to grow up fast and start school to relieve the intense cost pressure. I am one of those mothers who spend half their life trying to organise their children’s pick-ups and drop-offs at pre-school and after-school care. Parents need quality and reasonably priced flexible childcare if they are to manage to hold down a job as well.

The Labour Party recognises that the issue of childcare is fundamental to this cost of living discussion. That is why Labour has a costed pledge, funded by an increase in the bank levy, to extend free childcare for three and four year-olds from 15 to 25 hours per week for working parents of three and four year-olds. In addition, another measure that will have parents up and down the country heaving a sigh of relief is that the Labour Government will introduce a legal guarantee to access to wraparound care from 8 am to 6 pm at primary schools in England—we need to note that that is just for England. This is reinstating a programme that proved successful under the previous Labour Government, whereby, in 2010, 99% of schools in England were providing access to before and after-school childcare. This programme was abandoned by David Cameron, effectively ending that guarantee of a core offer of activities from 8 am until 6 pm for school-age children. Does the Minister regret the decline in wraparound childcare on this Government’s watch? Will Ministers now support Labour’s pledge for a primary childcare guarantee?

There is a proposal from the Government that things will change in 2016 but that is too late for mums and dads of today. What will happen today, tomorrow and the next day? By 2016, their children will be in school and it will be too late. There are three fundamental problems which have been addressed unsatisfactorily by the Government relating to childcare: the costs have gone up, the places have gone down and there have been cuts in support to parents. The Government really need to get a grip on the issue of childcare and demonstrate that they are on the side of children and families. All the current evidence suggests that they are out of touch and have no concept of the difficulties facing families today.

I thank the noble Baroness, Lady Massey, for tabling today’s debate on access to affordable childcare and for introducing it so effectively. She has a long track record in fighting for the rights of children and families, as I know from sharing with her the position of trustee for UNICEF, a position which my noble friend Lady Walmsley also held. I also thank all noble Lords who have spoken in today’s debate. As ever, this has been a very powerful debate and we all agree that the cost and quality of childcare matters. As the noble Baronesses, Lady Massey and Lady Bakewell, my noble friend Lady Jenkin and others have pointed out, life has changed over the past few decades. Of course men and women have long worked but as social and economic patterns have changed, so too has the way that children are brought up. Increasingly, from the Second World War onwards, women took up paid work and, what is more, nuclear families often lived away from other family members. As the noble Baroness, Lady Bakewell, said, we have here a large-scale social change.

Many of us here had the experience of the huge challenges of arranging paid childcare, as the first ones to do so in our families. The noble Lord, Lord Graham, thought that I might inject my own experience and I must not disappoint him. I recall my experience as a lecturer at UCL, returning to work with a baby and finding that I would have needed to reserve a place in the nursery at the moment of conception, not birth. My baby accompanied me, and I kept him as quiet as I could for the first few months until he secured his place. I knew to act faster when I became pregnant the next time. Although that then almost obliterated my salary, I had a very good and wonderful workplace nursery.

However, I identify with those who felt guilt, as expressed by the noble Baronesses, Lady Massey, Lady Bakewell, and Lady Morgan, my noble friend Lady Jenkin and others. I still have this image of Munch’s “The Scream” from when my second child’s face was one large, gaping, wailing hole as I left him one day in the nursery when he was aged about one. I wondered what I must be doing to him. I also recall the black looks of my male academic colleagues at the Wellcome Institute as I had to leave work when the nursery closed at 5.30 pm, but their wives were looking after their children and they did not have to worry about it. As the noble Baroness, Lady Prosser, mentioned, I then had to carry my tired children home and the evenings were no fun.

I recall when I was first here phoning home and speaking to my then six year-old daughter, to discover that her eight year-old brother was in possession of a power drill—and did it matter? No adult was at home and the person supposedly looking after them had taken my other son to something. I was phoning from just outside the Chamber while waiting for a vote and the noble Lord, Lord Peston, was on the other phone. He heard my desperate reaction as I heard about the power drill and reassured me that they would survive, and they did—but they might not have. So I am extremely familiar, as so many here are, with what this actually means.

It is now commonplace that both parents will return to work before their children are fully grown. I am glad also that we have made the moves we have to make sure that there is shared parental leave. We are not talking here only of children who are under school age but of those going through school as well, including their holidays. Of course, not all parents will want to place their children in childcare and parents should have that choice, but for those who return to work who, as I say, are increasing in numbers, it is essential that they have access to good quality childcare. I am sure that we all agree with that and I do not quite follow the points made by the noble Baroness, Lady Morgan, when there had been so much agreement across the Chamber. We all understand the significance of this.

Childcare is obviously particularly important for enabling mothers to work, as the noble Baroness, Lady Prosser, my noble friend Lady Walmsley and others have said. That is because it remains the case that the primary responsibility for children is seen as being the mother’s, rightly or wrongly. We know from many surveys that women still carry out the bulk of caring for children and for the home so, as the noble Baroness, Lady Bakewell, said, this is all part of a long process of establishing more equality for women.

The noble Baroness, Lady Massey, asked whether we are facing a childcare crunch. I do not agree; what I said about my own experience and what others have said indicate that as this social change goes on, childcare has been a challenge all the way down and continues to be so. It was so under the previous Government and I pay them credit for what they did. We have been building on that and are taking a number of positive steps that are beginning to demonstrate an impact but, as the noble Baroness and others all said, all Governments have faced this challenge and will do so. We all, from whatever party, need to continue to address this. It is best to be working together on this, in my view.

Research shows that more than half of stay-at-home mothers would prefer to be in paid employment and that nearly a quarter of employed mothers would like to increase their working hours—although they can do so only if they can arrange reliable, convenient, affordable, and good quality childcare, as the noble Baroness, Lady Prosser, and others made very clear.

As anyone knows if they have left a child in care, knowing that they are well looked after is absolutely vital. It is complex and not easy to leave your child with another but when you see that they are safe and happy, that is of key importance. When I saw my daughter gazing with adoration at the wonderful person who looked after her, that too made me happy. My noble friend Lady Walmsley is quite right about the benefits of good quality care. As I listened to the noble Baroness, Lady King, I also recalled that when my daughter was about seven days old that same young lady, who is now a university student, left a particularly large wet patch on Paddy Ashdown’s carpet here. I was trying to maintain my career, which meant that my daughter came with me, so that swam into mind. I left very rapidly then and this may be the first evidence that my noble friend Lord Ashdown has that I, or she, was responsible for that wet patch.

The noble Baroness, Lady Massey, mentioned that childcare is a low-wage profession with high turnover. We agree with the noble Baroness that the quality of the workforce is key; evidence shows that this is extremely important. The Government have introduced the early years teacher status from September 2013, in recognition of the impact of graduate teachers on children’s development. We have introduced apprenticeships and bursaries of £3,000 to increase the number of staff educated at least to A-level and to have English and maths GCSE. I learnt quite a bit from the person who was caring for my daughter about how to bring up three children who were close in age and in competition with each other. At that stage she had been taught but had not had her own children, which she now has.

We all agree that we need to aspire to having good quality childcare available at a reasonable cost, and that it is vital that we get that right. Noble Lords have also emphasised the economic benefits that this would bring to the country, as my noble friend Lord Kirkwood and others have emphasised, as well as to the families themselves. We realise the significance of that.

As I say, we recognise what the previous Administration achieved, but all would recognise—this has run through the debate—that more needs to be done. That is why we have taken a number of steps to seek to reduce parents’ childcare bills. In September 2010 the Government increased the free entitlement to early education for three and four year-olds to 15 hours a week—570 hours per year—up from 12.5 hours a week. My noble friend Lord Kirkwood and others are right to emphasise the importance of early years education. It so happens that early years education can also help in terms of childcare, but I would not necessarily conflate the two.

However, 96% of three and four year-olds are now accessing a free place. As my noble friend Lady Tyler mentioned, from September this entitlement was extended to around 130,000 disadvantaged two year-olds, and it will be extended still further from September 2014 to two year-olds from working households on low incomes, for whom the costs of childcare are such a burden, and more than 260,000 children will be eligible. My noble friend Lady Walmsley stressed the importance of that educational provision.

The total funding for early years education has also increased by more than £1 billion over the life of this Parliament. My noble friend Lady Jenkin is right about the proportion of GDP that we put into this yet, as she emphasised, we still see the challenges in the cost both to the state and to families. The noble Baroness, Lady King, talked about universal free childcare. As I say, there is universal childcare for three and four year-olds, and the Government are proud of extending that to 40% of two year-olds. There are arguments for extending that further, of course, but the Department for Education estimates that universal full-time childcare for children aged one to four would cost £18 billion. She seemed to indicate support for that by her reference to her colleague in the Commons but it sounds from what the noble Baroness, Lady Morgan, indicated that that is not actually an agreed position. That kind of provision was made in some countries, obviously—I remember visiting nurseries in Russia—but it sounds as if the Labour Party has not signed up to that.

I would like to clarify that the shadow childcare Minister has said that this is an aspiration to which we are attached. It is a vision that we recognise we should work towards, and I hope that perhaps all sides of this Chamber agree with that.

I appreciate that clarification. I am sure that that is something that a lot of us would ideally wish to see.

However, on its own, simply providing more funding will not halt the long-term increase in childcare costs or provide the childcare places that we need for the future. Nurseries find it difficult to expand without jumping through many hoops, especially in planning. In addition, a complex registration system and duplicatory inspection regimes have created barriers to new entrants to the childcare market. We are not making enough use of the many excellent facilities in our schools. In Denmark, for example, 88% of six to eight year-olds take advantage of before-school and after-school or holiday care, compared with only 22% in England. What the noble Baroness, Lady Morgan, said about wraparound care in schools was not exactly accurate; a number of the schools that she was referring to were simply pointing parents in the direction of care, not providing it themselves. Unfortunately, I do not think that in the past this has been cracked, and it is therefore important to be clear about what the situation actually is.

I assure the noble Baroness, Lady Massey, that we are indeed looking at this strategically. Our reforms focus on three key areas: increasing supply—we are working very actively to expand the number of places available with childminders and in nurseries and schools; streamlining inspection so that we can focus on what matters to improve children’s development and ensure that they are safe; and reforming financial support to parents, making it simpler and more consistent. That is an issue that the noble Baroness emphasised. On the simplification of funding streams, the Government are carefully considering how best to achieve that as the universal credit and the new tax-free childcare system schema are rolled out. It is important to get the balance right between stable funding for providers and flexibility and choice for parents.

As noble Lords have said, we need to increase supply. We are doing what we can to halt the long-term decline in childminder numbers—that has been a very long-term decline, as anyone can see from the figures; it is not recent—and provide new opportunities for high-quality private and voluntary nurseries and schools. Noble Lords here will be well aware that we are coming up to day four of Report on the Children and Families Bill, and we are legislating to enable the creation of new childminder agencies to make it simpler for people to become childminders, to provide training and support and to help parents to access home-based care. We are making it easier for schools to expand to take two year-olds and to offer out-of-school-hours childcare. In February we will have the first results from schools regarding our demonstration projects on this, and we will be assessing how they are working and what can be done to expand that. So we are taking a number of measures to try to address this.

The noble Baroness, Lady Massey, asked particularly about disabled children. I assure her that from September, as I hope she will know from the Children and Families Bill, all children with special educational needs and disabilities will for the first time be entitled to 15 hours a week of government-funded early education from the age of two. I appreciate that she is also talking about childcare in addition to that, though, and she is right to ensure that what is being provided covers all children.

A few noble Lords have made reference to children’s centres and indicated that they thought that these were closing in large numbers. We are well aware of the great services that children’s centres provide to their local communities for prospective parents before and after their babies are born, for the parents and children themselves until they are five. The noble Baronesses, Lady Massey and Lady Prosser, for example, thought that 576 Sure Start centres had closed. In fact that is not the case; as of 30 November, fewer than 2% had closed and more than 3,000 were open. The question of Sure Start comes up quite often, and as I looked at this carefully I found, and this is worth emphasising, that children’s centres provide only a very tiny proportion—less than 1%—of all registered childcare places. That does not mean to say that they not of value, but they are not central, and have not been, to what we are talking about today.

With regard to inspection, we have to ensure that while increased choice is important, if provision was not of a high standard it would leave parents with no real choice at all and be detrimental for children. The noble Lord, Lord Graham, made that point very clearly. Growth should not be at the expense of quality. Ofsted has recently announced reforms to early years inspection, and expectations will be higher and accountability increased. I have a lot of detail about the inspection process that I am happy to write to my noble friend Lady Walmsley about. She was also asking about childminder agencies. We are working with 20 organisations to trial how childminder agencies will work. As part of that, we are considering with Ofsted the most effective way of ensuring the quality of those childminders registered with an agency. I am happy to spell that out in greater detail, given what I need to cover.

We remain committed to helping families with the cost of living and supporting parents to work. We are improving support for middle-income families by introducing a new tax-free childcare scheme. Noble Lords will, I hope, know the details of that. Once the scheme is fully established it will benefit 2.5 million working families. For low earners, government will continue to pay up to 70% of childcare costs through working tax credit and universal credit. I am again happy to put details in a letter to noble Lords who have taken part in this debate. The right reverend Prelate the Bishop of Ripon and Leeds and my noble friend Lord Kirkwood asked about this. We are already investing £2.2 billion in universal credit childcare support and making a further investment of £200 million to provide extra support for working families earning enough to pay income tax. We are considering responses to a recent consultation on tax-free childcare and will respond shortly.

These are positive indications that the package of reforms that the Government have put in place are starting to have the desired impact. The signs are promising in terms of the cost of provision and maternal employment. The National Day Nurseries Association reported in July that 58% of nurseries have frozen fees. The average fee increase across all nurseries was 1.5%, which is well below inflation, and 200,000 women with children have gone back to work since 2011, which is more than during the five years before that.

However, we are not complacent. We know that a great deal needs to be done. We need to encourage growth in every part of the childcare market, place quality at the heart of childcare provision, create genuine choice of providers for parents and ensure that work really does pay. We are talking about a long and very important social change. This has been a very important debate. The right reverend Prelate, who will be much missed when he takes retirement, pointed out that it is part of the weft and woof of our society. It is vital that we have flexible, accessible, high-quality childcare available to those parents who wish to access it. We know that for better equality between the genders more parents will be seeking such assistance. I am glad to that so many noble Lords have contributed to this important debate. Their contributions have been very thoughtful. Once again, I thank the noble Baroness, Lady Massey, for securing this debate.

My Lords, I thank the Minister for her response. I also thank all noble Lords who have taken part in this debate for their very powerful contributions. It has been such a good debate that for the first time ever my notes are longer than my speech was, but I assure the House that my response will not be as long as my speech.

I have learnt a lot today and had some ideas reinforced. I heard an important concept put forward: an all-party commission on childcare. There is a great deal of consensus between us in this House, as always when we speak about children. I shall not refer to noble Lords by name, but they will know who they are. Speakers on all sides said that all is not well, much has been achieved, but we still have some way to go.

Personal reflection is always very important, and we had it about a 16 month-old child on the hip, a wasp’s mother and wet patches, and my noble friend Lady Prosser spoke about campaigning and organising. We have mentioned key issues which could form the basis for discussion on this large social change. Some of these issues seem to be about how the system can be made simpler and more flexible, coherent and accessible. Let us look at structures, including holiday care. Let us look at spending smartly, as a noble Lord said, and at how we can show that childcare can ultimately pay for itself if it is rightly funded. Let us reinforce what we know about women and employment. Childcare is good for women, families and the economy. Let us look at good practice, not just abroad but in the UK. Let us look at the benefits of early intervention and how it can prevent problems later on. At the same time, let us look at the early years workforce. It is key that childcare must be of the highest possible standard and must benefit children. Let us look at inspection. Let us look at issues about disabled children and childcare. Let us look at in-work poverty. Let us look honestly at social mobility and childcare. That is just for starters. Much work has been done and is being done by all parties on childcare, families and children, but, in thanking the Minister again, I ask her to suggest some cross-party forum way where we can forge and examine these issues realistically and honestly.

Motion agreed.


Question for Short Debate

Asked by

To ask Her Majesty’s Government what action they will take in conjunction with other European Union member states to establish a European-wide evacuation and resettlement programme for those fleeing conflict in Syria.

My Lords, I appreciate this opportunity to lead the discussion in this House on what has been termed,

“the greatest humanitarian catastrophe of modern times”.

More than 850,000 Syrian refugees are in Lebanon, inflating the country’s population by almost a quarter, 575,000 refugees are in Jordan, 560,000 refugees have crossed the border to Turkey, and 130,000 have fled to Egypt and 210,000 to Iraq. Following news on Tuesday that Iraq is reopening a border into its Kurdish region, this last number is set to escalate.

The total number of Syrian refugees is now estimated to be 2.3 million, of whom only 0.5%, around 12,000, is spread across the whole continent of Europe. Bulgaria, whose people were so demonised in the lead-up to 1 January and which is the European Union’s poorest country, is bearing the brunt. An estimated 100 Syrians enter Bulgaria every day, many of them illegally. Those who arrived last year were five times the country’s annual asylum quota. This poor country simply cannot cope.

While the numbers are important, we must not let them mask the human sorrow, the tragedy, the catastrophe, that is the real substance of this crisis. The UN and its partners in the region face many pressures. They have to safeguard the health of millions, many of whom are now at risk of contagious diseases, such as polio. Their ability to deal with the extraordinary, such as survivors of torture and victims of chemical attacks who now have severe respiratory problems, is obviously limited.

These organisations are also fighting to ensure social stability, which is an uphill battle. In Lebanon, where the population has grown by an extra 25%, essential resources, space and labour are all causes of significant social tension. Near a village in east Lebanon, a makeshift refugee camp providing shelter for hundreds was burnt down last month, a sign of the increasing social tension in that area. The violence is spreading. The Lebanese town of Tripoli saw bloodshed mirroring the Syrian conflict in the past few months. Car bombs in Beirut are once again headline news. Lebanon’s recovery from its own civil war has been long, slow and difficult and is far from over.

The Syrian civil war is enough to spark renewed violence that can destabilise the whole region. The spread of violence will continue unless practical and immediate measures are taken to relieve the pressures on Syria’s own neighbours. They are generous, but can they cope? The international community has responded admirably to the United Nations high commission’s call for financial assistance for refugees. The UK has pledged £500 million in aid—4.1% of the 2013 aid budget. A further £16 million was pledged only a few days ago. However, refusing to provide further practical help can undermine the overwhelmingly generous response from the UK public to this crisis.

It is immediate, hands-on, practical help that is now needed. We have so far failed to allow any extra space for Syrian refugees, but I suggest that it is now absolutely imperative that we do so. I received a Written Answer on 28 November from the Minister, informing me that the Government refuse even to consider relaxing the financial requirements in the family immigration rules for the extraordinary cases of Syrian nationals resident in the UK. I consider this response reflects a deplorable lack of compassion on behalf of the Government, considering how we as a nation and a society could combat that international crisis. Simplified and expedited family reunions for Syrians here, on any kind of visa, should surely be considered further. What proactive efforts have been made to reunite refugees in the UK with their families? Will the Minister make a declaration on the status of Syrian students in the United Kingdom?

On Tuesday, the Deputy Prime Minister stated that we have accepted 1,500 Syrians seeking asylum in the UK. This number, however, needs to be taken in context to be properly understood. First, it represents only those who were able to reach the UK independently using the normal asylum process. That precludes so many—millions—of those who are most in need of our help. Secondly, I understand that 352 Syrians were refused asylum. Indeed, by the third quarter of 2013, there were still 446 Syrians awaiting a decision on their application made through the normal channels. The truth is that ignoring the problem and accepting Syrians seeking asylum only through normal routes can be hugely damaging. The UN has called for us to take Syrian refugees in addition to our current resettlement quota.

I am not at the moment calling for the creation of another EU body. Under the auspices of the UN, a working resettlement programme already exists. The UN aims to register all refugees, and in so doing document those in particular need. When other developed nations answered the United Nations’ call for resettlement, they responded to the cry for help from the UN on behalf of these most vulnerable human beings. Not all countries have used the same method but they have, in their own way, responded to the need. Norway, Finland and Sweden have each accepted 400 to 1,000 refugees on a permanent basis. The Government of Canada have accepted 200 refugees, but have also pledged a further 1,100 places through private sponsorship. Germany, taking the lead, has pledged 10,000 places, staggered across the next three years, on the basis of a pilot humanitarian assistance programme, limited to a two-year stay. On a similar basis, Austria and France have each offered 500 places. Even Moldova, with a GDP of just over $2,000 per person, is taking 50. We have said that we can take nobody.

Does the Minister agree that only a firm, global or continent-based resettlement programme will offer a durable solution to this crisis? Both in financial and in practical human terms, the current, unequal levels of response are totally unsustainable. The United Nations is already working closely with these countries to select and assist the most vulnerable, including women and girls in danger of sexual violence, survivors of torture, refugees with severe medical needs and disabilities, those in need of family reunification, and those who face persecution because of their political views, sexuality, ethnicity or religion. We hear so much about the persecution of Christians in that part of the world. We are saying that we are not going to accept these people. We are denying them a place and saying that they must make do with what other countries—Jordan, Turkey and others—are offering. The priority is not only to accept those who are in danger, but also those who will be invaluable in the rebuilding of Syria once this dreadful conflict has ended.

Amnesty calls on us to accept 10,000 of those in need. I fully support that call. Does the Minister? He will say, “Ah, but that is a big number”. With the Vietnamese boat people in 1979, we did accept 10,000. The fears of a public backlash in that case were totally unfounded. The British people proved their compassion and their hospitality. Of course, a decade earlier, in 1968, the east African Asians were another example. Forty-five years on, and in the light of the greatest humanitarian catastrophe of modern times, we are called upon to do so again. When the Minister says that we cannot possibly have a resettlement programme, where does he get his knowledge from? Where is the difficulty? The UK has a proud history of providing support in this way, most recently in the Balkans. What has changed?

I suggest to the Government and to this House that we can no longer afford to sit back and wait. The social, financial and human cost of doing nothing is mounting by the minute. The cost will surely be felt by all. As a Government, we can move and assist so many people in a very practical way.

