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Grand Committee

Volume 753: debated on Wednesday 7 May 2014

Grand Committee

Wednesday, 7 May 2014.

Arrangement of Business


My Lords, welcome to the Grand Committee this afternoon. If there is a Division in the Chamber, the Committee will adjourn for 10 minutes.

Scotland Act 1998 (Modification of Schedule 5) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the draft Scotland Act 1998 (Modification of Schedule 5) Order 2014.

Relevant document: 24th Report from the Joint Committee on Statutory Instruments.

My Lords, I shall provide a brief summary of what this draft order, which was laid before the House on 17 March 2014, seeks to achieve. The order is made under Section 30(2) of the Scotland Act 1998, which provides a mechanism whereby Schedule 4 or Schedule 5 to that Act can be modified by an Order in Council, subject to the agreement of both the UK Parliament and the Scottish Parliament. This order will amend Schedule 5 to the Scotland Act 1998, which I shall refer to as the 1998 Act, to update the definition of “food” in that Act. It will also amend Section J4 of Schedule 5 to the 1998 Act to reflect the agreement reached regarding the regulation of animal feeding stuffs.

Upon devolution, the regulation of food safety and standards was devolved under the 1998 Act. As at 1 July 1999, the 1998 Act understood “food” to be as was defined by the Food Safety Act 1990. Post devolution, that definition was changed on a GB-wide basis by the Food Safety Act 1990 (Amendment) Regulations 2004 to align it with the new European Union definition of “food”. The definition at devolution and the definition post devolution are largely similar, but they are not identical. I would like to be clear that this is a technical, legal difference and there is not necessarily a specific food which would have fallen under one definition and not the other. Importantly, this 2004 change resulted in a mismatch between the legal definition of “food” in the 1998 Act and “food” as it was defined in EU law. The legislative competence of the Scottish Parliament and the executive competence of the Scottish Ministers was, therefore, limited by an out-of-date definition of “food”. This was never the intention of the 1998 Act.

Similarly, in relation to non-medicinal animal feed and additives, the regulation of animal feed safety and standards was also devolved under the 1998 Act, except for the regulation of veterinary medicines, which was reserved. Section J4 in the 1998 Act reserves the subject matter of the Medicines Act 1968, which I shall refer to as the 1968 Act. Section 130(1) of the 1968 Act, as it stood as at 1 July 1999, defined “medicinal product” as including substances fed to animals and, therefore, veterinary medicinal products. However, it was subsequently agreed between the Veterinary Medicines Directorate—an executive agency of the Department for Environment, Food and Rural Affairs—and the Food Standards Agency that certain zootechnical additives, which do not have a medicinal effect on the animals that consume them, should be regulated within the framework of animal feed law rather than veterinary medicines legislation. It was agreed that the Veterinary Medicines Directorate would regulate for the UK all matters falling within the scope agreed and set out in the Veterinary Medicines Regulations 2005. Although those regulations have since been revoked, being replaced or amended by new veterinary medicines regulations almost every year, the definitions of “veterinary medicinal product” and “specified feed additives” have been unchanged since 2005. In effect, certain animal feed-stuffs and additives ceased to be veterinary medicinal products yet continued to fall within the scope of the reservation stated at Section J4 in the 1998 Act. Thus, the legislative competence of the Scottish Parliament and the executive competence of the Scottish Ministers was limited.

To address these problems, in 2005 and 2006 orders were made under Section 63 of the 1998 Act to update the executive competence of the Scottish Ministers by transferring certain necessary functions to them. These orders allowed Scottish Ministers to continue to regulate for food safety and standards by giving full effect to EU law, and also allowed them to legislate for, and control, all non-medicinal animal feed in Scotland. However, those orders did not, and could not, address the issue of the Scottish Parliament’s legislative competence in these areas. This Section 30 order will bring the Scottish Parliament’s legislative competence better into line with the executive competence of Scottish Ministers, both by updating the definition of “food” in the 1998 Act—thus bringing it into line with European Union legislation—and by amending Section J4 of Schedule 5, with respect to animal feeding stuffs. We believe that this order is a sensible way of addressing the anomalies I have described.

This order demonstrates the Government’s continued commitment to working with the Scottish Government to make the devolution settlement work in a very practical way. I hope the Committee will agree that this order is a reasonable use of the powers in the Scotland Act 1998. The order was debated in the House of Commons on 29 April this year and received the approval of that House on 30 April. I commend the order to the Committee. I beg to move.

My Lords, I thank the Minister for explaining the content of the order. I welcome any move that is devolutionary in character. I certainly believe that Scottish-branded food and the animal feed-stuff that goes toward producing it are a central part of the Scottish economy and the tourist economy. I believe that Scottish farmers and growers are some of the most efficient in the world and that the Scottish Parliament therefore should certainly be in direct control of this type of regulation.

My Lords, I thank the noble and learned Lord the Minister for so fully explaining the ins and outs of these various additions to Schedule 5. On the question of bringing these regulations into line one with the other, I was interested to hear about the devolving of zootechnical feeds and items like that, but the notes to the order talk about some elements that are quite difficult to get one’s head round, such as medicinal products for use in animals that are not veterinary medicinal products or feed additives. First, will the regulations now work in the same way both in England and in Scotland? Secondly, I understood that all of these subjects were controlled under the Veterinary Medicines Directorate in practical terms. Does this mean that the Scottish Parliament will now need to set up its own Veterinary Medicines Directorate because the regulations devolve the matter to the Scottish Parliament?

My Lords, I join in the thanks and appreciation to the Minister for the excellent way in which he introduced this order today. He always does this; we are not surprised in any way when he does it so expertly and we are really grateful to him. I wanted to raise two points. I am afraid that I do not have the detailed knowledge of food and agriculture possessed by my noble friend the Duke of Montrose, so my points are more technical.

First, I have a general point. I am increasingly concerned that this Parliament is seen by some people as merely a rubber stamp for the Government and that all the Government need to do is to bring something before both Houses in this Parliament and it will be agreed on the nod. Too many things are going through on the nod. I sit in the Chamber and think, “Why are we agreeing to this? Why are we not discussing it? Why are we not debating it?”. Do we not have the time? Yes, we do. We have been in recess for four weeks. We could have been discussing and debating issue after issue, point after point. Of course the Government like to get things through on the nod, but that is not part of democracy. We can see democracy being challenged elsewhere in the world, so we should be upholding it and making sure that Parliament’s role is appreciated. Every issue, however detailed it is, deserves proper consideration by both Houses of this Parliament.

Like other noble Lords, I go around the country as part of the Lord Speaker’s excellent Peers in Schools initiative to spread the word in schools about the House of Lords and its role, and I find it very useful. I talk about the three roles of the House of Lords: legislation, challenging the Executive, and holding debates. But I must say that more and more I feel like a fraud when arguing that case if the House has not sat for four weeks. It now looks as if we will not be sitting for another three weeks in the run-up to the Queen’s Speech. It is quite wrong that Parliament should meet so infrequently in order to challenge the Executive. That was the first point I wanted to make. I am sure that it is not something the Minister and his officials will have anticipated, or if they have, they have been very clever and deserve degrees in clairvoyance, if nothing else.

My second point relates to the devolution settlement. The Minister said that this order shows that the devolution settlement is working in a practical way. Perhaps I can say that I agree with him absolutely, and it is what we should be shouting from the rooftops: devolution is working. It has provided an opportunity for Scotland to make decisions about its own affairs on all the matters that affect Scotland in particular, and it is working really well. The traditions of Scotland and its legal system, on which the Minister is one of the experts, have managed to continue for over 300 years in spite of the existence of the United Kingdom and the Treaty of Union. If anyone is worried that I am straying from the subject before the Committee—my noble friend Lord Rosser has just a slight inclination that I might be doing so—this will bring me back. The Minister mentioned European Union food safety laws. Let us imagine the problems that would arise on a whole range of things if Scotland was to become a separate country from the rest of the United Kingdom. It would raise all sorts of questions about the transfer of foodstuffs across the border. It is just one of not hundreds, but thousands, of issues where greater problems would be created if Scotland was to be a separate country.

While not wanting to put words in his mouth, I hope the Minister will agree that the devolution settlement is flexible and working well. Almost every time the Grand Committee meets, there seems to be some kind of order relating to Scotland to be considered, tweaked and improved so as to get devolution working even better. This shows that the devolution settlement is flexible, workable and practical, and that it can and will be improved as long as Scotland remains part of the United Kingdom.

My Lords, as usual it is a pleasure to try to follow my noble friend Lord Foulkes and we shall see how I get on with that. I should like to place on the record my sincere appreciation for the Minister and his team on the usual high-quality briefing and willingness to discuss matters. As it happens, the briefing was so good that it did not require any further meetings.

It is interesting that the noble Earl, Lord Mar and Kellie, mentioned how this is working but was not as fulsome as my noble friend Lord Foulkes in paying tribute to the devolution settlement as actually being good enough to work in the current atmosphere. It is interesting as well that objections are coming from the Scottish National Party about the fact that Westminster deals with issues such as this and brings forward statutory instruments to put into effect sensible and common-sense measures, but the main reason that this order has been brought forward is a ruling from the European Union. It is funny how the SNP objects to Westminster but does not object to the European Union, although some of us have always had reservations about the amount of regulations coming from Europe.

The Minister has given a very full explanation, which is endorsed by the fact that the Joint Committee on Statutory Instruments had no words of complaint and raised no issues. Despite my noble friend Lord Foulkes wanting to scrutinise this, it is difficult to scrutinise and find something to object to. Much as I would very much like to, I cannot find anything to have a go at.

My noble friend Lord Foulkes also mentioned the slightly wider issue of sittings of the House. I know he feels strongly—quite rightly—about sittings but he did not mention that the principle of simultaneous sittings of both Houses of Parliament seems to have gone. Time after time, Parliament sits, but only one House of Parliament. That is dodging accountability. Last week, we had Statements on the Floor of the House of Commons but nothing in the House of Lords, because we were not here. This Government are going down the road of accepting the very dangerous principle that Parliament can sit, but with only one House. However, that is a slightly wider issue, and I place on record our full support for the Minister’s explanation and for the order.

My Lords, I thank noble Lords who have participated and thank them for the welcome they have given the order. My noble friend Lord Mar and Kellie was absolutely right to remind us of the importance of the food industry in Scotland and the importance of maintaining its quality.

My noble friend the Duke of Montrose raised some technical issues. He asked whether, following devolution of zootechnical feed regulation, matters would work in the same way in England and Wales as in Scotland and whether it would be necessary for Scotland to set up its own veterinary medicines directorate. Veterinary medicines will continue to be regulated by Defra. It is because certain items in the EU definition were removed from the definition of veterinary medicines that we are having to make this adjustment. Veterinary medicines will continue to be regulated by Defra—in practice by the Veterinary Medicines Directorate—and so the system will be the same in England and Wales as it is in Scotland. Non-medicinal zootechnical issues will be devolved, but that will be about implementing European Union law, and there will therefore still be consistency north and south of the border.

The Minister made a point in relation to the question from the noble Duke, the Duke of Montrose. Can he confirm that the work undertaken by Defra, in Scotland as well as in England and Wales, is one of the many things that would have to be torn apart if Scotland separated from the rest of the United Kingdom?

The noble Lord makes a very alert and important point. The Veterinary Medicines Directorate is a directorate of the United Kingdom Government and would not automatically be transferred or shared in the event of a yes vote—which I hope will not happen. It is yet another example of one of the many institutions and agencies which operate on a Great Britain basis. I believe they operate successfully on that basis.

In response to the noble Lord, Lord Foulkes, Parliament should certainly not just be a rubber stamp for the Government. It is important to put on record that the process we are following here is set out in a law passed by Parliament. As I have indicated, this order has been debated in the House of Commons and approved by it. The fact that we are having a debate on it is very healthy and right and proper. The issue is, indeed, technical but nevertheless the debate has offered noble Lords an opportunity to express their views and to ask some very pertinent questions.

