House of Lords
Tuesday, 3 March 2015.
Prayers—read by the Lord Bishop of Norwich.
The following Acts were given Royal Assent:
Pension Schemes Act,
Serious Crime Act.
My Lords, I received the top lines of the YouGov report only late last week. The YouGov survey asked many useful and interesting questions about attitudes to cycling and is sufficiently data rich to stand more detailed analysis. One key finding, which we are pleased to note, is the evidence of considerable latent willingness to engage in more cycling, which justifies the Government’s strategy on supporting cycling provision.
I thank the Minister for her reply and declare an interest as a vice-president of RoSPA. The RoSPA-commissioned YouGov poll has given us some compelling insights into the need for greater provision for cyclists. One-third of people think that cycling safety is one of the biggest transport issues we face; two-thirds back the idea of a network of cycle routes; and 78% say they would like to see separate cycle lanes. The Government have given money to certain cities, but with more than 100 cyclists a year being killed, what will the Government do now, given these findings, to accelerate the introduction of safe cycling provisions for all our roads?
My Lords, one death from cycling is one death too many, so obviously we are very concerned with safety. Your Lordships will be aware that we launched a THINK! Cyclist campaign in 2012, and a third round of this is planned to run in 12 cities in March 2015—the original five cities and seven additional ones. We have made it easier for councils to introduce 20 miles per hour zones and 40 miles per hour zones in rural areas, and Trixi mirrors. The Deputy Prime Minister announced £100 million to improve conditions for cyclists and walkers, alongside and crossing the strategic road network. We have set up a task force with Transport for London to raise awareness of safety among HGV drivers and to take targeted enforcement against the minority of potentially dangerous operators, drivers and vehicles. We are always looking at more ways to make cycling safe.
Does the Minister agree that a cyclist’s main protection should be his or her own eyes and ears? The eyes are there to warn against impending danger from the front and the ears ought to assist in identifying impending danger from behind. I cycle regularly from my flat in Camden to Westminster—it used to be Lincoln’s Inn, then it was the Royal Courts of Justice and now it is Westminster—and I am appalled by the number of cyclists who bicycle with earplugs in their ears listening to music. If they listen to music, they cannot possibly hear any danger approaching from behind. There are regulations to ensure the use of lights on bicycles in dark or dingy weather. Should there not also be a regulation to prevent the highly dangerous practice to which I have referred?
My Lords, it is important that everyone does all they can to try to improve cycle safety. In London, many of the recent incredibly sad deaths have been related to collisions with HGVs. Europe has adopted, and we are enforcing, new rules on goods vehicles in consequence of that, and London is taking it further with its Safer Lorry Scheme, which will be more fully implemented in September. There is a whole variety of actions that we can take; London’s superhighways are another example. Much of the money announced today for the eight cycle cities may well go on segregated cycle provision.
My Lords, it must be a local decision. There are some areas where decisions should be made not by government at the centre but by local government, which understands the local circumstances. Changes have been made to make it much easier for that to be implemented. Change in the rules on road layouts and changes in signage mean that it is now much easier for a community that wishes to have 20 miles per hour limits to make sure that they are in place.
My Lords, since three recent fatalities of cyclists in London have been caused by tipping lorries, and as most of the fatalities have been caused by heavy lorries, often turning left, is it not a top priority for the Government to see that heavy lorries are redesigned so that the driver’s vision is not restricted? As for road junction safety, is it not a scandal that, as revealed by the Mayor of London in response to a Liberal Democrat question, something like £50 million of the present budget available for cycling safety has not been spent in the current financial year?
As my noble friend knows, central government made £15 million available to London to deal with some of the worst junctions. That has been important and I obviously want to see that implemented. We have a wide range of approaches to dealing with issues around HGVs, including new rules that will mean that cabs are safer and vision is better. We are working on the technical standards that will apply to those rules.
My Lords, enforceability is always absolutely crucial. I hesitate to tell cyclists exactly what they should do when there is so much scope for us to make improvements in other areas, and I suggest that we pursue those. Obviously, cycle training matters and addresses many of those issues, and we have invested a great deal in Bikeability.
The noble and learned Lord, Lord Scott of Foscote, asked a question about headphones. I do not think that he got an answer to it and no doubt the noble Baroness the Minister will wish to respond. However, the Government’s Cycling Delivery Plan, published more than a year late, contains no specific targets on increasing the percentage of journeys undertaken by bike from the current level of 2% and no specific long-term funding targets for cycling. Bearing in mind that, following pressure from Labour and cycling organisations, among others, the Infrastructure Act included a requirement to produce a cycling and walking investment strategy, do the Government intend to update the Cycling Delivery Plan by including the specific targets that are currently lacking and to which I have just referred?
My Lords, noble Lords will be aware that the Government have committed over £588 million to cycling—more than double the previous Government—and that has been absolutely crucial. The cycling and walking investment strategy will require a major piece of work, including a great deal of consultation, to design investment for the future, but our goal is to get to the £10 per head benchmark, which I think is widely accepted as the right number.
My Lords, academies are independent, self-managing organisations. Academies cannot borrow, except in exceptional circumstances, and so can build up reserves in order to accommodate longer-term plans that reflect their success and popularity, such as capital investment to fund maintenance or expanding provision for greater pupil numbers. They also need to hold cash to pay short-term obligations such as salaries.
Comparing net current assets of academies with the closest equivalent measure in local authority maintained schools shows that academies have 51 days’ cash, whereas local authority maintained schools, which can obtain money for capital from their local authorities, have 25 days’—51 days is a prudent buffer.
I thank the Minister for that reply, but does he accept that most parents would be appalled to know that academies are stockpiling public money, averaging nearly £6,000 per school, rather than spending it on their child’s education? Does he not accept that the fact that academies feel the need to have these reserves is simply a damaging consequence of having thousands of individual academies being managed separately—many would say badly—by the Secretary of State?
As I already said, we regard the cash management of academies to be very prudent. We see no reason why efficiently run schools should not be involved in careful financial planning. It may well be that the Labour Party would like to run the school estate like they ran the economy—borrow, borrow, borrow and nearly go bust. We do not think that that is a sensible approach and we do not think that we should penalise successful schools.
My Lords, my noble friend will be aware that this works out at an average of £1.2 million per secondary academy and £1.8 million per academy chain school. He will also be aware of the suggestion that we are setting up schools to be run as businesses. Will he tell us, in no uncertain terms, that there never have been and never will be any attempts to run schools as profit-making businesses?
My noble friend will know from his experience over 25 years as a primary head that all schools are facing cost pressures from national insurance and pensions, so any prudent school will have some level of cash reserves. I mentioned capital requirements for academies. The education sector has a lot to learn from the business sector in terms of efficiencies. We have found that when business people and educationalists work well together through the academies programme the effects can be quite dramatic. I cannot make promises for ever, but there are no plans as far as this Government are concerned to bring profit-making to the school system.
My Lords, some academies and other schools have secured private funding which they ring-fence to finance a chaplain, international links or some other good purpose. For the avoidance of doubt, will the Minister give an assurance that such funds are not to be treated as free reserves? Further, will he encourage academies to secure such funding?
I entirely agree with the right reverend Prelate and I pay tribute to his very good work in the school system in Norfolk. We should welcome such funds into the school system. We should welcome people who bring these funds and give their time freely. It is a development that we should seek to encourage.
My Lords, given the Minister’s statement a moment ago that he does not wish to penalise successful schools, will he look again at the imposition of VAT on sixth-form colleges, which was the subject of a Question that his noble friend answered the other day, to which, frankly, we did not get a satisfactory Answer? For £31 million, which is a tiny part of the amount held in reserves by the academies, the VAT burden could be lifted altogether. Is that not the right thing to do?
Is it not enormously sensible for the governors of our academies to hold reserves at the end of a Parliament, when they have no idea what the policy may be in the future? We also have low inflation at this time, and I imagine that a fair number of them are preparing for capital works based on their reserves.
My Lords, would the noble Lord assist those of us who are, perhaps, not as clever as some other Members of this House and do not entirely understand the status of the money that is being held in these reserves? He said that academies are independent institutions and, of course, they are. However, they are publicly funded and the money held in those reserves is therefore, by most ordinary people’s calculation, public money. With reference to the answer he gave to the noble Lord, Lord Storey, could he explain in what way these funds are different from, say, the funds held in a charity? Are they to be used wholly and exclusively for the benefit of the institution? Can he assure the House that nobody else can benefit from them?
In the light of the reply he gave to my noble friend, would the Minister be prepared to state that the Government’s policy should be and is that any pupil or student—of any age, whether sixth-former or primary school pupil—is entitled to have an equivalent amount of money spent on their education, unless there is a special allocation because of special needs? Government Ministers lambast local authority maintained schools, including some church schools, for not spending money and yet claim that academies have this right.
My Lords, the Government see the effective handling of complaints as a cornerstone to trust in the police. We have undertaken significant policing reform, including reforming the IPCC to handle all serious and sensitive cases. We have consulted on reform to make the complaints and disciplinary systems independent, customer-focused and transparent. These major reforms will improve the public’s experience and the process. The Government will respond to the consultation during this Parliament.
I thank my noble friend the Minister for that Answer. However, will the Government, as a matter of urgency, set up an independent inquiry into South Yorkshire Police over its systematic failings and slow and inadequate responses and improvements in cases of child exploitation, particularly its handling of the Rotherham cases?
My noble friend is absolutely right to highlight the appalling situation that has been uncovered in Rotherham and South Yorkshire. That aspect of the South Yorkshire Police is, of course, subject to review by Her Majesty’s Inspectorate of Constabulary, which undertook one review in 2013 and two in 2014. Reviews are now being undertaken by the National Crime Agency and Operation Stovewood. At this stage, we do not feel there is a need for a further independent inquiry but I would be very happy to meet my noble friend, as a very senior member of the community in that area, to see what more can be done to learn the lessons from that dreadful experience.
My Lords, last year the family of a severely autistic man, Faruk Ali, alleged that he was victimised by the police outside his home in Luton. The IPCC is currently investigating the incident in which an officer has been recorded deriding Mr Ali for his developmental disability and using racist language. Can the Minister confirm what steps the Government are taking to eradicate discrimination of this kind, which arises time and time again in complaints against the police? In asking this question, I declare my interests as set out in the register.
My Lords, is my noble friend aware that last week the Metropolitan Police and the Independent Police Complaints Commission reached an agreement on how complaints about stop and search and the confiscation of property at ports of entry should be dealt with. Can he tell us how long it will be before individual complainants against the conduct of the police at ports of entry receive an answer to their complaints?
Does the Minister accept that one disquieting feature of the report is that cases that were investigated locally in 2014 took on average 135 days to investigate completely while in the previous year they were dealt with in 125 days? Can he give the House an assurance that all necessary resources, financial and otherwise, will be projected at seeing to it that the situation at least does not deteriorate and instead of that improves?
The noble Lord is absolutely right and we know that justice delayed is justice denied. We need to move quickly towards a result in this situation. The reality is that most complaints are dealt with satisfactorily by the constabulary and it is only the very difficult cases that find their way to the IPCC. Often they are more complex and thus more lengthy in their consideration. However, the noble Lord makes an absolutely sound point.
Is the Minister surprised that complaints against the police, especially those on the beat, have increased and are bound to increase when police forces are being drastically reduced? Is he seriously asserting that in those circumstances the public are not being prejudiced thereby?
I think that we have to look at this carefully. Certainly in terms of front-line policing, we try to preserve those numbers. The decisions are matters for the chief constable and the police and crime commissioner in a particular area. However, the acid test as to whether the police are effective on the ground is a twin point. One of those is that, yes, if complaints are rising then we should be concerned about that, but the other is that crime is falling to record low levels at the same time. That is something for which the police deserve our thanks and praise.
My Lords, that is the very point I want to touch on. Let us not in our Chamber knock the police. The police are a vital organ of our society and they do a fine job. There may be the odd mistake here and there, as there is everywhere, but the police are first class.
My Lords, following on from those two questions, there is another point to be made. The Minister will know that we are concerned about the sharp rise in the number of complaints being made to the IPCC and he will also be aware of our view that a more effective police standards authority is needed to tackle the most serious cases involving corruption and force integrity. Have the Government undertaken any research to understand why the greatest number of complaints that have been made are about police neglect and failure of duty as well as about individual police officers being rude or intolerant? The points that have been made by my noble friends reinforce that. Since this Government took office, in my county of Essex alone, we have lost almost 600 police officers, with even more cuts planned of around 200 officers. When the Government planned such a dramatic cut in police numbers, was any assessment made of the impact that that would have on the quality of service that the police would be able to provide to the public?
A couple of issues underline those questions. One is that some very high-profile, major systemic failures have been uncovered, not least the one raised by my noble friend Lord Scriven in his supplementary question. But we have two bits of evidence. One is that crime has fallen by 20% since 2010 while at the same time we have seen the level of complaints against the police go up. That is why we are having a review: to understand why that is and what more can be done while at the same time recognising the incredible job that our police forces do in keeping us safe.
My Lords, the performance of electoral registration officers is monitored and reported on by the independent Electoral Commission. The commission’s most recent assessment, in June 2014, showed that the large majority of EROs are performing well against the performance standards set. Where problems are found, the Cabinet Office and the Electoral Commission work closely with the EROs to ensure that they are implementing their public engagement and implementation plans for the transition to individual electoral registration.
My Lords, did my noble friend see that, yesterday, the chair of the Electoral Commission reported to the Select Committee in the other place that 2 million applications to register have been received since 1 December? The position is improving. But I hope he agrees that the situation is very mixed locally. Given those circumstances, are the Government looking at the proposal from the Electoral Commission that it should be in a better position to monitor and instruct electoral registration officers locally? The commission recommended:
“Should any ERO decide not to undertake such activity, the Commission will make a recommendation to the Secretary of State to issue a direction to require them to do so”.
Is it not time for the Government to respond to that recommendation? Indeed, is it not time to name and shame those local authorities and those EROs who are simply not doing their job?
My Lords, the evidence that a large number of EROs are not doing their job is not there. Five of the six EROs who were rated last year as not having achieved their performance standards were in Devon and Somerset, rather to my surprise, and not in Labour-held areas—in Devon and Somerset, it tends to be either Liberal Democrat or Conservative seats. The question of training is one that we are well aware of. The Electoral Commission works with the Association of Electoral Administrators and others to ensure that EROs are well trained and do their job as well as they can.
My Lords, does the Minister agree that the best way of ensuring that we have full registration is a compulsory ID card with a biological identifier, which would then allow all people to be registered from the word go and to then vote electronically as well with that card? That would ensure the fullest participation in registration and in the election.
I agree with the noble Lord that there are some very large questions about how much data the Government already have about people who are or are not registered and how much they are allowed by current law to pull those data together. I very much hope that, in the new Parliament, we shall debate actively what changes in the law we need for that. Moves towards compulsory registration and the sort of unique individual identifier that he suggests—a lighter form of ID card—may be coming, but that is something that we all need to discuss very carefully.
My Lords, I have to say from having met a number of EROs during the past three years that they are a subculture of their own. I think that some of them would jib a little at the thought that they were entirely modern. They are committed to their task, which they find increasingly difficult. Gated communities and rapid turnover of people in rented housing make their lives more difficult. The refusal of people to answer letters when they are canvassed and the difficulty of canvassing on a house-to-house basis are all problems that they face, but all the evidence that I have is that most EROs are doing their job extremely well.
My Lords, I declare an interest as the chair of the All-Party Group on Voter Registration. What is so frustrating about the Minister’s responses to these questions is that he repeatedly gives the impression that it is all fine and that there is nothing to worry about. When will the Minister and the Government accept that we have a crisis with people dropping off the register? Just over a week ago, the Electoral Commission reported that 1 million people had gone missing from the register up to 1 December last year. The closing date for registration is 20 April. The Government have about six weeks to do considerably more than they are doing at present. They have the power; they need to get working on it straightaway.
The Government are not complacent: we do not have a crisis. The figures for last December show that, under the transition, we are roughly at the level that we were at three years ago. That is not good enough—there were already 7.5 million people missing three years ago. We are continuing to work, and everyone here should be continuing to work, to encourage people to register. I saw in this morning’s Daily Mirror that it is running its own its own campaign with a bus, the cast of “The Only Way is Essex” and various others to encourage particularly vulnerable groups to come on board. We all have to work on that, and I am still confident that many of the missing young people will actually use their mobile phones to register online in the last two or three weeks before the deadline.
I apologise if there was a slip of the tongue. We are, of course, very concerned that this process should go through successfully, and we have been working very hard to make it go through successfully. I pay tribute to all those involved in National Voter Registration Day, which led to nearly half a million registrations coming in in one week. We all have to work extremely hard. I suppose that the origin of my surprise is that I meet—as I am sure we all meet—a great deal of voter disengagement and unwillingness to engage with politics. Those are the people who do not register to vote. We have to get out there and persuade them to vote. I trust that all parties, and all of us as campaigners—those Peers who go into schools and into universities—are getting this message across all the time.
Electrically Assisted Pedal Cycles (Amendment) Regulations 2015
Motor Vehicles (Wearing of Seat Belts) (Amendment) (No. 2) Regulations 2015
Renewable Transport Fuel Obligations (Amendment) Order 2015
Crime and Courts Act 2013 (Consequential Amendments) (No. 2) Order 2015
Motions to Approve
That the draft regulations and draft orders laid before the House on 14 and 16 January be approved.
Relevant documents: 20th and 21st Reports from the Joint Committee on Statutory Instruments, 25th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 24 February.
Child Exploitation in Oxfordshire
My Lords, with the leave of the House, I shall now repeat, in the form of a Statement, the Answer given by my right honourable friend the Secretary of State for Education to an Urgent Question in another place earlier today concerning a serious case review of child sexual exploitation in Oxfordshire. The Statement is as follows:
“No child should have to suffer what the victims of child sexual exploitation in Oxfordshire have suffered. The serious case review published today by Oxfordshire Safeguarding Children Board is an indictment of the failure of front-line workers to protect extremely vulnerable young people over a number of years. Reading the details of what happened to them has been truly sickening. The serious case review makes clear that numerous opportunities to intervene to protect these girls were missed, as police and social workers failed to look beyond what they saw as troubled teenagers, to the frightened child within.
I welcome the publication of the serious case review. It is only by publishing such in-depth accounts of what happened, what went wrong and why, that children’s social care systems locally and nationally can address the failings that have betrayed some of our most vulnerable children. That is why the Government have insisted that serious case reviews be published and in full. The Minister for Children and Families has also written today, with Ministers from the Home Office and the Department of Health, to request from Oxfordshire Safeguarding Children Board a further assessment of the progress being made, and we will send an expert in CSE to support it in this month.
Sadly, Oxfordshire was not alone in failing to address the dangers of CSE. We now know from the report of Professor Alexis Jay and Louise Casey on Rotherham, and Ann Coffey’s report on Manchester, that child sexual exploitation has been a scourge in many communities around the country.
This Government have been determined to do everything in their power to tackle CSE. That is why, today, we are publishing an action plan setting out the action we have already taken to strengthen our approach to safeguarding children from sexual exploitation, and the further steps we think are necessary to address the culture of denial, improve joint working, stop offenders, support victims and strengthen accountability and leadership. We are setting up a national centre of expertise in tackling CSE to support local areas around the country. There will be a new whistleblowing portal so that anyone can report concerns about CSE. We have prioritised CSE as a national threat so that police forces will now be under a duty to collaborate across force boundaries. We will consult on extending the criminal offence of wilful neglect to children’s social care, education professionals and elected members.
This afternoon, I will join the Prime Minister, the Home Secretary and other Secretaries of State in Downing Street to discuss with local and police leaders how we will collectively take forward the actions set out in today’s plan. The experiences of the children set out in this serious case review should never have happened. We are determined to do everything in our power to stamp out this horrific abuse and to bring perpetrators to justice”.
That concludes the Statement.
My Lords, I welcome the Government’s decision to view child sexual abuse as a national threat—clearly it is one. No one can be unmoved by the horrific sexual sadism inflicted on vulnerable young girls and boys, or, for example, the case of the 12 year-old girl who had to have a back-room abortion after being raped. In one of the trials, a social worker gave evidence that nine out of the 10 professionals responsible for one young girl’s safety knew what was happening but did nothing.
On this side of the House, we believe that stronger laws are needed to protect children. Does the Minister find it strange that just last week his colleagues voted against a new specific offence of child exploitation? Does the Minister feel the Government’s definition of wilful neglect does enough to ensure that individuals report signs of sexual abuse? Lastly but possibly most fundamentally, does the Minister recognise that if we want to stop dealing in disaster we desperately need age-appropriate and compulsory sex and relationship education in schools? Why will not the Government join the cross-party consensus of the Labour Party, the Liberal Democrats, the Education Select Committee and all the professionals in the field, and agree to introduce this immediately?
As I have already said, we will consult on widening the offence of wilful neglect. I am sure that, as a result of that consultation, we will look again at all possible legislation and offences that we could bring into the piece. As no doubt the noble Baroness heard me say, sex and relationship education must be taught in all maintained schools and is taught in virtually all academies. We welcome the supplementary advice, Sex and Relationships Education (SRE) For The 21st Century, issued by the PSHE Association, the Sex Education Forum and Brook. They produce some excellent resources, which are available to all schools.
