House of Lords
Tuesday 19 October 2021
Prayers—read by the Lord Bishop of Durham.
GPs: In-person Appointments
To ask Her Majesty’s Government what steps they are taking to ensure all patients can choose to have a telephone or in-person appointment with their GP; and what assessment they have made of the impact of appointments not being in person on the late diagnosis of conditions.
We have published a comprehensive new plan to support GPs and make it easier for patients to see or speak to GPs and their teams, based on their choice. The plan is backed up by a new £250 million winter access fund, which will help patients with urgent care needs. As part of this, practices should ensure that they are providing the right proportion of appointments for their registered population that is clinically warranted and takes account of patient preferences.
I thank the Minister for his reply but point out that one of the fundamentals of the NHS has been that the patient has decided when they wish to see the doctor. Under Covid, that has been breached many times, with doctors having far more power not to see patients. Can he assure me that the aim of the department will be to get back to a system where the patient decides whether they need to see the doctor?
My Lords, I am happy to agree with the sentiment in the question from my noble friend, but it is important to make sure that we are not overly prescriptive. Patients sometimes want face-to-face consultation, but they may also be happy with a telephone call or an online consultation. At the heart of this should be patient choice.
My Lords, has the Minister heard GPs say, as I have, that the most important question a patient asks is the one as they are leaving—the one as they are walking out of the door? Will the training of GPs be amended to cover the different listening techniques that may be required for online consultations, so that these important questions are not missed?
I thank the noble Baroness for sharing her expertise in this area, and absolutely agree with the question she asked. I do not have the details of the training of GPs to make sure that they are best prepared for online consultations, but I will write to her.
My Lords, does the Minister agree that we are in danger of looking at this issue the wrong way around? Given that there is much ongoing research into clinician and patient experience of virtual appointments, that primary care consists of many more people than just GPs, and that complex diagnoses are usually given by specialist consultants, there are multiple reasons from both the clinical and patient viewpoint for what medium to choose. Can the Minister reassure the House that there will be no blanket targets imposed on professionals for the percentage of appointments that need to be face to face, virtual or by telephone, and that GPs, patients and other clinicians are able to assess between themselves what is the most efficient medium to ensure the best possible outcome for the patient?
What is important here is that we leave it to the relationship between the GP and the patient to decide the best form of consultation. Sometimes that will be face to face and, if the patient wants a face-to-face consultation but the GP is unable to provide one, they have to give a good medical reason why not. However, we can balance that with online and telephone appointments.
Many GPs are feeling as if they have been completely thrown to the wolves by Ministers, and even Jeremy Hunt has said that the proposed plan and the £250 million winter access fund to support GPs and reduce the pressures they face is little more than a sticking plaster and will not help, given that the real problem is the shortage of qualified GPs. There are not even locums in many places and no longer applicants for many GP jobs. Has the Minister talked to GPs about their current extensive workload, and will he reconsider the assistance needed to support our exhausted GPs?
It is important that we listen to GPs and understand their needs and how we can support them. We have committed to growing and diversifying the workforce and boosting GP recruitment. We have also committed to recruiting an additional 26,000 primary care staff to be embedded in multidisciplinary teams. The details of the training will be left to the trainers themselves.
My Lords, it was appropriate for GPs to avoid physical contact with their patients when the Covid risk was significant. As this abates, it is surely equally correct for GPs to agree to returning to seeing patients when they so request and where their symptoms invite further investigation. Also, rewarding GPs at a lower rate for telephone appointments and for working three rather than five days a week might serve as an effective incentive to restoring physical appointments.
At the centre of what the department requires and expects is that GPs work with their patients to decide the most appropriate form of consultation. In some cases that will be telephone, in some cases that will be online, and in some cases it will be face to face. When the patient requests face to face and the GP refuses, they have to give a good medical reason why.
My Lords, healthcare depends crucially on the relationship between patient and professional. A recent study of Norwegian records found that the longer the relationship between an individual GP and a patient, the more you reduce the need for out-of-hours care and the likelihood of being admitted to hospital. Face-to-face consultation is important but even more important is the case manager function of the general practitioner. Can the Government make a similar study in England in terms of individual GP and patient relationships and medical outcomes, and encourage the devolved Administrations to do similar work so we can compare data?
The relationship between the patient and the GP is important, so we have made sure that choice is at its centre. As they develop the relationship, they can decide on the most appropriate way to be consulted and to give advice.
The Government have consistently promised and failed to increase the number of GPs. Instead of the 5,000 additional ones promised in 2015, this year we have 1,300 fewer GPs. When the Health Secretary announced the £250 million winter access fund to enable GP practices to improve the availability of services to patients, where did he think those GPs would come from? Where is the magic locum tree? It is a seven-year pipeline to produce a GP. Does the Minister agree that rubbishing and attacking GPs is not going to attract medics to take up this profession?
I think we all agree that we should appreciate the work that GPs did during Covid; they were often the front line. It is important that we continue to make sure that we recruit more GPs. Some 3,793 doctors—the highest ever number—accepted a place on GP training in 2020, so I do not recognise the criticism.
My Lords, I take this opportunity to welcome the noble Lord to his new position; it is the first chance I have had to do that. Does he agree that virtual appointments increase the number of patients dealt with but not the quality of the consultation? Now that we are coming out of extreme measures, what are the Government doing to level up the worst GP practices to the standards of those undeniably excellent ones in some areas? Will he now encourage GPs to have more face-to-face appointments?
I thank the noble Lord for his warm welcome to me in my new role. As other noble Lords have expressed, it is really important to make sure that the relationship between patient and doctor or GP is respected. That will not always mean being seen face to face, but when a patient asks for this there has to be a good medical reason if the appointment is not. Speaking from personal experience, I have found online consultations as good as, if not sometimes better than, face-to-face appointments.
My Lords, I declare an interest. Last November, my father turned yellow. He rang to get a doctor’s appointment and was given a telephone consultation. He does not have a smartphone. The GP said, “It’s jaundice, but it might be pancreatic cancer.” No other suggestion was made and there was no suggestion that he could go in to see the GP. He did not know that he had a choice. He is still with us 11 months later; it clearly was not pancreatic cancer. The idea that people have choice does not work if they are not strong and vocal enough to be able to tell the GP practice, “I need a face-to-face appointment.” What will the Minister do to make patients aware that this is possible?