I certainly agree with the point made by the noble Lord, Lord Foulkes, which I think was echoed by the noble Lord, Lord McAvoy, and my noble friend Lord Mar and Kellie, that this is an example of the devolution settlement working. I think that it is a very good example of that. It is a technical issue but it shows a willingness to address practical issues in a practical way as and when they arise. Under the previous Administration, a certain amount of executive devolution was achieved on these issues through a Section 63 order. However, we now have a position whereby the Scottish Government have decided to establish a new food body for Scotland which will take on the roles and responsibilities of the UK-wide Food Standards Agency. Therefore, there is legislation going through the Scottish Parliament and a Bill has been drafted to sit within the limited sphere of legislative competence in relation to food and animal feed as set out in the 1998 Act. If this House passes the order—it will also need to be passed by the Scottish Parliament and then submitted to Her Majesty in Council—the Scottish Government intend to seek an amendment to widen the scope of the Bill to bring it in line with the scope of the existing food and animal feed law, as amended by this order. Therefore, the issue is of practical relevance given that the Bill is currently before the Scottish Parliament.

We have shown good will in negotiations and discussions with officials in the Scottish Government, my own department and other departments of the UK Government, not least Defra. That is a good practical example of the flexibility of the system. People refer to the status quo but I do not believe that there is any such thing as the status quo in relation to something which has evolved since 1 July 1999. The system has shown its ability to respond to different circumstances and I sincerely hope will continue to do so as we move forward. I again commend the order to the Committee.

Before the noble and learned Lord sits down, would he care to comment on the limited ability to hold a Government to account due to the lack of sittings?

My Lords, I will have to check but I do not think that there are many, if, indeed, any, fewer sitting days this Session than in the previous Session. The number of sitting days is not far off that for the previous Session. No doubt my noble friend the Leader of the House would be able to give the exact figures. I do not think that it is unique for one House to sit when the other is not. That probably happened under the previous Government as well. I am sure that the noble Lord will welcome the fact that the House will not sit in order to accommodate the Liberal Democrat conference in Glasgow in October. I do not welcome it as I have lost my excuse for not attending the conference. However, that does mean that the two Houses will be in step as regards when they are sitting, or not sitting in that case.

Motion agreed.

Merchant Shipping (Convention Relating to the Carriage of Passengers and their Luggage by Sea) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the draft Merchant Shipping (Convention Relating to the Carriage of Passengers and their Luggage by Sea) Order 2014.

Relevant document: 25th Report from the Joint Committee on Statutory Instruments.

My Lords, before I turn to the detail of the draft Privy Council order, I would just like to say that it is not often that I get the opportunity to debate a maritime matter, and I thank those noble Lords who are taking part.

The United Kingdom, which is surrounded by some of the world’s busiest shipping lanes, is particularly vulnerable to the consequences of maritime casualties. Thankfully, such instances are rare, particularly those involving passenger ships. However, we need only look at the terrible tragedies elsewhere in the world involving the cruise ship “Costa Concordia”, and more recently the South Korean ferry “Sewol”, to remind us that we can never be complacent.

Through this order, we are seeking to amend the Merchant Shipping Act 1995 to reflect the UK’s ratification of the International Maritime Organisation’s protocol of 2002 to the 1974 Athens convention relating to the carriage of passengers and their luggage by sea. This modernises and significantly strengthens the international framework for providing compensation in the event of death or personal injury to a passenger, or the loss of or damage to luggage, when travelling by sea.

The 2002 Athens protocol, which entered into force internationally on 23 April 2014, increases the limits of liability that currently exist for carriers of passengers under the 1974 Athens convention up to 400,000 special drawing rights, which is the virtual currency used by the International Monetary Fund. As of 24 April 2014, one special drawing right is equal to approximately 92p. The 2002 Athens protocol also requires carriers to maintain compulsory insurance of not less than 250,000 SDRs per passenger on a strict liability basis, and this insurance is to be evidenced by a certificate from a state party. It also provides claimants with the right of taking direct action against the insurer.

UK ratification will actually have very little practical effect on UK ship owners. This is because the key provisions of the 2002 Athens protocol have already been introduced into EU law. EU Regulation 392/2009, which entered into force on 31 December 2012, was implemented in the UK by means of the Merchant Shipping (Carriage of Passengers by Sea) Regulations 2012. Nevertheless, further government intervention is now necessary to ensure that UK-flagged passenger vessels can be issued with the correct state certification attesting that they have the necessary insurance in place at international level to meet their obligations under the 2002 Athens protocol when travelling on international, as opposed to EU, journeys.

In addition, the order will also enable the 2002 Athens protocol to be extended to the overseas territories and Crown dependencies, should they so wish it, which, if they chose to do so, would enhance the protection that is available to passengers travelling on board vessels that are flagged to those territories when travelling on international journeys.

In keeping with the responses received during public consultation, the order also preserves the existing arrangements for domestic journeys. This means that the original 1974 Athens convention, along with a limit of liability which has been progressively raised to 300,000 SDRs for those ship owners whose principal place of business is in the UK, will continue to apply to the carriage of passengers within the UK, the Channel Islands and the Isle of Man.

This order also presents us with an opportunity to revoke some related domestic legislation—Carriage of Passengers and their Luggage by Sea (Interim Provisions) Order 1980. This is an enabling power and applies only to contracts for domestic carriage made before 30 April 1987, so it no longer has any practical effect. It was identified as being completely redundant under the maritime theme of the Red Tape Challenge—an initiative that I sure many noble Lords will be familiar with.

Finally, some noble Lords may have already spotted that there is no review provision in this order. This is not an oversight; there is simply no power to incorporate such a provision here. Nevertheless, I can assure noble Lords that the Secretary of State for Transport will carry out a review, and will publish the conclusions of that review, every five years. The first such report will be published before 23 April 2019. I commend the order to the Committee and beg to move.

My Lords, I think the Minister was perhaps a bit premature in thanking noble Lords who are taking part in a rather rare maritime exercise in the House. I do not want to disabuse her, but I was not going to say anything at all. This order is a natural follow-on from what has happened before. I have no problems with it at all. The UK Chamber of Shipping also had no problems with it, so it is generally to be welcomed.

We have been fortunate in this country in that we have not had a major accident with a passenger ship since the “Herald of Free Enterprise” some 27 years ago. That was responsible for beefing up the amounts of compensation that can be paid to passengers for loss of life and luggage in those circumstances. Let us hope that that record continues although, as the Minister said, we are still suffering from these problems. We saw one in South Korea the other day, and the unfortunate incident with the “Costa Concordia” was another example. I welcome this order and wish it well.

My Lords, I am in the same position as the Minister. Debates on maritime matters are all too rare. I do not think the Minister was expressing the view that she is a particular expert in this field, and I would certainly not claim to be. That may become horribly evident in the contribution I have to make.

As the Minister said, this order amends the Merchant Shipping Act 1995 in the light of our ratification of the International Maritime Organisation’s 2002 protocol to the Athens Convention 1974 relating to the carriage of passengers and their luggage by sea. Ratifying the 2002 protocol ensures that UK-flagged passenger vessels can be issued with correct international certification and enables the protocol to be extended to the overseas territories and Crown dependencies, should they so wish. When the order was discussed in the other place a question was asked about what the Government’s accountability and jurisdiction would be if ships that are not UK-based, but are part of the Red Ensign group, chose to opt into these rules. It would be helpful if the Minister could clarify that point.

As the Minister said, the key provisions of the protocol have already been introduced into EU law—I think from the end of 2012—and implemented by the UK, but this order is needed to ratify the protocol, which came into force internationally on 23 April and incorporates the international elements. The 2002 protocol applies to international carriage only, but the order ensures the application of the Athens convention to domestic journeys within the UK, the Channel Islands and the Isle of Man. The 2002 protocol increases the liability limits for carriers that have been applicable in the event of accidents involving loss of life or personal injury and also requires carriers to maintain compulsory insurance on a strict liability basis, as well as providing claimants with the right to take direct action against the insurer. Under the order, the new limit of liability is, I think, the 400,000 special drawing rights. The Minister said that a special drawing right is currently equal to approximately 92 pence. It certainly fluctuates marginally since earlier in the year when it was being debated in the House of Commons the figure was given as approximately 93 pence.

The Government have also said that the further policy objective of the order is to revoke some redundant legislation. It would be helpful if the Minister could spell out which legislation is being revoked, bearing in mind that the Government’s objective appears to be that, for every new order introduced, two should be revoked. I am not clear what the two orders are that are being revoked.

The Explanatory Memorandum states in paragraph 10 that, although,

“external stakeholders were invited to contribute to the IA, the available evidence base continues to have a number of limitations”.

It then goes on to say:

“Given the significant uncertainties surrounding the impacts of this measure”,

relating to,

“the number of Overseas Territories and Crown Dependencies that … choose to ratify the … Protocol … and the limitations of the available evidence base, it has not been possible to monetise any of the costs and benefits in this IA”.

At least, that is my understanding of what it says. Yet when the order was discussed in the other place, the Minister described it as “short and highly technical”. I have always construed the reference to “highly technical” to mean “incomprehensible”. He said that not least because the,

“key provisions of the 2002 protocol have already been introduced into European Union law … and … implemented in the UK”.

The Minister in the other place said that the order therefore had,

“little practical effect on UK shipowners”.—[Official Report, Commons, Second Delegated Legislation Committee, 30/4/14; col. 3.]

I simply ask which is the correct version—that the order is short and highly technical with little practical effect on UK ship owners, as per the Minister in the House of Commons, or that, due to the significant uncertainties surrounding the impacts of the measure and the limitations of the available evidence base, as per the Explanatory Memorandum, monetising any of the costs and benefits of the order in the impact assessment is not possible and, by inference, would represent something of a voyage of discovery. Perhaps the Minister could indicate which horse of those alternatives she is backing, or, alternatively, say why what would appear to be two somewhat different views on the clarity and scope of this order are in fact saying precisely the same thing.

A further issue raised in the House of Commons was about the ships to which this order applies. In his response, the Government Minister said that,

“the classification of ships is determined by the area in which they operate and not necessarily the gross tonnage”.—[Official Report, Commons, Second Delegated Legislation Committee, 30/4/14; col. 8.]

However, because he was unable at that particular moment to give a definition of classification A and B vessels as referred to in the impact assessment, he undertook to write to the Committee. Can the Minister here provide that information and say whether the provisions of this order might be extended to other classes of ships?

A further question raised in the other place was about what steps the department was taking to ensure that information about the impact of the order was made available to ship owners and their passengers and customers. It would be helpful if the Minister could say what is happening on that issue. Of course, the answer to that may depend on whether she agrees with the Minister in the House of Commons that it is short and technical with little practical impact or with the Explanatory Memorandum, which appears to suggest otherwise. Finally, the Minister in the other place said that he was concerned to reduce the costs of the legislation around sulphur for UK shipping and, in particular, for the UK ferry industry. He went on to say that he had,

“asked the IMO to undertake an early review of the 2020 regulations”.—[Official Report, Commons, Second Delegated Legislation Committee, 30/4/14; col. 8.]

What exactly are the Government pressing for in that review?

We welcome the objectives of this order but would appreciate responses to the points to which I have referred.

My Lords, I thank the noble Lord, Lord Greenway, for his reminder that we must not be complacent on this issue. As he says, the British shipping industry has an excellent safety record that is to be valued, but we must ensure that we continue to keep that record, as complacency would be dangerous. It is important to us to maintain that position in the global marketplace and our reputation for maritime excellence, as well as recognise our obligations to people who travel by sea.

I shall try to address the questions raised by the noble Lord, Lord Rosser, although I am not sure that I will satisfy him, given that the Minister in the other place did not. If there continue to be gaps, we will definitely follow up in writing but I will do my best to attempt to answer in an area which, as he is well aware, is certainly not one in which I would claim expertise. First, the noble Lord referred to the overseas territories and Crown dependencies and asked for a somewhat fuller answer, if I understood him correctly, on how we would enforce that protocol within that context if they opted to become signatories. He will know that the UK—as a signatory to international conventions on shipping-related matters—is bound to make sure that it gives effect to any changes under the conventions. It would therefore have a responsibility to ensure that any signatories among the overseas territories and Crown dependencies were followed through; failure to do so would constitute a breach of our international obligations under these conventions. I hope that adds significantly to the comments made by my honourable friend in the other place. We have obviously been encouraging these territories and Crown dependencies to sign up, so it is clearly good for travellers if they do so.

On revoking legislation, I believe I covered that in my opening speech. The Carriage of Passengers and their Luggage by Sea (Interim Provisions) Order 1980 seems to be almost unusual in that nobody thinks it has any practical effect any more. Therefore, removing it from the books strikes me as extremely appropriate. If I understood the question of the noble Lord, Lord Rosser, he was saying that there was a sort of “one in, two out” relationship. I have no idea what the “one” is or what the pairing “two out” was, but I think that he would support the idea that anything that was completely redundant was best off the books, rather than providing a complication.

