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Grand Committee

Volume 755: debated on Wednesday 16 July 2014

Grand Committee

Wednesday, 16 July 2014.

Local Audit (Delegation of Functions) and Statutory Audit (Delegation of Functions) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Local Audit (Delegation of Functions) and Statutory Audit (Delegation of Functions) Order 2014.

Relevant document: 3rd Report from the Joint Committee on Statutory Instruments

My Lords, this order is one of a number of statutory instruments that will put in place new arrangements for the audit of relevant authorities as set out in the Local Audit and Accountability Act 2014. I do not wish to take up your Lordships’ valuable time by repeating in this debate the arguments that were put forward during the passage of the 2014 Act supporting the abolition of the Audit Commission. However, it remains the view of the Government that the arrangements that we are putting in place, including this order, will create a more efficient audit system, giving greater responsibility to local bodies whilst providing greater opportunities for local people to hold those bodies to account. They will also save £730 million over the five years between 2012 and 2017 and an estimated £1.2 billion over 10 years.

On the specifics of the instrument being considered here today, the order delegates certain of the Secretary of State’s powers in relation to the eligibility and regulation of local auditors to the Financial Reporting Council, which is the independent regulator responsible for the oversight and development of corporate governance standards. Let me provide a little context on its background. The Financial Reporting Council is a company limited by guarantee that is partly funded by the Government. You might also wish to know that its board of directors is appointed by the Secretary of State for Business, Innovation and Skills, and it already carries out delegated functions, similar to those that I will shortly outline, for statutory—that is, company—audits. The functions that this order delegates to the Financial Reporting Council include: authorising professional accountancy bodies to act as recognised supervisory bodies for local audit; authorising professional accountancy bodies to offer a local audit qualification; undertaking significant public interest disciplinary cases and, where appropriate, imposing a range of sanctions on those auditors found to have committed misconduct; carrying out an additional level of oversight and monitoring of audits of significant local public bodies, defined by regulations as “major local audits”; and reporting to Parliament annually in relation to inspections. The order closely follows the existing delegation order for statutory—that is, company—audit approved by Parliament in 2012 and, in article 10, makes a small amendment to that order to ensure that the same minimum consultation period applies to Financial Reporting Council consultations whether the consultation relates to company audit or local audit.

How does the order fit into the new audit framework? These arrangements will simplify the rules that currently apply to auditors by removing unnecessary duplication from the system. At present, audit firms have to work under two regulatory systems—one set by the Audit Commission and the other by the Companies Act 2006. The new audit framework largely replicates the Companies Act regulatory regime, with which auditors are already familiar, to cover local audit. That is not to say that we are removing necessary safeguards or compromising the quality of local audit; the work of the auditors will not change. The National Audit Office will set out what auditors should do to fulfil their statutory duties and, as set out in this order, where appropriate the Financial Reporting Council and professional accountancy bodies will monitor the quality of audit, as they already do for the private sector.

Through this order, the Financial Reporting Council will take on the responsibility for authorising professional accountancy bodies to act as recognised supervisory bodies. These bodies will, in turn, have responsibility for deciding which firms are eligible to undertake local public audit and for monitoring compliance with the rules and practices that they have established, and also with auditing standards. The Financial Reporting Council will also have responsibility for the recognition and supervision of audit qualifications that are not recognised by the Companies Act 2006. In approving an additional qualification, the Financial Reporting Council will need to assess whether it meets the minimum requirements as set out in the Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014—SI 2014/1627—which were laid on 27 June and are subject to the negative procedure.

The monitoring of major local audits will be covered by the Financial Reporting Council. The Secretary of State has specified in the regulations that I have just mentioned which relevant authorities will have their audits defined as major local audits. Briefly, the conditions are that an audit of relevant authorities with either total income or total expenditure above £500 million, or an audit of relevant authorities with local government pension funds with assets in excess of £1 billion or more than 20,000 members, will be considered to be a major local audit. The Financial Reporting Council will also, subject to consultation, be able to give a direction to a relevant authority specifying that its audit will be a major audit.

Why do we need this order? Without the order, the Secretary of State would retain oversight of the whole regulatory framework for local auditors, thus continuing an anomalous position and a dual regulatory regime. As I said earlier, the powers being delegated to the Financial Reporting Council here largely mirror those delegated by the Secretary of State for the Department for Business, Innovation and Skills to the Financial Reporting Council for oversight of the regulation of statutory—that is, company—audit.

Before the introduction into Parliament of the measures included in the 2014 Act, we consulted widely both on the broad policy approach and also in more depth on the proposed framework, through the publication of a draft Bill. Noble Lords may also recall that a parliamentary pre-legislative scrutiny committee provided detailed scrutiny of what is now the Act while it was in draft form. During the Bill’s passage through Parliament, we also provided draft regulations on several of its key provisions to the parliamentary Bill Committee, and last autumn we undertook an interactive public consultation exercise. Over 130 replies to the consultation were received in total, of which 62 commented on the regulatory framework, including the main audit firms which currently carry out local audits and which have been engaged throughout this process.

Nearly 80% of the relevant replies were in favour of the approach proposed for the regulatory framework. This reflects the work that we undertook before consulting, in having regard to the existing statutory framework and engaging with key stakeholders through a working group to make sure the proposals reflect their views. It was found that 71% viewed the Local Audit (Professional Qualifications and Major Local Audit) Regulations as providing an appropriate framework to allow a body to develop a suitable qualification for local audit, and 63% agreed that the proposed thresholds were appropriate to capture the audits of significant local bodies.

Following comments made during the consultation about the role of the Financial Reporting Council, we made minor changes to the order being discussed here today. It now includes a requirement that the Financial Reporting Council consults any bodies whose audits it decides should be subject to additional monitoring by being treated as a major local audit, even though it would fall outside the conditions described as defining a major local audit in the regulations I have just mentioned.

I commend the order to the Committee.

My Lords, I thank the Minister for her very full introduction to this order. As has been explained, it puts in place elements of the regulatory framework for the local audit regime. This involves delegating certain of the Secretary of State’s powers to the Financial Reporting Council. As would have been apparent from the debate in another place, we do not oppose this order. As has been said, it is about removing duplication and an attempt to replicate the Companies Act regime for local audit. However, I have one or two questions.

The Audit Commission is to be abolished in 2015. What arrangements are in hand for the management of the audit contracts that were outsourced and are not due to come to an end, I think, until 2017? Has a decision been taken on whether or not they are to be extended? I think there was the option of extending them for a further three years. Paragraph 7.1 of the Explanatory Memorandum makes reference to an “open and competitive market”. Could we therefore have an update on how many different firms are currently undertaking local audit work and how many were eligible to bid under the Audit Commission’s final transfer? Perhaps we could also have an update on the ultimate disposition of those audit contracts—I think some of them were bundled on a regional basis—and how they were transferred, and whether any of those arrangements have had to be unpicked and retendered for one reason or another.

As the noble Baroness explained, the FRC will have responsibility for monitoring “major local audits”. This term has been defined in the recent set of negative regulations, which have been referred to. Can we be told how many major local audits there are expected to be? Reference has been made to the consultation exercise from last autumn and comments received from the LGA about the Financial Reporting Council being involved in local authority audit policy. Would the Minister care to comment on that?

On the Government’s suggested savings, can we be told how much will be saved as a result of the audit arrangements already contracted out by the Audit Commission? I think that was a bone of contention when we debated the Bill.

Subject to the answers to those questions, as I said, we have no difficulty with this order and I am happy to support it.

I thank the noble Lord for being the only person present for the beginning of the debate, and for the points he has raised.

He asked how many local bodies will be undertaking major local audits. We estimate that there will be around 100 to 150. He also asked whether there would be an extension to the existing audit contracts that are in place, to allow for the transition phase. We have asked the LGA to set up a company which will manage existing audit contracts, running to 2017, so I hope he is satisfied by that. We will make a decision on whether or not to extend those contracts in due course.

I think I have answered both his questions. Was there another one?

I think there were one or two. There was one about the savings. I think the figure of £730 million was referred to. I was trying to understand how much of that, if any, relates to the work that was already done by the Audit Commission outsourcing its contracts in 2013 and perhaps 2014 as well. I was also interested in getting an update on how those contracts were actually dealt with when the Audit Commission contracted them out. I do not think they were all done in one contract; I think they were done in a series of regional contracts but I do not have in my mind the totality of how that all worked. Have any of those contractual arrangements had to be unpicked? I think the arrangement was that they were contracts between the audit companies and the Audit Commission.

I am certainly grateful for the update about the LGA being the entity that will monitor and manage those outstanding contracts, and that there is not yet a decision on whether or not they will be extended. If the Minister were able to pick up some of those other points, that would be helpful.

I apologise to the noble Lord. On the £730 million-worth of savings that we have estimated over the next five years and the point that the noble Lord raised about the previous period, we estimate that there were about £200 million-worth of savings. I will write to the noble Lord with an update on who has the contracts and how they are located.

I have a correction. The LGA will set up a separate company, and we are working together for it to do so.

To be clear, is that separate company going to manage the existing contracts as well as possibly looking to amalgamate or centralise contracted audits in the future, or is it just one of those functions?

I understand that a transitional body will be in place to run the contracts at this stage. If the noble Lord is not entirely satisfied with those slightly hurried answers, I am happy to write to him.

