House of Lords
Wednesday 8 May 2019
Prayers—read by the Lord Bishop of Rochester.
Disabled Students’ Allowance
To ask Her Majesty’s Government on what grounds possession of an Education, Health and Care plan by a dyslexic candidate is deemed to be insufficient to prevent them undertaking a second assessment for the Disabled Students’ Allowance.
I beg leave to ask the Question standing in my name on the Order Paper and draw the House’s attention to my declared interests.
My Lords, EHC plans set out the educational support that children with special educational needs require. In some cases, a child’s EHC plan will have been informed by a diagnostic assessment undertaken by an appropriately qualified specialist. These assessments are acceptable as evidence of a dyslexic student’s condition when applying for DSA. Officials would be happy to look further at this issue and I invite the noble Lord to submit any additional evidence that he might have.
I thank the noble Viscount for that Answer and for the assistance that he has given me in trying to correct what I think is an oversight. It might have been a case of no good deed going unpunished by the Government when they removed the compulsory need for two diagnoses. However, will they take on board that it is quite clear that the school and university systems did not talk to each other or, if they did, nobody listened? We have got ourselves into a situation where people have to undertake another diagnostic assessment that costs £600.
The noble Lord makes a good point—the school system should talk to the higher education sector. The SEND code of practice makes it clear that children and young people with special educational needs and disabilities should be helped to prepare for adult life. Schools should therefore support the young person in planning their next phase of education, including higher education. The local authority has a legal duty to make young people aware, through their SEND local offer, of the support available to them in higher education.
Recognising disadvantage and with just two out of five disabled students aware that additional funding is available to help with their studies, it is little surprise that disabled students have a higher university drop-out rate. Will the Minister acknowledge that there is a problem here, and will he also agree to meet student representatives to discuss a joint Claim It! campaign to raise DSA take-up levels and help unlock the undoubted talents that disabled students possess?
The noble Lord is right in that we want all children, no matter what challenges they face, to be able to achieve well in early years, at school and post-16 and to fulfil their potential in adult life. I should point out to him that the SEND reforms that we introduced in 2014 are the biggest in a generation. I will reflect on the question that he has asked and I will certainly get back to him, but I do not want to make any commitments right now.
My Lords, is the Minister concerned that some schools are now not spending anything at all on continuing professional development for their teachers because they have no money for it? Is not continuing professional development essential if teachers are to treat children with special educational needs with the sensitivity that they deserve?
The noble Earl makes a very good point. Schools are obliged to look at each pupil to see whether there is a need to assess them, and indeed, some money is set aside for each school for this very purpose. Some schools might need to do better and, if that is the case, Ofsted and the school inspection system need to come down hard on those that do not do enough in that respect.
My Lords, I am very grateful to the Government for saying that they will look again at the impact on performance tables of excluding children, and take action to keep the responsibility for those children with the school that is excluding them. Will the Minister encourage the Government to look at the effect that Progress 8, in particular, is having on the provision of courses suitable for children, often with education, health and care plans, for whom the examinations within Progress 8 are too high a hurdle? It seems that schools are being penalised for providing for these children and that provision for them is therefore becoming less common.
I will certainly take the points made by my noble friend back to the department. I hope there was general acceptance and approval of the announcement yesterday about the exclusion decisions and recommendations made by the Timpson review. As the House will know, we are looking to take those forward.
My Lords, following on from my noble friend’s Question, do the Government have any intention of issuing guidelines to universities on the acceptable evidence for dyslexia? It seems that, despite the acknowledgement that dyslexia does not go away, some HEIs are still requesting post-16 diagnostic assessments for students to be allowed reasonable adjustments for exams.
As the noble Baroness will know, the OfS has a statutory duty to have regard to the need to promote equality of opportunity across the whole student lifecycle for disadvantaged and traditionally underrepresented groups. As I was saying earlier, the link between the school system and higher education is extremely important so that universities can better understand the needs of their students and provide the necessary technology—both hardware and assistive software—to give them the best start at university.
My Lords, I speak as a parent who has benefited greatly from the British Dyslexia Association’s programme and its analysis of my child’s dyslexia, which we were able to use in discussions with the school. It was fine for us; we were fortunate that we could afford to pay the £500 or £600 for the programme. Are the Government doing anything to help the parents of children who cannot afford to pay this amount to organisations such as the British Dyslexia Association, which gave us a fantastic report and analysis? Are they supporting those parents and children who cannot afford to take advantage of something like this?
Yes indeed, there are several schools which help parents out if the parents cannot afford it. Local authorities can also step in to help. The noble Lord was referring to schools, but higher education institutions are also in a position to help, and many do. I have a list here somewhere of the institutions that offer help, to ensure that the right diagnoses are made.
My Lords, does the Minister agree that the dyslexic and autistic spectrum is very wide, with any two cases seldom the same? Does he also agree that, with the co-operation of parents, very great progress can be made in individual cases?
The noble Lord makes a good point that these cases all come under the heading of “specific learning difficulties”. As he will know, this includes not just dyslexia but dyspraxia, dyscalculia and all kinds of other issues that need to be taken into account. It is very important that the right assessments are made. Reverting to the EHC plans, these are quite complex. It may well be that the EHC plan includes a small element of dyslexia while the rest is made up of a mix of very complicated stuff, bearing in mind the child’s background.
Freedom of Movement
To ask Her Majesty’s Government whether they will produce a comprehensive list of (1) the type of, and (2) the reasons for, movement between the United Kingdom and the European Economic Area countries under Freedom of Movement and related provisions, as defined by the Treaty on the European Union, the Treaty on the Functioning of the European Union and the Charter of Fundamental Rights of the European Union.
My Lords, information on the different types of free movement rights available within the European Economic Area can be found on the European Commission website. The Office for National Statistics already publishes information on the reasons for migration to the UK by EEA nationals in its quarterly report on long-term international migration statistics.
I thank the Minister for her reply. However, even taken together, all the documentation does not give us the big picture when it comes to the mobility impact of Brexit, depending of course on how much will be left of our participation in the internal market—some of it or none of it. Right across the international services sector, significant numbers of firms are now considering moving lock, stock and barrel to places such as Amsterdam. Will Her Majesty’s Government urgently produce a Green Paper by the end of this month on the options, with some range of likely impacts and the numbers likely to be involved, getting practical feedback from the industry sector and umbrella bodies such as the TUC and the CBI?
My Lords, in any scenario—deal or no deal—there will be a transitional period until the end of 2020 to give businesses time to adjust. In a deal scenario, free movement will continue during the implementation period, but in a no-deal scenario the Government’s European temporary leave to remain scheme will enable EU workers to continue to come to the UK visa-free for three years. On the question of the Green Paper, in December last year the Government published a White Paper setting out our proposals for the UK’s future skills-based immigration system after our exit from the EU, taking as a starting point the MAC’s recommendations.
My Lords, should we not also focus on the fact that this Government are stealing from British citizens the freedom to live, work, study or retire in another EU country? Can the Minister explain why the Prime Minister talks misleadingly about ending free movement as “taking back control of our borders”? She was perfectly capable three years ago of explaining that passport checks, which we can and will continue to impose as we are outside Schengen, sit compatibly alongside the freedom to move to work without red tape. They are not the same thing.
I am not sure what the question was there. As for stealing UK citizens’ rights, from a UK point of view we have made provision for EU citizens’ rights in the UK. It is clearly up to individual member states how they reciprocally deal with that.
My Lords, surely the central issue here is that freedom of movement is tied up with the delivery of services. Service industries, which dominate our economy, can trade effectively only if their personnel can be moved. It is not just a question of border control; every service industry, from banking to ballet dancing, needs to move people across borders. The problem is that in any future deal—for example, as set out in the political declaration—the two issues of mobility and access to the single market by the service industries are separated. It is time that the Government brought those two strategies together, otherwise the bulk of our service industries will suffer.
The noble Lord is right: it is absolutely clear that we need an environment friendly to businesses both at home and abroad, and “abroad” will include the EU when we leave it. Our immigration system will be skills-based. We want the brightest and best to come to this country to work, study and live. That is why we consulted the MAC on our future system.
My Lords, have the Government done any work to quantify the economic and social disadvantage that citizens of the UK will suffer by losing the right to live, work and study anywhere in the European Union as a result of being a citizen of a member state, in comparison to any other arrangements that may be put in place in future?
The noble Lord has asked me a question that is a little out of the Home Office’s purview. Until a deal is done it is very difficult to tell what the future economic landscape will look like, and in fact the best way to advantage the economy is to get a deal done.
My Lords, why have the Government still not taken full advantage of the various provisions that exist under free movement to member states to return people who do not have a job, such as the Belgians do? Given that we are still in the European Union until 31 October and will be under European legislation until the end of 2020 or perhaps longer, why are the Government not taking advantage of the flexibility within European free movement?
The noble Lord will of course correct me after Questions when I am wrong, but it is my understanding that the Government are fully abiding by the provisions under EU law and will continue to do so until we leave the EU.
But does the noble Baroness not accept that for certain sectors where income levels are low, particularly tourism and care homes, there is a real danger of losing key staff? What provisions do the Government have to make up for that?
Obviously the tourism industry is incredibly important, particularly where we sit in London. It is hugely vibrant. As I said, we consulted the MAC on longer-term migration. There is of course a trial period that we have already articulated for short-term work in the UK.
My Lords, why are the Government making it difficult for EU citizens living in the United Kingdom to exercise the right to vote in the European elections?
My Lords, the noble Lord strays into another department again with election law. Election law is quite firmly fixed. I would have to refer to—
You are speaking for the Government.
I am speaking for the Government on Home Office matters.
I am speaking on a range of matters today, actually. The noble Lord is talking about election law, which precludes certain EU members from voting in local elections.
Gender Pay Gaps
To ask Her Majesty’s Government what steps they are taking to require employers to publish action plans relating to their gender pay gaps which include (1) a long-term strategy on how they will close such gaps, (2) how such progress will be monitored, and (3) the requirement to publish the results of that progress.
My Lords, we are thrilled that over 10,000 employers have published their gender pay gap reports for a second year, but what matters now is the action that they take to close that gap. I urge all employers to publish an action plan detailing what they are doing to address the pay gap and to use the Government Equalities Office guidance on identifying effective actions to do so. Since employers publish their figures annually, we will track their progress and hold them to account.
While I thank the Minister very much for her reply and that she will be urging employers to publish action plans, is she aware that the figures supplied for the reporting deadline in April showed that the gender pay gap has failed to improve in the past year? Every industry continues to pay men on average more than women, and the average gap dropped by only 0.1% over the year. One of the key drivers of the gender pay gap is that there are fewer women employed in senior and higher-paid positions. Much more needs to be done by employers to encourage and to promote women to top positions. Would the Minister agree that the Government should require employers to publish action plans and ensure that they are accountable and transparent with meaningful sanctions put in place for those who do not comply? Without this requirement, progress will be very slow. Would she agree that women have waited a very long time for this gap to close, so surely now is the time for much more progress to be made on the gender pay gap, which would be beneficial not only to women but to the economy and society?
I certainly agree that women have waited an awfully long time not only for these regulations to come into force but for the gender pay gap to narrow. The noble Baroness said that the GPG has not narrowed. It has narrowed marginally—not enough, and there is more to do—but it is quite pleasing that there are 366 employers who, though they do not have to produce a gender pay gap return, have done so in this second reporting year. Last year, 48% of employers produced an action plan, which is very pleasing indeed. The Government have provided an online toolkit, and there have been 14,000 views of that online. We are slowly moving in the right direction, but we must remember that what we have done is ground-breaking globally.
My Lords, the Royal Statistical Society has found that the government system used to report pay gaps is flawed in some important respects, open to gaming and very difficult for people to understand. Can the Government please look at this and consider implementing some of the recommendations, such as introducing online gender pay gap reporting calculators with built-in sanity checks, to ensure accurate reporting and to prevent implausible entries?
The noble Baroness is absolutely right to point out that accurate reporting is crucial to understanding what organisations are doing to reduce the gender pay gap and crucial to ensuring that there is no gaming of the system, as she points out. Based on our research with employers, we know that the majority were able to understand the gender pay gap reporting system and are correctly reporting their data; 95% are reporting ahead of the deadline, which is very good news indeed. As she knows, the EHRC is responsible for enforcing the regulations and is looking at any statistically improbable data. The Government Equalities Office has already implemented some of the recommendations from the Royal Statistical Society’s report—so I thank the noble Baroness for raising the issue—including improvements to the guidance and the statistical sanity checks.
Will the Government, in the interests of fairness and equality, make the same demands of employers in relation to ethnicity as they do in relation to gender? There is plenty of evidence to indicate that black and ethnic minority people suffer equally, if not worse, from disparity when it comes to employment pay and prospects.
I thank the noble Lord very much for raising that. I do not disagree with him that BAME representation, not only in organisations but also on things such as FTSE 100 boards and FTSE 250 boards, is diabolical. We always saw gender pay gap reporting as a start on this journey—which is absolutely not to dismiss the noble Lord’s point that we have an awful lot further to go.
My Lords, in her initial Answer, the Minister talked about holding businesses to account. Could she set out what sanctions the Government have to hold businesses to account and what thresholds they will use when they apply those sanctions?
As I said to the noble Baroness, Lady Burt, the EHRC has enforcement powers if people are misreporting or not reporting at all. Although the story so far has been very good, with almost 100% compliance, sanctions are within the EHRC’s powers.
My Lords, to what extent is the gender pay gap distorted by the number of people, often very senior, who are masquerading as self-employed when they are working for large organisations? They are missed out of the figures altogether. Is not the only answer that individual tax returns should be in the public domain, as they are in other countries? Then we could pin all this down once and for all.
The noble Lord has raised this before. There is not agreement across the House about such intrusion into people’s personal data. We often talk about data protection and privacy of data. He is right to point out that there are certain cohorts of people for whom pay data is not required because they are not employees—they might be partners and therefore not salaried—but the good thing about the gender pay gap reporting is that it is done on a quartile basis, so that one can see at each level of the organisation where the disparities lie.
Victims of Crime: Mobile Phone Data
To ask Her Majesty’s Government what consultation took place before the introduction of a consent form to allow police to access mobile phone content of complainants of offences; and how proportionality will be achieved.
My Lords, the National Police Chiefs’ Council and the Crown Prosecution Service consulted a number of stakeholder organisations on the development of a national consent form. The CPS has issued guidance on the examination of mobile devices, making it clear that decisions should be made on a case-by-case basis in the pursuit of reasonable lines of inquiry. A commitment has been made to engage with stakeholders further on the form and guidance.
My Lords, I am encouraged by the noble Baroness’s reply. The standardisation of consent forms has caused real concern, not least among police and crime commissioners. As a former criminal law practitioner, I know as a fact how difficult it is to get convictions in the probably around 90% of cases where the defence of someone known to the victim is consent, as opposed to an attack by a complete stranger. Will the Attorney-General, who appears to have agreed the new forms, take personal charge of any review to ensure proportionality, and can we hope that disclosure problems will be substantially reduced and that there will be more successful prosecutions?
First, I commend the noble and learned Lord. Despite his efforts the other day, he was not able to get in when I answered the Urgent Question—or it may have been a Statement. However, he has now asked his Question and I am able to focus on it. He is absolutely right to raise the issue of consent. The JSC does not specifically cover consent but there is a discussion on privacy issues and its recommendation on this issue is, essentially, to have good guidance. The noble and learned Lord mentioned guidance and I will quote from the Select Committee’s report, which said:
“It is important that those who come forward to report serious offences, particularly those of a sexual or otherwise sensitive nature, are treated by investigators with respect and sensitivity. Their personal information should be handled in the same way and in accordance with their rights to privacy, where that is consistent with the interests of justice. The law is clear in that the right to a fair trial is an absolute right which cannot be violated to protect the right to privacy. We heard differing views on whether disclosing certain private information was always necessary to uphold the right to a fair trial, and this emphasises the need for clear guidance on this point”.
My Lords, if social media indicates consent to sexual activity between the two individuals concerned, both before and after an alleged sexual offence, surely it would be proportionate to examine it and disclose it. Trawling social media for patterns of behaviour would surely not be proportionate, as it does not tend to prove or disprove the matter at issue: namely, whether consent was given on the occasion in question. Does the Minister not agree?
The noble Lord makes an important distinction between trawling social media and identifying evidence that could be used in a trial. As I said to the noble and learned Lord, Lord Morris of Aberavon, the NPCC and the CPS have invited a number of organisations to discuss their concerns around this, and I am sure that what the noble Lord talked about will come up in these discussions.
The noble Baroness’s responses have given us clear evidence of how much thought she has given to this difficult issue. Does she agree that consistency is very important? For years now, it has not been permissible for defence lawyers to cross-examine complainants about the clothes they wear or their sexual history without there being a clear evidential basis for doing so and the permission of the judge. Should we not be consistent and ensure that we protect the privacy of complainants, after a gross invasion may have taken place of their most essential privacy, and allow the trawling of electronic material only where there is a proper evidential basis for doing so?
The noble Lord takes us back some years—we spoke about it earlier—to when judges or lawyers might refer to the clothes that somebody was wearing almost as evidence that they had not been sexually assaulted. Consistency is important. Having your mobile phone taken from you, albeit with consent, feels like a huge intrusion. It is clear in the guidance that it should not happen in all cases or as a matter of course, and sometimes your mobile phone should not need to be taken away from you at all. So these further conversations will start to develop the thinking about how we can be consistent in this area.
My Lords, there has been a lot of misinformation about the consent forms, which is having the worrying effect of victims not wanting to come forward—and, as we all know, it is difficult to get victims to come forward anyway. What can be done to make sure that information about what the consents forms are and how they work is properly put out there so that victims can feel safe when they come forward about filling them in?
I thank my noble friend for raising this point, because victims coming forward is at the heart of what we are trying to encourage in such a sensitive area as sexual assault. Historically, victims have been unwilling to come forward and we do not want anything that they might have read in the press that is misleading to discourage them from doing so. I am very pleased that the police and the CPS are going to engage further with victims’ groups and I hope that this can be resolved to the extent that victims feel that they can come forward.
NHS: Shortage of GPs and Nurses
Private Notice Question
To ask Her Majesty’s Government what is their response to recent reports that there is a serious shortage of GPs and nurses working in the NHS.
My Lords, I beg leave to ask a Question of which I have given private notice.
My Lords, the Government recognise the pressure on the NHS workforce. The forthcoming NHS people plan will set out how we will attract more people into training and keep the workforce that we have in the NHS. In 2018, Health Education England recruited a record 3,473 junior doctors into GP specialty training—a 10% increase since 2017. Demand for nursing courses is strong: the latest data, published this February, showed a 4.5% increase in the number of applicants compared with 2018.
My Lords, I thank the Minister for her Answer and acknowledge her long-term commitment to the National Health Service. I shall not just swap statistics with her—that is easy—but I wish the Government would not keep repeating basic statistics. She talked about an increase in the number of GPs, but we have the lowest number of GPs for more than 50 years, with patients on occasion having to wait seven weeks for an appointment. We know that there is a 40,000 shortage in the number of nurses and that, according to the interim report that the Government have received and despite all their efforts, that figure could increase to 68,500. That report states that shortages in nursing are the single biggest and most urgent problem. Instead of playing around, will the Government seriously address the drastic situation that our NHS is in? We truly survive because of the efforts of the staff.
I thank the noble Lord for his Question and I echo his sentiments exactly in thanking GPs, nurses and all of our NHS workforce. Probably every noble Lord in this Chamber has a personal story of owing the NHS for personal service, as we do as a nation. That is exactly why the Government have put in a serious plan to address the challenges within the workforce. First, within the long-term plan we identified an increase in funding that is higher within general practice and community care than the wider increase in funding of £4.5 billion. Secondly, we have recruited the highest number of GP trainees ever. This is not swapping statistics, this is identifying the fact that we are being successful in recruiting into a challenging specialty. Thirdly, we are opening brand new medical schools to ensure that we have the capacity to increase training, while recognising that it takes time to grow a doctor. Fourthly, we are putting in place incentive programmes to make sure that the job is more attractive, so that we can retain those individuals.
Within the new general practice contract framework we have put funding in place for up to 20,000 more support and technical staff working in GP practices in order to relieve the pressure within that job. This will help bring down delays in getting appointments and make sure that the job is more attractive in itself. When it comes to nursing, we have put in place a pipeline, with new nursing associates and the new nursing degree apprenticeship, and we see this starting to pay off. So there is an improving picture, but there is still some way to go. We are making sure that we put in place a serious plan and we are determined to deliver on it.
My Lords, the Nuffield Trust has noted that there are fewer GPs per head in poorer areas than in wealthier areas. Health inequalities in this country are being made worse by some of the political decisions of this Government. Can the Minister say what steps the Government are taking to ensure that everyone has equal access to a GP, whatever their income and wherever they live?
The noble Baroness is right that driving out variation within the NHS is one of the key commitments of the long-term plan: it can be seen as a priority throughout every commitment within it. One of the ways in which we intend to do this is through the new undergraduate medical school places; the expansion in medical schools has been targeted specifically to address that. Those medical schools will be placed in key areas—Sunderland, Lancashire, Chelmsford, Lincoln and Canterbury—to ensure that we recruit doctors from right across the nation. That is something that I think she will welcome.
My Lords, I declare an interest as the author of Medical Generalism, a report for the Royal College of General Practitioners some years ago. Do the Government recognise that while their moves to increase supply are admirable and welcomed by everyone, the problem is retaining staff? We have an increasing number of medical and nursing staff who, for reasons to do with taxation, their pensions and their revalidation processes, find that it is just not worth their while to carry on with the onward, uphill struggle to carry on providing services. I recently met some who have dropped off the medical register simply because the revalidation processes were just too cumbersome for them. These are good clinicians, whose skills are now being lost. Their skills are also being lost from the pool of people to teach the next generation of doctors coming through the system. These pressures are now having a knock-on effect in emergency departments, where waiting lists are going up inexorably, and we know that that is being reflected in the four-hour waiting targets. Talking to staff in emergency departments, they are routinely seeing situations that used to be unusually busy.
I thank the noble Baroness, who is very expert in this area. She is absolutely right that there is no point in our bringing new trainees into the system if we do not retain the expertise and the teaching quality within the system. We can be very proud of the quality we have within the system, which is why we have put in a number of programmes to address this. We have put in a targeted, enhanced recruitment stream to attract doctors into parts of the country where there have been consistent shortages. We have put a broad offer of support for GPs to remain within the NHS, including GP Career Plus, the GP Retention Scheme, the Local GP Retention Fund and the national GP Induction and Refresher Scheme. We have also put in place a number of schemes for nurses, including a scheme that will attract nurses into specific, targeted areas, such as mental health, learning disabilities and district nursing, where we believe we should make the career more attractive. We recognise that there is more to do, and in areas such as pensions, which the noble Baroness rightly raised, we are taking that issue up with the BMA and the Treasury.