I sympathise with the case that the noble Baroness communicated. It is important that GPs and patients work that relationship out between themselves. If a patient asks for a face-to-face appointment and the GP refuses to give one, the GP has to have a good medical reason.
My Lords, the time allowed for this Question has elapsed.
Drugs: Black Review
To ask Her Majesty’s Government what assessment they have made of Dame Carol Black’s Review of drugs part two: prevention, treatment and recovery, published on 8 July.
On 27 July, the Government published an initial response to Dame Carol Black’s review, welcoming all 32 recommendations and setting out a clear cross-government commitment to the agenda. The Government have also committed to respond to the review in full by the end of the year and to set out a long-term drug strategy which will present our whole-government response to drive down drug supply and demand.
My Lords, I also welcome my noble friend to his place on the Front Bench. With entrenched drug use driving half of the nation’s crime and people with serious drug addiction occupying one in three prison places, does he accept Dame Carol Black’s finding that the current public provision for drug misuse, prevention, treatment and recovery is not fit for purpose and that Her Majesty’s Government face an unavoidable choice: invest in tackling the problem or keep paying for the consequences?
I thank my noble friend for the question and the point he made so forcefully. In January, the Government announced a £148 million crime package for 2021-22, which has been allocated to local authorities for drug treatment and recovery services, with a focus on improving services for offenders and reducing deaths. This is the largest increase in drug treatment funding for 15 years.
My Lords, we have a very good example inside the UK of the short-term impact of cutbacks in rehabilitation and treatment. In Scotland, we now have the highest level of drug-related deaths in Europe, partly as a result of cutbacks in treatment and rehabilitation made over the past decade by the Scottish Government. The UK Government share some responsibilities on drug policy with the Scottish Government under the devolution settlement, so will they guarantee to work with the Scottish Government to try to turn around this devastating situation?
In September 2020, Kit Malthouse and Jo Churchill, the then Minister for Prevention, Public Health and Primary Care, co-chaired a UK ministerial meeting focusing on UK-wide approaches to drugs misuse. The second UK drugs ministerial took place at Hillsborough Castle in Belfast on 11 October. The Government maintain a commitment to consulting the devolved Administrations—or devolved Governments in many cases—as well as a number of expert speakers.
My Lords, the Government’s initial response welcoming Dame Carol Black’s recommendation to create a cross-departmental approach to tackling drugs misuse and related harm is welcome. However, they have not responded to many of the key recommendations, of which the most important is the introduction of multi-year ring-fenced funding for treatment services, distributed by local need, with at least £552 million invested in the treatment system annually by the end of year 5. When will the Government’s full response be published? Will Dame Carol’s recommendations be fully funded?
The Government have committed to giving a full response to Dame Carol Black’s review by the end of the year and have already taken action. Since part 1 of her review, the Government have announced £148 million of investment to tackle drugs misuse, supply and county-lines activity. That also includes £80 million for drug treatment and recovery services.
My Lords, will my noble friend the Minister consider the third option, not mentioned by my noble friend Lord Moylan; namely, a partial decriminalisation? The evidence from those European countries and US states that have pursued this course is that not only does it relieve pressure on the police, the criminal justice system and the taxpayer but it leads to a decline in the number of drugs-related deaths. I appreciate that this is a complex issue and that there are strong views on all sides, so perhaps my noble friend the Minister will consider a temporary experimental change in the laws, as Parliament did over changing our time zone, where we lift the restrictions for a year, and then at the end of that we have a vote.
I thank my noble friend for reminding us of the third option—or the third way, as some might say. It is really important that we consider all views, and I have read, over the years, many arguments in favour of liberalisation. At the same time, however, I have also read many criticisms from drug treatment charities, saying that it is not as simple as that. At this point, the Government are not committed to any trials on the basis suggested.
My Lords, I refer the Minister to Dame Carol Black’s assertion that
“we can no longer, as a society, turn a blind eye to recreational drug use.”
Will the Minister make it very clear that the downgrading of cannabis—the making of cannabis legal—would send out a message that it is fine? But it is not fine for those millions of young people all over the country who get caught up with cannabis. It is a gateway drug, and the Government should not be thinking of doing anything like what the noble Lord, Lord Hannan, has suggested.
I thank the noble Baroness for her question and for her point that it is important to continue to invest in drug treatment services, but also to make sure that we stop drug users from engaging with drugs in the first place.
My Lords, among some 32 recommendations, Dame Carol stressed the importance of getting more people into treatment who require it, diverting people away from the criminal justice system, and ensuring that service users are given a wider package of support for housing, employment and mental health. With drug-related deaths in England and Wales rising for the eighth year in a row in 2020, what conclusions might be drawn about the effectiveness or otherwise of the current cross-government approach to tackling addiction? Can the Minister assure the House that wisdom will prevail such that funding for substantive health support services to tackle addiction will be announced in the comprehensive spending review?
The Government have committed to answering in full the recommendations of Dame Carol Black’s review. In terms of joined-up thinking across government, the Government established the new Joint Combating Drugs Unit—the JCDU—in July 2021 to co-ordinate, and drive a genuinely cross-government approach to, drugs policy. The JCDU brings together different government departments, including those that the noble Baroness mentioned—the Department for Health and Social Care, the Home Office, the Department for Levelling Up, Housing and Communities, the Department for Work and Pensions, the Department for Education and the Ministry of Justice—to help tackle drugs misuse across society by adopting a cross-government approach.
My Lords, the drug treatment and recovery workforce has deteriorated in quantity, quality and morale in recent years, with excessive case loads, decreased training and lack of clinical supervision. How do the Government plan to increase the number of professionally qualified drug treatment staff and improve occupational standards and training requirements?
The Government will answer all the recommendations in Dame Carol Black’s review by the end of the year. In response to the noble Baroness’s specific question, I shall write to her.
It is hard to legislate to prevent drug use when it is such big business for organised crime globally. Many equatorial countries destroy their rainforests so that they can grow drugs, because that is part of their economy. Are the Government looking at those two things: global organised crime syndicates and environmental devastation from drug growth?
The noble Baroness raises a very important point: we should look at this more globally, not just look at our country’s drug strategy in isolation. Various departments across government are looking at that and working with partners across the world, but I shall write to the noble Baroness in more detail.