My Lords, I congratulate the noble Lord, Lord Roberts, on having secured this debate. It could not be more timely, and I very much agree with what he has said. The background for this debate is of course a wider discussion on immigration in this country, a discussion which I regret; I do not regret discussion about immigration, but I regret the tone of the immigration debate which is taking place. However, this is not the occasion on which to debate that.

We are talking about a specific humanitarian issue: dealing with an absolute nightmare in Syria. The figures are terrifying: 2.3 million people have fled Syria; 4.25 million people have been internally displaced; and there are more fleeing that country every day. Against this, the United Nations High Commissioner for Refugees has made a modest request that Europe should accept 30,000 vulnerable refugees who fled Syria—vulnerable people being pregnant women and children—and I would add those with strong family links and some member of their family already in the United Kingdom. Of course it is good that the United Kingdom has made a substantial cash contribution, but that should not be the end of our responsibilities. They should go much wider than that.

What about the current burden on countries like Jordan and Lebanon, to which reference has been made? Jordan has 500,000 Syrian refugees already. One in five of the population of Lebanon is a Syrian refugee. Prince Hassan of Jordan was asked whether his country was running out of patience with Syrian refugees. He said:

“We’re not running out of patience, we’re running out of water”.

The sheer burden on Jordan of coping with the numbers means that it is frankly at the point where it cannot cope anymore. The UNHCR is asking for a small gesture from a country as affluent as ours, because we are talking not just about Jordan and Lebanon but about Turkey and Egypt.

The question is whether our Government are running scared of public opinion. I expect, deep down, that that is what they are thinking. I believe that British public opinion is better than that. I believe that the British people are much more willing to accept what is a humanitarian responsibility. I am convinced that we should not be running away from the issue because we are afraid of what some of the newspapers might say.

Just before I came into this House, and indeed for a short period after that, I was chief executive of the Refugee Council. We dealt with a programme for Bosnians at the request of the British Government. At very short notice we were asked to make arrangements for 4,000 Bosnians who had been detained in those vile Serb concentration camps—people who were absolutely traumatised, as are the Syrians today. Those people came at short notice, and we arranged for reception facilities and that they should then be moved on. We arranged that they should not all come to London but that those people should be in regional clusters to make it more acceptable in other parts of the country—and it worked. There was virtually no public objection that I can remember, but enormous public support. The people of this country knew what the Bosnians had suffered—we saw it in our newspapers—as they know, day in, day out, what the Syrian people have suffered.

To make the wider community understand, we had a reception centre in Newcastle, for example. We arranged an event where we invited local councillors, doctors, social workers, churches and the wider community to come along to meet and to welcome the Bosnians, and it worked. They came there and they were happy to say, “We welcome you in this country as individuals”, and there was no terrible public outcry. Indeed, on the whole the Bosnian programme worked pretty well. Lessons had been learnt from the earlier Vietnamese programme about dispersing people in small units, because in the experience of the Refugee Council it was better that people should be together with other members of their community for mutual support, language, religion, culture, and so on. That is all manageable, and indeed, we have the experience of how the Bosnian programme was managed. It was not perfect, but we learnt a lot from that process.

The UNHCR has a very modest target of 30,000. As the noble Lord said in opening the debate, Germany has already agreed to take 10,000. Even Moldova, the poorest country in Europe, has taken or pledged to take 50, and Norway, for example, 1,000. Surely as a country we can do better than to say, “Yes, we will be generous with the cost of running the camps, but no, we don’t want any of you”. As a country, we can do better than that. We should fully face up to our humanitarian responsibilities and say, “Yes, we will take a proportion of these people”. I am not saying that we should take more than Germany, but we should see if we can match the German numbers or at least make a significant effort to take a good proportion of the people that the UNHCR has asked us to take. We, as a country, can do no less.

My Lords, I also congratulate the noble Lord, Lord Roberts of Llandudno, on initiating his debate. I thank him for taking the rather unusual step of inviting noble Lords to take part through the correspondence columns of the Guardian two days ago.

Although I agree with the main purpose of the noble Lord’s proposal, which is to encourage the European Union and Her Majesty’s Government to do more to help the appalling plight of the Syrian refugees, I have to take issue with the implication of his Question, namely that our current emphasis should be on evacuation and resettlement. With the Geneva conference, under the chairmanship of the Secretary-General of the United Nations, only 13 days away, I hope that the Minister will accept that our main effort, and that of our European colleagues, should now be to work for a diplomatic outcome at that conference, and one which might at least promote a ceasefire between the warring parties and enable at least some of the Syrian refugees to return safely to their homes.

I know that the Minister usually replies to questions as a Minister from the Home Office. However, picking up a point made earlier today by the noble Baroness, Lady Symons of Vernham Dean, Front-Bench Ministers speak for HMG and not for their departments. I hope therefore that the Minister will nevertheless be able to give us, on behalf of Her Majesty’s Government, a little more information about the Geneva conference than I have been able so far to garner from the media. Although it was reported that the Russians, the Americans and the United Nations had reached agreement in late December that the aim of the conference was,

“to bring two broadly representative and credible delegations of the Syrian Government and opposition to a negotiating table”,

I have seen no details since then of whether the Secretary-General has been able to get the deeply divided opposition, who seem to spend more effort fighting each other rather than opposing the Syrian Government, to put together anything approaching a credible delegation to represent them at Geneva. Nor have I seen any details of which other national delegations have been invited to take part, other than reports in late December which remarkably did not mention either any European participation or any from Jordan or Saudi Arabia.

There have been recent reports, which I profoundly hope are untrue, that the United States is blocking a proposal that Iran should be invited to take part, even though the Russian news agency TASS has recently quoted Mr Ban Ki-Moon as expressing the view that it would be useful for Iran to be invited. It is essential that Iran should be there if we are to have any hope of getting a diplomatic resolution to this crisis. Although there have been several questions in this House about the Government’s attitude towards Iranian participation, I have not yet heard a definitive response to those questions. I hope that the Minister may be in a position to enlighten us on this important point.

I suppose I should apologise to the noble Lord, Lord Roberts, for having strayed some way from the precise proposal in his Question for Short Debate. Nevertheless, I hope that the Minister will be able to give us some assessment of where the Government believe the Geneva conference stands, and whether his right honourable friend the Foreign Secretary agrees that all our efforts, and those of the European Union, should now be aimed at helping the Secretary-General and Ambassador Lakhdar Brahimi ensure a diplomatic outcome to the Geneva process, which might enable at least some of the Syrian refugees to be resettled in their own homes.

My Lords, I, too, congratulate the noble Lord, Lord Roberts, on securing this debate, and on the eloquent passion with which he spoke.

I slightly take issue—and I rarely do—with the noble Lord, Lord Wright, who said that we should just concentrate our efforts on diplomacy. When I was a Minister I thought that, as a Government, we were supposed to be able to multitask. It is not beyond the wit of a Government both to pursue a peace settlement through diplomacy and to do something to alleviate the appalling circumstances in which many Syrians live, both in other countries and within their own country.

My point was that our priority should be the Geneva conference. I was not for a moment suggesting that we should slacken our efforts to help the refugees.

I misunderstood the emphasis that the noble Lord was placing. His points are valid, but it is equally valid to say that we should do something about the crisis that is already there, not just in Syria but now in these other countries as well.

I speak as someone who has witnessed the position in Lebanon of the refugees from the Syrian conflict, and who has spoken to the leaders of that country, from the President downwards, who are having to handle this situation. Lebanon is a country that has enough problems of its own without taking in the equivalent of 20% to 25% of its own population. Just imagine what would happen if a European country was asked to take in numbers of that particular order.

I declare my interest as a member of the advisory board of the Council for European Palestinian Relations, and I have made many of my visits under its auspices. I do so slightly nervously, as the Israeli Defence Minister seems to have declared the council an illicit organisation. I interpreted his declaration to mean simply that we were doing too good a job in getting European parliamentarians to see the circumstances in which Palestinians were living.

There are now even more Syrian refugees in Lebanon than when I visited. Winter has come, and women with young children now live in the bitter cold, with nothing but cardboard and plastic sheeting for protection. Their shelter is damp, dark and unhygienic. They fled their country when the bombs started to fall not because they chose to, and women and children are living there in many cases without any male support in many of the family groupings. To some extent, we have facilitated the situation by refusing to make any real effort to take some of those people out of the circumstances in which they find themselves.

Over 50% of the Syrian refugees are children. That means that more than 1 million children are living and being brought up in the most appalling conditions. The Government should reflect on how they think those young people—assuming they survive to adulthood, and some will not—are likely to feel about those affluent countries that have actually refused to take any of them. That is something that the Government would do well to reflect on—and if that was put and explained to the British people, they might give the Government a surprise, and be much more welcoming than the Government believe that they would be. I share the views of my noble friend Lord Dubs on that matter.

I do not want to go much further on the general issue, other than to say that, if it is true that Germany can accept 10,000 people and the other, poorer countries can accept people too, as the noble Lord, Lord Roberts, said, I find it shameful that we as a country are unable to make the kind of gesture that other countries have made. It is not sufficient just to give money to the humanitarian efforts of the United Nations. Could the Minister explain three things in that area? First, why cannot we emulate countries of a similar size to us in Europe in what they are doing? Secondly, why are the Government being so rigid about allowing Syrians to leave the terrible circumstances in which they are living and to come into this country to be hosted by members of their own family who are here? That seems to me reckless behaviour. Thirdly, how many of the 2,000-plus Syrians who have sought asylum here have had their asylum application accepted and/or been given leave to remain on a permanent basis? If he cannot give those figures now, perhaps he would write to me to save me the trouble of putting down a Parliamentary Question.

Lastly, I draw attention to a particular group of refugees—the Palestinians—who have been displaced already and have been living in Syria for many years. I want to draw particular attention to the 30,000 Palestinian refugees trapped in the Yarmouk camp on the outskirts of Damascus. It has been under tight siege for many months by the regime’s forces, and the regime is preventing humanitarian assistance being provided to the besieged people. Around 30 people have died already, but there are nearly 30,000 Palestinians living in those circumstances, which are probably worse than the circumstances of some of the people living in the Lebanon. What action have the UK Government taken to try to persuade the regime, if necessary through their Iranian colleagues, to help humanitarian aid to get into that camp in Yarmouk?

My Lords, I, too, congratulate my noble friend on securing this debate and bringing the plight of the people fleeing Syria to the attention of the House once more. As he says, it is a great exodus of people; it is estimated that, by the end of this year, 4 million people will have left Syria. At the moment, it is 2.3 million, but it is growing all the time. The conflict is continuing much longer than expected; initially, it was assumed that the UNHCR, with an appeal to the international community, would be able to cope. This has not proved to be the case, and the numbers of people fleeing are simply staggering. More than half of the 2.3 million are children, and 75% of those children are under the age of 12. Noble Lords can imagine the terror that they are living with

Lebanon, Turkey, Jordan, Iraq and Egypt are hosting some of those people, and we know that they are not coping—and I shall not repeat what other noble Lords have said. Resettlement is desperately needed, if only in the short term, until Syria is stable again. I will repeat the figures. Excluding Germany, which has pledged 10,000 places, the EU in total has offered 2,340—not really very many—and we in the UK none, even though I believe that Nigel Farage of UKIP has suggested that we should take Syrian refugees, which is a very great recommendation. Up to now, 17 countries have offered places up to a grand total of 16,000 places for 2.3 million people. Even Australia, which, as I have been reading recently, is not known as a state that welcomes asylum seekers and refugees, has offered 500 places—but the UK none. The only solution, as the noble Lord, Lord Wright, said, will be a political one, but that seems far off, although we must hope. So the resettlement being asked for will not necessarily be permanent but could give people security and breathing space and, above all, care and education for the children, who always suffer disproportionately in these situations.

Those of us who have been to Syria know what a wonderful country it is. I was there three years ago with the Council for European Palestinian Relations, which has already been referred to, a fine organisation that hopes to introduce parliamentarians in Europe to all sides of the situation. We visited refugee camps for Palestinians, some of whom have been there since the creation of Israel—since the Nakba, in fact—when some 8,000 or 10,000 were killed or driven from their homes. The subsequent war between Israel and the Arab states added to that refugee crisis. Others were forced to flee neighbouring Iraq after the Shia Government took control following our ill judged war on the Iraqi people. Palestinians who fled the terror of the Nakba on the creation of the State of Israel and went to Iraq were, when I was there, fleeing into Syria because of the actions of the Iraqi Government, and are now fleeing Syria because of the civil war in that country; that means four displacements in 40 years for those people, and there is estimated to be up to 500,000 of them. It is worth noting, too, that President Assad’s Government gave the Palestinians a lot of help in the refugee camps; they had housing, right to work and healthcare and education. They did not want citizenship, only the right to go home to Palestine.

Those people who have now fled Syria cannot be officially helped by the UNHCR because they are not refugees unless they are fleeing their own country. So it falls back to UNRWA, created to help the Palestinians after the State of Israel was created, which in those days was catering for 750,000 people, to cater now for 5 million Palestinian refugees, still in camps all over the Middle East. As we face the problem of Syrian refugees, we must not forget the Palestinians among those refugees and the Palestinians all over the Middle East, who still have no home to go to.

I have a dream, my Lords. I have a dream of what a wonderful force for good Israel could have been, and I think still could be, if only it dropped its exclusivity of being a Jewish state and agreed to share with others land and resources—particularly water, in relation to Jordan, as was mentioned earlier. Israel could be part of the solution in the Middle East by joining the Arab League and western Governments in helping with the resettlement of this latest tremendous wave of refugees from Syria and by coming to some agreement on the right of return for Palestinians. Sadly, that is a dream, but in the mean time I hope that the Minister will be able to tell us that we in this country will play our part by taking refugees from Syria.

My Lords, the noble Lord, Lord Roberts of Llandudno, spoke with real passion and feeling. The more one reads and hears about the devastating impact on the population of the now long-running conflict in Syria—as opposed to the politics of the conflict—the more one can be forgiven for having feelings of despair and utter frustration. Hence comes the vital importance of the diplomatic efforts to resolve the current crisis, to which the noble Lord, Lord Wright of Richmond, referred.

Of course, this is not a purely internal Syrian conflict; there are other countries and different factions and groupings heavily involved behind the scenes—sometimes hardly even behind the scenes—with most of, but by no means all, those countries being within the region.

We now have getting on for 2.5 million registered refugees, more than half of whom are children, and a further 4.25 million people who are displaced inside Syria. That means that nearly a third of the country’s population have had to leave their homes. The United Nations High Commissioner for Refugees has described the situation as,

“a disgraceful humanitarian calamity with suffering and displacement unparalleled in recent history”.

The figure for refugees is also only the number of those who have registered as such; hundreds of thousands are believed not to have registered with an asylum authority.

Five countries close to Syria, including Iraq, host 97% of the refugees. In two of those countries, Jordan and Lebanon, the effect has been to increase their populations by 9% and 19% respectively. One inevitable consequence has been to put considerable strain on the resources available in those countries.

Apparently, the United Nations humanitarian appeal for refugees from Syria and the region is only some two-thirds funded, following the response from the international community. We have pledged £500 million for the Syrian relief effort, which the Government have said is the United Kingdom’s largest ever response to a humanitarian crisis.

The provision of resettlement and humanitarian admission places has not yet evoked a particularly positive response either. The United Nations High Commissioner for Refugees set a goal of securing 30,000 places for Syrian refugees from 2013 to the end of 2014. So far, just over half those places have been pledged, of which just under 12,500 have been pledged by EU countries. Of that figure, 10,000 places were offered by Germany in the form of a humanitarian admission programme. Excluding Germany, the remaining 27 EU countries have pledged just under 2,500 places, with 18 EU member states, including the United Kingdom, not making any resettlement or humanitarian admission pledges. The Gulf Co-operation Council countries have not offered any resettlement or humanitarian admission places either to refugees from Syria.

With the ability of Syria’s neighbouring countries to host refugees becoming ever more strained and with conditions for refugee populations deteriorating, more are attempting to reach the EU by risking their lives, on journeys by sea or across land, to reach Europe. Hundreds, if not thousands, have drowned on journeys by boats that never reached their destinations.

The Government’s approach has been that it is better to help neighbouring countries such as Lebanon, Jordan, Turkey, Egypt and Iraq to cope with the very considerable numbers of refugees from Syria, and we can be proud of the support that we have given and the amount that we have pledged for the Syrian relief effort. The more that can be done to enable those countries to cope and provide conditions that are acceptable, the better, since the likelihood is that those who have been forced to flee Syria will wish to return to their own country when it is safe to do so.

However, it is also our view that we should do our part, alongside other countries within the UN’s programme, to provide a safe haven for some of the most vulnerable Syrian refugees fleeing this murderous conflict. We have referred to a figure of around 500 refugees. We do not believe that the Government should turn their back on those people. It is our moral duty to respond to the UN’s call for help by accepting some Syrian refugees, just as for hundreds of years our country has helped those fleeing persecution.

The specific issue for debate is what action the Government should take in conjunction with other European Union member states to establish a Europe-wide evacuation and resettlement programme for those fleeing conflict in Syria. It is of course for the Minister to answer that question when he responds, but he should certainly have something to tell us, since a Home Office Minister stated in a parliamentary Written Answer in October last year that the Government,

“continue to discuss the Syrian crisis with our European partners”.—[Official Report, Commons, 24/10/13; col. 223W.]

Can the Minister indicate what exactly is being discussed and whether the establishment of a Europe-wide evacuation and resettlement programme for those fleeing the conflict in Syria is being discussed with European partners?

In the light of our £500 million pledge for the Syrian relief effort, we are in a good position to pursue with European countries the need to provide humanitarian assistance to displaced people, in partnership with neighbouring countries and the United Nations High Commissioner for Refugees. However, we are not in such a strong position to pursue with European countries the need to accept some Syrian refugees, because we have not been prepared to do so ourselves. Apparently, even Mr Farage thinks that we should do something in that direction; the Government, however, do not. Like my noble friend Lord Dubs, I suspect that the Government’s stance has had more to do with opinion poll judgments than any lack of compassion.

In the parliamentary Written Answer to which I referred, the Home Office Minister stated that,

“the Government has no current plans to resettle Syrian refugees”.—[Official Report, Commons, 24/10/13; col. 222W.]

Hopefully, the Minister will be able to tell us that that is no longer the Government’s position, that plans now exist and that, as a result, we will also be in a better position to pursue with our European partners the issue of accommodating Syrian refugees.

My Lords, in concluding this debate, I should like to begin my contribution to it by thanking my noble friend Lord Roberts of Llandudno for tabling the Motion, which gives us the opportunity to talk about this very serious issue. He graphically described the catastrophe that has overtaken the people of Syria and the consequential problems for the people not only of that country but of neighbouring countries. The Government share many of the deep concerns expressed by noble Lords today; if there are disagreements between us, they will be about how we best handle the issue.

Conflicts of this magnitude, with such a severe impact on civilian populations, require a commensurate response from the international community. The Government are proud of the fact that the UK is playing its full part in that response. The UK has pledged £500 million for the Syrian relief effort, of which more than £470 million has already been allocated to partners both inside Syria and in neighbouring countries. This represents the United Kingdom’s largest ever response to a humanitarian crisis. It is also the second-largest bilateral contribution by any country behind that of the United States—until very recently, we had given more money than the rest of the European Union put together.

By providing aid in this way, we believe that we can help far more people than we could by resettling what could be only a token number. I think that all noble Lords will agree that the numbers that have been mentioned today are tokens compared with the massive figure of 2.3 million people who have already left that land.

We are proud of the UK’s record of offering protection to those genuinely in need. In the EU, the UK is the third-largest recipient of asylum seekers from Syria, behind Germany and Sweden. As the Deputy Prime Minister said earlier this week, in the year up to September 2013 the UK had received more than 1,500 asylum applications from Syrians. Over the same period, more than 1,100 were granted refugee status. We also operate an immigration concession for Syrian nationals who are already legally present in the UK, designed to make it easier for them to extend their stay or switch immigration category.

In response to the remarks of the noble Lord, Lord Roberts, in some cases reiterated by other noble Lords, 30,000-plus Syrians have sought refuge in the EU so far, not the 12,000 he quoted. We recognise that Bulgaria is under considerable pressure. We are supporting efforts by the European Asylum Support Office to build capability in Bulgaria. UK aid is providing immediate practical help to Syrians in the region. Family members of Syrian refugees in the UK are eligible for family reunion under Immigration Rules and 90% of Syrian asylum claims are granted. We recognise the scale of this process and we respect the views and values which want to resettle Syrians, but our own view is that aid in the region will help more. I think I have made that clear in my response so far.

The Government have discussed with EU partners on a number of occasions, both in Brussels and bilaterally, the best way to respond to those fleeing Syria. I emphasise to the noble Lord, Lord Rosser, that these are active negotiations. We have also spoken to the United Nations High Commissioner for Refugees and other partners in the UK. We are very aware that some, including the UNHCR, would like to see a more proactive programme of resettlement of refugees currently hosted by countries neighbouring Syria. We have considered these options very carefully and respect the views of those countries who favour a resettlement programme, but we maintain that our top priority and that of the EU should continue to be to provide humanitarian assistance to displaced people in the region, in partnership with neighbouring countries, UNHCR and other UN and non-governmental partners.

Beyond immediate humanitarian assistance, our priority must be to help neighbouring countries provide sustainable protection in the region. With more than 2 million people, as we know, now having been displaced from Syria, regional protection is the only realistic means by which the rights of the vast majority of displaced persons can be safeguarded. Accordingly this should be our focus, rather than resettlement or providing “humanitarian admission” to displaced Syrians, initiatives which provide only very limited relief to the neighbouring countries and can have only a token impact on the huge and increasing refugee numbers.

Turning to the comments of the noble Lord, Lord Dubs, I recognise his interest in this issue. We are not running scared of public opinion; we have considered all options very carefully and concluded that we can make the biggest difference through our generous humanitarian package, which is second only to that of the USA, as I have said. We considered the Bosnia-style approach, but there is no EU support for such an approach and there is a difference: Bosnia is on the border of the EU and was easier to access and to handle than the Syrian situation.