My Lords, the increased numbers of staff coming through GP and nurse training are of course incredibly welcome but the truth is that we have a problem now, which is that we need more doctors and nurses practising today. One way to do that is to look around the world to recruit people, but another way is to make sure that we make the most of the resources we have through technology. Can my noble friend tell the House what the department is doing to enable us to use technological solutions to improve the efficiency of the GPs who are practising today?
My noble friend is absolutely right, and he has his own expertise in this area. I am pleased to be able to report that we have had an increase in recruitment of nurses and NHS workers from abroad. Compared with June 2016, we have over 5,200 more EU health and care staff working in the NHS, and we have had a 126% increase in the number of non-EU NHS workers, which shows the attractiveness of working within the NHS. But he is also right that we need to make sure that those who work in the NHS have access to the most innovative and effective tools possible, which is why, particularly within GP practice, we are launching the GP IT Futures programme. That will provide GPs with the best tools possible so that we can make their job more efficient while also allowing them to provide the best-quality care to patients.
My Lords, I think I need to declare an interest as a member of a CCG; I spend some of my time surrounded by GPs, who are utterly wonderful, and who tell me that morale is not good. The problem is that a lot of GPs are leaving because they are completely fed up with the way that they have been treated by the NHS. That has to be taken account of by the noble Baroness, Lady Harding, as part of her work in bringing forward the plan, and I know it will be.
I am afraid that it does not say much about the current lack of a workforce strategy that we are having to trawl the world to get GPs and nurses to come and work in the UK. I know that other Members of your Lordships’ House have been worried that we are taking nurses, GPs and doctors from countries where they are very much needed. Will the Minister address how to how to deal with the morale of GPs, as well as the ethics of the UK recruiting nurses and doctors from countries where they are needed?
I slightly question the premise of the noble Baroness’s question, given that I am the daughter of an English doctor and a South African nurse. This has always happened in the NHS, and it is an absolutely acceptable process. Recruitments go back and forth between nations, and that has always been the case.
To move on to the noble Baroness’s question about morale in the NHS, particularly within general practice, it is essential that that it is addressed, and she is right that GPs are the bedrock of the NHS now and in the future. That is why we have announced in the long-term plan not only that we are investing an extra £4.5 billion in primary and community care, which is at a faster rate than the rest of investment within the NHS, but the new contract to develop partnerships to provide greater certainty for GPs to plan ahead and to give them the extra 20,000 support workers who can make the job within GP practice more effective and sustainable. That is also why we have announced the GP IT Futures programme to give them the tools that they need to deliver more effective services and to deliver better-quality care, and why we have announced targeted and enhanced recruitment schemes to support and retain GPs within practices, not only in hard-to-reach areas but within the pipeline. That demonstrates that the Government are completely committed to general practice and will retain that commitment as long as we are able to do so.
Iran Nuclear Deal
My Lords, I wish to repeat as a Statement an Answer given to an Urgent Question in the other place by my right honourable friend the Minister for Asia. The Statement is as follows.
“The UK notes with great concern the statement made by Iran today concerning its commitments under the Joint Comprehensive Plan of Action. We are analysing the detail of it and are in close contact with other parties to the deal, but I have to say to the House that today’s announcement from Tehran is an unwelcome step. I urge Iran not to take further escalatory steps and to stand by its commitments. We are not at this stage talking of reimposing sanctions but one has to remember that they were lifted in exchange for nuclear restrictions as part of the JCPOA. Should Iran cease meeting its nuclear commitments, there would of course be consequences.
For as long as Iran keeps its commitments, so will the United Kingdom. It is critical that we maintain an open dialogue with Iran. The Foreign Office political director visits Tehran this week to discuss this and a range of bilateral issues. I hope to visit Iran in the coming months.
In this regard, we recall our own firm commitments under the deal, including sanctions lifting for the benefit of the Iranian people. The lifting of nuclear-related sanctions is an essential part of the JCPOA. It aims at having a positive impact not only on trade and economic relations with that country but, most importantly, on the lives of many of the Iranian people, who have had such a tough time in recent decades. We deeply regret the reimposition of sanctions by the United States following its withdrawal from the JCPOA.
The UK, along with the remaining participants to the JCPOA—France, Germany, Russia and China—are committed to working on sanctions relief for Iran, together with third countries interested in supporting the JCPOA. We are determined to pursue efforts, together with other European partners, to enable the continuation of legitimate trade with Iran. The UK and our European partners met Iranian officials only yesterday in Brussels to discuss the next steps needed to operationalise the special purpose vehicle, INSTEX, which is aimed to facilitate legitimate trade with Iran.
Even at this stage, we encourage all countries, including Russia and China as JCPOA participants, to make their best efforts to pursue the sanctions relief that the agreement allows for through concrete steps. We take this opportunity to call on countries not party to the JCPOA to refrain from taking any actions that impede the remaining parties’ ability fully to perform their commitments.
Finally, it is important to remember that the UK remains clear-eyed about Iran’s destabilising activity in other parts of the Middle East, including its ballistic missile programme, which must now be addressed. However, we see this being best done with the JCPOA remaining in place”.
My Lords, I very much welcome the Minister’s Statement. Of course, it is about keeping commitments. Today, we have seen retaliation for the United States imposing further sanctions, which will become a tit for tat if we are not careful. It emerged in discussions in Brussels, which I welcome, that practically all EU multinational companies that were trading with Iran have now ceased to do so, and the US is threatening to impose sanctions on any country that imports oil from Iran. On commitment to the nuclear deal, can the Minister tell us in a little more detail how we are upholding our side of the bargain? How will we work with our European partners to ensure that we do not regress and end up with Iran pursuing its nuclear option?
Let me assure the noble Lord that the United Kingdom remains fully committed to the JCPOA. When the United States withdrew from the agreement, the United Kingdom, along with other key European partners, was clear about the importance of retaining and sustaining this treaty. It is not perfect, as we have said a number of times in your Lordships’ House, but it is an important vehicle to ensure that Iran does not progress on the nuclear pathway in any respect. Therefore, it is important to keep the deal alive and on the table. It is for this reason that we remain committed to the special purpose vehicle to which I alluded in the Statement. We are working through the technical details to ensure that, together with other partners, including the E3—with Germany and France, the initial owners—we look to the specific needs of the Iranian people so that the current situation and terrible suffering they are enduring does not prevail. This will include a focus on foodstuffs, agricultural products, pharmaceuticals and trade in consumer goods. It is important to make progress in this respect, and we remain committed to the SPV.
Must it not be accepted that today’s disappointing announcement is a direct consequence of United States policy? It reflects a need on the part of President Rouhani to respond to internal political pressure and, of course, the painful impact of sanctions on Iran’s population. Can Her Majesty’s Government assure us that when President Trump visits the United Kingdom in June, they will tell him in no uncertain terms that his unilateral policy undermines nuclear non-proliferation, multilateral diplomacy, and international law and institutions, not to mention transatlantic solidarity?
On the noble Lord’s final point, transatlantic solidarity is an important attribute but there are times when we differ. We have not waited for the arrival of the President of the United States to make clear our differing perspectives on the JCPOA and our other differences. The noble Lord will be aware that Secretary of State Pompeo is currently visiting London and has had various meetings with the Foreign Office, including with my right honourable friend the Foreign Secretary, at which this issue was discussed with him. Our view remains clear: we need to work to ensure that the JCPOA remains on the table; we need to ensure that the SPV alleviates the suffering of the Iranian people; we remain committed to the SPV, along with our European partners; and we differ from the United States in our approach in this respect.
My Lords, I draw attention to my entry in the register of interests: I am the trade envoy to Iran and chairman of the British Iranian Chamber of Commerce. Although this is a very gloomy development, is it not important to remember that President Rouhani said in the statement referred to that Iran does not intend and does not want to withdraw from the JCPOA, but wants it to persist? Is it not the case that the International Atomic Energy Agency has certified that Iran is fully compliant with the agreement on no fewer than 11 or 12 occasions? One must draw the conclusion that Iran has been pushed to react by the extra sanctions and the aggressive action of the United States in trying to reduce Iran’s exports to zero, which would have a devastating impact on living standards in the country. The Minister said that the Government remain committed to the JCPOA, but does he acknowledge that the SPV that has been set up—I acknowledge the great efforts of civil servants to make it work—is extremely limited? It is restricted to food and medicines; that is all. It does not obviate the need for a bank when doing business with Iran. In fact, not a single transaction has been made under the mechanism so far; something much more ambitious must happen if there is to be any trade between Europe and Iran.
On my noble friend’s final point, no trade has happened yet because the SPV is not yet operational. We continue to work on its technical detail. My noble friend is right to mention President Rouhani’s declaration that he is keen to ensure that the JCPOA, a working agreement, remains on the table. The United Kingdom shares that aspiration. Therefore, a 60-day window still exists; we hope that no other steps to change the situation we currently face will be taken during that time. As I said in the Statement, we regret the announcement from Tehran but it is important that we continue to look at how we can work through the challenges we face. Equally, we must look at the SPV’s creation and initiation of the process; for example, my noble friend talked about medicines and humanitarian aid, which are important, but this is also about looking at agricultural products and consumer goods. It is important that we continue to work to ensure that the SPV becomes operational.
My Lords, the Government have given a measured response, working with allies other than the US, but recognising that Iran is engaging in malign activities in the Middle East. Does the Minister agree that what the Trump Administration appear to lack is a sense of history? Experience shows that the Iranian people will rally around the flag and will not yield to bluster, warships or to the privations visited on them. That is surely what is happening now.
The noble Lord is correct to draw attention to Iran’s activities, including, as I said in the Statement, the current focus on its ballistic missile programme. That is not conducive to peace in the Middle East; rather it adds to the insecurity and instability. Indeed, Iran’s actions in other areas of the Middle East have also been causing instability. We continue to urge Iran to abide by the commitments it has made through international bodies, including through UN Security Council resolutions, and to continue to work towards peace in the Middle East more widely, particularly in those countries where it has influence. On what is happening in Iran, as I have said, our commitment to the SPV is closely focused on alleviating the plight of the Iranian people. Whatever challenges or differences we may have with the Iranian regime, they are not with the Iranian people. There is a rich history and culture in Iran, which we have all seen in the past. We hope that in due course Iran will re-emerge on to the international scene.
My Lords, pursuing the point made by the noble Lord, Lord Campbell, is it not the case that the United States has sent a carrier fleet and a new bomber task force to the Gulf? The US has declared the Islamic Revolutionary Guard Corps a terrorist organisation, which it may or may not be; I do not know. As we have heard, the US has vastly increased the oil sanctions. Do we know what the purpose of the policy of the United States really is? Are we talking to its representatives about it to have some kind of dialogue, given that the US is supposed to be one of our close allies? Is the US behaving like a close ally?
I assure my noble friend that the United States has been, is and will continue to remain a close ally of ours and there is much that we agree on. However, there are times of difference and the JCPOA is one such example. My noble friend has drawn attention to recent US deployments. Let me assure him that we remain very concerned about the risk of escalation in the region and I stress that we are urging all parties to show due restraint. However, the point was made in the previous question about Iran’s continued destabilising regional activities, so we will continue to work towards asking Iran and others to ensure that we do not escalate the situation in what is a very tense region at the moment. However, the United States and the United Kingdom enjoy strong bilateral relations, including through international organisations, and we continue to work on joint priorities. Indeed, this morning I attended a meeting on the importance of freedom of religion or belief. I assure the House that on that point, the United States and the United Kingdom are very much aligned.
My Lords, I regret that the time for Back-Bench questions is up.
Common Agricultural Policy and Market Measures (Miscellaneous Amendments) (EU Exit) Regulations 2019
Motion to Approve
That the Regulations laid before the House on 5 April be approved.
My Lords, I declare my farming interests as set out in the register.
The purpose of this statutory instrument is to ensure that the regulatory baseline currently applicable in the UK under European Union legislation will be maintained on the UK statute book and can continue to operate effectively after exit. This instrument does not make any policy changes. It consists of a series of technical amendments that are essential to ensure that two new amending EU common agricultural policy regulations are retained in UK law at the point of the UK’s withdrawal from the EU.
This instrument is among a small number of affirmative statutory instruments that have been made under the urgent procedure. The urgent procedure was used because during March 2019 the European Commission introduced two new amending EU CAP regulations and it was essential that the UK should retain these amendments in an operable form in advance of a possible no deal exit on 12 April 2019.
The two new amending EU common agricultural policy (CAP) regulations are EU regulation 2019/288, which applied to all member states from 1 March 2019 and relates to direct payments to farmers under the CAP; and EU Commission delegated regulation 2019/428, which took effect from 26 March 2019 and relates to marketing standards in the fruit and vegetables sectors under the common organisation of agricultural markets (CMO). The instrument also takes the opportunity to make a few minor typographical corrections and, in the case of Regulation 3(3), removes a duplication in a small number of previous Defra EU exit SIs. Again, these amendments represent no change to policy. Agriculture is a devolved policy area and Defra has worked closely with devolved Administrations, who have all given their consent to this instrument.
As I explained on 20 March 2019, when we debated a number of instruments concerning the common agricultural policy, the UK Government have pledged to continue to meet their funding commitments in the agriculture sector. This SI, by taking account of the EU’s regulatory updates, fine-tunes Defra’s direct payments EU exit instrument, ensuring that the flexibilities to manage the budget between Pillar 1 and Pillar 2 are reflected and up to date.
The EU direct payments provisions amended by this instrument will enable UK relevant authorities to continue to have the flexibility to decide whether to transfer funds from the direct payments budget to the rural development budget via an inter-pillar transfer. This inter-pillar transfer provision was available across the United Kingdom in previous years of the CAP and has been used by England, Scotland and Wales in those years, but was limited up to and including the 2019 direct payments scheme year. Defra had already intended to address that regulatory gap for the 2020 scheme year via domestic legislation. However, the EU has now decided to make an inter-pillar transfer provision available to member states for the 2020 scheme year. That decision came into effect via new EU regulation 2019/288 on 1 March 2019, and Defra has taken the earliest available opportunity to account for these changes through this instrument. This instrument will retain the valuable flexibility currently afforded to UK relevant authorities. This will enable direct payment and rural development funding levels for 2020 to be maintained in line with previous years.
For the common market organisation (CMO), this instrument amends provisions of an existing exit SI as regards marketing standards for mixes of fruit and/or vegetables and citrus fruit. The EU has recently undertaken some refinements of its regulations on marketing standards for fruit and vegetables to align the EU marketing standards with the latest United Nations Economic Commission for Europe marketing standards. It has also clarified that marking and labelling requirements for small packages of mixed fruit and/or vegetables apply equally to mixes of fruit, mixes of vegetables and mixes of fruit and vegetables. That update came into effect on 26 March 2019, and the version of the EU marketing standards regulation that will be retained in UK law on exit will include this update. We want to ensure that this regulation is operable in the UK at the point of leaving, taking this amendment into account. The updates made by this instrument are therefore only technical in nature, such as ensuring that labelling changes are applied consistently and updating references to other provisions. This will provide clarity to stake- holders.
Finally, we have used the opportunity provided by this instrument to make minor technical amendments to four EU exit statutory instruments relating to the CAP that were made by Defra between February and March 2019. By way of example, Regulation 3(3) of the instrument omits a duplicated provision. Regulation 6(2) amends a phrase in a non-operative section of a domestic SI describing a provision of retained EU legislation to ensure the terminology is consistent with the exit statutory instrument that amends the provision described as “appropriate authority” rather than “relevant authority”. Neither amendment has a practical implication; they merely tidy up the statute book. The other corrections are essentially of a typographical nature, such as use of the word “of” instead of “or”; taking account of different phrasing in the EU regulation; and correcting an instance where the text quoted in the statutory instrument does not match the text in the retained EU regulation.
I take full responsibility for the errors, and obviously I regret any error. As I have said before, my task is to ensure that everything is right. I assure your Lordships that we felt it better to attend to these, so that the statute book was perfection. I am being absolutely open when I say that we need to attend to them. I hope your Lordships will understand that I am always disappointed to have to offer my regrets about inaccuracies, but is it not far better to be straightforward? I beg to move.
My Lords, I take this opportunity to thank my noble friend for bringing forward these regulations today. I also take the opportunity to thank his department, which had to deal with more statutory instruments in a record time to enable us to be prepared for what could still be the eventuality of Britain leaving the European Union with no deal. I know that this has been at some considerable human cost to his department.
My question relates to information from the new Minister for Agriculture in the other place, our honourable friend Robert Goodwill. As my noble friend alluded to in his introduction, the Minister set out the ability for inter-pillar transfers between Pillar 1 and Pillar 2. When this was considered in the other place, our honourable friend stated that,
“inter-pillar transfers of up to 15% can be made from year to year”.
He went on to elaborate:
“England has availed itself of 12%, Scotland 9.5%, and Wales 15%—the full amount”.—[Official Report, Commons, Second Delegated Legislation Committee, 7/5/19; col. 8.]
As of that date, Northern Ireland had yet to avail itself of the transfer because of its particular circumstances.
What my noble friend has brought forward today will ensure that we will be prepared to leave. I congratulate him on his honesty in identifying the errors that were made, inevitably, in bringing forward so many statutory instruments in such a short time. What will be the position relating to Scotland, Wales and Northern Ireland in the run-up to and post 2020? I also welcome the commitment that funding will still be in place, as I understand it, until that time. What is the status of the framework agreement that will, presumably, come into place to deal not just with agriculture but with fisheries and a number of other areas relating to my noble friend’s work in the department? I understand that it will be the UK Government who will decide what the position is for agricultural policy at that time. At the moment, Scotland and Wales have been able to have a differential in the transfer between Pillar 1 and Pillar 2. Will they lose that flexibility going forward, either before or after 2020?
I intend, however, to give a fair wind to the statutory instrument before the House today.
My Lords, we on these Benches support the comments of the noble Baroness, Lady McIntosh of Pickering, who has reflected on the errors to the three statutory instruments on CAP which have already come. It would be churlish to make more political capital out of that, given the huge number of statutory instruments that the department has had to deal with. As she rightly says, there has been a huge human cost, so we do not wish to make any political capital out of those drafting errors.
Equally, the Minister in his opening remarks reflected on the need for this statutory instrument to ensure that the discretion remains to enable flexibility between Pillar 1 and Pillar 2. Again, we support the discretion to move money from Pillar 1 to Pillar 2 to encourage further expansion of rural development schemes.
The one issue I will raise is the need to transpose into UK law the European Union’s new marketing regulations on the standards for fruit and vegetables. The EU has been extremely strong on ensuring food standards protections for consumers—for example, in respect of chlorinated chicken coming on to the market. The EU made this change to the marketing regulations to prevent the market being flooded with sub-standard goods.
Although we welcome the transposing of these regulations through this SI, the question is, what confidence can we have that, in future, the Government will be able to ensure the food standards that the European Union has been so good at protecting? That is particularly relevant in a week when we hear that in the discussions between the Labour Party and the Government on stitching up a potential Brexit deal, it is environmental protections that the Government have not guaranteed.
So, yes, we welcome the transposing of the standards, which will offer further protections to consumers on food standards and more protections for our farmers and the environment—but what guarantees can the Minister give that, if we leave the European Union, those food protection standards will be maintained?
My Lords, I thank the Minister for his helpful and honest introduction. I note that this statutory instrument is headed, “Exiting the European Union. Agriculture. Food”. It also refers to marketing and agricultural products.
My concern today is sheep farming, the sheepmeat industry and the upland communities of Wales and, indeed, across Britain. It is a truism to say that Brexit is a huge moment in our national history. My hope is that the sheepmeat industry, the farmers of our uplands and the scattered communities in which the farmers and their families live will not lose out as we leave the European Union.
I know that the Minister knows his agriculture—he farms—and the Secretary of State for agriculture is a lively participant in the agriculture and environment scene. I would like the department to assure us that government will make every effort to protect and advance the sheepmeat industry. Nobody in the upland communities of Wales, for example, is enriched by running their flocks across the scenic hills of Wales. It is a challenging and demanding life, and as well as being able to make a living, these able and experienced farmers make a major contribution to the landscape. Consequently, it is free of scrub, birch, gorse and bracken. If the industry falters, the far-flung, supportive villages of these handsome hills will also falter.
Here is a way of life. It is a culture and the heritage of many centuries. It is very supportive of the needs of the people of Britain. These communities are owed a great deal from any Government of the day. I hope that the Minister will boldly declare that across all the British Isles, but certainly in Wales, the Government will fight to make sure that this beleaguered industry, which faces major problems, can survive and be enhanced.
The Minister will know that when the magnificent, red-shirted XV take the field in the national stadium, they want to win, and they recently won against those in white shirts from England. In this instance, I am asking a Minister from England to be of service to Wales. I remind the House that many millions of sheep graze on the slopes of the hills in the lovely land of Wales. Sheepmeat is an industry, and we wish it to be kept. We hope Ministers will give us that assurance.
I thank the Minister for his introduction to the regulations. I declare my interests as set out in the register, being in receipt of EU funds. The House may well have thought it had dealt with the multitude of EU exit orders prior to the UK’s non-exit on 29 March, but they continue and will continue. With such a torrent, it is not entirely unexpected that there may well have been minor drafting errors to correct and technicalities to update and I appreciate the conciliatory way the Minister has addressed those issues today. Those issues will not detract from the praise due to him and his team for how he has handled the process and undertaken discussions around the House across a wide range of subjects in such a short period. I think his department probably comes second only to the Treasury in the number of statutory instruments it has to process.
These regulations amend five previously agreed EU exit orders to correct minor drafting errors and incorporate recent amendments made by the European Commission to CAP legislation relating to direct payments and marketing standards in the fruit and vegetable sectors, even those made as recently as 28 March. The main alteration is that member states are now able to make further inter-pillar transfers from Pillar 1 direct payments to Pillar 2 rural development for a further year until 31 December 2019. In the UK, decisions on inter-pillar transfers are devolved. The other pertinent amendments make it clear that marketing standards for mixes of fruit and vegetables apply to mixed packages and make a number of small changes to the general and specific marketing standards in order to align the UK marketing standards with the latest United Nations Economic Commission for Europe marketing standards.