The recurring theme in the report of the importance of holistic care—supporting individuals who use drugs with their health and well-being, housing needs and opportunities for education, training and employment—is very pleasing. It is also good that there is testimony in the report from people with lived experience, who can help to shape the support needed. Building on the question from my noble friend Lord McConnell, can the Minister explain how there will be a commitment to essential funding to put many of these excellent recommendations into practice, both in the UK and in the devolved Governments?
The Government will respond to the Dame Carol Black review by the end of the year, and that includes how much funding will be committed. The Government are committed to looking at the review’s distinct proposals to see what resources will be needed and to make that bid.
My Lords, we as a family have experienced the state of mental health services in the past six weeks, and I had the privilege of meeting numerous in-patients and the anguished, distraught parents of young people with drug-induced psychosis being looked after by the least-trained or well-equipped staff, often in the absence of adequate numbers of doctors and nurses in the ward, as well as in the community. In welcoming the noble Lord to his role, I ask him whether he will respond to Dame Carol Black’s call for £500 million for drug services. Will he argue for that and do his best to ensure that it is available to all those who need it, and will he agree to meet some of us to discuss this?
I thank the noble Baroness for her question; we have known each other for a number of years, and I have always admired the work she has done in local communities in Tower Hamlets. In response to her specific question, I will commit to meet her and others who want to discuss this issue in more detail, but we have to wait until the end of the year for the Government’s response to Dame Carol Black’s review.
My Lords, all supplementary questions have been asked and we now move to the next Question.
Child Poverty: Nuffield Foundation Review
To ask Her Majesty’s Government what assessment they have made of the Nuffield Foundation’s review Changing patterns of poverty in early childhood, published on 14 September; and what steps they intend to take as a result, including in relation to the two-child limit for welfare benefits.
I am pleased to say we have read and analysed the report and note its recommendations. The Government are committed to supporting low-income families and having parents in work, particularly full-time, because we believe that this is the best way to tackle child poverty. In 2019-20, 14% of children under five in working households were in absolute poverty before housing costs, compared with 52% in workless households. That is why our focus is on the Plan for Jobs, and we have no current plans to change the policy of providing support for a maximum of two children.
I thank the Minister for her response, and for how she engages with us regularly on this, but ever since the two-child limit was introduced, successive DWP Secretaries of State have said to us and many others, “Give us the evidence that the two-child limit is increasing poverty.” The Nuffield report is the latest in what is now a long list of reports stating such evidence, so when will Her Majesty’s Government admit that this is now the biggest cause of the growth in child poverty in this country, that it is a failed policy and that it needs to be reformed?
No admissions or confessions today, my Lords. When I read the report, I did not get from it the specific point that the right reverend Prelate made, and I think the best way, as we had such a great engagement meeting last week, is for us to sit down and go through it again so that he can make absolutely sure that I understand that point.
Sir Michael Marmot’s 2020 report, produced by the Institute of Health Equity, found that the health gap between wealthy and deprived areas of the UK has grown in the past decade and that people can expect to spend more of their lives in poor health. Does the Minister agree that intervention to prevent child poverty would help reduce this health inequality in later life and, if so, what steps will the Government take to ensure that that happens?
The noble Baroness is right to point out the issues related to low income and health, and we accept that low income is associated with poorer long-term health outcomes. That is why we are continuing to support parents to get into work. Our other support includes increasing the national living wage, £6 billion a year to help parents with childcare costs, Healthy Start vouchers and a £221 million holiday and activities fund.
My Lords, the Nuffield report said that last year over 54% of families with young children in poverty had three or more kids, and that the recent rise in early childhood poverty is largely the result of changes to benefits policy, including the recent two-child limit. The right reverend Prelate the Bishop of Durham could not have done more—he comes back at least once a year with new evidence. The government response is always “just a little bit more”. The evidence is clear: this policy is having one effect—pushing large families into poverty. So I ask the Minister: how bad would that poverty have to get for the Government to change their mind?
The noble Baroness is right to mention the great tenacity of the right reverend Prelate in this area. The Government, however, have had to take difficult decisions—
Yes, they have: they have had to take difficult decisions to stabilise the economy and build a welfare system that works for those who use it as well as those who pay for it. I can say only that I will meet the right reverend Prelate, and I am happy for the noble Baroness to join us. We will see what comes from that conversation.
My Lords, the children’s commissioners of Wales, Scotland and Northern Ireland state that the two-child limit is a clear breach of children’s human rights. Will the Government act on this, or continue to sweep aside widespread evidence that this vicious policy is increasing poverty and damaging children?
I can add nothing to the answers I have already given. The Government have no plans to change the policy.
My Lords, the problems of some low-income families are made worse by trouble between the parents. Will my noble friend give any encouragement on measures to help resolve that situation?
I am happy to say that one of the areas of responsibility in my portfolio is the programme for reducing parental conflict. I have met numerous local authorities that are delivering it and we are seeing great progress in the reduction of parental conflict. We are putting £34 million into championing family hubs, which is another great and exciting measure that we are taking during these difficult days. We want to make sure that we reduce conflict so that children get the best start in life.
We know that many children get it in the neck from poverty. Let us hope that we can address that problem. The biggest problem that I would like the Minister to talk about is the children who are about to slip into poverty. More than 500,000 people who have not been able to pay their rent or mortgage because of Covid-19 are going to be evicted. It will be an enormous increase: what are we doing about that?
The noble Lord makes a very valid point. Without trying to sideline the issue, I will go to my colleagues in the department for housing—forgive me for not knowing what it is called now; the levelling-up bastion, perhaps—and make sure that the noble Lord gets an accurate answer to that question.
The Nuffield review outlined six elements for tackling early childhood poverty. Notably, these include, first, a multidimensional approach to multiple socioeconomic risks and the needs of families with young children, and, secondly, support for parental mental health and parenting from day one of a child’s life. What progress are the Government making in ensuring that all families have access to a welcome family hub as part of their cross-departmental best start for life policy?
Nothing would make my heart sing more than everybody having access to a family hub. At the moment, there is £34 million for those hubs. We are doing great work with them. I have decided, because I thought that family hubs would come up today, to do an all-Peers briefing on them so that noble Lords can hear exactly what we are doing and ask all the questions they wish.
My Lords, a five year-old boy in Blackpool can expect to live for 53.3 years in good health, compared with 71.9 years for a boy born in Richmond—a truly shocking gap of 18.6 years. Last year’s report of the Select Committee on Food, Poverty, Health and the Environment made recommendations for reducing that gap. As part of their levelling-up agenda, how many of those recommendations have the Government implemented?