My Lords, this is yet another thoroughly dispiriting report. Many of these young people were in the care of the local authority for their protection and safety. Will the noble Lord assure the House that he will continue to do everything that he can to persuade local authorities that when they assume parental responsibility for a child or young person, they have not only a legal duty but a moral duty to be a good parent to those vulnerable children?
My Lords, my question is about the proposal to extend the offence of wilful neglect because there is evidence to suggest that that will not work. The BBC’s “Panorama” reported a case from the 1990s where a member of staff had sexually assaulted several boys. That was reported to the headmaster but the member of staff left and found another job, where he carried on abusing children. The police officer investigating the case, Alec Love, tried to bring a case of wilful neglect against the headmaster of the first school, but the judge threw it out. Mr Love said it was very hard,
“to prove the person wilfully set about to neglect the child or young person”.
Today, the serious case review report found that the authorities made mistakes and could have acted sooner but it found no evidence of wilful neglect or that the signs of exploitation were ignored. In the light of both these findings, why do the Government think that simply extending the offence of wilful neglect beyond the health service and adult social care will be effective?
I am grateful to the noble Baroness for her comments. The Government do not think that simply extending this offence of wilful neglect will be effective in and of itself. It is obviously a high bar and, as a result of consultation, I am sure we will be taking advice on whether there is something else that we should do, in addition or instead. We have already committed to consult on the introduction of mandatory reporting.
My Lords, in Rotherham and in Birmingham the Government instituted an independent inquiry into the local authority and have gone further in Birmingham’s case by requiring all-out elections. Will the Government now institute such an inquiry in Oxfordshire?
The events and the serious case review took place some years ago, in 2011. Last year, Ofsted found that Oxfordshire was good, but the Children and Families Minister has today written to the Oxfordshire LSCB, asking it to carry out a further assessment of its work on CSE, specifically of work with the police and the health services, and will be sending in an expert on CSE, Sophie Humphreys, to help it.
I am the vice-chair of the Lucy Faithfull Foundation, an organisation that has worked in this area for many years. Of course, Lucy Faithfull was a well respected Member of the noble Lord’s Benches. I want to ask about local authority social work departments. How many vacancies are there in these departments? What are the Government doing to encourage social workers, who are feeling extraordinarily oppressed and dispirited at the moment? What do the Government know about the current level of case loads for social workers? How can we encourage local authorities to have the right resource to meet the programme? I have one more small question: what are the Government doing to work with voluntary organisations? The Lucy Faithfull Foundation had a prevent programme, which now runs in Wales, Scotland and Northern Ireland but was cut in England. Those sorts of programmes are essential to prevention.
The noble Baroness makes some very good points, as one would expect from someone with her vast experience in this area. This Government are determined to try to raise the status of social workers and improve the practice of social work. We have had Sir Martin Narey’s report, as a result of which we introduced the knowledge and skills statement for social workers. We have an outstanding chief social worker in Isabelle Trowler and we are investing heavily in new training methods, such as Frontline, Step Up to Social Work and master’s qualifications for social work. I do not think we can do enough in this area.
My Lords, the Minister referred to local authority councillors and how they should be at the forefront of making sure that this sort of practice is mitigated and investigated properly. Is he satisfied that local authority councillors are given proper training and made to understand that they have the responsibilities as corporate parents? I was a councillor in two London boroughs, and had approaches from staff and individuals when they were worried about cases of sexual abuse, and the staff were not doing enough about it, so they came directly to me. I took on the role to make sure that this went straight to the chief executive and that it was investigated properly. But I encountered time and again that a lot of local authority councillors do not understand that they are corporate parents and have responsibilities that they should take very seriously.
I am sure that the noble Baroness makes some very good points. Sadly, in my job I meet a lot of local authority councillors in very difficult situations, so I may not have a particularly good cross-section. Her point about proper training for councillors is a very good one, and I will take it back and look at it.
My Lords, I have a small but telling point. Is the Minister aware of how he diminishes this issue by using the acronym, CSE? It is child sexual exploitation and it would be wise if the Minister said that in full, so that we may realise the real horror of what we are talking about.
My Lords, will the Minister pick up two points made by the noble Baroness, Lady Howarth, about vacancies among social workers and resources? Vacancies and a lack of resources are major problems for social workers dealing with child sexual exploitation.
I will have to write to the noble and learned Baroness on vacancies. On resources, through the innovation fund, we have funded a number of new methods of social work experiment, and we are investing heavily in terms of money, but I will write on that point, too.
My Lords, will the Minister reassure the House that, as a result of this further appalling tragedy, we will not just be placing the blame at the door of a local authority, local authorities or social workers but that government departments and Governments will examine their own conscience, look at their own practices and policies, and play their part in ensuring that, so far as possible, these things do not happen in future?
My Lords, we all agree that we have to protect vulnerable children and young people. The UK is a signatory to the Lanzarote convention. Why has it not ratified it in legislation when 38 other countries, including most European countries, have done so and have brought forward legislation?
Yarl’s Wood Immigration Removal Centre
My Lords, with the leave of the House, I shall repeat a Statement given in the other place by my honourable friend Karen Bradley.
“Mr Speaker, detention is an important part of a firm but fair immigration system. It is right that those with no right to remain in the UK are returned to their home country if they will not leave voluntarily, but a sense of fairness must always be at the heart of our immigration system, including for those whom we are removing from the UK. That is why the allegations made by Channel 4 about Serco staff at Yarl’s Wood are serious and deeply concerning. It is why they required an immediate response to address them, and it is why the Government have ensured that this is being done.
All immigration removal centres are subject to the detention centre rules approved by this House in 2001. These, and further operational guidance, set out the standards we all expect to ensure that the safety and dignity of detainees is upheld. No form of discrimination is tolerated. In addition to these rules and standards, removal centres are subject to regular independent inspections by Her Majesty’s Inspectorate of Prisons and by independent monitoring boards, which publish their findings. The chairman of the independent monitoring board for Yarl’s Wood is Mary Coussey, the former independent immigration race monitor.
The most recent inspection by Her Majesty’s Chief Inspector of Prisons found Yarl’s Wood to be a safe and respectful centre which is continuing to improve. The last annual report of the independent monitoring board commented positively on the emphasis placed on purposeful activities within the centre and on the expansion of welfare provision, and raised no concerns around safety.
None the less, the Home Office expects the highest levels of integrity and professionalism from all its contractors and takes any allegations of misconduct extremely seriously. As soon as we were made aware of the recent allegations, Home Office officials visited Yarl’s Wood to provide assurances that all detainees were being treated in a safe and dignified manner. The director general of Immigration Enforcement has written to Serco making our expectations in response to these allegations very clear. We told it that it must act quickly and decisively to eradicate the kind of attitudes which appear to have been displayed by its staff. Serco immediately suspended one member of staff who could be identified from information available before broadcast and suspended another having seen the footage. The company has also commissioned an independent review of its culture and staffing at Yarl’s Wood. This will be conducted by Kate Lampard, who the House will be aware recently produced the lessons learnt review of the Jimmy Savile inquiries for the Department of Health.
However, more needs to be done. The Home Office has made it clear that we expect to see a swift and comprehensive introduction of body-worn cameras for staff at Yarl’s Wood. In addition, we have discussed with Her Majesty’s Chief Inspector of Prisons how we might provide further independent assurance.
This Government have a proud record of working to protect vulnerable people in detention. We have reviewed the Mental Health Act and set out proposals for legislative change as a result. We have held a summit on policing and mental health, highlighting the particular concerns of black and ethnic minority people, and commissioned HMIC to undertake a review of vulnerable people in police custody, which will be published shortly. That is why, before these allegations were made, the Home Secretary commissioned Stephen Shaw, the former Prisons and Probation Ombudsman for England and Wales, to lead an independent review of welfare in the whole immigration detention estate. We will, of course, invite him to consider these allegations as part of that overarching review.
This country has a long tradition of tolerance and respect for human rights. Detaining those with no right to remain here who refuse to leave the country voluntarily is key to maintaining an effective immigration system, but we are clear that all detainees must be treated with dignity and respect. We will accept nothing but the highest standards from those to whom we entrust the responsibility of their care”.
My Lords, that concludes the Statement.
My Lords, I listened to the Government’s Answer with great care. We are told again that the most recent inspection found Yarl’s Wood to be,
“a safe and respectful centre which is continuing to improve”.
The Minister said, in repeating today’s response:
“As soon as we were made aware of the recent allegations, Home Office officials visited Yarl’s Wood to provide assurances that all detainees were being treated in a safe and dignified manner”.
How could they provide such assurances without an investigation? What was the evidence on which they based such assurances? Serious allegations of abuse are well documented, such as those from women who have had male staff enter their rooms when they are naked, in bed or even on the toilet. We have heard that a pregnant woman suffered a miscarriage without medical treatment and of guards referring to women as “animals”.
The Government’s response today refers to Serco’s response. What about the Government’s response? Yarl’s Wood is the Government’s responsibility. On 28 January, when I raised this issue in your Lordships’ House, the Minister said of the allegations about Yarl’s Wood that,
“if the information is supplied to us, it will be investigated very thoroughly indeed”.—[Official Report, 28/1/15; col. 197.]
Has such a thorough investigation—which must be independent and specific to the allegation at Yarl’s Wood—started? If not, why not?
The noble Baroness is right to be concerned and shocked about this. I watched that documentary on Channel 4, and quite frankly I was sickened. I think most decent people will have been sickened by the attitudes that were on display there. That is the reason why we have had that immediate reaction to this, and why there is the Stephen Shaw review into the entire detention estate.
I have to say that this is a story which is not going to go away. There are a number of things coming. The first is the Stephen Shaw inquiry, which is coming down the path. The independent monitoring board will be publishing its latest report, and Her Majesty’s Inspectorate of Prisons will be visiting again for an independent review. We have had the very thought-provoking report from the all-party group published just today by Sarah Teather, and there is also the work being done for women refugees, which raises a great deal of concern. So we are very conscious that there is a lot of evidence building, and pressure is mounting on Serco. We are very much on their case and watching them like a hawk. I have to say to the noble Baroness that we are following a process here. Evidence has been produced; we will be acting; and we expect Serco to act in the interim.
Perhaps the Minister is aware that we are the only country in Europe which does not currently have a maximum time limit for detention in immigration cases. Can he comment on the report published only today by the APPG—of which I had the honour to be a member—in which we recommended that the maximum limit should now be set at 28 days? If that were adopted, would it not go quite a long way to solving the sort of problem which has arisen at Yarl’s Wood?
I listen to what the noble and learned Lord says on this of course. This subject was debated in your Lordships’ House in the context of the amendment to the Immigration Act proposed by the noble Baroness, Lady Williams, in which she sought a cap of 60 days. We have to look at this, but we are making progress. One serious point—I am not making any cheap points here—is that it was not so long ago, in 2008, that children, even disabled children, were held at Yarl’s Wood. We have moved on from that. We are now focusing on pregnant women and the treatment of women there, and I expect us to continue to make progress in the way that we treat people who are in our care.
My Lords, I hope that the Minister will understand if I say to him gently that there is a sense in this Statement of the Government distancing themselves from responsibility. Will he also accept that there is an underlying issue, not just of practice but of policy? We are one of very few countries in Europe not to have a maximum time limit on detention. Internationally, there are a lot of good examples of constructive engagement and alternatives to detention rather than a focus on end-stage enforcement. Detention is so often not needed. I was a member of the all-party group inquiry, and the Chief Inspector of Prisons said to us that,
“at least a third, and getting on for half, of all detainees are released back into the community. And this poses the question: if they’re suitable to be released back into the community at that point, why do they need to be detained in the first place?”.
The noble Baroness is right. Of course many people who have come here have entered this country clandestinely. We need to establish their identity, which sometimes takes some time to do. In the wider context of the security of the country, we need to make sure that if people come here clandestinely, we check out that they are who they say they are and their reasons for doing that before they are released into the community. I think people expect that. However, again, we need to look at this whole area. That is why we have asked Stephen Shaw to undertake his review. We will be studying the all-party report and, of course, the allegations that have been made against Serco very carefully and will come forward with responses to them.
My Lords, I raised the issue of Yarl’s Wood in this House three years ago and was assured at that time by the noble Earl, Lord Attlee, that he would invite representatives of the Home Office to the House to discuss the issue, which he did. Officials came along here, and my noble friend Lady Kennedy and I discussed with them what changes were desired to make the lives of the women tolerable. That was three years ago. A report that came out earlier this year, which I and the Channel 4 programme drew on, was behind the Question I asked last week. In answering, the Minister said that there needed to be a higher quota of women working there. The Minister speaks of process and of more reassuring reports, but could he undertake to tell me how soon, and at what date, we will know that there are more women staff in Yarl’s Wood?
There were to be 66%. Under its contract, Serco has to deliver that by 2015. We will make sure that it brings that forward. In addition, it has moved to ensure that there are body-worn cameras there, which can catch any incorrect activity and record it. That is a very good step. I will also take this opportunity to clarify something during that exchange on the Question the noble Baroness asked last week. The noble Lord, Lord Hylton, asked about the number of suicides and self-harm, but I heard it to be a question about suicides and said that there were none. Sadly, there are of course instances of self-harm, which are deeply regrettable and need to be investigated. I apologise for getting that wrong.
Children are of course not held at Yarl’s Wood but at a family detention centre, often the Cedars, which is run by Barnardo’s, where they receive education. However, I agree that it is very important that children in particular are carefully looked after in this respect.
When I was Chief Inspector 15 years ago, there was something wrong and rotten in the culture at Yarl’s Wood. I remember looking into it then and strongly recommending that the Home Office install a regular system of oversight of what was going on, no matter who was carrying out the contract. I understand that system of oversight still does not exist, and we still have complaints about Yarl’s Wood. When is that oversight going to be installed?
I will look again at what the noble Lord said at that point. There is of course the independent monitoring board, which is headed by Mary Coussey, a former Independent Race Monitor. The immigration monitoring board has the keys to Yarl’s Wood and can go in and out at any point in time. Obviously, it will need to look very carefully at how it has undertaken its responsibilities, and the conclusions which it has drawn from its activities.
My Lords, it has happened more than once in this and related fields that a monitoring body reports all is well, and shortly afterwards it is revealed that all is very far from well. Is it not an occasion for a rigorous examination and consideration of the methods used by the monitoring body itself? How often is that done?
We need to look very carefully at that. We have had a report from HM Chief Inspector of Prisons and we have the independent monitoring board. I recognise that there are huge concerns, rightly so, in your Lordships’ House about the allegations which have been made and about what has been done up to this point. I also recognise that because of the limitations of time it is not possible for all noble Lords to get in. I am very happy to arrange an opportunity—perhaps in the next week—to meet with colleagues and to bring some Home Office officials so that we can hopefully provide some additional information about these very distressing concerns.
Small Business, Enterprise and Employment Bill
Report (1st Day)
Clause 3: Companies: duty to publish report on payment practices
1: Clause 3, page 4, line 1, after “policies” insert “and performance”
My Lords, I shall speak also to Amendment 2, which is consequential to Amendment 1. I also ask the House to note the register of interests, which lists my interests in small businesses as an owner, worker and occupier and in other connections.
These amendments provide that companies must produce a quarterly statement that lists all the payments to suppliers which have been paid more than 30 days after the suppliers’ agreed payment terms without a formal query having been made. The amendments also confirm that in all those instances interest equalling the Bank of England rate, which is the base rate, plus 8% has been paid to compensate the supplier. Where interest has not yet been paid, it sets out a payment plan to ensure that compensation is promptly paid. The obligation is on the payer to pay. Finally, we are seeking assurances from the relevant auditor that the company is maintaining accurate and honest financial records and statements.
We are pleased that the Government have attempted to address late payments but unconvinced that their current approach is sufficient. The central thrust of government policy is to change the culture of late payments and to believe that that culture change will lead to a significant and speedy change in what has become current business practice. This is achieved principally through the Prompt Payment Code.
We support the measures in the Bill requiring large unlisted companies to publish information about payment performance and practices and to strengthen the Prompt Payment Code, which commits signatories to pay within agreed and clearly defined terms. However, late payment legislation already provides for a maximum 30-day period in which to quibble after receipt. Many shareholders are unsure that the additional legislation will achieve any real change. Small companies fear that they will be pressured into not levelling their potential claims or will be squeezed in other ways. One reason why we suggested in Committee that dates be introduced—and I see that the Government have responded to that in the Prompt Payment Code, which is to be welcomed—is that we already have a statement of dates. We were also encouraged that the Minister, at our urging, wrote to the FTSE 350 companies to suggest that they become members of the Prompt Payment Code. Our concern was, as expressed in the letter, that this was really about reputation, corporate social responsibility and obligations, which are all important in dealing with culture changes, but insufficient. This approach is not enough.
Our approach is to ensure that payments are made by placing the onus on the person paying and not the person chasing; it is not fair for the smaller supplier to be coerced or pressured or even to have to face potential consequences to make sure that they are paid on time. We asked for our alternative approach to be considered in the consultations on the duty to report and enforcement, which we believe were drawn too narrowly. As Henry Ford always said, if he had asked his customers what they wanted, he would have designed a faster horse. We do not need a faster horse; we need to invent something that is relevant, like the motor car, which deals with the problem.
Why do we believe that an alternative approach is essential? There are a number of reasons. The first is the sheer scale of the problem. In 2008, there was £18.6 billion outstanding in late payments; in 2014, according to many reports, the number had grown to £46.1 billion. In Committee, we had a number of estimates in excess of £50 billion and, today, estimates say that we are moving very close to going through the £60 billion mark. That is an extraordinary growth. Since the 2011 EU directive on late payments, which became law in this country in 2013, other reports that we have received suggest that the number has got even higher, even quicker. So these large rises have taken place even during the time when we have said that we are dealing with the problem. I fear that the large problem of late payments will not be addressed by the Prompt Payment Code, which has been co-signed by 1,700 firms. It needs a much more fundamental attack, and we argue that contracts should be void if they specify more than 60 days in the terms.
Although the Prompt Payment Code is of course a good thing, there are considerable limits to it; so the measures to strengthen it are positive. However, policy is too reliant on it. As I said, the code has approximately 1,700 signatories, made up of companies and public authorities. The number of large businesses—defined as those with more than 250 employees—stands at 7,000, so 1,700 signatories sounds like a jolly good number. However, companies employing between 50 and 250 employees add another 32,000, while those employing between 10 and 49 add another 195,000, with micro-businesses increasing the number by more than 5 million. Micro-businesses, which employ fewer than nine people, are included in this code. Out of a universe that is now in excess of 5 million companies, we have 1,700 signatories. I do not believe that this will ever grow sufficiently large to change the culture. Given that the code also includes public authorities, it is very hard to see how it can gain that scale.
Moreover, the stated intention of the code is to ensure that it remains a gold standard. If it is a standard for some to aspire to, that inherently means that others will not meet the standard and will therefore be excluded—and the culture will not inherently be transferred to them. To be perfectly honest, for those companies that see it as a badge of honour, you are dealing with suppliers that may think that the badge of honour is an important consideration, but I suspect that whether they have a serviceable need that a business addresses, or a route to market, is probably far more significant.
It is also the case that some of the signatories are part of the problem. There have been significant news reports about a number of the people currently signed up to the code in terms of their extended payments and late payments. The changes to the payment code which have been suggested—reducing the number of days and having the means to remove people from the code—have certainly not yet been adopted by all the members of the code. They are being written to, but all the responses have not come through.
I therefore suggest that the code is limited not only in its design but even in addressing its own recommendations on how to change the culture. I think I have been diligent in trying to make sure that I got to know as much as possible about the Prompt Payment Code. I looked at its website. As I say, we support the Prompt Payment Code. I appreciate that it identifies that co-signatories undertake to pay suppliers on time, give clear guidance to suppliers and encourage good practice.
I looked at those things. I looked at the clear guidance to suppliers because I thought that that was very relevant. It says that you must provide,
“suppliers with clear and easily accessible guidance on payment procedures”,
and that you may click to see the “Treating Suppliers Fairly” guide. Naturally, I clicked to see the guide. When I did, I was taken to the site of the organisation that runs the code, the Chartered Institute of Credit Management, and it says:
“We can’t seem to find the relevant information, you may be able to find the information you require using the menu above”.
I could not find it in the menu. I put it into the search mechanism and came back with two results:
“Business leaders believe late payment can be overcome”;
“Credit managers urge Sir Alan to act promptly on late payments”.
That related to a statement made by my noble friend Lord Sugar in 2009, in his previous job as the enterprise champion, to address late payments. I do not think I need to say any more about the way in which this has been adopted.
We are relying on a code. Other countries in Europe have relied on legislation and have had much more success. We have a problem in that there is no evidence that the code will be able to address the ever increasing sophistication of the extended payment problems and the mechanisms used by companies. It is insufficient in its own right.
Finally, I shall give another reason why I think it insufficient to rely on a code. We all agree that growth in the economy is essential, that supporting small businesses is essential and that cash flow and the velocity of money in the economy are very important. As a measure to help trigger a more dynamic UK domestic economy, this is essential. Overseas suppliers who rely on letters of credit with guaranteed bank payments are better served than UK businesses as matters currently stand.
It was reported at the weekend that the Groceries Code Adjudicator was in receipt of complaints that Lidl has now extended its payment terms to 120 days. It was reported that that was in great contrast to the 30 days that it uses to pay in its home market of Germany. It is time to get serious in tackling late payments and in not placing UK small business behind others. We accept and support the code, but it is insufficient. We need to move much more in establishing that the payers need to pay on time and that the level of late payments needs to come down, since these take place on an enormous scale and are a huge drag on our economy. I beg to move.