Motion agreed.

Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment) (No. 2) Regulations 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment) (No. 2) Regulations 2014.

Relevant document: 3rd Report from the Joint Committee on Statutory Instruments

My Lords, these regulations amend the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) Regulations 2012. The regulations have been approved in the other place and, if approved by the House, would come into effect at the end of this month. The regulations introduce a new level of fees payable for prior approval applications for permitted development for change of use and associated physical works.

The coalition Government are committed to reducing planning regulation and ensuring that the system for securing planning permission is proportionate to the potential impact of any development. We want to ensure that the best use can be made of existing buildings and that we deliver the homes we need without unnecessary regulation. To support these key aims, we are increasing national permitted development rights so that appropriate development can take place more quickly.

In the Budget document, we set out the three-tier planning system. A full planning application is appropriate for larger-scale developments with the greatest impact on neighbours, the wider community or the environment. Permitted development rights, on the other hand, remove the need for a planning application. They are appropriate for small-scale changes and some strategic development where the impact is less. Permitted development rights with prior approval provide an intermediary role between permitted development and a full planning application. This is a simpler and cheaper process where the principle of the development has been established but certain specific issues still require local consideration.

In April, an order came into force introducing further flexibility for owners to make better use of existing buildings and to help increase housing supply. These new permitted development rights include enabling shops and agricultural buildings to change use to homes. For the first time, they also allow the limited building works necessary to deliver the new homes.

These permitted development rights are subject to prior approval, providing applicants with a less complex and less costly process than a full planning application. Prior approval for change of use normally requires the local planning authority to consider matters such as the impact on transport and highways and contamination and flood risks. By allowing some physical works, as well as the change of use, the local planning authority will also have to consider the proposed design and external appearance of the building. For example, an existing shop front with a large plate glass window is unlikely to be appropriate for a home without some alterations. However, it is important that any resulting frontage is still in keeping with the area. It may be adjacent to other shops, and the local planning authority will have to ensure that the design does not have a detrimental impact on an area.

Prior approval for change of use requires the local planning authority to consider specific issues, and we introduced a fee of £80 last year for these applications. These regulations now provide that a fee of £172 is payable for prior applications where the local planning authority considers not only the specific impact of the change of use but the design and appearance of building works associated with that change of use. This recognises that these applications involve some additional work for the local planning authority compared to a straightforward change of use.

These regulations will apply to the flexibilities introduced in April allowing change of use from shops to homes and from agricultural buildings to homes together with associated building works. The fee of £172 for prior approval is a considerable saving to the applicant. If we had not introduced these permitted development rights, a farmer making a planning application to convert a barn to three new homes would have faced a fee of £1,155, which is calculated as three times the planning application for a dwelling-house. When we consulted on the package of increased flexibilities for change of use last summer, we set out our intention to introduce a £172 fee for prior approval applications where some physical works are also permitted.

It is important that we continue to take steps to simplify the planning system and make the application process proportionate to the impact of development. This modest fee for a prior approval application for both change of use and some building works is a saving for developers trying to make better use of their existing buildings and will help planning authorities in meeting the costs of these applications.

I commend the regulations to the Committee.

My Lords, I again thank the Minister for explaining the regulations. As we have heard, they are focused on the very narrow point of the level of fee applicable to permitted development rights for change of use where prior approval is necessary and where limited building works are associated with the change of use. The fee is to be £172.

The Minister will be aware from the debate in another place on these regulations that we are not in agreement with the underlying policy involving this particular use of permitted development rights. As my honourable friend the shadow Planning Minister Roberta Blackman-Woods put it,

“we are not against allowing change of use, but we believe that it is best achieved through adherence to local plans”.—[Official Report, Commons, Sixth Delegated Legislation Committee, 8/7/14; col. 5]

The Government’s Greater Flexibilities for Change of Use consultation proposed five different circumstances but, as I understand it, only two are the subject of this order. The fee levels apply where the change of use can involve some building work: one is where the change of use is from shops or financial and professional services buildings to a dwelling-house, and connected building work is involved; the other is when existing buildings currently used for agricultural purposes are to be used as a dwelling-house, and building work connected with the change of use is involved. In each case, certain building work is permitted. Can the Minister say something about the parameters under which that is considered? When is it connected to the relevant provision and when does it go beyond that? There are obviously plenty of opportunities for abuse of these provisions. I would like to understand how that matter is to be approached. In the case of change of use of shops, it appears that prior approval will be required to cover design, transport and risks of flooding, as the Minister explained. For agricultural buildings, prior approval will focus on siting and design. As I understand it, the prior approval is not necessarily looking at the same thing in each case. It has to look at specific things. That, presumably, is tucked away somewhere in regulations. I hope that the Minister will enlighten me on that.

One of the other flexibilities not covered by this fee proposal relates to the change in building use from buildings for agricultural purposes to new state-funded schools. How many times has this flexibility been used to date? Has it been used to facilitate free schools? I reiterate that we have difficulties with the underlying policy but, subject to the points I have made, we will not oppose these regulations.

I again thank the noble Lord for taking part in this two-way debate. Our objective is basically to simplify the planning process, thereby making it easier and cheaper for developers who want to carry out small-scale works with a limited impact.

I was asked about the scope of a development. I understand it to be within the permitted development rights of the said dwelling. If it is anything other than that, I will let the noble Lord know. I hope I have responded to the point that he made but I take it to be within permitted development rights, which will, of course, be different for each dwelling.

Permitted development with prior approval provides developers with a less complex and less costly process than a full planning application. These regulations support that approach. As regards what building works would be allowed under this provision and what would not, work which is required to deliver a new use would be allowed and, I think, probably nothing beyond that. Therefore, in the case of a shop front, a smaller window as opposed to a large frontage would be allowed. If it was a barn, I am guessing that a suitable front door might be allowed but nothing beyond what would be required to change from the old use to the new use of dwelling. I think that addresses the point about not going beyond the original intention of the regulations.

I will have to write to the noble Lord about the point he made on schools. I have some experience of this issue in terms of free schools. I know that if local authorities have land or existing schools available, negotiations can be entered into but, as schools are not dwellings, I will have to write to him on that. Does that address the issue?

I am grateful to the noble Baroness. Her response touched on the key points. As regards the point about whether the provision is connected with the building works, change of use from, say, an office to a dwelling is one thing, but I guess that what would be permitted to facilitate the change of use of agricultural buildings could be more contentious. Did the noble Baroness say that these provisions were set down in detail in the regulations or in the permitted development rights themselves?

I understand that it is within the permitted development rights of those buildings, whatever those permitted development rights are. If that is not the case, I will write to the noble Lord. However, I will let him know whether or not the provisions are set down in the regulations.

I am grateful. Perhaps the noble Baroness can write to me on the issue of schools. I was prompted to inquire because the terminology now used is “new state funded schools”. I have a feeling that we had a bit of run around this because we originally saw a specific reference to free schools, so I was interested in finding out what the current situation was on that. I have, however, no further queries and I am grateful for the response.

I should clarify this because there is something in the recesses of my mind. Where local authorities have suitable buildings, and free schools are being set up, they should try to assist in making those public buildings available, but I will clarify that in a note.

Motion agreed.

Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014.

Relevant document: 4th Report from the Joint Committee on Statutory Instruments

My Lords, the private rented sector now represents the second most common form of tenure in England, providing for 4 million households. We believe that there are more than 3 million residential leasehold properties in England. I declare at this point that I am both a leaseholder and a landlord.

Approximately one-third of letting agents and a minority of property managers are not members of a redress scheme. This means that people using these services do not have ready access to an independent complaints procedure if they receive poor service from their agent. The majority of letting agents and property managers provide a good service. However, for people living in or owning property in the private rented and leasehold sectors, who rely on these agents, the inability to seek redress can have a significantly detrimental impact on their quality of life.

The Enterprise and Regulatory Reform Act 2013 gave the Secretary of State the power to require all residential letting agents and property managers in England to be members of a government-approved redress scheme. The first order, laid before this House on 25 October 2013, gave the Secretary of State the power to approve redress schemes and to set out requirements for them. As stated when that order was debated in November, a second order was to be made, making the requirement mandatory, once the Secretary of State was satisfied that all agents were able to join a redress scheme. The Secretary of State is satisfied that we have now reached that stage and we propose that the duty to belong to an approved redress scheme will come into force on 1 October this year.

In April 2014, the Secretary of State approved three schemes: the Property Ombudsman, the Ombudsman Services Property and the Property Redress Scheme. These three schemes provide an independent, transparent and competitive source of redress for landlords, leaseholders and tenants. Furthermore, the performance of these redress schemes will be monitored, ensuring that a high level of service and standards is maintained.

The redress schemes will have a range of options to tackle poor service by letting agencies. They will be able to require apologies, explanations, compensation, making good and even expulsion from the scheme. To ensure that all letting agents join a scheme, councils will be able to fine agents more than once for failing to join one. Yet the order is fair, in that should an agent or property manager feel that the fine is wrong or unreasonable, they will be able to appeal to the First-tier Tribunal.

We recognise that enforcing the requirement for membership of a redress scheme will entail a new burden for local authorities, so we will make additional funding available. Furthermore, councils will be able to retain the fine, enabling the proceeds from tackling cowboy agents to be used to tackle yet more rogue agents, where they exist, thus continually driving up standards in the industry. Councils will also be assisted by the redress schemes working together and with trading standards, minimising the capacity for rogue letting agents and property managers to hide.