I say to my noble friend Lady Tonge, whose interest in these issues I respect, that we have considered resettlement arguments carefully and respect the right of other countries to offer resettlement programmes, but we believe we can make a bigger difference through generous aid efforts in the region. We have so far given UNRWA £23.5 million to help Palestinian refugees.

Would we not be able to consider some sort of help even just for the children? Noble Lords may remember the Kindertransport that went on, quite rightly and enthusiastically, during the Second World War. There are so many children involved here and so many are unaccompanied. Could we not have some sort of scheme to help them?

The noble Baroness makes a very interesting suggestion and I thank her very much for it.

While we recognise that others may wish to participate in these activities, it is important that this does not substitute or deflect our attention from longer-term regional solutions. That is why we firmly support the establishment of an EU Justice and Home Affairs-led regional development and protection programme, the RDPP, for those displaced by the Syrian crisis. Providing durable solutions for those displaced, while at the same time meeting the needs of the countries bearing the brunt of Syrian displacement, is rightly at the heart of this programme. I again reassure the noble Lord, Lord Rosser, that we are very much engaged in this programme.

The Home Secretary announced in July last year that the UK will contribute €500,000 to the project, bringing its overall size to more than €13 million. This type of approach aims to promote refugees not only being protected and supported in the short term, but being well placed to integrate into the local community or return home if the possibility arises. It is also designed to support broader socioeconomic development in host countries, such as Jordan and Lebanon, to help mitigate tensions between refugees and host communities. The noble Lord, Lord Wright of Richmond, is correct to draw attention to the fundamental need for a political solution.

I am sorry to interrupt the Minister’s flow, but is he well informed on the circumstances in which people are living as refugees in Lebanon in particular? Lebanon has laws that prevent any of those refugees working: they have no means of sustaining themselves. Does that not make a little difference to the Government’s views about how these people can survive over a long period?

That is exactly why I am going on to say that the noble Lord, Lord Wright of Richmond, is right to say that a political solution to this problem is imperative and is strongly supported by this country. It was supported by the noble Lord, Lord Rosser, and my noble friend Lady Tonge joined in recognising the importance of it.

The noble Lord, Lord Wright of Richmond, asked me if I could give more details about the Geneva conference on 22 January. I cannot give him any more information than that which he already possesses, but I will write to him and, if I may, place a copy of that letter in the Library and circulate it to all Members of the House who have spoken in the debate.

I have a couple of notes here for the noble Lord, Lord Rosser. Options to help Syrian refugees, including some form of resettlement, have been discussed on a number of occasions. We expect to continue these discussions but there are no plans for an EU-wide evacuation or resettlement programme. Instead, we want to focus on developing a programme for protection in the region and a development programme. I think I have made that clear throughout the remarks I have made.

I understand that this is a highly emotive issue and one that continues to require real action through high levels of international co-operation, both in the region and more widely. The UK has a proud tradition of providing protection to those in need, and this Government are committed to continuing to play their full part in the international response to the humanitarian crisis in Syria. I thank the noble Lord, Lord Roberts, for giving us a chance to explain that.

Local Government Finance Settlement

Motion to Take Note

Moved by

My Lords, it seems to have become something of a tradition that when the House reconvenes after the Christmas Recess I lead a debate on local government funding. The government settlement announcement usually happens later and later in December, so we do not have a chance for a debate before Christmas. I am pleased that the debate has attracted not just the usual suspects on local government, and I look forward to their contributions. I of course look forward to hearing from the Minister, who is the new face on the government Front Bench. Her predecessor, who is sitting behind her, will no doubt be listening to what I say with interest. I am glad that she does not have to respond today. I should declare my usual interests in local government. I am leader of Wigan Council, chairman of the Greater Manchester Combined Authority, and a vice-president of the LGA—as are others in this Chamber—and of SIGOMA.

Commenting upon the settlement, Sir Merrick Cockell, the Conservative chair of the LGA, said that it,

“confirms that councils will continue to be at the sharp end of public sector spending cuts up to 2016”.

He added:

“Councils have so far largely restricted the impact of the cuts on their residents. They have worked hard to save those services that people most value and have protected spending on social care for children and the elderly, but even these areas are now facing reductions. That impact will only increase over the next two years”.

I certainly agree with that statement, which was, however, made before the Chancellor said on Monday that there is another £25 billion of cuts in public spending to come.

In the settlement Statement, the Government made three interesting and key headline messages. First, they said that the cut in spending power was only 2.9%. Secondly, they said it was,

“fair to every part of the country—north and south, rural and urban, metropolitan and shire”.—[Official Report, 18/12/13; col. WS 151.]

Thirdly, they said it would be possible to deliver reductions by “sensible savings” and “eliminating waste”. I shall scrutinise each of those matters in turn. The concept of “spending power” of local authorities is an interesting, new, complex and extremely controversial way of defining spending. It includes a number of different sources of local funding—25 in total, the biggest being council tax and settlement funding. However, it also includes the highly contentious new homes bonus, to which I am sure colleagues will refer later. It also includes the relatively small amount of funding to lead local flood authorities. Members may be interested to know that funding for those authorities will decline by one-third next year. Perhaps in view of the recent weather, the Government might wish to reconsider that.

The headline figure of 2.9% is achieved by an interesting device of excluding the GLA. It may no longer be considered a local authority, but perhaps it still is. If you include the GLA, the figure increases to 3.1%. However, this time, when defining the spending, the Government have included pooled health budgets, which are the responsibility not of local authorities on their own but of local health partners. Those budgets are of course also included in the Department of Health’s figures, so there is some double counting there. If those figures were excluded, then the cut would increase to 5%. CIPFA, the respected local government finance body, says that the direct funding for local authorities has reduced by 9.4%. It also commented that the announcement was,

“stronger on spin and misleading presentation”.

The claim that this settlement is fair is simply disproven by the statistics that the Government themselves have provided. The average metropolitan area loses 4.2%, which is twice the loss in shire counties. In London, the average loss is more, 5.5%; and the contrast with shire districts is even higher. Chesterfield loses 6.9%, while the good citizens of Epsom and Ewell actually gain by 3.3%. There are huge gaps there.

The shift from direct funding through the grant system based on need to this “funny money” definition of spending power has meant that the more deprived parts of the country are losing grants at a greater rate than those less deprived parts. Surprise, surprise: the most deprived areas of the country happen to be Labour authorities.

The third contentious claim was that these cuts could be achieved by so-called sensible savings. That ignores the fact that this is not year 1 of any round of savings in local authorities. Ever since 2010, when the Government came in, there have been significant cuts, and they have continued. All the examples of low-hanging fruit—the things that people can take away—have gone. We are now into serious cuts in spending. My own local authority had to take off £66 million, will have done so by the end of this financial year, and faces a further £43 million in cuts over the next three years. Cuts at this level cannot be achieved by slicing and cutting; we are actually going to have to make significant savings in real services.

Local government, like everyone else, is facing a number of pressures to increase spending. We face inflationary pressures. Local authorities pay fuel bills, and we all know what is happening to those bills. We face demographic change, which increases the demand for services. In Wigan in the past six years, the over-65 population has increased by 19%. When you get to my age, it is good news that the population is living longer but there is a significant impact on local spending.

There are also new burdens famously being placed upon local authorities that are never fully funded. Sometimes they involve taking away existing grants and putting them into a new box. A couple of years ago, the Government cut the Social Fund and passed the responsibilities on to local authorities. Grants were provided for that, although they were inadequate compared with what had been spent previously. Next year, there is no sign of those grants in the settlement, so all the local welfare funds will now be paid for directly by local authorities.

The Government are probably not alone in misunderstanding the way that local government works nowadays and the way it has changed. Parliament, too, has not really understood the complex changes that are taking place. I come to this House and hear people asking for additional services, and putting pressures and demands on local authorities that, in themselves, may be desirable. However, we are not dealing with even a zero-sum game, whereby we have to find the money from existing resources. We are in a negative funding game, whereby we are having to find additional funding from other cutbacks.

Since Monday when I was back at work, I have spent time each day mainly on local government funding. Yesterday, I had to be back in Wigan to determine our budgets for next year. I have been a local councillor probably for more years than I would like to confess, but the language of what I am doing is now totally different from what I was doing even five years ago. In our budget we talked about “transformational change” and having really to think about whether we should continue to provide services at all. We talk about “building self-reliance” among high-dependency groups in our communities. We can no longer afford to fund those people at the rates that we have in the past. Despite all the pressures, we cannot exclude the big areas of spending in local government, which are adults’ and children’s services.

I want to refer to the system of local taxation. I think that I can see an established pattern in how local taxes change. Stage 1 is that a local tax becomes unpopular for some reason, probably fuelled by a media campaign. Stage 2 is when the Government respond by trying to mitigate the effects of the tax through a subsidy—they put in money to try to reduce its impact. On the whole, that does not work, so we get to stage 3, where the unpopularity continues. The Government therefore then move to stage 4: they abolish that form of local taxation and try to replace it with something else. We saw that some time ago with the rates, and in place of the rates we got the poll tax. However, that did not last too long and we then got the council tax.

What concerns me is that our current major forms of local funding—that is, the council tax and business rates—are both now at stage 2 of the process. Both are heavily reliant on subsidies from the Government to make them justifiable. The council tax—and I make no apologies for repeating my point—is still based on 1991 values. It is difficult to understand that when it applies to a house built last year, perhaps with a broadband connection, which an older house does not have. However, I shall put that to one side.

We now have layer upon layer of council tax freeze grants, which are effectively the Government subsidising the council tax. At what point will the Government think that they are no longer affordable? I am sure that such a point must come, so those grants will be reduced and we will get into a real mess.

I remember on several occasions, along with my noble friend Lord McKenzie and the noble Earl, Lord Lytton, debating business rates very late at night with the noble Baroness, Lady Hanham. We tried to persuade the Government not to go ahead with the change to the valuation that they were making in the then Local Government Finance Bill. We were unsuccessful. However, suddenly the Government rightly recognised that the valuation of business rates was not regarded by the business community as fair, so the Chancellor came up with a wheeze in the autumn Statement to reduce the impact of business rates. Therefore, we will again have a local tax which is heavily dependent—and will be dependent going forward—on government subsidy. I acknowledge that the Government have fully funded that but, going forward, another local tax is dependent upon funding from central government.

At some stage we are going to have to think of a system of local government finance which is really local, which really works and which has cross-party support. Perhaps the time to look at that is now, because those taxes cannot go on.

I believe that we cannot simply go on with the current approach to public services and public spending. Therefore, I welcome the Government’s announcement in the autumn Statement that they want to develop more place-based budgeting. That is the future in many areas. Also, through better healthcare funding they have recognised the importance of integration between health and social care. However, I am concerned about the pace and adequacy of those developments.

On many occasions the Prime Minister has talked about the need to do something about “troubled families”, as he calls them. We have two separate work programmes in government for dealing with troubled families. A recent report from the National Audit Office said that they were unco-ordinated and were not speaking to each other, and the DWP programme has managed to get only 4% of people back into work, which is far less than it was aiming for. This is a really important, dependent part of our population. We need to work together effectively on a local basis. We cannot do it on a national scale; it has to be done locally.

I read that over Christmas some 18,500 patients who were medically fit to go home were kept in hospital simply because no adequate care package was in place. That is a disgrace for all of us who are involved in care. I am not simply laying the blame at the door of the Government; we should all be ashamed that that happened. It meant that 18,500 families did not have a really good Christmas, but it also cost us money. If we are going to keep people in expensive acute care, we need to make sure that we serve them much more effectively and on a much more cost-effective basis.

At this point I had intended to say that I thought that 2014-15 would be a difficult and tough year for local government, but 2015-16 will probably be worse. I was then shown a news cutting from the West Midlands which said that Wolverhampton City Council had an emergency budget meeting last night at which it made cuts to avoid what it called “insolvency”. Technically, unlike the situation in America, local authorities cannot become insolvent, but there will clearly be an increasing danger in the next couple of years that local authorities will become financially unviable. Would the Minister care to say whether the Government have contingency plans in the case of local authorities becoming financially non-viable?

The seriousness of local government funding is now becoming apparent to everyone. We are not talking about peripheral services; we are talking about main public services. I hope that I can persuade my party to commit to start to reverse the system and put more money back into deprived authorities such as Newcastle, Newham and—dare I say it?—Wigan, and take the money from Surrey, Oxfordshire and Epsom and Ewell. This is a serious debate and there will be consequences. I look forward to the contributions.

My Lords, I congratulate the noble Lord, Lord Smith of Leigh, who is an outstanding and highly respected servant of local government, on securing this important debate.

I declare an interest as, and speak from the standpoint of, the leader of a London borough that may be a neighbour of Epsom and Surrey but is actually the worst resourced in London. Grants provide less than a quarter of our budget and the borough has to raise about 70% of its budget directly from council tax. Incomprehensibly, it is a tariff authority for business rates. My director of finance will be surprised—and I agree with what the noble Lord said about spending power—to discover that we are told that our spending power will actually rise in 2015-16. It does not feel like that on the ground. I think that spending power is a highly questionable measure.

All those of us who care deeply about local government will want to see efficient local councils as well resourced as is practicable, and, even if this sets me up as an Aunt Sally for this debate, I believe overall that in the present circumstances we are. Also, as the noble Lord, Lord Smith, said, in terms of the Autumn Statement, and indeed this settlement, there is evidence that the Government are listening and have listened to representations about the system. Therefore, I do not share the view that the draft settlement put before Parliament—which I agree was regrettably late in the year and without an Oral Statement—is the beginning of the end of the world. Indeed, in the context of a country that still plans to borrow £11 million every hour next year, some will say that it is arguably on the generous side.

No doubt we will hear about difficulties today. I candidly acknowledge that there will be colleagues who will have difficulties, as will we, so there will be some shroud-waving. I looked up what the noble Lord, Lord McKenzie of Luton, whom I hugely respect for his great contribution to local government, said about the 2012 settlement. We have heard about the risk of insolvency. The noble Lord said in 2012 that the then settlement would push many local authorities “to the brink” and put,

“their long-term viability in question”.—[Official Report, 19/12/12, cols. 1604-05.]

It did not turn out quite like that then and I doubt that it will this time. Indeed, Luton’s current council tax booklet tells me that Luton council,

“has kept its tax the lowest in Bedfordshire and the tax rate is well below the average of other unitary councils”.

It says that Luton,

“has kept costs down with a range of money-saving and income-generating ideas”,

and that the council,

“has been able to set a balanced budget while continuing to protect vital services”.

It speaks of £4 million of growth. If that is the brink, some of us would like to be on it.

In an immensely difficult period economically for this country as a result of the disastrous legacy of waste and unsustainable overspending which our coalition Government inherited in 2010, local government had to, and has to, share the burden, and I thank my noble friend and the Secretary of State for the efforts they have made to ensure that local government is given support financially. For example, the ludicrous farce of comprehensive performance assessment—remember all that—has been swept away, saving hundreds of millions of pounds.

We have seen consistent support through the freeze grant for councils that restrain their expenditure, which has now been extended to both 2014-15 and 2015-16. I am particularly pleased by the announcement that the funding for the next two freeze years will be built into the spending review baseline. The noble Lord was quite right to say that there were inevitable fears about a cliff-face effect when it eventually disappeared. So that was good news. Incidentally, I hope that the noble Lord, Lord Beecham, who follows me, will confirm that Labour supports and would continue the freeze of grant policy and entrenchment in the baseline.

I do not have a particular beef about overall spending. The reality is that in the easy money era of 1997 to 2010, spending by my authority—one local authority alone—rose by 50% in real terms, after allowing for inflation. Against that background we have all been able to make savings, and we still can. In our case, as with many other local authorities—there is nothing particularly special about our authority—public satisfaction with services has actually risen, as we now share services, and costs and waste have been pared. Indeed, the residents’ survey published in our authority this month is the best that we have ever had.

Central government has a great deal to learn from local government when it comes to saving money and good management. Frankly, you only have to glance for a second at the staggering waste in the NHS bureaucracy to see the truth of that. I think that I may find more common ground across the House when I say that equally, I wish central government—not only this Government but their Labour predecessor, who were in some ways even more dictatorial—would stop interfering and regulating what should be local policies. Why are local councils the only bodies banned from proposing new schools or neighbourhood plans? Why are we not more trusted?

We should consider the vital duty of promoting local business, which is absolutely central to any debate on local authority finance. Businesses need premises, but what do we get? Are we trusted to do locally what is right to secure them? No—we get the dogmatic imposition of the automatic right to convert office space to residential use. I was disappointed that, jointly with Islington’s Labour council, we were unable to persuade the High Court of the unfairness of this policy. Given the staggeringly high land values in south-west London, we are quite predictably being hit heavily by it. Already there have been 140 prior approvals for automatic permitted development. This has so far lost some 20,000 square metres of office space—a high number in our local context—dented opportunities for future business development in an area where we want to promote small IT businesses, and involved so far the eviction and termination of almost 50 existing business tenancies.

Let me share with the House an unsolicited e-mail that I saw this morning on the way to this debate from a small local specialist IT company. The managing director wrote:

“We have been operating at our address”—

in Twickenham—

“for the last eight years; at the end of July we received a letter from the Landlord giving us notice, as they put in an application for change of use; they are now building fourteen one bedroom flats and we had to move all our office equipment into storage as we have not been able to secure a lease in the area. Most of the offices we went to see are also changing into flats. We are a small company and have had to let three people go until we find premises”.

It is very sad. That is just one example of what is going on, and not only in our area.

My dismay at this back-of-the-envelope planning policy, imposed from on high over the reasoned objections of local councils, in which a short-term dash for profit is cutting an irreversible swathe through strategic provision for small business, will not come as news to my noble friend. I wish that whatever Government come—Labour, Conservative or Liberal Democrat—will be localist and will listen to advice from those with local experience and understanding in some policy areas.

My noble friend is a good listener and will not mind a little bit of “saying it as I see it” from a fellow Nottinghamian on that point, particularly when I return to my central consideration. I believe that this Government have been as fair and as supportive in financial settlements as local government can expect in these difficult times. Like many others, I remember all too well the dark years of Gordon Brown’s tenure of the Treasury, when average band D council tax bills in England more than doubled. Since 2010, by contrast, council tax has fallen as a proportion of the family budget. Many people up and down the land will share my thanks to my noble friend and to the Chancellor for that.

My Lords, I refer to my local government interests in the register.

For the past 47 years I have been a councillor for a ward that is among the 10 most deprived wards in the country. Its spiritual needs are in part met by the daughter of the right reverend Prelate, who is the vicar of St James’s church in that ward. Life expectancy is 10 years less in that ward than in the ward in which I live. The unemployment percentage is in double figures. Most of our primary school children in the ward are entitled to free school meals and the schools operate a breakfast club. We have one food bank in the ward and another within a quarter of a mile of it. Hundreds of residents have been hit by the bedroom tax and the changes to council tax support, which can take just under £4 a week from people on JSA of only £71 a week but also affect many people on low wages. Rent and council tax arrears are mounting and evictions may follow, although the council is doing all it can to help avoid them. Non-statutory youth provision is being cut, play centres are closing and another voluntary centre is under threat. The future of our successful Sure Start centre may be in doubt after 2015. Maintenance of open spaces is under severe pressure. The city’s citizens advice bureaux, its law centre and other agencies are overwhelmed with people seeking help over financial and legal issues and are themselves facing grant and income reductions.

Before the general election, the Guardian published a letter from me—it has published a few since—in reply to an article which dismissed the achievements of the Labour Government. Whatever failings that Government, like all Governments, may have had, I could identify many ways in which my constituents had benefited, from massive investment in decent homes, to school and hospital building, the minimum wage, Sure Start and concessionary travel. I ended the letter by saying that I trembled for their future if the Conservatives won the election. Those fears have been amply justified—and more—by the past three and a half years of rule by the Conservatives and their Liberal Democrat accomplices.

However, what is particularly galling is the brazen effrontery of the Secretary of State, who is in complete denial about the havoc that is being wrought throughout much of local government. This was the Minister who was first across the Chancellor’s door in 2010 to offer up local government as a sacrifice on the altar of government cuts—Salome to George Osborne’s Herod, although fortunately we were spared the preliminary dance of the seven veils.

Newcastle, like many other urban councils with high levels of deprivation, faces cuts of 40%—£108 million a year on what was a budget of £260 million. As a result of cuts in the grant and a failure to reflect rising costs and demands of the kind mentioned by my noble friend Lord Smith—whose masterly opening of this debate I applaud—especially in the fields of safeguarding children, adult social care and concessionary travel, core funding is to be cut by 25% over the next two years. The nearby authority of Durham, not the most affluent part of the country, faces cuts of £110 million a year by 2016-17, on top of the £114 million a year it has already suffered.

The story is repeated up and down the country, especially, as my noble friend pointed out, in authorities with a Labour council. Even the Conservative leadership of the LGA has been compelled to warn of the impending collapse of local government by 2020 beyond the delivery—albeit even then in attenuated form—of statutory services.

Ministers are content to rely on selected and misleading statistics to pretend, Candide-like, that all is for the best, albeit in what is perhaps not the best of all possible worlds. However, as Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, pointed out, the much delayed announcement, unusually made by virtue of a Written Statement of the settlement, was, as my noble friend pointed out, stronger on spin and misleading presentation than the technically sound explanation that councils and the public would expect.

Here it becomes necessary to delve into the arcane world of local government finance. The territory bears an uncanny resemblance to the Schleswig-Holstein question of the 19th century which, it will be recalled, was understood by three people: Bismarck, one who was mad, and another who was dead.

Thus the much vaunted new homes bonus costs a significant number of authorities , including Newcastle, more than they receive because, like the council tax freeze grant, it is effectively top-sliced out of money that should have come to councils anyway. It is a classic example of the three-card trick. In similar vein, the Government make much of spending power, carefully ignoring that this does not include a range of specific grants, many of which have been mentioned, such as the education services grant and the housing benefit administration grant, but crucially does include pooled budgets of the NHS and the better care fund, much of which will be spent not by councils but by the continuing NHS bodies, be they clinical commissioning groups or others.