The statistic shared by the noble Lord is sobering. Again, not wishing to sidestep the issue, I will need to go to the relevant department to make sure that he gets an answer. I will make sure that it is shared with noble Lords.
My Lords, the Minister is a kind and compassionate person. Can she tell the House how this Government felt comfortable taking away the £20 uplift in universal credit just as food and fuel prices are on the way up? How will that affect the children already living in poverty?
That is the subject of the month so we should expect noble Lords to raise it. I must say that I have answered this question a number of times. The Government’s position is clear: the uplift was a temporary solution that we extended for six months, and it is to stop. We have the household support fund, of another £500 million, and we are doing everything we can in terms of energy to make sure that people have the support they need. I would be happy to write to the noble Baroness laying all that out, rather than taking time now, to make sure that people understand.
To ask Her Majesty’s Government what discussions they have had with the government of France since the announcement of the AUKUS agreement.
My Lords, as neighbours, allies and partners, we have continued to engage with the French Government across a wide range of business since the AUKUS announcement.
My Lords, I thank the Minister for her Answer—what there was of it. This AUKUS treaty makes a lot of sense for the Australians. We often forget the huge sea ranges in that area. For example, it is 9,000 miles from the submarine building yards in south Australia to the Chinese yards; that is the same as the distance from London to Singapore. Nuclear submarines, not conventional ones, are needed to cover those ranges, so the Australians have made the right decision. Indeed, the fact that our three countries are working together confronts the Chinese on the grey-zone work they are doing against our agreed global values; that is a good thing.
However, it rather seems that we have left the French out on the side. They are very angry. At the NATO discussions this week, they were throwing their toys out of their cot. I would like to think that we have been talking closely with them. What I really want to ask the Minister is: are we still as close as we were in terms of Royal Navy-French navy liaison and the work that both navies do together, both in NATO and outside it?
I seek to assure the noble Lord that we recognise the significance of the French Government’s reaction to AUKUS and the strength of the feeling it has generated. We have a long-standing relationship with France in global security and defence; that is founded on firm lines, not least the Lancaster House agreements. We are both committed to the same things, whether that is NATO, Euro-Atlantic security or broader global security in the Indo-Pacific and south-east Asia. A lot binds us together. We value France’s presence as a defence partner and look forward to continuing to work with it closely.
I congratulate the Government on what is a very innovative new alliance, even if it was executed with maybe slightly less diplomacy for our near neighbours than it might have been. This new alliance is supportive of Australia. It reinforces the idea that China does not have free rein in the Indo-Pacific, and it reinforces the work of the Quad. With the Quad in mind, does the Minister think there will be new members of AUKUS, such as Japan?
I thank my noble friend for affirming the strategic importance of AUKUS, echoing what the noble Lord, Lord West, said. The tripartite collaboration has been formed for a specific purpose and change in that respect is not envisaged. But my noble friend is absolutely right to recognise that AUKUS complements and enhances other relationships in the region, such as the Quad, Five Eyes or the FPDA, and that reflects both NATO’s approach and the EU Indo-Pacific strategy.
My Lords, do the Government recognise that France is not only a close neighbour but also one of the few countries in the world that shares our fundamental values and interests? I support AUKUS, but was it not a great shame that no effort was made to bring France into the AUKUS conversation? Should not the Prime Minister have immediately reacted to the hurt feelings of the French by having a conversation with President Macron to see how the relationship can be put on a sound footing again?
I simply respond to the noble Lord by observing that the instigator of this new arrangement was actually Australia: it was Australia that decided that it wished to change its model of submarine. That is why it approached both the United Kingdom and the United States. As the noble Lord will understand, there are clearly issues of profound commercial sensitivity inherent within that, and that inhibited our ability to be more public or widespread in our consultations.
My Lords, when the Minister repeated the Prime Minister’s Statement on AUKUS in September, I asked what conversations the Prime Minister had had with President Macron before the announcement; answer came there none. Can the Minister please tell the House whether the Prime Minister and the Government understand the importance of the UK’s relations with France, that it remains our closest neighbour and that we should be working much more effectively to ensure that our bilateral relations and our relations within NATO are secure, because that is where our security lies?
The noble Baroness is correct about our relationship with NATO and the significance of NATO to Euro-Atlantic security; I entirely agree with that assessment. She is also correct that France is a very important partner and ally, as I indicated to the noble Lord, Lord Liddle; nobody disputes that. We continue to engage and consult at macro level. We have shared common interests, and they are best prosecuted when we work together on them. That is our agenda and our endeavour, and I am absolutely certain that it is also the French objective.
My Lords, we all support the AUKUS deal, but does the Minister realise that the French are absolutely furious with us, to the extent that, only a few weeks ago, they cancelled a meeting with our Defence Secretary to look at the future of the Lancaster House agreement? We depend on France to work with us in common interests across the world, so how will the Government prevent AUKUS opening up a rift in NATO, which is central to our security in Europe and beyond, just as the alliance is working on a new strategic concept?
This is not opening up a rift in NATO. In fact, AUKUS has reinforced a NATO leaders’ summit decision to place greater emphasis on regional partnerships; and, interestingly, AUKUS reflects the new EU strategy for the Indo-Pacific for south-east Asia. There is a shared commonality of interests when we address threat, and I think I have observed before to the noble Lord that threat does not respect boundaries. So we address threats, France addresses threats and the EU addresses threats. We do it best together, and NATO is pivotal to that. That is acknowledged by all member states.
My Lords, the purpose of the AUKUS pact is to ensure stability in Asia-Pacific. What is the strategy in the intervening years, given that the nuclear submarine programme will not be in play until 2040, before which time much can happen? Additionally, has China indicated any conventional or additional proliferation retaliatory measures? Was Five Eyes cited or consulted, as this has national, regional and potentially global security consequences?
As for the future, the UK will continue to engage with allies and partners regarding the stability of the Indo-Pacific region, whether that is through the FPDA, bilateral relationships or Five Eyes, to mention but a few. With regard to Five Eyes in particular, we are discussing the arrangement with Canada and New Zealand, because Five Eyes is a unique and highly valued partnership.
My Lords, if this is a genuine defence and security treaty and not just a subterfuge to take the contract for submarines away from France, why are Canada and New Zealand not involved from the start, as the other two of the Five Eyes?