The definition of what constitutes letting agent and property management work is very broad. We have therefore provided some exemptions where there is already a suitable mechanism for customers to seek redress or there is existing regulation. For example, universities helping to find student accommodation or operating halls of residence, legal professionals, managers of refuge homes and mortgage receivers are all engaged in work that could be covered by this order but are subject to existing regulation.

The order will bring a source of redress to the individuals who use around 3,000 letting agents and property managers. It will complement and strengthen existing provision in both the leasehold and private rented sectors. It will also complement the requirement that we are introducing through the Consumer Rights Bill for letting agents to publicise their fees both in their offices and on their website. This will encourage competitive fees, deterring agents from charging tenants and landlords for the same service.

Overall, we want to raise standards for landlords, tenants and leaseholders. Mandatory redress and transparent fees will go a long way to achieving this. I commend the order to the Committee.

My Lords, I welcome the noble Baroness, as I think that this is the first time that we have done this. For me, this is a great delight because, as I am sure that she will not need reminding, it implements the amendment that I managed to secure, against the Government’s wishes, in the House. Needless to say, therefore, I warmly welcome the order. However, I want to make some comments and pose some questions to the Minister. I understand that my questions landed her on desk a little late and that some of the answers may have to be by letter.

First, the scheme will work only if all landlords and tenants become aware of their right to take any unresolved complaints against letting or property management agents to an ombudsman. What plans are there to raise such awareness? Will these include requiring every agent to publicise the relevant ombudsperson on their headed notepaper, website or whatever?

Secondly, in other retail areas, the consumer can shop around between providers, so normally transparency of fees is of great assistance. However, this of course is a different industry, where that does not apply to tenants, 60% of whom find their home via an agent. The tenant can choose only between properties; they do not select the agent. It is the landlord who selects the agent. What plans do the Government have to encourage landlords to shop around and thus drive up standards? Tenants simply cannot do that.

It is obviously too much to expect that the redress scheme itself will raise standards. It will certainly not be able to do it unless local authorities enforce the awards—although we are delighted with the incentive that the Government have made available, which I think local authorities will grab with both hands. In addition, standards will not rise unless there is some sort of feedback loop to ensure that bad practice is stamped out rather than continually requiring the consumer to suffer and then make individual complaints.

The Government may well say that they will oversee the redress schemes to make sure that they are effective, but I am more interested in how we oversee the sector to see that the lessons from those redress systems are brought together. Somebody should have responsibility for seeing what the common problems being complained about are and driving up standards in that way. It is, as we know, an industry infamous for instances of bad practice. According to Shelter, one in four people have been charged unfair fees. Reference checks can cost as little £10, which is very nice, but as much as £275, while renewal fees can cost up to £200. This is in a sector of 9 million tenants, where rents have increased by twice as much as wages since 2010. These unfair charges are hitting a group already suffering from high rents.

The Minister touched upon cases of agents double-charging; that is, charging both landlord and tenant for the same service. I am less relaxed than the Minister that simply putting up the list of charges will deter that. There is, furthermore, probably an interesting legal question as to whether tenants become clients if they pay an agent for a service. Can the Minister tell the Committee whether a payment for such a service makes the tenant a consumer under the Consumer Rights Bill? Would they therefore have the same consumer rights over those services, especially the right to have such a service provided with “reasonable care and skill”, as set out in that Bill?

It is clear that redress systems themselves cannot, of course, enforce their awards. If a letting or managing agent does not implement an adjudication, all the redress scheme can do is de-list the agency. The two existing schemes have an agreement that they would not take on an agency which has been debarred by the other, which is a pretty essential requirement to aid enforcement. Can the Minister tell the Committee whether the new, third scheme will undertake not to take on an agent that has been debarred from one of the existing schemes for not abiding by an adjudication? Without that, there will be no enforcement—unless the Government have something else up their sleeve they have not yet told us about. Can the Minister also tell us whether the new, third scheme will operate to an existing code, which the other two obviously already work to? What thought has been given to consistency of outcomes, which the two existing schemes strive to achieve?

On the selection of redress schemes, outlined by the Minister in her introduction, could she explain why, for the very first time in the development of statutory requirements to belong to an ombudsman, a profit-making body has been approved? All the others, across housing, energy, health, local government, telecoms, and legal and financial services, are either statutory bodies or not for profit. Why do the Government consider that this area of public policy should reside in the hands of someone out to make a profit? Why, anyway, did the Government want to add a third—a new, non-existent body—to two established, recognised and respected schemes? Is helping to set up a new ombudsman not at variance with Cabinet Office guidance that the Government should not set up a new ombudsman where there is already a satisfactory one in the relevant market? It would be interesting to know what risk assessment has been done of a “flight to the bottom”—in other words, making it as cheap as possible for landlords, when the majority of complaints will come from tenants—if there is a plethora of ombudsmen, with fairly obvious consequences for the quality of adjudications.

I understand that the new scheme is seeking to charge landlords considerably less than the established schemes, but does such competition on price—to be paid by the landlord, who will not be making the complaints on the whole—not risk compromising the quality of service provided to tenants? Will it not be confusing for consumers, tenants and landlords, to have to try and find out which is the appropriate ombudsman for their particular letting agent? Elsewhere, there is a move to rationalise and even reduce the number of schemes to make it easier for consumers, as we have seen from the report by the Select Committee in the other place. At the very least, should we not be working towards a common portal to help complainants rather than setting up ever more ombudsmen?

My concern is that this apparent government support for the fragmentation of the redress architecture with a plethora of ombudsmen may be a reflection of the lack of support for effective redress, particularly given the Government’s early resistance to this move. I would be interested to know what views they have sought from both landlords and tenants for their approach of supporting the increase in the number of schemes.

As the noble Baroness may know—I realise that she has taken this on very late—the Labour Party is against double-charging landlords and tenants for the same service. It would be interesting to know whether the Government share that view, and what assessment they have done of any conflict of interest where a letting or managing agent charges both contracting parties. To which does the agency owe a duty of care and other obligations?

Finally, how do the Government’s plans to implement the EU directive on ADR tie in with this particular order? Are we to assume that a similar pattern is to be followed for other markets? Are the Government setting out to allow private, for-profit companies to be the main suppliers of alternative dispute resolution? That is of course wholly different from our long and very advanced history of ombudsmen in this country.

My Lords, I thank the noble Baroness for her input on this debate, and I congratulate her on the part she has played in this area. I will go straight to the various questions which the noble Baroness raised. The first question was about raising awareness and agents publicising their fees. We expect scheme membership to be publicised by members, and all three schemes will publish a list of members. We expect the schemes to work with their members to publicise which scheme they have joined. This should be displayed on an agent’s letterhead and perhaps on a sticker in their windows, on their website and so on. As for what happens when an agent fails to display their membership details, all three schemes will publish a list of their members, which will enable the general public to search those lists. Alternatively, someone could contact their local authority, which will be obliged to investigate.

The noble Baroness asked what will prevent an agent being kicked off one scheme and then joining another without the public knowing. All three approved redress schemes have agreed to work together. They have the power to share information with the appropriate regulatory bodies and with each other to ensure that rogue agents do not play one scheme off against another. Should one of the schemes expel an agent, it must set the conditions for readmittance of that agent and tell the other schemes. An agent must then meet those conditions before they can join any of the schemes. Given that the majority of letting agents provide a good service, with only one-fifth of tenants and 17% of landlords dissatisfied with the service according to a Which? report of November 2012, this will only apply to a few exceptional agents.

The noble Baroness also asked whether tenants would qualify as consumers under the Consumer Rights Bill. I will write to her about that. She also asked whether the third scheme was working with the existing schemes and whether it will use the existing code. The answer to that is, simply, yes. The noble Baroness asked what the reason was for the third scheme. The DCLG will monitor the performance of the schemes through key performance indicators and will undertake a review of the policy in around a year, after the regulations come into force, to ensure its objectives are being met. The schemes were selected as they all met the conditions for approval, including demonstrating that they are independent, fair, effective, transparent and accountable. The first two are existing schemes, as the noble Baroness pointed out, which between them already have 60% of the total 11,560 agencies as members. The PRS is a new provider but is very much open for business.

The noble Baroness also asked whether approving a scheme which is run by the same company as one of the tenancy deposit schemes will create a conflict of interest. The PRS met all the conditions for approval, including that it should be independent. It indicated in its bid that it will apply for membership of the Ombudsman Association, which will demonstrate that it embodies the key characteristics of redress schemes, namely effectiveness, fairness, openness and transparency. I hope it will give the noble Baroness comfort that the DCLG will monitor the performance of all the schemes and will have the ability to withdraw approval should a scheme no longer meet the conditions for approval.

I think that addresses all the points that the noble Baroness made. If not, I shall write to her afterwards.

Some of those answers are particularly welcome, for example about publicity and working together, but the Minister has not commented on the use, for the first time, of a private for-profit company. I assume she took my comment as a comment rather than a question. I would be interested if she could respond to that but, if not, I will let it lie on the table.

Motion agreed.

Public Bodies (Marine Management Organisation) (Fees) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Public Bodies (Marine Management Organisation) (Fees) Order 2014.