The trick of the Government is to talk about spending power, not spending need—hence the ludicrous comparison, to which Ministers are addicted, between Newcastle and councils in the distressed areas of Berkshire, Wokingham, and Windsor and Maidenhead. Thus Newcastle’s children’s social costs are three times that of the latter—£226 per head higher in relation to population. Adult care costs are £206 per head higher. Homelessness and welfare is £82 per head higher and concessionary travel £59 per head higher. There is no comparison between Windsor and Maidenhead and Newcastle in terms of need and deprivation.

Unemployment is four times higher in Newcastle than in Windsor and Maidenhead. No wonder Rob Whiteman said:

“When Government ministers compare such different councils as affluent Windsor and metropolitan Newcastle in an attempt to justify the ‘fairness’ of the settlement it only serves to highlight how out of touch this process has become”.

Thus the alleged greater spending power of Newcastle, touted by Ministers, is illusory—but in time, under this settlement, even Windsor’s spending power will exceed Newcastle’s, and that of local authorities like us. Of course, there are many more victims of this cynical and callous approach. It is not a matter simply of the north-south divide. The pernicious impact of this persistent drift from needs-based distribution will be felt—is being felt—in inner London boroughs and coastal towns, as well as the towns and cities of the Midlands, the north and parts of the south-west.

Without consultation, the Government have cut, and will continue to cut, the grant for resource equalisation, designed precisely to compensate those councils with a lower council tax base, including those with large numbers of students who are exempt from tax. This will be cut by 36% over the next three years, with a huge impact on the distribution of grant, by definition hitting hardest those areas with higher numbers of lower-banded properties. Newcastle, for example, has 57% in band A—the lowest band. Windsor has just 3%. We should remember that many of those in that band who would have received council tax support will now be paying 20% or more of the local council tax, which previously would have been covered by council tax support.

Interestingly, many of the worst-affected councils under this and future settlements are those with high numbers of BME residents, such as Newham with 71% and Birmingham with 42% of the population. There appears to be no evidence that an equalities impact assessment has been made in this respect. I invite the Minister to comment on what might well be a matter for judicial review, because equality obligations appear to have been ignored. The whole way in which the Government have manipulated the system while giving airy assurances about its supposed fairness makes the American fraudster Bernie Madoff look like the Governor of the Bank of England.

During my 17 and a half years as leader of the city council, I thought I had times of great difficulty, as the city faced penalties, rate capping and the depression of the 1980s. Some of that was under the aegis of the noble Lord, Lord King, with whom I must say a civilised relationship is always possible. They were nothing like as bad as the problems facing today’s council, or the people of our city and others. If I am re-elected in May, I hope to notch up my half-century as a councillor in 2017. I can only hope and pray that by then we will have a Government who treat local government as an essential partner in the economic and social life of the country and ensure that it is supported by adequate and fairly distributed resources. If not, I will not be the only one to tremble at the consequences for our communities, our youngsters, our elderly, our economy and our environment.

My Lords, I thank the noble Lord, Lord Smith, for introducing what I think has become an annual debate in his usual and characteristically reasonable way, in spite of all the provocation that I am sure he feels has been offered to him. I also apologise that I missed the first minute of his speech. My train was cancelled due to a landslip in Surrey, which I suspect at this time is not feeling overgenerously resourced by central government. However, I think I got the main drift of his speech, much of which, of course, I and all the rest of us in the Chamber today with a local government background agree with.

I also have to start by declaring my own interest on this occasion, for the last time in this annual debate, as a councillor in the London Borough of Sutton, and, for the first time in this annual debate, as a vice-president of the LGA. Perhaps this is the point too for me to welcome the Minister to her first outing in this annual debate. I am pleased to see her predecessor, the noble Baroness, Lady Hanham, also present today, probably relishing the fact that she can sit two Benches back and enjoy the debate in a way that has maybe not been possible in the last few years.

Throughout my 40 years as a councillor—and I recognise that the noble Lord, Lord Beecham, regards me as a wimp for giving up after only 40 years, but that will be the case—this has been an annual ritual. Central government, of whichever party is in power, has always said how fair and generous the annual settlement has been, and local government, whoever has the majority there, has always said that it is not fair, not generous and that it means the end of the world as we know it. Then, sadly, local government sets about arguing among itself as to which parts of the country or which types of authority are more or less fairly dealt with. I very much regret that.

One thing that has changed over those 40 years, to which reference has already been made, is the date of the announcement of the settlement. It used to be certainly in early November, it slipped a bit to December and for the last two years it has been, in effect, Christmas Eve. I understand that that timetable is not entirely in the hands of the DCLG—of course it is not—but I think we would all wish to say, through the DCLG, “Please try to bring this timetable forward”. It makes life extremely difficult for all local government, and most especially for the finance staff trying to deal with this in a very short time, however expected the settlement may be.

In my first year as a councillor, way back, the Tory leader in local government, who happened also to be a Sutton councillor, told me that there were really only two parties. I thought that was the usual political comment being made to a Liberal in those days, but he said it was the central government party and the local government party. I have to say that I have increasingly come to recognise how right he was. If I ever have any doubts about it, that is characterised in your Lordships’ debates on local government. Most of us who take part in these debates, for whatever party, have a long background in local government, and inevitably speak in a sense on behalf of the local government party. All too often the poor unfortunate Minister who has to reply, who may indeed belong to the local government party too, has to deal with that. That will go on.

It would be going too far to say that there is good news in this settlement; that is too much to expect given the state of the national economy, the reasons for which we have rehearsed many times. However, there are certainly aspects that even the LGA has been right to welcome, and I am pleased that it has done so. The first is that it is no worse than originally expected. It is a sign of the times that that can be seen as good news. However, it is good news and is a welcome sign that central government has recognised that local government has borne the brunt of the public sector spending cuts, that it is not just the annual ritual of crying wolf and that the financial outlook for local government really is very grim.

The change of heart on the new homes bonus, limited though it is, is welcome, except in London, where the heart was not changed at all, and the new homes bonus is going to the London LEP and not to the London boroughs. I know that London Councils has made strong representations about this, and that the Minister will not be able to give a definitive answer today. However, I hope she can at least confirm that it is being considered seriously and is not the done deal that many in London believe it is.

The slight relaxation in housing revenue account borrowing capacity announced in the autumn Statement is also a welcome move in the right direction, but a very small one. I have argued many times in this Chamber—as have many others—that the HRA cap, with prudential borrowing, should be lifted altogether. In London alone, that would release funds for an extra 14,000 homes. I have no doubt that we will continue to argue for the further relaxation of that cap, but not today.

Despite this relatively good news—I stress “relatively”—it is clear that the financial year 2015-16 will be the crunch year for probably most local authorities. As other speakers have said, so far, most have been able to make significant cuts in ways that have not too seriously affected most residents who are not in receipt of direct support. That may well be one reason why public satisfaction with local councils has indeed gone up in the past two years rather than down. We experienced exactly the same phenomenon in the 1990s, when budget cuts were being made, albeit they were not as serious as the current ones. However, the cuts required for 2015-16 are of such magnitude that the public generally will be affected and will notice. Decisions on those cuts will have to be made in the coming financial year before the May 2015 general election. That is obviously bad news for the government parties, as it will come just when we are trying to convince the voting public that the corner has been turned, that austerity was worth it and that economic recovery is on the way, yet the message from their local councils will be almost exactly the opposite.

I am pleased to see that no one on the Benches opposite is smiling at that. It is not good news for any party. Wise Labour politicians will know that local residents blame their local council for the decisions that are made, the demonstrations take place outside the town halls and that in many parts of the country Labour councils and Labour councillors have to make those decisions, so it is bad news for everyone. I think that it is bad news for all of us who believe in the democratic process. We all know what the threat may be to the healthy democratic process, so the threat is there and is obvious and is getting very close to us. However, I also believe that it is a great opportunity. We are now in the situation where both the level of central government funding is such and the state of play is such that it really is time to introduce the fundamental and radical change to which the noble Lord, Lord Smith, referred towards the end of his speech, and I would like to have had more time to deal with that.

We have seen significant consensus moves right across the political parties with the LGA’s Rewiring Public Services campaign; the work of the London Finance Commission; and the long overdue but very welcome co-operation between London government and the core cities. All parties in local government want to see that fundamental reform that gives local government more independence, more financial freedom, less opportunity to blame central government and less dependence on central government. The questions now are the following. How are we going to do it? When are we going to do it? When will the parties in central government—in that I include the Labour Party as part of the wider central government role—actually come clean and say that they agree and say how it will be achieved, and what is the timetable for that? I look forward to seeing that in all three party manifestos and in any coalition agreement that may appear after the election, and I look forward to more positive debates annually in future.

My Lords, I congratulate the noble Lord, Lord Smith of Leigh, on introducing what is now his annual new year greeting. When I read the briefing from the Library for this debate, it struck me that we could all make the same speeches that we made this time last year and comment on the discourtesy of government in making the financial settlement for local government so late in the day for planning purposes, the unfair distribution and the end of local government as we know it. However, I am not sure how useful that would be.

Similarly, I listened to the interesting debate introduced by the noble Lord, Lord Shipley, in December on reviewing the Barnett formula. I remember thinking, “Good luck with that”, because the formula for distribution is only one element of our challenge. Centralisation by successive Governments—I agree with what the noble Lord, Lord Tope, has just said in that regard—is a much bigger challenge, and it is hard to take when it is carried out in the name of local government autonomy. Time and again we see evidence that one of the key engines for growth in an economy is strong regional government with real powers. If the Government are in doubt about this, why not try an experiment and give one of our cities the independence they had 130 years ago? Call it the Birmingham Independence Bill or, given the number of speakers from the north-east, the Newcastle Independence Bill. I am not talking of elected mayors, which I think are an abomination, concentrating on style over substance, but of real power for regions or cities. This is about not just the survival of local government but the future health of our economy. There is a human cost to what is going on. Half a million local government jobs have disappeared, mainly affecting women. This is the equivalent of 372 jobs disappearing every day. These people had a commitment to public service and cared about what they were doing. There is real and sustained damage to services which are vital to maintaining the social fabric and supporting community cohesion. The public are being misled about claims of a fair settlement for local government and that efficiency savings can make up the difference. Does the Minister really believe that a consultation period lasting from 18 December to 15 January, which is next Wednesday, is adequate?

The austerity measures will affect the most vulnerable in our communities. For instance, the lesbian, gay, bisexual and transgender housing advice service has reported that there has been an all-time high in calls for support, with 25% of younger LGBT people already street homeless. The LGBT officer in UNISON has reported:

“Another recurrent theme was marginalisation, guilt and isolation. People expressed concerns that their needs as LGBT people were treated as less important than others … They felt guilty for asking that their needs be met in a climate of austerity. Cuts were leading to less acceptance”.

There is a price to be paid for the loss or diminution of social cohesion, and it would be dishonest to claim otherwise. If local government is reduced to offering only the statutory social care elements of its functions, and the vast majority of the population has no interface with those services, one wonders what the impact will be on the democratic buy-in to local government in the future. We have heard at least two examples this week in this House of the potential impact of local authority cuts: first, from the noble Lord, Lord Elystan-Morgan, on how desperate the effects of the floods are in Aberystwyth, and his comment that he did not believe the Government were aware of their seriousness; and, secondly, from the noble Baroness, Lady Murphy, about cuts in social services, which meant that social services were no longer able to do preventive work which might minimise the number of troubled families.

The cuts in total support from central government and the impact on less well-off people are but one aspect of the financial pressures on a local authority to which my noble friend Lord Smith of Leigh has already referred. Local authorities face further costs due to inflation and increased demands from an ageing population. There will also be extra costs in relation to pensions, because of the abolition of contracting out, and the costs of flood damage. The Government appear to have money to splash around for bin collections, which have had virtually nil take-up, and for referenda on council tax, which the LGA has said are,

“an unnecessary and a costly burden that will put growth generating investment at risk”.

However, these are tiddlers compared with the proposals for funding the bill for care. Other noble Lords in this debate are much better qualified to speak on this but, as we know, the Better Care Fund is a pooled budget for health and social care services shared between the NHS and local authorities to deliver better outcomes and greater efficiencies through more integrated services for older and disabled people. No one would disagree that pooled funding should be an enduring part of the framework for the health and social care system beyond 2015-16, which was a commitment in the Autumn Statement in December. However, according to the LGA, the fund simply brings together local government and NHS resources that are already committed to existing activity—it does not address the financial challenges facing councils and clinical commissioning groups. Indeed, the LGA has accused the Government of double counting.

Underfunding of the reforms to social care could turn out to be the biggest con trick by this Government—perhaps even bigger than the spare bedroom tax. My fear is that it will not lead to a peasants’ revolt—which the noble Lord, Lord Heseltine, has called for in relation to local government regeneration—but will be represented by thousands of sad stories of single old people living out their lives in cold and misery and the disabled being stuck in their homes instead of having the full life to which they have been told they are entitled. Some of us have fought all our lives to improve standards of pay, standards of living and equality of opportunity for the disadvantaged in our society. One woman whose home had been flooded over Christmas told the Prime Minister, “Nobody came to help”. I wonder whether that will be the strapline under the record of this Government.

My Lords, along with other noble Lords who have spoken in the debate, I express my appreciation to my noble friend Lord Smith of Leigh for giving us the opportunity once again to discuss the latest local government settlement. Noble Lords will forgive me if I take a slightly different road from earlier speakers in order to avoid repetition of what has already been said.

I draw your Lordships’ attention to a report in this morning’s Daily Telegraph under the headline, “Councils’ ‘impossible dilemma’ over tax help”, which goes on to say:

“Local authorities in England will be forced to cut services or increase tax bills over the next two years because of a predicted £1 billion reduction in government funding for council tax support a report has warned”.

The report to which that refers, of course, was produced by the Local Government Association, which, despite the optimism of one of its vice-presidents in the form of the noble Lord, Lord Tope, was fairly scathing about the settlement that your Lordships are discussing today. I watched the noble Lord with interest as he fought during his speech between loyalty and reality. I am afraid that although, in his speech, loyalty proved to be more effective, reality shines through in the LGA report. Whether or not the LGA takes its vice-president to task for what he had to say is a matter for him and it. The LGA warns that the figure for the reduction in overall support for local authorities by 2016 could rise to up to £1 billion, creating that “impossible dilemma”, to which the Telegraph report refers,

“between charging council tax to the working age poor or extending cuts to services such as road repairs, bin collections and care for the elderly”.

The report goes on:

“But the local government minister, Brandon Lewis, said ‘the reforms give councils stronger incentives to support local firms, cut fraud, promote local enterprise and get people into work’”.

I do not know the Local Government Minister—he was born the year I was elected to a local authority, in 1971—so I looked him up on Wikipedia. To my surprise I saw that, during his time as leader of Brentwood Borough Council, he co-hosted a radio show with local MP Eric Pickles, called “The Eric and Brandon Show”. I do not know whether perhaps they were the Laurel and Hardy of Brentwood, although that is hard to imagine. The Secretary of State of course relishes his appearance and caricature as the jolly fat man who “waters the workers’ beer”, to quote an old song, although jollity is not something I would normally associate with him. The fact that the two of them had a radio show indicates that at least there is some diversity as far as newly appointed Conservative Ministers go. However, the suggestion that this settlement goes in any way to support local firms was truly undermined by the noble Lord, Lord True, who pointed out that central government refuses to relinquish any control over the sort of planning matters that are so important at local level. That surely demolishes that particular argument. It was also said that the settlement will get people into work but, of course, as my noble friend Lady Donaghy has just said, hundreds of thousands of people have lost their jobs in local government since the coalition was appointed. A succession of such settlements will guarantee that the number of people in local government out of work will continue to rise.

I ask your Lordships to look with me at what the settlement means for my own local authority. I had the honour to represent the constituency of West Bromwich East for some 27 years. It lies in the borough of Sandwell. The borough issued a press statement following this so-called generous settlement we are discussing today. It said:

“The revenue grant cut of what is now being [termed] ‘Standard funding assessment’ for 2014/15 … is £22.2 million and the provisional cut for 2015/16”—

which most of us would agree is the crunch year—

“is a further £28.9 million. These cuts will add to the cuts to date of £55 million to provide an overall cut per year in government revenue grant of £107.1 million since May 2010”.

I defy any of us to say that local authorities, and particularly one such as Sandwell, could manage cuts like that without a substantial reduction in services.

Sandwell Council has never been one of those eccentric local authorities that made all the headlines in the 1970s and 1980s. It has never gone in for festooning lamp-posts with anti-nuclear signs or other such fripperies. Under the leadership of the current leader of the council, Councillor Darren Cooper, it has continued the eminently sensible policies for which it is renowned. Yet it is being punished—I can find no other word to describe it—by the sort of settlement we are discussing today. The fact is that the council will now have to cut deeply into those resources that my noble friend Lady Donaghy referred to. The people who will suffer because of this settlement are the elderly, children in care and various other socially deprived people in areas of great social deprivation—such as the borough of Sandwell.

Of course, it is not just in Sandwell that local authorities are quite rightly saying enough is enough so far as this Government’s attitude to them is concerned. Reference has already been made by my noble friends to the meeting that took place last night in Wolverhampton, where the straight choice was between massive reductions in services or insolvency. That is the situation in which they find themselves. If next year’s settlement is along the lines that we are discussing in this debate, other local authorities—not just in the West Midlands—will find themselves in a similar position.

The city of Birmingham does now. Again, it is a city that has done its best to sell itself throughout Europe and the rest of the world, and done so enormously successfully. The transformation in Birmingham over the past decade or decade and a half has been enormous. However, the leader of the city council, Sir Albert Bore—another respected figure, I hope by both sides of the House—said:

“Birmingham City Council is a responsible local authority and we will do all we can to deliver against these figures”—

that is, the figures we are discussing in this settlement. He went on to say:

“However, to pretend that they can be delivered by traditional efficiencies and the sort of savings the Secretary of State for Communities and Local Government has highlighted is simply misleading. This council”—

that is, Birmingham City Council—

“has not sought to delude itself or its citizens that these massive budget reductions can be achieved in this way. Accordingly, we are systematically and fundamentally reviewing all of our services, working with our partners and undertaking an extensive dialogue across the city. We will protect key services wherever possible but it may be necessary to cease the provision of others altogether”.

That is the scale of the dilemma.

I conclude on what is perhaps something of a surprising note: the impact that this Government’s attitude to local governance has on Conservative representation around the West Midlands. In my own borough of Sandwell, there are 72 councillors. It has been predominantly Labour since it was created in the Heath—at the time, I called it the Heath-Robinson—reorganisation of local government back in 1974. But the Conservative Party controlled the council for a year or so in the 1970s. Out of 72 councillors on Sandwell Council, there are now only two Conservatives left. I hope the Minister will take this in the spirit that it is intended, as although I have no great wish to promote the interests of Conservative councillors—I have worked with some extremely good ones over the years; I have worked with one or two I would not describe in quite the same way—they are a dying breed outside London and the south. Again, when I was a councillor, Manchester City Council was controlled by the Conservative Party. There are now no Conservative councillors on the city council at all. In all seriousness, the sort of parsimony we are discussing in the settlements that have taken place over the past few years under the coalition—particularly this one and perhaps the one next year—will further decimate the Conservative Party’s local government base. I support this particular aspect of this: it certainly will not help the coalition get re-elected in 2015.

My Lords, I, too, am very grateful to the noble Lord, Lord Smith of Leigh, for achieving this debate and to Wigan for releasing him to make that powerful case on behalf of so many of our metropolitan districts, such as Leeds, of which we have heard much in this debate. They face particular difficulties, partly because of their size and the amount that they have to provide, in responding to the cuts being made to their budgets.

I am also very grateful to the noble Lord, Lord Beecham, for his support and encouragement of the people of Benwell over 50 years. I hear much of them and of him from my daughter Catherine, who is rector of Benwell. She also shares her concern for the spiritual and social needs of that area of Newcastle. Like the noble Baroness, Lady Donaghy, I sometimes wonder when we discuss local government affairs here why we do not simply move ourselves to Newcastle on the basis that we hear so much of the north-east. On the basis that if you cannot beat them you might as well join them, I look forward to my own retirement to the neighbouring borough of North Tyneside in the next few weeks.

Today, I want to concentrate on the crucial issue of the removal of funding for local welfare provision from April 2015, which is indicated in the local government finance settlement and to which the noble Lord, Lord Smith, made brief reference as he introduced the debate. Under the Welfare Reform Act 2012, key elements of the discretionary Social Fund—crisis loans and community care grants—were abolished and replaced by funding to local authorities, with the intention that they establish their own local welfare assistance schemes. The £178 million allocated for 2013-14 was a cut of 46%, but local welfare assistance has in the past year been of crucial benefit to those who have fallen into financial crisis through the additional pressures of this period of austerity.

It is true that the money has not been ring-fenced but, in my experience, it has mostly been used to benefit those in most need. In discussion of the Welfare Reform Bill, it was a deliberate act on the part of the Government to provide that £178 million to help those in most need and to help local authorities to make provision for them. It was in response to a number of debates, including those on the capping of benefits, which took place at that time. The integrity of the noble Lord, Lord Freud, and the Government was great in that provision for those in most need in our society.

The Children’s Society’s Nowhere to Turn report has highlighted the postcode lottery in the present, new regime and in particular its effect on low-income working families who, in a crisis, are often barred from making a claim under the new arrangements because they are working. Local authorities are, however, making a real effort to provide support in kind for those in most need. I pay tribute to those, including those in Leeds, who have worked so hard to help people by making the best use of that reduced funding through local welfare assistance.

One particular danger of the reduced provision, which will be exacerbated by its abolition, is the need for people to rely on high-interest lenders or loan sharks. If all funding is withdrawn by the Government and the DWP no longer has any responsibility in this area, there will be substantial extra pressure on that group of people who fall into crisis circumstances, who are the prey of loan sharks. Loans are already a casualty of the present system. Reasonable interest rates on loans are simply not available for those in most need in most areas. Much as I applaud the work of credit unions and the substantial cross-party support for them, they are in no position to help in these crisis cases. The alternative is the payday lenders, leading to an ever increasing spiral of debt. The removal of all funding can only make that worse. Can the Minister tell us what guidance she will give to local authorities for the continued provision of safety-net schemes when the DWP has ceased providing funding for them? Can she also tell us how she envisages that people in crisis can avoid the appalling interest rates of the high-interest lenders and, worse still, the loan sharks?