I certainly share that view—there is no point keeping something on the books that is completely redundant—but I was looking at what the Minister said in the Commons:

“I am pleased to say that the Department for Transport, as its contribution to the red tape challenge, met its commitments on one in, one out. It is now meeting its commitments on one in, two out as well”.—[Official Report, Commons, Second Delegated Legislation Committee, 30/4/14; col. 8.]

It was in light of the Minister’s comment in the House of Commons that I was asking what the two were that were being removed now that this one was coming in.

I am sure that the department would be delighted to write to him, as I will, with our successes in removing unnecessary and problematic regulation. We would be delighted to follow up on that issue but, standing at the Dispatch Box today, I cannot tell him that I know the answer.

The noble Lord then asked a question—he will help me if I am not fully understanding this—as to whether this was a piece of legislation that had no practical impact, or a piece of legislation that had important impact and looked at two areas of discussion. This is a piece of legislation that would have been significantly important had not the EU already enacted its provisions. Looking at the SI today, it is fair to say that it does not have a big practical impact because that was achieved back in 2012, when the EU protocol, which incorporates a directive including these provisions, came into force. It is important that the levels of compensation have been raised for passengers who may be in the appalling situation of being injured—potentially even killed—or having damage to their luggage. That is entirely appropriate. The protocol is necessary because there must be some containment of liability or else insurers will not be willing to step up to the plate. In that case, we would see a dramatic diminution in passenger sea transport. Raising that limit has been important, and the fact that it is an international protocol also matters, certainly to British passengers who do not necessarily travel only on UK-flagged vessels. It has been an important piece of legislation.

We did say at the end that we welcomed the objectives of the order, so we are not in any argument about what the order is seeking to achieve. Our point was just about what appeared to be the rather different view of the Minister in the Commons—who considered the order to be short, technical and with no impact on UK shipping—and paragraph 10 of the Explanatory Memorandum, which says that the,

“available evidence base continues to have a number of limitations…significant uncertainties surrounding the impacts of this measure…it has not been possible to monetise any of the costs and benefits in this IA”.

Clearly, as far as the author of this document is concerned, it is an issue of some significance. If it were not, why are those words in there?

Frankly, in a sense, I am with the Minister, but if one is writing a technical document one does it against very technical standards. If you went out and described to a member of the public the increase from only 40,000 SDRs—I think that was the original figure—to the current 400,000, they would see that as a significant and important change. The technical language used by those who follow a very technical process of assessment may be somewhat different. As a very effective politician with a good history, the noble Lord will appreciate that issue. I do not have a problem with the difference. If his question was on whether we have consulted people to ensure that they consider the impact is appropriate, I should say that there was extensive consultation in 2012. Given that the practical effect of this SI is to extend the international scope rather than the EU scope, the noble Lord will understand that we did not need to repeat that consultation. He will know that this is a very widely supported measure.

The noble Lord asked about class A and class B domestic vessels. As he will know, domestic vessels are defined by the areas of the sea in which they operate. Class B ships are passenger ships engaged on domestic voyages where they are at no point more than 20 miles from the line of the coast. Ships falling within the description of class A are those on domestic voyages operating at greater distances from the coast. Under the EU protocol, I believe that class A will come under these same provisions in 2016 and class B in 2018, but through the mechanism of the EU.

The UK had already raised its limits to 300,000 SDRs for domestic sea travel. I think that the noble Lord, Lord Greenway, referred to this. When the relevant statutory instruments are brought in to deal with those changes for 2016 and 2018, it may well be appropriate to look more broadly at the entire domestic environment. However, at this moment in time, awards are not pushing up anywhere near to the limits provided under the current arrangements and it seemed tidier to deal with the domestic situation within a similar timeframe.

I am trying to ensure that I do not go over time but an issue was raised about communication. As the noble Lord will remember, extensive consultation took place in 2012. Those conversations continue on a regular basis with the Chamber of Shipping and all the various interested parties, so there is no concern that appropriate bodies will not be aware of the relevant provisions.

I was trying to look that up because I remember that a fairly substantial answer was given on it in the other place. However, I will come back to the noble Lord on precisely how we are informing consumers of their rights because I have to confess that it has slipped my mind at the moment.

Questions were asked about the ferry industry and the early review of the 2020 regulations. I will obtain more detail on that issue for the noble Lord, if it is available. However, a review tends to be reasonably broad ranging—that is why it is a review. Presumably, it will cover the appropriateness of the regulations and their practicality in a modern environment. I hope that I have covered those issues adequately. If there are any outstanding issues, I will be glad to follow them up in writing. I commend the order to the Committee.

Motion agreed.

China: Investment into the United Kingdom

Question for Short Debate

Asked by

To ask Her Majesty’s Government what assessment they have made of the recommendations of the report of the All-Party Parliamentary Group on East Asian Business on foreign investment from China into the United Kingdom.

My Lords, I am most grateful to have been granted time for us to debate what I believe is a crucial inflection point both in the UK’s relationship with China and in China’s own outward investment story. I declare an interest as the chair of the All-Party Parliamentary Group for East Asian Business and as a director for the Manchester-China Forum. I also declare a number of other relevant personal and public roles and interests which are outlined in the Lords register.

In particular, I would like to highlight through this debate the recent publication of a report commissioned by the All-Party Parliamentary Group for East Asian Business and conducted independently by Roland Berger entitled the Independent Review of Chinese Foreign Direct Investment. I hope that this report will help inform and stimulate this debate, and the debate that we as a society and country need to have as Chinese firms over the coming years dramatically increase their investments internationally, and in the process become a more important feature of economies such as ours.

In many ways there has always been investment and trade from and with China and the Chinese into the UK, whether in financial or non-financial ways, with waves of Chinese immigrants over the years putting in their time, energy and capital to help build and rebuild this country in the run-up to and after the two world wars. Think of the catering industry and the supply chains that feed it, and then think about the recent manufacturing story as UK firms worked with Chinese partners to lower their costs and globalise their supply chains. And then think about more recently as newly affluent and increasingly aspirational Chinese people have come to the UK to invest in a variety of financial assets, from property to stocks and bonds, arts and antiques, and luxury items.

During this period and in particular with the liberalisation of trade within China and encouragement of state and private enterprises to invest abroad, outbound FDI has accelerated, creating a huge opportunity for countries such as ours. The APPG report highlighted a number of scenarios, from today’s relatively low investment base to seeing the UK capturing between 3% and 5% percent of China’s future annual global outbound foreign direct investment, which alone would create between 48,000 and 75,000 direct jobs by 2020 in a median and optimistic scenario. The drivers of such investment include a competitive tax regime, the City of London as a future hub for offshore renminbi trading, high educational quality at different stages, our world-class industry sectors, and our openness as a country to FDI in areas as diverse as manufacturing, infrastructure and finance.

The Government in particular have done a significant amount to enhance Britain’s attractiveness to such investment. The most visible expression of this includes the various ministerial visits last year, as well as changes to the visa process to make it easier for tourists and business leaders to come, shop and do business here. Behind the scenes I know that much good work is carried out by UKTI, the China-Britain Business Council, and regionally to encourage Chinese people to visit and invest on both the large and the small scale. This has produced fruit with recent announcements such as the Royal Docks development by ABP, the investment into Manchester’s Airport City being spearheaded by Beijing Construction Engineering Group, and the significant investment in R&D and higher education by telecoms firms such as Huawei, a supporter of the APPG. In addition, we have in recent years witnessed major welcome investments into nuclear power, water utilities, engineering firms and even breakfast cereals. More such investments are in the pipeline, evidenced by recent positive visits to the UK by organisations such as the China Entrepreneur Club, whose member businesses represent a significant proportion of private enterprise turnover in China. Indeed, the chair of McKinsey & Company Asia recently wrote that 2014 could be the biggest year for Chinese foreign direct investment into the UK, and the APPG report highlights the continuing strong upward trend we are likely to see in the wake of these first major investments.

Now is a crucial time when major global Chinese firms are deciding where to locate their headquarters as they start to look beyond the borders of Greater China, and the UK can undoubtedly benefit from this influx so long as we remain an attractive place to invest and do business in. However, we must remember that the benchmark should not be how much such investment is growing in absolute terms, but how we are doing in capturing a share of this investment globally as compared to our competitor nations in Europe and around the world.

While we have a lot to be thankful for and to congratulate ourselves on as a country, the APPG report highlights a number of areas where we could do even better, not just to continue to boost our share of Chinese global FDI, but to ensure that there is balance and diversity in the investment from China geographically, by sector and, indeed, by size. The report highlights that as Chinese firms decide where to locate their headquarters, more could be done to address the issue of hiring talent. It is all very well to enable the chairperson to locate to the UK, but headquarters need to have top teams, and if you are relocating part of your top management from China to help establish operations here in Europe, you will want to do so in countries that make that possible. Currently, there are difficulties for firms looking to bring in experienced Mandarin speakers versed in their own corporate culture. Other countries in Europe and elsewhere often even help to negotiate visas for top management at the point when the decision about which country to locate to is being made.

We need to operate on a level playing field globally with other nations, particularly Germany and others in Europe who have the added advantage of being in the Schengen zone. The need for business management visas, which could be addressed if we redesigned our system more around the skills we need as a country, ought to be addressed alongside the issue of the removal of post-study work visas. In my view, the system ought to be relaxed for countries in the emerging world that we want to trade with more, such as China, in order to provide our local firms with Mandarin-speaking, China-savvy talent that will help them grow, as well as supporting firms which are interested in locating their headquarters here.

Another area highlighted in the report is the need for more FDI to be attracted into areas within and beyond London and for resources to help diversify agency support so that it is not carried out only centrally, but also regionally. With the recent focus of UKTI effort around strategic sectors, which fits with the report’s recommendation for greater sector expertise in our national approach to attracting foreign Chinese investment, there is a real opportunity for cities and localities to utilise their local knowledge and networks and help small and medium-sized enterprises to connect with China by receiving Chinese investment. It would be interesting to see what the Government can do to diversify and attract more funding into this area so that the north and west of the country and areas outside London, as well as poorer areas of London, can benefit from the influx of Chinese funds.

The report also contains a number of recommendations and observations that highlight the importance of the cultural and even linguistic sensitivity needed for us to continue and grow our trade links with China and to attract further Chinese investment, from bringing in Chinese language-translated tax information, just as we have brought in Chinese language visa application forms, to encouraging commissioners of public tenders to be aware of the sometimes lengthy decision processes in China for outbound investors, which can take a year or more for investments of more than $1 billion, to simply understanding China’s regular five-year plans and how they affect priorities for investment at the level of firms and sovereign wealth funds. Here there is a role for both public and private intermediaries to be supported in their efforts to help bridge the cultural and linguistic divide. Intermediaries struggle at times, particularly in making medium-sized deals happen, because the timelines for facilitating an investment and ultimately getting paid for their work can be lengthy. This is important because while billion-dollar deals benefit the economy and help us hit our quotas, small and medium-sized firms, as we know, employ more people and have the potential to create more jobs.

What is the Government’s response to the recommendations in the APPG report, and how do they intend to address the visa, regional and intermediary- support challenges that it highlights, so that we can continue to compete with countries such as Germany and others and bring the benefits that come with increased Chinese investment to more industries and to firms of different sizes and geographies?

The final point I wish to make is to emphasise the importance of relationships. For 50 or more years, we as a country have benefited greatly from our alliances with Europe and America, with whom we have shared cultural and linguistic histories. Businesses here in the UK have traded with, invested in and received investment from partners across the English-speaking world and the continent for many decades. Relationships have been key to this, as well as proximity and opportunity. With the re-emergence of China economically on the world stage, it is relationships that are going to be key, not least because, perhaps more than most places in the world, they form the bedrock of business culture. To receive productive, successful investment from China and to ensure it creates local jobs and growth for Britain and British firms requires an understanding of the Chinese mindset, its culture, its priorities and its people, and of how Chinese firms are having to learn to adapt to deal with our market, our legal system and even our media.

To this end, I want to ask my noble friend the Minister how as a country we plan to do more to engage the local Chinese British diaspora and visiting Chinese students in the UK—as well as more British students and graduates as they learn Mandarin and gain relevant experience in China—so that they can assist our efforts in both countries to facilitate, attract and make the most of increased Chinese foreign investment in the years to come. Beyond that, how can we work together to encourage our towns and cities to look east to create the right climate for Chinese FDI? Finally, I want to ask how we can get our small businesses in particular to feel more comfortable with trading and receiving investment from Chinese investors, which can then be a potential spring-board for them to expand their exports to other parts of the world, not just back to China itself.