Relevant documents: 1st Report from the Joint Committee on Statutory Instruments, 2nd Report from the Secondary Legislation Committee

My Lords, the order is made under the Public Bodies Act 2011. Section 4 of the Act enables Ministers to make an order modifying the funding arrangements of certain public bodies, including the Marine Management Organisation. The purpose of the order is to allow the MMO to charge for the monitoring, varying and transfer of marine licences.

The MMO is the principal regulator of marine activities around England and was created by the Marine and Coastal Access Act 2009. Its mission is to enable sustainable growth in our marine area, facilitating growth in coastal communities while protecting and enhancing the marine environment. Its responsibilities include the operation of the marine licensing system in English waters and the offshore waters of Wales and Northern Ireland.

Part 4 of the Marine and Coastal Access Act created the new streamlined marine licensing system for most UK waters. The system replaced the previous licensing system under the Food and Environment Protection Act 1985. A marine licence enables consistent decision-making about what activities are allowed to take place in the marine environment. Developments subject to a marine licence can range from small projects, such as the installation of buoys or the construction of small jetties, to larger harbour, dredging and wind farm developments. It is government policy to recover licensing costs where practicable. To a large extent, the Marine and Coastal Access Act and regulations made under it allow for the recovery of most of the costs associated with marine licensing. Indeed, the fee structure for marine licensing was updated and revised in April this year. This revision was designed to ensure that the calculation of fees more accurately reflected the actual costs incurred by the MMO.

However, the powers in the Marine and Coastal Access Act do not allow for the recovery of all the costs associated with monitoring, variations and transfers of licences. These costs were recoverable under the previous licensing system, and it was never the intention to omit them from the Marine and Coastal Access Act. The proposed order under the Public Bodies Act is therefore designed to close this particular funding gap. The order specifies that the MMO may charge a fee in relation to monitoring an activity authorised by a marine licence, the variation of an existing licence and the transfer and variation of a licence from the licensee to another person. The order specifies the level of the fees that may be charged. The basic principle is to charge applicants for the hours that are worked on a case, with the hourly rate fixed at £94. However, maximum ceilings will apply to simple variations or transfers, or the monitoring of non-complex cases. This is intended to provide greater certainty for smaller businesses and other operators. A different formula will apply in relation to the monitoring of disposal sites for dredged material. In these cases, the fee is calculated on a per tonne basis, up to a maximum of £15,000. This is because disposal sites are typically used by more than one operator and the MMO needs to have a method for apportioning the monitoring costs. Once in force, the order will increase the MMO’s income from marine licensing by about £600,000 a year. In the overall context, that sum of money may not appear huge but, in the context of the MMO’s budget of about £28 million and the focus on costs, it will make an important difference.

We have consulted on these proposals. As explained in the explanatory document accompanying this order, most respondents agreed with the overall principle and the need to recover costs. However, there were inevitably some concerns about the potential burden of regulation and the need for transparency and consistency in charging. We and the MMO are sensitive to the pressures on marine businesses and other users and have worked hard to remove unnecessary regulation and make the system work as efficiently as possible. This has included exempting low-risk activities, the use of longer licences for activities such as dredging and disposal, fast-track licensing for simple straightforward applications and the introduction of a coastal concordat to improve co-ordination of the consenting process for coastal developments in England.

I am grateful to the Secondary Legislation Scrutiny Committee for clearing the draft order within the 40-day affirmative procedure. In its consideration of the order, the committee agreed with the Government that in the longer term it will be desirable to rectify the deficiency in charging powers through an amendment to the Marine and Coastal Access Act. My department will continue to look for a suitable opportunity to do so in the future.

In summary, the Government consider that the approach set out in this order will provide a fair means of charging, a modest saving to taxpayers and an essential support to the MMO’s efforts in safeguarding the marine environment. To this end, I commend the order to the Committee.

My Lords, I thank the Minister for his explanation of the order, which I very much welcome. I chaired the joint pre-legislative scrutiny committee on the Marine and Coastal Access Bill. One of the concerns of the committee was the funding of the Marine Management Organisation. That was reinforced during the passage of the Bill through this House. As the Minister said, the Marine Management Organisation is still somewhat underfunded. This is especially so since Defra’s budget was cut. I think that what is proposed here is really a variation on the “user pays” principle. It is absolutely right that the MMO should be able to recover the full costs of varying or monitoring marine licences. In my opinion, the measure is very much to be welcomed. I think the Minister said that the MMO will gain to the tune of £600,000 a year and the taxpayer will be saved from paying that amount.

I thank the Minister for his explanation of the ordering. From these Benches, I am happy to approve of the measure. The Marine Management Organisation is a relatively new organisation set up by the previous Labour Government under the Marine and Coastal Access Act 2009. It was set up with cross-party support, and it is encouraging that it still receives that support.

We continue with our support for this order to allow the MMO to move towards full cost recovery in relation to the activities it undertakes. The old licensing system under Part 2 of the Food and Environment Protection Act 1985 was insufficient in a number of ways to allow cost recovery. It is therefore regrettable that, under the charging powers of the Marine and Coastal Access Act, monitoring costs, especially for dredging, are still not fully recoverable. While powers under the Public Bodies Act are being used to move more quickly towards full cost recovery, I join with the Secondary Legislation Scrutiny Committee in considering that it would be desirable that Defra remedies the situation through an amendment to the MCAA 2009 at an early opportunity.

I also recognise that the MMO has undertaken a review of activities and moved quickly to reduce unnecessary burdens and costs on businesses and other marine users by increasing the number of exempt activities, expanding the use of longer licences and other efficiency measures. Further improvements will be encouraged through the organisation’s stakeholder forum group, customer satisfaction surveys and key performance indicators.

Can the Minister clarify further, however, how the MMO will operate in relation to establishing an ambitious, ecologically coherent and well managed network of marine protection areas, which was also part of the MCCA 2009? Can he confirm that the MMO will be involved under the power to designate marine conservation zones in UK waters? What assessment have the Government made to allow the MMO to move towards full cost recovery in the activity on designation and regulation of the planned marine coastal zones? An independent science advisory panel concluded that 120 sites would contribute to an ecologically coherent network of marine protected areas, and that this network would need to be strengthened. However, in November 2013, the Government designated just 27 zones, covering 8,000 square kilometres of offshore waters and around 2,000 square kilometres of inshore waters. Will these cost recovery powers allow more sites to be designated and monitored at an earlier date—that is, much sooner—following further site-specific conservation advice?

Finally, I ask the Minister whether, under the regulations for fee ceilings, which will limit the cost to smaller-scale projects for small businesses, the cost met by the public subsidy will have a cap attached. If so, at what level will it be and how will it work? With those few comments, I am content to support the order.

My Lords, I thank noble Lords for their comments on the order—in particular those of the noble Lord, Lord Greenway, which were helpful.

Noble Lords know that we are committed to achieving a sustainable marine economy, which means, among other things, having an effective system for managing activities taking place in our seas. The marine planning and licensing systems are operated by the Marine Management Organisation and are key to that. In setting up the MMO, the Government have been keen to ensure that it can operate effectively and efficiently, and it needs to have the right people and resources to act as a modern enabling regulator. This means working to find solutions that enable sustainable growth to take place while protecting and enhancing the marine environment. It also means recovering the reasonable costs that it incurs in licensing.

Noble Lords referred to the views of the Secondary Legislation Scrutiny Committee. As I said, the committee has agreed with the Government that, in the longer term, it will be desirable to rectify the deficiency in charging powers through an amendment to the Marine and Coastal Access Act, and we will continue to look for a suitable opportunity to do that.

The noble Lord, Lord Grantchester, asked a number of questions, partly around MPAs. As he said, we have announced an initial 27. The MMO will be involved in meeting the objectives on marine conservation zones; for example, through marine plans and licensing. We intend to designate further sites and will make a decision on them early next year.

The noble Lord’s other questions centred on capping of fees. Costs will be met by public subsidy, which we will be able to manage through careful case management and efficiencies. If I have missed anything in that answer, I will write to the noble Lord, but I hope that he will accept it.

Approval of the order will enable the MMO to recover the cost of regulatory activities that it cannot currently charge for. As I have said, this change will result in a saving of about £600,000 annually to taxpayers. Despite that not being a huge sum of money, it will make a big difference to the MMO’s finances in these straitened times and is essential to delivering and maintaining a high-quality service. I thank noble Lords for their contributions.

Motion agreed.

Green Deal (Qualifying Energy Improvements) (Amendment) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Green Deal (Qualifying Energy Improvements) (Amendment) Order 2014.

Relevant document: 3rd Report from the Joint Committee on Statutory Instruments

My Lords, since its launch in January 2013, the impact of the Green Deal has been growing steadily. At the end of May, more than 230,000 Green Deal assessments had taken place. Almost 24,000 of those took place in May alone. Research has shown that 80% of those who have had a Green Deal assessment have installed, or intend to install, at least one measure. More than 800,000 energy efficiency measures had been installed in almost 700,000 homes through the energy company obligation, cashback and the Green Deal by the end of April. This is a great achievement.