Local welfare provision is often inadequate, but it is vital. We must not push people into the arms of high-interest lenders. We must defend our ability to respond to the crises which people face in their lives and for which we need to make provision.

My Lords, I have to tell the House that although noble Lords are trying very hard, we are running a little slow on this debate, and we would like to get a couple of quick contributions in the gap.

My Lords, I will try to note that. I, too, thank my noble friend Lord Smith of Leigh for securing this debate and for his forensic analysis of the balance of the settlement. I declare my interest as a vice-president of the LGA. Although, like others, I have a feeling of déjà vu, I think that I actually participate in this debate only every couple of years. Nevertheless, the Government have shown, on the basis of the figures for this year and next, that local government will continue to take a hugely disproportionate share of the cuts in public expenditure—slightly disguised, as my noble friend Lady Donaghy said, by the treatment of health and social care provisions, but the figures are still clear. Within that, the distribution is also extremely regressive. It moves money from cities to shires and, within those groups, for example in London, which authorities face the biggest cuts over the next two years? It is Tower Hamlets, Hackney and Newham. Even within the shires, my own county of Dorset, which has fairly deprived rural areas in many respects, has a 50% higher cut than that of the county of Surrey.

As the briefing provided to us through the Library shows, there is effectively a direct correlation in the wrong direction between the level of cut and the level of deprivation, authority by authority. This is not a happy picture and, while we are all sometimes lost in admiration for how councils of all political persuasions try to cope with these cuts in their own areas, we have to face up to the fact that was well set out by the right reverend Prelate just now: the social effects of some of these cuts are dire indeed.

One issue we have to face—this is a message for all Front Benches, and all Governments and potential Governments—is that underlying all this is the terrible centralisation of local government funding in this country, which the noble Lord, Lord Tope, underlined. Even by the 1970s, we had the most centralised system of funding in Europe. Since the 1970s, successive Governments have tightened central control of local authority funding. It is also historically the highest level of centralisation for some of our great cities and shire counties, which were much freer in the 19th century and the early part of the previous century. Some of the great achievements of local authorities reflected that freedom. Local authorities are heavily dependent on the government grant. They are not allowed to raise specific taxes in their areas. The taxes they can raise, as council tax, have been capped or frozen. They have virtually no flexibility on the business tax and severe limitations on their ability to borrow, even from the public sector loan board. They have almost no ability nowadays, compared with earlier centuries, to go to the market to raise money.

Your Lordships will know that my particular interest is housing. It has become clear to all parties and interests within the housing sector—all forms of tenure and everybody from developers through to tenants—that there is a very serious crisis in housing in this country. There is a role for local authorities both as leaders and providers in this area, yet the rules that govern their ability to do anything serious about housing effectively stymie their ability to play a key role in this area. The interventions by the Government, who started by cutting social housing funding, including their positive intervention in relation to the new homes bonus, have been shown by the Select Committee in another place to be pretty ineffective. Their latest Help to Buy scheme has certainly helped a number of first-time buyers but, without effective action on the supply side, all it will do is raise the price of housing, and thereby rents, in the private and public sectors.

The fact that local authorities cannot go to the markets to raise money for housing is nonsense. That is the major bar to local authorities or ALMOs being able to build more houses. It all reflects the definition of the public sector borrowing requirement or the public sector net debt that is adopted by the Treasury and imposed on local authorities in this country.

It is a different definition from the one that applies in Europe, and it has different consequences from the situation in North America. When the Government report to international bodies such as the IMF and the EU on the national borrowing requirement, that excludes the kind of borrowing that is allowed by the public sector borrowing requirement in other European countries.

This is not an act of nature; it is a positive decision by successive Treasury officials, and one that makes a nonsense of the ability of local authorities to do anything about the housing crisis that is facing them in most areas, either on an immediate basis or on a long-term strategic one. We know, and this has been reiterated by all parties, that we need to double the level of the new supply of housing. This is an inhibition on the public sector acting directly. I am not just talking about the ability to build traditional council housing; I am talking about the ability of local authorities to engage in joint ventures with housing associations and to support developers in the private sector in building houses. If all this is barred to local authorities, there is no hope of resolving the housing crisis that faces us.

I ask the Government—I also direct this to my own Front Bench in terms of what an alternative Government would do—at the very least to review how this definition of the public sector net debt is impacting on the ability of local authorities to do their job in one very important area, one that is vital to the future health not only of our society but of our economy, since housing could provide a much needed local and national boost to economic activity. Could the Government at least commit themselves to a review? The current situation is a nonsense. It is part of the general centralisation of financing within this country but it could specifically be dealt with pretty easily, in immediate and bureaucratic terms, with the stroke of a pen. I hope that the Government, and indeed other parties, can commit themselves to such a review.

My Lords, I thank my noble friend Lord Smith for securing this debate. I confess that I am not one of the usual suspects taking part in this annual event, nor am I an expert in local government funding, and I would not dream of engaging on the detailed consideration cited by many other noble Lords who have expertise. However, I have some expertise in what cuts or inadequacies in local government funding mean to consumers, especially to caring families and to the voluntary sector. It is on this that we should focus in the difficulties that we are facing, and in each case it is evident to anyone engaged in these sectors that not supporting caring families and not supporting the voluntary sector result not in the savings that we all know have to be made but, rather, in increased expenditure. We have already heard from my noble friend about the numbers of people staying in hospital because local services were not available to enable them to be discharged.

I want to illustrate this with an example. Mandy is a woman in her 60s caring for her severely physically and mentally disabled son, who is 32—she has been caring for him since he was born—and her mother, who had a stroke three years ago. Mandy’s husband left her some years ago and she is the sole carer. She dearly loves both George, her son, and Vera, her mother, and happily accepts her role as carer, even though it is very stressful. What has enabled her to cope and to manage to keep going is that George goes into residential care one weekend a month and her mother attends a day centre run by the Stroke Association twice a week. She was told in November that George will now be eligible for respite care only for two weekends a year instead of every month, and the day centre has no funding beyond the end of March this year.

Mandy herself is a diabetic. The stress associated with losing most of the very minimal support that she has been enjoying, if that is the word, means that her blood sugar levels have gone up to a dangerous level and it looks as though she herself will have to be admitted to hospital. If this happens, both Vera and George will need residential care. So the withdrawal of a small amount of care will result in more expenditure for the state.

This is the reality of what cuts to local authority budgets mean: cuts to direct services to families and to the voluntary sector. Many of the services provided by the charitable sector are in the area of preventive work, and we have heard from many noble Lords how important that is in stopping situations developing or getting worse—the day centre for the stroke patient, the drop-in centre for someone with mental illness and family support for those coping with addiction. Many local authorities hardly engage in this work at all nowadays, since eligibility criteria have become so much stricter, so they have to rely on charities. Of course the charitable sector must play its part and take its share of financial cuts, but it would be not only unjust but counterproductive to make it take more than its fair share. Where a local authority has control of only 5% of its budget, the rest being set out in statute, and that 5% is whence comes the funding for the charitable sector, the budget may be drastically cut simply because it can be when other budgets cannot. We see this happening everywhere. Will the Minister tell the House what guidance is being given to local authorities in this regard because so many initiatives that make up the so-called big society are dependent on precisely this funding, which is now at risk?

I also want to say a word about morale. The services which support families are dependent on the dedication and commitment of hundreds of thousands of local authority and voluntary sector workers. Since the rewards and conditions are not great, their job satisfaction is an important factor in keeping them dedicated and committed. This is hard when you are constantly being told that your working conditions are only going to get harder as yet more resources are cut, and that the public sector must bear the brunt of future cuts, as we have just heard from the Chancellor. In addition, if your morale and the morale of your service are low, you are inevitably less inclined to embrace change and new ways of working, which are essential when making the best of scarce resources. You are inclined to retreat into your silo for safety. Nowhere is this more important than when considering integrated services across health and social care and the voluntary sector, which are so essential from the point of view of the patient, the user and the carer. Again it is counterproductive not to invest in staff support of all kinds to ensure that these dedicated people, on whom many rely, do not become entrenched in the so-called silo mentality.

Labour’s Total Place programme was a fine example of the benefits of integrated care. This Government’s Whole Place scheme is more limited in scope, but the potential is there. Pilot projects focused on health and social care and families with complex needs in high-cost areas show how services can be combined and transformed to produce significant savings and improve outcomes. For example, Greater Manchester estimates from pilot work that it could achieve £270 million net savings over five years, while Essex forecasts that savings of £414 million could be made over six years. Does the Minister agree that if we want to break down the barriers to integrated working, the morale of workers is of the utmost significance? Will she tell the House how the Government intend to maintain it in the face of constant threats to the public and voluntary sector as a result of pressure on the budgets of local authorities?

My Lords, I am grateful to the noble Lord, Lord Smith of Leigh, for initiating this debate, and I declare my vice-presidency of the Local Government Association. So far in this debate the Labour Party’s approach has been avoiding two critical issues. The first is the level of government debt because although the economy is improving, we still have major fiscal problems. This year’s deficit is forecast to be £111 billion, which is very high by any past comparator year. Over the next four years, there will continue to be high annual deficits adding more than £300 billion to our national debt. Four years from now the national debt could be £1.5 trillion, double what it was in 2010 when it stood at £760 billion.

That level of rising debt is unsustainable and has to be reduced. The Government have protected some public services from cuts. They have ring-fenced the National Health Service, schools, overseas aid and pensions. Because of that, it is inevitable that other budget heads will have to take a bigger cut if debt is to be contained—unless the Labour Party thinks that the ring-fence around the National Health Service, schools, overseas aid and pensions should be removed. In summing up, the noble Lord, Lord McKenzie of Luton, might tell us what the Labour Party’s position on that is. For local government, things are difficult. This is not a surprise since local government accounts for a quarter of public spending.

My second concern about the way in which the Labour Party is approaching this debate is that it talks mostly about cuts in government revenue support to councils and the distribution of those cuts when total government spending in an area needs to be added in, since health and schools are ring-fenced. The Labour Party also assumes that the level and distribution of revenue support was correct in 2010 when this Government took over. Large cuts would have come under Labour anyway, not least in working neighbourhoods funding directed at the more deprived areas. That is the context in which this debate is being held.

However, there is no doubt that the cuts have been steeper in the more deprived parts of the country. The Government try to justify it by talking about spending power which, as we know, includes more than just revenue grant because it includes council tax, charges and fees, and NHS funding for social care. Ministers have rightly pointed out that poorer areas still get much higher levels of support than richer areas. This then begs the question as to what the differentials should be, and here things are much hazier. Running complex formulae in DCLG simply gives us sets of numbers with absolutely no certainty that their basis is robust.

The settlement consultation documentation says that the most deprived areas in single-tier authorities will have 50% higher spending power per dwelling than the least deprived areas and that, to deliver this spending power, central government support will be three times higher per dwelling in the most deprived areas. The trouble is that it is not clear that these figures are the appropriate ones. Why are they as they are? Can they be justified in detail?

Let me take as an example our big cities which are in many ways very similar. Leeds in 2014-15 will have spending power per dwelling of £1,851, but Birmingham will have much higher spending power per dwelling at £2,587. Newcastle will have £2,407; Sheffield, £2,125; Liverpool, £2,492; Manchester, £2,428; Nottingham, £2,371; and Bristol, £2,152. Can the Minister explain the basis for these differences in spending power per dwelling across our big cities, from £1,851 in Leeds to £2,587 in Birmingham?

Of course, that point is more generally applicable because similar differences arise all over the country. The problem of defining a fair distribution of grant is compounded by the decisions councils themselves take on council tax levels, which can vary considerably between councils, both at Band D and as an average payment from each household. That problem is compounded even further by sums allocated to an area but not via the council. Schools budgets and the pupil premium are good examples; DWP spending is another.

This is why we need to know how much the Government are actually spending in an area in terms of total public expenditure, and I hope that the Minister might look at how this might be done. Unless we know this across Whitehall, we shall continue to have uncertainties about how much is actually being spent, and some in local government will continue to talk only about cuts to council budgets when actually it is the total amount of public spending in an area that matters because it is all that funding that delivers local services.

I turn to some specific issues and the current consultation. First, it has been reported that 42 councils plan council tax rises rather than another year of freezing it, and that more than half of those are Conservative-led. They should not be criticised. Localism should mean that it is their business. Freezing council tax with a central grant making up the loss placed into a council’s baseline for future years is fine as a temporary measure, but I have been uncomfortable, for some time, with the view that it needs to be frozen for five years or longer. The reason is that that increases local government dependency on central Government at exactly the time we should be empowering councils—with their electorates, if it is felt that a referendum is justified—to make the right decisions for their local area. That is localism, and we will never solve the overcentralisation of England unless we get councils to raise more of their revenue locally. Many, of course, have been doing that, and many will do so next year.

Secondly, on the specifics of the consultation, I come to the £120 million safety net holdback proposed for 2014-15. I doubt that it is necessary and I would distribute it unless consultation clearly demonstrates otherwise.

Thirdly, it is unclear whether this funding settlement as proposed will enable all councils to deliver their statutory obligations. Councils have to help in this process as part of the consultation by demonstrating exactly where they may fail to meet them. Councils also have to help by pressing for single funding pots for local authority spending, health, and for expenditure by the DWP. Savings are to be made in that area by reducing duplication. I entirely agree that we need to create a place-based system of finance in England, and local government has to lead it. That could be based on the governance that is developing locally: combined authorities, health and well-being boards, joint committees, local enterprise partnerships, and so on.

Our current model for financing and running local government is not fit for purpose. The Local Government Association has proposed five-year funding settlements, wider revenue-raising powers and the wider involvement of local government establishing how grant is to be distributed. I concur with its position, but we are now in great danger of seeing some local authority services sinking to levels that are unacceptable for a civilised country. I hope very much that the Government will take on board the financial problems that many councils now face.

My Lords, I welcome this debate, and congratulate my noble friend Lord Smith.

The importance of local government, as many other noble Lords have commented, is that it has a very large and direct effect on people’s lives—on their health, jobs, education, leisure, environment—and particularly on poorer areas and communities, which may not benefit to a disproportionate extent. However, they are not necessarily the people who are most reflected by opinion surveys. Therefore, the notion that because opinion surveys show that things are getting better might not, for the population as a whole, reflect the key activities of councils. Nevertheless, over the past 20 years everyone has seen a remarkable improvement and a rise in morale in many of the most depressed communities—or in some of the ones I have seen. Increased funding was very much central to that process, so I am not ashamed of the fact that the Labour Government spent considerable quantities of money, as one saw great advantages come from that.

It is also important to realise that local government’s activities are associated not just with spending money, but often with great creativity and with making improvements requiring imagination, as I learnt myself when I was a city councillor introducing pedestrianisation, which cost very little indeed. I was recently canvassing in Stoke—a very important city—where the slag heaps have been turned into green hills and an international cycling arena. However, as the noble Lord, Lord True, and others have commented, there are many rigidities in our local government compared to that of other countries. I put down a Parliamentary Question on the issue that many schools are still unable to use public parks, nor are school playing fields allowed to be used as public parks, as they are in the United States. It is quite extraordinary. I battled on that issue as a councillor years ago.

As the noble Lord, Lord Shipley, has just commented, when the facilities and services provided by local government are insufficient to maintain communities—this is not just a zero-cost effect—there will be other costs, perhaps to health, and perhaps to security and policing. There are areas in cities where we have seen the role of focused funding, in Sure Start centres, youth clubs and social health programmes, which have proved to be very effective for deprived families; those are areas which may be cut in the likely financial outturn. Of course, in richer towns there is a differential expenditure according to whether local people sue them. In a certain rather well-to-do city, which I shall not name, it was well known that pavements in certain areas were always very well maintained, because, if they were not, people would sue the council. So there is another way in which people can have a comeback.

No mention has been made in the debate of the role of the Audit Commission. When I was a councillor—and as a Member of the House of Lords—I saw reports from the Audit Commission about new ideas, progress and problems in local government. I cannot see that the demise of the Audit Commission has led to the creation of an equivalent substitute. All that we see in the Government’s documentation is that they have produced a leaflet of 50 ways in which to save money, which is not quite the same thing.

The Government’s encouragement to local authorities to stimulate new business and housing is, of course, welcome. As a former councillor and a director of a high-tech company in Cambridge, I saw at first hand how councillors working with all local organisations could be very effective in bringing in innovative business—although they could also be very effective in stopping local business—but it had to be done properly. One difficulty in the past three years is that one way in which local government was working with business was through the regional development agencies, which were clobbered when the present Government came to power, although they have now been effectively reinstated under some new name.

The other important feature, as other noble Lords have said, is that no company is going to invest in an area unless there are not only good pavements but high standards of health, environment and education. The Trading Standards Institute, in producing information for this debate, was very concerned about the loss of funding for its inspectors—and the same applies for public health inspectors. To give noble Lords a bit of history at this point, when I became a councillor in Cambridge I met the chief public health inspector, Mr Edwards, who said that Cambridge was a very dodgy place. When he first arrived in Cambridge, which I suppose was in the 1960s, he checked on all the taps in all the famous colleges. Of course, Prince William is going to one of these Cambridge colleges, and I hope that someone has checked the taps—because when Mr Edwards did so, he found that a certain college had very dodgy water. He said that that was probably why Prince Albert died three weeks after visiting a certain college in Cambridge. Those inspectors have a very important role. The Trading Standards Institute has commented on the role of fraudulent actions by people and businesses, which local government inspectors can help to prevent.

More recently, we see another role for local government, working with government agencies in dealing with the issues of floods and the coastline. How can we have businesses moving into these areas if there is uncertainty about whether they will be prevented from flooding, as the noble Lord, Lord Smith, said? There seems to be some real question as to whether there will be ongoing funding for this process and these events look as if they may become more serious and frequent.

Even the most middle-class people, whose pavements are nice and smooth and who live near parks, still have to breathe the same air as those in poorer areas of the cities. There are very considerable developments in that regard; the average air quality in UK cities, as Defra has pointed out, is now worse than the EU recommended standards, and even worse in poorer areas, with high traffic concentrations. The funding for air quality monitoring, forecasting and traffic management is apparently to be cut back. If there are a large number of unhealthy people as a result, that may involve a cost to the NHS and the community. That is just one example of where a cost-benefit analysis would seem to be appropriate when investment decisions are being made.

In conclusion, as legislators in this House of Lords with responsibilities for government, our responsibilities are for the whole of the UK and we must ensure that government looks after the people in all areas of the UK, especially those who are most reliant on government.

My Lords, it is with great pleasure that I take part in this debate, which was excellently introduced by my noble friend Lord Smith of Leigh. I declare an interest as the newly elected county councillor for the Wigton division in my home county of Cumbria, although it is not my first experience of local government. I have not as long a record as my noble friend Councillor Lord Beecham, but I was elected in 1971 as a Labour councillor to the old County Borough of Oxford when I was 23. Those were heady days for local government. Nowadays, the Conservatives think of Keith Joseph as the trail-blazer for Thatcherism, but then he was Secretary of State for Social Services and was encouraging us to increase our social services budgets by 10% a year in real terms. Well, it all had to come to an end, and it was my adolescent political hero Tony Crosland who, in 1975, told us, “The party’s over”. I am afraid that, in the late 1970s, that phrase applied not just to the increase in local government spending—my own party went pretty near the brink.

Indeed, my second spell in local government was in the London Borough of Lambeth in 1982, where I was fighting the lunacy of Ted Knight’s illegal refusal to set a rate. I hope to God that we never have to live with that kind of experience again. The contrast in local government between today and the early 1980s could not be more striking, I think, in two respects. First, the cuts now being demanded of local government are massive and unprecedented. I think that I am right that, in 2010, Cumbria’s total budget for capital and current together was £720 million and there were £88 million of cuts to be achieved by April 2014, but it will be necessary to achieve another £88 million from within that £720 million by 2016-17. Of course, if George Osborne gets his way on requiring £25 billion of further cuts over the following two years, it will be a pretty gloomy picture.

I say to the noble Lord, Lord Shipley, that I do not think that many people on our side of the House sincerely dispute that cuts had to be made in 2010, because of the impact of the global banking crisis on a very exposed UK economy. If Labour had been elected, as Alistair Darling made clear in the run-up to the general election, there would have been deep cuts in public spending. I agree with the noble Lord, Lord True, that there was fat that could be cut. The question is whether the extent is now reasonable.

My second point is about local government’s response. Think of the early 1980s and the contrast could not be starker. Local authorities, including I think virtually all the Labour-controlled councils, have behaved with realism and responsibility in this very difficult situation. Many of them have planned and pioneered innovative ways of delivering services at lower costs—I think of my old London Borough of Lambeth where I was a councillor, which is now a model of innovation in local government. That is a tremendous success for the modern Labour Party. It would be nice if, for once, Eric Pickles could at least acknowledge that local government has met this situation with realism and responsibility. Of course I would not want to equate the Minister in any way with the Secretary of State, who often lacks the ability to reach out across the party divide in order to recognise the tough decisions that local government has responsibly taken.

There is a very serious question about the sustainability of what is planned for the future. I think that the Government should now be, as the noble Lord, Lord Smith, suggested, not only thinking about what would happen if local authorities became insolvent, but carrying out a major study of whether and how a sample of authorities will be able to sustain their present pattern of statutory activities with the financial outlook that we have.

Already in Cumbria, the Labour/Lib Dem administration is being forced to pare back virtually all non-statutory services. Our budget consultation in the coming year, for instance, assumes that the authority will withdraw from providing free school transport for all post-16 schoolchildren. In a sparsely populated county, it could have extremely negative implications for equality of opportunity if children from poor homes can no longer access the best A-level provision. Similarly, we are proposing to withdraw all bus subsidies in Cumbria. Bus subsidies are the lifeblood of communication in communities made up of small towns and ex-mining and agricultural villages.