Of note is that continuing updates are likely as negotiations continue around the UK’s EU exit as regards continuing changes made at EU level. While this is clear up to the date of exit, will the Minister confirm what this means in relation to any transition period? I note that the noble Baroness, Lady McIntosh, has concerns on these issues. When any divergence between the EU and UK could begin and the Government’s policy in any transition period are of great importance. Will the Minister confirm my understanding that during any transition period after EU exit day the Government will continue to incorporate into UK law EU measures to ensure the operability of the statute book? Again, I acknowledge that certainty will be maintained with regard to the existing regime through the Treasury’s guarantee to continue the status quo. The importance of that was highlighted by my noble friend Lord Jones in relation to sheep farming in Wales.
These regulations update EU regulation 1307/2013 to give effect to the new discretion for member states to continue to determine inter-pillar transfers of up to 15% up to 31 December 2019. It is worth reflecting that there is already divergence in the rate between the constituent parts of the UK, with Scotland, as noted by previous speakers, at 9.5%, England at 12% and Wales already at 15%. Can the Minister confirm what the position could be in relation to Northern Ireland and say who, in the present predicament, would make any decisions there? Can he also confirm that the devolved Administrations will still be able to decide their own flexibility for inter-pillar transfers? Does it concern him that the range between 9.5% and 15% is considerable and could affect food production and competition within the UK?
Paragraph 7.7 of the Explanatory Memorandum says:
“The impact of the amendments … is deemed to be negligible”.
I agree that this added year for any decision regarding transfers is in itself negligible but the decision to increase the transfer rate is certainly not negligible, and the monetary change can affect farmers, the food chain and the environment. Will the Minister acknowledge that a change in the rate of transfers between Pillars 1 and 2 is significant?
Perhaps I might also follow up with a concern. As the Minister knows, the Rural Payments Agency has had, and continues to have, problems with performance. What action are the Government taking to improve performance with the BPS while the UK remains part of the CAP and to ensure that the RPA’s structure is able to adjust to any new regime consequential to a new agriculture Bill?
It is important to the food chain that marketing standards in the fruit and vegetable sector continue to function effectively to protect the interests of consumers as well as businesses in the sector. Does the Minister agree, and the Government commit, to the continuation of common standards with the EU after Brexit? The continuation of close co-operation with the EU is imperative for agriculture, industry and consumers. Otherwise, I am very happy to approve the regulations before the House today.
My Lords, I acknowledge the generous thanks that have been expressed to the department. It has been a great privilege to work with lawyers and officials in Defra, and we will be attending to some other statutory instruments on Monday. I think that all your Lordships will agree that, whatever our views on the matter, we should acknowledge that officials in the department have worked literally through the night on many occasions, and we should be extremely grateful to them. It is also appropriate to point out that there are times when we all work together very well, and I want to place on the record the co-operation and understanding that there has been in this project to try to get the statute book in order. Whatever our views on the matter, we have all sought to get it right. Although we will be returning to the fray with other statutory instruments on Monday, I wanted to acknowledge that.
My noble friend Lady McIntosh of Pickering made the point that much of the guts of the inter-pillar arrangements is, like agriculture, as we all know, devolved. That means that each part of the United Kingdom has always made its own decision on these matters and indeed on whether to carry out an inter-pillar transfer. In the case of Northern Ireland, that has been its decision, but Northern Ireland was keen to be part of this statutory instrument on the basis that it gives the flexibility to consider that option if it so wishes. It is up to each UK Administration to decide what level of budgetary transfer they wish to make for the 2020 direct payment scheme. As I have said, that is the way I think it should be.
So far as the future is concerned, we all await the Agriculture Bill in your Lordships’ House; I do not say that in any but the most serious of tones, because we are all waiting. Obviously, the Agriculture Bill begins what would be a seven-year transition period from 2021—again, 2020 continues the structure of the old system—to 2027 for direct payments to help farmers in England, for instance, to plan for the future. In the meantime, payments for 2019 and 2020 will be made on the same basis. As I said, this is devolved, and these are matters for devolved Administrations. Although I do not have direct responsibility in this area, I know from the regular meetings held with Ministers in Defra and the devolved Administrations that everyone is seized of the importance of agriculture in all parts of the kingdom.
The noble Lord, Lord Jones, rightly champions Welsh lamb, and I am mindful of the Woolsack on which the noble Baroness is sitting. Sheep rearing, whether for meat or material, is all about a long-term cultural heritage and a way of life that we owe to farmers all across the kingdom who farm in the uplands. I would like to place on record again, and say to the noble Lord, that we owe the farmers of Wales a great deal for many things: they are the custodians of great landscapes, where much of the water and many of the watercourses of Wales come from—that is the case for the uplands. We are very conscious of what the upland farmer produces for the country, and this is reflected in our environmental land management schemes. I am absolutely confident that, in the payment of public money for public goods, our policy will have upland and sheep farmers who care for the landscape—producing food of course, but also acting as custodians of important places—very much in mind.
The noble Baroness, Lady Parminter, rightly raised the issue of marketing standards, which comes up, and should come up, regularly. Marketing standards are well established within the UK agricultural sector, and any proposed changes would require engagement with stakeholders and consultations. The whole basis of marketing standards is that the British product is recognised as the best in the world; this is clear in the marketing standards that we have through the EU and will be so in those we have when we are making our own decisions. They will factor in, first, that existing EU marketing standards will remain operable after exit to continue to protect consumers and traders. Whenever we consider changes, it will be very much with the premise that marketing standards and our ability to give confidence to the consumer will be retained. I am sure that the noble Lord, Lord Jones, wants Welsh lamb to be exported, as we do, as well as kept for domestic consumption. That is so important. I say to the noble Baroness, Lady Parminter, that this is an area where we have brought all the marketing standards back on to the statute book. Clearly, any decisions made in the future, when we have that responsibility, will recognise our responsibility not to compromise what are very strong standards.
The noble Lord, Lord Grantchester, asked a number of questions about the RPA. On 8 April, the RPA confirmed that 99% of BPS 2018 claims have now been paid. I would say, having looked at this over the years, that whether with probate or other issues there will always be a small number of claims outstanding, but this is a significant improvement. It is why I have confidence that, in the movement of the ELS and the countryside stewardship payments to the RPA, we are looking again for enhanced performance.
The noble Lord asked about potential divergences between the devolved Administrations and Defra and so forth. Again, we cannot have it all ways. Devolution means that we have to, and should, respect the decisions of the Administrations in those countries. What I think is important, and what I can acknowledge, is that despite the hurly-burly there are productive and collaborative discussions on these matters between devolved Administration Ministers and Ministers within Defra, because clearly we all want a vibrant UK agricultural system.
With regard to what the noble Lord, Lord Grantchester, and the noble Baroness, Lady Parminter, said, yes, we must and will continue to protect consumers. We want standards of the highest order to continue not only for our domestic consumers but for issues of provenance—the ability for UK agriculture and UK farmers to be known around the world for high standards of production and animal welfare. Our standards and the mark of UK production, in all parts of the UK, mean that people can have confidence in the food that they are eating. Those are all issues that my department feels extremely strongly about.
On operability, the key point that I want to make is that the whole purpose of this instrument is to ensure that there is operability. In a withdrawal agreement scenario with the carrying on of an inter-pillar transfer for 2020, given that EU exit SIs would not come into force until the end of the implementation period, the current withdrawal agreement would disapply the direct payments regulation for the 2020 scheme year. The Government would bring forward equivalent legislation for that scheme year in due course that would include provisions for inter-pillar transfers in line with the Commission’s recent amendment. The whole point about what we did with the urgent affirmative procedure —what we are doing today and what we may have to do in future—is that, whatever our views on the matter, we have sought to ensure that the statute book is ready for any scenario. I repeat that what the Government have sought to do, in the discussions that have taken place across the House and in the other place, is to seek to factor in that we ourselves need to be ready for whatever scenario takes place. Obviously, others are working on securing a deal. We want a deal. We have had to factor in scenarios that may be possible, such as the one that my noble friend Lady McIntosh of Pickering referred to, but we as a Government seek a deal. We want an implementation deal and then one that continues. We want a very harmonious and strong relationship with our friends on the continent and in the Republic of Ireland. Obviously, this is what we all want.
I will look at Hansard because I think the noble Lord, Lord Grantchester, asked about one or two matters of detail on which I might not have the distinct, correct form of words that I would like. If that is the case, I will write and copy in all noble Lords who have spoken in this debate. In those circumstances, I hope I have answered as best I can. I beg to move.
Trade etc. in Dual-Use Items and Firearms etc. (Amendment) (EU Exit) (No. 2) Regulations 2019
Motion to Approve
That the Regulations laid before the House on 4 April be approved.
My Lords, I am pleased to be able to open this debate on these regulations, which are made in exercise of the powers conferred by Section 8(1) of the European Union (Withdrawal) Act 2018, and correct errors in an earlier instrument— the Trade etc. in Dual-Use Items and Firearms etc. (Amendment) (EU Exit) Regulations 2019. They are an important part of our preparation for a no-deal EU exit.
The earlier regulations had been debated and approved by both Houses. They amend two retained EU regulations. The first is the dual-use regulation. This controls the export, transfer, brokering and transit of dual-use items. Dual-use items can be goods, software, technology, documents or diagrams that can be used for both civil and military applications. The second is the firearms regulation. This lays down rules on exporting, importing and transporting of firearms and their parts, components and ammunition. These are not military firearms, but the kind used by hunters and sports shooters.
The error—I must apologise for this—was the removal of annexe IV of the dual-use regulation. Annexe IV establishes authorisation requirements for certain intra-Community transfers. It was deleted because in a no-deal scenario, the UK will not be party to intra-Community transfers. However, annexe IIg of the dual- use regulation relies on the list of goods in annexe IV. This list includes various stealth technologies, crypto- graphic equipment, missile technologies, detonators and chemical weapons, so annexe IV needs to be retained, even if we have no use for authorisation requirements for certain intra-Community transfers.
These regulations were made on 4 April 2019 using the urgent procedure because of the importance of ensuring that annexe IV was reinstated for a no-deal exit, when exit day was anticipated as 12 April 2019. It had initially been prepared prior to 29 March 2019. Without reinstating annexe IV, existing European Union law would not be effective in UK domestic law on the day we exit the European Union.
Let me be clear: the error has not caused any harm given that the regulations were due to take effect only in a no-deal scenario. I know that it should not have occurred in the first place, but we spotted it in good time and are taking the necessary steps to rectify it.
In correcting this, we have also taken the opportunity to make other minor changes. When this House debated the original regulations, my noble friend acknowledged that the Joint Committee on Statutory Instruments had reported the instrument for defective drafting in three respects. My noble friend said that we would correct these errors and we are now doing so. I am grateful to the Joint Committee for pointing out these issues, which we have taken the opportunity to correct.
By making these regulations, the Department for International Trade will have completed the legislative part of controlling the export of strategic goods in preparation for no deal. If these regulations are no longer required on exit day, we expect to revoke or amend them. Alternatively, commencement could be deferred to the end of the implementation period.
However, we are acutely aware that the EU can continue to make new and amend existing legislation. While parliamentary deliberations continue about the terms of UK departure, we might have to adapt and amend our regulations to reflect any changes that the EU makes, so the departmental work and commitment to provide detailed advice and guidance about export controls and trade sanctions will continue. I take this opportunity to remind the House that these regulations are solely about ensuring that we have a functioning statute book on exit day in any scenario.
To conclude, I hope that this House will work in the interests of our nation to ensure the passage of this legislation. It is essential to ensuring that we are prepared for EU exit. I beg to move.
My Lords, there may be a slight feeling of “mea culpa Wednesday” when people read through today’s proceedings in Hansard. However, we are grateful to the noble Earl for picking up this issue at the first opportunity since his noble friend Lady Fairhead stepped down. She sent me a very kind email yesterday, indicating that she was stepping down. I wish to put on record how much all of us across the House enjoyed working with her on the Trade Bill and on these issues of international trade. I hope that the noble Earl can forward those remarks to her.
This issue is necessary, and there will be no opposition from these Benches to what the noble Earl has indicated. We are very grateful to him for clearly outlining the actions taken by the Government in correcting the errors in the original drafting and in ensuring that there is no gap in the annexe that he outlined would need correcting. However, in terms of preparedness, this continues to damage our reputation for good governance. There was the botched deadline of 29 March; it was known that defective legislation would be on the statute book and that further legislation would have to be put forward to correct it, which this does; advice to businesses was published and then withdrawn; and, to some extent, continuing concerns on operability were not addressed.
Given that this issue impacts on defence and security industries, and is linked to organised crime and non-state actors, as well as human rights and our adherence to international obligations, while it is reassuring that there would be no gap because we have not yet left the European Union—and will not do so without any agreement —there are people who will look for any gap in any legislative coverage, including those within who do not have the best interests of our country at heart. Therefore, the prospect that there could have been gaps is quite alarming. In the other place, the Minister, Graham Stuart, said when he moved this measure that any gap in competent legislation would put us in breach of international obligations. I accept the seriousness with which the noble Earl has brought this forward.
I shall ask two questions, which I hope the noble Earl can address. First, Regulation 3(27)(d)(iv) amends Annexe IIe of the European regulations to omit reference to the European Charter of Fundamental Rights. As I mentioned, this is an issue that impacts on human rights, and a specific measure that highlights that human rights are included within the provisions. How do the Government see the definition of such violations, if we are to stand alone? We referenced this issue during the Trade Bill. Commitments were provided by the former Minister, so clarity on how the Government intend to take this forward would be welcome.
Secondly, by definition, many of the technologies move fast and need continuous updating, while licensing regulations need to be ahead of those that do not have the best interests of our country at heart. There is a dual-use co-ordination group currently chaired by the Commission, in which the UK participates by virtue of our membership of the European Union. By leaving, obviously we are also leaving the dual-use co-ordination group. However, it is a given of the significant correction that the Government are making that we will have an ongoing relationship with this dual-use co-ordination group to ensure that there are no emerging gaps. How do the Government envisage our having a relationship with the dual-use co-ordination group if we will be out of it? If the Minister can respond to these points I would be most grateful. We share the intention of ensuring that in any situation there is competent legislation.
My Lords, like the noble Lord, Lord Purvis of Tweed, I put on record our thanks to the noble Baroness, Lady Fairhead, for her work and for the excellence of her contributions during her time as Trade Minister. We are sorry to see her go but obviously delighted to see such a wonderful substitute in her place before us, beautifully adorned as the noble Earl is with the White Rose of York. I see nothing in that; I simply make that comment in case it would not be picked up in Hansard.
In his contribution, the noble Earl made it clear that he offered his apologies on behalf of the Government for the mistakes made in the original drafting and took full responsibility for them. What we are left with is the Government taking the opportunity to pick up drafting errors drawn to the attention of your Lordships’ House by the Joint Committee on Statutory Instruments. These have been worked into the draft before us and resolve the problem referred to by the noble Earl and the noble Lord, Lord Purvis. I have very little to add to that. We covered the original drafting in some detail but did not pick up the mistake, which is one of those things. I do not think there are any further issues to raise. The points largely concerned how this fitted into the overall scheme for the control of goods which could be used by others to whom they are sold for suppressing civil rights, et cetera, in other countries. We are clear that that is happening.
There was one thing I meant to ask at that time. I am sure the noble Earl does not want me to go on to this but I offer it to him as a question to which we may need an answer in some sense. The change on page 2 of the statutory instrument to Regulation 3(22)(h)(ii) is a substitution. The change made is,
“for ‘either non-EU Member States or Wassenaar’ substitute ‘non-Wassenaar’”.
I have got lost in the double negative there and I wonder whether the noble Earl, either when he is on his feet or in responding by letter, if he prefers, could explain to us who exactly makes up the non-Wassenaar group. If there are any issues there to which he wishes to draw attention, I should be happy to hear those but with that, I am happy to support these regulations.
My Lords, I thank both noble Lords for their contributions on these regulations. I also thank them in particular for their kind words about my noble friend Lady Fairhead. I will pass on their comments and make sure she is aware of them.
The noble Lord, Lord Purvis, raised two points, one of which relates to the Charter of Fundamental Rights. Section 5 of the EU withdrawal Act specifically provides that the charter will not form part of UK law on or after exit day. However, we will continue to assess export licence applications against a robust framework, and we will not grant a licence if there is a clear risk that the items might be used for internal repression. I will look further at the question he posed on this issue and if I can add anything more to this, I will write to him. The noble Lord also mentioned the dual use co-ordination group. In particular, he said that technology moves fast and he is quite right. As far as the group is concerned, I recognise the importance of continued co-operation with the European Union. This is of course a matter for negotiation in the future relationship but we hope very much that we will maintain a close co-operation with the EU and individual member states. This would of course cover such items as the group that he mentioned.
The noble Lord, Lord Stevenson, mentioned a number of double negatives and the Wassenaar arrangement. I had a look at that arrangement when I first saw the regulations, as I thought it would be a good idea to have a little knowledge about this. What I can tell him, which I know will be followed up by what I cannot, is that there are 42 countries in the Wassenaar arrangement and that many are former Comecon countries. I will have to write to him on the details relating to the double negatives and the actual meaning of where we are going on it because, as he said, it is important to get a bit of clarity on this issue.
The UK is a global champion of free trade. Now, and as we leave the EU, we will continue to play an active and supportive role in ensuring global security through strategic export controls that facilitate responsible exporting.
I have been clear on the Government’s commitment to these regulations. Let me reiterate a key point in my opening statement: we made a mistake, for which I apologised and apologise again. We discovered it and through this regulation we will correct it before any no-deal arrangements come into service. We have a responsibility to ensure the safety and security of our people. This legislation supports that objective. I commend the Motion to the House.
Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019
Motion to Approve
That the draft Regulations laid before the House on 8 April be approved.
Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
My Lords, these regulations add certain new requirements to the reporting of directors’ remuneration by publicly quoted and traded companies. The purpose of the new measures is to give shareholders more information with which to assess how rewards to directors are matched by performance—for example, by requiring companies to provide more detail about the award of company shares to directors.
The new requirements stem from a new European directive, commonly known as the revised shareholder rights directive. The directive is due to be transposed by 10 June 2019. These draft regulations would implement Articles 9a and 9b of the directive, covering the reporting of directors’ remuneration, to the extent that they are not already given effect in existing UK law. Other parts of the directive are being implemented by Her Majesty’s Treasury, the Financial Conduct Authority and the Department for Work and Pensions.
The regulations add a small number of additional requirements in respect of the directors’ remuneration policy and the directors’ remuneration report which publicly quoted companies are already required to produce under the Companies Act 2006. The main change that the draft regulations would make to the remuneration policy would be to require companies to provide additional detail about proposed share-based remuneration to directors, including arrangements under which directors can exercise their shares.
The Government believe that this will be a valuable addition to the existing framework for executive pay reporting. The award of company shares to directors is of considerable interest to shareholders since it has the potential to align the interests of directors more firmly with the long-term success of the company.
The draft regulations also provide for the remuneration policy to set out more information on directors’ service contracts, in particular their length, and to highlight the key changes introduced in a new remuneration policy compared to the previous policy.
For the remuneration report, the main new requirement proposed in the regulations is for companies to compare the annual change in directors’ remuneration to the annual change in average employee pay over a rolling five-year period. This new measure would provide greater transparency on how pay in the boardrooms of quoted companies aligned with pay and reward across the company as a whole. It would also complement a new obligation introduced by the Government last year for quoted companies to disclose and explain each year the ratio of their chief executive officer’s total annual pay to the average pay of the company’s UK employees. The regulations additionally propose that remuneration reports in future show the split between fixed and variable pay for each director in every year.
Taken as a whole, the new measures in the regulations would further strengthen confidence in the UK’s executive reporting framework as one based on transparent, consistent and accessible public reporting to shareholders.
I want to highlight two provisions in the draft regulations intended to ensure the compatibility of the new measures—which, as I have said, originate from the revised shareholder rights directive—with the UK’s existing company law framework.
The first of these concerns the scope of the companies covered by executive pay reporting. The UK’s existing executive pay regime applies to quoted companies, whereas the shareholder rights directive that these draft regulations will help implement applies to traded companies. In practice, the vast majority of traded companies are also quoted, meaning that their shares are both tradeable on a regulated market and quoted on the FCA’s official list. The draft regulations address this slight differentiation in company definitions between the directive and UK company law by providing for executive pay reporting to apply both to quoted companies and to traded companies, whether or not they are quoted on the official list.
The second provision in the draft regulations, to ensure compatibility between the new measures from the directive and existing UK law, is a small procedural change to the Companies Act to allow shareholders to retain their existing right to a binding vote on any proposed payments to directors that would otherwise be outwith the terms of the directors’ remuneration policy. The procedural change provides that shareholder approval for any payments to directors outwith the remuneration policy results in an amendment to the policy for the purpose of those payments. In this way, UK law will be compatible with a requirement in the directive that all payments to directors must be in line with a shareholder-approved remuneration policy.
Turning to the impact of the regulations, the Government believe that the additional cost to business will not be significant. The UK’s executive pay reporting framework is already one of the most robust and transparent in the world, and the draft regulations propose only targeted enhancements to the existing remuneration policy and remuneration report. The Government tested and discussed the draft regulations in advance with a wide range of interested parties, including business groups, investors and civil society representatives. No significant concerns were raised, and a small number of technical comments helped inform the final drafting of the regulations before they were laid before Parliament.
These regulations are intended to increase further the ability of shareholders to scrutinise how directors are rewarded for their performance. In doing so, the regulations will enable the UK to implement Articles 9a and 9b of the revised shareholder rights directive, covering executive pay, and I commend them to the House.
My Lords, the content of this statutory instrument is all good stuff, in my view. Greater transparency, enhancement of shareholders’ rights to challenge around remuneration, comparators now with senior executives and average pay within organisations—I would have thought that this was something we would embrace with enthusiasm. Indeed, I hope that the UK was very much engaged in the process of encouraging the shape of this directive. However, it raises a question that I hope the Minister can answer. The directive completed its process through the European Parliament and Council two years ago. The Government expected that we would have left the European Union by this time, yet they had not taken the opportunity to bring forward this statutory instrument and these improvements. They have been forced to do so now because this directive needs to be implemented in regulation by 10 June—and we have not yet left the European Union, so that requirement remains on our shoulders.