To continue building momentum, we recently launched the Green Deal home improvement fund. This fund will help even more people to install energy efficiency measures in their homes by providing them with money back on the contributions they make towards the installation of improvements. People in England and Wales can now get up to £7,600 back through this new fund, which will allow them to take control of their energy bills and have warmer, cleaner and greener homes. This includes: up to £1,000 for installing two energy efficiency measures from an approved list; up to £6,000 for installing solid wall insulation; and up to a £100 refund on the cost of their Green Deal assessment. Take-up of the Green Deal home improvement fund has been positive. The latest figures show that, as of 14 July, 9,559 applications had been received and 6,607 vouchers issued, with a total potential total value of £36,484,100.

The delivery of more measures, on a large scale, can dramatically improve people’s quality of life by making their homes warmer, by having an impact on their health and by driving down the cost of having a decently heated home. The successful implementation of the Green Deal is dependent on encouraging consumers to take decisions to retrofit their homes with a range of measures that they can trust to deliver savings in energy consumption and in their bills. To do this, we have put in place a robust framework that defines what measures are legally eligible for use within the Green Deal, alongside a robust methodology for estimating the savings that will be realised.

When the Green Deal was launched in 2013, the Green Deal (Qualifying Energy Improvements) Order 2012 defined an initial list of 45 measures that would be legally eligible for use. To ensure that we are promoting the maximum number of measures possible and taking account of developments in energy efficiency product technology, we are committed to keeping this list under review. This amendment order makes two minor technical adjustments to the original 2012 order. The instrument amends the 2012 order to allow two additional energy efficiency improvements to be installed under a Green Deal plan. Those are: more efficient circulator pumps; and storage wastewater heat recovery devices—attached to baths or showers. We will be introducing a number of further measures within the Green Deal later this year, which will not require a technical amendment to the 2012 order as they are already covered by its definitions. These additional measures are: energy efficient luminaires, including modern LED lighting for the first time in domestic properties; the use of replacement glazing panels for double-glazed windows; party-wall insulation; and more efficient storage heaters.

The amendments brought about by this order are technical in nature but will add greater choice under the Green Deal and form part of continuing efforts to maintain and improve a robust legal framework that provides consumers with the confidence required to take forward whole-house retrofit and therefore save energy. I commend the order to the Committee.

My Lords, I welcome my noble friend’s explanation of this amendment order. I declare an interest, first, as chairman of the United Kingdom Accreditation Service, which provides accreditation in order to protect the consumer interest in the rollout of the Green Deal, although that is not relevant to this order. I also have a more specific interest, as I have recently had a Green Deal assessment of my own and have signed up to a number of measures arising from that assessment, although I should point out that the specific proposals in this amendment order do not affect my own circumstances.

I just want to put a question to my noble friend. Having had a long involvement with better regulation and advising the Government on how to make legislation and regulations more efficient, I welcome any ability for existing legislation and regulations to be amended promptly and easily. I have looked with interest at the final sentence of paragraph 8.1 of the Explanatory Memorandum—it contains a certain amount of gobbledygook or a typo, as it does not quite make sense, although I think I understand what it intends to communicate—which suggests that the measures are being brought forward after technical dialogue, albeit at an informal level. The question that I want to put to my noble friend is: is there a continuous process for reviewing and, where necessary, revising the technical and other aspects of the Green Deal, especially as they relate to legislation and regulation, or is it a periodic process? I suppose the sub-question of that is: is it a formal process or, as implied by that paragraph, is it very much reliant on informal dialogue? I ask that last question not because I have any concerns about the value of informal dialogue but to be better advised as to what that process is.

I am grateful to the Minister for her introduction to the order before the Committee today. On this side, we are very happy to support the Green Deal and all that it seeks to achieve to improve the energy efficiency of the UK’s housing stock. However, we urge the Government to do better. In the past, the Minister has side-stepped my requests for the Government to share with us their measure of success for the uptake of Green Deal plans. In the context of her extolling the numbers to date, is she able to tell us the date, on a projection forward, when the Government would identify the Green Deal programme as having been a success?

The measure before the Committee today is merely technical, in extending by two the measures that could be taken up under a Green Deal plan: namely, circulatory pumps and storage wastewater heat recovery devices attached to baths and showers. I am happy to support the order and agree that it is good to be able to make more measures available that will improve energy efficiency further.

In the debate on the order in the other place, it was mentioned that householders must now have two items to qualify for a cashback contribution. Will the Minister clarify that householders can still proceed with only one measure in their plan—they will just not qualify for cashback—or is the level of expenditure also important? The Minister might argue that this is sensible to drive forward the ambition for home energy efficiency improvements, but might imposing supplementary qualifying standards have the effect of reducing uptake? I appreciate the information given by the Minister on further measures to improve uptake. Will her department be monitoring the effects on uptake once these are introduced?

There was widespread concern about the cost of finance under the funding provisions at the inception of the Green Deal. While the introduction and extension of cashback measures may be a reaction to the slow uptake, can the Minister say who provides the cash for cashback and whether the department has plans to review the terms of finance from the Green Deal Finance Company? Will the Government be reassessing the total amount that could be financed under the Green Deal, especially in relation to the addition of these two measures today, and indeed any further measures once they are introduced?

We are a little anxious that the plethora of measures under the Green Deal may be adding unnecessary complexity to the scheme, but endorse the order before the Committee today.

My Lords, I am extremely grateful to my noble friend and the noble Lord for their supportive remarks. I reassure my noble friend that we are constantly reviewing the process, whether internally or externally with industry and more widely. That is because this programme is the first of its kind in the world and, therefore, as we learn how to better streamline some processes or make available information so that consumers can engage much more fully, we want to ensure that the process is responding outwards so that we get as much uptake as possible.

My noble friend is absolutely right. I have just looked at the grammar and I think that the grammar might be tweaked slightly. I will ensure that I take that back to those who put it in there in the first place.

The noble Lord opposite had several questions, as always, on this very simple order. If I do not pick up all his questions, I promise to write to him. He asked what success would look like. He is aware that these are still very early days in the programme, but I have indicated the figures that are now beginning to emerge. Of course, success will take many forms, so it would be wrong for us to put in place a real target, but an aspiration would be to have possibly around 1 million households adopting some of these measures by 2015. I add the caveat that we may not know about the take-up of some measures which have been financed through a different route. I am looking for inspiration from the officials behind me as regards other responses. If they are not forthcoming, I will have to write to the noble Lord on those responses.

The noble Lord also asked about cashback and whether it constituted support through subsidy. He is, of course, aware of the golden rule which is in place to protect consumers, so that, whatever they pay, they will make savings. Overall, I judge that the noble Lord supports this order although he will continue to question and challenge what the Government are doing, which is absolutely right. Does he wish to ask me another question, given that I have failed to answer the others?

I merely wished to tease from the Minister whether cashback was a subsidy or part of the golden rule. Could people’s bills be larger at a later stage because they had received some cash savings upfront?

No, my Lords. As the noble Lord is aware, the golden rule is very strict. The cashback is the incentive which should encourage people to put measures in place given that the savings which flow from that will count towards the cost of installing the measures.

I will need to look at some of the questions that the noble Lord has raised. I hope that he is reasonably satisfied with my response. I commend the order to the Committee.

Motion agreed.

Gangmasters (Licensing Authority) Regulations 2014

Motion to Approve

Moved by

That the Grand Committee do consider the Gangmasters (Licensing Authority) Regulations 2014.

Relevant document: 5th Report from the Joint Committee on Statutory Instruments

My Lords, the regulations were laid before Parliament on 9 June 2014. They revoke and replace the Gangmasters (Licensing Authority) Regulations 2005 and reform the governance of the Gangmasters Licensing Authority (GLA) by reducing the size of the board from its current 29 members to nine members and enabling board members to be recruited through open competition rather than by nomination from a restricted set of organisations.

The GLA was set up in 2004 to protect vulnerable and exploited workers after the tragic deaths of 23 Chinese cockle pickers in Morecambe Bay. The authority licenses businesses which provide workers to the farming, food processing and shellfish-gathering sectors to make sure they meet the employment standards required by law, and carries out inspections and enforcement activity. Since 2004 the GLA has issued over 2,500 licences and initiated the successful prosecution of 70 individuals. Since 2010, the GLA has identified £1.2 million in proceeds of crime and protected over 5,000 workers, recovering some £4 million for victims. The GLA became a Home Office non-departmental public body on 9 April 2014, transferring from Defra.

The regulations before noble Lords today reflect one of the key recommendations of the Red Tape Challenge review of the GLA’s operations and implement a measure announced in a Written Ministerial Statement presented to Parliament in May 2012 by the noble Lord, Lord Taylor, when he was Parliamentary Under-Secretary of State at Defra. The planned reform of the board was a key recommendation of the triennial review of the GLA, which reported in April 2014.

When the GLA was established in 2004, the main concern underlying the design of its governance structures was to encourage a high level of participation from the widest possible cross-section of industry stakeholders in order to secure support for the introduction of the licensing regime. This resulted in a very large, representative board with places reserved—subject to ministerial appointment—to specific organisations named in statute, as well as a number of ex-officio places for government departments and agencies with operational interests in common with the GLA. This approach succeeded in helping the GLA establish itself as a well respected and effective regulator. However, it was recognised that the governance structures enshrined in the 2005 regulations were intended to serve the authority during its early years of operation, and that they should be reviewed to ensure that they continued to enable effective leadership.