In my division of Wigton, I am facing a very tough battle with the leadership of my council, with whom I get on very well, to rescue and repair the swimming pool that has been closed. I know that if we can find the money to repair that swimming pool the county will not be able to sustain it over the future years—it will have to become a community responsibility and the community will have to take charge of running it and finding a way to finance its deficit. The big society may sound a noble aspiration, but I have to say that from the present Secretary of State all you feel is a vicious kick in the backside and a lot of disingenuous information and bluster.

The Government claim that the overall reduction in the spending power of local authorities is only 2.9% next year and 1.7% the year after. Many speakers in this debate have demonstrated how that is not so. Without the NHS money, which is not free money, coming into local government the reduction in central government support for local authorities is going to be 15.9% over the next two years. That is a huge body blow. Cumbria as a shire has done a bit better than the mets—our reduction is only 8.5%—but, frankly, the Conservatives have looked after their own in this local government settlement and I think it is a bit of a disgrace.

We are required to make savings. There is a trifling scarcity grant, but in fact the cost of providing services in rural areas is very great. The Government need to explain what they are doing with the grant for local welfare provision, which many noble Lords have referred to, because this is a serious problem. In Cumbria, for instance, we have one division in Workington where life expectancy of people is 19 years less than in the most prosperous division, next to Penrith, yet the Government are withdrawing all support for us in dealing with the circumstances of poor families.

Of course further efficiency savings could be made, but we really need from the Government a rethink of their present approach. It is time that the realism and responsibility that local government has shown in the past three and a half years are matched by a similar attitude on the part of the Secretary of State.

My Lords, I want to speak briefly in the gap, which I know is getting shorter, and therefore my speech will be shorter.

I thank the noble Lord, Lord Leigh, for introducing this debate again. I do not envy my noble friend on the Front Bench having to answer it. I can only be grateful that it is not me this time. I do not particularly want to comment on the way in which local government finance has been discussed. However, I want to point out two things. One is that I have sat on the Opposition Front Bench as a shadow local government Minister and complained bitterly about the distribution of the grant. I swore that the Conservative local authorities were being denied revenue and it was all going up to, for example, northern boroughs. So the type of debate is not changing. Everyone always believes that they are very much worse off. What I do not deny is that local government has borne a heavy burden over the past years in how it is having to manage its finances, and there are two particular areas on which I want to touch.

The first is that while local government has borne that burden, it has been given a much wider ability to deal with it. I am not talking about the level but the means. When I was leader of a borough, I would have been grateful to have the flexibility that is now available to deal with budgets. We could not have pooled budgets or worked with other local authorities. We could not have had joint town clerks or done half the things that local authorities can now do with other public authorities to make the budgets work better. This is a matter of which we do not want to lose track.

I have suggested that we have an annual moan that goes back a long way, and I am sure that we will continue to do so. However, let us not lose track of the fact that council leaders who have spoken here today have a far greater ability to manage budgets than was ever available in the past. I hope that my noble friend will address some of that. I know that this is not the easiest debate for a Minister but we must hang on to the fact that we have more flexibility to deal with the way in which local government manages and defines budgets in the future.

My Lords, I, too, with the leave of the House, would like to speak briefly in the gap. I declare my interest as a former Preston councillor and former Lancashire county councillor.

The noble Baroness, Lady Hanham, is right. I, like her, sat in council meetings with people such as her noble friend Lord Heseltine. However, what I want to say to her and my noble friend Lord Smith is that it is no good talking about giving Lancashire freedom and then telling it that money has been transferred from the DWP for care and urgent-need support schemes. At the time of the transfer, the money was cut from £270 million to £172 million. By 2015-16, that money will have completely disappeared. It is no good talking about giving freedom to leaders of local authorities if they have no resources to put into areas such as the youth service. It broke my heart when this Government came in and took away the education maintenance support grant, which the previous Labour Government had brought in. It was pioneered in Lancashire and was taken up by other authorities. To the young people in places such as Skelmersdale and Wigton, it was not a case of an additional party going on or of too much money being spent; it provided genuine help to young people who needed it.

I apologise for speaking in the gap. I agree that there will always be an argument about the allocation of grant, but it is no good allowing local authorities to be told by noble Lords opposite that they have the power to move the deckchairs on the Titanic. In the north of England, many of us feel that the services that are really needed are sinking and we want government recognition of that fact.

My Lords, like others, I start by thanking my noble friend Lord Smith of Leigh for initiating this debate and for bringing to our deliberations both his expertise on local government finance and his practical experience hitherto of dealing with some of the worst consequences of recent settlements. However, I think that he admitted to us that options are beginning to be closed off, given what is before us today. I also congratulate my noble friend Lord Liddle on his return as an elected local councillor.

This has been a powerful debate with contributions from beyond the usual suspects. As my noble friend Lady Pitkeathley said, you do not need to be an expert in local government finance to understand the consequences of cuts and the benefits of quality public services. I am also grateful to my noble friend Lord Beecham not only for his contribution today but for organising an in-depth and very timely brief from Paul Woods, director of resources at Newcastle City Council. I thank the noble Lord, Lord True, for his interest in Luton, and I will share with him the representations that the council has felt able to make, given the savagery of the cuts that are proposed for us.

We share with the LGA concerns about the timing of the provisional settlement—a week before Christmas. The process was not enhanced by the unedifying spectacle of the Minister in another place having to be dragged to the Dispatch Box to answer an Urgent Question tabled by the right honourable Hilary Benn. As we have heard, the settlement covers the upcoming year 2014-15, with provisional grant figures for the subsequent year, and it does not make for happy reading. Councils will face significant further spending reductions up to 2016 and, as others have said, if the Chancellor should have his way—although we are trying to stop him having that—beyond. The challenge to local government could not be put more clearly than by the LGA:

“The next two years will be the toughest yet for local public services. By the end of this Parliament, local government will have to have made £20 billion worth of savings”.

As many noble Lords have said, 2015-16 will be the crunch year for councils and local public services. The noble Lord, Lord Tope, clearly had that view. It is a stark message indeed. The ministerial mantra, parroted in another place, of sorting back-office services and using reserves is a grossly inadequate response to the scale of the challenge faced by local government.

We accept that the Government have not been completely deaf to the assertions of local government in framing the settlement, and we welcome the change of tack in the reduction of money held back from councils, especially the new homes bonus, but without this matters would be worse. The noble Lord, Lord Shipley, referred to the safety net holdback, and we share some of those concerns.

The Government have been pushed into action on business rates by Ed Miliband, although they could do more in cutting business rates for 1.5 million SMEs. It is only right that councils are being fully compensated for the loss of business rate income arising from these measures, although they deserve assurances about when they will receive the cash. Perhaps the Minister can provide that for us.

Local government finance remains complex and we are about to enter the second year of the business rate retention era. All the more reason, therefore, why the Government should strive for transparency in the presentation of their arrangements, and this they have failed to do. Independent commentators have described the announcement as stronger on spin and misleading presentation than the technically sound explanation that councils and the public would expect. In particular, comparing such different councils as affluent Windsor and metropolitan Newcastle in an attempt to justify fairness shows just how out of touch the process has become. My noble friend Lord Beecham made that point. Time does not permit today to take stock of how the business rate retention scheme is working, although the LGA has already highlighted a concerning, emerging issue about the level of financial risks that councils face due to appeals and business rate avoidance.

One of the bones of contention—again dealt with by my noble friend—is the presentation of the overall settlement in terms of spending power rather than the settlement funding level. The former shows cuts of only 2.9% and 1.8% respectively for the two years, whereas the latter shows cuts of 9.4% and 13.2%. These are staggering amounts. The former includes significant tranches of NHS money to support social care, which will go to social care authorities only. Pooled funding, as my noble friend Lady Donaghy said, is to be welcomed, but the fund does not address the financial challenges facing councils and clinical commissioning groups in so far as it is bringing together resources already committed to existing activity.

The settlement funding level is the local share of business rates and the revenue support grant, the money available for statutory services. The latter has been cut by 17% next year and by 41% over the two years. So it is clear that the cuts expressed in terms of spending power understate the impact of changes to government funding of council services.

We need to consider not only the overall level of the settlement: its distribution is also vital. We dispute the Government’s assertion that it is fair. My noble friend has pinpointed this problem, in particular, and has identified the technical arrangements that are driving it. His analysis is right. A simplistic comparison of total spending power per household is meaningless without an understanding of the different spending pressures that councils face in meeting statutory demands and their ability to raise revenue through council tax and business rates.

What is happening under the settlement is that the spending power of the more deprived areas has been reduced, while that of the wealthier areas is being protected. This is an inevitable consequence of the cut to the resource equalisation component of the revenue support grant, especially in an environment where the RSG component overall will be a declining part of the settlement funding assessment under the business rate retention scheme. This unfairness can be depicted in a variety of ways but, given the regional changes in spending power over the two years to March 2016, London authorities will lose 8.2%, the north-east 7.2%, the north-west 6.5%, the West Midlands 6.1%, Yorkshire and Humberside 6%, the east Midlands 4.2%, the south-west 2.2%, the east 2% and the south-east 0.6%. The figures speak for themselves. What definition of fairness justifies this distribution?

By the end of next year, compared to 2010-11, the 10 most deprived local authorities in England will have lost six times more than the 10 least deprived. We should not be surprised, given that we have a Government who have delivered tax cuts to millionaires and the bedroom tax to the poor and disabled. We should be in no doubt that these settlements are pushing some councils, inevitably those covering the most deprived areas, to the brink of financial failure. We have heard from several noble Lords about Wolverhampton’s experience.

As to the protection of individuals, can the Minister confirm that the settlement removes for 2015-16 the identified funding—some £170 million—for local welfare provision which was meant to stand in the stead of the discretionary social fund? We join the right reverend Prelate the Bishop of Ripon and Leeds in probing that matter. We should go back to our debates on the Welfare Reform Bill to revisit the assurances that were given at that time because I do not think that they are being fulfilled.

The noble Lord, Lord Snape, and others refer to the fact that council tax support funding is not transparently identified in the settlement, and the fears that councils may be forced to reduce their support in line with the reduction in their settlement funding assessment. The LGA points out that council tax has already become more progressive and that the cut in central government support, which could amount to £1.1 billion, would make this worse. As for a council tax freeze, is it not the case that an increasing number of councils, including Tory councils, are struggling to hold the line because it is difficult to balance the books? Unpalatable choices are inevitable, given the cost of living crisis that already besets so many families.

It is difficult to remain optimistic despite the historic resilience of local government, and recognising the role that councils could play in delivering jobs and growth. Councils have had to innovate and have benefited from strong and imaginative leadership; we have heard from some of those leaders today. However, this settlement will test their resilience like never before. For the future—this deals with the point made by the noble Lord, Lord Shipley—they deserve restoration of fairness in the distribution of resources. There can be no going back to 2010; I agree with my noble friend Lord Liddle on that. I agree with my noble friend Lord Whitty on the devolution of powers over housing, and would say to him that there is an independent commission that Ed Miliband has set up to look at the financing of affordable housing and council housing. There should also be devolution of powers over planning, jobs and skills. Above all, we want local authorities to have more responsibility to be able to serve their communities in the way that they think best.

My Lords, I am grateful to the noble Lord, Lord Smith of Leigh, for securing this debate today and, indeed, for his warm welcome to me in this role and in responding to this annual event for the first time. I should like to respond particularly to the remarks made by the noble Lord, Lord Beecham, about my right honourable friend the Secretary of State, Eric Pickles. All I can say to the noble Lord, Lord Beecham, is that it is such a shame because he speaks so well of you.

Noble Lords have covered a lot of ground in this debate and I may not have the opportunity to respond to all the points that have been put to me. I will do my best today. Where I am not successful, I will, of course, supplement my response with a follow-up letter which I will place in the Library of the House. I will just point out to the noble Lord, Lord Whitty, that we have a debate on affordable housing before the end of this month so we will be able to return on that occasion to some of the points that he raised.

The starting point in a debate such as this is to look at the context in which we are debating these matters and acknowledge that over the past three years the Government have had to take some tough decisions about the public finances. Tough, but these are now paying off as the economy gets back on track. My noble friend Lord True highlighted one prediction of the noble Lord, Lord McKenzie, in his contribution to last year’s debate which did not materialise. That was about councils becoming insolvent. It is worth reminding the House that the noble Lord, Lord McKenzie, also suggested last year that we were facing an environment of little growth and increasing debt, but as we look ahead, growth is forecast to be 2.4% this year. The Office for Budget Responsibility expects that jobs will be up by 400,000 and employment is at an all time high.

As the noble Lord knows, while we remain having to bring down the deficit, we still have to pay off debt but we are having to deal with less debt than we might otherwise have done had we not taken the measures that we have.

I shall return now to what we have done in terms of the changes we have made and people’s reaction to them. It is worth reminding your Lordships that, as regards the changes we have made to the way in which councils are funded, a recent survey showed that public satisfaction with council services has stayed the same or actually improved in 90% of cases. That is a real credit to local authorities. We are making progress but in order to continue to do so it is vital that we stick to the disciplined course that has been set. Like every part of the public sector, councils have had to shoulder their fair share of the responsibility to pay down the deficit and get the nation’s finances back on a stable footing. The noble Lord, Lord Liddle, acknowledged that the right honourable Alistair Darling, when Chancellor, said in 2010 that cuts would be necessary if the Labour Government were re-elected at that time. However, it is worth noting that the Labour Opposition have opposed all of this Government’s cuts to local government. My noble friend Lord Shipley was right to ask what the noble Lord, Lord McKenzie, would do if Labour were elected. I noted that he did not provide us with much information on that in his winding-up speech today.

Much of the comment today has focused on reductions in central government grant. However, concentrating on those grants misses the bigger picture. It is far more accurate to look at the overall spending power that councils have. Contrary to what has been said, spending power is the best available measure of resources available to councils. We have published the methodology and the data in full on our website. Spending power includes the money the councils raise through council tax, business rates and financial incentives. I am sure noble Lords will welcome being reminded that local authorities now retain 50% of those business rates, which is not something they were able to do previously.

This debate illustrates some stark contrasts between this Government’s approach and philosophy and those of the Opposition. The previous system made councils dependent on central government for their income. Councils got more money by painting the blackest possible picture of their area. Indeed, Andy Sawford, the opposition spokesman in the other place, said only this week that the Labour Party would return to this approach if it succeeded in winning the general election next year. The Opposition talk about so-called fair funding but what they do not say is which councils they would cut if they were to introduce their preferred approach.

In contrast, we have set up a system which inspires ambition and aspiration and rewards councils which go for growth, support businesses, attract investment, help create jobs, and which are absolutely focused on transforming their services to deliver the best possible outcomes. By that I mean the most effective and most efficient public services which best support local residents. Our system means that councils which respond to new opportunities see the benefits of their efforts. I remind noble Lords what my noble friend Lady Hanham said when she spoke powerfully about the flexibility that local authorities now enjoy. I give way to the noble Baroness.

Will the Minister please give the names of two or three local authorities which in her Government’s view have deliberately overemphasised their deprivation in the past in order to secure help? Did Windsor do that?

I am not suggesting that people overemphasise, I am suggesting that the different approaches between this Government and the noble Baroness’s Government led to authorities focusing on where they faced difficulties rather than focusing on how they could benefit from opportunities.

One of the best illustrations of this Government’s approach is the new homes bonus, an incentive that will be worth almost £1 billion next year. This year, Bradford can expect some £2 million in new homes bonus for year 4 of the scheme, Wiltshire some £3 million and Walsall £1.2 million. The Government have listened to local authorities about not topslicing the new homes bonus, which was acknowledged by the noble Lord, Lord McKenzie. I am listening to noble Lords who call for even greater localism and I am interested in what they say but I also hear some contradictions in the various analyses that have been made by noble Lords in the debate today.

One of the other major points raised by noble Lords is that some parts of the country are losing out compared to others. However, the settlement represents a fair deal for every part of the country: north and south, district and county, city and shire. On average, councils will have spending power worth £2,089 per household. The average spending power reduction is just 2.9% in 2014-15. There is protection for more deprived areas of the country, those areas which are most dependent on grant. They continue to receive significantly more government grant. Notwithstanding the comments made by the noble Lord, Lord Beecham, it is worth making the point that Newcastle, for instance, receives in the region of £900 more per household than authorities such as Windsor and Maidenhead.

We have also recognised—

Does the Minister not recall the indices of deprivation to which I referred? The required spending is much higher per head than in Windsor and Maidenhead. On that basis, how can she possibly compare the two?

This system acknowledges that there is greater need in an area such as Newcastle. That is why it is receiving considerably more per household than areas that are not in as great a need. We acknowledge that and that is what we are doing. However, we also believe, taking on board the point made by my noble friend Lady Hanham, that Newcastle, along with every other area of this country, also has great opportunities to raise more funding in its own area through the various different kinds of scheme that are there and that will increase growth in the area if the opportunities are taken. We have also recognised that services can sometimes be more difficult and expensive to deliver in rural areas and have set aside £9.5 million to help them as they modernise their services.

The noble Lord, Lord Beecham, raised questions about the inclusion of social care funding. Social care funding, or the better care fund, which is worth £3.8 billion, is jointly agreed by councils and the NHS locally. Provisional settlement figures show that authorities facing the highest demand for services receive substantially more funding.

As councils are now in the process of setting their budgets, council tax payers will be looking to them to keep bills down. When we look at the local government finance settlement, local council tax payers are very much in the front of our mind. The Opposition talk a lot about the cost of living, but it is worth pointing out that under the previous Government, as my noble friend Lord True said, council tax more than doubled. This Government have done everything possible to protect hard-working families from further rises. Over the past three years, we have offered enough funding for councils to freeze council tax without losing income. We will be doing the same again for the next two years, with a further £550 million available to councils. We also intend to roll that funding into the baseline, giving certainty that councils will not lose out tomorrow by helping council tax payers today. Where bills have been frozen, the average bill payer could have saved more than £700. I very much hope that as many councils as possible will take up this offer, passing on these savings to their residents and doing their bit to help people with the cost of living.

I do not think that any noble Lord raised the issue of council tax referendums but I am sure your Lordships will wish to know that we are still consulting on the principles of that. The threshold will be announced shortly. Noble Lords should be aware that we are open to representations about a lower threshold than that set up to now. Transparency and accountability to local taxpayers are absolutely critical. Those authorities which have been setting a 1.9% increase to avoid the 2% threshold for a referendum are simply not having an honest conversation with their residents. The money is there to freeze bills so why not take it?

I am grateful to the noble Baroness. Is she saying that you can have any increase you like under 10% as long as the Government approve of it? Why does she not allow the electorate to make its judgement as it does upon Governments, at the ballot box at elections?

The noble Lord knows very well that we are ensuring that councils can freeze council tax. We think that it is important that that can be delivered as a way to support families who struggle with the cost of living. The noble Lord, as concerned as he is about the cost of living, should support councils in freezing their council tax.

I do not agree with the noble Lord, Lord Liddle, that my right honourable friend the Secretary of State has not paid tribute to what many councils have done to try to transform services. We acknowledge that many councils have taken steps to make savings through common-sense measures, but much more could still be done. I also do not agree with the noble Lord, Lord Smith of Leigh, that nothing more can be done because only low-hanging fruit was available to them. We are not talking small change here. It is estimated that some £2 billion a year is lost through local fraud. Local authorities spend £60 billion a year on procurement. There remains plenty of room for councils to save significant sums through more joint working, sharing back-office functions and using smarter procurement practice. Council tax payers rightly expect to see councils tackle these issues before they start putting up bills or cutting back on services. As has already been mentioned, the Government published Fifty Ways To Save. I will not accept any cynicism about this because no council is yet fully realising the potential set out in that document. As one example, there are only around 20 shared chief executive posts in the country. There are plenty of other examples where local authorities have made significant strides forward in this area and demonstrated what is possible.

Councils also have more than £19 billion in reserves. People would be surprised to hear that that is increasing while at the same time local authorities plead poverty. There is also something like £2 billion-worth of uncollected council tax. Councils have varying degrees of success in their collection rates, but all need to aspire to the best. That is even before we begin to consider the more fundamental transformation in services through models like the troubled families programme or the whole place community budgets, where the emphasis is on early intervention and prevention. Over time, these programmes promise to be more effective and efficient. I could offer more examples but do not have the time. I highlight this kind of approach in response to the noble Baroness, Lady Pitkeathley, and others who raised concerns about some specific services. We have set aside £200 million from capital receipts to support service transformation. Next year, there will be a further £330 million to continue this transformation, including a £200 million expansion of the troubled families programme.

Several noble Lords raised questions about the timing of the announcement. I am sure that noble Lords will understand that the settlement must follow the Autumn Statement, which this year was on 5 December. The noble Baroness, Lady Donaghy, asked about the consultation period. I make the point to her and other noble Lords that the consultation period we are in at the moment is on top of widespread consultation during the course of the year that led to the provisional settlement. I have already mentioned in respect of the new home bonus one change that we made in light of listening to that consultation. My honourable friend the local government Minister has already had one conference call open to all local authorities. He will hold another and continues to have an open-door policy available to all those wishing to engage and discuss matters with him.

The right reverend Prelate the Bishop of Ripon and Leeds and the noble Lord, Lord McKenzie, asked about local welfare provision. Councils will continue to provide support to those in the community who face financial difficulty or find themselves in unavoidable circumstances. The LGA has raised those issues with DWP Ministers, and I understand that it is in discussion with the DWP at this moment.

As I said, I will follow up some other points in a letter that I will write following the debate. In concluding, councils have taken important steps towards modernising and transforming their services, and I pay tribute to them for their efforts, but it is possible to do more while also keeping council tax down. We have delivered a settlement that is fair to all parts of the country, and we believe that the flexibility is there to help councils to meet this challenge and, most importantly, to serve their local taxpayers even more efficiently and effectively than they have been able to in the past.

My Lords, I thank noble Lords for their contributions to today’s debate, particularly the right reverend Prelate the Bishop of Ripon and Leeds. I wish him well in his retirement. This has been his last debate; he has made important contributions to this House.

There has been considerable agreement in the House, and certainly a passionate view, that localism is the way that we should go forward. Many noble Lords referred to the impact that the cuts will have in future on vulnerable people. My noble friend Lady Donaghy talked about the impact that they will have on the workforce, some of whom will lose their jobs, but those who stay in jobs have also faced a pay freeze for three years and now a 1% rise, so their real standard of living is going down.