My Lords, I support this amendment and will take the illustration of the insurance industry. There are special features connected with the insurance industry. Hence, it has its own legislation. However, the Minister dealing with what was then the Insurance Bill, the noble Lord, Lord Newby, indicated that other steps and avenues would be pursued to see that the insurance industry could be brought within the scope of some statutory obligations on late payment.
The history of this, briefly, in the insurance industry is as follows. Lloyds of London has unilaterally been able to veto a strong recommendation from the Law Commission which was accepted by everybody else in the industry, including all the main insurance companies, that there be such a statutory duty in that sector so it could be brought into line.
Evidence from other sectors, including overseas parts of the industry, shows that the present arrangement, whereby London has no such guarantees against late payment, is doing serious reputational damage to that major industry. However, the rubric has it that one actor in that industry, namely Lloyds of London, which represents maybe 25% of the industry, which we all agree is not insignificant, can cast such a veto in its own interests against public policy, government legislation, simply by stating—this is the astonishing point—that it finds such a clause, recommended strongly and unanimously by the Law Commission, “controversial”. In other words, to deem a clause such as that to be controversial means that the Bill would fall.
Therefore, in Committee, some noble Lords who supported the amendment generally did not want to take that risk. However, the Minister in that context, in seeking the withdrawal of the amendment, undertook to pursue the issue on the basis that it was not going to be left there and that other means—other legislation—would be explored and pursued. This amendment is a good exemplar of how that commitment should be honoured.
My Lords, I rise to speak against these amendments. I must first declare an interest because I run a large public company, TalkTalk, which would clearly be subject to this legislation.
I agree with the Government’s prompt payment proposals, and it is worth us pausing to recognise how robust they are and how tough a reporting requirement this will be. To report quarterly in detail on your payment performance and policies is more detailed than the report I have to make on the financial performance of my company. I have an obligation to report in full on a half-yearly basis. I would not underestimate the power of transparency—of having to report this publicly and clearly. We see this in a whole range of compliance areas in business. Having to explain publicly to your customers as much as to your suppliers what you are doing acts as a strong brake on bad behaviour and is the beginning of the culture change in payment policy that I am sure that all sides of the House want to see.
I am not persuaded, however, by the Opposition’s amendments. There is a real danger that we try to overcomplicate and second-guess how businesses will wish to negotiate with each other. There are also a lot of unintended consequences—I am sure that they are genuinely unintended—in the Opposition’s amendments that will simply lead businesses to avoid the provisions and will create the very problem that they are seeking to avoid, which is the negotiation of much longer payment terms that meet all the requirements of a much more tightly defined code but actually do not enable small businesses to be paid faster.
It is therefore important that we support the Bill and the improvement in publicising and shining a light on poor payment policies and performance. But we in this House must not think that we can create culture change by specifying in ever more precise detail what businesses can and cannot do. That would have the opposite effect on the culture that we are trying to change.
My Lords, I start by coming back at what the noble Baroness, Lady Harding, has just mentioned. I know that she runs an exceptionally good company; I do not know what TalkTalk’s payment terms are, but I bet that they are good and that it pays on time.
However, there are many people out there, including many large companies, whose behaviour is quite disgusting. We have seen in the past few months egregious examples of big customers stuffing their suppliers. I will give a few examples. Diageo, the owner of Guinness and Johnny Walker, recently informed its suppliers that it would extend its payment terms from 60 to 90 days. AB InBev, owner of Budweiser, Stella and Boddingtons, has extended its terms of payment to 120 days. Heinz has doubled its payment terms—I wanted to say from Heinz 57 but it is not quite that—from 45 to 97 days, and the list goes on to include Monsoon, GlaxoSmithKline and Debenhams, to name just a few more. It is a common theme. These companies put the squeeze on their suppliers for two reasons. First, they want to accumulate as much cash as they can. That is understandable as they want to boost their balance sheets. More perniciously, they do it simply because they can. It is bullying.
Many of us have run small businesses and we know all too well the perils of cash flow management. We know what it is like to sweat while waiting for our big customer to make the payment. That is what keeps us up at night and what this amendment aims to rectify. According to the Institute of Directors, two-thirds of its members with fewer than 250 employees suffer from late payments. It is estimated that payments delayed over and above the contractual terms total—well, in my notes I have £40 billion but my noble friend Lord Mendelsohn says £60 billion. Whatever it is, it is a very large number. It is not just the supplier who suffers; it goes to the supplier’s own suppliers and to all the families who work with these companies that are now at risk. It permeates everything.
In this amendment we seek to introduce a radical change. Where a late payment occurs, an automatic interest rate penalty will kick in at the Bank of England base rate plus 8%. I can promise that if there is an outstanding payment with interest rates clicking up at 10% or 11%, it will gain everybody’s attention and will be paid.
I should like to make one more comment. Later this afternoon we are going to be addressing the issue of government schemes to improve finance for small business. I have no doubt that the best way to improve SME finances quickly and effectively would be to improve cash flows.
My Lords, I support the thinking of both the previous speakers because there is a problem with late payment. I know that the noble Lord, Lord Mitchell, has a lot of business experience of this, particularly working with small businesses—and the noble Baroness, Lady Harding, also has a lot of experience in the business world. The argument here is really that the Bill is a move forward. It is trying to open up the issue of what terms companies are offering and attempting to make sure that they are properly reported.
However, the Labour amendment is unduly prescriptive and there will be a lot of unintended consequences if companies are forced down from their current credit terms of 60 or 90 days to 30 days. There would be the bureaucracy of quarterly payments and quarterly reporting and the information that would have to be provided on what is in those quarterly reports. We have to be clear that this is a very prescriptive amendment, which to be properly considered would need a great deal of consultation with business, particularly small businesses, on its consequences—because they could be quite dramatic.
I suspect that first there would be a big jump in the number of invoices being queried; that would be bound to happen. This would inevitably damage the legislation’s attempt to make companies more accountable and for the first time properly report publicly what they are doing—instead of having the information just drift out as a result of complaints from suppliers. People will be able to see what companies are doing, and the companies can be held accountable. It seems that that is the first stage. If there are consequences we want to look at, it would be better to deal with them gradually, so that we get genuine improvement on payment terms, rather than setting up a very bureaucratic and prescriptive solution that could damage a lot of companies and even deter business.
My Lords, I also have doubts about the terms of the amendment, both for the reasons that my noble friend has just given and because we have to consider who is laying down the payment terms. The amendment refers to the supplier’s payment terms as though the supplier—the small business that we are thinking of—is able to say that it wants payment within a certain time. However, in the instances that the noble Lord, Lord Mitchell, gave just now of large companies extending the terms in which they make payments, it is of course the customer who lays down the terms. If you do not like those terms—the extension to a larger number of days—then you do not supply. A big company in a powerful position in its market will be able to lay down its terms and that will drive a coach and horses through the amendment. Therefore, I do not think that this is the solution.
I do not for a moment say that there is no problem—of course there is. I entirely accept what was said earlier and in Committee about the difficulties of late payment, and these are not new difficulties; we have had them for years. I think that the amendment to the existing law proposed in the Bill is a step forward. I would like to see that come into law rather than the more prescriptive version suggested by the Opposition.
My Lords, I thank the noble Lord, Lord Mendelsohn, for his amendments on the important matter of late payment and for the general support that he has given to the Bill’s provisions. I also thank him for his diligence and interest. I am grateful, too, to the noble Lord, Lord Lea, to my noble friend Lady Harding, and the noble Lord, Lord Mitchell, with their business experience, to my noble friend Lord Cope and to my noble friend Lord Stoneham for his perceptive and practical comments about the risk of unintended consequences—gleaned, I think, from his very careful study and attendance every day in Committee.
Before turning to the amendments, I want to reassure the House about the Government’s unwavering commitment to tackling late payment. The measures we are taking forward in the Bill form part of a comprehensive package of measures to bring an end to the UK’s late payment culture. The Government are absolutely clear that large companies should lead by example and pay their small suppliers within 30 days. We need to shake up corporate culture to drive home our message—that it is not fair and not right to pay your suppliers late or use unfair payment terms.
That is why we are taking action in the Bill to require the UK’s larger companies to report on their payment practices, and we have already consulted on the detail of what this might look like. We proposed that companies report quarterly against a comprehensive set of metrics, including the proportion of invoices paid beyond 30, 60, 90 and 120 days and the average time taken overall to pay invoices. Therefore, there is a real incentive to show that you pay promptly and on time, and an opportunity for companies to explain if payment is late. It is a strong brake on bad behaviour, as my noble friend Lady Harding suggested.
This reporting will be rigorously monitored, with a company director required to sign it off, and breaches will be sanctionable by a criminal offence. Importantly, we will require companies to make this information public, so there will also be the power of transparency. The new reporting requirements will mean that poor payment practices are exposed, and it is this transparency that will drive a fundamental change in corporate behaviour. I also highlight that on Monday the Government published a summary of responses to our consultation. While the Government are still considering the evidence received, I am pleased that a clear majority of stakeholders agreed with our overall approach, although there were concerns about some aspects, including our very rigorous reporting requirements.
Last week, my right honourable friend Matthew Hancock MP also announced significant changes to the Prompt Payment Code. I know that the noble Lord, Lord Mendelsohn, and others have encouraged us to strengthen this, and the code will now promote 30-day payment terms as standard and enforce maximum 60-day terms. The change will be rigorously enforced by the new code compliance board, which will include people from business representative bodies who will investigate challenges made against signatories to the code by their suppliers. The compliance board will remove signatories found to be in breach of the code’s principles and standards. This will shine further light on poor payment practices. The Government are also seeking views on how to provide business representatives bodies with additional legal powers to challenge grossly unfair contractual terms or practices, which will build on existing protections for small businesses.
The noble Lord, Lord Mendelsohn, highlighted the issue of Lidl. The Government are clear that large companies including Lidl, which is a leading German supermarket chain, should lead by example and pay their small suppliers within 30 days. It is neither fair nor right to use unduly long payment terms. As I said earlier, we are already taking action in the Bill to require such companies to report on their payment practices through very tough requirements, including the detailed metrics that I have already described.
The noble Lord, Lord Lea, talked about the situation in the insurance industry and I will certainly look at the points that he raised. The noble Lord, Lord Mitchell, gave us a list of companies reported to be squeezing suppliers. This is further evidence, frankly, of the need for change and the action we are taking in this Bill and in the regulations made under it. He mentioned Diageo, which is already being investigated by the Prompt Payment Code administrator. The Government are being tough for small business, and we will take the necessary steps to stamp out poor practices.
I turn to the specific amendments. I recognise the strength of feeling that has been expressed and I am pleased to say I have been persuaded by some of the noble Lord’s arguments. I can confirm today that we will table amendments at Third Reading to insert the word “performance” into Clause 3, which was a concern that the noble Lord pressed in Committee to which we have listened. I also commit that we will use this power to require companies to report on the amount of interest owed on late payment because we agree that this will help to exert the necessary pressure on companies to make sure that their suppliers are fairly compensated. We will make express reference in the Bill to interest owed and paid. We will introduce amendments on both these points at Third Reading.
I now turn to the proposal to require companies to prepare a compensation plan on each instance that they fail to pay late payment interest. I am afraid that, on this point, I continue to believe that introducing this measure would lead to unintended and undesirable consequences. For example, businesses could lengthen their payment terms to avoid accidently having to pay out. If they do get caught by the requirement, there could be debates about whether payment plans provided cover for delaying tactics. While we are committed to tackling late payment, we are equally committed to trying to incentivise prompt payment with as little bureaucracy as possible. The discussions that we had with stakeholders indicated support for this view. These discussions reinforced the findings from our 2012 consultation that introducing further penalties would not tackle the problem of late payment. Instead, respondents called for greater transparency on payment practices, which this Bill delivers.
The noble Lord gave us some interesting feedback on the website. He will be glad to hear that BIS has just awarded the Chartered Institute of Credit Management £50,000 to improve that very website, so he is on the money. The improved website will go live later this month and I can only thank him for identifying this issue and sharing it with the House. I shall take it away and ensure that it is addressed urgently.
It is clear that the noble Lord and I are united in our mission to tackle late payment, but we must make sure that any interventions will work to the benefit of the very small businesses that we seek to protect.
I turn to the question of ensuring the report’s accuracy. Our consultation proposed that the reporting frequency be quarterly, as companies’ ability to pay or practices in paying trade creditors can change quickly. Therefore, we are not proposing that companies report in their annual report. Instead, we propose that the report should be signed off by the company’s director, with breaches sanctionable by criminal penalties, using the power in the Bill to mandate reporting. The summary of responses we have published shows broad support for this proposal. Respondents clearly feel that these measures would suffice to ensure the report’s accuracy and I therefore do not agree that we should require further assurances from an auditor.
I am grateful to noble Lords for their significant contribution to the scrutiny of these provisions. We have considered very carefully the proposals set out in the amendment and I hope that, with my commitment to bring back some changes at Third Reading, the noble Lord will feel able to withdraw the amendment.
I thank the Minister for her extensive response to these amendments. I shall go through a few issues and then come back to them. In general, I thank the Minister for her very constructive and open approach throughout to these issues and to making improvements to the Bill. We share a great interest in and concern for helping to develop small businesses and doing what we can for them.
I am very grateful to the noble Baroness, Lady Harding. I had the great pleasure of talking about her, and our close connection, when she made her maiden speech. She is a remarkable business figure and I will address a number of the issues that she raised. The criticism has been made that we are trying to change culture through legislation. That is not our approach; it is the Government’s. The noble Baroness talked about the limitations of this. I have no doubt there are benefits to it, which I support, but I do not find myself on the same side of the argument as her on that one. We are adding duties and obligations because we have come to the conclusion that that is the way to address the size and scale of the problem. It is certainly true that legislation rarely changes the heart but, as the phrase goes, it can restrain the heartless. There are times when you have to use legislation as a lever to make things happen. I agree that the reporting requirements are an obligation, but they are a necessary one, and I hope that her support for them is heard by many other people in business.
I do not think that the issue of how customers and suppliers contract with each other comes up until the next set of amendments. They are slightly more complex so I will address that issue then. I want to say to the noble Baroness that I have become a bit of a junkie on the website. I am grateful that it is to get a £50,000 refresh, and perhaps even an app. Having looked through the Prompt Payment Code, I noticed that TalkTalk is not a signatory to it. We are talking about changing the culture, but if someone sitting in this House does not yet have a sense of how that culture should change, it is an issue when we come to address business at large. It is my feeling that culture change is insufficient in and of itself.
The noble Lord, Lord Stoneham, talked about being overly prescriptive, and he raised those concerns in Committee. I listened carefully to what he said and I have done my research on it. I felt at the time that the point was insufficient because of the scale of the problem and the way it is growing. When we look at how other countries with far less significant economic problems, or even problems in how to deal with this issue, we can see that they are the ones that have been infinitely more prescriptive. We can look at Ireland, while legislation in Germany passed just last year shows how that country has moved forward. It is only by being more prescriptive that we get clarity and avoid unintended consequences, which are more likely to arise in circumstances where a variety of alternative payment terms or arrangements are allowed to be put in place.
The noble Lord, Lord Cope, raised similar issues in Committee. Again, I listened carefully to him and I decided to take my cue from the GOV.UK website on the question of how we look at the dates. The website explains when a payment becomes late. It states:
“If you haven’t already agreed when the money will be paid, the law says the payment is late after 30 days for public authorities and business transactions after either: the customer gets the invoice”,
“you deliver the goods or provide the service”.
That is how we reach the point where this can be tested.
I am grateful to the Minister and we are encouraged by some of the changes that have been made. We feel that the areas of performance and being able to identify the interest payments are useful steps. However, I am bound to say that my noble friend Lord Mitchell made a powerful speech, going through yet again those companies that have good records in a variety of areas but allow themselves to do what has become far too natural and far too easy in the context of the UK. We stand out from others because we are not as strong as we should be on dealing with prompt payment and people who get into late payments. The prize is there. We are talking about close to £60 billion, so putting even a small proportion of that sum into the economy will have a huge accelerating impact. We on this side think that being on the side of small businesses means getting more money racing through the economy. The need to increase employment prospects requires us to press the amendments and push to see whether we can get the economy moving by getting these late payments to small businesses sorted out much sooner than would otherwise be the case. Therefore, I wish to test the opinion of the House.
Amendment 2 not moved.
3: After Clause 3, insert the following new Clause—
“Companies: dealing with suppliers
(1) The Secretary of State may make regulations—
(a) imposing a limit on the number of days after receipt of a supplier’s invoice a company can seek to challenge that invoice,(b) prohibiting the practice of a company seeking to change the payment terms of a supplier company unilaterally, and(c) prohibiting a company from requiring a supplier company to make a payment in order to join that company’s list of suppliers.”
My Lords, I will also speak to Amendment 4. Our amendments deal with an entirely connected element of late payment and other sorts of payment practices. Amendment 3 addresses concerns about companies exceeding payment agreements, discounting for prompt payment and retrospective discounting. This proposed new clause gives the Secretary of State new regulation-making powers to impose,
“a limit on the number of days after receipt of a supplier’s invoice a company can seek to challenge that invoice”,
and to prohibit companies from,
“seeking to change the payment terms of a supplier company unilaterally”,
or requiring supplier companies to pay to join that company’s list of suppliers or remain on it. Amendment 3 takes forward some fairly straightforward measures on what I would describe as abuses but on which I think there is a fair degree of consensus. Amendment 4 is perhaps slightly more exotic. It makes provision for the Secretary of State to,
“make regulations prohibiting the practice of a company seeking to reverse fixed payments and apply retrospective rebates and charges to a supplier company”.
Companies looking to extend their payment terms still could be on the right side of a prompt payment code if they use a variety of other practices to provide extended payment and credit terms to themselves. They can also add unfair terms using the asymmetry of power and information. Across much of the rest of the Bill the Government’s proposals have done a somewhat reasonable job to start addressing that issue, which afflicts small businesses, but companies can still change terms unfairly or even force unfair terms on weaker companies. “Pay to stay” must be the most egregious such practice but it is certainly not the only one. A weak approach to late payments coupled with no action on unfair practices or terms will mean that small businesses are unlikely to gain much from this Bill, which will seriously affect their cash flow or make their ability to fund and finance themselves not as strong as we really need with our current economy.
I have also witnessed at first hand the inventiveness of large companies to obfuscate and stop meeting their obligations on other payments. I have even had the misfortune with one particularly large supplier of meeting someone called “supplier disputes resolution”; this really means that they are a lawyer from the legal team, there to cause more problems rather than resolve anything.
I must thank the many small businesses and their advisers and representatives who are providing us with information on this. They have told us strongly, chiming with my own experience, of just some of the wariness that they feel is associated with raising the problems of poor practices of other companies, and of the nature of some of the pressures that they are under. These problems could include larger companies withholding payments, imposing fines or even creating retrospective payments or charges.
One has only to talk to small businesses for a short period to understand the iconic nature of the Premier Foods controversy, where it was forcing suppliers to pay to stay on its supplier list, which is perhaps one of the more appalling practices. Others force businesses to pay to go on the supplier list, which distorts competition and tries to use market power against smaller companies. Our measures will ensure that the problems of late payments are not transferred to other practices. The amendments also have the benefit of addressing legitimately some of the terrible and detrimental practices that small businesses suffer from large companies which exceed their agreements and act retrospectively, leading to tremendously bad consequences for other companies.
Withholding payments or arranging debits on control invoices can be caused by disputes or by issues about quality. These should rightly be raised prior to any unilateral fine, debit, discount or withholding of payment, and swiftly resolved between the parties. We agree with the Government that when there are disputes the most important thing is to resolve them as swiftly as possible. These amendments give the Secretary of State new regulation-making powers to address these issues.
There are cases where businesses retrospectively, at the end of the year, impose cuts to meet the previously agreed supplier prices to meet their margins, with no regard for the established contract. This is levelled against many plcs. Recently, we saw Debenhams unilaterally conducting a 2.5% discount on supplier prices as a last-minute attempt to boost its failing profit margins. Sending retrospective debit notes is on the basis of investments made to provide benefits to suppliers—very supposed benefits indeed. This is not to say that they do not make for a plausible argument; but the manner in which these can be applied and that they rarely have any performance-reporting, a direct correlation to those benefits or even requirement of proof that they were spent on this show the ways in which companies also impose egregious practices.
The contract terms, conditions and price negotiations are really up to the parties. Commercial terms, such as marketing discounts, early-payment discounts, stock write-downs, rebates and charging for central distribution costs appear to affect more the long-term performance of the companies operating them, and distort their price negotiations. But those are within the gift of companies if they decide to use those sorts of practices and the matter is clearly up to them. These terms can be entered into by parties, but it should not be possible to impose them retrospectively or coercively by means of threats or market power.
I am looking forward to the Minister’s response to these amendments. In Committee, the Government understood some of the concerns and they have not been deaf to the many stories that they have heard about the application of practices of this sort and the problems they create. They also seemed to acknowledge that their initial responses were not sufficient. In Committee, their view was that in practice requests for changes of payment terms are not imposed unilaterally and that they are made with the agreement of both parties, even if the smaller party may feel that it has no option other than to agree. We patently know that that is not the case. We have seen many examples of where changes have been made unilaterally.