I have heard much discussion from the Brexiteer community that Brexit will be an opportunity to set aside regulation, to reduce the burden on companies and to step away from what they consider to be a European view of director and senior executive responsibilities. Is the reason we did not see this statutory instrument earlier because the Government thought we might be able to avoid ever implementing it? I know that the Minister has praised it, but one would have thought that a Government who were enthusiastic about its content would have made sure that it was passed well before the original Brexit departure date. I hope that the Minister will address that, because it will tell us a lot about the Government’s expectation of how, in reality, they will handle regulation post any Brexit.
My second set of questions is around the parts of the directive that are not included in this statutory instrument because they are the responsibility of the Financial Conduct Authority and the Department for Work and Pensions, presumably to introduce through regulation. The Minister also mentioned the Treasury, but I noticed in the briefing we had that one series of rights is the responsibility of the Department for Business, Energy and Industrial Strategy. The other parts of the directive which are not covered by this SI are due to be transposed by 10 June 2019. Does the Minister have every expectation that that date will be met—that the FCA and the others engaged in this are on track to be able to deliver against it? What will happen with the set of shareholders’ rights that do not have to be transposed until 3 September 2020? I am not quite sure what they are, so perhaps the Minister can tell us more; I think it must be the ones that are the responsibility of BEIS. Do the Government intend to make sure that those are transposed or do they intend to discard them on the grounds that they expect that by that date we will no longer be a member of the European Union?
I hope very much that the Minister can help us through this process to enable us to understand why these regulations were not brought to us earlier to ensure that they were part of our statute book at the point of departure from the European Union. Did the Government intend to discard them if they found a way to do so, and if so, what does that tell us about their philosophy and intentions when it comes to issues such as transparency around remuneration for directors and senior executives, and the power of shareholders to be able to challenge?
My Lords, I am grateful to the Minister for introducing this statutory instrument. I can be relatively brief, because most of my points have already been raised by the noble Baroness, Lady Kramer, and I need only add a couple more things to them. Like her, I was caught immediately by the point at paragraph 2 of the Explanatory Memorandum which explained that this statutory instrument comes from a directive passed on 17 May 2017, and I wondered about the timescale of that.
In addition to the points she made, I point out that the department has a long and distinguished record in looking at directives and regulations that come from the European Union and has always prided itself on the quality of the material brought forward in support of the changes that it wishes to make through an SI, whether it is negative or affirmative. This SI stands out as one that has not been supported by a considerable amount of consultation and debate, and nor is there an impact statement, which I find rather surprising. Perhaps I would not go quite as far as the noble Baroness, Lady Kramer, in suggesting that there is a devilish plan here behind the work done by the department to try to avoid having to do anything in the hope that it would not be necessary because exit day would be before 10 June. Even so, the department has not covered itself in glory in the sense that, although it is true that the difference between where the UK Government have already got to with legislation and this directive is relatively small, these are not unimportant issues. If the department’s heart was in the wish to ensure that shareholders and indeed wider stakeholders had good information that allowed them to assess the performance of directors and to form a view on the effectiveness or otherwise of the company’s approach to directors’ remuneration and performance, these regulations, on the back of the directive, are in fact important. In a sense, that suggests that more work on and understanding of how boards will operate it would have been useful and helpful.
In introducing this SI, the Minister tried to paint a benign picture of how this was all happening anyway and was in line with where the Government were going. But that conceals a concern which has stemmed not just from anything heard on this side of the House but which has come from the Prime Minister, no less, who said that more has to be done to improve the way in which our limited companies system operates. There has been concern from the Bank of England about the whole question of whether tomorrow’s companies will need to be significantly different in terms of powers and responsibilities: it pointed out the much wider group of people who have an interest in the success or otherwise of a company, not just the shareholders. So there is a context here which has not been addressed by the Minister and I hope that he will comment on it.
To be more specific, we could not have reasonably expected the Government on their own to have brought forward regulations to make sure that in future we require that the remuneration of persons in the role of chief executive officer and any deputy chief executive officer must be reported, even if they are not directors. That is a major change, and it will help considerably to better inform those who judge companies.
On the question of how share-based remuneration is described, detail on vesting periods, deferral and holding periods is often lacking. In future, remuneration policy will have to indicate the duration of directors’ service contracts. Again, that will be useful. The remuneration policy must also set out the decision-making process for determination of review and implementation and all significant changes. These are important matters. They may be trivial in themselves, but, taken together, they will give much more information.
The Minister mentioned the split between fixed and variable remunerations and the question of share options. Share options have been a source of long-term concern to those interested in how companies pay their staff, particularly directors. To have that nailed down now is a really important change.
So those changes in themselves are important. The context within which this happens is of political interest. There is a question about why the regulations have been delayed so that we are doing this in a rush, and there is a worry about not having the wider context around consultation and cost, which suggests that something is not quite working here. I look forward to hearing the Minister’s response on that.
Like the noble Baroness, Lady Kramer, I am concerned about the SIs that will presumably be required from DWP on disclosure by asset managers about pension funds. This is also an area of interest, but it would be wrong if the regulations were not in place by 10 June. Can the Minister give us some information on that? Like the noble Baroness, I question how the Department for Business, Energy and Industrial Strategy will take forward the provisions requiring further facilitation of shareholders’ rights. It is a longer deadline—3 September 2020—but, again, further information would be helpful.
These matters are important. The statutory instrument is of great interest and I am happy to support it.
My Lords, as always, I thank both noble Lords for the positive side of their contributions to this debate—but thereafter it went a bit negative. The noble Baroness, Lady Kramer, supported by the noble Lord, Lord Stevenson, seemed to imply that we had been dragged kicking and screaming into bringing the regulations to the House. I assure them that that is not the case.
We were engaged in all the activity related to the EU in developing the regulations, but, as both noble Lords will know—probably far better than me, because they have been involved in BEIS matters for longer—this goes back quite a long way. Various improvements were made in 2013 and in 2018 to company reporting. So we have done quite a lot domestically, and we were involved with the EU in bringing regulations to book which, as the noble Baroness said, were produced in 2017 but do not need to come into effect until June this year. That date we will meet, and that is why we are bringing forward the regulations at this moment.
We have been preparing for a year to implement these measures. Those preparations had to take account of the new Commission guidance on the directive published last year, in 2018, and it would not have been fair to have introduced these new EU rules on UK companies two years before other companies in the EU. It is therefore quite right that we bring them forward at this stage. They form part of the Government’s wider corporate reform package that I mentioned, part of which was implemented last year and part of which was implemented earlier.
Both noble Lords asked about other government departments and the FCA. As I said, the FCA, DWP and the Treasury have to implement other parts. The Treasury will shortly be laying draft regulations. I do not know who in this House will do it; I imagine that it will be my noble friend Lord Young, as my noble friend Lord Bates is off on one of his walks. The measures in the directive are designed to increase transparency in the work of so-called proxy advisers, who advise institutional investors on the companies in which they invest.
DWP will shortly lay draft regulations to implement new measures in the directive covering how pension fund trustees carry out their stewardship roles with investee companies. The FCA will make changes to its handbook to give effect to new obligations under the directive covering asset managers and the disclosure of related party transactions by public companies, but that obviously will not need the same parliamentary scrutiny as these regulations. My department—BEIS—will also bring forward measures. I do not know whether they will be affirmative or negative, but I will advise the House in due course. We will bring forward appropriate measures to implement the final parts so that they can be brought into effect by September 2020.
Finally, the noble Lord, Lord Stevenson, asked about an impact assessment. I think that I made it pretty clear in my opening remarks that we did not think an impact assessment necessary, which is why we consulted widely with all the appropriate bodies, individuals and other parties. As a result of their comments, I am told, we made some changes and felt that an impact assessment was not necessary.
I believe that I have answered all the questions. As I said, we were not dragged kicking and screaming into doing this; we believe that the regulations are an appropriate response from the Government, partly to meet our obligations because we are still in the EU but also as part of the wider package I talked about, which came in last year and on earlier occasions.
Architects Act 1997 (Swiss Qualifications) (Amendment) (EU Exit) Regulations 2019
Motion to Approve
That the Regulations laid before the House on 5 April be approved.
My Lords, the regulations are part of the Government’s programme of legislation to ensure that, if the UK leaves the EU without a deal and an implementation period, there continues to be a functioning legislative and regulatory regime.
The only date on which a no-deal exit could happen is 31 October. Although the United Kingdom Parliament has rejected leaving without a deal multiple times, this remains the legal default at the end of the extension period. As a responsible Government, we have been preparing to minimise any disruption in the event of no deal for more than two years. On 28 March, we made legislation amending the Architects Act 1997 to continue to recognise EEA architect qualifications in a no-deal scenario. The statutory instrument extends those provisions to Swiss architect qualifications and is legally necessary.
The regulations are made using powers in the European Union (Withdrawal) Act 2018 to fix legal deficiencies in retained EU law to reflect that the UK will no longer be an EU member state after exit day. The regulations also use powers in the European Communities Act 1972 to implement EU legislation into domestic legislation—powers that are available only as long as the United Kingdom remains a member state.
As stated previously, the architectural sector is a global leader and plays a significant role in the British economy, with an export surplus of £437 million in 2015 and involvement in key global projects such as the Guangzhou Opera House in China and the Supreme Court of Singapore. This is a position that we will want to protect and enhance over the coming years by ensuring that UK architect businesses continue to have access to the brightest and best talent available.
Let me start by providing some context and background to these regulations, including a description of our previous statutory instrument amending the Architects Act in a no-deal scenario; that is, the Architects Act 1997 (Amendment) (EU Exit) Regulations 2019, which I will refer to as the 2019 regulations. As I previously explained on 25 March in the debate on the 2019 regulations, the mutual recognition of professional qualifications directive enables the recognition of qualifications obtained in another member state. This applies to EEA and Swiss nationals and includes the recognition of suitably qualified architects. This is a reciprocal arrangement, allowing UK and other EEA or Swiss nationals the opportunity to easily register to practise across Europe and Switzerland, and allows UK practices to recruit the best European and Swiss talent.
The Architects Act 1997 sets out the specific procedures for registering architects in the UK. The recognition of qualifications of EEA and Swiss applicants is carried out by the competent authority, the Architects Registration Board, an arm’s-length body of my department. There are currently three routes to recognition for an EEA or Swiss architect wishing to register in the UK. The main route to recognition in the UK for an EEA or Swiss national architect is through an “automatic recognition” system. To qualify for automatic recognition, an EEA or Swiss national needs to meet three tests. They must have an approved qualification, which means one listed in annexe V of the EU’s mutual recognition of professional qualifications directive. They need access to the profession of architect in an EEA member state or Switzerland, and a statement from their home competent authority confirming that they are fit to practise.
A second route, known as “general systems”, provides for recognition for EEA or Swiss nationals who do not have an approved qualification. The applicant is offered compensation measures, such as the opportunity to undertake additional training to make up any differences in qualification. This is a long and costly process which on average only four people across all these countries pursue annually. The third route facilitates the temporary or occasional provision of service. This allows EEA or Swiss professionals to work in the UK in a regulated profession on a temporary basis while remaining established in their home state. Typically, fewer than 20 EEA and Swiss architects pursue this option at any one time.
If the UK leaves the EU without a deal, the mutual recognition of professional qualifications directive will no longer apply in the UK. The 2019 regulations, which were made on 28 March, ensure that UK architect practices can continue to recruit the best European talent and maintain their global reputation as world leaders by preserving the main route to recognition. The mutual recognition of professional qualifications directive was extended by what is commonly referred to as the free movement of persons agreement between EU member states and Switzerland, allowing Swiss nationals to benefit from the recognition routes described. Due to the requirement of the European Communities Act powers to include Swiss qualifications, which exist only as long as the UK is a member state, we assessed that there was a substantial risk that all EEA-qualified architects wishing to register in the UK would be without legislative cover if the 2019 regulations were not made before 29 March. However, the extension to exit day has allowed us extra time to lay legislation to provide parity between EEA and Swiss-qualified architects in a no-deal scenario, as exists currently.
The policy intention is to provide the sector with confidence that all applicants can register in the same way after exit day as currently. This is the approach favoured by the sector, which recognises the skills brought by EEA and Swiss architects as contributing positively to the UK’s reputation as a world leader in architecture. The approach of continued recognition also received support in debates for the 2019 regulations. The instrument allows applications made before exit day to be concluded under the current system as far as possible. For future applications, it will freeze the current list of approved qualifications in the EU’s mutual recognition of professional qualifications directive. As a result, after EU exit in a no-deal scenario, an individual holding an approved EEA or Swiss qualification will be able to join the UK register of architects if they have access to the profession of architect in their home state. Through this legislation, this process will be open to anyone with a Swiss qualification and access to the profession in Switzerland, regardless of their citizenship.
We will remove general systems as a route to registration, as this is a long and costly process and is not utilised often. It places significant, unnecessary burden on individuals and the Architects Registration Board. Applicants without an approved qualification will therefore be able to register via the route utilised currently by third-country nationals.
This instrument does not change any part of the 2019 regulations; it simply extends the provisions to include Swiss qualifications. Although the number of Swiss architects registering in the United Kingdom is low—only 77 over the last 10 years, less than 1% of total recognition decisions via this route—we felt it was imperative to preserve the rights that Swiss-qualified architects currently enjoy and to provide parity between EEA and Swiss-qualified architects.
In summary, these regulations—alongside those made on 28 March—serve a very specific purpose: to prioritise stability and certainty if the United Kingdom leaves the EU without a deal or an implementation period by ensuring that EEA and Swiss-qualified architects can continue to register and practise in the United Kingdom. These regulations ensure that the United Kingdom continues to have access to Swiss talent after we have left the EU, thereby helping to maintain the UK’s reputation as a global leader in architectural services. Thereafter, they provide a stable basis for Parliament to change the law where it is in the United Kingdom’s best interests to do so.
In conclusion, this instrument is necessary to ensure that the Architects Act continues to function appropriately if the UK leaves the EU without a deal and an implementation period. I hope colleagues will join me in supporting the regulations; I commend them to the House.
My Lords, I thank the Minister for his introduction of these regulations to the House and his explanation of their content and purpose. It is certainly very important indeed that we make sure that international professionals currently qualified by virtue of their training in the EEA and Switzerland have the opportunity to come and support our construction industry, which—as the Minister has rightly pointed out—is a major export earner for this country. To that extent, I very much welcome the fact that this is being brought forward. The Minister might have been slightly glossing the specifics of this statutory instrument, which—as I understand it—is a consequence of Switzerland being left off the original document and therefore becoming a late runner in this race.
My broader point is that this is just another deckchair being rearranged on RMS “Titanic”—the no-deal option. The Prime Minister and Parliament themselves have repeatedly said that this will not happen, and therefore we are misusing our time in the House this afternoon. I do not want to take long contributing to that process, simply to say that if we had spent some time instead dealing with homelessness, fire safety or climate change, it would have made a much bigger contribution to the well-being of our country than this statutory instrument.
The Minister has made it quite clear that this is effective only if the UK leaves without a deal; it does nothing more and nothing less. In Part 2 of the supporting documents, entitled “Statements required when using enabling powers”, the final sentence of paragraph 5.2 says that,
“in order to allow for the continued recognition of Swiss qualified architects, this Statutory Instrument needs to be made before exit day”.
It was not made before exit day. It has come in time only because exit day has been extended to 31 October. It can of course come into force only provided that the original accession Act remains in force, which it would not do in the event of no deal. I would like to hear from the Minister confirmation of that point and, bearing in mind that a no-deal exit has been ruled out, some explanation of why we are spending time on this and not on homelessness, climate change or fire regulations, all of which are urgent, pressing issues that we should spend some time on.
I would be grateful if the Minister would check with his private office how many legislative proposals, consultation responses and consultation launches that have been previously announced as coming “shortly”, “in the spring”, or “by the summer” are currently outstanding and queueing for the attention of this House, while we spend our time—waste our time, I say—on statutory instruments dealing with a fantastical no deal that we all know is never going to happen.
My Lords, I thank the noble Lord, Lord Bourne, for explaining to us the purpose of the regulations before us today. I do not intend to detain the House for very long, and I am very happy to support the regulations as far as they go. However, I agree with the noble Lord, Lord Stunell, that there are many other pressing issues that he and I are keen to get on with. There are many issues—in the department of the noble Lord, Lord Bourne, and in others—that we desperately need to get on to. Having said that, I have no particular questions for the noble Lord on the regulations before us. As far as they go, I am content with them.
My Lords, I thank the noble Lords who have responded to this debate. The noble Lord, Lord Stunell, took quite a long while to tell us that he thinks we are wasting our time dealing with this; that was uncharacteristically churlish of him, if I may say so. These regulations are important. This affects only about seven people a year in Switzerland, but it is important that we recognise that there is considerable interest in the United Kingdom in making sure we regularise this position. I am not going to enter into the pantomime knockabout of Brexit. On behalf of my department, I am doing what is responsible for an important sector of the UK economy. We do not want a no-deal scenario, as the noble Lord knows. However, if, God forbid, that happened, and we had not protected these Swiss architects, I would feel very guilty.
The noble Lord, Lord Stunell, asked why we are not spending time on fire safety. As a Government, and in my department, we have spent an awful lot of time on that. We are in the process of implementing the Hackitt review—I make no apologies for that—and we answer questions on it and debate it. He mentioned homelessness. On Friday, we announced extra money for homelessness, and I answered a Question on it on Thursday. He mentioned climate change. My noble friend Lord Henley, who is present, answered a Question on that yesterday. We are, quite rightly, always answering questions in these very important areas. In spending a short time on this issue, we are not detracting from the importance of those others. We are doing something rather important.
I thank the noble Lord, Lord Kennedy, for his positive response and responsible position. We need to ensure that architects are able to act, and this will be mutually in our interest too: British architects will be able to operate in the EEA countries and in Switzerland.
We have, I think, not taken too long on this important legislation. I beg to move.
Competition and Markets Authority: Legislative and Institutional Reforms
Question for Short Debate
To ask Her Majesty’s Government what assessment they have made of the letter from the Competition and Markets Authority (CMA) to the Secretary of State for Business, Energy and Industrial Strategy dated 21 February which sets out the CMA’s proposals on legislative and institutional reforms to safeguard the interests of consumers and to maintain and improve public confidence in markets.
My Lords, the Question posed for debate is exactly the one that I want to ask of the Government: what is their response to the CMA’s proposals?
In one sense, I am sorry that we are debating this now, rather than when the CMA was established, when we did try to raise these very issues. My noble friends Lord Whitty and Lord Stevenson and I tried to get a consumer focus written into the CMA’s objectives, as well as its structures, via a consumer panel or board appointments, but we were rebuffed by the coalition Government—even as, in the same breath, they abolished the National Consumer Council. That did not augur well for consumer interests, which is why I welcome the approach set out in the CMA’s letter to the Secretary of State for Business, Energy and Industrial Strategy. I hope he will use the word “Energy” in his title to run with these proposals.
As we said at the time, and as the CMA chair has said, competition is not an end in itself but a tool to serve the intended beneficiaries: consumers. Although without competition, consumers are disadvantaged, if not completely ripped off, a simple economic analysis of markets without measuring consumer detriment simply is not enough—as the long-suffering public know, with higher prices and unfair practices. As the noble Lord, Lord Tyrie, wryly muses:
“Adam Smith’s invisible hand appears rather idle”.
There are particular reasons why we need regulators —or the law—to protect consumers: sometimes because there are monopolies but sometimes because of the specialist nature of the providers—doctors and lawyers come to mind. Often, though, regulators are needed where the individual consumer cannot challenge the provider themselves—unlike with a broken table or a faulty car, where the consumer can see the problem and knows who sold the goods to them. With many goods and services, the imbalance between consumer and provider is immense, particularly where consumers rarely make a purchase—houses and pensions come to mind; where the consequences are long term or invisible to the client, as with will writers and surveyors; where buyers cannot shop around for quality or price—letting agents, lawyers and e-commerce are examples; or where the mischief is so large that no individual can take on the system, such as when Volkswagen cheated to make cars look less polluting than they were. Drivers bought them in good faith, but they were actually mis-sold those cars. But what happened in the UK, as opposed to the States? There was no action here and no compensation for consumers, whose car resale value promptly dropped.
At present, the CMA can only address consumer detriment caused by an adverse effect on competition, not by gross mis-selling or unfair contracts. I recently won a case at the Advertising Standards Authority in which a so-called “treatment” for dementia had been advertised, but all that happened after I won was that the ads could no longer appear. There was no fine on the company. No one was responsible for contacting people who had bought these junk products, and there was no compensation for purchasers.
We need a regulator that will step in to protect all consumers from those who break the law. The current proposals in the letter to the Secretary of State would give the CMA the power to fine firms that flout consumer law.
We have debated past CMA failures in this House before, particularly in relation to secondary ticketing, where the CMA originally failed to measure the consumer detriment or to grasp that, in such a market, only it could act. I am pleased to say that more recently, it has applied for an injunction to stop Viagogo’s unacceptable behaviour. However, if it had had the power to fine earlier, it could have acted more quickly, cheaply and decisively than it could via drawn-out court processes. Although I am sure that Viagogo could have absorbed any civil fine, given its lucrative but dishonest practices, the threat of personal disqualification might have made the difference. Similarly, the CMA had to embark on lengthy enforcement against the care home company Sunrise Senior Living before securing a £2 million settlement for the inflated costs in T&Cs. However, the new proposals would have given the CMA interim measures to protect vulnerable consumers from unfair practices and even award compensation.
Another example is medicine, where pharmaceutical companies’ control of prices is wholly unchallengeable by individual patients, who either bear the costs through higher taxes for the NHS, the bulk purchaser, or lose because NICE feels the drugs are too expensive to prescribe. Indeed, even the bulk purchaser, the NHS, is weak in the face of determined pharmaceutical companies. The CMA’s involvement over Phenytoin suggests that the NHS might be losing some £200 million a year through such unfair pricing.
With unfair contracts, individual consumers cannot challenge the system, so a robust regulator is needed to stand in their shoes, but the CMA has lacked the tools to put the consumer centre stage, with its hitherto narrow focus on competition and process rather than practical outcomes meaning that consumer detriment goes unchallenged. So I strongly welcome the proposal for a new duty to make the economic interests of consumers and their protection from detriment paramount. This should always have been the objective, as any attempt to regulate markets should be to safeguard consumers. However, many regulators appear closer to the providers—the regulated community—than end users.
I have spoken in the House before about the Government’s Regulators’ Code which, as I recall, speaks of working with the regulated community but not with consumers. The National Consumer Federation’s Consumer Charter for Regulators is vital here. As it says:
“The main purpose of regulation is to promote and protect the interests of consumers … where market forces alone would not deliver the best outcome”.