Because this new arrangement is predicated on the desire of another state—Australia—to make changes to its submarine fleet. That was not instigated by the United Kingdom; we were approached by Australia.
My Lords, this has had an impact on our relationship, as recognised by the US State Department. The Secretary of State has spent two days in France; President Biden has spoken to President Macron. At every level there has been a connection between the US and France to improve and restore relationships. What have this Government done? Has the Minister spoken to her colleagues in the FCDO? Are they working on a common strategy to improve our relationship with our closest ally?
Yes, I want to dispel the illusion that there is some conspiracy of silence on the part of the UK; there is not. Certainly, from a defence perspective, business continues, as it has to, because of the essential nature of our activity. I was at the EI2 conference in Sweden just a few weeks ago and I spoke to Madame Parly, the French Defence Minister. We have a lot of important matters to engage upon and that is what we are doing.
My Lords, that concludes Oral Questions for today.
Arrangement of Business
My Lords, before we move to the Motion, with the leave of the House I thought it would be helpful if I highlight some of the arrangements currently under way in relation to a new system of pass-reader voting. This afternoon, the Procedure and Privileges Committee agreed to move to a system of voting in the Lobbies and Prince’s Chamber using parliamentary passes from 1 November. The House authorities and digital teams are working hard to ensure that all necessary systems are ready by that point.
The House will be asked by the Senior Deputy Speaker to approve the new procedures for our Divisions using passes and pass readers on 25 October. One key part of getting ready for pass-reader voting is for Members of the House to register their security pass on the new system. If noble Lords do not do so, they will be unable to use the system to vote in Divisions after 1 November—if that is the decision of the House.
Registration is quick and easy: I can confirm that it took very little time this morning; it takes no more than a minute or two. There are staff waiting in the Royal Gallery this afternoon to register, until 5 pm. Members will be able to register in Millbank House Library tomorrow morning, and in the Royal Gallery tomorrow afternoon, and registration will then continue in the Royal Gallery on Thursday morning. So I urge all noble Lords to take a few minutes this week to register their pass.
Business of the House
Motion on Standing Orders
That, for the purposes of Standing Order 38 (Arrangement of the order paper), on Thursday 21 October the balloted topical question for short debate in the name of Lord Tyler be treated as if it were a question for short debate so that it may be taken as lunch break business.
My Lords, on behalf of my noble friend the Leader of the House, I beg to move the Motion standing in her name on the Order Paper.
Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill
Second Reading (and remaining stages)
That the Bill be now read a second time.
My Lords, in the UK there is a wide range of opportunities for people to invest and help make a better future for themselves and their families. The Government’s role is to ensure that the system of regulation is suitably robust, so that individuals are treated fairly and have confidence in the financial system that they entrust with their hard-earned savings. While our regulators are working hard to minimise harm to consumers and pensioners, unfortunately, no system of regulation can completely eradicate the risk that firms fail, or that some bad actors, intent on committing fraud, slip through the net.
This Bill relates to two areas where it is necessary for the Government to step in to ensure a fair outcome for London Capital & Finance investors and victims of pension liberation fraud. This two-measure and two-clause Bill will provide the necessary powers for these two separate groups to receive the compensation they deserve. The first clause relates to a new government scheme to compensate London Capital & Finance bondholders who lost money after the firm entered administration in 2019. The second clause seeks to provide the Secretary of State for Work and Pensions the power to make a loan to the board of the Pension Protection Fund. The purpose of that loan is so the existing fraud compensation fund, which the Pension Protection Fund administers, has the necessary funds to continue to provide compensation to eligible pension schemes.
This Bill, which garnered widespread support in the other place, demonstrates that the Government will take action and step in when necessary. There are some important issues at stake. One, on which I am sure there will be considerable debate this afternoon, is the competence of the regulator. There is also the question of when and how the Government should step in to provide compensation. I would like to touch briefly on each of these issues and to provide some context for each of the measures and how they are intended to operate.
The House will be aware that the Government have committed to establishing a compensation scheme for investors in the failed mini-bond firm, so-called London Capital & Finance, or LCF. LCF was an FCA-authorised firm that sold unregulated non-transferable debt securities, commonly known as mini-bonds, to investors. Some 11,600 bondholders, many of whom had invested a significant portion of their savings, lost around £237 million when LCF went into administration in early 2019.
Following the unprecedented scale of this collapse, the Economic Secretary directed the FCA to launch an independent investigation into the FCA’s regulation and supervision of LCF. Dame Elizabeth Gloster led the investigation, which concluded that the FCA did not effectively supervise and regulate LCF during the relevant period. Dame Elizabeth’s conclusions raise serious questions about the regulator’s approach to supervision and I would like to use my remarks later in this debate to provide some further detail on the plans they have in place to address her recommendations.
LCF’s business model was highly unusual both in its scale and structure. In particular, the firm was authorised by the FCA, despite generating no income from regulated activities. This allowed LCF’s unregulated activity of selling non-transferable debt securities, commonly known as mini-bonds, to benefit from the so-called halo effect of being issued by an authorised firm, helping LCF gain respectability among bondholders, many of whom were elderly.
In response to regulatory failings detailed in Dame Elizabeth’s report, and the range of interconnected factors that led to losses for bondholders, the Government announced that they would establish a compensation scheme. The scheme will be available to all LCF bondholders who have not already received compensation from the Financial Services Compensation Scheme. It will provide 80% of bondholders’ principal investment up to a limit of £68,000, which represents 80% of the compensation they would have received had they been eligible for FSCS protection. Where bondholders have received interest payments from LCF or distributions from the administrators, Smith & Williamson, these will be deducted from the amount of compensation payable.
The Government expect to pay out around £120 million in compensation to around 8,800 bondholders in total, and have committed to ensuring that the scheme has made all payments within six months of the Bill securing Royal Assent. However, it is important to emphasise that the circumstances surrounding LCF are unique and exceptional, and the Government cannot and should not be expected to stand behind every failed investment firm. This would create the wrong incentives for individuals and an unacceptable burden on the taxpayer. Ultimately, investors must choose investments that are suitable for their risk tolerance and invest in high-risk, high-reward schemes only if they are prepared to lose the sum that they invested.
Government stepping in to provide compensation in response to regulatory failure or maladministration is unusual, but not entirely without precedent. Noble Lords will recall that the Government provided compensation to investors in Barlow Clowes, an investment scheme that failed in the 1980s, and in respect of Equitable Life. Like the LCF scheme, compensation was based on a percentage of investors’ losses.