The late payment directive is explicit that unfair contractual terms and practices are not acceptable. I spent some time looking at the late payment directive, which I was assured had significant UK participation in its drafting. I have to confess that it is rather good. It talks about the way in which these sorts of changes are not acceptable and should not be acceptable and says that, even in circumstances when they are imposed on the smaller party, they should not be.
The Government argue that concern about doing something about “pay to stay” may have the unintended consequence of stopping supplier lists, which may be a good thing. We agree with them. This is not meant to stop supplier lists. It is important for companies to be able to manage supplier lists. The problem is the terms on which people join those lists. We suggest amendments which give the Secretary of State the ability to make those changes. We are not being prescriptive. We are broad in defining what they can address. It remains for future consultations, regulations and other things to implement them. What we are trying to get at is clear. It is also clear that we are doing something, which is not too prescriptive. I know that some noble Lords have concerns about that. In many ways we have taken, perhaps for the first time, the argument that the Government presented in Committee that “may” cannot become “must”—so rather than “must” we have said “may”. It is important for the Government to understand that these are some of the issues they should address. Given the scale and size of the problem, we can identify late payments, as opposed to poor and extended payment terms, as somewhere where we need action to help small businesses. I beg to move.
My Lords, “pay to stay” and retrospective terms are examples of thuggish behaviour which large companies use to beat up their suppliers. I listened to what the noble Lord, Lord Cope, said on the previous amendment about suppliers having a choice about whether they want to supply large companies. I do not think it is quite that simple. The companies we are talking about—major supermarkets and the like—have tremendous power, and suppliers have no option but to supply them, so this is not a contest of equals but of David and Goliath, and in this case Goliath usually wins.
As my noble friend Lord Mendelsohn said, just before Christmas Premier Foods, the maker of Mr Kipling cakes and Hovis bread, told suppliers that they could lose their contracts unless they made cash payments to remain suppliers. That time, it misjudged the mood. The press took up against it, and very quickly it backed down. Perhaps that is a good example of shaming some of these companies about what they do. However, the practice still exists and our amendment gives the Secretary of State power to prohibit a company requiring a supplier to make a payment in order to join that company’s list of suppliers.
Even worse is the ability of companies to alter the terms of payments unilaterally. I have seen it personally in a family business and with suppliers to big retailers. A supplier fulfils all the terms of the contract and he waits and waits for a payment that never comes. Eventually the company contacts the supplier and says that payment could be made in a couple of days if only the supplier could accept a hefty discount. This is odious behaviour and in this amendment we seek to contain it.
I thank noble Lords for tabling these amendments on unfair practices and the noble Lord, Lord Mendelsohn, for sharing his experience, including points of agreement. Unfair payment terms and practices hit small businesses the hardest and are simply unacceptable. I consequently have considerable sympathy with the intention behind these amendments.
Our intention is to drive a fundamental shift in payment culture—a paradigm shift in UK corporate behaviour to stamp out poor payment practices. Obviously, the key question is how we achieve this. One option is to seek to tackle each and every harmful practice as we spot it, but I suggest that this is futile. As the previous debate suggested, if businesses want to exert undue pressure on their suppliers, they are likely to find ways to do so. Because banning individual practices only tackles the symptoms, it will not drive a change in underlying corporate culture. We are doing something different and using a new transparency to drive change in corporate behaviour. The power of the new reporting requirement should not be dismissed. It will subject companies’ payment practices to full public scrutiny, thereby allowing poorer-performing companies to be named and shamed. In so doing, it will exert significant pressure on companies to move away from unfair practices.
The noble Lord, Lord Mendelsohn, mentioned the case of Premier Foods, which I believe shows that transparency can successfully lead to swift change in practices. Following public scrutiny of its “pay to stay” practice, which the noble Lord, Lord Mendelsohn, rightly described as egregious, Premier Foods moved quickly to simplify its controversial supplier list scheme. The Government are clear that large companies should not be using their economic power to place further strains on already hard-pressed small businesses. The Secretary of State has already asked the Competition and Markets Authority to consider the available evidence on “pay to stay” clauses, which I hope will be welcome to the noble Lords, Lord Mendelsohn and Lord Mitchell. The new reporting requirement will also elevate poor payment practices to become a boardroom issue. We have proposed that a company director signs off the report to ensure it is taken seriously at the very top.
We have tested this proposition with stakeholders, and most have shown little appetite for greater regulation on specific practices. Businesses in the UK value the freedom of contract that has been built up over hundreds of years but they strongly agree with the Government that increased transparency will help us to take significant steps to address the current imbalance in economic power which noble Lords have described so graphically. That is why we must focus our efforts on getting transparency right by putting in place a comprehensive, robust reporting requirement for all the UK’s larger companies. Clause 3 is already drafted sufficiently widely to allow the Government to require reporting on the subject of these amendments through secondary legislation.
I turn briefly to the detail of the amendments. Late payment legislation already sets a maximum 30-day period to quibble after the receipt of relevant goods and services. We sought views on this issue during our recent consultation. There continues to be little appetite for legislation. Our stakeholders tell us that they are reluctant to use current avenues to challenge due to fears of damaging relations with customers—a point which has already been made. We also heard concerns that the change, as proposed, could result in unintended consequences, with companies starting to dispute more invoices as a means of gaining time to review them. Our stakeholders have instead called for increased transparency on dispute resolution processes. The Government will therefore require companies to report on these as part of the mandatory reporting requirement.
We also consulted on unilateral changes to payment terms. As a matter of contract law, unilateral changes cannot be imposed on a contracting party after the contract has been agreed. However, in reality, smaller companies, as has been said, may feel that they have no option other than to agree when such changes to an existing contract are proposed by bigger companies. A ban as proposed would not prevent this practice, as it would not prevent bigger companies from seeking changes and would not address the reasons why smaller companies feel unable to resist such changes—while effectively rewriting the core principles of contract law. Instead, therefore, our stakeholders supported increased transparency to shine a light on poor behaviour. I again propose to mandate reporting on this in our reporting requirement.
Charging suppliers to join or remain on supplier lists and seeking to reverse fixed payment and apply retrospective discounts and charges are deeply concerning practices. Although we could put in place a blanket prohibition on these practices, they are but two of the ways in which larger companies can seek unreasonable commercial advantage from smaller suppliers. Our stakeholders believe that bans on specific practices would be easy to sidestep.
Once again, increased transparency will help address the economic imbalance involved. Our stakeholders support increased transparency on the use of “pay to stay” clauses. I can commit to requiring companies to report on these practices in the reporting requirement. We also commit to holding further discussions with stakeholders to discuss whether reporting on other practices mentioned, such as retrospective discounts or charges, should be mandated in the prompt payment report—which, of course, we have the power to do. I hope the noble Lord agrees that I have sought to address his concerns through the medium of transparency and, on that basis, will feel able to withdraw his amendment.
I thank the Minister for that reply, although I have to say that I remain extremely concerned about part of the approach. I know that the Minister shares a great deal of the concerns about this and that she is a very practical person who has looked at different ways to deal with it. Talking about transparency, culture and the possibility that there will be attempts to sidestep this is rather similar to closing the door after the horse has bolted. We are in that situation now. The Minister says that doing something more prescriptive will obviate what she is trying to do on culture, but I happen to think that it will work, while her approach will not.
I will give the example of a good friend of mine—perhaps they will not be after I have raised this—who is a senior member of a company that uses a method called central distribution charges, which is effectively “pay to stay” by another means. It uses it in the UK, but not in Germany, France or Italy. In the end, that is because it is not allowed to use it, as it is not a proper term. My concern is that we can say, “They will sidestep it”, but we are in that situation now.
Companies come to all sorts of arrangements. We hear great stories from companies such as Next, Dunelm or John Lewis, where the price you pay is the price you pay, but there are far too few of them. Many others use a variety of measures to ensure that they meet a margin way in excess of what they have agreed the contract should deliver. That is our concern. It is wrong to say we can do this using the means of the reporting mechanism, because there are other contract terms you can use to sidestep the reporting mechanisms that we have. A much better and more effective way of doing this and stopping every such method is to create the architecture and a framework to look at what you can stop.
A very famous online company has a 40 to 50-day payment period. At 90 days they send fines, which you then have to contest. There is no individual you can speak to—it has to be done online. Eventually, you will get your payment terms, possibly within 180 days. They extend it through a variety of mechanisms which would not be covered by the existing provisions or by the transparency arrangements. Those are the problems which we are still some way from meaningfully addressing. It is very important for us to consider how we go further on these asymmetries and poor practices and to look at the sorts of things which others, using more prescriptive means, have been able to address through legislation or regulation.
There is a strong case for these amendments. I am conscious that the Minister has made some progress, if it is somewhat glacial compared to what I would prefer. However, on the basis that we can get the Government to take these matters seriously and that they are prepared to deal with the most egregious examples and to start dealing with where companies and poor practice ends up, I beg leave to withdraw the amendment.
Amendment 3 withdrawn.
Amendment 4 not moved.
5: After Clause 3, insert the following new Clause—
“Payment practices: retention of monies
(1) The Secretary of State may by regulations impose requirements on certain companies to publish information about their policies, practices and performance in holding, safeguarding and releasing sums withheld by, or on behalf of, a payer from monies which would otherwise be due under a contract, the effect of which would provide the payer with security for the current and future performance by the payee of any or all of the payee’s obligations under the contract (“retention monies”).
(2) The regulations under subsection (1) may prescribe—
(a) the companies or type of companies to which the regulations apply;(b) the information required to be published;(c) the intervals at which, and format and manner in which, publication must take place; and(d) the type of description of contractual provision to which the regulations apply.(3) The restrictions on regulations in section 3(3) shall apply to regulations made under subsection (1) of this section.
(4) The Secretary of State shall arrange a review of the operation of the type of contractual provisions mentioned in subsection (1) after a period of 18 months following the coming into force of the first regulations made under subsection (1), and shall lay a copy of the report of the review before each House of Parliament.
(5) The review provided for under subsection (4) may make recommendations for requirements and obligations to be imposed upon certain types or descriptions of companies in relation to the practice of retaining monies as described in subsection (1).
(6) After public consultation, the Secretary of State may by regulations impose such requirements and obligations on prescribed companies as were recommended by the review, in whole or in part and with such amendments as the Secretary of State believes to be required in order to—
(a) ensure that the practice of withholding retention monies does not give rise to unfair treatment of payees;(b) provide assurance that retention monies are held securely; and(c) ensure that the position of a payee company from whom retention monies are being withheld is protected when a payer company becomes insolvent.”
My Lords, Amendment 5 is in my name and that of my noble friend Lord Mendelsohn. I declare an interest in that my wife is a practising solicitor who deals with construction contracts. When we raised this issue in Committee I made the following points. Recent research shows that about £3 billion is outstanding within the construction industry, and only in that industry, by way of cash retentions; that the practice unfairly enhances the working capital of the party deducting them; and that most of those who retained moneys openly accepted that they added cash retentions to their working capital or actually reinvested them. The effect is that bodies that are commissioning work are also in effect borrowing from the small firms that are carrying out the work. This is counterproductive to good economic activity at a time when such firms are also having major problems in accessing finance.
The key issue is that cash retentions are being deducted from payments already earned. However, there is no statutory protection for the retained moneys that will ensure that they will in fact be available for release if, in the event, there are no uncompleted remedial works that need to be done. There is a good case for any retention funds to be kept separate from working capital, perhaps within an escrow account—as is now used for government contracts—or a separate trust account.
When the Minister responded to the debate, as well as outlining the new but still rather patchy approach to payments being adopted by the Government, she agreed that there were a number of issues of concern with the payment culture in the construction industry. But she said that the current statutory framework governing contractual terms on payment—which was introduced in 2011—with a prohibition on “pay-when-paid” clauses and a right to adjudication, would be sufficient to see out this unfortunate practice. She added that since 2014, the Government have been working with the industry to implement a payment charter that contains 11 commitments, including one specifically aimed at removing the need for retentions, with the intention of moving by 2025 to a position where retentions are no longer necessary.
The noble Baroness pointed out that the powers being taken in the Bill would be sufficient to gather the information needed for a review of current policy, and I take that point. But she was a little unconvincing about why it will take 10 years to gather the information about this issue, even if there were a need to go wider than just the construction industry. If this amendment is accepted, it would have far-reaching benefits for small businesses throughout the construction industry. They would not have to wait another 10 years before this practice is outlawed—but even if they did have to wait that long there is surely a case, which I have outlined above, for action now to require the use of escrow accounts for this type of payment. I beg to move.
My Lords, I thank the noble Lord for this amendment and for providing the opportunity for us to look again at the important matter of retention payments. Following Committee we have been busy. We have consulted with stakeholders on payment terms, and it is clear that the practice of retentions is an issue, as we suspected, largely confined to the construction sector. As with other payment issues in construction, issues with retentions go to the heart of the industry’s business models. These models are driven by a broad and diverse range of customers—and, of course, there is an extensive reliance on subcontracting. The work is project based and frequently short term, with no ongoing relationships. Typically, low levels of capitalisation mean that the industry is heavily reliant on cash flow.
On the amendment, government is already able to include a new obligation to report on retention practices through the powers in the Bill. Since Committee, we have held a round table with key construction representative bodies to discuss how this might be done. We are following that up with a series of bilateral discussions to make sure that we get it right. The amendment would also require government to undertake a review of the practice of retentions. Following debate in Committee, we have held discussions with a wide range of stakeholders in the construction industry, and we found that there was a range of opinions. A proper assessment across the industry of the costs and benefits of the retention system will be vital to get the policy right—and it needs to be done in partnership with the industry.
I am pleased to inform noble Lords that the Government will therefore work with the Construction Leadership Council to undertake an analysis of retention payments under construction contracts. We are currently agreeing the project specification and it is our intention that the final report should be published early in 2016. That will provide an evidence base much more quickly than the 18 months after the coming into force of the reporting requirement envisaged by this amendment. The partnership is also important; an enduring solution to the issues rests in culture change. Legislation on its own is never likely to achieve change. The outcome of the research will inform the discussion about how the industry moves to a position of zero retentions.
Finally, the amendment would require government to take a power to introduce regulations. The Government’s work with the Construction Leadership Council will provide the evidence base for any action needed. Before that review has taken place, and given the lack of a clear consensus in the industry and among its customer base, the Government do not believe it appropriate to take such a power at this stage. We are taking a number of steps which will address the key issues at the heart of this amendment—and, on that basis, I hope that the noble Lord will feel able to withdraw his amendment.
I am very grateful to the Minister for that response. I agree with her that the issue is the business model in play in the construction industry. It is almost certain that the conclusion that will come out of the review that she is talking about is the one that we have been talking about—that there will need to be a new model for how the industry deals with the problem of how it contracts for and pays for the work that has been undertaken on construction contracts. That cannot happen too soon, because there are a lot of issues that need to be picked up in that regard.
I was very glad to hear of the work that has already been started. It is a good way forward—and, of course, there is an advantage in having a sector group responsible for construction that is well embedded in the department. That should, I would have thought, bring forward some of the issues that she has mentioned.
It is rare for the Opposition to offer the Government a chance to get their hands on an unmoderated handle of power, which they might use on some unspecified future date, because we generally take the view that that is not a good thing to do. We did that in this amendment, but it has been turned down and spurned. I simply regret that—but I beg leave to withdraw the amendment.
Amendment 5 withdrawn.
6: After Clause 5, insert the following new Clause—
“Small and Medium Sized Enterprises Access to Finance
(1) The Secretary of State has a duty to conduct a review on alternative forms of finance available to small businesses as defined in section 33(2) and micro businesses as defined in section 33(3).
(2) The review should include, but is not limited to—
(a) an assessment of how the banking sector is catering to the finance needs of SMEs,(b) current methods used by the Government and relevant organisations to encourage SME consideration of alternative forms of finance, and(c) the extent to which alternative forms of finance have been used by SMEs.(3) The Secretary of State shall release a report on the findings of this review and lay it before both Houses of Parliament within one year of the commencement of this Act.
(4) The Secretary of State may, by regulations, act on the findings of the review.”
My Lords, I have addressed your Lordships’ House many times to take the Government to task for the slow take-up of new schemes designed to provide finance to small and medium-sized businesses. My theme has been constant. There have been so many initiatives over the period of this Government that even I, who really ought to know about these things, am confused. If I do not get it, how can small businesses understand the options when they seldom have to deal with them?
I have cited Funding for Lending as an example. I know that the Government think that it has been a resounding success, but that is not what I hear at the coalface. One banker said to me, “What am I to do? The Government throw money at us, and I have a choice: whether to deploy these funds on small businesses, which are risky and difficult and costly to analyse and administer, or else use the cheap funding to build my mortgage business where I can assess the risk, and it is easy to run”. It is also not what the figures show. More often than not, one quarter followed by the next quarter, the amount of funding extended by Funding for Lending has gone down.
While all these government initiatives have been sputtering along, there has been a very acceptable growth in non-government schemes. The market for alternative finance has exploded, largely as a result of the paralysis of the high street banks, and we on these Benches think that that is to be encouraged. Challenger banks have made a very big impression. Metro Bank, Aldermore and others, such as Santander, are changing the landscape. Peer-to-peer lending has taken off and is becoming a major force. We, as I say, welcome these changes. The traditional banks have let down small business, and it is perfect that alternative sources are stepping into their shoes.
We need, however, to know what is happening in the marketplace. So many questions are asked in your Lordships’ House on this issue, and the truth is that no one seems to know the answer. This amendment will place a duty on the Secretary of State to conduct a review of alternative forms of finance available to small business. This review will examine how the banking sector is catering to the finance needs of SMEs and how SMEs are being encouraged to use alternative forms of finance.
We need the facts, and only an obligation on the Secretary of State will give us the information we require. I beg to move.
My Lords, as the noble Lord, Lord Mitchell, has said, we have debated access to finance and all the various schemes, both government and private sector, on a number of occasions. I agree with him that there is an awful lot going on in this field. A lot of improvements have been made, by the Government’s efforts, these new forms of alternative finance and so on. I go along with the noble Lord, Lord Mitchell, on all that and on the difficulties of assessing quite what is happening and where the best developments are.
Where I get into trouble with Amendment 6 is the last little bit—proposed new subsection (4)—which says that, at the end of this review, when it is laid before Parliament:
“The Secretary of State may, by regulations, act on the findings of the review”.
That is an incredibly sweeping power, which I would be wholly reluctant to give the Government. I heard what the noble Lord, Lord Stevenson, said at the end of the debate on the previous amendment, but this is a very sweeping power indeed, about which I am very cautious.
My Lords, I support the amendment of the noble Lord, Lord Mitchell, and will be very surprised if the Government do not see merit in it. The coalition Government have made very serious efforts to address the impact on the economy of a shortfall in credit availability. They have launched multiple schemes, as the noble Lord, Lord Mitchell, indicated. The previous Government, of which I was a member, did likewise, and we found it extremely difficult to stimulate sensible extensions of credit to support business. The coalition Government found that they finally got lending going largely through the mortgage market. Only time will tell whether that has long-term economic benefit.
The Government have encouraged us to leave relatively undisturbed the dominance of the major banks. The market share of our major banks would be sufficient in normal circumstances to have triggered a competition inquiry many years ago. The dominance of the major banks is reflected largely in the absence of any differentiation in their products and pricing, and their basic business model is the same. They do not compete aggressively for market share; they do so at the margin but, on the whole, they sit on large legacy books of existing relationships. We know that, statistically, one is more likely to divorce than to change one’s bank.
Therefore, the Government should be encouraged to promote new forms of lending and should see this as an important adjunct to their own policies to support the economy. In those circumstances, I should like to believe that the Government would see real merit in the amendment of the noble Lord, Lord Mitchell, thereby ensuring that we get clarity about how the banking and credit availability system is working. I do not think that Santander is a challenger bank; it is the old Abbey National. Aldermore, Virgin, Metro and Bank One are challenger banks, but not Santander. However, if progress is not made by these banks, that is precisely the circumstance in which the Government would want to reach to independent evidence to show this.
I do not quite share the anxiety of the Benches opposite about the sweeping powers implied by the final part of the amendment. I imagine that they could be exercised only within the powers of existing law. I hope that a Government who are committed to furthering and promoting competition and transparency will not put themselves into contortions to reject the amendment. If they do so, they will stir continued anxiety that sitting opposite are a Government of bankers, for the bankers, rather than for society and our broader economy.
My Lords, as has been said, we have discussed finance for SMEs at length and it will continue to be a perennial topic. I welcome Clause 5. All the challenger banks—the noble Lord, Lord Myners, named some of them but I was thinking more of the crowdfunding-type organisations—are very excited about what is going to happen in the market. I have talked to some of the big four clearing banks and they are excited. Despite the fact that one might have thought that they would be nervous about the clause, which will almost force them to send their customers to challenger banks, they are keen and excited about, and welcome, this event.
On the surface, the amendment looks sensible, other than—I reinforce the point made by my noble friend Lord Cope—proposed subsection (4), which is open-ended. Business is nervous about this sort of provision. It is worried by some of the pronouncements that have been made by the Opposition. A Labour Party proposal that has not been raised in this House suggests that if a business chooses not to raise finance, or is not successful in raising it, but actually seeks to find a purchaser of more than half its equity, before such a transaction can be completed to a purchaser of the choice of the vendor, the vendor will be required to offer the business to all its employees on comparable terms. That was proposed in a recent speech by the leader of the Labour Party because he wants a John Lewis-type economy. While I understand that direction of travel, it is, of course, totally impractical and destructive to business life. That sort of policy might be brought in under subsection (4) of the amendment. That makes me nervous and is one of the reasons why I would not be happy about the proposed new clause.