The Chinese economy is going to remain a driver of the global economy, and over time of our economy, for many years to come. At this pivotal moment, let us do all we can to encourage relationships to be built up and capital to be invested so that British businesses, industries, and sectors can benefit from this growing and welcome trend. Let us ensure that at every level, not just here in London and in central government, everyone can play a part in helping to make this much needed investment work for the benefit of all.

My Lords, I thank the noble Lord, Lord Wei, for that wonderfully powerful lobbying from a certain perspective—but that is what an APPG chairman is supposed to do—and I think that we were all extremely interested in everything that he had to say. I certainly will not disagree with anything he said, but I want to highlight a couple of different issues. Before I start, let me also say that this is my first interaction with the Minister, and I am delighted to be on the same side as him—but perhaps slightly opposed—in this very significant debate. I look forward to hearing what he has to say.

I want to pose a couple of general questions. One of the most important issues that should affect Britain’s economic and political considerations is where to draw the line between strategic interests and commercial interests. Not everything can be up for sale, and not everything can be sold to everyone. In the Dubai Ports World controversy in the US some years ago, a state-owned enterprise attempted to buy what was deemed a strategic US asset. At issue was the significant question of who controls US ports. By the way, this was not a right-wing Republican argument—one of the champions of the opposition to Dubai Ports World taking over US ports was one Hillary Clinton—as there were people on all sides who saw ports as a strategic asset and therefore vetoed the attempt by Dubai Ports World to take control. Ownership was not a significant issue, as P&O had ownership of the ports at that time, but ownership by a strategic ally is very different, in terms of public perceptions of security, from ownership by a non-transparent state-owned enterprise. The issue was ownership by a foreign power about which there were perhaps reservations, either about the state itself or about the record of the entity that was attempting to do the transaction.

Likewise, on the issue of Pfizer and AstraZeneca, we in the UK need to think long and hard about strategic assets and whether research and development, including scientific research, comes into the category of meeting the public interest test. I would argue that it does, not just because of the jobs and R&D spin-offs but because, where a primary purchaser is in a dominant position in relation to the state sector—that is, in the NHS—we need to ask whether we give disproportionate pricing power to a player in foreign ownership that would be in charge of that kind of strategic asset. I would say no.

Going back to the China debate, but keeping on that theme, one need only look at the ire or public sentiment that was aroused when another strategic industry—I shall use the example of UK water utilities—was privatised. The water companies were taken over by a state-owned enterprise, which in this case meant France’s EDF, and the profits reverted to the French taxpayer. There was considerable speculation about why, in an era of austerity, British schools could not be built but the French Government had sufficient in its coffers to do quite well with its public sector.

I have not mentioned any Chinese company as an example. However, the APPG report highlights that analysis of the growth in Chinese investment, which has increased by a factor of 13 since 2008, shows that much of the growth is due to a small number of M&A deals, which are dominated, it points out, by state-owned enterprises and sovereign wealth funds. So it is only a matter of time before we are caught in a controversy where a Chinese firm or a state-owned enterprise is involved, and hence the need for the Government to think through the broader principles in this area, particularly the security dimension. Needless to say, the manner in which an industry is run is critical to public acceptance. Where it is well run and the UK benefits from investment, there is usually little disquiet. However, when it comes to an issue where “rent seeking” is too blatant—which I think was the case in the water utilities—at a cost to the consumer, in my view there is cause for legitimate complaint.

A further strategic concern has to be around technology transfer. Only yesterday, noble Lords who take the Financial Times will have seen a report on security service chiefs expressing their concern about cybersecurity in the context of junior staff at IT companies being lured into positions through remuneration where they might be able to divulge vulnerabilities in IT systems to competitors. I should say that the description of a “competitor” in terms of cyberespionage is not usually the bread-and-butter business of the level playing field where there is healthy, market-led competition, but rather the ability of foreign powers to bring down assets in other countries. Estonia experienced that from Russia, the US from the Chinese, among others—that is well documented and recorded—and of course Iran from Israel and, vice versa, Israel from the Arab countries; that is just to name a few of the well known cases. The more overt commercial attacks, which can cause the economy much more harm, are often unreported for reasons of commercial confidentiality, although they have higher costs for the economy and the companies themselves. I wonder if, in answering this debate, the Minister will reflect on the question of how and to what extent we define strategic industries, particularly when the investor has low levels of transparency, there is no public accountability and our own leverage is potentially extremely limited due to the size of our economy in relation to that of the investor.

Another factor I want to touch on is not mentioned in the APPG’s report, but it touches on global trade and competition. I refer to the EU-China trade talks that have been embraced by the UK Government and for which they have become the cheerleader in the EU. I would not wish for a moment to appear to be opposed to the talks, and I am not, but I hope that we learn the lesson from the current crisis in the EU over Russian energy supplies to several EU states. It is serving to downgrade EU states’ resilience in security terms and some countries are virtually being held hostage by certain Russian companies in terms of pricing and the delivery of energy.

The lesson here is twofold. An overreliance by strategic sectors on one supplier gives the foreign owner too much power which it may exploit. Trade dependency is similar, and one must not get hooked on any one market. So, while we welcome investment from China and our investment in China, it is terribly important that we keep our eye on diversified markets and diversified investments. It may be exciting—in the case of China we are talking about a low base at this point; I accept that completely—and there is much to play for, but we need to keep an eye on the end game, which is that overreliance on either side may not be very healthy.

The second point is my final one, and it is about multilateralism. Over the entire post-war period, Britain has championed a multilateral, global, rules-based order, whether that was the establishment of the United Nations or the Bretton Woods system, the UNCTAD or the WTO. I am therefore sorry to see us taking a narrow focus on EU-China talks rather than EU-East Asian trade talks that would include the other powerful emerging economies in south Asia. That is what the APPG is about. My fear is that when large powers are allowed to break off from multilateralism into bilateralism, geopolitics comes into the frame and power is disproportionately distributed, thus disadvantaging weaker economies. I am really sorry that the APPG on East Asian business has not sought to battle for those other countries as well in this regard, but I am sure that it will do so in other reports. Indeed, I can see that the noble Lord, Lord Wei, is nodding his head, so I look forward to those debates.

In conclusion, I agree with all the conclusions that the report laid out, and I hope that the Minister will be able to take its recommendations on board, despite the omissions. On the emphasis of the noble Lord, Lord Wei, on having ambassadors within the UK, I should declare a very small interest. I happen to be chancellor of the University of Northampton and am delighted to report that, as of last year, the president of the Northampton students union has been the first Chinese national ever to be president of a students union in the United Kingdom. So we are an outward-looking university, just as we are a country.

I am very pleased to follow my noble friend Lady Falkner, and I am pleased that she made some points about AstraZeneca, a very current issue and something that we should be majorly concerned about, separately from this debate today. However, it is welcome that the UK is the most popular destination for Chinese investment in the EU. This is good, and it represents an improvement over the past few years.

The recent All-Party Parliamentary Group on East Asian Business review of foreign direct investment into the UK is very welcome, informative and helpful in pointing to areas where we are being proactive in the UK, and where we could do more. I congratulate the noble Lord, Lord Wei, very much indeed on his leadership on this, which is really why I am here today. I am not here to say too many more words, because the report is so comprehensive, but just to give my support to the report and say, “job well done”. I hope that the Government pick up on the points that have been made.

The report is comprehensive and has drawn attention to all concerned about the issues involved. One issue that was alluded to by the noble Lord, Lord Wei, on which I have campaigned for quite a long time, is that this country needs to enable those from China who want to come here to do so. In the past, there have been great stumbling blocks on the issue of visas. There have been enormous and unnecessary problems when people from China have come here for investment purposes but also as tourists. At the end of the day, we want tourists to come here to produce a good return for our economy, but also to introduce people from China to the fact that this country is what it is and is an area in which they can invest if they learn more about us. On an issue that I and a number of my colleagues have raised on a number of occasions, we have had assurances recently from the Government that these concerns are being taken on board. I hope that that is the case; I know that many from the Chinese community continue to monitor it.

We have an issue that came up about visas, with people applying from China finding that the documents that they need to fill out have not been in Mandarin. That is something that we have to address, when it comes to people who want to invest in this country, to ensure that the pieces of paper that they need to consider have been translated into Mandarin.

The point was also made that the regions of the UK should be proactive in helping inward investment, as well as the UK Government. The specific recommendation was made that each UK region should have at least one bilingual adviser in place. We as a country are not particularly as good at languages as some other countries are. I own up to this myself. Some of my colleagues have four or five languages but I struggle with one or two when I am a tourist—but beyond that, I have none at all. It is therefore important to encourage investment from China throughout the regions and ensure that regional advisers are bilingual.

There are many recommendations in this report and I hope that the Minister can confirm that it is being examined in detail, given that there is much to be gained by increasing investment to help growth in this country. I could go on endlessly but look forward to the Minister’s response because there is so much that we can gain. Perhaps I may quote from the report, which states:

“Compared to the country’s overall track record in attracting foreign investment, the UK’s performance lags with respect to China. Much of this potential gap is attributable to failures to recognise and adjust to the unique circumstances of Chinese investors. Faced with a lengthy and cumbersome approval process at home, and a relative lack of deal making experience abroad, Chinese investors take longer to agree to deals, are highly sensitive to price and perceived risks, and require additional levels of professional support throughout the process”.

I again thank the noble Lord, Lord Wei, for instituting this debate, and the Minister for being here. There is an awful lot to be gained by considering this report and the many recommendations within it.

From this side, we certainly welcome this debate. As the noble Lord, Lord Wei, observed, this issue is important for the future of the UK economy. The APPG is to be commended for producing this useful report, but the question is what Her Majesty’s Government will do about its recommendations—a matter that the noble Lord put pointedly to the Minister. The answer is not unimportant.

The report commends a strategic approach but any strategy requires sound content, otherwise it becomes mere public relations. There is much good work in the report but in this intervention I will focus on where more effort is required. That should not be taken in any way as a criticism of this report.

Let me begin with some general observations on the UK’s approach to date. Having, for example, the Prime Minister take an assortment of business people to China is no doubt well intentioned but it is hardly a strategy. If it is ill thought out, with no clear plan of what is to be achieved, it can easily create a wrong impression—an impression that perhaps our Prime Minister is being somewhat transactional. That is not a good outcome.

Furthermore, warm words of welcome to Chinese investors that are matched by an obstructive visa regime can be very unhelpful. The noble Lord, Lord Cotter, has given an example of that. Let me give another one. Last autumn, a Chinese ministerial party—I repeat, a ministerial party—seeking to visit the UK was held up in Beijing. Their flight slipped by while they were waiting for their visas to be produced by the UK Border Agency. If ministerial parties are treated in that way, it is hardly the right message to be sending to investors from China. I immediately accept that there have been some improvements on the past, but compared with France we lag way behind. If anything, there seems to be an unwillingness to match welcoming words with action. This does not go unnoticed by Chinese investors.

Having the UK welcome Chinese infrastructure investment is all very commendable, but unless there is effective follow up, initiatives may run into the sand. If due diligence on prospective investors is not carried out, one runs the risk of embarrassing failures, and there is no point rolling out a red carpet to Chinese investors if we ignore our domestic requirements, such as planning, consultation with potentially affected communities and due process, that can subsequently produce obstacles and upset the project. That can risk creating an impression of insincerity on the UK side. A focus on outcomes is essential to build good relationships. An intelligent focus is even better.

Turning to the report’s recommendations, I offer one caveat. It suggests we should,

“encourage the creation of more NGO trade promotion bodies”.

I respectfully suggest that this should be treated with caution. One criticism that has been voiced on a number of occasions by Chinese interlocutors is that there are already too many UK bodies speaking with too many different agendas in seeking a relationship with China. Focus on clear messages may be a better way forward. That may not require more trade promotion bodies for China, just greater clarity.