Turning to the specifics of the Bill, the LCF measure is contained in Clause 1 and includes two key elements. First, it provides parliamentary authority for the Treasury to incur expenditure in relation to the scheme. Secondly, it makes a minor technical change which disapplies the FCA’s rule-making processes for the purposes of the LCF compensation scheme. The Treasury intends to use Part 15A of the Financial Services and Markets Act to require the Financial Services Compensation Scheme to administer the scheme on the Treasury’s behalf.
By disapplying FCA rule-making requirements, existing rules pertaining to the FSCS can be applied to the scheme without the need for the FCA to undertake a lengthy public consultation and impact assessment. This reflects the fact that the Government are fully funding the scheme and so there is no need to directly consult with FCA levy payers. It also avoids any unnecessary delays to compensation payments that such consultation would inevitably entail.
As I set out, this is a two-measure Bill, the second clause of which concerns loans to the board of the Pension Protection Fund. Clause 2 will amend the Pensions Act 2004, inserting a new section, which will give the Secretary of State for Work and Pensions the power to lend money to the board of the Pension Protection Fund, which manages the Fraud Compensation Fund. Pension savings are the largest financial asset for many people across the United Kingdom, for which they will save over the course of their working lives to provide for themselves in their retirement. That is why the Fraud Compensation Fund was established: to provide a safety net and pay compensation to occupational pension schemes which have lost out financially due to dishonesty.
When the Pension Protection Fund was set up in 2004, pension liberation fraud did not exist. This fraud involves members being persuaded to transfer their pension savings from legitimate to fraudulent schemes, with promises of high investment returns or access to a lump sum or loan from their pension scheme before the age of 55 without incurring a tax charge. It was not and could not have been envisaged for such schemes to be in scope for the Fraud Compensation Fund when it was established. Therefore, clarity was needed as to whether these schemes were eligible to receive compensation through the fund.
On 6 November 2020, the High Court found these pension liberation schemes to be in scope for compensation through the Fraud Compensation Fund, subject to meeting eligibility criteria. Since then, the Government and the Pension Protection Fund have worked rapidly to ensure that all those who have been victims of pension liberation schemes—an expected 8,806 people—are able to be compensated through the Fraud Compensation Fund.
One victim of this fraud is one victim too many. I reassure your Lordships that the Government are fully committed to working with regulators, the industry and enforcement agencies to protect people from pension scams perpetuated through transfers from one pension scheme to another, and to making it as hard as possible for criminals to carry out their malevolent intentions. It is estimated that the pension liberation fraud claims will exceed £350 million, far greater than the approximately £43 million currently held in the Fraud Compensation Fund. Therefore, there is a need for the Fraud Compensation Fund to have access to additional funding, and this Bill provides exactly that.
This Bill is necessary and important. It will ensure financial protection and fair outcomes for victims of pension liberation fraud. It will also provide some relief and closure for London Capital & Finance bondholders. I commend this Bill to the House and beg to move.
My Lords, I want to address the second part of the Bill, Clause 2, which allows the Secretary of State to
“lend money to the Board”
of the Pension Protection Fund. The background to this is that, in effect, the fund’s remit was extended to cover pension liberation schemes. I am not totally convinced by the argument that these were not known about in 2004be. Be that as it may, it is clear that, like Clause 1, this provision is necessary only because of a lamentable series of failures of Government, of legislation and of regulators.
It is of course right that members of occupational pension schemes should be compensated where they are victims of dishonesty and have a reasonable expectation that they should be protected. But we need to ask: why is this happening, and what can be done about it? This Bill is just a sticking plaster and we need to address what lies beneath. For example, we have to consider what the role of online advertising and spam has been. I have no doubt that there should be specific provisions in the draft online harms Bill, and we will certainly seek to add these when it comes before us. The Bill needs to tackle financial crime and advertising.
We have the stark warning from the House of Commons—both the Treasury Committee and the Work and Pensions Committee—that there is a risk of large financial losses to the public. This is all in the future, not something that has happened and will not happen again. The problem we face is that financial crime is ever evolving. We were told that pension scams were not recognised as a threat back in 2004. Of course, the arrangement goes back to 1995, following the Maxwell scandal. The reason pension funds are sitting ducks for this sort of fraud is that, in Willie Sutton’s apocryphal phrase, “That’s where the money is”. He was supposed to be talking about robbing banks. Here, we are talking about pension funds. Regrettably, in my view, the front door has been left open following the move to so-called pension freedoms. As well as claiming credit for the additional liberties introduced, responsibility has to be taken for the unintended consequences, which are indeed dire.
Can the Minister tell us what the Government are doing to get ahead of the game—to take a lead and not just react to the latest scandal in this area? We also need to ask: what more can pension funds themselves do to protect members? I recognise the difficulties, but it is the funds with members who are not subject to fraud which will have to meet the cost of this measure. There is every incentive for the industry itself to take a lead, so what steps will the Government and the Minister be taking to encourage the development of this work?
Finally, it is worth noting the amount of money involved in dealing with pension fraud: up to £350 million in compensation, we are told. That is no mean sum, particularly when set against the existing scale of the fund when it held only £26 million. The £350 million figure was estimated a year ago, at the time of the trial. Can the Minister provide an updated estimate of what the ongoing growth in the figure will be?
My Lords, my remarks relate to Clause 1. I preface them by saying that I have benefited from briefings by certain firms of city stockbrokers. This is obviously a regrettable but necessary Bill, which, of course, one supports. At times like this, one casts around looking for people to blame for getting us into this situation. It could be the avarice of the promoters, the weakness of the regulators or the cupidity of the private investors. It is on the last that I wish to focus my remarks, because it would be a great mistake if we were to conclude from this that private investors cannot be trusted to know where to put their money and that they should be further protected and restricted in the opportunities available to them. To take one example, over the last 12 months, literally billions of pounds have gone into Premium Bonds and National Savings products—sums totally dwarfing what was invested in London Capital & Finance—showing that private and retail investors can and do make very sensible choices.
However, it is not surprising that some private investors end up investing in dodgy minibonds, given that we have removed from them the opportunity to make respectable investments. When I refer to private investors, I am not talking about just comfortable rentiers but perfectly ordinary people, some of them called Sid. What has happened in the last 10 or 20 years to the opportunities available to them for investment in respectable securities? In the case of equities, it is true that they can invest in the secondary market, but the new issues of equity securities which it was possible for them to invest in have almost completely dried up. The IPOs no longer reach the public markets; they are all now private placements because it suits finance directors to cut the private investor out and the regulators are compliant in that: no more Sids.