My Lords, I am grateful to the noble Lord, Lord Mitchell, for proposing the new clause, for his survey of finance for small and micro businesses, and for his welcome for some of the positive innovations that there have been in this sector in recent years. It was also extremely useful to have the comments of the noble Lord, Lord Myners, with his great experience in the City and in government, but I also heard the concern of my noble friend Lord Cope about the sweeping nature of the power. It was good to hear the comments of my noble friend Lord Leigh of Hurley.
The noble Lord has proposed a new duty on the Secretary of State to publish a review on alternative forms of finance available to small and micro businesses within a year of the commencement of this Act. I start by reassuring noble Lords that the Government share their conviction that small and micro businesses need greater access to alternative forms of finance. Lending to small business, as has been said, is still concentrated within the four largest banks, which account for almost 90% of business loans by volume. Overall rejection rates for loans and overdrafts are declining, but still stand at around one in four over the past 18 months. Access to appropriately regulated alternative sources of finance can provide a real counterbalance to the mainstream banking sector.
I fully agree with the noble Lord that we should seek transparency on the availability of alternative forms of finance. I disagree, however, that a new review is necessary as it would duplicate existing publications on small business finance. One of these publications is the British Business Bank’s report on small business finance markets, which was published in December 2014. Its main focus was on the increasing use of alternative forms of finance by small business. I believe that this is what noble Lords are largely seeking from this clause. I can confirm that the British Business Bank intends to publish its small business finance report annually. I am happy to commit today to place this report in the Library of the House when it is published again this year.
The British Business Bank’s publication sits alongside a number of other independent pieces of research into this important subject, including the Bank of England’s quarterly Trends in Lending report, last published in January, the quarterly independent SME Finance Monitor, most recently published last week and Professor Russel Griggs’s report on the banks’ lending appeals process, published this week.
My response to the noble Lord would not be complete without touching on an even more important report—the work of the Competition and Markets Authority, the new, independent competition regulator. The CMA is conducting a market investigation into the retail banking sector, including the provision of banking services to small businesses. It has a wide range of powers available if it finds there are problems in the sector. The existence of this investigation helps to respond to the points made by the noble Lord, Lord Myners. The CMA is due to report by April 2016 and I know that it will be of huge interest to this House. The Government will then respond to any recommendations made within 90 days. Any legislation that follows this response would, of course, be subject to parliamentary scrutiny in the usual way. I believe that we should let the regulator do its job and not pre-empt its recommendations with a concurrent review by the Secretary of State of how the banking sector is catering for the needs of SMEs.
Finally, I draw the noble Lord’s attention to the positive measures in this Bill to promote access to finance. Clause 1 removes a contractual barrier to invoice finance. Clause 4 provides for greater sharing of information through credit reference agencies. Clause 5 provides for the UK’s larger banks to be required to refer rejected finance applicants on to alternative finance providers. These provisions got a good degree of support across the House in Committee. I believe that all these measures will make a real difference to the availability of alternative finance for small business. Given the activity described, I am not convinced that a further report as proposed in this clause would be of merit. I hope that the noble Lord will feel reassured by what I have said and that he will feel able to withdraw his amendment.
I thank the Minister for her reply. I thank the noble Lord, Lord Cope, for his insightful addition to what was said and on reflection I think that he may have a point on Clause 4. I also thank the noble Lord, Lord Leigh. He and I know each other well. I have never before heard the statement that he made but he has my email so he knows exactly where to send it. I also thank the noble Lord, Lord Myners—I find it very hard to say that and am tempted to say “my noble friend”—for making the comments that he did. I have always felt that the banks are, and act like, a cartel and that you cannot tell one from the other. It is really good that they are now starting to change and are being forced to change. If my particular area—digital technology—is making that happen, so much the better. Crowdfunding has been very exciting but many of the new challenger banks have been able to come into this because of the technology they are using. That is absolutely fantastic.
I thank the noble Baroness for her comments and feel very reassured that the Government are working in this direction. The facts are really clear. Whether we are in government or not, I would like to be standing here in a year’s time having a conversation like this with the facts at hand. I beg leave to withdraw the amendment.
Amendment 6 withdrawn.
Clause 13: Electronic paying in of cheques etc
7: Clause 13, page 13, line 18, leave out from second “instrument,” to end of line 19 and insert “if”
My Lords, Amendments 7 to 19 and 84 make two technical but essential changes to the cheque-clearing provisions relating, first, to consistency in the treatment of cheque and non-cheque paper instruments and, secondly, to the continuation of current statutory protections for the paying customer.
Amendments 7 to 9 and 19 are designed to ensure that non-cheque instruments, such as warrants and travellers’ cheques, are treated in the same way as traditional paper cheques under the new provisions for electronic presentment. Under the new legislation for cheque imaging, as currently drafted, it would be possible for corporate customers and other large non-bank customers to make arrangements to submit cheque images directly to the central switch that clears cheque transactions for all member banks, rather than their bank submitting images on their behalf. This would make the clearing process more efficient. However, the current drafting means that this option will not be available for non-cheque paper instruments that are not drawn on a bank.
The Government’s policy intention is to provide for a system that treats cheques and non-cheques in the same way, and therefore it is necessary to make these amendments to ensure the equal treatment of non-cheque instruments in all circumstances of presentment. On the basis of current practice, this approach does not present any difficulties. However, it is possible that the position could change in the future—for example, as a result of the development of new types of instruments that do not currently exist. For this reason, Amendment 9 confers a power on the Treasury to restrict the circumstances in which presentment by image is permissible. This power is intended to be used to deal only with any unforeseen issues that may arise in the future and could not be used to have any retrospective effect on instruments that have already been presented by image. It is subject to the affirmative procedure.
Amendment 12 is intended to ensure the continuation of current statutory protections for the paying customer. Under the existing cheque clearing system, a customer who makes a payment with a cheque can request the original cheque to be stamped “paid”, which stands as prima facie evidence that the payee has received the amount payable. This provides a protection for the payer in situations where the payee claims that they have not received payment.
The legislation for cheque imaging does not provide for an equivalent protection when cheques or other paper instruments are paid in by electronic image and the physical instrument does not end up in the possession of a bank. It has become clear that the loss of this protection would remove a useful service currently relied upon by some cheque users. Therefore, it is necessary to make an amendment to preserve this type of protection for the paying customer under electronic cheque clearing. This amendment will confer a power on the Treasury to make appropriate provision in regulations, subject to the affirmative procedure, because the precise nature of the evidence to be provided to the payer may depend on the technical design of the clearing system. The regulations will be able to set out the nature of the evidence to be provided to the payer and the effect of that evidence, including the weight to be given to such evidence.
Amendments 10, 11, 13 to 18 and 84 are consequential amendments dealing with the procedure for making regulations under Amendments 9 and 12, and they provide minor and technical clarifications of the drafting.
To conclude, these amendments will ensure that the provisions for electronic presentment treat cheques and non-cheques consistently and that existing customer protections continue under the new system. I beg to move.
My Lords, I welcome the contribution to this debate by the noble Lord, Lord Newby, and for his helpful explanation of the matters that are being considered by this large group of amendments. We had a fair bash at this in Committee, so I was a little surprised to see so many additional regulations on this matter, particularly as this is an attempt to simplify rather than make more complicated an already rather obscure area of financial transactions. Indeed, in some senses these amendments seem to take us back rather than forward in that they seem to provide a bolstering of a paper-based or evidence-based solution to a number of things that one would have hoped could have moved on to an electronic age. But I am sure that the intention behind them is entirely correct, and we support the general direction of the move.
I wanted to pick up on one point. In the wording of the amendments on the Marshalled List there is reference to the power for the Treasury to make regulations, but it does not specify how they are to be exercised in practice. I agree that the number of occasions will be limited, but the Minister mentioned that the first group would be subject to the affirmative procedure and did not say anything about the second or third groups and whether they would be subject to the negative or the affirmative procedures. Could he clarify that for me please before we leave this point? If it is too difficult to do now, I am very happy to have that in correspondence, but we have no objection to this in general.
My Lords, I think I said that the second group would be subject to affirmative resolution. My understanding is that the two issues that we are debating will both be subject to the affirmative procedure. If I am mistaken, of course I will write to the noble Lord.
Amendment 7 agreed.
Amendments 8 to 19
8: Clause 13, page 13, line 22, after “to” insert “regulations under subsection (1A) and to”
9: Clause 13, page 13, line 22, at end insert—
“(1A) The Treasury may by regulations prescribe circumstances in which subsection (1) does not apply.
(1B) Regulations under subsection (1A) may in particular prescribe circumstances by reference to—
(a) descriptions of instrument;(b) arrangements under which presentment is made;(c) descriptions of persons by or to whom presentment is made; (d) descriptions of persons receiving payment or on whose behalf payment is received.”
10: Clause 13, page 14, line 12, leave out “is” and insert “appears to be”
11: Clause 13, page 14, line 37, leave out second “banker” and insert “person”
12: Clause 13, page 14, line 37, at end insert—
“89CA Copies of instruments and evidence of payment
(1) The Treasury may by regulations make provision for—
(a) requiring a copy of an instrument paid as a result of presentment under section 89A to be provided, on request, to the creator of the instrument by the banker who paid the instrument;(b) a copy of an instrument provided in accordance with the regulations to be evidence of receipt by a person identified in accordance with the regulations of the sum payable by the instrument.(2) Regulations under subsection (1)(a) may in particular—
(a) prescribe the manner and form in which a copy is to be provided;(b) require the copy to be certified to be a true copy of the electronic image provided to the banker making the payment on presentment under section 89A;(c) provide for the copy to be accompanied by prescribed information;(d) require any copy to be provided free of charge or permit charges to be made for the provision of copies in prescribed circumstances.(3) The reference in subsection (1)(a) to the creator of the instrument is—
(a) in the case of a bill of exchange, a reference to the drawer;(b) in the case of a promissory note, a reference to the maker.”
13: Clause 13, page 14, line 43, leave out “subsection (1)” and insert “this section”
14: Clause 13, page 15, line 47, at end insert—
15: Clause 13, page 15, line 48, leave out “section” and insert “Part”
16: Clause 13, page 16, line 7, leave out “section” and insert “Part”
17: Clause 13, page 16, line 9, leave out from “containing” to “may” in line 10 and insert “—
(a) regulations under section 89A or 89CA, or(b) the first regulations to be made under section 89D,”
18: Clause 13, page 16, line 12, leave out “this section” and insert “section 89D”
19: Clause 13, page 16, line 14, at end insert—
“(12) For the purposes of this Part, a banker collects payment of an instrument on behalf of a customer by—
(a) receiving payment of the instrument for the customer, or(b) receiving payment of the instrument for the banker (but not as holder), having—(i) credited the customer’s account with the amount of the instrument, or(ii) otherwise given value to the customer in respect of the instrument.(13) Section 89D(4) applies for the purposes of subsection (12) in its application to section 89D.””
Amendments 8 to 19 agreed.
Clause 17: Review of regulators’ complaints and appeals procedures
20: Clause 17, page 19, line 14, at end insert—
“( ) The following regulators are excluded from the provisions outlined in this section—
(a) the Equality and Human Rights Commission;(b) the relevant regulators in—(i) the Department of Health;(ii) the Department of Transport;(iii) the Department for Work and Pensions;(iv) the Department for Business, Innovation and Skills;(v) the Department for Culture, Media and Sport;(vi) the Department for Communities and Local Government.”
My Lords, my noble friend Lady Thornton would have preferred to have been in her place on this matter, but unfortunately she has suffered an unexpected bereavement. I am sure that your Lordships’ House would wish to send her its commiserations and hope that she is in good spirits at this difficult time.
The question of whether the Government have the relationship with the EHRC correct has featured on a number of occasions in this Bill and the Deregulation Bill. The Minister will be aware that the EHRC enjoys an A status as a national human rights institution. It is therefore right that on all occasions the Government are crystal clear that it is not appropriate to apply general regulations to the EHRC. The A status is awarded by the United Nations International Coordinating Committee of National Human Rights Institutions, which regularly reviews the EHRC’s compliance with the United Nations Paris principles, which require the EHRC to be an independent body.
We have to avoid the reality, or indeed the perception, of interfering with the commission’s ability to perform its regulatory functions and ensure that it is always and at all times independent. If that were jeopardised, it would in turn jeopardise the A status, which is generally agreed to be of importance to the UK’s international standing and reputation. For example, it enables the UK to influence the protection of fundamental rights globally and gives us a voice at the United Nations Human Rights Council. Any downgrading of the commission’s status would have a significant negative impact on the UK’s global influence.
The amendment also deals with regulators in other departments unspecified, which suggests that there may be regulators within each or any of the departments that might have the same characteristics as those applying to the EHRC. In some senses, that is a reflection of the fact that we are still in discussions within the Deregulation Bill about exactly how this process will be developed.
We understand—the Minister may be able to confirm—that it has now been decided to exclude at least one regulator in the Department of Health. If that is the case, the exclusion should also appear in the Bill, as that of the EHRC will if the amendment is accepted.
When she replied to this debate in Committee, the Minister said that this amendment was not necessary, primarily because the list of regulators to which the small business appeals champion provisions can apply will be set out in regulations and that, because these will be taken under the affirmative procedure, there would be adequate control of the process. It is well established within this House, and Parliament generally, that it is not possible to amend secondary legislation. Therefore, this is not really the answer to the question of whether it is appropriate to bring forward a list of specified regulators in secondary legislation. There are three main reasons why the Government should accept this amendment, which would provide clarity.
The first, which has already been mentioned, is the need to protect the EHRC from any possible imputation that it is not independent. Secondly, the noble Baroness herself argued that financial regulators should be excluded from the Bill because they already have an extensive statutory framework for engaging with business stakeholders. This makes it easier for other regulators in the other departments mentioned to be excluded. Following the line taken on financial regulators, it would be appropriate to think about whether there are specific regulators to which similar arguments apply and they should also be listed in the Bill. Thirdly—and more generally—it provides the opportunity for regulators to have uncertainty about their position removed, because they will not have to wait for secondary legislation to come forward to know whether they will be included in a future regulatory provision. As we all know, uncertainty is very bad for business.
The Minister said in Committee that she agreed that there may be regulators for which the growth duty—an issue that is for the Deregulation Bill, not this one—is not appropriate, but she did not think it would be appropriate to start excluding certain regulators within the Bill because,
“regulators may change over time and it is important that there is flexibility to amend the list accordingly”.—[Official Report, 12/1/15; col. GC 100.]
As I have tried to explain, the opportunity for flexibility is not given, because the secondary legislation process does not provide it. Real flexibility would be to determine now which regulators go into the Bill and which do not. That is why the amendment would be important in making sure that there is clarity. I hope the Minister will accept that there is at least a case for looking at this issue again and, perhaps, coming back to it at Third Reading. I beg to move.
I do not find the second half of the amendment compelling, but the first half is very important indeed. The EHRC has a very special role in society and it is looked at very carefully by people outside. The Government have to be super-careful: we know perfectly well that this will not, of course, interfere with the EHRC. This is not, in any way, some sinister operation, but there are people out there who will find sinister operations in anything, particularly when one is dealing with something as delicate as the issues with which the EHRC is concerned. The trouble is that the mischievous people come from both ends of the spectrum: one end wants the EHRC to be more dominant and expansive in its role and the other end wants to have as little to do with it as possible. It is, therefore, important that the wording is right and I hope that my noble friend will have been able to consider this, both in relation to this Bill and on the other occasion that this issue has been raised. I hope she understands that this is not because either side really thinks that there is something here that is wicked or hidden and being covered up. It is simply that there is a very blanket view from outside and it is quite hard to see why it is so difficult to exclude the EHRC. I very much hope that my noble friend will be able to help on that part, at least. The other part of the amendment is probably otiose: I shall not argue with it but I would not want to support it. However, the EHRC is particular, special and has a real reputation in the rest of the world that we do not want to see undermined.
My Lords, I also have a problem with a large part of the amendment. I disagree with the argument of the noble Lord, Lord Stevenson, that putting some departments and regulators in the Bill would make it more flexible than using secondary legislation. The Bill provides a requirement for that secondary legislation to be debated by Parliament. My other concern is the very wide exemption that the amendment suggests for a large number of regulators that fall under the six departments cited. This would undermine and threaten a policy that has been developed specifically to support small businesses and would send an unhelpful message. The policy is simply aimed at improving the appeals and complaints processes of a regulator when dealing with small businesses.
We should not forget that driving greater efficiency, accountability and transparency into the interaction between regulators and those they regulate has to make sense, as does having a simpler, more effective, more transparent, less costly and better understood series of processes by which small businesses are able to challenge regulators’ decisions and behaviour. Ensuring that regulators have appeals and complaints processes that work well and are fit for purpose, that rectify wrongs with minimal delay and are sensitive to small businesses—and micro-businesses in particular—must be good news for the economy as well as for the objectives that regulators are seeking to deliver. I would be very uneasy at the thought of the Bill exempting the number of departments and the very large number of regulators that the amendment proposes. I agree about the EHRC, but I understand that the Government will use secondary legislation to exempt it from this section.
My Lords, I thank the noble Lord, Lord Stevenson, for his comments on Amendment 20, which would restrict the regulators to which the provisions on small business appeals champions can apply. It was also good to hear from my noble friends Lord Deben and Lord Lindsay.
Clause 18 already provides that the list of regulators to be covered by the appeals champions should be set out in regulations. A consultation on the list of regulators closed in January. We intend to publish a summary of the consultation and our response before Parliament rises, based on careful consideration. The Government’s response will then become the basis of the regulations which will bring regulators into scope. These regulations will be subject to affirmative resolution, so Parliament will have the opportunity to consider which regulators should be on the list. On other occasions, the noble Lord, Lord Stevenson, has called for just that affirmative resolution. Although the consultation has closed, we shall take into account representations that noble Lords have made during discussions on the Bill. I am coming on to reassure about the EHRC, but I encourage any noble Lord who has particular concerns about anything else to let me know: we will give them a fair hearing.
Listing inclusions and exemptions would make the Bill cumbersome and unwieldy. Pre-empting our case-by-case consideration through a blanket exemption is not the right way ahead. The amendment first seeks to exclude the EHRC. Noble Lords have linked this to the protection of the EHRC’s A status as a national human rights organisation. The Government share the determination to protect the commission’s status and we understand that, as a regulator, the EHRC is different and needs to maintain its independence from government.
The Government’s position is that the EHRC will not be in the scope of the champions policy. It was not included in our consultation on the list of regulators to be brought into scope. No specific regulatory functions of any other particular named body are listed for inclusion or exclusion in the Bill and it is not necessary to do so in relation to the regulatory functions of the EHRC. Doing so would set a precedent that might lead to overly complex legislation. We have never proposed to include the EHRC, and today I can make a commitment not to do so. The Government will not include the EHRC in the small business champions policy. I hope that noble Lords will accept that full, unequivocal and repeated assurance. In Committee, the noble Baroness, Lady Thornton, was kind enough to accept my assurance on this point, and the majority of noble Lords accepted similar assurances in respect of the growth duty during the passage of the Deregulation Bill. I hope that the House will be willing to do the same today.
The second part of the amendment proposes to exclude any regulator belonging to a list of departments. The proposal would exclude more than half of the regulators we propose to include. Many of them have considerable contact with small businesses. There is broad support for small business appeals champions to make sure that businesses have effective routes to regulators. The amendment would deny that assurance to care homes, which need to challenge rulings by the Care Quality Commission or businesses challenging inspections by the Health and Safety Executive. I do not understand why we should emasculate a policy that has such widespread backing.
The noble Lord, Lord Stevenson, asked whether the Government had decided to exclude a health regulator from the appeals champion policy. We have made no decisions yet, and we shall do so on a case-by-case basis. As I have said, if any noble Lord or regulator is in this situation, they should make representations to us. We intend to make a decision on the list and publish our response before the end of the Parliament.
This is not the growth duty. This is simply a policy that aims to improve public administration and provide an assurance that regulators have the procedures and processes in place to support business appropriately. We all agree that small businesses need a better deal, and we should be aiming to apply this policy to regulators where possible rather than looking at potentially wide exemptions. I hope that, in the circumstances, the noble Lord will feel reassured and that he will agree to withdraw the amendment.
I thank all those who have contributed to the debate. Perhaps I may make one or two points about it. I would say to the noble Earl, Lord Lindsay, who obviously has great knowledge of and experience in this area, that I can understand why he might think so. However, I draw his attention to the fact that the intention in the second part of the amendment is to select a group of regulators equivalent or similar to the EHRC in the sense that they are required to be taken out of a broader approach. It does not attack all the regulators in a department. If he misunderstood that, I apologise, but it is clear that what we are trying to do here is to say that because we were not involved in drawing up the list of regulators, we are not absolutely clear which are in and which are not. In that sense, it is imperfect and we would have to be quite inventive, if the amendment were to be accepted, to come to the right conclusion. I accept that it is not as well done as it could have been. However, it has provoked a good debate and that is the point. Indeed, the noble Baroness has already accepted that there may be one or two regulators that might well be included in the list of the growth duty within the Deregulation Bill. That might not be appropriate for small businesses—and vice versa. We are in a situation where we are not sure how the lists will bottom out. It is that unease which I was trying to attack, and in that sense I hope that the noble Earl is reassured on the point.