So consumers must be at the heart of regulation. This is where the new CMA approach is brilliant, along with its focus on enforcement, including legal powers to order remedies, civil fines for individuals and, vitally, the disqualification of company directors for breaches of consumer law, which can already happen for competition law breaches. Just as consumers will pursue complaints only where there is the possibility of redress, company directors will prioritise compliance only where their own position is at risk—and potential disqualification is a meaningful risk.
It is no surprise that consumer representatives have welcomed these proposals, with Which? commenting:
“Giving the regulator … a duty to put consumers first will help tackle the imbalance of a system that … worked in favour of powerful businesses rather than consumers”.
Citizens Advice says the proposals are,
“strong stuff ... and great to see”.
Both groups’ eyes, however, are on the Government, who need to ensure that these proposals are swiftly implemented to protect consumers.
Consumer confidence in some markets is shockingly low, with only one-third trusting gas and electricity suppliers, the very markets supposedly overseen by regulation. These CMA proposals appear when the public hardly trust big providers or the machinery of the state to protect them. As the noble Lord, Lord Tyrie, says, the CMA proposals are,
“taking place against the backdrop of an erosion of trust”.
The Government should heed his warning. Without these changes, public dissatisfaction will only grow, so I urge the Minister today to give a positive response from the Government and an undertaking to act rapidly to implement these proposals.
My Lords, this debate is on an important subject—namely, how to improve the UK’s regulatory regime on competition and consumer law. The Secretary of State asked the new chairman of the CMA to outline ways in which this might be improved, and today we are discussing the latter’s ideas. I should register my interest, notably as a company director outside the FTSE 100 in tech services and banking.
I am grateful to the noble Baroness, Lady Hayter, for proposing this debate. She and I worked together on the Consumer Rights Act 2015, which ushered in some important consumer safeguards, not least in the digital content area and on secondary ticketing, which she mentioned and which was a long story. I am not sure that the new rules have had time to settle in, as new laws always take time, and I disagree with a number of things that she said.
Responding to consumer needs has underpinned my whole career. I worked on the Citizen’s Charter, which was about making government measure and act on feedback about its services. Then I was at Tesco for over 15 years, where objective data from consumers—we called them customers—were always the harbinger of success or failure. If you looked after the consumer, you were successful.
I am not convinced that more legislation now is the best way ahead, not least because the costs get passed on to the consumer. We have already seen some adverse impacts from the energy price cap, which was imposed against the advice of the CMA, and we do not know whether we will be in or out of the European Union and its laws in the months and years ahead.
I am very glad that we will hear from the noble Lord, Lord Tyrie. On one point—the final recommendation in his letter—I agree unequivocally. The package as a whole, and indeed any fundamental reform of the regime, should be submitted to open and rigorous external scrutiny.
I also believe that before embarking on new laws—there is a great washing line of new proposals in the CMA document, from new duties and director responsibilities to enhanced penalties—we should always look carefully at what already exists, whether it is managed well and how improvements can be made.
Let us take local government. I am unfashionable in valuing the work done by local authorities, which are close to citizens and know local businesses and local rogues. Trading standards have been persistently unappreciated and starved of funding, but they represent good value for money. I know from the work I have done with them—for example, on online and offline counterfeiting when I was the IP Minister—that there are multiple benefits compared with the relatively small sums spent on that in local government.
I have attended many tutorials and seminars on competition and am convinced that Adam Smith—another reference—was right. Competition is required if a capitalist society is to operate as well as it can for the benefit of all. Recognition of the advantages of competition is what distinguishes a capitalist society from a socialist one, with the latter’s preference for nationalisation and, hence, monopoly. The results are manifest in the much greater economic success of capitalist societies. Oddly, the best recent examples are China and India, which ditched most aspects of socialist economics and consequently made extraordinary progress.
In some areas of life, strong competition comes about naturally, but that is not the case everywhere. It is more or less universally acknowledged that there is a need for a public body to investigate cases where competition has or might become weakened to the detriment of others—notably consumers. The mechanism by which these needs are met in the UK is the CMA. I think we are all agreed that it has an important job and, that being so, it is sensible to examine whether that job could be done more effectively. Whether it was ideal to ask the body in question to conduct such a review is another matter. Most bodies consider that the world would be better if they had more powers and, to nobody’s surprise, that is what the CMA chairman’s letter proposes. It might have been better to ask an outsider to make recommendations.
One component of the CMA’s powers has always concerned me—the fact that in some matters it acts as both the investigating body and the judge issuing fines and so on. One understands why the CMA came to be established in that way, since it largely mirrors the equivalent powers enjoyed by the European Commission under the EU treaties. It has also taken steps to mitigate the dangers of this dual role. However, when all is said and done, in some cases the CMA acts as both prosecutor and judge. I will share with the House some of my own experiences when I was a Tesco executive.
In 2002-03, the British dairy industry was going bust. There were many comments in the press and indeed by Ministers of the Crown to the effect that something must be done and that the supermarkets were to blame. The farmers came to see the top people at Tesco and they—a very hard-nosed bunch—were convinced from the figures that the industry was unsustainable. They regarded it as their moral duty to do something about it. They agreed quite independently to implement price increases, from which all or most of the benefit would go to dairy farmers. Other super- markets followed suit.
In due course, the OFT claimed that what had happened, with everyone raising their prices together, constituted a cartel and it sought to fine Tesco and others vast sums—in Tesco’s case approaching £100 million. I suggest that even if the law was, strictly, broken, this ought to have been regarded as a technical breach, since it had little relation to people meeting in secret to set prices. Everything happened in the full glare of publicity and for motives which many had accepted were worthy.
The OFT showed no signs of appreciating, still less accepting, the point. Instead, it proceeded with unnecessary vigour, not recognisable from the points that the noble Baroness, Lady Hayter, made. Our legal advisers recommended going quietly and paying up. They usually do. The other main supermarkets no doubt received the same advice and acted on it, since they pleaded guilty. That is an indictment of the system. We did not do so, for one reason. The CEO and, indeed, all of us were so incensed by the idea that we had taken illegal steps to cheat our customers that he ordered us to fight every inch of the way. Slowly the case unravelled. The charges against us were dropped one by one. Eventually, we reluctantly accepted one low-level charge and a fine well below £10 million on a dairy product.
The CMA has long since taken over from the OFT, but I think that that episode should have taught it that juggling the role of judge and jury is hard. It shows how difficult it is for investigators to stand back and appreciate that their initial enthusiasm might have been unbalanced.
It is salutary to look at the letter that we are discussing in the light of that example. Its most prominent proposal is that an extra provision should be added to the statute making it clear that the overriding duty of the CMA should be to consumers. Reflecting on that suggestion, I suspect that, had it been in place when our milk case was live, it would have undermined Tesco’s position. Justice, I suggest, can need many factors to be weighed, and the balance between them can vary in ways that cannot be foreseen. Seeking to give one factor overriding importance risks skewing investigations and imposing an intolerable burden on businesses—or, of course, driving them overseas if they are mobile.
An existing safeguard for those investigated by the CMA is the right of appeal to the Competition Appeal Tribunal; here the letter suggests what amounts to a clipping of the tribunal’s wings. I think we should reflect long and hard before accepting a proposal from one body that a second one, the function of which is to review decisions taken by the first, should have its powers trimmed.
Effective competition is essential if the economy is to operate to everyone’s advantage. Abuses need to be challenged and stopped, and the body charged with defending competition needs powers adequate to its remit. But all bodies—indeed all people—have a bias in their own favour. That is why the courts have rightly developed doctrines to eliminate bias from their proceedings. These safeguards are as important in matters of competition as anywhere else.
My Lords, it is a pleasure to follow the noble Baroness, especially in her enthusiasm for trading standards. As a past president of the Chartered Trading Standards Institute, I am pleased to be taking part in this timely QSD and delighted to be supporting my noble friend Lady Hayter, whose expertise in this area is highly respected across the House.
The publication of the letter from the noble Lord, Lord Tyrie, chairman of the CMA, to the Secretary of State for BEIS on 21 February was greeted, if not with the champagne-popping excitement seen in Royal Windsor this week, then at least with extremely positive and encouraging responses from the competition and consumer protection community in the UK, including trading standards. I repeat my noble friend’s Question: what is the Government’s response to the letter from the noble Lord, Lord Tyrie?
These proposals for reform of the competition and consumer protection regimes of the CMA are far-reaching and considerable, significantly seeking to place an overriding statutory duty to treat the interests of consumers as paramount. So say all of us. In particular, the proposals wish to align powers and penalties in consumer cases with those of competition law, such that the CMA itself can order the cessation of activities without the need for court action and, in tandem, give the CMA the ability to administratively fine firms up to 10% of turnover where required.
The proposals also give the CMA the power to order the cessation of practices that harm consumers, on an interim basis, subject to legal review. As the noble Lord, Lord Tyrie, says in his letter:
“The central challenge is that, despite relatively recent legislative changes, the UK has an analogue system of competition and consumer law in a digital age”.
The letter goes on to seek statutorily to enshrine the post-2012 landscape arrangements for the division of responsibilities for consumer law enforcement between the CMA and trading standards. I was involved in that division of responsibilities as chair of the Consumer Codes Approval Scheme, which took over those responsibilities from the OFT; it certainly seemed to make sense at the time to use that process to alleviate consumer detriment.
Having spoken to colleagues at the Chartered Trading Standards Institute, I know that they strongly support the proposals in front of us from the CMA to have, as a statutory duty, the interests of consumers as paramount in its decision-making. They also support the statutory enshrinement of the distinction of current roles in the national enforcement framework between the CMA and trading standards. However, the tricky bit for the Chartered Trading Standards Institute comes with the proposal for aligning the CMA’s current powers on competition issues with its consumer enforcement role—in particular, the powers to fine and seek cessation of practices on an administrative basis.
I believe that the CTSI’s concerns arise from the fact that there are distinct differences between the CMA’s competition and consumer roles, especially as, on the consumer side, there currently exists a system of local and national enforcement through trading standards. This is not the case for competition law, and the Tyrie letter does not make clear what the impact of CMA administrative actions and decisions for consumer enforcement would be on trading standards’ decision-making and enforcement choices. Perhaps the Minister could write to me on how the Government see this working out, especially in the light of the highly overstretched and underfinanced workforce within local authority trading standards departments.
While welcoming these proposals, I cannot help but think that, in drawing up the CMA’s future architecture, the one issue that will impact it more than anything else is hardly mentioned. This is the dog that does not bark at the elephant in the room—which is, of course, Brexit. Page 1 of the letter states that:
“The UK is widely held to be an excellent place to do business”.
I would add, “Yes, of course, certainly until Brexit”. On page 2, the letter exhorts business not to engage in anti-competitive or unfair trading practices. I would add that it will be much more difficult to clamp down on that bad practice—an example is given in the letter of “gaming the system”—when businesses in the post-Brexit world, if we come to that, will be obliged to do everything in their power to attract new trade opportunities to make up for leaving the EU.
On page 3 of the letter Brexit is again only a footnote, as it reminds us:
“Brexit, too, poses challenges for the CMA, not least from a greater workload of large, complex cases previously reserved to the European Commission, and the assumption of responsibility for monitoring and enforcing State aid rules”.
To say that Brexit is a “challenge” for the CMA is rather like saying that climbing Everest in stilettos is a challenge. As Carl Mortished said in his piece on 6 March in the Evening Standard,
“the EU competition commissioner … was able to resist powerful politicians”—
I presume he means national politicians.
“However, standing alone and outside the EU, Tyrie may not find it easy to attack monopolists when our Brexited government is desperate to persuade foreign mega-bucks to invest more in Britain”.
And of course we live in “Trump trade” times, which does not help these reforms either.
The CMA, in another understated footnote on page 8, suggests:
“The CMA’s capacity to give priority to this”,
“work would be impeded by a ‘no deal’ Brexit”.
Well, so say all of us. Do the Government agree with the CMA in this regard?
In conclusion, these are excellent proposals, launched at a uniquely uncertain time for the country and its place in the world. While I wish the CMA well in its necessary future planning, I am sure that none of us, especially the noble Lord, Lord Tyrie, underestimates the scale of the economic and trade duress that UK business and consumers will face in the near future if we are outside the European Union.
It is a pleasure to follow the noble Baroness, Lady Crawley. I thank the noble Baroness, Lady Hayter, for securing this important debate on an issue in which I have always taken great interest. The UK has one of the strongest consumer rights frameworks in the world but, as consumer group Which?, with its extensive experience of campaigning on behalf of consumers for many years, has highlighted, inadequate enforcement systems are too often preventing those rights from being enjoyed. The asymmetry of information between customers and businesses is well documented, especially in areas that I am most familiar with: financial products and services. I refer noble Lords to my registered interests.
I agree with the noble Baroness, Lady Hayter, that there are many instances of important one-off purchases, and the power of consumers is too often worryingly weak. At a time when trust in institutions, big business and the political establishment seems to have fallen dramatically and public dissatisfaction is rising, it seems more important than ever that the Government and the business community ensure that consumers have confidence that their rights will be enforced in practice, and that they will be effectively recompensed if things go wrong. The rise in populism, with people feeling that the system is stacked against them, can be aggravated by failures in consumer protection, or by claims that they are being protected that turn out not to be effective in practice. I applaud the Government for their Modernising Consumer Markets Green Paper, and welcome the recognition that this issue requires reform. I also welcome the work of the noble Lord, Lord Tyrie, for the Competition and Markets Authority, proposing important reforms to legislation and consumer protection.
I hope the Minister can give us further information on the Government’s intentions to act quickly; to improve the powers of the CMA to both gather and demand information; to require companies to co-operate with their investigations; and to enforce consumer protections and levy adequate deterrent fines, as so rightly pointed out in the letter from the noble Lord, Lord Tyrie. Can the Minister assure the House that the department agrees with the CMA proposals that the consumer interest is vital and needs to be at the heart of its work?
Unfortunately, the current system relies on local authorities’ trading standards services, which, according to Which?, account for 75% of public enforcement responsibilities, whether that be for scams, product safety or food labelling. Given the budget constraints of councils, which are already struggling with social care costs, local authorities are often inadequately equipped to cope with such responsibilities. Could the Minister explain to us how the work that the newly established Office for Product Safety and Standards within his department, which is most welcome, will support local authorities?
Indeed, it would be excellent to build on this initiative by having a consumer-focused body concerned with product standards to ensure that they are fit for purpose and not harmful to the public. I absolutely believe that a strong public enforcement regime that protects consumers and provides adequate deterrence to poor practice is needed, along with proper alternative dispute resolution services that consumers can turn to if they need to pursue claims against a business. This could have a central portal, which would really help the public to easily find a place to make their complaint. Currently they are too often passed from pillar to post, and it is just too confusing. If they have a full-time job, for example, they usually do not have the time to do this and will just give up, feeling that the system is against them.
Of course most businesses operate fairly and strive to provide good-value products or services, not least to attract future business. But I have seen first-hand how confusing it can be for consumers to find out the appropriate place to complain to when they have suffered detriment. Most business does not require recompense; it operates well. However, the ombudsman system can be bewilderingly confusing, with different bodies covering different types of complaint. It is important to make it easier for consumers to feel that they are being listened to when things go wrong, which is, as I stress, in the minority of cases, and to see that the Government are taking their treatment seriously.
The Conservatives have always been the party of business, and business is vital for successful economies. I agree with my noble friend Lady Neville-Rolfe that competition is a vital element of successful capitalist economies and of driving better consumer outcomes. But we must also care about how business treats its customers and ensure that it is fair. It is important that consumers’ economic interests and protection from detriment are taken seriously and that earlier, more robust intervention is introduced when it is needed to reassure the public that they will have proper rights of redress.
The letter from the noble Lord, Lord Tyrie, outlines that the CMA’s current statutory duty is,
“to promote competition, both within and outside the UK, for the benefit of consumers”,
which is subtly different from putting consumer interests at the heart of what it does. Currently, it can take more than three years for the CMA to issue binding remedies. It does not have sufficient power to fine firms for failure to comply with its findings. It would also be a good step forward, as the letter says, if the CMA could liaise more directly with business and obtain commitments for improved practice without lengthy investigations on a more formal basis. I believe that most businesses would want to comply.
The CMA has weak enforcement powers. Therefore, it can offer only weak deterrents. It has to take a business to court if it thinks practices are illegal and even if it wins it cannot issue fines. Of course there is always a difficult balancing act between the rights of business to make good profits and the rights of consumers to be treated fairly, with adequate recompense when their rights are violated. The CMA is right to suggest that it should be able to ban directors for breaches of consumer law, for example, not just of competition law. I agree that it is really important to ensure that whistleblowers are compensated and protected properly whenever possible, with anonymity. I hope that my noble friend the Minister will reassure the House how seriously the Government take this issue and offer their response to the letter from the noble Lord, Lord Tyrie.
My Lords, I congratulate the noble Baroness, Lady Hayter, on promoting this debate, which is both timely and important. It is a pleasure to have something meaningful to get one’s teeth into.
I start by declaring an interest. The CMA is working on two initiatives. First, it is addressing its purpose and what powers it has. These were the subject of the letter from the noble Lord, Lord Tyrie, of 21 February to the Secretary of State in BEIS and are today’s main focus. Secondly, and more mundanely, it is examining whether the barrage of central control regimes that apply to it on pay, promotion, recruitment, appointments, finance, procurement et cetera are optimal for the tasks it faces. I am advising the CMA on this strand. It is work in progress and I have nothing further to add at this stage.
When I saw that the noble Baroness, Lady Hayter, was opening the debate, I wondered which noble Baroness was going to turn up. Would it be the noble Baroness with a long track record in consumer protection, or would she follow the line of the Labour leadership in the other place, seeking greater freedom for the Government to intervene, to back winners—or, more likely, prop up losers—and to respond to lobbying on mergers? I should not have doubted this, actually; I think I knew the answer. I am delighted that she has stayed true to her consumerist instincts and is backing the pro-competition, pro-consumer agenda.
The current competition regime is based on two remarkable Acts: the Competition Act 1998 and the Enterprise Act 2002. The driving force behind both was a Labour Chancellor, Gordon Brown. These Acts embody three principles. First, within the framework set by statute and consistent with the strategic steer provided by the Secretary of State, the CMA should be able to act independently of Ministers. There is an obvious read-across here from the operational independence of the Bank of England. Secondly, decisions should be based on evidence of economic impact on companies, consumers and suppliers, and not be driven by lobbying or ministerial whim. Thirdly, the regime should be stable and predictable.
The proposals set forward by the noble Lord, Lord Tyrie, in his letter do not seek to overturn these principles. They do quite the opposite: they seek to entrench—I think Gordon Brown would have used the phrase “lock in”; that was always his favourite expression —these principles, develop them and make them more effective in practice. These proposals are entirely consistent with the strategic steer that the then Secretary of State for BEIS, Sajid Javid, set out in a letter to the CMA in 2015. In that letter he said:
“We want the CMA to examine markets, new and existing, freely and fearlessly to see how competition can be improved … this Strategic Steer gives the CMA a clear mandate to help government design policy interventions and, when necessary, actively challenge any government rules and regulations if they consider they are negatively affecting competition … The Government is clear that the CMA should remain a strong, independent competition authority”.
I think all those principles remain.
It is natural that a new chair coming in will want to look at the fundamental purposes of the organisation. He has just joined. This is doubly important when it is likely that Brexit will take place in one form or another. In addition to its existing responsibilities, the CMA will take on more and more complex cases for mergers and antitrust enforcements, currently handled in Brussels.
Next, the CMA will become the enforcer of state aid regulations. This will, on occasion, put it head to head with other public authorities, making it more necessary than ever to safeguard its operational independence. Then there is the Furman review, which proposed a new digital markets unit, since it is in the digital space that many of the most pressing issues of consumer protection arise. It could be located within the CMA.
The CMA’s proposals should be examined constructively and I shall highlight some of them. First, there is the placing of an overriding consumer interest duty on the CMA in the courts. The way the current duty is framed can leave the CMA restrained from acting to protect consumers’ interests, unless they are doing so through purely competition-based remedies. This leads logically to the next proposal: to revisit the distinction between phase 1, which is market studies, and phase 2, which is market interventions. The scope of these two phases is different. A market study can identify a consumer detriment, but a subsequent market intervention must clearly address adverse effects on competition before action can be taken. For example, there could be a fully competitive market with no dominant players, though some players within it may adopt practices detrimental to consumers or suppliers. In that case, the CMA’s powers of enforcement are weak, so the right approach may well be to remove the distinction between market studies and market interventions.
Next, the CMA is seeking greater enforcement powers. Where it concludes that consumer law has been breached, it has no powers to order a cessation of illegal practices but must first pursue businesses through the courts to obtain binding remedies. Then there is the issue of individual responsibility. At present, competition law enforcement can result in a fine on a firm, but these fines do not necessarily have any impact on the individuals running those firms. By contrast, the Financial Conduct Authority can impose fines and other sanctions on regulated individuals.
Finally, there are proposals about the fees charged for examining merger proposals. Large companies can spend millions—tens of millions—on an army of advisers, which indicates just how much money they think they will make from these proposals. However, the CMA may charge only a little over £100,000. This is a nonsense. The CMA should be able to recover the full costs of the actions it takes and the effort it puts into examining these mergers. That money should be retained by the CMA and not sent to the Treasury, though the Treasury should retain any of the fines.
I hope these ideas will be taken forward urgently and constructively. Some will require legislation. However, when the Commons adjourns at 4 pm after considering Kew Gardens leases, the excuse that there is no legislative time is pretty thin. The competition regime in the UK has many excellent features, but there are those in politics today who wish to turn the clock back, to bring Ministers and politicians more into the process. I hope that rather going backwards, we will use the CMA’s proposals to move forward, as the noble Baroness, Lady Hayter, has urged. I hope this will be done to enable the CMA to respond more quickly to problems that it identifies.
My Lords, I join in applauding very much the tone, and much of what was suggested, in the letter sent by the noble Lord, Lord Tyrie, to the Secretary of State. As has been said, the UK has a highly respected competition regime, and has been instrumental in devising the European regime—which has had some successes and some failures. As my noble friend Lady Crawley says, Brexit now presents us with some problems. My sub-committee of the EU Select Committee produced a report relatively recently on competition and state aid post Brexit. It means that the competition authorities here have to take on more resources, because they will have more cases—plus the state aid cases referred to by the noble Lord, Lord Turnbull. It also gives them an opportunity to rethink their role, which I think is what the noble Lord, Lord Tyrie, has done here. I hope that the Minister and the Secretary of State take his propositions seriously.