The report importantly refers to financial services. It identifies progress by London as an offshore renminbi centre. Renminbi settlement and clearing house developments are clearly positive, although they have not gone the full way as yet. More effort is plainly required. Singapore recently surpassed London in renminbi business. Paris, Frankfurt and Luxembourg all have ambitions to be renminbi centres. Her Majesty’s Government should take the initiative now. They should consider a currency swap—a real one, this time, not simply an emergency backstop—that creates liquidity on the market now. Another initiative might be purchasing renminbi for UK reserves. Her Majesty’s Treasury could do that, and it would be a step forward. The Bank of England says that it is not for it to decide this issue and that it is for the Treasury to decide. If the Treasury wants to make imaginative steps forward in our relationship with China, adding renminbi to the UK reserves would be a very substantial step. I commend that to the Minister, at least for consideration, although possibly it does not fall within his responsibilities. Many good speeches have been made on the theme of London as an offshore renminbi centre and some real progress has been made, but London has to regain its momentum to improve renminbi liquidity in the London market to make London in reality the—not a—major offshore renminbi centre.

The report refers to sector strategies, which is very welcome as it appears to be recognising a need for industrial policy, but there needs to be a certain coherence in it. Chinese equity purchase and M&A in the UK have been referred to. They have been welcomed in the UK. The noble Baroness, Lady Falkner, referred to this as an area where problems might arise, but plainly there is a tremendous opportunity for UK and Chinese business to go into partnership in these areas. However, as the noble Baroness pointed out, we must be astute to the possibility of Pfizer-type issues arising. Ed Miliband and, indeed, the noble Lord, Lord Heseltine, have made useful contributions to this issue and it appears that the Government have been listening to some extent, after something of a false start on this issue. As the noble Baroness pointed out, not every sale of a UK company to an overseas acquirer will be in the UK’s best interests.

The report correctly recognises the importance of sectors in manufacturing and services, and HMG can have a role in dealing with this. The needless damage of putting the UK’s EU membership into play may not be wise. Placing a question mark over the UK’s success in the automotive sector, based, as it is, in the UK as a platform for the EU market, is not constructive. The Minister will no doubt appreciate that the current Government continually making noises about splitting away from the EU is not an attractive invitation for Chinese direct investment in the UK to Chinese automotive manufacturers and others.

China is serious about outgoing investment, and we need to match its seriousness of intent. There are limits to government action, of course, but relations with China are an area par excellence where Her Majesty’s Government should be able to make a real contribution. This is vouched by the success of government efforts by Germany, Sweden, France and others in engaging with China, both politically and economically.

Everyone by now says relationships are key in China. The noble Lord, Lord Wei, directly recognises this. A rapid turnover of Ministers with the China portfolio is not a help—unless, of course, the Minister is not up to the job. However, there is also an issue in relation to civil servants. The approach to rotation of officials can be counterproductive: the despatch of personnel without sophisticated language skills to China can be less than ideal and the removal of real experts for personnel policy reasons is actively damaging.

There is a need for Ministers and officials, as well as businesses, to understand the very different Chinese culture. There is a need to build expertise on what may now be the world’s largest economy. Only knowledge and understanding of China will build a fruitful relationship. If the UK does not get serious, we will be an also-ran in what the Prime Minister calls the “global race”. However, if we work at building the relationship, the UK can indeed be, as the report aims for it to be, the favourite place for China to invest.

My Lords, I am pleased that we still have some of the Scottish contingent in for the debate. I start by thanking my noble friend Lord Wei for initiating this important debate and for the report from the All-Party Parliamentary Group for East Asian Business. China’s rise is indeed an opportunity, not just for the UK but for China, and I very much believe that this will be the decade of the Asian multinational. Our two Premiers described our two countries as “partners for growth” and we have seen notable progress in Chinese investment into the UK.

The noble and learned Lord, Lord Davidson of Glen Cova, raised a number of questions about the UK’s performance in relation to trade with China. I regret that some of the statements are perhaps a little out of date: our performance has certainly been weak historically but we are now making significant progress. Initial results for 2013-14 show a substantial increase in the level of inward investment from China. As my noble friend Lord Wei said, this is across a number of sectors, from property investment to infrastructure, manufacturing and nuclear, to name but a few. Announcements in press releases indicate commitments of upwards of £8 billion—a very substantial increase on past experience.

This growth reflects the efforts not only of the Government but of many groups and individuals including the APPG. It also reflects the success of government policy in making the UK an attractive place for businesses to establish themselves, to invest and to grow. However, I fully accept that there is clearly still much to do. The report highlights a number of areas, and I would like to address some of the particular points made in it.

The report recommended that we should provide additional regional support for inward Chinese investment. I should stress that the policy we operate, which I think has operated for some time, is based on the UK-first principle, where we try to attract inward investment to the UK and then spend time with the potential investor showing them regions that may be suitable for that type of investment. That said, we are doubling the number of partnership managers to work alongside local enterprise partnerships and enterprise zones to assist them in attracting inward investment. UKTI will continue to work with bodies to improve the local proposition, based around a region’s particular capabilities. We welcome, for instance, initiatives such as the Manchester-China Forum, championed by my noble friend Lord Wei, to promote regional co-operation and relationships.

UKTI does not typically recruit advisers with specific language skills but those with sector skills. However, we have in place sector specialists who are bilingual. In addition, we use the resources of UKTI in individual countries and have a large number of advisers in China as well as, of course, the FCO network. They assist with inward investment opportunities and marketing.

The report also recommends that the Government work together with NGOs to encourage inward investment and market the UK. I take the point that there are a number of these NGOs but the Government certainly work with a wide range of organisations, such as the China-Britain Business Council, the CEC—which was mentioned earlier—the 48 Group Club, UK-China CEO Dialogue and, of course, the APPG. I also recognise and welcome the point made about the diaspora community. As a Government, and as part of our trade effort, we should be seeking to use diaspora communities far more widely, in relation to trade not just with China but with a number of other countries.

Noble Lords, including my noble friend Lord Cotter, also raised issues of immigration policy. I have heard many of the same concerns directly. Although there are definitely issues, some of it is also perception. I will set out a few facts. First, the UK has more visa application centres in China than in any other country and 96% of Chinese visa applications are approved. The UK issued a third more visas to Chinese citizens in 2013 than we did in 2012, so we are making progress. There was a 9% increase in the number of study-related visas.

I wonder whether the Minister could focus not so much on the numbers of visas, but on the problems that the visa process creates: delay and complexity. That is what sends the message that you, the Chinese investor, are not welcome.

My very next words were going to be that the average time to process a visa is seven working days. Of course, there will be more difficult cases, but we also have a three-day to five-day priority service available. The Prime Minister, during his well thought through trip to China, announced that we would be trialling a 24-hour service this year. That received a standing ovation in the room he was in.

The Minister did say that I was out of date, but possibly he did not necessarily mean that in relation to visas. Only last week I had a party of Chinese investors saying that they were having considerable problems with delays in getting visas. These are people who wish to invest in the United Kingdom but are experiencing delays. Perhaps the information that the Minister is obtaining is out of date.

I am sure that if the noble Lord would provide me with some details of that particular party, we can look into what their challenges were. We are trying hard to make the process of applying for a UK visa easier. We have a pilot scheme allowing selected travel agents to make offline applications for tour groups using the same forms that are used for Schengen—with a small additional form—so that people do not have to enter the same information twice. We also have a select business scheme to provide key businesses wanting to invest in the UK with special services. There are currently around 140 members. The Home Secretary has announced the launch of the GREAT Club, an invitation-only account management service for the very highest-level investors.

I recognise that there are issues in relation to graduates. All graduates have a four-month period in which to apply for a graduate-level job, which allows skilled, well paid graduates to stay in the UK. I accept that the situation is not perfect. Significantly, we talk with the Home Office about how we can improve perception and what we can do around both policy and process. However, the situation has improved significantly. From talking to Chinese businessmen, which I do regularly, I know that they recognise some of that improvement. However, there is still more work to do.

I now turn to taxation. A competitive and clear tax regime has a role to play in attracting inward investment and is seen as a UK strength. I know the policy recommendation was that HMRC should translate its guidance into Mandarin, but it is not HMRC’s policy to translate tax returns into foreign languages, partly due to costs but also for reasons of equality of treatment. Having been a tax accountant in the long-distant past, I can confirm that nuances of languages can be very difficult at times, although there is of course an opportunity for professional services to advise on these issues. I will pass the comments regarding foreign languages on to HMRC, but it is not an issue that I have had raised directly by inward investors.

I welcome the comments from noble Lords on the importance of setting up as an offshore RMB centre. Over the past few years, we have made a lot of progress in changing some of the regulations and policy and in giving encouragement. We can debate whether London is a leading offshore RMB centre, but many would say it is the leading centre. We have certainly seen progress, but we know that there is more to do and we will be looking for further—

The Minister indicated I was out of date. He was perhaps not referring to the surpassing of London by Singapore as an RMB trading centre, which was noted at the end of February. Perhaps he would care to comment on that.

In currency trading, there are different time zones. I was a spot trader once upon a time in my life and used to take over from Singapore. We shall see how the figures on RMB trading come out for the full year. The UK has established a very strong presence in RMB, which is as a result of the Government’s policies and the changes they have made.

UKTI has created a number of sector organisations focusing on increased investment in areas such as automotive, life sciences, financial services, offshore wind, regeneration and innovation. They will help individual sectors and investment, not just from China but from other countries. They are not aimed just at China, but we think these sectors are important to show expertise in individual areas. In addition, we have a specialised group aimed at regeneration opportunities: RIO. This has been particularly attractive to Chinese investors and provides a pan-UK list of opportunities for regeneration in every region around the UK. RIO not only presents a playbook of opportunities but will guide potential investors through some of the barriers rightly raised by the noble and learned Lord, Lord Davidson.

This Government has a strong focus on building relationships with China. There have been numerous trade and ministerial visits, which are well thought out and well appreciated by the Chinese hosts. The highlight was the Prime Minister’s visit with the biggest business delegation ever assembled. More than half the companies that went on that were small companies. One of the important agreements signed during that visit was with the National Development and Reform Commission, to enhance trade and investment between the UK and China. As a result, and with the support of the British embassy in Beijing, the NDRC has launched the Chinese Enterprises Investment Guide to the UK, which is the first guide that it has published written for Chinese companies looking to invest in another country.

I shall pick up some points raised by the noble Baroness, Lady Falkner. The UK is proud of its position as an open economy, which we think has benefited the UK. It has created millions of jobs. When we talk about overseas investment, we have to look at JLR as an example of an acquisition that has helped the UK immensely and created value added and jobs. It is far less about the nationality of the company involved than its quality. We have public interest tests, particularly related to security, a key area which the noble Baroness raised, and areas such as media plurality. It is important that we look at the context of how much we have benefited. The UK will continue to position itself as open and to consider some of the challenges. I remind noble Lords that when we talk about AstraZeneca, Astra was a Swedish company; when we talk about GlaxoSmithKline, Smith, Kline & Co. was from Philadelphia. When we talk about openness, we have to remember that it is a two-way street.

The noble Baroness referred to diversifying into China too much. The challenge we have today is that we are not diversified enough. The EU has 45% of our trade and the US is our largest single market. It is this Government’s aim that the fast-growing markets should represent a larger proportion of our trade. The EU-China trade talks are just one of many trade talks. There are trade agreements being made and discussions going on with Japan, India, Singapore and the USA. We have recently concluded talks at the political level with Canada and we are discussing EPAs with many countries around the world. There is of course the Bali WTO agreement. This country is championing free trade around the world and will continue to do that on a plurilateral and multilateral basis, as well as on a WTO basis.

In conclusion, the UK has been very successful at attracting inward investment—we must remember that we are the number one in Europe for inward investment. It is the aim of this Government to improve our position in gaining inward investment from high-growth economies where historically we have not been successful, and of course China is number one in that list. We made significant progress in 2013 with multibillion pound investment across a range of sectors. We agree with the report that there is more to do, and we will do more. I thank all noble Lords who have spoken today for attending and for their interest in this subject. We have considered the report in detail and will continue to look at its recommendations. We will continue to engage strongly with government and non-government organisations in the UK and in China to make further progress and to make the UK the most attractive and successful investment destination for China in Europe.

BBC: EU Coverage

Question for Short Debate

Asked by

To ask Her Majesty’s Government whether, in the course of their renewal of the BBC’s Charter and Guidelines in 2016, they will take into account the BBC’s coverage of European Union matters, in the light of its recognition of the need for greater breadth in such coverage following publication of the report of the Independent Panel led by Lord Wilson of Dinton in 2005.