What then about government bonds or gilts? These used to be available for purchase at the Post Office. If you wanted to invest in a new issue of gilts, you could literally cut a coupon out of a newspaper and send it in, making a non-competitive bid. This hardly happens anymore. Let us take, for example, the Government’s recent green gilt. It was not marketed at private investors at all. Instead, private investors will in due course be offered an opportunity to invest in the “green bond”, but, if you look at it, this is not a bond at all; it is another national savings fixed-term deposit product. The Debt Management Office says, “Why should we reach out to private investors beyond what we do? We get all the money we want from them through the existing national savings products.” But that is the attitude of the bean counter, not the nation builder.
I come finally to corporate bonds—highly rated bonds issued by large companies. The effect of European Union regulation and, particularly, the prospectus directive, which is still in force, is that a bond with a denomination of less than €100,000 requires much more elaborate regulation. When I worked in bonds 30 or 40 years ago, the private investor was the backbone of the market. The denomination of most bonds was closer to a thousand dollars or pounds than 100,000, so they were available—you could invest in them. Now, you need €100,000 just to buy one, so, of course, private investors are effectively cut out of that market, and there are other reasons why these securities are no longer available.
This is not just about where people put their money. In my view, it is about the democratisation of financial markets, or rather about their de-democratisation over the past 10 to 15 years. It is also to some extent about levelling up, and it should be on the Government’s agenda that ordinary people have access to reputable financial investment in the way that large institutional investors do, and they no longer have it. It is also about winning and maintaining popular support for the financial services markets, which are important to us and our economy. They are more fragile if they are totally disconnected from ordinary investors. This is about giving investors an opportunity to avoid having to invest in alternative, dodgy mini-bonds that in some cases need to be rescued at the expense of the Treasury.
This is a big subject and I do not expect a comprehensive answer from my noble friend this afternoon, but I hope that he will be willing to meet me and one or two City experts, and will possibly even rope in the Economic Secretary to the Treasury, because this is too important a subject for changes to be made through a whittling of regulation and other administrative changes, as we have seen over the past 15 years, without occasionally, as today perhaps, stopping to take stock of the cumulative effects.
My Lords, I rise to make two fairly brief points in this short debate with a limited number of participants, which is disappointing given the importance of the issues behind the Bill. I go back to a much larger Bill that had a little more participation, the then Financial Services Bill, and to the Second Reading speech of the noble Lord, Lord Agnew of Oulton, who said:
“we remain committed to ensuring that the UK maintains the highest regulatory standards and remains an open and dynamic global financial centre. This is even more important now that we have left the European Union … the UK must assume full responsibility for its financial services regulation ... this will be underpinned by an unwavering commitment to high-quality, agile and responsive regulation, with a focus on safe and stable markets”.—[Official Report, 28/1/21; col. 1810.]
Does the Minister acknowledge that the need for this Bill points out that our regulatory standards are not the highest they could be, that in fact they are disastrously poor, and that this is a threat to the security of us all? Further, will he acknowledge that words such as “competitive”, “dynamic”, “agile” and “responsive” are not compatible with the desire expressed for a safe and stable financial market?
As we heard very often from the Government during the passage of the Financial Services Bill, the financial sector is regarded as a source of great profits, but we see the cost of those profits in not just the financial suffering of the people being compensated under this Bill but in the human impact. We are talking about people who have seen large chunks of their pensions savings and their entire future life disappear, with years of uncertainty ahead of them. We think about the mental and physical health impact that has on people and the threat that the financial sector is presenting.
I will move very briefly to the specifics of the Bill, and say that I look forward to the speech of the noble Lord, Lord Sikka, who I have no doubt will address regulatory failure in much greater detail. A couple of questions need to be asked. The Government have acknowledged that the LCF investors were innocent, duped and failed by the regulator, yet there is a cap on compensation of £68,000. This is a government failure; should we not be saying, as we have heard in other debates in your Lordships’ House, as with the building safety scandal, that government failure should be met by full government compensation, not people forced to lose out through no fault of their own? What about investors in Blackmore Bond, in Basset & Gold, in secured energy bonds and, indeed, in Connaught, where it was acknowledged that regulatory supervision was “not appropriate or effective”? The Government have said that this particular scheme—this Bill—has come about as a result of unique and exceptional circumstances, but does the Minister acknowledge that there is nothing unique or exceptional about this: this is business as usual in our financial sector far too often?
I turn, very briefly, to the pension liberation fraud. We have seen pensions treated as a market. It is clearly not a safe or stable market, as the noble Lord, Lord Agnew, was saying in debates on the Financial Services Bill. Should it really be a market at all?
My Lords, it is a pleasure to follow the noble Baroness, Lady Bennett of Manor Castle. The London Capital & Finance scandal tells the familiar story of privatising profits, socialising losses, frauds, fiddles, mis-selling, negligent regulators and ineffective auditors, while innocent people have to pick up the tab. The much-maligned state has to come and somehow clear up the mess made by the City of London once again. I welcome the compensation for the London Capital & Finance investors, but I have a number of questions for the Minister.
There are mini-bond scandals, as the noble Baroness, Lady Bennett, said, at Blackmore Bond, Basset & Gold, the Mexican food chain Chilango and many others, but no compensation has been offered, even though the FCA failed to regulate them properly. The collapse of LCF was investigated by Dame Elizabeth Gloster, but why is there no independent investigation of other mini-bond scandals? The other scandals may be smaller, but that does not mean that the pain is any less for people who have been defrauded, cheated or misled. The Government claim to have looked at 30 mini-bond firms that have failed over the last six to seven years, but have failed to elaborate whether there was any mis-selling or fraud and have certainly offered no compensation to other investors. When will the others be compensated? If the FCA’s negligence is a defining factor, as the Minister indicated, then many others also need to be compensated. For example, Neil Woodford’s Equity Income Fund collapse in the summer of 2019 left a lot of investors out of pocket. The FCA was negligent, but there has been no compensation. The independent report on the collapse of Connaught stated that the FCA supervision was “not appropriate or effective”. It could have done more to protect consumers, the report said. The investors lost over £100 million but have so far recovered only £18.5 million through litigation. Why was there no compensation for them? Again, the FCA failed.