What is the end of this policy? That is the central point. As my noble friend Lady Hayter says, the end is consumer benefit. Like her, I recall us making that case at the Committee stage of the then Enterprise and Regulatory Reform Bill, which set up the CMA in its present form. We were not properly heard then. We need to be heard now. Even the reference to Adam Smith given by the noble Baroness, Lady Neville-Rolfe, was that the aim of competition is actually the welfare of all. It is a means, not an end. Therefore, it is right that the objectives of the CMA be written in those terms.
I have a number of points, and will also no doubt be tempted to respond to some of those already made. If we are to change the nature of the CMA in the direction that the noble Lord proposes, that has to be reflected in the totality of the regulatory regime on competition and related matters across the board. In other words, it also needs to affect the way we operate the sector regulators in terms of their competition function. That, I think, is an important point. Also, it has to be built into the structure of the CMA. It was, I think, six years ago—God!—that there were suggestions about a panel within the CMA or some other means of reflecting the consumer interest, and that needs to be part of the new thinking. The role of consumer organisations is also important here, not as part of the CMA but as its interlocutors—Citizens Advice, the National Consumer Federation, Which? and, of course, trading standards. I am even tempted to say that the Government should come back and rethink the unfortunate abolition of the statutory consumer basis made under the coalition. I have a slightly personal grudge here; nevertheless, it is sensible to reconsider those issues.
I will put one other thing on the agenda because I am presently conducting a commission looking at the effect of energy companies in their dealings with vulnerable consumers. While an increase in competition usually benefits most consumers, it does not necessarily benefit all of them. Some consumers get left out of whatever process we have. One thing that needs writing into the consumer protection role of the CMA, and the increase in its powers advocated here, should be to pay particular attention to the needs of those who are not quite able to engage with the market, particularly the sophisticated and digitally-driven market that we now have. Whether that comes from questions of capacity or income, we need to pay attention to it.
On the implications of Brexit, as I say, there are possibilities for changing the structure because we no longer have to quite conform with or mirror the European structure. We will need to ensure that the CMA has adequate resources. I am glad to say that its staff have been co-operating with my committee to indicate how they are progressing on that. The noble Lord, Lord Tyrie, referred to speeding up processes. Clearly, one of the complaints about European and national competition regimes is the issue of speed and he made a number of very sensible propositions there. In particular its power on market investigations is, in a sense, a jewel in the crown. Internationally, many other competition regimes do not have that power and it is an important part of its armoury but it is a bit clunky and needs speeding up. Early intervention and direction, and the undertakings sought by the CMA, would make that more effective.
I am not totally sure about the criticism implied in some of the noble Lord’s views on the CAT. I partly agree with the noble Baroness, Lady Neville-Rolfe, but the fact is that all regulators are judge and jury to a certain extent. The issue is whether they are subject to some form of appeal and what the nature of that appeal is. It is true that the CAT has become a bit litigious, or that companies which appeal to it have become over-litigious. Perhaps it could be focused down a bit but the aim should be to enhance and focus the role of the CAT, not make it less effective.
I will not repeat the points made by my noble friend Lady Crawley, and by the noble Baronesses, Lady Altmann and Lady Neville-Rolfe, about trading standards. The national-level activity on consumer protection and abuse of the market has to have a local arm. The reality is that, over the last 10 years, the resources available to local government trading standards have been cut by over 50%—in some places, it is far worse. Unless their local arm of trading standards operates effectively, any individual citizen or small company that feels that they are being abused by companies under consumer protection, or under things such as safety standards, cannot get redress. In most of the country, they are not. That needs to be addressed within the same timescale as we address the CMA’s own role.
The CMA has a number of new challenges. If I may advertise again the products of my sub-committee, in the glory days just before Brexit we produced a report on the challenge of online platforms and the ability of competition authorities across the world to deal with this new form of trading, which is now a dominant form. Markets are difficult to define and whether you are dominant in a market is difficult to define, as is whether you are abusing that dominance. The long-running saga of the European Commission and Google illustrates this. The digital giants are the new oil companies—the equivalent of the Rockefellers of the 1890s—and we need anti-trust legislation to be able to deal with them. Our traditional forms have not really managed to do so. The Googles, Amazons and Facebooks are not necessarily acting in the interests of consumers even though consumers may think that those companies are because, for the most part, they do not pay anything up front. The fact is that the data about consumers is both the product and a currency for that type of company.
The CMA will also need to return to some old issues. I have often thought that the terms “cartel” and “monopoly” do not entirely describe the most usual form of market distortion, which is effectively oligopoly. In so many of our sectors, whether it is in energy, banks, supermarkets, insurance or whatever, there are half a dozen or so companies determining 60% to 70% of the market. Our market laws have not really worked out how to deal with that situation, either in respect of the rest of the market and competition within it, or in respect of consumers.
My last point is simply this. We need to ensure that our competition authorities are up to speed, resourced properly and respected so that they have powers which they can use. The proposals of the noble Lord, Lord Tyrie, move a significant way in the direction of strengthening that intervention. I hope that the Minister will be able to reply today—we will hear from the noble Lord, Lord Tyrie, in a moment—in a very positive way to at least the gist of the direction in which the noble Lord recommends that the Government should go.
I am extremely grateful for the support that I have just received from the noble Lord and from a number of other noble Lords around the House. I congratulate the noble Baroness, Lady Hayter, on securing the debate and also of course declare significant interests, both as chair of the CMA and as author of the letter to the Secretary of State to which her Question on the Order Paper refers. It will not surprise anybody if I say that I agree with everything that I have said in my letter—just for the avoidance of doubt. I also want to apologise to the House for missing the opening few moments of the debate.
Some interesting comments have been made, some of which require further thought. There have also been some points of disagreement. Where it is warranted, rather than address those points directly now, I shall come back to them—to the noble Baroness on one, and there may be one or two others.
I think that there is widespread and growing cross-party consensus that competition law and policy are in need of some reform. The legal framework appears to be letting ordinary consumers down. Since the Competition Act was passed more than 20 years ago—here is some of the evidence of the need for reform—profit margins have risen from 20% to 60%; the turnover share of the UK’s largest businesses has risen from 21% to 28%; loyalty penalties for customers in telecoms and financial services alone stand at more than £4 billion a year; and there is price discrimination against the vulnerable in essential services and price gouging by pharmaceutical firms—that much is scarcely in dispute.
Meanwhile, the growth of the digital economy is bringing huge benefits, but it is also making competition and consumer law look increasingly out of date and at risk of being unable to address anti-competitive behaviour before the market moves on and identifies new areas. The existing framework is at risk of being unable to protect millions of previously quite capable and competent consumers who are now vulnerable to exploitation, many of whom are simply time poor and do not have time to address and absorb the huge amount of information on the web required to make good decisions.
When the Secretary of State asked me to undertake this work—he is not a long way away from me at the moment, as a matter of fact—I am sure that it was with some of the points that I have just made in mind. The proposals that I have made are aimed ultimately at preserving, not replacing, an independent competition framework and adapting it to make it more fit for the future and responsive to developments in fast-moving markets and to problems faced by ordinary consumers. There are a large number of proposals in the 44 pages of the letter—it might be the longest letter that I have ever written—and I am very impressed by the number of noble Lords and noble Baronesses around the House who have clearly read it.
In the interests of time, I shall draw noble Lords’ attention to just four of the proposals. First, several new duties are proposed; I shall highlight two in particular. It is proposed that a new duty be imposed on the CMA to ensure that the economic interests of consumers are paramount—several contributions referred to that—and to act more swiftly than we currently do. That should affect the way in which our work is scrutinised in the courts.
Secondly, on the markets regime, changes are proposed that would allow the CMA to order legally binding remedies in markets where competition has been compromised. The scope of that regime needs to be broadened so that it can address a wider range of consumer harm. And it needs teeth, in the form of financial penalties for those who fail to comply with CMA rulings—I think that there was a good deal of support for that.
Thirdly—I think this is an area where there is already widespread agreement in principle—consumer law enforcement needs to be strengthened significantly. When companies break consumer law and rip off consumers with unfair trading practices, or exploit them through unfair contract terms, the CMA currently has to apply to the courts to request them to order the practice to stop. Firms do not get fined and they are no worse off for having broken the law. So, just as it does when it takes on firms engaged in anti-competitive practices, the CMA should be able to decide itself that a firm is breaking consumer law and to order it to stop. It should also be able to fine firms that then flout the law.
The fourth area that I will refer to has also been mentioned by one or two noble Lords. More needs to be done to promote personal responsibility for complying with competition and consumer law. Individuals are far less likely to break the law if they know that they may be held liable for it. The public rightly expect personal responsibility for serious wrongdoing by firms. With that in mind, the proposals include measures to increase board-level responsibility for complying with the law so that both competition and consumer protection are in the minds of company directors. It is also proposed that, for serious breaches of consumer protection law, director disqualification should be a possibility, just as it is for competition law offences.
I have only a couple more points to make, as I have already had the opportunity to make so many points in the letter. All regulators accumulate vested interests; they cluster around regulators. Sometimes they make crucial points. They are also often very effective at getting at Parliament. It is extremely important that we at the CMA all listen to those vested interests, but it is just as important that regulators avoid being captured by them. Certainly, we do not intend to be captured by vested interests in competition law.
I end by asking the Minister to update the House on the Government’s view by responding to a few questions. Does he agree that far-reaching reform to the framework for competition and consumer law is now required? Does he agree that the proposals outlined in the letter are a step in the right direction? If he does, will he tell us how and when the Government will take them forward? Finally, does he agree that we should try to continue with reform to competition law as far as possible on the basis of the cross-party consensus for the legislation that has been in place pretty much since the Labour Government’s introduction of the Enterprise Act a little over 20 years ago? I hope that he can give us some encouragement on that. I certainly think that he has had some encouragement on that last point from a good number of contributions around the House this evening.
My Lords, I too welcome this debate and thank the noble Baroness, Lady Hayter, for securing it. It is a pleasure to follow the noble Lord, Lord Tyrie, and I recommend his speech at the Social Market Foundation earlier today, which I attended. I declare my interest as a director of the London Stock Exchange plc.
The proposals of the noble Lord, Lord Tyrie, are part of a wider review of the competition regime, and the consumer focus also fits with the direction of travel of the inquiries into the FRC and audit, and growing concern over the power of large companies, especially in services, along with new business methods and contracts and new types of dominance and oligopoly, as the noble Lord, Lord Whitty, said.
If there is a generic flaw in the state of our laws concerning companies, it has been in expecting that the public good, or the consumer, can be served in a derivative manner—for example, by promoting competition for the benefit of consumers. It cannot be presumed that competition always serves the public well, when bad practices can be market-wide and indeed driven in that direction by the need to compete. Therefore, I welcome suggestions to have consumer protection powers that mirror those in competition and that, for both consumer protection and competition, the procedures should be capable of collecting more and earlier information and of being swifter in delivery and more effectively enforced.
Given that the noble Lord, Lord Tyrie, has delivered a raft of suggestions and has rightly observed in his letter that further consultation and details will be needed, will the Minister let us know what form of consultation is envisaged? Will it be by the Government, the CMA or both, and when? Will all the proposals be progressed together, or can some be done more quickly?
Several of the proposals would align with practice and developments in competition authorities in other countries, where there is already, to some extent, a track record. The UK has been seen as strong in competition matters and, while that might be true on observing state aid rules and permissiveness for mergers—some would say too true—somehow we have got into the position, laid out by the noble Lord, Lord Tyrie, on page 39 of his letter:
“The UK is not only one of the best jurisdictions for companies to defend a competition case; it is one of the best jurisdictions to lose one”.
That is because the review system allows opening up of the whole case, allowing new evidence even if it could have been submitted sooner to the competition authority. That is not the norm for competition cases in other countries.
Further, our system allows setting aside of remedies until the end of the review, for which procedures have become overly long and have departed from the written procedure that was originally envisaged. If a company loses a case, although the fines available match those in other competition authorities, at 10% of global turnover, the amounts levied have ended up being much lower. With some types of business, the length of the investigation, added to by any review and deferment of remedy, can be sufficient for the company to benefit substantially, taking a substantial market share or playing a part in distorting business practices by establishing new norms or even completing the whole chain of the value cycle in that business. Then, if the fine is small, it can become a price worth paying.
It is a tough call for a regulator to ask simultaneously to have more powers and to prune the scope of legal appeal, but in this instance a good preliminary case to do that has been made. I have some sympathy with the point made by the noble Baroness, Lady Neville-Rolfe, about doing the investigation and being the judge, but that does happen with other regulators as well. What irritated me even more when I had oversight of competition in the EU was the lack of transparency, in terms of not being able to find out what was going on, sometimes even for the business that was under examination—that drove me to go to Luxembourg, to the ECJ, and to sit through the Microsoft tying and bundling case. Actually, I thought the judges did a very good job of digging out the facts, but without that I would really not have had a good understanding of what had been going on, and the public are often left not knowing what has gone on.
Most of the other proposals have two common threads. The first is making the consumer interest specific and stand-alone, enabling bad practice to be dealt with, whether or not it has a competition aspect, and making procedures and remedies the same as under competition cases. I will take a great interest in how that progresses and will measure it against the Australian law of unconscionable conduct in commerce. As I have suggested before in debates about corporate liability, it would be a good idea to have some similar catch-all available in our law. I want all bad behaviour in commerce to be caught, certainly for consumer protection but also between other organisations or businesses.
The second thread is enhanced powers, applicable for both consumer and competition matters, ranging from greater information-gathering powers to more flexible procedures regarding market studies and investigations that do not tie into an inevitably long timetable. This is important considering the speed and innovation of modern business, particularly in the digital age. But how “Get it done quickly” is to translate into law while allowing thoroughness will need some care, more resources and rapid appointments to panels.
The idea of having a Financial Services and Markets Act Section 166-type inspection, paid for by the company, is floated as a possible additional tool and a way of getting expertise. This idea was put forward in the context of the Kingman and CMA reviews of the FRC and audit, and it pops up here as well. It needs examination as to how and when it would be used so that it does not get out of hand, as did the monitoring trustee arrangements that the EU Commission put in place for Microsoft. I recall criticising that arrangement for creating a “Microsoft regulator”, and in fact the Commission lost that part of the case at the ECJ. We therefore need to examine whether, because of the nature of business, it has got to a situation where we are saying that we need to create mini internal regulators, but Section 166 may have become overly fashionable.
I agree with requiring more individual responsibility, and that must cover senior managers and executive committees, not just boards. I am pleased to see the suggestion of more use of director disqualification; again, I have recommended several times that when there is a serious finding in business governance and culture, there should be an automatic review of whether the directors should be recommended to the courts for disqualification. It is possible for the Secretary of State to instigate investigations, but that should be kept for special cases. In general, it should not have to rely on government intervention.
I concur with other noble Lords that this is a robust set of proposals, and they have my support and that of these Benches.
My Lords, I thank the noble Baroness, Lady Hayter, for introducing this timely debate. Like the noble Lord, Lord Turnbull, I was intrigued as to which Lady Hayter we would see but, as my noble friend Lord Tyrie stressed, we are happy that it is the Lady Hayter who wishes to look to the consumer benefit, does not look at state intervention, as some of her colleagues in another place might want, and generally goes along with the broad thrust of the suggestions put forward by my noble friend, if I may call him that—I appreciate that he no longer sits on our Benches.
Noble Lords will be pleased to hear that although they will have noticed a large number of yellow notes coming to me, I will not respond in detail to every single point made in this debate; time does not allow me to do so. However, in responding I can to some extent give the broad thrust of some of the Government’s views about where we should go and what we should be doing. I shall take the four questions that my noble friend Lord Tyrie put towards the end of his speech, when he asked whether far-reaching reform is necessary and whether the letter is a step in the right direction. Crucially, he then asked “when?”, which is always one of the hardest questions to respond to at the Dispatch Box, and whether we should do more to do this with cross-party consensus. Following the debate, I think my noble friend will agree that there is a considerable degree of cross-party consensus on his letter. My noble friend himself referred to the letter, as did many other noble Lords, and I do not think anyone said that it was going down the completely wrong track. However, as my noble friend said in the second paragraph of his letter:
“The attached provides preliminary advice. Work is continuing at the CMA on a number of these proposals”.
He described the letter as long; I think it is six pages long, but a further 30 or 40 pages were attached to it. There is a great deal to do there but a great deal more for the CMA, the department, government and others to do. We want to look at that in due course and we certainly want to respond in the proper way.
Just as my noble friends Lady Neville-Rolfe and Lady Altmann said, we believe that competition is crucial and that it should be the lifeblood of our economy. It brings clear benefits for consumers. Businesses that have to compete against each other are incentivised to offer goods and services to consumers that provide greater choice, better quality and lower prices. Consumers themselves benefit from strong markets subject to healthy competition and effective consumer protection rules, and that is what we want to see.
With the Competition and Markets Authority, we have a well-developed set of consumer rights, which are some of the strongest in the world. They have been developed over the years with a degree of cross-party support—I appreciate what the noble Baroness and the noble Lord, Lord Whitty, both of whom were involved in the passage of the 2015 Act—had to say. It was recognised in 2015 that the United Kingdom was ahead of the rest of the European Union in introducing specific rights and remedies for a great many services, particularly on digital content. I shall say a little more about that.
As my noble friend said, any system that regulates markets needs to ensure that it keeps pace with developments in that market, and a dynamic market requires a dynamic competition regime. We have been at the forefront of global reforms, promoting open markets that enable growth and improve consumer outcomes, and we intend to remain on the front foot. That is why we acted, first by publishing the consumer Green Paper last year to which my noble friend Lady Neville-Rolfe referred, which raised fundamental questions about how the Government could ensure that markets work for all consumers, following that up with the consumer White Paper to be issued later this year, focusing on loyalty penalties, and the independent review of digital competition, which reported in March, seeking the views of my noble friend Lord Tyrie on strengthening the competition and consumer enforcement regime.
Following that, and given the Government’s ambition to ensure that we have a competition regime fit for the future, my right honourable friend the Secretary of State asked my noble friend to suggest reforms to the competition and consumer enforcement regime. He responded with the letter dated 21 February, published on 25 February, which we in government welcome as an encouraging step in the right direction that provides a firm basis for further work by both the CMA and the Government.
As all noble Lords who have read the letter and the attachment know, the proposals are wide-ranging and ambitious. They include a greater focus on consumers by introducing a new statutory duty on the CMA to treat the economic interests of consumers and their protection from detriment as paramount; swifter investigation through a new statutory requirement on the CMA to conduct its investigations swiftly, while respecting parties’ rights of defence; stronger powers on competition and consumer enforcement; and a wider set of suggestions, including civil fines for individuals, board-level responsibility for competition and added duties for auditors.
I give an assurance that we intend to consult in due course. The debate introduced by the noble Baroness, Lady Hayter, is a useful start in that direction.
We are also committed to ensuring that those markets work for all. That is why we published the Green Paper last year, looking at how to modernise the approach taken by the CMA and regulators to safeguard consumer rights and protect vulnerable consumers. We want to ensure that our regulatory, competition and enforcement regimes are suitable for the modern economy and the modern consumer. The consumer Green Paper announced that review of alternative dispute resolution, including proposals to strengthen enforcement nationally while maintaining the strong local protections that the noble Baroness, Lady Crawley, with her experience of trading standards, and the noble Lord, Lord Whitty, both believe are important. It announced the smart data review to consider giving consumers more control over their usage data to help them get better deals; performance metrics for consumers in each sector, including information on price differentials; and the creation of a consumer forum comprising Ministers and regulators to ensure joined-up working while respecting regulatory independence.
The consumer White Paper will also set out proposals for the next phase of action to strengthen the consumer regime. The proposals we will set out in our White Paper are based on a clear set of principles. Competition should be central to our approach—the Government should always look to intervene to remove barriers to competition where they arise—but consumers should be able to get redress when things go wrong, so consumer rights should be enforced effectively. Consumers should benefit from new technology and new business models, with competition and regulation working in the consumer interest.
I am running out of time but I wanted to touch on what the noble Baroness, Lady Crawley, referred to as the dog not barking at the elephant in the room—a rather confusing picture but there we are. To touch briefly on EU exit, perhaps I may make clear how we believe that our competition would operate post exit.
We will leave the European competition regime at the point of EU exit. The CMA and other regulators will take on responsibility for all anti-trust and merger cases that affect UK markets. Subject to parliamentary approval, the CMA will also take on the role of the UK’s state aid regulator.
In a deal scenario, the current withdrawal agreement makes provision for an implementation period, during which the status quo in competition will be preserved. This means that the CMA and the European Commission will continue to share jurisdiction for the enforcement of anti-trust and merger rules. During the implementation period, we would seek to negotiate comprehensive co-operation arrangements with the EU as part of the future economic partnership, alongside commitments to maintain and enforce effective competition laws. In a no-deal scenario, which we do not believe will happen, the CMA would immediately take jurisdiction over all cases affecting the UK.
My time is running out so I end by thanking the noble Baroness, Lady Hayter, and, more importantly, my noble friend Lord Tyrie for his letter and for what he described as preliminary advice. I assure him that we received that letter; as he knows, my right honourable friend was at its launch, and he and other colleagues in the department take it seriously. We will consider it and, as I said, we intend to consult on it.
Question for Short Debate
To ask Her Majesty’s Government what assessment they have made of the effectiveness of the governance of English football.
My Lords, I am very pleased to have secured this debate. The timing is quite incredible because the football club I support, Bolton Wanderers—my noble friend on this occasion, the noble Baroness, Lady Morris, supports Bolton too—faced winding-up orders in the High Court today. I will come on to that later.
Many problems surround the governance of football and many issues cause concern, such as the Premier League’s influence on the Football Association, the operation of the financial fair play rules, the FA’s response to racism, safeguarding and the operation of agents—I could go on. The Government need to be more proactive in taking a stand on these problems, which are important to so many people. Football is massively important to the UK economy but we cannot treat it simply as a business. It is much more important than that: it is part of this country’s heritage and affects the lives of millions of people on a weekly, if not daily, basis. The rules of governance are not adequate and need to be changed, particularly to recognise fans as stakeholders in the sport.
I declare my interest as a lifelong football supporter. For many years, I have received hospitality as a guest at the FA or various football clubs, but my main interest is that I am a season ticket holder at Bolton Wanderers and have been for most of my adult life, as have my husband and my children. We are also all members of Bolton Wanderers Supporters’ Trust. The experience of Bolton Wanderers at the moment is my primary concern, but I suggest that it is an example of what could befall many clubs. The structure of governance is inadequate and has made some of our problems worse.