I hope that I did not give the impression that the noble Lord, Lord Shipley, claimed that I did: that I thought that local government did not need to change. As someone responsible for local government finance, I began to make my decisions about the future in 2009, when I realised that things were going to get tough from then onwards, so I prepared my authority to deal with that. We cannot go on simply doing the same round—I think the Minister responded somewhat to that—we need to rethink the way we deliver all public services, not just local government. We need to do it on a place-based system.

There are many ways in which I could save money for the Ministry of Justice but, frankly, I am not going to spend a penny on that unless I am sure that I will get a return for it. That is the incentive I want from the Government. Tell the Ministry of Justice that we can keep people out of prison if we give them more support, but only if we get some incentive to put our investment in.

The Minister gave a robust defence of the Government’s position; I am not sure that she was on firm ground all the time. Spending power is a very arbitrary definition of what is going on in local areas. There is much in it; there is much left out. When we had a proper place-based settlement we understood how much money was going in and it was in the control not of local authorities on their own but of local authorities working in partnership with other agencies. We need to get the DWP to recognise that we are not going to get people into jobs from offices in Whitehall or Manchester—it will be local people on the ground who get people back into work. That will have the biggest impact on public spending, because families with incomes from employment, on the whole, do not depend on public services like those who do not have jobs.

I was a bit surprised when the Minister suggested that it was in local authorities’ interest to paint things in the blackest shades. I have never done that about my authority; I have simply pointed out where there are differences in the way that authorities are run. Noble Lords gave examples of death rates in different areas, which I think adequately illustrated that.

Early intervention is the key going forward, but in many areas of local government, we have limited ourselves to critical needs. When we have a Secretary of State who seems fixated with the frequency of bin collection, I think that says it all.

Motion agreed.

EU: Reform

Question for Short Debate

Asked by

To ask Her Majesty’s Government what priority areas of United Kingdom reform ideas they will discuss with European Union partner countries.

My Lords, I welcome this opportunity to speak in the last debate of this afternoon. I express gratitude first to my noble friend Lady Warsi, the Minister in charge, for coming today. I am sorry that she has to be the last speaker and I hope it will not take too long for that to occur. My colleague and good noble friend Lord Teverson was originally going to speak, too, but had to withdraw his name for a noble reason. He is attending in Paris the awarding of the CBE to a distinguished French senator, Josselin De Rohan, who is retiring soon and whom I also know, so informally my noble friend is also representing me at this occasion. It is a very good Anglo-French occasion anyway and Josselin De Rohan, like most members of the Gaullist or UMP party in Paris, is an enthusiastic European as well as a patriotic Frenchman. The two go side by side in France with most people. I do not know why some people in this country seem to have difficulty with that.

I also thank very much the excellent Lords Library team for its helpful briefing pack, which I hope has been of help to other colleagues in this debate.

In a way, this debate is an unusual way of linking psychologically to tomorrow’s complexities on the EU referendum Bill’s Second Reading. We have a huge list of, I think, 77 worthy speakers and there is a complicated situation about what may happen after the next general election. Once again, we see some politicians in the UK—some, I emphasise—contorting, wheeling, skirting and scheming to overanalyse our long-standing membership of the EU. It is not all of them but enough to get the attention of those who are, interestingly enough, the non-UK personal taxpaying owners who dominate some of the more unsavoury right-wing papers in the UK, which all pronounce in an anti-European mode. No other member state, least of all those who joined when we did or shortly afterwards, such as Greece, Spain and Portugal, has expended so many hours wringing their hands with extraordinary quasi-geopolitical despair about whether it was a mistake to join in the first place.

In that context, I was also rather glad that my noble friend Lady Warsi, in replying to today’s third Question, tabled by our good friend and colleague the noble Lord, Lord Spicer, avoided any response directly to the acquis communautaire suggestion, which could be described as hair raising, to say the least.

We do not do this kind of thing over membership of the IMF, the World Bank, the UN, the WTO or NATO, all of which impose serious and onerous treaty obligations, so why do we do it over Europe? Why is working closely and inextricably with foreigners in Europe so dangerous and why are some of us so insecure and, indeed, immature about this subject? It is a mystery to me so I hope today that my noble friend the Minister will afford us some cheering and cheerful answers to these obfuscating mysteries and leave us in a good mood when we depart.

However, I was glad when the Prime Minister, in his Bloomberg speech almost a year ago, sounded unusually positive on Europe. He quoted Churchill after the war, referring quite rightly to the new economic challenges that faced the oldest continent and saying that we, too, are a continental power. He stressed that he was no isolationist, which he showed in his actions after that. Everyone involved in running both the national Governments and the European Union institutions to strengthen the EU’s long-term cohesion accepts that continuous modernisation and reform is a vital ingredient. This is not rocket science so why does one small part of the bigger of the two governing parties in Britain get so apoplectic about items that are mere tangible common sense?

At the same time, we have to ask ourselves honestly why the UK and many politicians remain so scared of the euro, a strong international currency. Is it a currency with too many duties for us to perform to manage to be a member? Latvia has just joined with great courage. Why do we seem to favour the easy option of regular devaluations? These are serious questions about reform and modernisation. Has not the foolishness of repeat devaluations got us into a terrible position, many years since that first started in 1947? Do we in this country really want to force the other member states to invoke the Lisbon treaty machinery permitting countries to leave, since in many of their eyes—sadly, I have to say this—we are now the bad and unreliable member of the club?

I am grateful to my distinguished colleague Charles Kennedy MP, who I am delighted to remind the House is both rector of the University of Glasgow and president of the European Movement in the UK, for his arresting new year blog a few days ago. He complained that no one in HMG explains what they mean by reform and said that free movement of labour, goods and capital—labour is particularly in the news nowadays—is both a sacred treaty principle and a legal requirement. That is a reality to which the British diaspora—the by now at least 2.5 million British people whom we informally estimate are residing in the other EU countries—would also attest.

The editorial on 4 January in the Figaro newspaper said quite rightly that surely what we all need is a strong EU-wide strict frontier entry policy, agreed rationally between all the member states, rather than piecemeal individual exceptions because senior politicians in certain countries do not have the nerve to stand up to atavistic, xenophobic motives based on false hearsay and rumours. Indeed, the recent remarks about Romanian and Bulgarian potential immigrants to this country have been deeply disturbing to many people.

All the while during this 2013 period, our German embassy friends have rightly agreed with British official suggestions to widen and deepen the single market—there is strong agreement between us and Germany on that—but they warn against threatening to leave the club rather than simply ensuring that the rules are modernised and that continued integration takes place. Indeed, the new FRG grand coalition in Berlin shares these British ideas precisely because Germany itself has harmonious relations between companies and trade unions rather than the atmosphere of mutual distrust between the two bodies that still haunts us in Britain. Once again, that means more integration, not less, a subject about which we appear to remain very confused.

Alarming questions remain as a result of Mr Cameron’s recent rather clumsy démarches on the EU scene. Is the Tory referendum planned for 2017 just PR rubbish or a serious attempt to give the long-suffering public a real say, as they had in 1975—yet again for narrow internal party reasons—under a different party? Why does the infamous EU Act of 2011, which a number of us oppose strongly, specifically exclude enlargement treaties from the referendum lock? If Turkey were to join the EU, why would that not be an enormous new delimitation of the out-of-date and quaint definition of “true national sovereignty”, whatever that means in the modern world? Can the Government accept that most reforms in the Union are part of a continuous legislative and procedural evolution as well as being comprehensively covered in the extensive Lisbon treaty provisions, which consolidated all the accumulated treaties since Messina and Rome and include more of a role for national parliaments?

Sharing sovereignty is not losing it; it is a net gain. Each country becomes even more influential and strong precisely because it is part of the larger modern comity of the whole Union. Before anyone complains too loudly about a so-called lack of democracy—the democratic deficit—with the unfairly criticised European Parliament, we are reminded in history how long it took the USA after its revolution, albeit that it was gradually developing into being a single country, to get the electorate voting in more than mere handfuls of percentages, with a restricted property qualification to boot for many decades, evolving gradually from individual states to a single polity.

The background to this sad subject has been anything but cheering and uplifting, and austerity and slowdown in the member states’ economies have been an inevitable concomitant. The signs are now, gradually and painfully, getting better in many parts, including in Britain. However, an ominous aspect remains. At a time when virtually all sane and sensible representatives of our UK business and corporate community are so pro-European—the CBI is a good example of that, bearing in mind its views a few years ago—politicians’ recklessness has left us now teetering on the brink of resolving our incoherent European policy stances, at best as a semi-detached and irrelevant member country or possibly even with complete separation. Are we not therefore paying a very heavy price for years of insouciance by the pro-European politicians in this country who have always been ready to postpone indefinitely a strong and necessary defence of a full role for the UK, instead of always pretending to be half-committed? The moment of truth is coming, and I am sure that the Minister will help us today.

My Lords, I thank my noble friend Lord Dykes for initiating this debate on European priorities. The right place to start is indeed from the famous Bloomberg speech by my right honourable friend the Prime Minister on 23 January 2013, which I strongly believe set the right agenda and pointed in the right direction. However, follow-up is now needed. The reform agenda will not solve itself; it must be vigorously pursued. Indeed, as the excellent pro-European organisation Open Europe puts it:

“Sweeping European reform is fully possible but … Downing Street must seriously raise its game”.

Of course, it is not only Downing Street. This should be above parties if that is possible, but certainly it should mobilise the best brains in this country.

Two essential strategic requirements follow from the agenda-setting of the famous 23 January speech. The first is obvious. It is that allies must be secured if there is to be European reform. It must be European reform, not just reform of the narrow issue of Britain’s relations with the rest of the European Union. There is definite progress on this. Mr Cameron, the Prime Minister, is gathering support for European reform on a scale frankly not dreamed of and, no doubt, longed for by previous Prime Ministers from both major political parties. Support for reform is coming quite strongly from the Netherlands, Sweden, the Czech Republic, Slovakia, Hungary, the Baltic states and, of course the Club Med countries. Although they are arguing for reform for very different reasons, as we know, related to the difficulties of the eurozone, they are also looking for a reformed system. We should also have Poland with us as a friend and in the reform programme—for the different kind of EU for the 21st century—but, frankly, present differences are not exactly helping that. However, I believe that the underlying interests are the same and point in the same direction.

In my view, there is no question of the UK being somehow marginalised or isolated, as some of the gurus and commentariat keep insisting. Even if we were alone in this EU reform programme, and we are not, in our modern networked world interdependence is guaranteed to every responsible nation. We are linked to all our neighbours in Europe and, indeed, with the wider world and the developing world far more closely today than ever before. We are caught up in an international system of connectivity and joint responsibility as never before in the history of the world. The intensity of communication is instant and deep, and that completely changes the interface between all nations.

It is not just a question of Governments in Europe supporting or being in favour of different aspects of European reform. There are also powerful interests that support them and which are shifting very visibly and very clearly. There is growing scepticism among German business leaders, who say that the doctrine of ever closer union has failed; that is frequently reported in the Frankfurter Allgemeine Zeitung and other bodies. We have the CSU in Munich calling very loudly for more localism and less centralism and regulation. We have the German association of family businesses, which are really the beating heart of the German economy, demanding that the treaties be “fundamentally recalibrated”. Frankly, the call is coming from countless quarters all over the European Union for the political class to rethink its hard-line 20th century dogmatic position, whether in France, Spain, Germany or any of the countries I have mentioned. That is the first requirement that flows from the 23 January agenda and the need to mobilise political support behind it.

The second essential element is the development of a really profound intellectual case against the outdated 20th century doctrine of integration and against what many countries regard as—as quoted in this morning’s papers—“federalist hyperbole”. The centralist model is simply no longer relevant in an age when all the disciplines, from scientists and engineers to physicists, are telling us about self-assembly, flexibility and building from the bottom up. This demands a different relationship internationally, and you can see it developing, perhaps away from the media somewhat, at every level in our different societies.

As many have pointed out—many people of strongly pro-European inclination—Europe today is not working. Unemployment is miserably high at 12%. Youth unemployment is frankly appalling; the figures are unbelievable. The euro problem is not solved. It has gone underground for the time being, but those who think it is solved are living in cloud-cuckoo-land.

In looking at decentralisation and the balance of competences, as our Foreign and Commonwealth Office is now doing, we should be especially wary of overambitious European energy policy, which is currently a catastrophe and of which the outcome is, horrifically, much more coal burning. Europe is burning more coal than ever. Germany is building 10 new coal-fired stations. There are sky-high energy prices in Europe, which are damaging our industry and competition, losing jobs and creating more fuel poverty. Oddly enough, this is an area in which, in some senses, you need more Europe. We need more physical connections of gas and electricity interconnectors to make our market work, but we also need much less administrative interference from Brussels in our national energy policies. More Europe and less Europe go together there.

Generally, we should not only assess but unpick and reallocate some of the competences that are now no longer valid and were conceived in a different, pre-internet, age. Equally important is that there is no real single market in services. There, too, we need fundamental change. I am not against a detailed shopping list of things that it would be nice for the different countries of Europe to have, including this country; that is perfectly reasonable. Of course, the whole subsidiarity principle needs to be boosted. National parliaments should be given a red-card role. Then there is the working time directive, tighter budgets and the common fishery policies—we have been over these things a thousand times. As long as these aims are widely supported, and are not just British special pleading, I am all for putting maximum force behind them. However, that is frankly not enough.

The fundamental case for change to bring the European Union into the 21st century, which people really want, needs advancing. I agree with Mrs Merkel—incidentally, I am sure that we all wish her well in her recovery from her recent skiing accident—that Europe is no longer the right model. An utterly transformed world has now emerged. New patterns of modernisation are now unfolding in Africa and Asia, which are not the same as the European modernisation experience at all. The growth markets we must penetrate are outside Europe and the West. Power has not just shifted east and south but has fragmented into a thousand pressures, sources, cells and groups in the global digital network, with both good and, frankly, very bad outcomes, as the Arab so-called spring—and now autumn and winter—reminds us.

Our priority is not so much to lead because, in the networked world, leadership is an out of date concept. It is working with, rather than leading, other partners in honest and realistic EU reform in the face of these totally new conditions. We need to turn the European Union into a positive force to meet this new world. We are ideally placed to do that, so let us get on with it.

My Lords, I thank the noble Lord, Lord Dykes, and I am sure that the whole House is grateful to him for giving us the opportunity this afternoon to debate this important matter.

There has been a striking change, at least in the tactics and rhetoric of the Government on this issue over the past year or so; that is of course very welcome. I am sure that noble friends of mine will accuse me of being very naive if I place too much reliance on this, but I speak this afternoon on the basis that that change is genuine, that the Government are acting in good faith and to encourage them along that path. It is not impossible that there is a large element of genuineness about the government rethink. A year or two ago, the Government were adopting an extremely confrontational stance towards our partners in the European Union, vociferously demanding all sorts of concessions, exemptions, derogations and repatriations, and occasionally laying on some histrionics, such as walk-outs and so forth, in order to appease pressure from the Cashites in the Tory party and UKIP. It was a deplorable spectacle.

I have heard the noble Baroness, Lady Warsi, say on several occasions that the Government now take the line that they are committed to our membership of the European Union and simply want to be a member of a reformed European Union in the future. Of course, I welcome that very significant change. The change may be a genuine one for two very good reasons. One is that the Government—and the world—have clearly seen that the tactics they were adopting previously were pretty counterproductive and unintelligent, and they have drawn the sensible conclusion from that. The second thing is that they were forced to look into the abyss: into what would actually happen if we left the European Union. I know that they have had some very frank advice on that—franker in private than in public, of course—from bodies such as the CBI, the Corporation of the City of London, the Engineering Employers Federation, and from a number of Japanese and American multinationals and others as well. Therefore they have had to confront the alternative, which has been a salutary process.

In that spirit, therefore, I will not attack the Government this afternoon but will try to be helpful and suggest ways in which we can make a success of those discussions. We on this side of the House, and I think the whole country, want to see reform in a positive sense. Any human institution can always be improved and reformed, and the more important that institution, the more important it is that it is improved and reformed by each generation. Therefore we should be committed to that process in principle. I will suggest one or two bases on which the Government might decide what are the sensible initiatives to take and what the less productive course to take might be in the months and years ahead, as discussions continue with our partners.

The first thing I urge on the Government is always to focus on the substance, not on the symbolism. Always go for the content, not the colour of the wrapping on the package. We should have absolutely no more farces such as those we had with the Justice and Home Affairs opt-out, where the Government opted out of a whole series of measures and then wanted to opt right back into them, because on the substance they were very necessary and in the national interest. That was a deplorable and ludicrous exercise, and it was quite obvious that the Government were pirouetting around in order to appease their own extremists and to head off pressure from UKIP. That was not a very edifying episode at all. I hope that the Government will learn the right lessons from that in future and that they will always focus on the reality and the substance, and be pragmatic.

Being pragmatic, my second point is that it would be sensible to take up issues where we have a particular credibility and, obviously, where our national interest is directly engaged. The obvious selection is the single market. We have a natural credibility on the single market as after all, we took the decisive initiatives to push it through in the 1992 programme and so forth, which we should not allow our partners to forget. We have not completed the single market—there is some important work to be done. I hope that as a result of this discussion on the reform of the EU we will be able to make some concrete progress there.

One thing that cries out to be resolved is the services issue—we must have a proper services directive. Of course, we have a services directive, but we all know that that is inadequate. It was much better than what we had before and was a considerable achievement in itself, and we all know that you can only move human institutions along at a certain pace. However, now is the time to try to achieve a real services directive so that we have a single market in services that is comparable to the one that we have had successfully for a long time in goods.

Last time round we found that the French and the Germans were the greatest obstacle to that, but it is possible that the Germans will now be less opposed. That is partially because their economy is doing so well and unemployment is falling in Germany, so they are less frightened perhaps by the prospect of Polish plumbers coming across the frontier to work in Berlin—that was one of the many issues that arose last time—and also because the Germans have got into the habit of lecturing everybody else about deregulation, so they may be more open to deregulatory arguments themselves. Therefore I put it to the Government that a good proposal would be to invest a certain amount of capital in services and to develop, I hope, a certain amount of momentum for that.

Secondly, on energy, I am never quite sure whether I agree with the noble Lord, Lord Howell, or not, because he says one thing at one moment, and something that sounds slightly contradictory in the next sentence. However I agree with some of what he said about energy policy. Energy policy is an area where we need to complete the single market—there is no question about that at all. We do not have a single market in the retail sector in energy, and that, after 20 years of the single market, is quite disgraceful. We should do something about that. We have had partially state-owned monopolies in France—they are not entirely nationalised, of course—and “monopolies” is the word. In the terms of the domestic market, they are holding up progress on this, very much to the detriment of the interests of French consumers, as much as anyone else. We should deal with that, and now is the time to do it. I think that we would have a lot of support in taking up that issue.

My third piece of advice to the Government is the kind of advice that I would give to anyone who felt that they wanted to slightly change their image in a particular context—that is, to surprise people positively, and come up with something that results in the continentals saying, “Good Lord, the British really have changed”, which would establish a certain credibility for what we say about being pragmatic. If we are genuinely pragmatic and open-minded and believe in European reform, clearly there will be cases when the competences of the Union should be extended to resolve a particular problem, because that is the right way in which to do it. There may be other cases, of course, which I would recognise, whereby under the subsidiarity rule it would make pragmatic sense to repatriate certain functions.

I have yet to be convinced, to be honest, that any powers need to be repatriated—and I have looked at the suggestions that have been made on fish and overseas aid, and so forth. It has always seemed to me that there was a very good argument for not repatriating; in fact, in many cases, we might want to go further into integration. But we can have that discussion another time. I am certainly open-minded and could be persuaded that there are situations in which we should repatriate powers, and I hope that the Government and the noble Lord are open-minded and could be persuaded that there are cases when, in fact, the European Union is in the best position in the interests of all its members to have the necessary jurisdiction to resolve the problem.

One area where that is certainly true is with banking union. I have heard no good reason at all why we should not be members of the banking union, and it is extremely dangerous that we are not. We think that we are being very clever in negotiating the double lock, but that works only if there are four member states remaining outside the banking union. If you look at the matter purely objectively, you can see that there is every interest in our being a part of it, and it is extremely dangerous to fragment a supervisory regime or bank resolution regime. It is not something that can possibly be in the country’s interest.

Since time is short, I shall make a final suggestion, which is one that I made before to the noble Lord, Lord Newby. The Government—and I congratulate them on this—have come round to the arguments of many of us over quite a long time that we need to do something about the scandal of payday loans and loan sharks. I see that the Minister is nodding to me, and I understand that the Government have instructed the FCA to come up with an interest rate or cost limit on those payday loans. I congratulate them on doing that. When that has been done in the United States and individual states of the Union—and the Minister will be familiar with this argument, because those opposed to it have always come up with it—it has always been ineffective, because lenders have come in from other states. This is an obvious area in which, if we are to have effective regulation, we need to have it on an EU-wide basis. I put it to the Minister a few weeks ago that it would be worth taking the matter up with Brussels to see if the Commission might be minded to produce a regulation or directive, and whether our partners would agree that this would be a sensible move to take. Now that I have put the issue in public to both the Treasury and the Foreign Office, I would be grateful to the Minister when she responds to this debate, or subsequently in writing, leaving a copy in the Library of the House, if she would let me know whether my arguments have been considered and what the Government’s conclusions are.

My Lords, I join in thanking the noble Lord, Lord Dykes, for having secured this important debate, and, in so doing, declare my own interests as professor of surgery at University College London and a member of the General Medical Council.

The area of health and delivery of healthcare was not an area originally anticipated as having any competence at European Union level, specifically in the treaties. The delivery of healthcare and the allocation of healthcare resources along with the development of health policy were described as an area in which member states and national governments maintained absolute competence. The Department of Health balance of competence review, necessitated by the fact that, inadvertently, much European legislation and many directives have impacted on the delivery of healthcare, determined broadly that, in those areas where European regulation and directives have impacted on the delivery, it was positive. However, it identified a number of important areas where there were unintended detrimental consequences resulting from European regulation.