My Lords, noble Lords will be aware that the BBC’s charter obliges it to be impartial, wide-ranging and fair in its political output, and that,

“no significant strand of British public thought is knowingly unreflected or under-represented”.

I should declare an interest in that, since 1999, I and others have been sponsoring an analysis of the BBC’s EU output to see if it is meeting those obligations in that area. This research can be found on the website, and is the longest-running and most detailed analysis ever undertaken of the BBC’s output. As I said in my last debate on this, on 11 March 2002,

“bias, like beauty, is often in the eye of the beholder”.—[Official Report, 11/3/02; col. 653.]

The News-watch research now includes over 6,000 hours of the BBC’s EU coverage across numerous news and current affairs programmes. More than 8,200 individual EU reports have been fully transcribed, and transcripts from some 5,000 guest contributions have been collected and analysed. The director of the programme, Mr David Keighley, has had a long and successful career at the BBC and in commercial broadcasting, and his CV can be found on the News-watch website. He sits as a justice of the peace.

By 2004, Mr Keighley and his team had produced such damning evidence of the BBC’s Europhile bias, including a complete failure to air the case for the UK to leave the EU, which was already a significant strand of British public opinion, that the BBC set up its first and only truly independent inquiry chaired by the former Cabinet Secretary, the noble Lord, Lord Wilson of Dinton. That inquiry broadly supported Mr Keighley’s conclusions, and so in reply the BBC made the commitments to which this Question for Short Debate refers. However, I have time to deal with only two of them. The BBC said:

“With specific reference to Europe our aims are … to offer our audiences across all platforms clear, accurate and accessible information about the way EU institutions work and their impact on UK laws and life”,

and, secondly,

“to ensure impartiality by reflecting the widest possible range of voices and viewpoints about EU issues; to test those viewpoints using evidence-based argument or informed opinion”.

I am sorry to say that the BBC has not yet fulfilled those promises. Let us look at the first aim, which is that the BBC would make sure that the British people could understand how the EU works and how it makes so much of our law. With our elections to the European Parliament only 15 days away, I would have thought it helpful if our people knew what they were actually voting for and how it fits into the EU’s law-making process. I would have thought it helpful if they knew that the power to propose EU legislation lies with the unelected Commission, and that the power is exercised in secret; that its proposals are then negotiated, still in secret, in COREPER—the Committee of Permanent Representatives, or bureaucrats, who are appointed by the member states—and that they then go to the Council of Ministers for further clandestine discussion and decision, with the European Parliament enjoying powers of co-decision at this late stage in the proceedings; and that the Commission and the Luxembourg court then become the Executive and sole arbiter of all EU law. I would have thought that it would also be helpful if the British people understood how wholly irrelevant their Parliament here in Westminster has become in that process and how even our Government have only some 8% of the votes in the Council of Ministers, where it has been outvoted on every one of the 55 objections that it has made against new EU legislation since 1996.

I would have thought that it was the BBC’s duty under its charter at least to try to explain the above process to its licence fee payers, but it has not done so and is clearly determined not to do so. When I have raised this failure with all the chairmen and director-generals over the past 14 years, the answer has been always the same: “Oh, but the EU is so boring”. Well, it need not be. What about a new series of “Yes, Commissioner”? You would not even have to make the jokes up—the script would write itself from pure fact. Indeed, in UK Gold’s second series of “Yes, Prime Minister” last year, we saw Sir Humphrey explaining to a bewildered PM how the EU works, and very funny it was, too. I have sent the Minister a three-minute clip of that and would be happy to send it on to other noble Lords who want it. There is only one catch: Sir Humphrey says that the President of the Commission is elected—perish the thought. So even Antony Jay and Jonathan Lynn made a rare error on that one.

The other area where the BBC is in breach of its charter is in not allowing those who want to leave the EU the airtime to make their case. For instance, since 2005 the “Today” programme has allowed only some 0.04% of its airtime for withdrawalists to say why they want to leave, yet this is a view shared by upwards of 50% of the British people. The BBC almost entirely excludes Labour Eurosceptics from any debate on EU matters. Since 2005, only 0.09% of the “Today” programme’s guests on EU affairs have come from the Labour Party or the British left. The BBC prefers to view Euroscepticism through the prism of splits in the Conservative Party, with UKIP as the BNP in blazers— much more fun. It is not good enough for the BBC to reply that Nigel Farage has been on air a lot, if he and others are not given the space to explain how the EU works and, thus, the case for British withdrawal. There is one recent exception to that, as the BBC held a debate between Mr Farage and Nick Clegg recently. I suppose that it felt obliged to do so because LBC Radio and Sky had already done the same and it had proved rather popular. I bet that the BBC will not do anything like that again, if it can help it.

Finally, when the BBC deigns to commission what it pretends is an independent report into its output, the result is incestuous and incompetent to the point of dishonesty. I refer to the supposedly independent report last July by Mr Stuart Prebble, which has been taken to pieces by News-watch and exposed last month in a publication from the respected think tank Civitas, on whose website the whole depressing saga can be viewed. In a nutshell, Mr Prebble was not independent at all. He had been a colleague for many years at Granada TV of the BBC trustee—David Liddiment—who commissioned him and he had part-owned and run a company that made programmes for the BBC. He and the trustees commissioned the research directly from the former head of BBC news, Richard Sambrook, who is now at Cardiff University, where Richard Tait, a former editor of “Newsnight” and former BBC governor and trustee, also works in the same department.

Just for good measure, the Cardiff academic who led the research, Professor Karin Wahl-Jorgensen, had recently been employed by Brussels to analyse European media coverage about further EU integration and to discover why the UK is so sceptical about that prospect.

Unsurprisingly, Cardiff’s methodology was seriously flawed and unprofessional. It looked at only two one-month periods of the BBC’s output, in 2007 and 2012, which compares ill with the massive work done by News-watch over 15 years. Cardiff staff and friends in the leftwing media even managed to claim that their research showed that the BBC was biased in favour of Euroscepticism. They did this by simply ignoring 20 of the 21 pro-EU speakers on the “Today” programme in their 2012 survey period. Thus the Prebble report gave the BBC’s EU coverage a clean bill of health, which was, of course, gratefully accepted by the chairman, the noble Lord, Lord Patten, and the other BBC trustees. So far, the BBC has not replied to the Civitas-News-watch report, and Mr Prebble has merely accused them of running a smear campaign. I trust that the Government will join me in looking forward to a detailed response very soon.

So I ask the Government not to renew the BBC’s charter until they are satisfied that it is capable of fulfilling it. This afternoon, I have dealt only with the BBC’s coverage of the EU. Similar criticisms could be made of its coverage of immigration and manmade climate change, at least. In conclusion, I trust that the Government will ensure that the BBC’s editorial freedom is preserved, but with that freedom must come the fulfilment of the great ideals of its charter. I beg to move.

My Lords, I thank the noble Lord, Lord Pearson, for this debate and for a very good start-off to it, as well as for drawing my attention to this report, which I must admit that I had not read before—and that is clearly something I should have done. But, my goodness, how things have changed since 2005 when the report was written. Since then, being anti-EU has become fashionable; it has strong street cred—it is the urban of today. If anything, the way in which the BBC reports European issues has actually gone in the opposite direction. As the noble Lord, Lord Pearson, said himself, UKIP coverage has been quite extraordinary. I congratulate UKIP and the noble Lord, as a former leader of the party, on what it has achieved with no Members of Parliament but a strong MEP contingent. It is an important political movement in the country which gets huge coverage. Most of it, until two or three months ago, was almost completely uncritical, unlike the coverage of us rather more boring traditional parties, which suffer all the things that are thrown at us for all the things that we try to do in government or, indeed, in opposition.

The report of the noble Lord, Lord Wilson, brings a number of things to our attention. It states that there is no intentional bias, but goes on to say that informal bias has been shown in the past. The important message from that is still true: the BBC and the media more generally tend to report in terms of extremes, in that it is either all in or all out, or that we need somehow to partially opt out rather than stay as we are or go completely. It also talks about over-simplification, giving some examples. One that I remember well is where it looks at the,

“development of a European defence capability being treated simply as a scheme for a ‘European Army’”.

We heard about that mainly in the tabloid and popular press, but the BBC covered it as well, and of course it was far from the truth. There are some other points that the report brings up, such as treating,

“France and Germany as shorthand for the rest of the EU and failing to recognise the increased diversity of opinion following enlargement”.

That is an important one; it may not be so bad, but it is an area where we are still at risk.

One of the biggest areas since 2005, where the bias has been completely anti-European, is with regard to the euro crisis. Not only the Financial Times but the tabloid press and the BBC predicted constantly for about 12 months the break-up of the euro, although for me it was one of the most unlikely things that was going to happen. What has happened? Has the euro broken up? How many member states have left the euro? Two actually joined during that period. Did we hear a lot about that from the BBC? I do not remember hearing much about it. During the euro crisis, did the euro stop being the world’s second reserve currency? I do not believe so. Is it still? It absolutely is. Did the exchange rate actually plummet so that it was worthless? No, in fact, I think—my noble friend Lord Dykes will know better than I—it actually went up in value by comparison, certainly with pound sterling at the time, although that has probably slightly adjusted to our benefit over the past few months. Did we hear much about Hungary, a non-euro member that had equal economic and financial difficulties and needed a European and IMF bailout? I do not remember a great deal of reporting about that either. Clearly, there was a euro crisis and there were a lot of problems in terms of the way that Europe made its decisions at the time. However, in terms of its reporting, the BBC was absolutely and totally biased in a negative way and caused much of the feeling about the rest of Europe that reflected on that.

There is another area of concern. I remember writing to the BBC programme “Feedback” some years ago, before I became a Member of this House, to complain that although I liked listening to the “Today in Parliament” programme, there was no European Parliament coverage. Of course, I realise that I could be criticised here because the European Parliament accounts for only 9% of our legislation—or 7%, I think my party leader would say—but there is very little reporting at all of the European Parliament, which is an important institution in terms of the laws that are made in this country, as I am sure the noble Lord, Lord Pearson, would agree.

I would also ask whether we expect to have a sceptical or “anti” view of the international institutions of which we are a member. Is that something we should demand from the BBC? Have I heard a lot of criticism of NATO or a lot of bias against NATO? Have I heard anything on the BBC about removing ourselves from NATO? Should we actually come out of the UN? Should we have suitable “balance” from the BBC in terms of withdrawal from the IMF? The most important issue, of course, which we confront not in England but in Scotland, is whether we should have had, over the past five to 10 years, equal balance from the BBC about Scotland’s withdrawal from the United Kingdom. I absolutely think we should not have done, but that, although it is not the same, is a parallel and similar issue to the UK’s membership of the European Union.

I will conclude there. However, I was interested to see that John Humphrys of the “Today” programme added more fuel to the fire on this. He was slightly critical of the BBC but I was delighted that he was reported as saying that BBC staff were more likely to be liberal rather than conservative because they were the “best and the brightest”. I do not mean anything about my coalition colleagues by that—that was a small “l” and a small “c”—but I would like to think that as liberals, which I am sure that many noble Lords in this Committee are in terms of international politics, we are the best and the brightest. The BBC should remain balanced, but I believe that, if anything, the balance over the past five years has been in the opposite direction.

My Lords, it strikes me that everyone thinks the BBC is biased against their own personal viewpoint. Those on the left think it outrageous that business representatives are on the news more frequently than trade union leaders. They have also said that, although there is a general bias to political incumbents, Conservative politicians get far more airtime than anyone from Brown’s Government ever did. Conservatives think that the more obvious partiality of the 1970s and 1980s—admitted by Mark Thompson to be a “massive bias”—is still in existence today. We think that the BBC has pushed issues such as the bedroom tax without any grounding in fact. Indeed, Conservatives would argue that the BBC using the phrase “bedroom tax” is itself indicative of bias, given that it is not a tax at all. Perhaps this highlights part of the BBC’s problem: it has become too big, while still trying to maintain some semblance of balance.

How do we get an insight into the BBC’s world view? It may be reflected in the stories that its planners consider running on radio and television. Where do they get those stories? Last year it was shown that the BBC continues to purchase more copies of the Guardian—68,307 copies—than any other paper. It bought 58,000 Telegraphs and 60,000 copies of the Times. The Guardian has far lower circulation figures than either of those papers, not to mention the tabloids.