The Red Tape Challenge review of the GLA concluded that its developing role in tackling worker exploitation and criminal activity demands more focused leadership, and the review recommended the introduction of a smaller board to provide the authority with clear strategic oversight and direction. Reforming the board in the way provided for in these regulations will enable the GLA to better adapt to the changing circumstances that it faces. Strong and effective engagement with the sectors that the GLA regulates remains important. This will be ensured through improved advisory groups reporting to the main board, building on the current system of sector liaison groups. I commend these regulations to the Committee.

My Lords, I greatly welcome the measure introduced by the Minister, particularly the reduction in the number of people involved in running this operation. This will presumably result in better value for money in what is produced by the Gangmasters Licensing Authority. However, considering that originally—and, probably, even now—the expenditure was supposed to be recovered from the applicants, will this mean that the cost of the licences will now reduce? I do not know whether the GLA was successful in that regard. It might well have had a shortfall but, as the Minister mentioned, it certainly issued a great many licences over the period.

Originally, the GLA appeared to have only one set fee in obtaining a licence, and I wonder whether the new body will be allowed to differentiate at all between large and small employers. This is a topic that I have followed on and off for some time, and one of the interesting things is the range of activities that the GLA covers. The Explanatory Memorandum states that the GLA issues licences to businesses supplying labour in connection with agriculture, and the gathering of wild animals and wild plants. The Minister mentioned this in her introduction, but it may not be immediately obvious to Members of the Committee that apparently the gathering of wild plants includes forestry, and therefore the whole forestry industry seems to be brought into the regulations.

The particular issue that I came across was that many of the people who come to work in forestry are single, individual contractors. For example, I came across a fencer. In fencing it is much better to have two people, but as an independent contractor he would ask someone to come along and cut branches off the trees along the path of the fence he was building. If that person, however, finished his work and stopped to pick up a hammer in order to help the fencer, a gangmaster’s licence would be needed. The distinguishing feature is that if you are in charge of equipment, you are not part of a gang. The minute you become involved in manual labour for someone else, a gangmaster’s licence is required. I should be grateful to know how this has progressed and whether there will be any discretion under the new body to tailor the way in which it applies the regulations.

I thank the Minister for her explanation. From these Benches, I am unhappy and reluctant to endorse this measure as currently drafted. Several features of the order cause considerable concern.

Labour is rightfully proud that in government it established the Gangmasters Licensing Authority. I remember that my noble friend Lord Whitty steered the Bill through this House without any amendment. It is unfortunate that the Government wish to press ahead with this order despite the misgivings voiced in the other place calling for a period of reconsideration, and the measure having been subject to a vote. That the Government wish to proceed with the governance alterations in spite of this controversy is to be regretted, given that the authority is so important and does such vital work.

My first anxiety stems from the fact that responsibility for the Gangmasters Licensing Authority passed from Defra to the Home Office in April this year. This runs the risk of interpreting the work of the authority as merely enforcement. I am sure the Minister will appreciate that there will be a difference of culture between the two departments. We are concerned that the Home Office may be focused only on prosecutions. Can the Minister outline how her department will widen the approach beyond mere prosecution towards prevention and guidance to encourage interplay in farming activities, with a view to achieving outcomes beyond prosecution?

Labour is approaching this area with a view to extending and building on the gangmasters legislation so that it covers other areas. In this regard, it is disappointing to hear that the Government may well have intentions to withdraw forestry from the authority’s areas of responsibility. The governance structure is a vital part of establishing full participation in the objectives and strategy of the authority, which is leading the way in tackling abuse among certain workers. The approach from my colleagues in the other place was to seek to be satisfied that the reduction in board representation from 29 ensured that the full skill set and expertise required by the authority would still be present. The Minister did not explain the logic behind reducing the number on the board to nine. While recognising that numbers could be reduced, we are looking for assurances that the board will continue to be effective, and indeed improved, by reducing its size to a certain number.

It is disappointing that the Minister in the other place did not explain how nine would be the correct number to ensure that the members of the board brought the level of expertise needed and that there was enough recognition from and connection to the community that will ultimately implement the regime. Instead, the Minister concentrated on the belief that the order had to be brought in immediately and could not be subject to further consideration. Since it is recognised that the board members will now be members on the basis of their own abilities and not as representatives of various organisations, the Government must have given some thought to the range of skills needed in order for the number nine to be proposed.

It would be helpful to understand better the consultation that was undertaken on the matter as explained in the memorandum. The explanatory document gives details of the consultation where the respondents agreed with the proposals to reduce the size of the board and to move away from a representative board to one recruited by open competition. Respondents were also asked to give details of their preferred mechanism for ensuring that a smaller board would have access to and take account of the wide range of stakeholder views. The memorandum says, at paragraph 8.5:

“Of those answering the question about the GLA Board structure, 56 agreed with the Government’s proposal for reform, while 5 expressed their disagreement. Forty five of the 48 responses to the question seeking views on how to maintain stakeholder contact with a reformed Board were in favour of the retention of a formal mechanism for ensuring these views were heard. There was no clear consensus on how this would best be achieved”.

I repeat the last sentence:

“There was no clear consensus on how this would best be achieved”.

Can the Minister say how many respondents came up with a number and how popular nine was?

I will be so bold as to suggest an amendment to the order today. Would the Minister consider an alternative, whereby the number of board members must total at least nine but not more than 15? That might go a long way to ensuring that the right skill set was always present on the board and make it flexible as to the operation of the authority and responsive to the challenges that may be thrown up in future. Would the Minister like to withdraw the order today to consider that? The TUC argued in its representation:

“If the Regulations are adopted, future Board members will be recruited against a generic skill-set. There is a risk that future Board appointees will have no knowledge of the agricultural, fresh produce and shellfish industries … The appointees are also likely to lack experience in representing or protecting vulnerable workers from exploitation”.

In her response today, will the Minister also include some further details that are not included in the regulations? Under Regulation 5, relating to,

“Tenure of office and remuneration of the Board”,

neither the length of time of a board appointment nor whether a board member may serve multiple terms of appointment is stated. Is this included in an earlier regulation that is not being changed by these regulations? Could the Minister perhaps expand with further details on how the department expects the board to be constituted and how it may operate? What assessment has been made of the impact of these changes on vulnerable workers? How will the Government ensure stakeholder engagement and provide joined-up government? Finally, will the Government review the impact of these governance changes on the Gangmasters Licensing Authority and its ability to perform its functions? On this crucial area, where so many people are vulnerable, I would like to be reassured by the Minister today.

My Lords, I thank the Minister for her explanatory statement. I did not find that it addressed all the issues of concern that my noble friend Lord Grantchester has already enunciated. I declare my interest as the acting chair of the Ethical Trading Initiative, the organisation that probably drove the previous legislation, along with the trade unions and corporates that were involved at the time. Understandably, we have a significant interest in the current proposal.

We feel that the general direction of travel during the past few years has been to make the GLA a bit more biddable to the Government’s agenda, including a focus on enforcement, possibly to the detriment of licensing and standards-setting work, which is widely acknowledged as having been important in driving a change in attitudes in the industry. It is often stated that it was a part of the Government’s Red Tape Challenge in its early days to consider whether to dissolve the GLA as a burden to business. I hope that the Government have moved away from that.

The noble Duke, the Duke of Montrose, talked about better value for money. It depends on how you assess that value for money: whether we are talking about just the cost to business of providing the scheme or about whether potential employees in these industries are still being adequately protected. We know that a lot of the risks have not gone away. I do not profess to be knowledgeable about the forestry industry; I am more familiar with the meat-processing and shellfish industries. We need to be careful about how we assess value for money.

I share the views of my noble friend Lord Grantchester about the move from Defra to the Home Office and his feeling that it will focus attention on enforcement and prosecution. While we do not regard that as unimportant, there is a concern that it will be to the detriment of standards-setting and best practice development. I would welcome the Minister’s comments on that, because we think that prevention, rather than dealing with the symptoms through prosecution, is just as important. We know that the risk is still there and in some ways has an impact on modern slavery, of which we have had examples in these industries. We should not be under any illusions about the level of risk. We may not have had a Morecambe Bay tragedy—and thank goodness for that—but we have had other tragedies of individuals being held more or less in a situation of bondage or slavery, with passports confiscated, living in terrible conditions and not even being paid minimum wages. We should not forget that.

I listened carefully to what was said about the size of the board. If we are changing to a board of nine, it is legitimate to ask whether there will be a sufficient skill set in the way that my noble friend has suggested.

I want also to ask about the advisory committees that are referred to in the consultation document, which states that,

“this instrument permits the Board to establish advisory committees. Unlike the existing stakeholder liaison groups, the measure introduced in this instrument obliges the Board to pay due regard to the advisory committees findings and recommendations”.

Can the Minister give any more detail on “pay due regard”? Will the board publish the recommendations of the advisory committees and will we be able to see how the Gangmasters Licensing Authority reacts to them? That is important, because it is inevitable that the committees will raise the concerns of stakeholders in those industries.

By having the right type of legislation and a body with a statutory mandate, positive lessons have come out of the GLA experience for tackling deep-rooted practices such as labour abuse. I am not sure how one would tackle modern-day slavery across different industry sectors without bodies such as the GLA.