The problems of Bolton Wanderers go some way back. We all remember the heady days of the Premiership, even European competitions, under Sam Allardyce and with fantastic stars such as Jay-Jay Okocha, Youri Djorkaeff, Guðni Bergsson and Per Frandsen. We still have a fantastic stadium—perhaps one of the best in the country. It is certainly the best in the lower leagues, and is considered by some lower-league clubs as an alternative to Wembley. We also must not forget that Bolton Wanderers was one of the founding members of the Football League in 1888.
For many years, Bolton Wanderers was fortunate enough to have the personal and financial support of the late Eddie Davies, a locally born businessman. His commitment was behind much of our success. When he felt that he had to leave after bankrolling the club for many years, our real problems started. Dean Holdsworth, one of our former players, tried to put together a package to ensure the club’s well-being. It seems that his efforts backfired when Ken Anderson took over. Since then, the club’s problems have escalated beyond belief. We have seen debts in the revenue to Bolton Council, to Greater Manchester Police, to the ambulance service, to players and to other staff mount up and go unpaid. The club’s training ground was closed because of a lack of food and power. We have heard that stock was taken from the club’s shop because of unpaid bills. The hotel, an integral part of the stadium, has been closed. The Professional Footballers’ Association has had to step in at times to pay players’ wages. Perhaps most worryingly of all, the stadium’s safety certificate was threatened because the stewards had not been paid. In the end, a strike by players led to the cancellation of our last home game and points will be deducted next season because of the failure of the present owner, Ken Anderson. It is a mess and a tragic state of affairs.
I believe that it relates directly to the problems of football governance. First, it relates to the fit and proper person test, which is neither fit nor proper and is now called the “owners and directors test”. It is supposed to protect against corruption, protect the image of the sport and keep unscrupulous people away from football. The experience of Bolton Wanderers and some other clubs is that this rule does not work—that it is either not adequate or not applied properly. I am sure that we need better, proper and stated standards, proper compliance procedures and greater transparency.
My second concern is about the English Football League. I cannot understand how the chief executive of the EFL, Shaun Harvey, could make the statements he did about the ownership of Bolton Wanderers under Ken Anderson and give the assurances he gave, for example to the Supporters’ Trust. On 14 February, Shaun Harvey said to the Bolton Wanderers Supporters’ Trust:
“Following recent discussions, the EFL remains satisfied that the club”—
“has the source and sufficiency of funds to meet its obligations as a member of the league at least until the end of the season”.
Yet within 14 days of that statement by the chief executive of the EFL, the club failed to pay its players. That was after the previous month, in January, when the chairman of Forest Green Rovers publicly reported that Ken Anderson had said to him in respect of a disputed transfer:
“You can seek a winding-up petition, you can bankrupt the club. I don’t care, I’m a secured lender. I’ll get my money back”.
Surely that report from one of its members should have set alarm bells ringing at the EFL. Shaun Harvey went on to talkSPORT and praised Ken Anderson because the club’s debt has been reduced. The club’s debt has been reduced but that is no thanks to Ken Anderson. It was reduced because the previous owner, Eddie Davies, had written off the vast amount of money that he had loaned the club. It was, to say the least, very strange to praise Ken Anderson. Today, the failure of Ken Anderson to pay those debts has led to Bolton Wanderers being in the High Court and notice has been given of the intention to appoint an administrator.
Tempting though it is, I am not asking the Government to step in and bail out Bolton Wanderers, but the issues of the lack of governance have, I believe, compounded our problems. What do we need from the Government? The first thing is a recognition that the 2017 changes to governance by the FA were not enough. Secondly, we need a recognition of the wide problems that I mentioned at the beginning, such as the role of agents, dealing with racism and the “fit and proper” rules. I believe that all of these issues should be of concern to the Government. Moreover, they need to insist that in every sport, but particularly in football, we have comprehensive rules, proper compliance and greater transparency. It is, after all, 2019.
Next, we need a greater recognition of the role that football fans can and should play in the governance of the game. I would like the Government to take this issue far more seriously because good proposals have been put forward by Supporters Direct and others. Further, I think that the frustration felt by many fans is very real. I would also like the Government to encourage the designation of more sports grounds and facilities as assets of community value. I must praise the Bolton Wanderers Supporters’ Trust and indeed Bolton Council because they have ensured that this has happened in Bolton. Without that designation of our football ground, I hate to think what the current owner might have done with that asset. All of this needs to be done with a sense of urgency. Too many of these problems are cropping up, and if you look at the number of clubs that have got into trouble recently, it is indeed alarming.
There are, of course, good owners. One such, Dean Hoyle at Huddersfield, who has just stepped down, is a great example. But too often the chairmen of football clubs—they usually are men—control the body that regulates them, and that cannot be good. UEFA recently recognised supporters as key stakeholders and Supporters Direct has been trying to push that forward, but others within football and, I believe, at the EFL, have actually been trying to stall that.
The experience of Bolton Wanderers shows that governance is inadequate. Of course that is my main concern, but football as a whole needs better governance or other clubs will end up in the same situation and suffer the same fate as Bolton Wanderers today.
My Lords, I start by thanking the noble Baroness, Lady Taylor of Bolton, for initiating this debate. It is not surprising that she is concerned about recent events involving her beloved football club, Bolton Wanderers, because football clubs are at the very heart of our communities. For many they are the subject of truly lifelong devotion. They are a source of unity and local pride, or disappointment. They inspire passions—witness the Liverpool v Barcelona game yesterday evening—that can make Brexit seem a trivial matter. Often the spirit, success or failure of towns and cities mirrors the performance of the local football club. As the Liverpool legend Bill Shankly famously observed:
“Some people believe football is a matter of life and death. I can assure you it is much, much more important than that”.
Football, the beautiful game and our national sport, provides us with much to be proud of. Our newest football league, the Premier League, founded in 1992, is one of England’s great success stories, attracting the largest crowds of any football league in Europe, and is a massive export, watched by a global audience of 4 billion people. Clearly it is imperative that we protect this vital, important, hugely influential and lucrative industry and all who work in it. But while we are successful innovators—women’s football is on course to double participation by 2020—we are old hands at the game too. The English Football League, founded in 1888, is the longest established professional football league competition in the world, while the Football Association, which dates back to 1863, is the oldest football association anywhere. It is also the overall governing body of the sport, involving 12 million players of all ages, with a staff of more than 800 and an annual turnover exceeding £375 million. We can see that it is more than adequately resourced to execute its important governance function effectively and without compromise.
Football in the UK is clearly big business and growing, and we should be mightily concerned with who owns our football clubs and how responsibly they are run. From time to time, the view that there should be greater control over who can own and run a football club and views about how best to monitor and evaluate clubs’ efficacy, solvency and outcomes are strongly expressed. It is absolutely vital that football authorities are eternally vigilant, constantly striving to improve and promote the best possible governance of clubs. Debates such as this command attention and, importantly, raise the governance profile.
None the less, it is my firm, carefully considered and informed belief that the football authorities absolutely recognise their responsibilities and the challenges, and are already doing all they reasonably can to have in place the rules and regulations to protect the game, clubs, staff and supporters. They certainly give every indication of taking governance very seriously by focusing substantial financial and human resources and time on the issue. After all, it is in their best interests to do that.
Some feel we should impose a sort of test for proposed owners of clubs, perhaps akin to a cut-of-the-jib test, but we just cannot introduce that kind of subjective test in a country legendary for the fairness of its legal system, founded on equality before the law. The three football authorities I mentioned each have an owners’ and directors’ test, but it is quite rightly an eligibility rather than a suitability test. Grounds for rejecting a proposed owner need to comply with criteria that would stand up in a court of law—for example, being disqualified as a company director, having a specific type of criminal conviction, being bankrupt or similar. The owners’ and directors’ test has been continually extended and enhanced. Clubs’ financial performance is rigorously monitored and reviewed annually by the leagues. But we still operate a free market economy in this country, so if someone wishes to buy a football club, is not subject to disqualifying conditions and can prove they have the funds to acquire and run the club, they must be allowed to. Action taken on the basis of suspicion and prejudice would be contrary to natural justice and as unacceptable in football as in any other area of life.
History demonstrates clearly how each and every type of business can fail, regardless of controls, tests and supervision. You have only to look at the high street over recent times to recognise that. An owner of a football club may well be able and skilled, have the best intentions in the world and be well funded, with capable management, but if the team fails to perform on the pitch and plummets down the league, ending up relegated to a lower division, the financial consequences can very quickly be disastrous. It is key to act promptly and positively when problems occur and take all steps to protect the reputation and integrity of the game, the club in question and all impacted.
Overall, while I am by nature far from complacent on this or any other issue, I am totally convinced and wholeheartedly believe that the football authorities are onside and doing all they can to protect their big business, our national sport. Of course, governance can always be improved—the improvements can be improved on as well—but I personally have confidence in the football authorities and their vigilance, focus, commitment and professionalism. I believe we can be assured and confident that the game is effectively governed and in good, safe hands.
My Lords, I begin by congratulating my noble friend Lady Taylor of Bolton on raising this important topic, which has been in the throes of debate for many years. I anticipate that she—and indeed the noble Baroness, Lady Morris of Bolton—are feeling sorrowful tonight at the plight of their club. Over 30 years, in this House and outside, I have heard my noble friend bellow the needs and virtues of this club. Along with my noble friend, Nat Lofthouse—a great man and a great footballer—always reminds me of this club. I hope this debate might bring a bit of comfort to both noble Baronesses if we can take some constructive approaches to this problem. I declare my interest in this matter as the current president of the Football Foundation, which is very much part of the football family.
I think it is a universal view that the governance of English football, particularly the structure presently in place at the Football Association, is in need of further reform. It was only after a great amount of public and parliamentary pressure that we saw any significant reforms made to the FA’s governance in 2017 to bring it into compliance with UK Sport’s governance code. While these reforms have provided positive moves in the right direction—particularly with three out of 10 members of the board now being women and a number of specific representatives for black, Asian and minority ethnic communities and disability, youth and women’s football now added to the council—the need for reforms is still strong. More energy and action is needed if we are to address the gaping holes that still exist in football’s governance. The vast majority of the increasingly large FA Council remains white, male and aged over 60—hardly representative of the great diversity among our fans and, indeed, players. Our eminent House of Lords Library has informed me that as of 2018 the FA’s equality, diversity and inclusion plan shows that only 5% of leadership roles are currently held by people from BAME backgrounds.
It is therefore clear that we continue to need more diverse management of the FA, particularly so that it is better equipped to handle the unacceptable growth of racism we have seen in recent months in and around our stadiums; we all know that. I hope noble Lords agree that the terrible handling of discrimination cases we have all heard of recently must not be repeated.
Equally important is the need to address the lack of female representation at the top levels of the game. I remember only too well going to women’s soccer events over the years—even to cup finals—to find only a small crowd of supporters. Now, the women’s game is flourishing, with talented players and crowds to follow them. They must be represented at the top levels.
I declared my association with the Football Foundation, and I am proud of the part that this body plays in meeting some of these challenges. As the nation’s largest sporting charity, the Football Foundation’s focus on the funding of grass-roots sports facilities saw an increase in football participation of 11% at foundation-funded facilities last season, with an increasing percentage of these being female users and players.
To be fair, in recent times we have seen a more enlightened approach to supporters’ representation, and these steps should go much further. Fans must be at the very centre of decision-making. As Labour first recognised in its 1997 charter for football:
“Fans are central to the development of football, which would wither and die without them. Supporters invest heavily in the game and they have a right to be consulted”,
and represented at the highest level. The numerous issues that our fans face—not least continuing to be ripped off by train companies with inflexible tickets, the lack of choice over safe standing spaces in their stadiums and many other issues—are best spearheaded by fans themselves at the top level, to ensure that they are properly addressed.
By way of conclusion, in a debate so ably opened by my noble friend, time is limited for us to make all the points that we might like to make. But in any criticism of the FA, we must remember that it is historically organised differently from almost all other football governing organisations in the world. By definition, being the first, it will find it difficult to adapt to some of the measures necessary today—but it must be capable of so doing. All of us wanting change must recharge our batteries and make positive suggestions for the coming years, for the good of the game we all cherish.
My Lords, I thank the noble Baroness, Lady Taylor of Bolton, for tabling this debate tonight. Sport often thinks of itself as different because of the role it plays in people’s lives. However, this does not mean that it can behave differently. Sport is entertainment; it engages people; it changes our lives; and it provides volunteering opportunities, where children can learn about risk-taking in what should be a safe environment. It is that safe environment that will be the basis of my contribution.
Football is a huge business and holds in its hands the hopes and dreams of many young men and women. That is why the whole sport—and all sports—needs good governance. I know from my time in sport that football has been the bane of many a Sports Minister’s life. My personal view is that some of the national governing bodies have had to be dragged kicking and screaming into the modern world of good governance. That there are good parts of sport does not give it an excuse to not behave in a transparent, open and ethical manner. Governance in football is not a new issue. Over many years there have been repeated calls for, among other things, better representation for women and fans.
I am delighted that Sport England recently launched a talent plan which has strong links to duty of care issues. However, it is only the girls’ game that is publicly funded in England, not the boys’ game, and I would like to ensure that both sides have to take the matter seriously.
It is a shame that the noble Baroness, Lady Brady, is not in her place at the moment. I would have loved to congratulate her on the West Ham women’s team making the FA Cup final. Sadly, they were beaten by Man City, but they are an exemplar of how football can be used to develop women’s sport in an incredible way. The Women’s FA Cup final was watched by more than 2 million people.
I have spoken many times in your Lordships’ Chamber about disabled fans at football matches, and while it is true that many clubs have improved, some are still taking their time to truly engage and make adequate seating available for wheelchair users. Wrexham AFC is one club that has grasped the idea.
While the sports governance code was published in 2017, it was merely a step forward. At the time, the FA’s Greg Clarke said that he did not want to “just be compliant”. We have to continually work to ensure that there is not tick-box compliance for major issues and that major issues are not hidden within sport. I believe that part of good governance is a duty of care to everyone involved.
Back in December 2016, the then Sports Minister, the right honourable Tracey Crouch, asked me to review duty of care in sport in the UK. I was asked to look at grass-roots sport in England, elite level, where lottery funding kicked in, and also professional sport. Football as a sport was incredibly helpful: several areas submitted information in different ways, and representatives attended meetings. As far as I am aware, the Premier League is the only governing body that has an action plan against each of the recommendations I made in the report.
When I was asked to do this—and I need to be clear that it was not someone from football who said this—I was told that there was nothing to see and that the duty of care towards those in the system was great. The turning point in my work, however, was November 2016, when those brave footballers waived their right to anonymity and talked publicly about being abused by former coaches and scouts in the 1970s, 1980s and 1990s. I have no doubt that some of that is still happening now.
We have to understand how hard it is for any athlete to raise such issues, then and now, even when there are policies in place. A young person in sport may be making a complaint against the very person who holds the key to the door of them representing their club or country, or it could be the coach’s best friend. What happened in football highlighted that some unscrupulous people will go where there are young people—in this case sport—and that there are horrible people holding positions of trust. Although I do not believe that every adult in sport is vulnerable, the very nature of being involved in a sports pathway gives a certain sense of vulnerability. We need legislation to protect young people who have reached the age of consent. The current legislation is limited to schools, hospitals and care homes, and that is not good enough.
Through my work on duty of care, I work closely with the CPSU. The following was taken from its briefing:
“While a relationship may well not be a breach of the criminal law, and the young person involved may not always view it as abusive or exploitative, the existence of a significant power differential between an adult with authority, control or influence over a significant aspect of the young person’s life always raises the possibility that the relationship is unequal and constitutes an abuse of the adult’s position of trust”.
Any breach of trust needs to be clearly defined as a breach of the organisation’s code of conduct, but that code also has to have weight and penalties, and not just be written on a piece of paper that athletes and players are unable to access. Yes, we do have DBS checks, but it is merely a moment in time. It is at times like this that I miss the sensible approach taken by the much-missed Lady Heyhoe Flint, who did so much to campaign on not relaxing legislation in this area.
My personal preference is not just to look at 16 and 17 year-olds but to expand legislation to anyone who is on a player pathway, because that abuse of positions of trust is possible for anybody who is involved in sport and has the ambition to compete at the highest level. A young person in sport should never feel that they have to say that the abuse they suffered was the price they paid for competing at the top level, or be told that the person in the position of trust is “just that way”. I have heard both those things said to me in this very House. CPSU research in 2011 of young athletes’ experiences of sport found that 29% of respondents had experienced sexual harassment. The Ministry of Justice has requested a meeting with me at the end of the month, which I am very much looking forward to. I wonder whether the Minister would support legislation that covers position of trust in sport.
Currently, NGBs are left to deal with issues such as poor practice and breaches of code of conduct. They have to have their internal processes, but there should be an external, independent one. Fundamentally, I believe that sport should not be marking its own homework.
One of the main recommendations in my report called for a sports ombudsman who could deal with issues such as this. What is Her Majesty’s Government’s current thinking in this area? Another recommendation is to have an induction process at each stage of squad development. Many governing bodies had or now have this in place, but we need to check whether that actually works. It is an important part of the process and should include educating young people on the relevant rules, assuring them of their right to enjoy and engage in sport freely and without pressure to comply with adults’ sexual requests.
Finally, does the Minister agree that this is a sensible approach not just for the good of football but for the wider good of sport and society?
My Lords, it is a pleasure to support my good friend and fellow Boltonian, the noble Baroness, Lady Taylor, and to congratulate her on having secured this debate—a debate which, as we have already heard in the noble Baroness’s excellent speech, is for us and all our fellow Bolton Wanderers fans timely and poignant. Who would have thought, 15 years ago to the day since Bolton Wanderers, a club rich in football history, secured its first top eight Premier League finish, that this 8 May would see us in the High Court with a request for a statement of intent to put Bolton Wanderers Football Club into administration? We now have two weeks to start the process of unravelling the misery of the last few years, and to hope that somewhere in the system good sense will prevail and we will have a credible and competent owner who cares about the staff, the players, the fans and the wider community in which football operates.
I have had the privilege—not always the pleasure—of being a Bolton Wanderers fan all my life; I declare that I too am a season ticket holder. Technically, I became a fan before I was born, as my mother—herself a staunch fan along with my father—did not let being heavily pregnant stop her attending matches, home and away. As a former trustee of UNICEF and a proud president of Bolton Lads & Girls Club, I have witnessed at first hand the transformative nature of football and the importance it plays at grass-roots and community level.
But as football fans, you live with the ups and downs, as my noble friend Lord Kirkham said, and at times it can seem all-consuming. Last year, in an interview entitled “Football and Society”, Phil Neville, speaking of his family’s love of football, said:
“If we won, it would make our week, if we lost, it would spoil our week—it was that important to my father, to me, to my brother and my whole family”.
That was my family too, and for that privilege of spending your week either elated or miserable, of hours spent mulling over “if onlys” and calculating how many points you need to win promotion, make the play-offs or escape relegation, football fans pay a lot of money. The least they can expect for their financial and emotional investment is that the club they support is well managed, well resourced and shares their values.
Most of the recent debate in football has centred on the governance and restructuring of the institutions that themselves oversee the governance of the game: the Football Association, the Premier League and the English Football League. The reforms were much needed and as far as they have gone are welcome, but I believe that alongside further internal reforms the EFL and ultimately the FA need to look closely at their vetting procedures for ownership, their overview of good governance and stability of a club, and the actions and sanctions taken when things go wrong.
It is imperative when the EFL deems owners and directors of football clubs to be fit and proper that it goes beyond a checklist of who they are and what they have achieved, including in some cases time served for past demeanours. I agree with my noble friend that bankruptcy should not mean disqualification, because lots of entrepreneurs have been bankrupt in their time, but we do need to look at their values. Surely, in assessing suitable ownership, the values and ethos of potential owners and their vision for the club beyond winning everything in sight should be part of the regulator’s decision-making.
I readily acknowledge that some of the hard-and-fast commercial rules of business are difficult to apply in football, especially if clubs are not to price their supporters out of watching or make that special purchase of kit for their children out of reach, and it may be necessary to inject more funds than had been originally envisaged. But where a potential owner shows proof of funds, or if more money is needed, you should at least expect those funds to be invested in the club and not remain in the owner’s pocket, to be dished out whenever they feel like it.
The EFL says clearly that it is in the interest of all clubs and the game that clubs adopt and can demonstrate good governance, so you would also expect that good governance would be the watchword of any club, as it should be in any business. That means a properly constituted board, with not only executive directors but non-executive directors, preferably with nothing to do with the club. Under the ownership of Eddie Davies, who truly cared for Bolton Wanderers, there was such a board. Our current owner Mr Anderson is—hopefully soon to be was—the sole director at Bolton. No one, absolutely no one, was there to question or challenge his decisions and behaviour, and the consequence was the appalling behaviour to staff and players: their wages were unpaid and they were not told what was happening, with all the anxiety that brings. We have already heard from my noble friend that the hotel, which forms part of the complex, closed because it could not guarantee health and safety. The players were striking, the club was not fulfilling our league obligations, and a proud club was brought to its knees. As my noble friend Lady Taylor said, it is a tragic state of affairs.
How can that be allowed to happen? Throughout all this, the EFL said that everything was okay and there was money to see us through to the end of the season. What support did they give us when this did not prove to be the case and everything came tumbling down? It was the potential imposition of sanctions. Sanctions can only handicap a new owner trying to rebuild a wounded football club and leave supporters and the wider local community feeling unfairly punished for what they see as irresponsibility entirely outside their control. It must be the part of the EFL, the FA and the Premier League to have responsibilities to supporters and the wider community of football clubs, responsibilities which now so clearly require greater and more effective oversight from the footballing authorities.
My Lords, I must first thank my noble friend Lady Taylor of Bolton not only for securing this debate but for the way in which she introduced it, and it is a joy to follow my friend the noble Baroness, Lady Morris of Bolton. The terrible story of Bolton Wanderers should be a salutary lesson to all of us as football fans, and none of us would want this situation for any club, let alone our own.
At its core, this is a debate about corporate governance including but recognising the circumstances peculiar to football. Football is a big business. According to Deloitte, Premier League and Football League clubs annually generate £5.5 billion-worth of revenue and contribute £1.9 billion in taxes. This needs good governance just in business terms alone. Today, I looked up a definition of corporate governance:
“The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community)”.