It is worth reflecting on the fact that, to do what is required in the Bill, as I understand it, appointments would need to be made to various regulators at board level. That would have an impact on how these bodies operate. I do not think it is an entirely free-riding champion helping to resolve appeals. These are people who, by their constitutional and statutory position, will have to have an involvement in the day-to-day work of these regulators. By accepting this, we are accepting by implication that there will be a change—perhaps a beneficial one—to the way that some regulators will operate in the future; they will not do so as they were originally set up. Again, that is what I am trying to reflect in this debate.
However, I accept that, as presently drafted, the amendment would not achieve the ambitions we had for it and there may be better ways to approach this. It may be that the rather convoluted process whereby I think the noble Baroness was inviting individual Members of your Lordships’ House to write in with special and favourite regulators to be excluded will mean that we arrive at a resolution in an appropriate way. I am sure that this will come out all right in the wash, but at the moment it seems rather a complicated way of doing it.
I will say again that it will not be possible for either House of this Parliament to pick and mix within the secondary legislation. Either it must be accepted as it stands or we can vote against the whole of the SI. It is not fair to say that we will have a choice at the time when these regulations are going through. The choice will have to be made outside Parliament and before the Government, whichever Government they are, put forward the secondary legislation. We have to be realistic about the fact that there will not be the same level of scrutiny.
I broadly take the points which have been made. It will be interesting to see how they go through. We made it clear in Committee that we are not against the idea of there being appeals business champions, as it were. I think we agreed that we would call them “small business champions” in relation to regulation. It is a good idea but I am not quite sure whether it will work in practice; only time will tell.
Finally, on the EHRC, I am grateful to the noble Lord, Lord Deben, for his consistent support for this issue. If it is so clear in the minds of Ministers that the EHRC is not, will not and never can be part of the processes involved in this Bill or in the Deregulation Bill, why on earth can they not just accept that it would be sensible to table an amendment at Third Reading stating that the EHRC is not involved? That would peradventure put beyond doubt the question of whether the EHRC is ever around. There may be evil forces at work and there may not. We do not think there are, and we are not looking at it with suspicion. However, enough damage has already been done to the EHRC, for heaven’s sake, and what is left of it needs to be protected. It would be a positive and rather a noble thing for the Government to accept at this stage that it would be right to have that line in an amendment, just because the EHRC is so special, as the noble Lord said, and to be super-careful because of the particular nature of the commission. That is for the Minister to reflect on and perhaps to come back at Third Reading.
I very much take the point that the noble Lord has made. I am happy to consider whether we could put the EHRC into the Bill, but whether I can do that, I am not sure. Giving the commission that clarity seems to be widely supported around the House.
That is a very generous offer and I think it would solve an awful lot of problems. Indeed, we have been discussing it week after week for the past two or three months. I would be very pleased if she can do this, but I repeat that I am happy to withdraw the amendment at this stage.
Amendment 20 withdrawn.
Clause 19: Guidance by the Secretary of State
21: Clause 19, page 20, line 1, after “must” insert “—
My Lords, government Amendments 21, 22 and 23 respond directly to our Committee debates regarding the small business appeals champion and the business impact target. Regarding the champion, the noble Lord, Lord Mendelsohn, made a number of helpful observations about how it might work in practice. He was keen to ensure that any guidance issued to the champions should be laid before both Houses as well as published. I made it clear in Committee that this was already our intention and I am pleased to confirm it with Amendments 21 and 22.
I turn now to the business impact target. I thank the noble Lord, Lord Stevenson, for his comments in Committee regarding the scope of the target. In particular, he raised concerns around the clarity of the coverage regarding voluntary and community bodies. I have reflected on this issue and I agree that there is more that we can do in the Bill to clarify it. I have therefore tabled Amendment 23, which is a relatively straightforward provision to simplify Clause 27(5). It will remove the current membership threshold of at least 21 individuals for unincorporated bodies that do not distribute any surplus to their members. As I am sure many noble Lords will be aware from their own work in the voluntary sector, such bodies can be adversely affected by redundant, ineffective or excessively burdensome regulation, just as much as businesses can. Therefore, including them within the scope of the business impact target makes a lot of sense. It will not harm the voluntary sector, but will help to ensure that any burdens from new regulations are minimised and that there is transparent reporting of impacts.
This Government have already made a number of changes that have made it easier to set up and run charities and social enterprises. Those include providing greater legal clarity on volunteer liability and supporting proposals to make criminal record checks simpler and less onerous. The amendment will mean that such bodies are not excluded from the definition of “small” and “micro” businesses in Clauses 33 and 34, meaning that they can benefit from any regulatory exemptions made by reference to that definition. I hope noble Lords will welcome the amendments, and I beg to move.
Amendment 21 agreed.
22: Clause 19, page 20, line 2, at end insert “, and
(b) lay any such guidance or revised guidance before Parliament.”
Amendment 22 agreed.
Clause 27: Sections 21 to 25 etc: interpretation
23: Clause 27, page 26, line 16, leave out sub-paragraph (i)
Amendment 23 agreed.
Clause 28: Duty to review regulatory provisions in secondary legislation
24: Clause 28, page 27, line 23, at end insert—
“( ) The Secretary of State shall conduct a review of the current regulatory machinery used to consider regulatory and deregulatory proposals.
( ) The review should include, but not be limited to, the work of the Regulatory Policy Committee.
( ) Following the findings of the review the Secretary of State shall bring forward regulations to enhance the role of the Regulatory Policy Committee and its recommendations.”
My Lords, the amendment is in my name and that of my noble friend Lord Mendelsohn.
The amendment might have been raised within the Deregulation Bill, because it deals with the overall architecture of the regulatory framework. Although I am proposing the amendment to Clause 28, to some extent it is possibly echoed in some other phrases and clauses in the Bill. However, it would be useful to get a response from the Government on the issue. I look forward to hearing what the Minister is able to say in response to my comments.
By way of background, I want to reflect a little on the purposes of regulation. The purpose of the amendment is to probe further the Government’s intentions in the changes that they are making to the regulatory machinery, particularly that bit currently undertaken by the RPC, which reflects on secondary legislation and gives the Government an external view of how that regulation will work in practice, particularly in the business area but not restricted to that.
Regulation is a word that we use extensively in this Bill and the Deregulation Bill. It takes several forms, and we should be careful to try not to mix them up too much. There are things that businesses have to do to be compliant, either with industry standards or with health and safety. But there are, in some senses, different types of regulation, including pre-emptive measures by businesses to reduce the likelihood of being sued, inspection-based regulations for food and hygiene standards, and workplace and financial regulations, particularly health and safety. Many of these will offer benefits to businesses outside of simple compliance, but, in many cases, they are there in generic form and do not specifically help an individual business.
It is important to bear in mind that the culture and context within which businesses operate, which we talked about a lot in earlier amendments, results from a combination of legislation and regulation. The two go together and cannot be distinguished, but where they are coming from and what they are trying to achieve must be carefully thought through.
I say all that because the Government have made a virtue of their one-in, one-out approach—now one in, two out. Doing it by numbers has rather taken the eye, rather than trying to lead into proper consideration of what the regulation is about. In some senses, it is a good thing. Simply saying that there has to be a reduction in regulation does focus the mind. But, and I offer this simply by way of observation, I feel that, in the Deregulation Bill, we got a response by numbers and not by intention or principle, which is not necessarily the right way. There may be a better approach, which might be to think harder about what it is that regulation is attempting to do and try to work out, across the various aspects of it, how it could be made more appropriate to the job.
Such an approach really has to answer questions about whether regulation is the right approach or there is some other solution; whether the regulations come from an external force, such as European Union requirements; and whether it will be easy to comply with. These are all areas that follow on from the need that one has. One hopes that, in doing that, the assessments that are made in the preparation of regulation answer those questions and, in aggregate, provide a better environment in which regulation operates. As part of that arrangement, the Government have set up and use an independent body, the RPC, to look at regulations put forward. It provides a kind of “traffic light” solution, which is relatively crude in its outline, as well as some detailed comments about whether the regulations are fit for purpose, whether they will achieve what is intended and whether they need to be rethought in terms of their impact.
If we are to continue to have the approach that I have outlined, which is not just a by-numbers approach but one which reflects the kind of economy that we are trying to build, supporting high-quality skills and other things, and where regulation in totality is fit for purpose and is as good as can be got, there is a role for a body which looks across the totality of government and considers more than just how the Government are proposing regulations but how they will apply. It is a two-sided approach: both looking at the words in the regulations and the impact that they will have, not just on business but on society more generally. One then has to ask what needs to be set up in order to do that.
As I understand it, Clause 28 requires departments to review secondary legislation that they propose. In our earlier exchanges in Committee, the impression was gained—I would like the Minister to confirm or deny it—that this would affect the work of the existing RPC, which is very well regarded. It is not entirely clear from Clause 28 what exactly is happening here, so I would be grateful if we could have more detail on that. Will the RPC be made statutory? Will there be more bodies that each department will have? Will the new arrangements being introduced be limited to secondary legislation or will they have a wider remit, as has the RPC, for all regulation, including regulation that impacts on other groups such as consumers, charities and other bodies?
Where will responsibility for the new system lie within government? Will it be within BIS or will it go to the Cabinet Office? That would be a more logical place to locate it, because the arrangements have to apply around Whitehall and not just within the business department.
The primary purpose of the amendment is to add some more detail to what was said in Committee and to enable us to reflect more carefully on the position of the RPC. I beg to move.
My Lords, in moving the amendment in his name and that of the noble Lord, Lord Mendelsohn, the noble Lord, Lord Stevenson, raises a number of interesting issues. I am delighted to be able to share many of the sentiments that lie behind the proposal, having served both the previous Government under both their Prime Ministers and this Government on a number of independent bodies advising them on better regulation.
While supporting and sharing the sentiments that lie behind the amendment, I am not completely convinced that the Bill is the right place in which to progress them. I am also concerned that, as written, there could be unintended consequences.
I wholly agree that the Secretary of State should be reviewing the current regulatory machinery used to consider regulatory and deregulatory proposals. I would prefer to see—which I believe is the case—the relevant Secretary of State regularly reviewing the entire regime that oversees regulation and deregulation; so rather than it being a one-off exercise, this, as it were, should be a regular exercise undertaken by any Government.
Going on to the next part of the amendment, I also agree that the scope of the review should include the RPC, but not be limited to the RPC. That is absolutely right. Not only are regular reviews very important, but the reviews should be very broad and should cover the broad scope that the noble Lord, Lord Stevenson, set out in terms of the landscape that surrounds and underpins legislation and determines the culture that produces legislation, regulation and so forth.
The ecology of regulation is certainly a very long and quite complex one. The review should look at how the better regulation machinery deals with policy-making prior to regulatory proposals being brought forward. It should look, as the RPC does, at specific proposals that come forward, but it should also look at compliance and enforcement issues. As the noble Lord, Lord Stevenson, mentioned, it should also look at the extent to which alternatives to regulation are properly considered. I share the motives behind this amendment, but, as I said, I have concerns about the exact proposal for putting this in the Bill.
In terms of the possible unintended consequences, it is the third part of the amendment that I have some concerns about. It is, to an extent, pre-emptive. To have a review of the better regulatory regime, and then presume that it must be the RPC that needs to be strengthened, is almost pre-empting the outcome of any such review. I wholly agree with the noble Lord that, at the moment, the RPC is the best show in town. It is doing an excellent job. It is well established, very well respected and extraordinarily effective. It is providing robust and independent scrutiny and analysis, supporting new regulatory proposals.
At 3 pm today I went to the launch of the RPC’s latest annual report. It was a well attended event. It looked back at the work it had done since 2010, over the lifetime of this Parliament. There are some very impressive statistics in the report. For example, it has managed to drive an improvement in the percentage of impact assessments from departments that are judged to be fit for purpose to around 80%. That is a much higher percentage than was the case in 2010, and some departments are achieving a much higher percentage than 80%. If noble Lords read nothing else but the executive summary, they will see a page or two of very impressive achievements elsewhere on what it has managed to deliver by way of progress. Further to the remarks of the noble Lord, Lord Stevenson, in those five years the RPC has scrutinised more than 1,200 regulatory proposals and issued just over 2,000 opinions on the quality of the evidence base supporting those proposals. It has done an extremely important piece of work throughout the past five years. I agree that the RPC’s role is absolutely fundamental to the current better regulation regime.
If we had been debating this matter eight years ago, we would have said that the Better Regulation Commission was the best show in town. A similar amendment then would have suggested putting the BRC in the Bill. If we had been discussing it 12 years ago, we would have said that the Better Regulation Task Force was the best show in town and would have suggested putting that in the Bill. One of the strengths of the better regulation effort by successive Governments over the past 10 to 15 years has been its ability to evolve. My concern about the last part of this amendment is therefore that it presumes the continuity of the current body. The RPC is, as I said, doing an extraordinarily effective job at the moment; but given what we have learnt from the past 15 years, it is not unlikely that we might eventually want either the RPC to evolve into a successor body or to create another body alongside it to broaden its duties or scope.
The last chapter of the RPC annual report which was launched today deals with the future. It is a very interesting chapter in that the RPC speculates, with the experience it has gained, on how it could be more effective and how the better regulation effort could be more effective in the years to come. Although I favour leaving the Bill as it is, the noble Lord’s comments in moving the amendment, and the issues which the amendment raises, are very important. The Secretary of State should regularly conduct major reviews of the machinery and landscape surrounding regulation. Those reviews should be very broad-ranging and should look both at current bodies and at new bodies that may be sensibly developed in the future. In the mean time, I welcome that the Bill provides for the continuity of the role that the RPC performs and the outcomes that it delivers. That is the most important thing—that the role is undertaken and the outcomes achieved.
Under the business impact target, the Secretary of State must appoint an independent body to verify the impact of new regulations that are scored under the target. That is set out in Clause 25 and has been welcomed by the RPC. I agree that it is an important signal that independent scrutiny will continue to play a central role under any future Administration. The current arrangements under the RPC are working very well, and the RPC has developed a strong foundation for the future. However, to assume that the current machinery will be the right machinery in three or five years’ time might not be the best way to proceed with the Bill. Otherwise, I welcome the issues that have prompted the noble Lord to table this amendment.
I thank the noble Lord, Lord Stevenson, for his amendment and for his comments on the work of the Regulatory Policy Committee. I liked his comment on the “traffic light” solution. Indeed, I give credit to the party opposite for its decision to establish the RPC in the first place. That created an important and enduring cornerstone for the regulatory machinery—one which this Government have continued to develop and improve.
The amendment requires the Secretary of State to review the current regulatory machinery used to consider regulatory and deregulatory proposals. Of course, such reviews already take place from time to time. They look both at the distribution of responsibilities between different bodies, and at the specific rules and requirements. When this Government came into office, they carried out their own review as to what arrangements were required to deliver their key policy priorities for better regulation. Critically, that involved a strengthening of the RPC’s independent scrutiny role.
The Government carried out a further review in 2012, when some useful changes were made, including a “fast track” route for proposals whose impact on business is modest. That change has helped make the system more efficient for both departments and the RPC. I am sure that the Government will ensure that reviews of the system will continue to take place as and when necessary. Given the terms of the amendment, I am equally sure that the Opposition, were they to be in our place, would do the same.
However, the benefit of reviews needs to be balanced against the need for stability in the system. This is why, for example, the appointment of the verification body under the business impact target in Clause 25 is required to be for the duration of a Parliament. An open-ended duty to review, as proposed in this amendment, could potentially undermine that stability and as a consequence put at risk a future Administration’s ability to deliver against the business impact target. It would also generate uncertainty for stakeholders about the wider regulatory system.
The amendment also requires that once a review of the machinery has been completed the Secretary of State must bring forward proposals to enhance the role of the RPC. The Government are by no means opposed to expanding the role of the RPC where it can add value—in 2013, we asked the RPC to scrutinise the new small and micro-business assessment—but it is very odd to create a statutory commitment to a further expansion of the RPC’s role in advance of the review that the amendment envisages.
The noble Lord, Lord Stevenson, asked whether the Government were legislating for the RPC. We are legislating to underpin the business impact target with robust independent scrutiny. Clause 25 requires the Secretary of State to appoint an independent body to perform that verification function. The proposals in the Bill entrench in legislation the verification role currently performed by the RPC but do not change the status or independence of the RPC. As regards the status of the RPC, it is an advisory non-departmental public body of BIS. It is not established in statute and does not have a separate legal personality. Its members are independent from the Government.
There is cross-party support for the RPC, the wider framework within which it operates and the principle that, from time to time, that framework should be reviewed. We can rely on that consensus to secure such reviews when they are needed. We do not need a statutory provision to do so. I hope that the noble Lord will be persuaded by my explanations and will agree to withdraw his amendment.
I thank the Minister for that response and also the noble Earl, Lord Lindsay, for his comments. We are at exactly the same place on this. I was only a bit sad that I got caught out trying to have my cake and eat it by sketching out the work which I think we agree is continuing and necessary, which will be to think harder about the regulatory functions, how best they can be delivered and—constructively and creatively—how best to do that work of review and scrutiny. On the other hand, I was taken by the “best show in town” argument: since we need something like this, why not just build on what we have, because it seems to be the best version of the body we all seem to think is necessary?
The Minister is right: the ecology of regulation needs a bit more scrutiny than it sometimes gets. Of course, his work and experience here were instrumental in our thinking on this. Without that scrutiny, we will not be in a very strong place to build on the policy issues we are talking about, and to think harder about the way in which legislation and regulation will bite on individuals, companies and society as a whole. There is not an easy solution. We must just keep it under review.
I note what the Minister said in his response. Maybe we should leave things as they are for the moment, but the lessons need to be taken back to all departments, not just BIS. There may be some argument for BIS perhaps loosening its hold on this and encouraging other departments to have a bigger share of it. Although in some senses that makes it less likely to be effective because there is no champion within government, it might have the impact of raising other people’s game, which would be good. We need more thinking around that—I am not saying that we would necessarily do it at this stage.
The annual report of the RPC is very impressive, as the noble Lord said. The volume of work it does is astonishing, given that it is independent, non-statutory and has no particular locus within government. I do not know how we get these people to do the work they do, but it is a message we might pick up in other areas. With that, I beg leave to withdraw the amendment.
Amendment 24 withdrawn.
My Lords, first, I congratulate the noble Lord, Lord Stevenson, on his excellent timing. With the leave of the House, I shall repeat a Statement made in another place by my honourable friend the Minister for Housing:
“Honourable Members will be aware of the Government’s ambition to create a new garden city at Ebbsfleet and of our intention to establish an Urban Development Corporation to drive forward its development and delivery. I would like to take this opportunity to update honourable Members on the progress we have made.
The country has faced a shortfall in housing for many years, with young people and families struggling to find the homes they want and need, particularly in the south-east. We are committed to increasing their chances, and our programmes to accelerate housebuilding are already seeing results. Our £1.5 billion large sites programme is expected to unlock 100,000 homes by the end of this month and a further 200,000 homes could be unlocked as we take the programme forward. This is in addition to the plans in place to create housing zones on brownfield sites across the country.
Last year, we published our prospectus for locally led garden cities, and we are now working closely to support the development of a new garden town at Bicester, with capacity to deliver up to 13,000 new homes. Our approach is a locally led approach. We invite local areas to come forward without any top-down, centrally imposed requirements. This approach will help make new garden cities locally acceptable and so make them a reality.
With close transport links and large areas of brownfield land, the Ebbsfleet area has huge potential as a place to deliver a substantial number of new homes. It has long been identified as an ideal location for major development—in fact, as far back as the last Government’s Sustainable Communities Plan. Yet, despite these ambitions, progress has been slow and Ebbsfleet remains largely undeveloped. Our plans for Ebbsfleet aim to change that and drive forward this historic development.
At last year’s Budget, the Government therefore announced plans to create a new, locally led garden city at Ebbsfleet, Kent, capable of providing up to 15,000 new homes based predominantly on brownfield land or former quarries. The Government are seeking not only to increase the pace of development but to create high-quality development and to build homes that are supported by local employment opportunities, green space and the necessary infrastructure so that Ebbsfleet becomes a place where people want to live, work and raise families.
To help realise this vision, the Government have announced that up to £200 million of infrastructure funding would be made available to support delivery. We also announced that a new statutory body—an Urban Development Corporation—would be formed to bring real focus on driving forward delivery. Since then, we have been working closely with each of the three local authorities and other partners on the preparatory work to establish the Urban Development Corporation and set the scene for the future garden city. I welcome the cross-party support that the Opposition have given to these proposals.
I am pleased to report that housebuilding is already under way in some areas of the proposed garden city. Last November, I opened the first phase of housing being led by Ward Homes at Castle Hill. Today, Land Securities exchanged contracts with Persimmon Homes for the next phase of 170 new homes at Castle Hill. Much remains to be done to increase the rate of development at Ebbsfleet, but this is welcome progress none the less.
In August last year, we consulted on the proposal to set up an Urban Development Corporation. We set out the powers that we are proposing that the corporation will have, including compulsory purchase powers, the transfer of the planning management powers that are currently exercised by the local authorities and, of course, the ability to invest money to secure the regeneration of the area. In our consultation, we asked for views on the area in which the Urban Development Corporation would operate, the planning powers that it would be granted and the composition of the board. The consultation was supported by an active engagement campaign, and the results demonstrated overall support for the proposal to create a development corporation for Ebbsfleet. In December last year, we published our response to the consultation in which we therefore confirmed our intention to continue with the proposal to establish a development corporation at Ebbsfleet.