On the review process, I notice that the Explanatory Memorandum states that there is no need for an impact assessment because there will be no changes that merit it. Nevertheless, this is a fundamental change to the operation of the Gangmasters Licensing Authority. Will the Minister reflect on the suggestions made by my noble friend Lord Grantchester? If she is not prepared to go quite so far as he suggested today, will she consider the need for a review process before a triennial review given the change that is taking place?

My Lords, perhaps I might come in again. It was very interesting to listen to the noble Lords opposite and hear their concerns. I wonder if we have a clear picture of what the members of the Gangmasters Licensing Authority are required to do. Presumably they have a very great role in drawing up the regulations and looking into the particular circumstances of any industry. By and large, the regulations are fairly clear. The enforcement is laid on those who employ the gangmaster. At the same time, of course, the police and various other bodies can carry out the enforcement. I do not know whether the members of the Gangmasters Licensing Authority are asked to go round and check on what is happening in different circumstances. Particularly if there is a legal case that arises, I suppose that they are required to appear in court. I wonder on how many occasions the members of the Gangmasters Licensing Authority have been asked to appear in court to defend their regulation.

There were two figures that the Minister quoted that I thought were interesting. I missed exactly whether the £1.2 million was the licence fee—I might have got that wrong but she can correct me if so. As interesting was the £4 million compensation that was obtained. I presume that was in circumstances where, for one reason or another, employment rights had been transgressed, whether it was minimum wage or whatever the circumstances were. It would be interesting to have some detail about what that compensation involved.

My Lords, I thank all noble Lords who took part in the debate. First, I will discuss the future direction of the GLA now that it has become a Home Office body, which has been touched upon in various speeches.

The Government are determined that criminals who engage in forced labour, trafficking and other abuses, and unscrupulous employers who exploit vulnerable workers should face tougher enforcement action and stronger penalties. That is why the GLA became a Home Office body in April, to enable it to strengthen its enforcement and intelligence-gathering capabilities. In the Home Office, the GLA can benefit from closer co-operational links to the wider law enforcement family and it will work in partnership with the National Crime Agency, regional crime hubs, local police forces and immigration enforcement teams. The GLA will be able to secure expert support from the National Crime Agency intelligence hub and immigration enforcement intelligence. The GLA will also have access to College of Policing-accredited training developed for immigration enforcement investigators.

The GLA is at the forefront of the fight against worker exploitation, forced labour and slavery. Some noble Lords touched upon modern slavery. A reformed board able to steer the organisation through change and provide leadership is essential. This reform is even more important now that the GLA sits alongside enforcement bodies in the Home Office, sharing intelligence and reducing crime.

The first point made by my noble friend the Duke of Montrose was about value for money. The reform is not primarily about saving money but about increasing effectiveness. The cost of licences is a slightly separate issue, but there is no current plan to change the licensing fee structure. The fees are currently banded according to the turnover of businesses, which I think one noble Lord touched upon, and the lowest fee is £400.

My noble friend also touched on forestry businesses. Forestry businesses were excluded from the need for licensing under an order in October 2013. As in the example given by my noble friend, forestry is therefore not an issue in this case.

Going back to the move to the Home Office, it is not about narrowing the focus of the GLA to prosecutions only. The move will only enhance partnership working, in our view.

The noble Lord, Lord Grantchester, talked about getting the right skills for the board. We are aiming for a board that has the best skills and expertise, which includes the expertise of the sectors being regulated but also those with other relevant experience; for example, commercial, financial and legal expertise, and expertise in the regulation of comparable sectors. Each individual applies through open competition and will go through a recruitment process. We want the right make-up for the board so that it can take forward the reforms that are needed to ensure that the GLA can continue to fight for workers and ensure that they are not exploited.

Noble Lords also touched upon the advisory committees that will sit alongside the main board. It is a matter for the board how it establishes and works with advisory committees. The Government’s transparency agenda would expect the board to publish relevant papers as appropriate.

There has been quite a lot of discussion this afternoon about why the Government want to reduce the current number of board members. I do not know whether noble Lords have sat on boards; I certainly have, and a board of 29 does not make decisions in a very efficient manner. Just from personal experience, I would rather sit on a board of nine than 28 or 29. The current make-up of the GLA board was designed 10 years ago to encourage all stakeholder groups affected by the licensing scheme to take part in establishing the authority. Now that licensing is established in the regulated sectors, the GLA needs a more streamlined board with a clear remit to provide strategic oversight. Having a board appointed on merit through open competition will bring the GLA in line with similar public bodies and widen the pool from which candidates can be drawn.

One noble Lord—I think it was the noble Lord, Lord Young—talked about the wide variety of stakeholders to be heard and asked how the board would do that. The advisory committees will help in that endeavour, and the existing stakeholder liaison groups, which cover the labour providers, labour users, workers and businesses concerned, will also continue.

Noble Lords asked why nine is the magic number. We believe that the right skill set can be gained through a board of nine members, while also ensuring that it is able to take swift and clear decisions. Nine is not inconsistent with comparable boards of other arm’s-length bodies.

If I could just touch on the point that the noble Lord, Lord Young, made about the £1.2 million, that is how much the GLA has identified in proceeds of crime and in protecting more than 5,000 workers and recovering some £4 million for victims. That is where the £1.2 million has come from.

I do not know whether I have satisfied the concerns of the noble Lord, Lord Grantchester, but I am sure that he is about to stand up and tell me if I have not.

I start by saying that I omitted to mention my farming interests in a dairy farm. I apologise to the Committee for that omission. However, in my experience in the farming sector I have never heard of a lack of back-up for any of the enforcement authorities that cover the many regulations that the general practice of agriculture has to abide by.

I listened very carefully to the Minister but I do not think I picked up how it was explained that the Home Office would ensure that best practice guidance and prevention would be maintained, even though there would be a greater emphasis on enforcement. Perhaps I could gently ask for that assurance to be given.

Similarly, I recognise that 29 is a very unwieldy number and that it could be reduced now the GLA is established. If the Minister could say a little more to reassure me on several of the further questions I posed about the GLA’s continuation of its functions, so that the Home Office could reassure stakeholders and the TUC, as the representative of workers, that possession of the proper skill set will be part of the background assessments in making an appointment, that would be most helpful.

I asked whether the Minister would consider the review timetable. I do not know whether the existing triennial review is all that is proposed but, given the changes that are taking place, a shorter period would seem to be appropriate. If the Minister could respond to that, I would be grateful.

As I understand it, the GLA’s current role and practice will continue. I will write to noble Lords and correct this if I am wrong, but I understand that there will also be a slight budget increase for next year. We are not taking anything away in the move to the Home Office. As to whether the GLA will focus only on enforcement, it will continue as a regulator in the sectors that it covers. It regularly issues briefing notes to the sector on licensing employment and the awareness of exploitation, and I understand that that will continue.

As I understand it, there is currently a triennial review, but I will clarify that in a note to the noble Lord.

Motion agreed.

Licensing Act 2003 (Mandatory Licensing Conditions) (Amendment) Order 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Licensing Act 2003 (Mandatory Licensing Conditions) (Amendment) Order 2014.

Relevant document: 3rd Report from the Joint Committee on Statutory Instruments

My Lords, I apologise that my noble friend Lord Ahmad could not be here this afternoon. He has been moved on and I am taking up this particular order.

The order was laid in Parliament on 23 June. It makes provision for changes to be made to the mandatory licensing conditions. The purpose of the instrument is to tighten the existing mandatory licensing conditions relating to irresponsible promotions, the provision of free water, the adoption and application of age verification policies, and the provision of small measures at licensed premises.

The Policing and Crime Act 2009 amended the Licensing Act 2003 to confer a power on the Secretary of State to specify further mandatory licensing conditions relating to the sale and supply of alcohol. Sections 19A and 73B of the Licensing Act allow for such conditions where she considers it appropriate for the promotion of the licensing objectives.

The department carried out a consultation on the alcohol strategy from 28 November 2012 to 6 February 2013. This consultation included questions on reviewing the mandatory licensing conditions. A number of suggestions were received but, in order to strike a balance between promotion of the licensing objectives and burdens on business, it was decided to restrict the changes to those which caused the most concern. These are the measures that are before noble Lords today.

The order would apply to all licensed premises in England and Wales. Scotland and Northern Ireland are subject to different legislation. The measure will make the existing conditions more effective and ensure that they are consistently implemented, particularly those regulating irresponsible sales and promotions.

I will now talk about the impact of this order. The changes will affect four areas—irresponsible promotions, provision of tap water, age verification and availability of small measures of alcohol.

First, we have made the condition regarding irresponsible promotions clearer. Some promotions, such as drinking games where the aim is to drink as quickly as possible, and using promotional materials that condone anti-social behaviour or drunkenness, will now be irresponsible in all circumstances. We have removed the exemption for table meals that allowed some premises to offer unlimited drinks, and have instead clarified that such promotions are permitted only if they do not carry a risk of breaching the licensing objectives. We have also simplified this part of the mandatory conditions by incorporating into this strengthened condition on irresponsible promotions the current ban on dispensing alcohol directly into the mouth. We have also removed the specific reference to the ban on the provision of free or discounted alcohol in connection with a sporting event. This type of irresponsible promotion is already covered by the ban on the provision of unlimited or unspecified alcohol for free or for a fixed or discounted fee.