I shall concentrate on two areas that were highlighted in that competence review and in the third report of Session 2013-14 of the Science and Technology Committee of the other place. The first is the question of the European working time directive, which has been debated extensively in your Lordships’ House. I return to that because the directive continues to have a very important impact on the way that we are able to organise and deliver healthcare in our country and because the unintended consequences of its impact have been substantial.

The working time regulations have affected the quality of care. Although initially it was anticipated that restricting working time to 48 hours per week for trainees would promote patient safety and improve quality, regrettably that has not been the case in this country. Indeed, where the question of the duration of working hours for junior doctors has been studied carefully, particularly in the United States, it is clear from prospective evaluations that have been undertaken over a period of time that such a restricted period of working each week has a detrimental impact on patient safety.

There has clearly also been a detrimental impact on our ability to train junior doctors.

I am most grateful to the noble Lord for giving way. I greatly recognise and admire his expertise and experience in this area, but can he perhaps tell the House why our continental partners, in France and Germany and so on, do not seem to have had the same problem with the delivery of healthcare that he suggests we have had as a result of the directive?

I thank the noble Lord for his intervention. That is because the application of the working time directive in those countries has been different from our rather fastidious application of the directive here in the United Kingdom. It is also due to the fact that the organisational structure for the delivery of healthcare is very different in France and Germany from the way that we deliver healthcare in our country.

Particularly in the craft specialties, such as my own specialty of surgery, trainees have found it increasingly difficult, within the restriction of 48 hours and the restricted period of time now available for specialist training, to develop the skills necessary to deliver independent consulting practice, which is very much a feature of the delivery of healthcare in our NHS but is rather different from countries such as France and Germany, where they tend to have larger departments with a much more hierarchical structure.

There has also been a substantial cost impact from the adoption of the working time regulations. In the first full year after their application across the National Health Service, an extra £200 million was spent on the provision of locums to fill rotas necessary to cover the provision of out-of-hours care within the NHS. Indeed, just for surgical specialties, the Royal College of Surgeons has assessed that an additional £60 million was spent to provide locums to cover surgical rotas. The Royal College of Surgeons estimates that, because of the application of the working time regulations, some 40,000 surgical hours are lost per month. Again, that has had a detrimental impact on ensuring that access to services can be adequately delivered to meet workload demands. Most worrying is the fact that, on a number of occasions, coroners have included in their narrative verdicts reference to the working time regulations as having had a detrimental impact on the care of individual patients.

Her Majesty’s Government recognise that this is an important challenge. Indeed, in 2010, the then Health Secretary and the Business Secretary announced that they were to initiate negotiations with our European partners not on withdrawing from the working time directive as it applies to healthcare but on ensuring greater flexibility, which would allow us to develop training schemes to meet the specific needs of the NHS in England in the training of our trainees. That resulted in the process being pursued through the mechanism of the social partners, but regrettably that negotiation has failed and the question has now been returned to the European Commission.

Clearly, this is an important area where action is required. As I have said, we need not to withdraw from the working time directive but to allow the necessary flexibility to allow working hours to increase from the current level of 48 hours to 56 or 65 hours, depending on what point trainees are at in their training and on what specialty or discipline they are training in. Can the Minister confirm that this might be a priority area in any further negotiations with our European partners?

The second area is the question of clinical research. Our country has a very distinguished heritage in terms of its contribution to biomedical research globally. The citations for research undertaken in our country are substantial. Some 12% of global citations for biomedical research are derived from research conducted in our country, a substantially greater proportion than in any other country in the world. Much of this is based on our distinguished history in delivering important clinical research. In 2001 6% of all patients entering clinical trials in the world came from the United Kingdom. By 2006, after application of the clinical trials directive, that had fallen to 1.4% and in the period 2007-11 there was a further 22% decline in the number of patients entered into clinical trials from our country.

The clinical trials directive has not only impacted on clinical research in our own country, it has affected all other European member states in terms of their competitiveness globally to deliver clinical research. The Medicines and Healthcare Products Regulatory Agency, which registers new clinical trials, identified in 2007 some 1,207 new trials registered. By 2011 it was down to 943. Clearly, the clinical trials directive is having a detrimental impact. It has, indeed, been renegotiated and a clinical trials regulation was agreed in 2012 by the European Parliament, due for application in 2016. The third report of the Science and Technology Committee of the other place identified ongoing concerns even about the newly drafted clinical trials regulation, concerns that were raised in evidence the committee received from the Academy of Medical Sciences and from the Wellcome Trust, a major funder of clinical research in our country.

In the area of clinical research, I suggest not that we withdraw from the clinical trials directive or the future clinical trials regulation, because there are important benefits to having a certain standard across the European Union, but that we should be able to ensure that flexibility provides for the specific environment in which we undertake and deliver clinical research in our country, with the strong national clinical governance mechanisms that we have in place, rather than find that the directive and the future regulation have had a detrimental impact on our ability to remain competitive in the life sciences area. The life sciences are an important feature of national activity, both in terms of ensuring excellence in our health service and in terms of the economic impact that life science industries have for our country.

My Lords, I, too, congratulate the noble Lord, Lord Dykes, on having initiated this debate. As he said, it is a useful preface to the mega-exercise of tomorrow. I wish the noble Baroness—genuinely—good luck in keeping awake during the 750,000 speeches, or 75 speeches, that will be given tomorrow. Perhaps I should not say this, but I have just written a book on the future of Europe and I have had the occasion to travel quite widely debating it, during which travels I have met a range of European political leaders past and present. I always greatly respect the speeches of the noble Lord, Lord Howell, and quite often agree with him. In this case I have to say that I disagree with quite a chunk of what he had to say in assessing European political opinion about the current position of Britain.

I think that the UK still stands at fundamental risk of being isolated and finding itself in a marginal position in Europe, and it is in the process of alienating some of its best allies in eastern Europe because of the current debate about migration. One only has to look at Viviane Reding’s comments yesterday, reported today in the Times, to see the current of opinion in Europe about some of these policies.

When the Prime Minister gave his Bloomberg speech, European leaders were at one in saying that Europe à la carte is not an option. Having talked to quite a few of them I know that that view is strongly held today. The Prime Minister wants an open and flexible Europe. Everyone wants a more open and flexible Europe, and many reforms are being pushed through to try to achieve this. However, it is absurd to identify flexibility with cherry picking. Flexibility often means, for example, enhanced leadership. In the case of the eurozone, for example, as the noble Lord, Lord Dykes, mentioned, we need more leadership and more capability to respond quickly. That is not achieved by a version of fragmentation.

It is easy to see what would happen if the government approach was generalised and every country wanted the benefits of being in the EU without the commitments. The whole enterprise would become unworkable. It is for that reason that when I travelled around I found a response to the UK’s position that sees it as a mixture of special pleading and blackmail. I fully agree with my noble friend that the Government must surely seek to cut through this and break away from it.

Although it has not been mentioned, this discussion is about the British review of competences. One should begin by saying that there are substantial differences between our review and that being carried out in the Netherlands, which is often thought of as being a similar exercise. The Dutch approach is not based on the idea of securing treaty change—as our approach seems to be—rejects an approach based on opt-outs, and is concerned with subsidiarity as such. I have read the literature on our review of competences and a lot of interesting ideas are developed in it, but I feel strongly that we should make a contribution to the Commission’s attempts in the REFIT programme to produce a more flexible and proactive Europe. That programme is for doing precisely that. It has already reached a sophisticated level.

The idea that the UK has a special view on the need for flexibility and clear leadership in Europe is totally false. All European leaders are conscious of this. One of the things on which I agreed with the noble Lord, Lord Howell, is that we have lived in a world of fantastic transformation, dominated by technology, throughout most of our lives. All states, not just the European Union as a collection of states, are stumbling in their attempts to deal with this new world. It is completely false to suppose that the major European leaders are not conscious of the need to do so and do not have in play programmes striving to do just that.

I should like to have a go at asking the noble Baroness four questions about this matter. When I tried to do so in previous debates, she did not always seem inclined to answer those questions. I suppose that I will be sympathetic, given her situation of being squeezed between the two debates, if she does not answer them today. However, they are questions that the Government should address.

Point 1 is that I read the first batch of reviews of competences, which seemed to contain a lot of interesting discussion. However, in those that have been published—those that I know of, anyway—I do not see any basis for renegotiation at all. If the Government do see one, I should like to hear it. A group of authors produced a detailed study of the first publication of the review of competences, which concluded that the,

“first set of … reviews reveals no grounds in the assessments of British stakeholders for any large repatriation of competences, nor for further opt-outs”.

The study was based on consulting major stakeholders in the relevant areas. I would like the noble Baroness to comment on this if she has enough stamina to do so, but she may be saving it all up for tomorrow—which would perhaps be a wise strategy.

Secondly, are the Government really serious about getting EU-wide agreement for proposals to place significant restrictions on immigrants from new entrant countries to the EU in the future? I have seen that mooted in the press but I do not see it as a feasible or desirable strategy. We clearly need treaty change. Is there not a contradiction between, on the one hand, the Government’s endorsement of the single market—which is, after all, the centre point of the whole Bloomberg speech—and, on the other, the apparent desire to block free mobility of labour? We cannot have a well functioning single market without free mobility of labour. It is arguable that we actually need more mobility of labour than we have at the moment for economic efficiency in Europe. In the United States, for example, mobility of labour is at something like twice the level that it is in Europe, and this is generally seen by all economists as contributing to the efficiency of the American economy.

As usual, the noble Lord is making a fascinating speech, but is there not a difference between mobility of labour for work, bringing the single market further success and action, and mobility of people and migrants for benefit purposes?

Of course there is a difference but there is now a lot of evidence which indicates that no more than a tiny sliver of migrants in the EU have come benefit-seeking over the past few years. There is no evidence for what the noble Lord suggests. The European Commission has carried out a systematic study of this, and personally I do not think that that point holds.

My third question to the noble Baroness is as follows. Everyone agrees that one of the UK’s major contributions to Europe in the past has been to support enlargement, it being the driving force behind part of the European Union’s success. We had a war in Europe in which 100,000 died. In my view, it will be crucial that the Balkan countries—Serbia, Kosovo and Albania—are incorporated into the European Union. Are the Government seriously threatening to block accession, as reported in the press, as part of a sort of blackmail tactic? Is there any truth in that assertion? Surely that would be wrong. We need those countries in the European Union. There is still the possibility of conflict in that area, and the UK has always supported such a process in the past. Is it now going to try to throw up a roadblock? I certainly hope not, and I hope that the noble Baroness will agree with that.

Fourthly and finally, it is pretty clear that the most that Britain is likely to get from the other 27 partners in this enterprise is a kind of patched-up, face-saving deal, because to a substantial degree it is based on special pleading. I have asked the noble Baroness this question twice before but I would still like to see whether she is willing to venture an answer. Following the Prime Minister’s Bloomberg speech, if the Government are still in power and if sufficient forms of response from Europe are not achieved, is there a situation in which the PM would actively campaign for the UK’s exit from the European Union?

My Lords, this has been an excellent short debate and I thank the noble Lord, Lord Dykes, for raising this topic. To be honest, the quality of the contributions is likely to be considerably in advance of what we hear tomorrow, and I think that this is a much more relevant topic for debate on the future of Britain’s relations with Europe. As I listened to the excellent speeches from all noble Lords who have spoken, it struck me that we should be using our wonderful Lords Select Committee to try to put together some kind of consensus about what a reform agenda for the EU would be. That would be a very valuable exercise.

There will probably always be some differences on areas such as social Europe but I think that there is a possibility of achieving a large measure of agreement on what such a reform agenda should be. However, the key point, which I put to the Minister during Questions this morning, is that an agenda for reform has to be a multilateral agenda for Europe and not a set of British demands for the repatriation of this power and opt-outs from this or that directive. I was glad to hear the noble Lord, Lord Howell, endorse that approach.

I do not agree with the Prime Minister’s speech about a referendum—we can debate that tomorrow—but it was extremely well crafted. There is a lot of common ground on about 80% of what it had to say about the future of the European Union.

However, the Government’s reform agenda has certain flaws. The questions asked by the noble Lord, Lord Giddens, were extremely relevant. I had intended to ask them myself. I will not repeat them but I will add to them. First, the assumption that there will be a major treaty change in the next Parliament is debatable at best. Some of the countries which most favour reform—the Netherlands, for example—are among the partners who are most opposed to a comprehensive treaty change. So we do not necessarily win allies on reform by demanding treaty change.

Secondly, as the noble Lord, Lord Giddens, said, our approach to future enlargement and the linking of that to the question of migration and limitations on migration, threatens to put against us in Europe most of the new member states that, when I worked for Tony Blair, we fought hardest to get onside. There are obviously many issues that need to be considered on the question of migration—social security benefits and so on—but if it is thought that we are playing a populist game on these issues, we will simply alienate a large section of the European Union.

The third error the Government are making is the assumption that the eurozone will become a much more integrated area and that we will have to accept a kind of permanent outer-tier status in the European Union. That is not realistic. I am sure that we can negotiate non-discrimination clauses and commitments that would reassure people who worry that a eurozone bloc might discriminate against us. I am sure that that could be done and the integrity of the single market preserved.

There is wide range of issues within the EU in which Britain should seek to play a leading role, such as energy and climate change; defence and security, where our bilateral co-operation with France is presently very strong; foreign policy; free trade agreements; and the deepening of the single market. We should not automatically assume that we will be outer-tier players. That is not a viable vision for Britain’s future in the European Union. I do not see a country such as Great Britain putting up for decades with the idea that it is only on the outer fringe.

The Government may have some of the right ideas about reform but they are not, in our view on this side of the House, going about it in the right way. There is a big opportunity for change coming up with the appointment of a new European Commission. Who will be the President? Are we pressing for reforms to how the Commission works? One of the key things in trying to ensure that Europe focuses on a limited number of key priorities rather than trying to legislate over a wide area is to think about how you streamline the European Commission so that it has a limited number of priorities, and making an agreement with the European Council about what those priorities would be.

I do not think that the agenda for the future should be one of repatriation of powers. However, it should certainly be one of understanding between the Council and the Commission about how competences that the treaties give to the European Union should be exercised. We must have another go at the question of more sharply defining the principles of proportionality and subsidiarity. For the moment, that is enough. The Government have a lot of major questions to answer.

My Lords, I thank and congratulate my noble friend Lord Dykes on securing this debate on an issue of such significance to the United Kingdom. It has been a great starter for the main meal of a debate which I sincerely look forward to tomorrow. I am sure that many of the issues that have been raised today will be raised again tomorrow.

This Government are clear that membership of the EU is in the UK’s interest. We are also clear that the EU urgently needs to reform. As the Prime Minister and Deputy Prime Minister set out in speeches last year, the EU needs to become more competitive, more flexible and more democratically accountable, with powers flowing both ways and fairness between eurozone and non-eurozone members. I am delighted to hear the noble Lord, Lord Liddle, say that he agrees with almost 80% of the Prime Minister’s speech from last January. He also agrees with the need for reform, and it would be interesting to hear specifically the areas that he does not agree with. I certainly look forward to hearing from the Benches opposite in relation to how they feel the British people could also have their say in relation to these matters.

It is the Government’s priority to engage with all member states and the European Union institutions to make these reforms, which we feel are essential, a reality. Some have suggested that the UK is seeking special treatment in Europe. I want to be very clear on this. The reforms that we seek are for the benefit of all member states, and we are working with them to achieve this. My noble friend Lord Howell of Guildford said exactly that.

It is not as the noble Lord, Lord Giddens, described. I am pleased to say that we are already making significant progress, and I do not accept what my noble friend Lord Dykes said in his analysis. Let me give him a few examples of what I think our approach is already doing in terms of making a difference. We worked closely with countries such as Sweden to achieve a double majority voting rule, which provides a safeguard for non-eurozone members in banking union decisions and makes sure that our voice is heard.

We worked with other member states, including Denmark, Germany, Sweden and the Netherlands, to abolish the policy of—

Will the noble Baroness tell the House the reasons which make it not in the national interest to be part of the banking union?

To be part of the banking union we would have to be part of the euro, and I am certainly not going to spend this debate debating the benefits of membership of the euro.

The noble Baroness is, with respect, wrong about that. A number of countries are joining the banking union who are not members of the euro, though they may join the euro of course. The banking union involves a common supervisory, common bank resolution and a common retail deposit insurance system which can be applied to countries which are not currently in the euro.

I will look into this matter again. My understanding was that the banking union flows from the single currency and not from the single market, and therefore I will look at this question again and write to the noble Lord once I have considered it.

I was talking about work that we had done with the Danes, the Germans, the Swedes and the Dutch to abolish the policy of “discarding” caught fish as part of a wholesale reform of the common fisheries policy. We have secured the first ever exemption of micro-businesses from new EU proposals from 1 January of last year. We have worked with a coalition of countries to secure the first ever cut to the EU’s budget. We could have done none of this alone. Our engagement with other member states has been, and will continue to be, key. We will continue to work closely with our partners to further the good work on international trade agreements and cutting red tape to make Europe more competitive. We will work with others to ensure that the rights of eurozone-“outs” are protected as the eurozone puts in place the necessary governance arrangements to secure its long-term stability and safeguard the position of the single market.

We will continue to seek greater democratic accountability within the EU, particularly through strengthening the role of national Parliaments, and ensuring that the principles of subsidiarity and proportionality are respected. We will continue to position ourselves at the heart of the debate on the interests that matter most to the United Kingdom.

I think that the reading of the Government’s position on the part of the noble Lord, Lord Davies of Stamford, is simply wrong. We have been clear that membership of the EU is in the UK’s interest. On many occasions, the noble Lord has heard me detail at this Dispatch Box what I feel those interests are.

My noble friend Lord Howell also spoke about the respect for more subsidiarity and national Parliaments needing a red card. I fully agree with that. The Foreign Secretary has, indeed, called for a red card for national Parliaments, and others, such as the Dutch Foreign Minister, have made it clear that they, too, agree. We support the principle set out by the Dutch—namely:

“Europe where necessary, national where possible”.

My noble friend Lord Howell is absolutely right to say that follow-up is now needed. The noble Lord, Lord Davies, also said that we should focus on substance, not rhetoric. I wholeheartedly agree with that. Progress is being made. For example, the Prime Minister worked with Germany, the Netherlands, Sweden and Denmark to secure the cut in the EU budget. The PM and Commission President Barroso co-chaired the meeting of leaders from Germany, Italy, the Netherlands and others in the Business Taskforce, which presented a report on cutting red tape. These are but a few examples.

The noble Lord, Lord Kakkar, has raised the working time directive before. This Government are committed to limit the application of the working time directive in the United Kingdom. The noble Lord made some incredibly important points in relation to specific professions where this has had a disproportionate impact. The evidence suggests that a one-size-fits-all approach in the working time directive limits the time available for training and reduces operational flexibility in relation to particular professions and, of course, in relation to medicine and surgery. The Government will continue to prioritise this important issue which came up in the first set of balance of competences review reports. I do not have details of the clinical trials directive in my brief but I will certainly write to the noble Lord.

My noble friend Lord Dykes asked why the European Union Act 2011 excludes enlargement treaties from the referendum lock. The referendum condition is focused on treaties that expand EU competences or change the voting rules. Extending the geographical scope of the EU does not currently fall within the relevant section because it does not curtail the competence of existing member states such as the United Kingdom.

The noble Lord, Lord Giddens, asked me four questions. I will try to answer some of them. He spoke about the first set of reports from the balance of competences review. I dealt with some of this in an Oral Question earlier today. Although the first set of those reports mainly concern non-contentious areas, even where they lay out the benefits of EU membership they go on to say that further improvements could be made. Therefore, there is a real need for reform outlined in those reports. The noble Lord asked about the restrictions on EU migrants. I do not think I could put it better than my noble friend Lord Howell who commented on that point. I wholeheartedly endorse his comments. The noble Lord has asked me before about the PM campaigning for an exit. I can tell him that my right honourable friend the Prime Minister is campaigning for a referendum. We need to get back behind the idea of giving people the right to decide. We can then campaign in whatever camp we want to as to what we feel the outcome of that referendum should be, but we should at least give people the choice.

The noble Lord, Lord Liddle, suggested that treaty change would not happen or that there would not be the possibility of treaty change. A number of ideas have been considered in European capitals and in Brussels that we feel would require treaty change. Europe is changing because of the eurozone crisis, among other reasons, and we expect that process to include treaty change.

I conclude by thanking the noble Lord, Lord Dykes, again for giving us the opportunity to examine this interesting issue. We have covered some ground and I am sure we will cover more ground tomorrow. The noble Lord, Lord Dykes, in setting out the debate, asked specifically about the vision for reform. I will simply repeat what I said at the beginning about a Europe that is more competitive, more flexible and takes account of the diversity of its different EU member states and the differences between those which belong to the single currency and those which do not; a Europe that is more democratically accountable, so that the connection between citizens and the EU can be strengthened; a Europe where powers flow both ways; and a Europe that ensures fairness between those that are in the eurozone and those that are not.

Many European leaders welcomed the Prime Minister’s January speech and the debate that it has provoked. Many voices across Europe—in the Netherlands, Germany, Sweden, Italy, Austria, the Czech Republic and elsewhere—have spoken out in support of European reform. The Government will continue to prioritise this issue, working closely with our partners across Europe to deliver a Europe that works for all its member states and that works better.

Draft Modern Slavery Bill

Message from the Commons

A message was brought from the Commons that they concur with the resolution of this House of 18 December 2013 relating to a Joint Committee to consider the draft Modern Slavery Bill presented to both Houses on 16 December 2013 and that they have made the following orders:

That a Select Committee of seven Members be appointed to join with the Committee appointed by the Lords to consider the draft Bill.

That the Committee should report on the draft Bill by 10 April 2014.

That the Committee shall have power—

(i) to send for persons, papers and records;

(ii) to sit notwithstanding any adjournment of the House;

(iii) to report from time to time;

(iv) to appoint specialist advisers; and

(v) to adjourn from place to place within the United Kingdom.

House adjourned at 6.26 pm.