Having said that, I actually think that producers and presenters work quite hard to achieve balance in the BBC’s political output. It is very far from perfect, of course, but you cannot say that staff at the BBC do not try. However, the BBC plays an important role in deciding what is part of a reasonable debate on a given issue. If staff decide that a certain expert or group is not suitable to come on its vast number of political programmes to discuss something, that person or group is instantly seen to be outside the terms of reasonable debate—a pariah, an extremist, hard right or hard left. However, I am afraid that Europe is one issue on which the BBC tends to lose any sense of reason. Peter Oborne, in his publication, Guilty Men, for the Centre for Policy Studies, offers more examples than I can offer in this short contribution.

Many of these problems would be addressed if the BBC were to be reformed. The licence fee model is outdated, with the biggest change coming in the past five years or so. It is that watching television is not the only way to watch television programmes. Programmes are watched on phones, tablets, laptops, and they will be watched on devices that have not yet been invented. The BBC has its own iPlayer service, which, like its commercial equivalents, allows viewers to watch programmes wherever and whenever they like. Perhaps the best way to overhaul the BBC is to make it a subscription-based service.

A paper from the Adam Smith Institute outlined some sensible proposals. The BBC could, over a limited period, allow licence payers either to lapse or switch to voluntary subscription. The BBC would maintain a core public service function, funded by a much smaller government grant. “Public service” would be redefined to essentials. The core content would be free and include news, but entertainment and most documentary and factual output would not be free. That would make the BBC a 21st-century organisation, fully adapted to the digital revolution. Subscription models in the US show that people value choice. People will watch BBC material once they have chosen to pay for it themselves. These kinds of reforms would fix a far bigger problem than perceived bias: the monopoly features of the BBC, or at least its dominant market share. It currently has around 70% of the news audience, according to Ofcom.

I once had the privilege of running a monopoly, or at least a company with no competition, in the London taxi industry. I can tell you the truth of the saying, “Monopolies are like babies; nobody likes them till they have one of their own”. The BBC loves its monopoly and thinks that it deserves it. However, I can tell it that in fact competition, though scary to a monopoly, is good for it. You can never quite demonstrate the merits of a dominant business because the customers have no choice. Give them a choice, and wonderful things happen. The BBC can then be proud of its output and of its happy customers, rather than be proud of its monopoly while trying to ignore the thousands of customers criminalised in the magistrates’ court for not paying their licence fee.

There was a programme on BBC2 in March called “The Restaurant Man”, in which people gave up their day jobs to start restaurants. It was nothing at all to do with politics. In that programme, the presenter said, “Opening a restaurant just to make money is wrong”. That, to me, is where the BBC is at its most biased. I am not even sure presenters and producers know it, nor do they think they are doing anything wrong, but the cultural, metropolitan elitism is far more rife than any hard, political bias.

When it comes to the EU, it is clear that the balance of the coverage does not reflect the balance of the paying public’s opinion. Restricting a core grant for public service material will ensure a narrower focus and a much greater ability to ensure balanced output. It will save taxpayers money too.

My Lords, I congratulate the noble Lord, Lord Pearson of Rannoch, on initiating the debate, which in my assessment is important if only to signal the necessity for having a much longer, fuller discussion on this issue in your Lordships’ House at a later date.

It is very possible that there will be an “in or out” referendum on Britain’s membership of the EU over the next few years. An incoming Conservative Government are committed to hold such a referendum before the end of 2017. Labour has said that, if elected, its Administration will hold a referendum if there is treaty change in the European Union. In my assessment, at some point over the next few years there will have to be treaty change in the EU to consolidate the structural reform of the Union following the euro crisis.

A decision to leave the EU would be massively consequential for the country. I am at the opposite pole from the noble Lord, Lord Pearson—in other words, I am a passionate and committed pro-European. However, I hope that the noble Lord will agree with me that a referendum must be preceded by a fully open and informed public debate over an extended period. That is crucial if a referendum takes place. As by far and away the most respected and trusted national broadcaster committed to impartiality, the BBC should and must play a central role in such a public debate. I hope that the corporation will start to think about, and prepare for, the eventuality of a referendum now rather than wait until such a decision actually approaches. The past history of the BBC’s reporting on the EU shows how problematic and difficult its role will be.

The 2005 Wilson report was important and hard-hitting, as has been said. Eurosceptics have concentrated on the now famous liberal “institutional mindset” that the report diagnosed at the BBC. Just as important in my view was the documenting of uninformed reporting and the pronounced tendency to see the EU through what was called the “domestic or Westminster prism”. The BBC took the report seriously, as has been said, and made a large number of notable changes, including the appointment of a full-time Europe editor. Since then, a whole string of further reports have appeared, including the BBC Trust review of impartiality which came out in July 2013. However, I am a social scientist and I like hard data. More important in my view is the content analysis of the BBC news reporting carried out at Cardiff University from 2007 to 2012. That research emphatically refutes the view that conservative and Eurosceptic voices do not get a hearing. They in fact feature almost twice as frequently as opposing views: the supposed “liberal bias” has more than been corrected.

However, perhaps more importantly the research shows that the EU is presented largely in terms of infighting between domestic political parties rather than the issues at stake. Political figures also dominate. These findings run completely counter to what audiences covered in the research actually say they want—that is, for the ideological opinions of politicians, activists and special interest groups to be minimised in favour of factual commentary and impersonal assessment. As I have stressed, this is an absolutely core requirement, with crucial relevance if and when there is a referendum. It would be good to hear the Minister’s views on how such an outcome could be achieved, and on the proper role of the BBC in securing it.

My Lords, it is a great pleasure to follow the noble Lord, Lord Giddens, in this debate and to deliberately embarrass him by praising his recent book on Europe—Turbulent and Mighty Continent—which I read with great pleasure, but also with apprehension that things might not be so easy in the future. It is a book, however, that underlines his traditional support for Europe, which I share as well. It was more impressive than the book I wrote two years ago called On the Edge: Britain and Europe, about the danger of Britain coming out of Europe almost by accident and carelessness, rather than any—

I assure the assemblage here that that was not a pre-arranged conversation: it was entirely spontaneous. As usual, the noble Lord, Lord Giddens, was exaggerating in his latest remarks. Be that as it may, it is very sad once again to see that old apprehension and fear of the European Union coming out in the speech of the noble Lord, Lord Pearson, although we expect that kind of thing from him because he is against what he calls “the project”. Of course, however, most other people in most of the other member states—virtually all of them, without exception—are in favour of the project, and so am I. It will develop according to the wishes of the sovereign member Governments in that Union as they decide to work together through the integrated collective institutions. The European Parliament now has a 50:50 role, which I believe is a very good thing. I commend the noble Lord, Lord Teverson, as a previous Member of that Parliament, who was probably one of the pioneers of that eventual plan. We will now see much better legislation coming out of those institutions as a result of the EP’s greater involvement.

I do not agree at all that the BBC is biased far too much in favour of Europe: far from it. Its coverage has improved as a result of the recent suggestions referred to in this debate today and I commend it as a high-quality public broadcaster based on a financing system that has the confidence of the public. It is coming up for review again in due course. Once again, the dark gothic forces on the right wing of the Conservative Party will be agitating for the abolition of the licence fee, as they do every seven-and-a-half years on a regular basis, led previously by the noble Lord, Lord Tebbit. That will always persist, and I disagree strongly. I go to the United States a lot, and anybody who is not in favour of something like the BBC should have the misfortune of being forced to watch Fox TV, for example, or listen to Fox radio, which is even worse. The BBC has therefore led high standards of broadcasting, impartiality and objectivity on a massive scale in respect of most issues.

Of course, there has been a dumbing down from the competition—based on the television equivalent of the tabloids and comics that masquerade as newspapers in this country—and therefore the BBC itself had to do some dumbing down as well. That would include dramatising stories on Europe. I thank my noble friend and colleague, Lord Teverson, for the absolutely prime example of the euro and the way in which the BBC behaved. It startled many of its adherents and supporters in the way it presented the “fate of the euro”—so-called—as a result of the international banking, financial institutions and hedge fund crisis. It was not caused by anybody in Europe or in Britain, but mostly by people in the United States. I refer to the way in which the BBC said that the euro was on the verge of extinction: Jeremy Paxman used the word “meltdown”, implying that the euro was going to finish in a few weeks’ time. Paul Mason, one of their more polychromatic and overexaggerated correspondents—he now has a different portfolio—dealt with those matters as well, and he said that the euro probably had just a few days to live before it ended. That is a total travesty of the truth on any objective measurement, as my noble friend indicated in his remarks.

Take the euro as an example. It is essential to reflect on its reality as an international currency. It has three or four weak member-adherent countries of course, but look at what is happening now. People who were writing off Greece said that Greece in a few weeks’ time would have to leave the euro and have a new drachma, heavily devalued and so on, and it would not be able to manage. Portugal, just recently doing its first bond issue, is no longer asking for international assistance after three years. Greece is coming out of these tremendous travails. All of them voted solidly—the Greek Parliament, too, with big majorities; there was total public support from all the political parties, apart from the right-wing neo-fascist party—for the reality of supporting the euro as the greatest unifier of the developing economy of the European Union. It has been a massive success. Let us look at the most recent payments figures for the world. The euro is now an international reserve currency of immense dimensions. I should mention here that the United States is a much more heavily indebted country than any in Europe: the federal debt alone is $17 trillion. Fifty American cities are bankrupt and at least 50 states are on the verge of bankruptcy or, like California, they are already bankrupt, yet there are no complaints about the United States because it is the leader of the western world and it can do that: send the dollar out and the more people who buy it, the better. Will it go on forever? I doubt it.

The figure for the US reserve currency is now 39.5% for total payments transactions across the world, but the euro percentage is now 32.5%. It is getting closer and closer. Confidence in the euro—led by Germany as the strongest economy but also by France, which is bravely supporting the strong currency system—is high. Britain is afraid to do so after we were driven out of the exchange rate mechanism, and we have been afraid of the euro ever since. Devaluing is an easier option here, and that is what we do. We have devalued seven times since the war, three times by government action and four times in the marketplace. The pound is now not a very strong currency, as my noble friend Lord Teverson indicated. That will persist as the way out because it is the easy way out. The Italians did that but then they changed their minds and joined the euro, which is now benefiting Italy. That is a classic example of where the BBC went over the top because of the pressures in this country as a result of the atmosphere created by the Europe haters developing their political activities and political parties like UKIP, which will not last forever and I am sure is just a temporary phenomenon. Britain must regain its self-confidence as a proud international member of this community, as we are of NATO, the UN and other institutions. We must be an active participant in the European Union because if we are not, we will go down the path of loneliness, desolation and isolation.

My Lords, I hope I will be forgiven for intervening at this stage. I did not know that I would be able to speak, so I did not put my name down. The first thing I want to do is thank the noble Lord, Lord Pearson, for this debate and for his efforts over a long period of time at huge financial cost to himself, and perhaps others, at investigating the BBC’s coverage of Euroscepticism, if I can put it like that.

So far as I am concerned, I am a great admirer of the BBC, so I am not in any sense against the corporation, and indeed I do not believe that it can be financed in any way other than how it is financed at present, but we shall have to see about that. However, the fact is that I believe that the BBC has failed in its duty in respect of giving the Eurosceptic side of the European argument. I have myself made several representations both to the chairman and the organisation that deals with complaints, but with little success. I hope that the BBC will take note of this debate.

It is true that Euroscepticism is popular at the present time, but what is more important than ever is that when we come to have the debate on “in or out”, I am in agreement with the noble Lord, Lord Giddens. It must be an important and properly financed debate. We have to ensure that both sides are properly financed, not as they were in 1975, and that they should have equal time, especially on the BBC but also on other radio and television outlets. That is of the utmost importance.

My time is nearly up. I have to say that I speak as someone who was not in favour of joining the Common Market and believe sincerely that we would be far better off if we were out of the European Union. This country can thrive very well outside the European Union, and it is about time we had a big debate about what our future should be. Perhaps this debate will help us towards that.

My Lords, I am grateful to the noble Lord, Lord Pearson, for tabling this debate today. Like the noble Lord, Lord Teverson, I am grateful to him for drawing our attention to the report by the noble Lord, Lord Wilson, which was published before I joined your Lordships’ House. I was not aware of it before this debate, but I have now read it and found it very persuasive and perceptive. It raised a number of challenging issues about not just the BBC’s but the media’s coverage of European issues. Many of the issues are commonplace but, as the report quite rightly acknowledges, as the public service broadcaster, the BBC bears a particularly heavy responsibility for raising public awareness and maintaining a scrupulous standard of impartiality on this issue.