Secondly, on the provision of tap water, we have also stated in the existing mandatory licensing conditions that free tap water must be provided to customers on request. We are strengthening this condition to state free potable water to customers on request, rather than simply water from a tap. This will ensure that the water is of sufficient quality to be consumed.

Thirdly, on age verification, we have made it clear that the designated premises supervisor must now ensure that the supply of alcohol complies with the venue’s age verification policy. This means that the supervisor is personally responsible for compliance with the policy. We have also extended the range of identification that can be accepted by premises by stating that ID can contain either a holographic or ultraviolet feature. This means that, for example, visitors from overseas without a UK driving licence or passport will find it easier to prove their age.

Finally, we have tightened the rules on the availability of smaller measures of alcohol. We are requiring premises to display smaller measures—half pints of beer, 125 millilitre glasses of wine, and 25 or 35 millilitre measures of gin, rum, whisky or vodka—on menus or price lists in the venue. Where a customer does not state their preferred size of these drinks, they must be made aware of the range of sizes available.

These amendments aim to further the promotion of the licensing objectives and make the mandatory licensing conditions more effective in achieving the objectives that were originally set for them—namely, to raise standards across the industry, ensure that alcohol is sold responsibly and ensure that the alcohol industry plays its part in tackling the unacceptable levels of crime and disorder that blight our communities.

I hope noble Lords will agree with the Government that this order is an appropriate use of the powers conferred on the Home Secretary by the Licensing Act 2003. I commend the order to the House.

My Lords, I generally approve of the order. I should mention that I am the vice-chair of the All-Party Parliamentary Beer Group and a member of CAMRA.

Alcohol-related crime and anti-social behaviour are at unacceptable levels and the provisions in the order to tackle that are welcome. I was struck by the impact assessment, which stated that the cost to society of alcohol-related harm is £21 billion a year, £11 billion of which is accounted for by alcohol-related crime—a shocking figure.

The beer, wine and spirits trade is important to the UK and to the economy. We all want to see an industry that is well run, creating jobs and enabling people of all ages to go and enjoy themselves. But alcohol-related crime and other problems due to the misuse of alcohol or irresponsible promotions are not welcome.

I looked at the points that the order is seeking to tackle and have the following comments and questions for the noble Lord, Lord Popat. Simplifying and tightening the law on irresponsible promotions is welcome. I can see the point about interpretation, and the problems that it has caused in the past for regulators and licensees, so this should be a better way. How do the Government intend to keep all this under review? Can the Minister explain to the Grand Committee how businesses will have to adapt to the removal of the exemption for alcohol provided with table meals?

Is the irresponsible promotion provision intended to be a catch-all? The provisions do not seem to deal with off-sales. When I go shopping at the weekend or on a bank holiday and walk past the beer mountain at the entrance to the shop, I always look at the price of it. They are just giving it away. That, too, is irresponsible, and perhaps we should look at that as well.

Requiring premises to list the prices of small measures is again welcome. I think that many well run establishments would do that anyway.

I welcome the requirement for free tap water to be provided. It amazes me that a provision making someone provide free tap water has to be put in legislation. It is ridiculous really.

On the provisions on age verification, the clarification that the responsible person is the premises’ supervisor is again welcome. I was today at a meeting of the All-Party Parliamentary Group on Voter Registration, of which I am the chair. We had a very interesting presentation from Mr Graham Shields, the Chief Electoral Officer for Northern Ireland. There, they provide every single citizen with an electoral identity card. He told us that young people love this card and everyone wants it, because, of course, it confirms their age for going into pubs and clubs. I have met the brewing industry and it confirms that the card is widely accepted in Northern Ireland as confirmation of a person’s age. Everyone uses it. It is provided free of charge by area registration offices. Could the Minister look at that? It is a clear example of good practice in Northern Ireland and perhaps it should be looked at over here, because it ensures that people going for a drink are lawfully able to buy a drink. That clearly has worked very well for them.

My final point relates to point 4 on page 6 of the impact assessment. The reference there to getting a free drink if England win a match is just cruel.

I thank the noble Lord, Lord Kennedy, who raised a number of issues. The cost of alcohol-fuelled crime in England and Wales is £11 billion, and this is unacceptable. In reality, that figure is what the noble Lord cited: £21 billion—through loss of work, sickness and the burden on the National Health Service. We want the alcoholic drinks industry to raise its game and to do more to promote responsible drinking.

We have already introduced a radical package of measures to overhaul the Licensing Act, including giving local areas more powers to deal with problem premises. We see such premises in our major cities such as Sheffield and Leeds and they are a major problem, especially late at night. Local licensing authorities are quite capable of addressing the problems that they have in their own area.

Alcohol-related crime also entails a huge cost to the police. They will be reviewing what they charge for licences to make sure that charges cover the cost of policing areas which have a lot of crime.

I am pleased to hear that. As I said, I grew up in Southwark and I remember how, when I was a young man, there were lots of pubs on the Old Kent Road on Friday and Saturday nights. When I became a councillor there, I spoke to the superintendent in charge and he said that the resources he had to deploy on those two nights of the week to police alcohol-related disturbances gave him problems deploying officers for the rest of the week. Thankfully, things have moved on, but this is still a serious problem and I welcome the noble Lord’s comments.

It is a serious problem. In fact, many operators are responsible and there are fewer problems in some areas than in others, so we have empowered local licensing authorities to look at that.

The noble Lord also referred to the off-licence trade and alcohol sold in supermarkets. There are significant differences between businesses where people remain on the premises consuming the alcohol they have just bought and those where alcohol is purchased for later consumption. It would not be appropriate to apply conditions such as requirements to provide free tap water to customers or to make small measures available to off-trade businesses. We recognise that there are issues with irresponsible promotions in-store and we are working with the off-trade to address these through self-regulation. We also talk to the Federation of Small Businesses about both alcohol and cigarette branding.

Supermarkets are at fault in this regard, not small businesses which often do not have the necessary resources. When you walk into a supermarket, often around a bank holiday, you have to walk past the beer mountain, comprising cheap lager, not usually of very good quality. There is an issue there. I hope that the noble Lord will look at it and get back to me on it. The behaviour of people who drink large quantities of alcohol at home also needs to be looked at.

I referred to off-licences, and of course supermarkets have off-licences but a large number of them are independent shops. Supermarkets promote alcohol by offering deals such as two for the price of one. We have now made it mandatory for them not to sell alcohol below cost price. However, we cannot stop them setting a price whereby they make a small profit. As supermarkets buy alcohol in bulk, it is often cheaper in a supermarket than in a pub. However, the good news about people buying alcohol from supermarkets is that they tend to take it home and drink it at home and not commit alcohol-related crime in the streets, which costs money to tackle.

I am sorry, but there are issues with people drinking at home. For example, it can lead to violence against women, so I do not think the noble Lord can just say that, if people take alcohol home, there is no problem. As I say, there are issues with people drinking at home and the problems that arise from that.

We are working with retailers, including the Federation of Small Businesses, to promote responsible retail practices. Last week, the Retail of Alcohol Standards Group committed to new guidance on this issue. But I understand what the noble Lord says about violence and drinking at home.

We are also seeking to clarify the irresponsible promotions condition. Removing this exemption will contribute to that. We do not believe that the impact of removing this exemption will be significant. Businesses can still offer this type of promotion as long as there is no significant risk of a breach of one of the licensing objectives.

The noble Lord, Lord Kennedy, mentioned Northern Ireland. I think it is best that I write to him. I have received some notes, but I want more information and it is best that I write to the noble Lord in detail on the subject. I think I have covered every area raised by the noble Lord, Lord Kennedy. The only things I have to write to him on are Northern Ireland and ID cards.

I welcome this debate. It came to me at very short notice, but I have really enjoyed doing it. When used responsibly, alcohol can be a welcome part of social situations and community events. However, alcohol-related harm affects many people in England and Wales, with victims in almost half of all violent crimes believing the perpetrator to be under the influence of alcohol. This is completely unacceptable, and that is why the Government are committed to tackling this issue, and why it is crucial that the Government use all the tools at their disposal to tackle the causes of that harm.

Through our alcohol strategy, the Government are promoting proportionate and targeted action to reduce the costs and problems caused to society by irresponsible and excessive drinking without affecting responsible drinkers. We have introduced a ban on the worst cases of cheap alcohol being sold below the level of duty plus VAT. As I said to the noble Lord, Lord Kennedy, quite often the supermarkets do that as well. We have also challenged the alcohol industry to do more to address the harm caused by alcohol and the Government welcome the package of new pledges by the industry that was announced on 8 July.

We are giving local areas more powers to address the alcohol-related problems that they face on a daily basis. We are also supporting local areas as they seek to reduce alcohol harms through the local alcohol action area scheme, which offers support to local areas in cutting alcohol-related crime and disorder, and reducing the damage caused to people’s health.

Licensed premises have a part to play in reducing alcohol-related crime by ensuring that they are responsible retailers of alcohol. The amendments to the mandatory licensing conditions will not only tighten the conditions to ensure that alcohol is sold responsibly but clarify them so that retailers can take steps to avoid a breach.

Now and in the future we must build upon and maintain this momentum and our commitment to reduce the harm caused by alcohol to consumers and their families, to the thousands of victims of alcohol-related crime, to local communities and to the businesses that are vital for our economy. I commend this order to the Committee.

Motion agreed.

Committee adjourned at 6.02 pm.