Note the “transparency” with “stakeholders”, and here we go to the peculiarity of football: the fans.
Business management generally took a wrong turn in the 1980s when the dominant thinking emerged that shareholder value was paramount. Prior to that, business was much more run to deliver customer value, and shareholders would benefit as a consequence, but since the 1980s managers have down-played the other stakeholders: staff, society and customers.
In football’s case, the customers are the fans. They drive the demand for football, either live or on TV. The club owner benefits from one of the most inelastic demand curves imaginable. I continue to pay £1,200 to £1,300 for a season ticket at Arsenal to watch the home games of the men’s first team. I have therefore missed the glories of Arsenal winning the FA Women’s Super League this season. Instead, we have had a mixed time on the pitch at the Emirates Stadium, just in the last week winning a Europa League semi-final 3-1 and then having a terrible draw to Brighton at the weekend.
Yes, I am a stereotypical Arsenal fan with an inflated sense of entitlement, but I am also typical of very many football fans. If I do not like my supermarket service at, say, Sainsbury’s, I can easily switch to, say, Lidl, but me switching my custom from Arsenal to Spurs is simply not possible. It is way more likely that I would leave the Labour Party, after so many years of membership and service, than stop supporting Arsenal. Fans are fanatics, and we deserve a special status as stakeholders in the governance of football.
This last year has been a troubling time for us Arsenal supporters, not just on the pitch. Late last year, Stan Kroenke took over the entire club, taking it private. Mr Kroenke, according to Wikipedia,
“is the owner of Kroenke Sports & Entertainment, which is the holding company of English Premier League football club Arsenal, the Los Angeles Rams of the NFL, Denver Nuggets of the NBA, Colorado Avalanche of the NHL, Colorado Rapids of Major League Soccer, Colorado Mammoth of the National Lacrosse League, and the newly formed Los Angeles Gladiators of the Overwatch League”—
I gather the Overwatch League is something to do with e-sports. He is not really a football fan, let alone an Arsenal fan.
As part of this takeover, he forcibly acquired the shares owned by the fans, including in bodies such as the Arsenal Supporters’ Trust, or its vehicle Arsenal Fanshare, of which I was a board member. Having negotiated to buy the shares owned by Alisher Usmanov, a Russian magnate who was not in my opinion a fit and proper person to own a football club, Kroenke then owned 98.82% of the club. He was therefore entitled in law to force other shareholders to sell to him and take the club private. As a result, supporters who had held shares in Arsenal, had inherited shares in Arsenal, had held them since the war, have seen that link end. It is the end of custodianship, and the transparency and accountability that comes with supporter ownership is also lost.
Private ownership of football clubs, often by overseas Governments or investors, is now commonplace. It needs a reaction from the governing bodies and the Government. Given the weakness of the regulators of the game to enforce any meaningful fit and proper person test, which has been discussed, the need for transparency and accountability is all the more important.
Supporters need greater recognition and a greater role in their clubs. We are more than wallpaper for the TV companies, which are the real customers that owners care about. You can watch a game behind closed doors, but it is not the same without the fans. The players behave differently, and it lacks the theatre and the emotion. Imagine last night at Anfield without the fans—it is impossible.
Owners need fans but take them for granted because they are fanatics. That is why I welcome the policy of my Front Bench that football supporters should be formally represented on the boards of football clubs. There is also a parallel policy of giving workers a place on the boards of major companies. If that goes ahead, we need to tweak it, as I certainly can vouch that Arsenal would be better served with supporters on the board, rather than workers in the form of millionaire players such as Mesut Özil and Shkodran Mustafi.
We should also examine whether there is a way to force clubs to provide their fans with financial reporting information and meetings similar to the AGMs that plcs have to have as a way of maintaining accountability and transparency.
Finally, is it time also to look at making it a requirement that a certain portion of equity in a club should be reserved for supporter shareholders of that club? I am not talking about a great amount but enough to provide accountability and transparency.
This is, particularly for Bolton fans, a hugely timely debate. I wish that club well. I hope that the regulators of the game are listening, and I hope that they will do more for the fans of the live game.
My Lords, this is one of those debates where you think of various things to say but then hear them ticked off one by one by the people who speak ahead of you.
If ever there were an answer to sexism, it can be seen in this debate. The female Members of this House have championed football—seen as a male preserve until fairly recently—and indeed they have done most of the heavy lifting. So it now falls to the rugby player to comment around the sides of the heavy work that has been done.
When it comes to Bolton Wanderers, I should declare that I was brought up in Norwich. Our experience is very different. We have had civic receptions to say, “Well done”, although we have been promoted and relegated almost as often. Our club has experienced ups and downs, but it is very lucky to have better management. If you have good management, you will survive the bumps and the bangs.
The noble Lord, Lord Knight, has just pointed out to us that, even if fans protest and do not turn up, they do not tend to transfer their allegiance. I just wonder how many applications from other parties will be arriving on his desk tomorrow morning—but that can probably be reported back to us. However, there is something about the soccer fan that makes him want to stay with his club—probably more so than in virtually any other sport. I have seen the same thing to some extent in rugby league, but rugby union is only just establishing a regular fan base. It used to be the case that you supported the club that you played for, at least perhaps in a junior team. That tends to be the culture. Also, the culture of promotion and relegation means that, if anything goes wrong, it goes wrong big time. If you have a bad season, your income base falls away and you become even more vulnerable.
The noble Lord, Lord Knight, referred to another thing that I had intended to mention: the idea of franchising and having a guaranteed fixture list must be very attractive to many big owners, particularly American ones. We have to look at the culture of this incredibly successful sport, which is an amazing generator of invisible earnings for this country. We have to examine disasters such as the one at Bolton—a disaster for the club, for the structure, for everybody involved in it and for the financial base of that town and the league itself. If we want to preserve the culture of it being technically possible to reach the top through good management and canny decisions, we have to make sure that there is better governance.
The briefing provided by the Library spoke about how a huge step was taken a couple of years ago—which it was. But was it enough? The evidence would suggest not. But one thing that has come out, both here and in much of the briefing I have received, particularly through the FA, is that we are not taking advantage of the fan. If ever there was a role for exposing and ensuring transparency in how a club is managed, there is a body that will do it for you. This is also a way in which the manager of the club, for instance, might benefit. He says, “I can’t pump more money in. I can’t buy you those players, because I have to prepare in case something goes wrong”. There is no guarantee of success. I am afraid that the average football fan has rather a record of blaming everybody else: the wrong combination of players, someone being injured, the wrong manager with the wrong team. It will happen, because just as success is rewarded, it is guaranteed that failure is punished. Things will swing around—even if it is only relative, it is going to happen.
So how are we going to do this? I suggest that it might be worth looking at something along the lines of members of the board, possibly non-executive directors, having the job of exposing what has happened. There is a degree of agreement. I thought we might be heading for a classic left-right combination when the noble Baroness, Lady Taylor of Bolton, and the noble Lord, Lord Kirkham, started up. But even then we had a degree of agreement that it is an independent structure that the Government cannot get that involved in. So we cannot regulate too much, but we should encourage a framework that tells us what is going on because, as all sports get more professionalised, these pressures are going to come, and indeed have already come. Rugby league has had, let us say, its interesting moments. The initial phases of professionalism in rugby union have had their moments. All have been placed under similar pressures. Football is far and away the most dominant game, but it will be seen as something as a template and model.
We have to look at this as a whole because of the importance of sport to our culture and everything else. We use professional sport as a driver to get others involved in sport. Indeed, many of the duties placed on our senior professional clubs are there to encourage junior and amateur sport, to make sure that people go through. The good work done by all sports, on mental health, for example, happens because professional clubs have the resources, the drive and the connections to do it properly. Sport is a tremendous asset when it is used properly. When it fails, the damage is massive. I am not sure of the situation in Bolton, but anyone who has been involved in youth teams, community work et cetera will be damaged. There can be no two ways about that. Also, do you want to link yourself to something that might disappear? How much more reticent will you be about using this asset? All these things come to the fore.
We have an odd situation, and an economic activity that is culturally linked to the very soul of many communities. Unless we get a better understanding, and a better way of looking after these things properly, we will continue to have these problems. Bolton Wanderers are merely today’s problem—as Leeds United were a problem in the past. Look north of the border and you see Glasgow Rangers. Whoever would have thought that they would go through the experience they went through? We have to see that these clubs are maintained and run properly. Making sure that they are transparent in their actions is the only real way we can do this, because I do not think we want a state-run professional sporting structure. So I hope that the Minister when he responds will give us an idea of what sort of encouragement and support the Government can give to football in this case, and professional sport generally, so that it can run itself better.
My Lords, I join others in congratulating the noble Baroness who brought this Question before us. With the noble Viscount and myself left to offer our contributions, it feels as though we are moving into extra time and I just hope it does not end in penalties. This has been a debate dominated by mention of, and sadness for, Bolton Wanderers. Two Members of this House with “Bolton” stuck on the end of their names have had fierce things to say in favour of their club and have expressed deep regret for its present fate. I wonder whether we could have a little proposal here on my part, not for the Minister to consider but perhaps for the two noble Baronesses. Mr Gordon Taylor has just retired from the Professional Footballers’ Association as the highest-paid trade union official in the world, whose last recorded emoluments amounted to £2.29 million. If I am right, the figure for Bolton Wanderers’ debt being quoted in court is a mere £1 million—perhaps it is a bit more than that but that is the figure that was in the newspaper; clearly I am in the presence of people who have authority that I cannot possibly claim—so perhaps Mr Taylor might be approached to see whether some of his generosity could be applied in that direction.
Like the noble Lord, Lord Addington, I am a rugby player. I do not always see the positive side of football; when I go to games, I can sometimes be quite afraid because of the kind of raw emotion on display and the nature of some of the chanting. After all, if you have been to Cardiff Arms Park or its successors and taken part in rugby games, where the opposing fans are mixed up with your own fans, having a jocular time, and the only villain of the piece is the referee, then you will know that that is greatly missed when we go to see a football game. I have lived within sound of the roar of the crowd at the Arsenal stadium—Highbury, as it of course was—but without ever being able to afford to go in it. Similarly, my wife reports her entire family going down to the Victoria Ground to see Stoke play—indeed, to see Stanley Matthews play. I was not going to mention Stanley Matthews, because he scored the goal for Blackpool against Bolton Wanderers in that famous cup final that saw them off in that year of glory.
However, we have to come to the point. It is the very importance, centrality and key role of football that makes it so vital that we give it our best scrutiny. I am sorry that two noble Lords have not spoken today. One is my noble friend Lord Triesman, who is not taking part in the debate for family reasons. His contribution and his insights into his time at the FA, his successor and his successor’s successor would have been more than useful. It is not an easy place nor an easy culture to manage. I think we would have found that my noble friend was still wearing his bruises as a result of that encounter with immovable and implacable systems and institutions in the FA. I think Mr Clarke is doing his best.
At the end of the day the board has been reduced from 12 to 10 and is required to have three women on it—this tick-box thing. There are now three women on the board but no one really from the minority-ethnic groups who are the first visual encounter with our football scene that any of us gets. In last night’s wonderful match at Anfield over half the team were from minority groups, and the same was true of Gareth Southgate’s team in the recent match against Montenegro. If you see the brilliance, the footwork, the commitment, the spirit and the passion represented in this diverse manner on the field, which is the most glorious advertisement for football, then you ought to see it in the management and oversight structures and institutions that run the game. Indeed you must see it, otherwise people from minority-ethnic backgrounds will feel that they are puppets paid to play the game but that the sport is not really theirs. Just one football coach was black, and I think that that is a shame.
The other person that I miss today is the noble Lord, Lord Ouseley. I wish that he were here, taking part and talking about Kick It Out. We cannot just gloss over the fact that racism and racial bigotry seem to be within the spirit and ethos of the game and express themselves in such ugly forms again and again. I remember meeting people from the Inter City Firm in the 1980s, the fascist thugs who organised at school gates to take their young protégés off to matches to disrupt them, to taunt the police and to have a go at Muslims. It was shameful and kept many Muslim people from our grounds altogether.
Our institutions must manage not only the activity and give an account for the funds that are theirs to manage, but the climate in which the game takes place. They have more responsibility than simply to regret things and effectively to wash their hands of it afterwards. I liked the introduction from the noble Baroness, Lady Grey-Thompson, about the need for those running football to actively remember their duty of care to everybody in the game, not just the players—the staff, the people in the background, the people we never see. They need to be treated properly too.
In every way, football is exciting. Indeed, why are we sitting here debating this when Spurs are about to go on the pitch to play against Ajax? If anybody has an up-to-date score before I leave, please let me have it. I did not realise that my noble friend Lord Knight is an Arsenal supporter. My daughter is, but my sons are Spurs supporters. It has made life in our household extraordinarily difficult. If only they had all stuck to their father’s sport, rugby, it would have been so different. But then, if we have a Motion to discuss the way the Welsh Rugby Union manages the game of rugby in Wales, we would get into the same sticky holes we have got into in thinking about football this evening.
Football is too important for us to simply think of it as a game played either on telly or in a stadium. It is part of the culture of this country, and that makes it absolutely necessary for us to give it our closest attention in terms of the way the institution looks after the people involved in the industry and the way the questions of bullying, grooming, racism and so on are looked after too. Thanks to those who brought this forward. Now, in extra time, over to the noble Viscount.
My Lords, I should start by saying that my noble friend Lord Ashton has absented himself from the pitch, so I suppose I must be the sub. I thank the noble Baroness, Lady Taylor, for securing this short debate, and all Peers for their informed contributions. It is a debate on football, which is rather remarkable. It is not lost on me that if we had more debates on football every day here it would encourage more young people to engage with politics. That is just a thought before I begin.
As my noble friend Lord Kirkham said, football is often referred to as the beautiful game, but it is more than that. It is our national game and there is much to celebrate. If I may highlight a few things, the Premier League remains a formidable domestic and international success. Economically, we benefit from the 100,000 jobs it creates, £3.3 billion in tax contributions each year and a figure of £7.6 billion GVA impact overall. One billion homes globally have access to Premier League coverage. Some 686,000 international tourists attended matches, bringing additional benefits.
Our stadiums are full each week. This includes the English Football League, which is one of the best-supported leagues in Europe. Our England teams, male and female at all age levels, are excelling on the world stage. With government support, this country looks forward to hosting the European Championships in 2020 for men and 2021 for women.
As the noble Lord, Lord Pendry, and the noble Baroness, Lady Grey-Thompson, said, the women’s game continues to grow apace, and the Government are firmly behind helping the FA’s ambition to double female participation numbers over the next few years. Over 50,000 fans, a record, attended the women’s FA Cup final at Wembley last weekend, won, of course, by Manchester City. Speaking of Manchester City, how about that fabulous goal, which I happened to see, from Vincent Kompany on Monday night? It sets up this Sunday well for a fantastic last day shoot-out between Man City and Liverpool for the championship crown. I see a few heads shaking.
It is no wonder that, in a nation that consumes football so avidly, in this Chamber we often find ourselves debating all aspects of the game—and sometimes that includes disappointing aspects. Many noble Lords will have been present last month, when my noble friend Lord Ashton spoke about the game’s problems in dealing with racism and other forms of discrimination that have blighted the sport in recent times. The noble Lords, Lord Pendry and Lord Griffiths, raised this important issue. May I reassure the House that the Government are working closely with football to address this important matter?
Issues of governance or ownership are other matters of concern. Perilous financial difficulties, failing to bring fans on board as custodians of their chosen club and securing long-term home grounds are of relevance, and we have heard them repeated today by several noble Lords. On governance, the Government have been active in pushing the FA to reform its structure and give the game the overall leadership it requires. The sports governance code that came into force on 1 April 2017 applies to all sporting bodies in receipt of public funding from Sport England and UK Sport. It challenged the FA and all other governing bodies to demonstrate that they meet the highest standards of governance and regulation. The code applies best corporate practice.
We welcomed the reforms the FA has now made to comply with the code by ensuring that its decision-making bodies are more transparent, more independent, more diverse and therefore more representative of the participants in the sport. The FA needed to reform so that it could continue to pursue the long-term potential of football in this country, from grass roots up to the national teams, with government support. In partnership with football, the Government are currently investing more money than ever before in community football programmes and facilities.
Concerning the financial stability of the game, the increased checks and balances brought in by the football leagues and the FA, in the highest echelons of the national league, have done a great deal of good in ensuring that their member clubs’ finances are managed in a fiscally responsible way—despite what the noble Baroness, Lady Taylor, said. Requiring regular financial returns of member clubs has had an extremely welcome effect in greatly reducing the number of insolvencies in the professional game. However, this has not been sufficient to safeguard the financial situation of Bolton Wanderers. I listened very carefully to the heartfelt comments of the noble Baroness and my noble friend Lady Morris in respect of Bolton Wanderers. Good governance is not foolproof in predicting and preventing failure in any sector. It is easy to forget that of the 92 professional clubs, in spite of the large sums of money involved and club competition lending itself to rewarding success over everything else, financial failures are in the minority. Unlike 10 to 15 years ago, very few clubs fall into administration because of financial mismanagement.
The owners’ and directors’ test—formerly the fit and proper person test, to which the noble Baroness, Lady Taylor, alluded—stands up to what we would expect to see in the private sector, and is stringently applied to its full extent. The English Football League and Premier League work closely together to ensure the best diligence possible in this respect. The test is based on a set of objective criteria, such as whether an individual is banned from being a company director or has been involved in more than one administration at a club since 2004. These points were made by my noble friend Lord Kirkham. It is not a subjective assessment of anybody’s fundamental ability to run a football club, or their motivations. As well as the owners’ and directors’ test process, the football authorities carry out additional background checks on individuals and their financial standing as part of the overall due diligence process. We would expect those to be applied to Bolton and any prospective buyer. However, while tests can protect against legally inappropriate owners, they cannot, as in any other line of business, predict success or aptitude.
Let us be clear that a professional club is a business, like many others. What sets apart the business of football from other commercial endeavours is the place of the club at the heart of its community—a point made today—and the fan base of supporters, which has a brand loyalty beyond compare, as the noble Lord, Lord Knight, said.
To pick up a theme from the noble Baroness, Lady Taylor, and the noble Lord, Lord Addington, the fans are extremely important to the success of our football leagues. We welcome the fact that there is now much greater dialogue between clubs and their supporters. They discuss the matters of most importance in running their club, which include its financial state and transparency over its ownership. These meetings are a mandatory requirement on football clubs, in accordance with football’s rule books, and were introduced as a result of the Government’s expert working group on supporter ownership and engagement, which reported in 2016. I am pleased that this has gained traction across the league. It could lead to fans being placed on the board, if that is by mutual agreement between the fans and clubs.
The noble Baroness, Lady Taylor, and the noble Lord, Lord Pendry, asked whether we would press for a greater role for football fans. The Government will continue to engage regularly with supporter organisations, such as Supporters Direct and the Football Supporters’ Federation, which do excellent work in representing supporter interests.
Club successes, however, can be frustrated further by their lack of ownership of a home stadium, as demonstrated in markedly different ways at Dulwich Hamlet FC and Coventry City FC. The reliance of community clubs on local authority-owned facilities was well understood, but less is known about the degree of risk that this may pose across the professional and semi-pro game. With this in mind, the Government asked the FA to conduct a review of stadium ownership to inform what guidance and advice is needed to secure better protection of club assets and give greater clarity to supporters, local residents and everyone interested in the protection and development of football clubs and their assets. We are working over the course of this year with the FA to ensure that the review provides as much support as possible for clubs, knowing how important they remain to local communities.
The noble Baroness, Lady Taylor, asked whether the Government will encourage listing stadia as assets of community value, which is an interesting point. We would absolutely encourage the listing of stadia as assets of community value, as suggested, and will consider how this should be reflected in the work of the review.
Ensuring the long-term sustainability of clubs must remain the primary responsibility of all club owners. I feel that I should reflect for a moment on the large number of current and past owners, throughout all tiers of the football pyramid, who have done just that. They invest, more often with their own sums, to keep the clubs healthy; they recruit the best possible players and staff; they invest in our stadiums, so that we have a safe and enjoyable experience when we watch football; and their clubs are vibrant hubs in their local community.
Responsibility also lies with the football authorities which govern the sport and set the rules and regulations with which clubs and their owners must comply. I have mentioned the financial reporting and ownership rules that are in place to try to ensure that clubs remain on a sustainable footing. Where they do not, the football authorities have a range of sanctions that they can apply which act as a deterrent. Our football authorities must continue to keep under review the ways in which their member clubs can be protected in the long term. Long-term business plans, proof of sufficient funds and concrete assurances should be provided by owners around the protection of the club. This would provide clarity and reassurance to fans and ensure that support for football thrives at all levels.
I would like to give some reassurance to the noble Baroness, Lady Taylor, my noble friend Lady Morris and the noble Lords, Lord Pendry and Lord Addington, about the future. As Mims Davies, the Minister for Sport, has said, if football’s current rules are not sufficient then new rules may be required. If the football authorities believe that to be the case, and football needed the help of government above the scope of powers the game has to govern itself, then of course government would welcome that discussion.
I want to move to the interesting comments made by the noble Baroness, Lady Grey-Thompson, who asked whether there was progress towards having an ombudsman and what the latest was on the Ministry of Justice’s work on positions of trust in sport. We recognise that dispute and grievance processes in sport need appropriate levels of independence, so the Minister for Sport is considering the issue of a potential ombudsman. On trust, it is vital that sports youth groups and charities are safe places, and I welcome the MoJ’s recent commitment to review the effectiveness of laws protecting people from abuses of power. The review will look at the existing law in this area to ensure that it is working effectively and is clearly understood. If it appears that there are gaps in current provision or practice, government will consider carefully how to address them. DCMS is supporting the MoJ with this review and ensuring that the views of its sectors, including sport, are heard clearly.
The picture that I have tried to portray is that football is in a pretty healthy state. It is a fantastic homegrown product and a most valuable export. We should be proud of it. But it still has its challenges, about which we have heard much this evening. There are always areas where it needs consider what more can be done. This includes around governance and the regulation of the professional game. It includes its support to the grassroots to ensure that the game does not lose its community roots and the legacy of generations that follow their clubs. It must continue to find ways to provide the environment whereby every player, volunteer and spectator feels safe and included in its success.
The Government will continue to challenge football in the areas where we think it is necessary and we will ensure the health of the sport and our collective custodianship of it. It is always at the heart of those agendas. Finally, I wish Bolton Wanderers a fair wind in seeing through its current challenges.
House adjourned at 8.16 pm.