However, it is also clear that it was a report very much of its time—it is, after all, nearly 10 years old—and having read the BBC’s response and the commitments contained within it, it seems that a genuine and robust attempt was made to address the structural and presentational weaknesses covered by the report’s recommendations. For example, the BBC now has a specialist Europe editor and the BBC News website has its own dedicated European section. The “Daily Politics” and “Sunday Politics” shows have featured MEPs on 172 occasions, with 51 of 73 UK MEPs being interviewed over the past 18 months. On Fridays, “Today in Parliament” on Radio 4 includes reports from Strasbourg, and BBC News broadcasts a half-hour programme, “Politics Europe”, at the end of each Strasbourg session. More recently, the debate between Nick Clegg and Nigel Farage was broadcast on BBC2 and BBC News with an audience of more than 3 million viewers, so there is some evidence that the mechanisms for better coverage are in place.

Similarly, the BBC has visited and revisited the concerns regularly raised about impartiality, most recently in an independent report by Stuart Prebble which was commissioned in 2012 and to which the noble Lord referred. He drew on research from Cardiff University. The noble Lord said that he found its research untrustworthy, but that scepticism has been challenged and challenged again, and all the authoritative people who have looked at the research think that it stands up and confirms that a wide range of viewpoints and opinions on Europe can be found on the BBC.

While I do not think it is helpful to dwell overmuch on the Wilson report of 2005, I agree with some of the concerns raised by the noble Lord, Lord Pearson, and others about the lack of breadth and depth of coverage, which is a real challenge for us. This is a more fundamental challenge than simply requiring a review of the BBC’s output or, indeed, its charter because it stretches across from the media to our other democratic institutions. For example, there is a fundamental knowledge gap that needs to be addressed. We cannot lay that purely in the lap of the BBC. It starts at a much earlier level, in schools, where, as we know, political education is sparse and centred on UK institutions. Survey after survey of young people have shown that they have a real thirst for more information about what goes on in Europe. A European Parliament report shows that young people across the EU have the most positive feelings about Europe but also that two-thirds of them want to know more about its institutions and opportunities. This mood is reflected in a recent Anglia Ruskin University report which shows that 81% of British young people feel disengaged because they do not know enough about the EU, how it works and, above all, how it affects their daily lives. This is the point made by my noble friend Lord Giddens. There is a thirst for facts and information, not just for rhetoric.

This lack of information was reflected in the canvassing I was doing at the weekend. There was widespread apathy about the forthcoming European elections, a lack of understanding of the role of the European Parliament and a failure to grasp the range of social, environmental and economic benefits of the EU which impact on our lives. The challenge of filling this knowledge gap requires a greater commitment from all those involved in democratic and civic groups—we cannot lay responsibility for this solely at the door of the BBC.

Secondly, we need to recognise that one of the great strengths of the European legislative process is its focus on collaboration and negotiation. However, that very strength is also a weakness when it comes to media coverage as there are no gunfights at the OK Corral or headline-grabbing issues. A lot is done through deliberation, which is hard for the media to report effectively.

Ironically, although I very much share my party’s commitment to reform of the EU, including greater democracy in its institutions, I also accept that an EU style of politics provides a great alternative model to an electorate who are sick of British adversarial Punch and Judy encounters, which are driving so many people away from our own political institutions and politicians in the UK. If the British media were only better able to capture the essence of European political systems, we could have a more meaningful debate about the nature of political reform both here and in the EU.

Finally, I will pick up on the noble Lord’s question—the fundamental one we are debating today—about whether these issues should be raised in the context of the renewal of the BBC’s charter. I hope the Minister will agree with me that it would be completely inappropriate to start raising issues of content when the charter discussions take place. This is a highly sensitive issue but it is important that we reaffirm the BBC’s editorial independence, free from political interference, when the charter is renewed. The BBC has its own processes in place for monitoring and evaluating quality and impartiality, which need to be respected.

I hope we are able to persuade the noble Lord, Lord Pearson, that we all bear some responsibility for extending knowledge and news about the EU. The debate should continue, but the BBC charter is not the right vehicle for dong this. I also say to the noble Lord, Lord Borwick, that it is not in our interests to attempt to weaken what continues to be a respected and admired institution through this type of criticism at this point in time. Quite frankly, I do not think we would be thanked by the electorate or by BBC viewers for doing that—it remains a much loved institution, something which I think all the polling would confirm. We have had a good debate but the charter is not the way to take this issue forward. I look forward to hearing the Minister’s response.

My Lords, I will respond initially to the last, important points made by the noble Baroness, Lady Jones, by reaffirming the Government’s commitment to the operational and editorial independence of the BBC. That should be reflected in everything that we do, including when responding to debates of this nature. Although it is tempting to get into the detail—about which we all have an opinion—that independence, objectivity and, indeed, the BBC’s charter obligation to deliver impartiality is the subject which is under debate here: whether it is actually fulfilling that commitment to impartiality under its charter obligation. I rather liked the introduction from the noble Lord, Lord Pearson, when he referred to bias being, like beauty, in the eye of the beholder. With the sweet coincidence of the ordering of the speeches, we then went from the noble Lord, Lord Pearson, to the noble Lord, Lord Teverson, and then to my noble friend Lord Borwick. I felt we got a wide range of the different perspectives that we have on this.

The noble Baroness, Lady Jones, raised another point about the thirst, particularly among young people, to learn more about the institutions and more about Europe. I think that point is particularly pertinent at the time when we are marking the 100th anniversary of World War 1. I certainly commend the work which the BBC is doing to highlight what was, in a sense, the genesis of the institution which we are now discussing.

The impartiality of the British media, particularly with regard to its coverage of controversial topics, has been a subject of great debate in recent years. We have talked about the report by the noble Lord, Lord Wilson of Dinton, which was published in 2005 and predicated on the basis that there was then going to be a referendum. The BBC wanted to engage with the issue of what its position should be if a referendum actually took place.

We know that a referendum did not take place. That deals with one of the points raised by the noble Lord, Lord Giddens, and others about the position of the BBC and whether it should have a role to play in a forthcoming referendum. The answer is that it most certainly should, and the form of that will need to be decided.

We should not diminish that record of impartiality. Opinion polls carried out by MORI show that 76% of adults regard BBC News output as accurate. That is not to be complacent, but it is a trusted source, and the reason that the BBC must take its duties incredibly seriously. It is also the reason why, I guess, the BBC Trust decided to ask the noble Lord, Lord Wilson, to undertake the review in the first place. It was followed up in June 2007 by the safeguarding impartiality review. In July 2011, there was a review of the BBC’s governance operations in relation to impartiality, and in July 2013 there was a review of breadth of opinion, which was raised by a number of noble Lords. As the centrepiece of the UK’s public service broadcasting landscape, the BBC bears a central responsibility for providing balanced accounts of such matters as part of its mission to “educate, inform and entertain”. This is an important element.

My noble friend Lord Borwick made an important point about competition. I am sure that it will not have been lost on the BBC that while in certain age groups it is gaining market share for its news services, among the young it has been losing market share. Part of that could well be the wide range of additional outlets and news sources, primarily social media, which are now available, and there needs to be a response to that.

The BBC’s fifth public purpose, as set out in the current charter, is,

“bringing the UK to the world and the world to the UK”,

by building global understanding of international issues and broadening UK audiences’ experience of different cultures. There is clearly a read-across here to balanced, impartial coverage of EU matters and the duty of impartiality. The noble Lord, Lord Borwick, raised an interesting fact about the newspaper preferences of the BBC, but it has an absolute duty. The charter review will provide the appropriate context to consider all aspects of the BBC’s scope, its purposes and its activities. The current charter expires on 31 December 2016, and the Government have yet to announce the process, timing and scope of the review.

In 2005, the noble Lord, Lord Wilson, led an independent panel to assess the impartiality of BBC coverage of the European Union and make recommendations for improvement where necessary. I accept the point made by my noble friend Lord Teverson that things have changed quite a lot since 2005. Indeed, there is no cross-party consensus about the future. That is not just a UKIP point but a Conservative point, a Liberal Democrat point and, I am sure, a Labour point too. Markedly different views are now being presented to the electorate, not least at the present time, about how Europe should progress.

My noble friend Lord Borwick asked about the licence fee and the BBC Trust’s role in securing value for money. The BBC Trust is directly accountable to licence fee payers. Among its duties is to exercise rigorous stewardship of public money. That is clearly a very important role which we expect it to take seriously in future discussions. That will certainly be part of the ongoing review.

The noble Lord, Lord Pearson, focused on three points raised by the noble Lord, Lord Wilson, who raised 12 points in his report. Overall, there was a view that the BBC had demonstrated some cultural and unintentional bias and that its coverage of EU news needed to be improved and to be more clearly impartial. To address this, the panel recommended that the BBC needed,

“a strategy, action and changes, led from the top”.

As part of those efforts to address the breadth of opinion cited in its EU coverage, the BBC appointed its first Europe Editor, Mark Mardell. That was a point that was raised and welcomed by the noble Baroness, Lady Jones, and the noble Lord, Lord Giddens. Mark Mardell was appointed in May 2005 to focus on the evolving role and nature of the EU and its impact on the UK. In an interview with the European Scrutiny Committee in November last year, witnesses from the BBC described the appointment of the Europe Editor as:

“The biggest single thing, which made a real impact on air”.

In addition to this, the BBC has introduced new training resources and a mandatory course for journalists on reporting Europe. It has also commissioned regular reviews of specialist subject areas. A number of noble Lords referred to the interest in the debates that took place between Mr Farage and my right honourable friend the Deputy Prime Minister, which were watched by more than 3 million people on the BBC. That was something that, again, sparked discussion and debate in the country, which must be welcomed.

I turn now to other reports on impartiality and European coverage. Since 2005, a multitude of other reports have been published by the BBC Trust and the European Scrutiny Committee to assess the progress on the BBC’s impartiality in EU coverage. Most recently, the review of the breadth of opinion reflected in the BBC’s output, commissioned by the BBC Trust and led by Stuart Prebble, was published in July 2013. I accept that the noble Lord, Lord Pearson, made some strong remarks about the direction of that report. I think that it is creditable to the BBC that it takes its responsibilities so seriously that it sets up these reviews from time to time. It was encouraging to see that an increase between 2007 and 2012 in the breadth of opinion provided on the UK’s relationship to the EU had been identified. I am sure it was not nearly enough for the noble Lord, Lord Pearson, but some progress had been made. Overall, the report noted that, although continuous improvements could be made,

“the BBC goes to great lengths to provide a breadth of opinion”.

This point about breadth was the point made by my noble friends Lord Dykes and Lord Teverson and the noble Baroness, Lady Jones; we should talk not just about breadth but also about the depth of coverage. That is a criticism which the BBC has accepted and is seeking to respond to.

The more literature we have in that area and the more views that we have, the better it will be. This includes contributions such as the book by my noble friend Lord Dykes. I have not yet read it, but given that it has now had a citation and endorsement from Professor Giddens—the noble Lord, Lord Giddens—we will all, of course, rush to the library to obtain a copy, although perhaps my noble friend will be wishing that we rushed to Amazon to do so instead.

Qualitative polling undertaken by Ipsos MORI on behalf of the BBC in May 2013 found that, when asked which source of news people would trust for being the most impartial, 49% would choose the BBC, compared with 14% for ITV and 3% for Channel 4. It is important to highlight as part of this debate the fact that, under the terms of the charter and agreement, the BBC must do all it can to ensure that controversial subjects are treated with due accuracy and due impartiality in news dealing with public policy or matters of political or industrial controversy. This is also in line with section five of the Ofcom broadcasting code. The BBC has an invaluable role in providing information to licence fee payers to enable them to form their own views about a particular issue. To “educate” and “inform” are two-thirds of the Reithian values that form the heart of the BBC’s mission.

In conclusion, I thank again the noble Lord, Lord Pearson, for raising this important issue, and all noble Lords who spoke in this debate. We have much to be proud of in the way that public service broadcasters in Great Britain cover news impartially and accurately. To date, this has allowed the UK to build arguably the best broadcasting industry in the world, bringing benefits to the UK public and across the globe. Given that the BBC is central to this broadcasting landscape, and the unique way in which it is funded, it is essential that the BBC retains the public’s trust as an impartial purveyor of news and programming and of balanced coverage of all matters. It is critical that it continues to do this.

Committee adjourned at 6.24 pm.