The consultation, although supportive, did highlight some areas of concern, such as the impact of development on existing infrastructure. These issues were not unanticipated, and at the Autumn Statement the Government announced that there will be a review of the transport provision for the Ebbsfleet area. At the Autumn Statement, the Government also announced the provision of the first £100 million to fund infrastructure and land remediation to kick-start development, subject obviously to due diligence. We are working closely with local partners to understand the scale of the infrastructure required and how best to accelerate delivery. We want to ensure that, on establishment, the Urban Development Corporation has in place the tools necessary to enable it to hit the ground running. It is crucial that the Urban Development Corporation is able to pick up the reins from the local authorities and deliver on its objectives seamlessly, without causing any unnecessary uncertainty among the local communities and businesses.
In August last year, we appointed Michael Cassidy as the chairman-designate. He was the chairman of the City of London Property Investment Board and has extensive experience in a range of roles across the business and industry sectors. Since his appointment, he has been actively engaging with local partners and the major landowners to develop a shared understanding of the work required to drive forward development.
More recently, we launched the recruitment process for a permanent chief executive. However, as this post will take some months to fill, we are appointing key interim personnel to maintain momentum and continuity. These interim posts will, in the mean time, continue to drive forward not only the set-up of the Urban Development Corporation, but also progress with the work to develop a shared strategy for the garden city. We have also made progress with the process to recruit, through open competition, the remainder of the Urban Development Corporation’s board members. Ninety applications were received and interviews are under way. These will be in addition to the local authority representatives from Dartford, Gravesham and Kent, who, as we have already made clear, will have a seat on the board.
The Urban Development Corporation will develop a shared vision and master plan for the locally led garden city which reflect the views of the local people. However, there is much that can be done in the mean time to set in place the foundations for this work and provide a platform for the Urban Development Corporation to work from. We are therefore progressing with the production of a development framework for the area. This will provide critical baseline data and act as the starting point for the design of the future Ebbsfleet garden city. In parallel, we are preparing the procurement process for a full master plan which can then be taken forward by the Urban Development Corporation. We want the design of the garden city to be as collaborative as possible. We will therefore use this preparatory work to make sure that future master-planning is carried out in a way that encourages the full participation of the local communities and local businesses.
We recognise that there is likely to be a transition period between the establishment of the Urban Development Corporation and the point at which it will be fully resourced to operate as the local planning authority. We are therefore working closely with the local authorities to agree and put in place a service-level agreement. This will enable the local authorities to administer the planning service for the Urban Development Corporation for a transitional period to ensure a smooth handover and develop a partnership to deliver a locally led garden city. We are also pushing forward with the final key stages of the physical set-up of the Urban Development Corporation, putting in place the accommodation and technical facilities needed to ensure that it is fully resourced and equipped to undertake its objectives.
Honourable Members will be aware that, in the other place, the Government tabled an amendment to the Deregulation Bill to change the parliamentary approval procedure from affirmative to negative for the establishment of the urban development areas and Urban Development Corporations. This amendment was accepted and is now part of the Deregulation Bill. I would like to place on record my thanks to the honourable Member for the City of Durham, Roberta Blackman-Woods, for her participation in discussions on how to proceed on this matter. I know she shares my view that we want to see progress in taking this proposal forward.
The Government therefore intend, subject to parliamentary approval, to lay a negative statutory instrument immediately following Royal Assent to establish the Urban Development Corporation. A separate order to grant the Urban Development Corporation planning functions, making it the local planning authority responsible for the development of the area, will be laid at the same time. I trust that this update will reassure honourable Members of the Government’s commitment to drive forward with creating a locally led garden city at Ebbsfleet fit for the 21st century”.
My Lords, I thank the Minister for repeating a Statement made in the other place. We are strong supporters of the development of Ebbsfleet and agree with what has been said about it in the Statement about it having huge potential to deliver a substantial number of new homes, which are desperately needed. The development of Ebbsfleet provides opportunities but by all accounts challenges in difficult terrain. We want to see a new generation of garden cities and new towns, and Ebbsfleet could be an important contribution towards such a programme. As the Minister said in his Statement, that is why my colleagues in the other place have sought to work constructively and on a cross-party basis with the Government on the delivery of Ebbsfleet. When because of their tardiness the Government fell foul of the Delegated Powers Committee we supported them on the amendment to the Deregulation Bill. The Minister will be aware that we remain unconvinced that the negative procedure, accompanied by a statutory duty to consult, was the best one for establishing the UDC.
As the Minister in the other place said, my honourable friend the Member for the City of Durham participated heavily in the discussions with the Government on this. She has a strong commitment to the delivery of a new generation of garden cities and has spoken eloquently on these issues in the other place and elsewhere. We of course welcome the forming of a development corporation to drive the development, but we have concerns about the use of urban development corporations to deliver a full programme of garden cities. Perhaps the Minister could take a moment to say in what way the garden city principles are to be encapsulated by the Government in the plans for Ebbsfleet. As he knows, UDCs are not set up to deliver garden cities or developments formed on the basis of garden city principles. That is also why we pushed for the inclusion of a sunset clause in what was then the Infrastructure Bill.
Although we welcome the initiative that the Government are taking to set up a UDC, it is safe to say that over the past five years they have given mixed messages on Ebbsfleet and garden cities. These were summarised by my honourable friend Emma Reynolds MP. She reminded us that in 2011, the then Housing Minister spoke about “rebooting” garden cities. Three years ago the Prime Minister announced that he would be publishing a consultation on garden cities by the end of the year. Six months later, the Deputy Prime Minister said that there was some lively debate going on within Government, but promised incentives that would deliver projects that were “big and bold”.
In December 2012 the Government announced that Ebbsfleet would be a site for the large-scale development of 20,000 homes. Early last year, instead of the big and bold projects that were promised, there were reports in the newspapers that the Prime Minister was suppressing a document and had gone cold on the idea. In January last year the then Housing Minister said that he was not aware of a report that was supposed to have been published, but the Deputy Prime Minister said that there was a prospectus and that the Government should be honest about their intentions. Then the Secretary of State contradicted his Housing Minister and said that he had been told by his department that there was a report, but not a report from the Department for Communities and Local Government—so that is all very clear.
In the Budget, the Chancellor announced that there would be a new garden city at Ebbsfleet with 15,000 homes. But today we should not be churlish. We finally have the welcome step of the setting up of a development corporation, but after five years of confusion and lots of announcements but very little action, I am afraid that many people will have concluded that this Government are not serious about tackling the housing crisis.
I shall conclude with a few questions. The Government made it clear earlier in the year that, once established, the Ebbsfleet urban development corporation would be expected to identify sources of additional funding further to the £200 million earmarked by the Government for basic infrastructure. Will the Minister tell the House how much additional funding is necessary to get Ebbsfleet moving and whether this additional funding has been identified from the private or public sector?
Will the Minister explain why he has not mentioned affordable housing today? Can he reassure the House that in the master plan there will be a commitment to a significant number of affordable homes? The Government’s garden city prospectus invited communities to come up with garden city proposals—or “big and bold” projects, as the Deputy Prime Minister called them. Will the Minister tell the House how many bids have come forward so far? Finally, will he say why is it thought that the urban development corporation is an appropriate model for the development of garden cities?
I reiterate that we support the development of Ebbsfleet. Now is the time to make real progress after the delays of recent times.
My Lords, I record my thanks and those of the Government to the Opposition and, in particular, to the noble Lord, Lord McKenzie, for his co-operation and support in the discussions that we have had about the Ebbsfleet development. Indeed, the noble Lord suggested the sunset clause he alluded to, which was taken up by the Government. I thank him for the constructive discussion we had in this regard on the important issue of moving forward.
The noble Lord asked a series of questions, and I will address them. He mentioned the importance of housing and the need to move forward. The Government share that objective, and we are driving forward on a raft of different initiatives that I referred to in the Statement I repeated.
The noble Lord raised the issue of the principles of garden cities, with specific regard to Ebbsfleet. We do not seek to prescribe what a garden city will mean at Ebbsfleet. That will be for the UDC to establish with the local community—but, as noble Lords would expect, we expect it to include good-quality design and green space. The noble Lord asked why a UDC was necessary and perhaps answered that question in that, as I mentioned in the Statement, we have seen delays on the development at Ebbsfleet, and the UDC will provide the necessary focus and commitment in ensuring that we move development forward in this area.
The noble Lord asked a series of other questions about the funding of the Government’s commitment. Again, it is for the UDC to establish what is needed and to make progress with development in the Ebbsfleet area—which will be the funding over and above the £200 million. He also asked about the garden city prospectus and said that there was confusion about whether it existed, whether it was a secret report and where it sat. It is not a secret report; the Government’s position is set out in the prospectus.
The noble Lord asked about the number of bids. I have announced Bicester—I mentioned that in the Statement I repeated—and we continue to work with other places interested in the delivery of large-scale development and garden city principles through the large-sites programme.
Once again I thank the noble Lord and Her Majesty’s Opposition for their support in moving this development forward with the creation of the UDC. I hope that once it is created we will be able to move forward rapidly in seeing housing developments progress to the target of 15,000 homes that has been set.
The noble Lord also asked about affordable housing. I have previously said from the Dispatch Box that the affordable housing requirement will reflect what is contained in the local plans of the authorities that will make up the UDC and will sit on its board.
My Lords, we, too, welcome the statement that £1.5 billion is being made available to the large-sites programme. I know that had already been announced, but that has been taken a stage further with the news that Bicester has applied for funding under the infrastructure support route, as mentioned in the Statement. The Minister did not quite answer the question put to him by the noble Lord, Lord McKenzie, about whether the £200 million that will be made available to Ebbsfleet for infrastructure is supposed to cover the whole of the cost of the infrastructure development or whether some money has to come from other sources and, if so, what they are. The Minister said that was a matter for the UDC to press forward. Will it be able to come back to the department if the £200 million proves insufficient or does it all have to come from private sources, which is what the noble Lord, Lord McKenzie, asked?
The Minister said that the first £100 million is to fund infrastructure and land reclamation and to kick-start development. Will he amplify that a little? What does he mean by “kick-start development”? I understand that a lot of work has to be done on the infrastructure because the state of the land means that a lot of remedial work has to be done on it. Does “kick-start development” mean that part of the £200 million that has been allocated for Ebbsfleet is for the construction of homes or facilities for the people who live in the homes? I know that the funding of schools has already been arranged with the developers. It would be useful if the Minister could say a little more about how that will work. If the developers are responsible for providing public services, such as schools or health centres, it would be useful for us to know that at the start.
The Statement says that—
I will try to be as brief as possible. What is the work required to drive forward development which the head at Ebbsfleet is now discussing with others? Will the Minister be a little more specific about that? Will he amplify what was said in the Statement about the development framework for the area? Will he give us some indication of what the baseline data which are to be provided are and the timescale for them to be provided? Finally, local authorities are to administer the planning service for the UDC for a transitional period. What does he envisage that will be? When will the UDC be in a position to take over the planning functions that it will ultimately have to deliver?
My Lords, my noble friend has raised a series of questions related to infrastructure and funding. With the leave of the House, I will answer one or two to allow for more questions, and will then write to him with specific details, which I will of course share with noble Lords.
The mainstay of my noble friend’s questions was about the £200 million and the further money required. This is not a cap for the UDC to work out what is needed and to make the case to the Government if more money is required. As I have said, the first task for the UDC is to draw up a business plan with details on how to spend the first £100 million—not on homes, as he asked specifically, but on infrastructure. That could include—to answer some of his questions—schools and community facilities. We very much want the UDC to be in the position of telling us how it can move this forward.
The important element is that this is not about giving the UDC specific targets or parameters in which to work. Once the UDC is created and appointed with local expertise, including representation from local authorities on its board, it is then up to the UDC to identify the priorities for the area, to ensure that whatever garden city develops reflects local needs, as I said in my response to an earlier question from the noble Lord, Lord McKenzie. As to the other specific questions that my noble friend asked, I will write to him.
My Lords, I join my noble friend in welcoming the Statement. I will ask a few very short questions and will be perfectly content with the Minister replying to most or, if necessary, all of them in writing.
First, what proportion of the affordable housing might be expected to be for rent, and will that include social housing? Secondly, to what extent will environmental concerns about housing design—particularly around energy efficiency—be incorporated into the scheme? Thirdly, will there be provision for extra care housing for the elderly? Since there will probably be 40,000 people or more we are going to see a town here, so it might be sensible to have extra care housing as part of the development. Fourthly, what steps will the Government encourage the UDC to take to ensure that there are employment opportunities—including training—for local people from the Kent area and the district councils there?
At what point, if any, will the local community—once it is becoming more of a town—be involved with the UDC? Will there be opportunity for local residents to become members of the UDC board once they become established there? Finally, what is the position regarding the provision of health facilities? Presumably NHS England will be involved in that, although normally of course the CCG will be commissioning hospital services. At what point will NHS England and the UDC be looking at the provision of appropriate health services?
The noble Lord rightly asks a series of quite specific questions. If I may, I will take up his offer and come back to him in writing on some of them. He raised—for example—the issue of affordable housing and clean energy and there is a target of 30% in the local plans, covering all forms of tenure. It is for the UDC to look at issues such as clean energy, and the board will be recruited on the basis of a wide variety of skills including expertise in this area. He asked specific questions about the elements of affordable housing. As I said earlier, this will reflect the priorities of the local authorities which will be represented on the UDC board. Specific questions on care homes, again, are very valid concerns to raise. On the specifics of affordable housing, I will write to him, because it is important we cover these issues in the detail he asked for.
My Lords, could I put this in a wider context? Progress on Ebbsfleet is welcome but, as the Statement indicated, it has been complex and slow and at the end of the day, we are talking about 15,000 dwellings. Best estimates suggest that we need 200,000 dwellings or so a year, of all forms of tenure. Can the Minister indicate in terms of other potential garden cities, or similar large sites, what proportion of that 200,000 is likely to be provided by initiatives such as Ebbsfleet and, I hope, Bicester? What proportion of that would be affordable housing, because we really need a much more substantial effort on the total housing crisis? While progress today is welcome, it is a very, very small step indeed.
I thank the noble Lord for his welcome support. He mentioned Ebbsfleet, but Bicester has certainly put forward a bid and we are looking at other areas to come forward with bids which will reflect their local needs. As to the specific issue of housing and the need to meet the requirements that we currently have, I share his concern.
I talked earlier about unlocking 100,000 homes through the large-sites programme. This is the aggregate number of the impact the Government have made on housing delivery through providing investment, capacity funding and brokering solutions. We have talked about unlocking a further 200,000. This is what we expect to be delivered through the current shortlisted schemes, and the Government are investing a great deal in various initiatives that we have undertaken. One example I will share with your Lordships’ House is the issue of housing zones. We are in the process of announcing the list of successful housing zones, whereby we are looking at innovative solutions to actually provide the housing which is clearly needed up and down the country.
Maternity Services in Morecambe Bay
My Lords, with the leave of the House, I shall now repeat a Statement made earlier today by my right honourable friend the Secretary of State for Health in another place about maternity care at the University Hospitals of Morecambe Bay NHS Foundation Trust. The Statement is as follows.
“With your permission, Mr Speaker, I would like to make a Statement on the independent investigation into the care of mothers and babies at the University Hospitals of Morecambe Bay NHS Foundation Trust, which is being published today. I commissioned this report in September 2013 because I believed there were vital issues that needed to be addressed following serious incidents in maternity services provided by the trust dating back to 2004.
There is no greater pain than for a parent to lose a child, and to do so knowing it was because of mistakes that we now know were covered up makes the agony even worse. Nothing we say or do today can take away that pain, but we can at least provide the answers to the families’ questions about what happened and why, and in doing so try to prevent a similar tragedy in the future.
We can do something else, too, which should have happened much earlier. That is, on behalf of the Government and the NHS, to apologise to every family that has suffered as a result of these terrible failures. The courage of those families in constantly reliving their sadness in a long and bitter search for the truth means that lessons will now be learnt so that other families do not have to go through the same nightmare. We pay tribute to those brave families today.
I would especially like to thank Dr Bill Kirkup and his expert panel members. This will have been a particularly difficult report to research and write, but the thoroughness and fairness of their analysis will allow us to move forward with practical actions to improve safety, not just at Morecambe Bay, but across the NHS.
Before we discuss the report in detail, I know the whole House will want to recognise that what we hear today is not typical of NHS maternity services as a whole, where 97% of new mothers report the highest levels of satisfaction. Our dedicated midwives, nurses, obstetricians and paediatricians work extremely long hours providing excellent care in the vast majority of cases. Today’s report is no reflection on their dedication and commitment, but we owe it to all of them to get to the bottom of what happened so we can make sure it never happens again.
The report found 20 instances of significant or major failings of care at Furness General Hospital, associated with three maternal deaths and the deaths of 16 babies at or shortly after birth. It concludes that different clinical care would have been expected to prevent the death of one mother and 11 babies. The report describes major failures at almost every level. There were mistakes by midwives and doctors, a failure to investigate and learn from those mistakes, and repeated failures to be honest with patients and families, including the possible destruction of medical notes. The report says that the dysfunctional nature of the maternity unit should have become obvious in early 2009, but regulatory bodies including the North West SHA, the PCTs, the CQC, Monitor and the PHSO failed to work together and missed numerous opportunities to address the issue.
The result was not just the tragedy of lives lost. It was indescribable anguish for the families left behind. James Titcombe speaks of being haunted by ‘feelings of personal guilt’ about his nine day-old son who died. ‘If only’, he says, ‘I had done more to help Joshua when he still had a chance’. Carl Hendrickson, who worked at the hospital and lost his wife and baby son, told me that he was asked to work in the same unit where they had died and even with the same equipment that had been connected to his late wife. Simon Davey and Liza Brady told me the doctor who might have saved their son Alex was shooed away by a midwife, with no one taking responsibility when he was tragically born dead. In short, it was a second Mid Staffs, where the problems, albeit on a smaller scale, occurred largely over the same time period.
In both cases perceived pressure to achieve foundation trust status led to poor care being ignored and patient safety being compromised. In both cases the regulatory system failed to address the problems quickly. In both cases families faced delay, denial and obfuscation in their search for the truth, which in this case meant that at least nine significant opportunities to intervene and save lives were missed. To those who have maintained that Mid Staffs was a one-off ‘local failure’, today’s report will give serious cause for reflection.
As a result of the new inspection regime introduced by this Government, the trust was put into special measures in June 2014. The report acknowledges improvements made since then which include more doctors and nurses, better record-keeping and incident reporting, and action to stabilise and improve maternity services, including a major programme of work to reduce stillbirths. The trust will be reinspected this summer, when an independent decision will be made about whether to remove it from special measures. But patients who use the trust will be encouraged that the report says that the trust,
‘now has the capability to recover and that the regulatory framework has the capacity to ensure that it happens’.
The whole House will want to support front-line staff in their commitment and dedication during this difficult period.
More broadly, the report points to important improvements to the regulatory framework, particularly at the CQC, which it says is now,
‘capable of effectively carrying out its role as principal quality regulator for the first time … central to this has been the introduction of a new inspection regime under a new Chief Inspector of Hospitals’.
As a result of that regime, which is recognised as the toughest and most transparent in the world, 20 hospitals—more than 10% of all NHS acute trusts—have so far been put into special measures. Most have seen encouraging signs of progress, with documented falls in mortality rates, but there remain many areas where improvements in practice and culture are still needed. Dr Kirkup makes 44 recommendations—18 are for the trust to address directly, and 26 for the wider system. The Government received the report yesterday and will examine the excellent recommendations in detail before providing a full response to the House.
However, there are some actions that I intend to implement immediately. First, the NHS is still much too slow at investigating serious incidents involving severe harm or death. The Francis inquiry was published nine years after the first problems at Mid Staffs, and today’s report is being published 11 years after the first tragedy at Furness General. The report recommends much clearer guidelines for standardised incident reporting, which I am today asking Dr Mike Durkin, director of patient safety at NHS England, to draw up and publish. However, I also believe that the NHS could benefit from a service similar to the Air Accidents Investigation Branch of the Department for Transport. Serious medical incidents should continue to be investigated locally, but where trusts feel that they would benefit from an expert independent national team to establish facts rapidly on a no-blame basis, they should be able to do so. Dr Durkin will therefore look at the possibility of setting up such a service for the NHS.
Secondly, although we have made good progress in encouraging a culture of openness and transparency in the NHS, this report makes clear that there is a long way to go. It seems medical notes were destroyed and mistakes covered up at Morecambe Bay, quite possibly because of a defensive culture where the individuals involved thought they would lose their jobs if they were discovered to have been responsible for a death. However, within sensible professional boundaries, no one should lose their job for an honest mistake made with the best of intentions. The only cardinal offence is not to report that mistake openly so that the correct lessons can be learnt.
The recent recommendations from Sir Robert Francis on creating an open and honest reporting culture in the NHS will begin to improve this, but I have today asked Professor Sir Bruce Keogh, medical director of NHS England, to review the professional codes of both doctors and nurses and to ensure that the right incentives are in place to prevent people covering up instead of reporting and learning from mistakes. Sir Bruce led the seminal Keogh inquiry into hospitals with high death rates two years ago that led to a lasting improvement in hospital safety standards and has long championed openness and transparency in healthcare. For this vital work he will lead a team which will include the Professional Standards Authority, the GMC, NMC and Health Education England, and will report back to the Health Secretary later this year.
The report also exposed systemic issues about the quality of midwifery supervision. While the investigation was underway, the King’s Fund conducted a review of midwifery regulation for the NMC, which recommended that effective local supervision needs to be carried out by individuals wholly independent from the trust they are supervising. The Government will work closely with stakeholders to agree a more effective oversight arrangement and will legislate accordingly. I have asked for proposals on the new system by the end of July this year.
For too long the NMC had the wrong culture and was too slow to take action, but I am encouraged that it has recently made improvements. Today it has apologised to the families affected by the events at Morecambe Bay. The NMC is already investigating the fitness to practise of seven midwives who worked at the trust during this time, and it will now forensically go through any further evidence gathered by the investigation to ensure that any wrongdoing or malpractice is investigated. Anyone who is found to have practised unsafely or who covered up mistakes will be held to account, which for the most serious offences includes being struck off. The NMC also has the power to pass information to the police if it feels a criminal offence may have been committed, and it will not hesitate to do so if its investigations find evidence which warrants this. The Government remain committed to legislation for further reform of the NMC at the earliest opportunity.
The report expresses a ‘degree of disquiet’ over the initial decision of the Parliamentary and Health Service Ombudsman not to investigate the death of Joshua Titcombe. I know the Public Administration Committee is already considering these issues and will want to reflect carefully on the report as it considers any improvements that can be made as part of its current inquiry.
Finally, I expect the trust to implement all 18 of the recommendations that have been assigned to it in the report. I have asked Monitor to ensure that this happens within the designated timescales, as I want to give maximum reassurance to the patients and families who are using the hospital that no time is being wasted in learning necessary lessons. We should recognise that, despite many challenges, NHS staff have made excellent progress recently in improving the quality of care, with the highest ever ratings from the public for safety and compassionate care. The tragedy we hear about today must strengthen our resolve to deliver real and lasting culture change so that these mistakes are never repeated. That is the most important commitment we can make to the memory of the 19 mothers and babies who lost their lives at Morecambe Bay, including those named in today’s report: Elleanor Bennett, Joshua Titcombe, Alex Brady-Davey, Nittaya Hendrickson and Chester Hendrickson. This Statement is their legacy, and I commend it to the House”.
My Lords, that concludes the Statement.
My Lords, I thank the noble Earl for his well-judged Statement and entirely echo the sentiments he expressed. Families in Barrow and the wider Cumbria area were badly let down by their local hospital and the NHS as a whole. He was right to apologise to them on behalf of both the Government and the NHS, and I do the same for the previous Government. It is hard to imagine what it must be like to lose a child or partner in these circumstances, but to have the suffering intensified by the actions of the NHS is inexcusable. Bereaved families should never again have to fight in the way that these families have had to fight to get answers. The fact that they found the strength and courage to do so will benefit others in years to come, and I pay tribute to them all, but particularly to James Titcombe. The report finally gives families the answers they should have had many years ago. It explains in detail both what went wrong and the opportunities missed to put it right.
I echo the noble Earl’s praise for Dr Bill Kirkup, the investigation team and the panel which assisted them. Our shared goal must now be to ensure that this report changes this hospital trust and the NHS as a whole for the better. Its recommendations are powerful but proportionate. We support them all, and the noble Earl can rely on our full support in introducing them at the earliest opportunity.
People’s first concern will be whether services are safe today. Clearly there are parts of this report where the alarm bell is being rung. It identifies the root cause of the failures as the dysfunctional local culture and the failure to follow national clinical guidance. There are suggestions in the report that this problem has not entirely disappeared. It says that,
“we also heard from some of the long-standing clinicians that relations with midwives had not improved and had possibly deteriorated over the last two to three years”.
It goes on,
“we saw and heard evidence that untoward incidents with worryingly similar features to those seen previously had occurred as recently as mid-2014”.
I am sure the fact that problems have been acknowledged means there is improvement. I very much take the latter point the noble Earl made in that regard, but can he say more about those findings and what steps are being taken to ensure that the trust now has the right staff and safety culture?
After safety, people will rightly want accountability, not just for the care failures but for the fact that problems were kept hidden from the regulators and the public for so long. When information did come to light it was not acted upon. Lessons were not learnt and problems were not corrected. The investigation recommends the trust formally admits the extent and nature of the problems and apologises to those affected. I am sure that this House, as well as the other place, will endorse that and want to see it done both appropriately and immediately.
Can I ask the noble Earl to ensure that any further referrals to the GMC and NMC are made without delay? Will he ensure that any managerial or administrative staff found guilty of wrongdoing are subject to appropriate action? I wonder whether it is time to revisit the issue of the regulation of managers and administrators because of this concern about staff moving on to another organisation and still being in the employ of the service, seemingly without being subject to accountability for their actions. We know a number of staff have left the trust in recent years, many with pay-offs. Will the noble Earl review those decisions in the light of the report and take whatever steps he can to ensure that those who have failed are not rewarded?
One of the central findings of the investigation is the particular challenges faced by geographically remote and isolated areas in providing health services. The investigation warns of the risks of a closed clinical culture, where,
“practice can ‘drift’ away from the standards and procedures found elsewhere”.
Given that, is not the report right to recommend a national review of maternity care and paediatrics in rural and isolated areas, and will he take that forward? Will the noble Earl comment on the concerns about the sustainability of the Cumbrian health economy? My honourable friend the Member for Copeland has today written to Simon Stevens, the chief executive of NHS England, to call for a review of the specific challenges it is facing. I hope that Ministers will be sympathetic to this call.
On the question of the CQC, the role of the regulator is to be a champion for patients, to expose poor care and to ensure that steps are taken to root it out. It is clear the regulator failed in that duty in this case. Given what was known, the decision to register the trust without conditions in April 2010 was inexplicable, as was the decision in 2012 to inspect emergency care pathways but not maternity services. In doing so, it failed to act on specific warnings. The report says there was, and remains, confusion in the system as to who has overall responsibility for monitoring standards, with overlapping regulatory responsibilities. We support the moves to makes the CQC more independent, but does the noble Earl agree that the journey of improvement at the regulator needs to continue and that there is a need for further reform, as recommended?
Will the noble Earl ensure that NHS England draws up the recommended protocol on the roles and responsibilities for all parts of the oversight system without delay and does he agree that the CQC should take prime responsibility? Does he also agree that the answer to a number of the problems identified is a much more rigorous system of review of deaths in the community and in hospitals than currently exists? Is it not the case that the reform of death certification and the introduction of a new system of independent medical examination are well overdue? We know Ministers have previously said that they are committed, in principle, to bringing this in but nothing has happened. I hope that the noble Earl will agree to bring this new system in without delay. It needs to go further, too. We need to look at mandatory reporting and investigation as serious incidents of all maternal deaths, stillbirths and unexpected neonatal deaths. We need to see how we can move to a mandatory review of case notes for every death in hospital. We have asked Professor Nick Black to advise us and inform a review which we want to conclude by the end of the month. I hope the noble Earl will support us in that review.
There are two other points I would like to raise with the noble Earl. I want to ask him about leadership of the profession nationally. He will know that maternity services are coming under great pressure at the moment. With the increase in the number of births, many maternity services are facing huge difficulties and challenges, particularly in recruiting midwives to work in those units and in making sure that they can respond to the pressures that are undoubtedly there. We do not have a chief midwifery officer, either at the Department of Health or at NHS England. I wonder whether we need a leader of the profession who can really start to raise the morale and tackle some of these issues which have been around for many years. There will be a head of profession within his department who will be working with the Chief Nursing Officer, but I wonder whether we need a more visible leadership of the profession.
The noble Earl also mentioned the work of the NMC and the King’s Fund review into midwifery supervision and regulation. I very much understand those recommendations and am very sympathetic to the need to look at this carefully. That clearly has major implications for the current supervisory role of midwives. I take the point he and, indeed, the King’s Fund report make, about that role needing to be independent of the employing authority. Can he confirm, though, that much of what supervisors do is of value and that, in moving to a new system, we would not want to lose the value of the work that current supervisors undertake? I echo the noble Earl’s views on the work of the NMC. Under the current leadership it has shown great signs of improvement, and it needs to be supported.
Finally, I pick up the point that the noble Earl made about the acceptance of honest mistakes as long as people and organisations are open. I agree with that, but could he reassure me that he believes that that philosophy is consistent with the Private Member’s Bill of the noble Lord, Lord Ribeiro, in relation to the issue of doing no avoidable harm? I believe that it is. Perhaps we will come back to this when we debate the noble Lord’s Bill, but if the noble Earl was able to say that it is consistent, it would provide considerable reassurance to those health organisations that have reservations at the moment.
My Lords, I welcome the measured and constructive comments of the noble Lord, Lord Hunt. He asked me a series of questions and I shall answer as many as I can. First, on how things are today at the trust and the safety of its services, clearly the CQC is the body best placed to make judgments about the quality of services. At the last inspection of the university hospitals of Morecambe Bay in February last year, safety in the maternity service at Furness was rated as good but overall the maternity services were assessed as requiring improvement. As a whole, the trust has been rated as inadequate. This demonstrates that, while the trust is making progress, there is still a long way to go, and it is clear that embedding changes of this nature takes time. The CQC will reinspect the trust in May 2015 and will make a judgment on whether it has made the required improvements.
The noble Lord asked about referrals to the NMC and the GMC. Where there are failings by a member of staff, they must be held to account. If an allegation is made about a medical doctor, a nurse or midwife, who may not meet the professional standards required in the UK, the relevant professional regulator has a duty to investigate—and, where necessary, to take action to safeguard the health and well-being of the public. The Department of Health is aware that the NMC and the GMC have each received a number of fitness to practise referrals linked to maternity and neonatal services provided by the University Hospitals of Morecambe Bay NHS Foundation Trust. As an independent body, each of them is responsible for operational matters concerning the discharge of its statutory duties. I would hesitate—in fact, I think it would be wrong of me—to comment further on those fitness to practise cases. However, we are confident that the NMC will take account of the recommendations and findings in the report.
The noble Lord made a number of comments about managers. As he well knows, the NHS is a huge and complex service staffed by committed people who often work under a huge amount of stress. I believe that those tasked with leading our NHS organisations, whether in management positions or clinical ones, are committed to making good decisions on behalf of patients. When it becomes clear that they are not up to the job, they should be replaced. Many senior leaders at Morecambe Bay have now been replaced. The current leadership should be allowed a period of time to refocus the trust on those values that are so vital to good patient care—staff morale, sound governance, strong leadership, team working and a focus on delivering high-quality care.
On the issues that are particularly pertinent when you have NHS services that are geographically remote, NHS England has today announced details of a major review of the commissioning of NHS maternity services as promised in the five-year forward view. The review will assess current maternity care provision and consider how services should be developed to meet the changing needs of women and babies. Recent advances in maternity care, changes in the demographics of women having babies and preferences of where they want to give birth will form the key focus. This review, which is expected to report by the end of the year, will be led by an external chair, supported by a diverse panel, and will include a review of UK and international evidence on safe and efficient models of maternity services.
I listened with interest to the noble Lord’s comments on the Cumbrian health economy as a whole. I am not in a position to comment on that at the moment but, if I may do so in writing, I shall be happy to. As for further reform of the CQC, we will examine the recommendation on this score in detail and publish a full response in due course. Further consideration is needed to ensure that the overall responsibility for patient safety sits in the right part of the system and the department has already committed to consider with relevant organisations the options for transferring NHS England’s responsibilities for safety to a single national body. We will also continue to look for opportunities to improve both the operation of the oversight arrangements in place at present and the understanding of those arrangements by NHS organisations and the public.
On the matter of reviewing all deaths and picking up the recommendations around death certification, a number of the recommendations in Sir Robert Francis’s Mid Staffordshire inquiry report refer to our planned reform of the death certification system and the introduction of the role of medical examiner in England and Wales. A new system of medical examiners has been successfully trialled in a number of areas around the country. The work of the two flagship sites in Gloucestershire and Sheffield has been continued and extended to operate a medical examiner service on a city and county-wide basis on a scale that will be required for implementation by local authorities when legislation is introduced. We will publish shortly a report from the interim national medical examiner, setting out the lessons learnt from the pilot sites. I hope that that gives the noble Lord an indication that this is work very much in progress.
On mandatory reporting of maternal, stillbirth and neonatal deaths, the Government are committed to doing further work to review avoidable deaths. We are working with NHS England to introduce a national standard approach for undertaking case-note review. This has the potential to enable NHS trusts to develop a better understanding of avoidable deaths. However, a top-down approach to ensuring that every trust reviews every death is not, in our view, appropriate. Our aim is to ensure that trusts focus their efforts on improving patient safety through learning about the root causes that have led to avoidable death. A systematic, but not necessarily burdensome, approach is needed, which is why we are moving ahead to develop a national rate and produce an estimated number of avoidable deaths for each hospital. The numbers will be made public. Trusts will be expected to report annually to the Secretary of State for Health on their actions to reduce avoidable deaths.
The noble Lord made a very interesting suggestion about the possible appointment of a chief midwifery officer. I would be happy to consider that idea. Of course, he knows that there is a head of maternity in NHS England at the moment.
On the performance of the NMC, it is, as the noble Lord is well aware, an independent body accountable to Parliament, via the Privy Council, for the way in which it carries out its responsibilities. In addition, its performance is monitored by the PSA, and the Health Select Committee has also chosen in recent years to hold an annual accountability hearing with NMC leadership. So there are a variety of robust measures in place to hold the NMC to account. I am aware that the performance of the NMC has a troubled history, which is why Ministers commissioned the Professional Standards Authority’s predecessor body, the CHRE, to undertake a full strategic review in 2012. As noble Lords will remember, the final report of the strategic review was published, putting forward 15 high-level recommendations for improvement in delivering the NMC’s regulatory functions, with the expectation that demonstrable improvements should be seen within two years. We welcome the new NMC chair and we hope that, under Dame Janet’s leadership, it will continue to make improvements to become a confident and capable regulator.
My Lords, back in 2006 the Minister and I had the unhappy experience of being in opposition when the NHS Redress Act went through your Lordships’ House. We are both on record as saying at the time that we felt that it was a fairly inadequate piece of legislation. I think the 44 recommendations in this report are searing evidence that that is in fact the case.
In the wake of the reports by Dame Carol Black, Sir Robert Francis and Sir Bruce Keogh, does the Minister agree that it is now time for a thorough root and branch review of the legislation underpinning the NHS complaints system? I have very little time in which to deal with the great many points in this report, but I wish to ask the Minister about two, which are important. First, in recommendation 27, the regulatory bodies, the GMC and the NMC, are asked to reconsider the guidance to professionals about what to do if they suspect that clinical standards or services are not being fulfilled. It seems to me that in this case there was a failure at every level in that respect. That is unacceptable. Secondly, the report points to the breakdown of the relationship between the CQC and the Parliamentary and Health Service Ombudsman. They had no communication and the consequence was that the families had nowhere to go to seek redress. It is difficult because that ombudsman is both the parliamentary and the health service ombudsman for Members of Parliament to make recommendations about ways in which the health service might be reformed. Will the Government act quickly on the recommendation of this report that there should be a memorandum of understanding between the CQC and that ombudsman?
I am grateful to my noble friend and I do indeed recall our debates on the NHS Redress Act. It is telling that the previous Government chose not to bring that Act into force in the end. The recommendation in the report that there should be a fundamental review of the NHS complaints system is one that we will consider very carefully. We agree that there are still challenges to improving NHS complaints handling, including improving the culture around complaints. Those challenges have been well documented. Our work to improve complaints handling across the board was set out in our update on progress in response to the Francis inquiries in February. Complaints and how they are handled is now one of the key strands of inquiry in all inspections of the CQC.
On my noble friend’s point in relation to recommendation 27, the GMC, the NMC and the PSA have guidance in place on how to raise and act on concerns about patient safety. We will work with these bodies to determine whether this guidance needs strengthening in the light of this report. The GMC has been undertaking its own review of how it deals with doctors who raise concerns in the public interest.
On my noble friend’s final point about the disjointedness of the CQC and the Parliamentary and Health Service Ombudsman, a new MOU was signed in September 2013 which outlined how the two organisations would collaborate, co-operate and share information relating to their respective roles. It is without question that the lack of co-ordination between the CQC and the PHSO was a contributory factor to the ongoing inability of the wider system to identify and act on failings at the trust.
I thank the Minister for repeating the Statement. I want to pick up two points. The report by the King’s Fund relating to the supervision of midwifery said that there was a risk in changing the situation because there might be no one ready to take on the job. That is a very telling phrase in what is a very long and sad report about what has been going on. We need to be very clear. I hope that the noble Earl will be able to reassure us that the supervision of midwives, which has a long history, from 1902 to now, but in very changed circumstances, will be sustained in a way that is going to be to the benefit of mothers for the safe delivery of babies. A report like this always sends shock waves through the profession and is very sad for the families involved. We need to be clear that the action being proposed in the Statement is taken forward quickly. I notice that the supervision is supposed to be concluded by the end of July. That is a very short time to sort out a very complex system.
The second point I want to pick up is the one made by the noble Lord, Lord Hunt, about a chief midwifery officer. The Minister said that he would look at that. It is not something that has been thought of very carefully. We have a Chief Nursing Officer and a director of public health and so it would be sensible to give this serious consideration, especially in light of the present situation. I ask the Minister to take that away and consider it.
On the noble Baroness’s second point, I shall of course take due note of her recommendation. It is something to which we will give very careful thought. On the principal issue that she raised about supervision, as she knows, the statutory supervision of midwives was designed more than 100 years ago—in 1902, I believe—to protect the public. In our view, it no longer meets the needs of current midwifery practice. The King’s Fund was commissioned by the NMC to review midwifery regulation following the findings of the ombudsman that midwifery regulation was structurally flawed as a framework for public protection. The current structure does not differentiate between the requirements of regulation and clinical supervision.
If, as I anticipate, legislation is needed to change this—I think it is clear that it is—that is likely to take up to two years, even on the best estimate. During that time the Department of Health will work with the UK chief nursing officers, the NMC and the Royal College of Midwives to develop a four-country approach, which it has to be, as the noble Baroness will understand, to midwifery supervision that will replace the current statutory midwifery supervision. I hope that that is helpful.
My Lords, I have to admit that, as an obstetrician, when I read this report, my immediate response was intense anger, anger at this systems failure on a grand scale. None of these things should have occurred. This is not an example of failure of a mild degree or of a relationship. This is failure on a major scale. No maternity unit in the country would tolerate these kinds of tragedies occurring in their own unit.
I commend the report. I have worked with the chairman and several of the expert advisers. Dr Kirkup worked with me when I carried out the inquiry on cancer services in Gateshead. He was a member of the team and I know the others, particularly as they come from my own hospital. Professor Stewart Forsyth was neonatologist with me, and I know James Walker, whose father is responsible for all the successes I have had in obstetrics and none of the failures. His name was also James Walker.
What can we do? There is the idea of mandatory reporting of unexpected maternal deaths and stillbirths. We have a stillbirth rate in the antenatal period that has not reduced in this country for 40 years. We have unexpectedly high numbers of normally formed babies who die in the interpartum period but who should not die. If that kind of tragedy ever occurred in my unit, there was a major investigation immediately afterwards. Mandatory reporting may highlight this issue because we need to address it.
I will focus on one recommendation of the several that are addressed regarding the professional organisations in medicine and midwifery. They need to step up to the plate and respond positively to this report on what their role will be in making maternity services safer in this country. The noble Earl referred to an airline-type investigation for root cause analysis. I accept that that is absolutely necessary but it requires experience and training and it must be done soon after the event to learn the lessons that might be applicable to other maternity units. I am encouraged to hear that NHS England will carry out a review of maternity services and I hope that it will be an in-depth review with the specific purpose of making maternity services safer. It should not be about demarcation issues with which we got ourselves tied up previously between different professional groups. It should not be about relocating services. It should be about making maternity services safer.
I have lots of questions but they are not for today and I will save them for another time. I hope all of us—no matter who the Government are—will now work to make maternity services in this country among the best possible.
Does the noble Lord not agree that one of the key issues is that nurses as midwives and obstetricians no longer work together as a team? They work separately and conflict with each other instead of seeing patients together. Would that not solve many of the problems identified in this shocking report?
The noble Lord is absolutely right. That is why I said that the review must address how to make maternity services safer and not address any of the demarcation issues. I work with midwives. Midwives taught me—I have said that before in this House—so there should be no issues between different professional groups, whether they be nurses, midwives, doctors, neonatologists, anaesthetists or whoever.
My Lords, anyone who reads this report will not fail to alight on the phrase that Dr Kirkup uses—that what we had at this hospital was a “lethal mix”, comprising, among other things, substandard clinical competence, poor working relationships in the maternity unit, a move among the midwives to pursue normal childbirth at any cost, shooing obstetricians away at various points, and failures of risk assessment and care planning that led to unsafe care. All these things should pull us up short and, indeed, do so. They are shocking. We certainly expect the relevant professional regulatory bodies, including the GMC and the NMC, to review the findings of this investigation report and act on the recommendations. Those organisations should review the findings of the report concerning the professional conduct of registrants involved in the care of patients at the trust to ensure that appropriate action is taken against anyone who has broken their professional code, but building on those lessons to see whether there are wider matters around safety to be considered.
On mandatory reporting, I can only add to the remarks that I made to the noble Lord,