The FCA and its predecessor bodies also failed to properly regulate RBS and HBOS, and those frauds are part of a long-running saga of pass the parcel—nobody wants to deal with it and, again, no compensation was offered. Surely, in the interests of equity and consistency, all those negatively affected by the FCA should be offered compensation. The Minister referred to the earlier precedents of Equitable Life and Barlow Clowes. In both cases, the regulators were negligent, and that is common to all the cases to which I have referred. So once again I ask, why is the LCF, which was founded by a former Conservative donor, being privileged but the others are not?
In spite of the compensation scheme, many LCF investors face huge losses because the compensation is capped at £68,000. This is not equitable. The burden of the cap is uneven and those who have less wealth stand to lose a greater proportion of it. Women are also hit particularly hard because they generally tend to have lower wealth. Some people have also invested more than the benchmark of £85,000 and they stand to lose an even bigger amount. They may well be relying on these savings for their retirement income. Again, can the Minister explain why investors are not being fully compensated? Does justice not really demand that?
Mini-bonds are just the latest instalment of the fraud and mis-selling that has been rife in the City. The FCA is always playing catch-up. After a long list of mini-bond scandals, in January 2020 it introduced a temporary ban on the sale of mini-bonds, which then became permanent in June 2020. The FCA rationale was that
“speculative mini-bonds were being promoted to retail investors who neither understood the risks involved, nor could afford the potential financial losses.”
That occurred to the FCA in only 2020—where on earth had it been while mini-bonds were openly being marketed and sold? Why the delay in recognising the danger? Even now, the FCA does not road-test any of the financial products to see under which circumstances they wreak havoc and what damage they do. The alarm bells should have been ringing long before. For example, as early as October 2015 investors on the MoneySavingExpert site were saying that LCF’s investment “sounds dodgy”. People were being warned as early as that but the FCA took no notice of those warning signs.
In April 2021, the Government issued a consultation paper on the possibility of bringing the issuance of non-transferable debt securities—that is, mini-bonds—within the scope of financial services regulation. That consultation ended on 21 July 2021. Can the Minister update us on the current position?
In the middle of 2020, the outstanding amount in the UK invested in so-called speculative illiquid securities, which includes mini-bonds, was £1.4 billion. More than 63,500 bondholders may well be holding mini-bonds so the scandal could be much bigger than the amounts currently being assigned to LCF. Can the Minister please enlighten us as to what the ultimate cost of the mini-bond scandal will be? What retribution may be levied on the FCA for its continuing failures? The LCF compensation is being paid and indeed the word “fraud” was used earlier but when was there actually a fraud conviction in connection with LCF? A number of individuals have been arrested and released but I think nobody has been convicted so far. Can the Minister update us on the progress being made by the Serious Fraud Office on this?
Regarding compensation, paragraph 35 of the Explanatory Notes says:
“The Bill confers a new power on the Secretary of State, specifically to provide a loan to the Board of the PPF … expenditure in relation to this Bill will be repaid by the income received from the FCF levy on eligible occupational pension schemes.”
In other words, those who have behaved and are honourable will be hit by the fraudulent activities of some businesses in the City.
Eventually, a loan of some £200 million to £250 million may be given, but how will it be repaid? I looked at the Pension Protection Fund’s accounts. The FCF levy for the year to 31 March 2019 was £4.8 million and for the year to 2020 it was £6.9 million. We are talking about repaying loans of up to £250 million. Will the levy double or triple? How many years will it be before these loans can be repaid? What interest rates will be charged by the Treasury or will these be interest-free loans? I look forward to some clarification from the Minister.
The FCA has been negligent, but what is the penalty? The chief executive who presided over the FCA’s negligence has subsequently been promoted and become the Governor of the Bank of England. There is no retribution against the executives who collected vast salaries and bonuses. No action has been taken against the lawyers who advised the company on particular matters. LCF collapsed some time ago. Have any of its directors been disqualified so far? What is the Insolvency Service up to? Again, I seek an update from the Minister.
I would like to raise some questions about auditors. I sought to table a probing amendment to explore this, but the Table Office told me that that cannot be done, because this is a money Bill. That was a lesson for a newcomer such as me who is learning about the various protocols and procedures of this House, so I hope the Minister will not mind if I provide some details on the issue I have in mind.
LCF was audited by three separate accounting firms. The accounts for the year to April 2015 were audited by a small company called Oliver Clive + Co Ltd. At that point, LCF had a turnover of only £14,072, profit of only £782 and share capital of just £1,000. That is hardly enough for a company entering financial services, but that is how it was doing.
The financial statements for the year to April 2016 show a turnover of £948,201, profits of £166,916 and share capital of £50,000. The company had net assets of only £25,592. That meant that the business had little capacity to absorb any financial shocks, which you will certainly experience if you dabble in the financial markets. These accounts were audited by PricewaterhouseCoopers, which raised absolutely no concerns about the business model or the company’s legal status. These accounts probably persuaded the FCA to give authorisation to London Capital & Finance.
The 2017 accounts were audited by Ernst & Young—the auditors seemed to change every year—which raised no concerns about the business model of the company, its legal status or its ability to recover loans of £48 million or redeem bonds of £44.5 million. The equity, or share capital, of £50,000 provided no buffer against any losses. LCF was extremely highly leveraged, with a leverage ratio of 160:1. I remind noble Lords that when Lehman Brothers collapsed, it had a leverage of 30:1. Bear Stearns had a ratio of 33:1.
This was a business with a leverage of 160:1, yet the auditors said it was a going concern and raised no red flags. The FCA did not ask any questions either. What the hell was it doing? Dame Gloster told us that the FCA had no accounting expertise. You do not need accounting expertise to realise that a leverage ratio of 160:1 will lead to disaster. However, the FCA asked absolutely no questions.
LCF had a low equity base, high leverage and low cash; that was basically its business model. It relied on the inflow of new money to redeem loans from investors, a bit like a Ponzi scheme. The LCF directors’ report claimed that
“the structure, interest profile and maturity of the company’s loan portfolio is expected to provide adequate liquidity to meet the company’s commitments to borrowers as well as providing a high degree of certainty that the company will generate revenues that will exceed the company’s expenditure base”.
The auditors showed absolutely no scepticism and simply gave it a clean bill of health.
As the Minister may recall, and if my understanding is correct, businesses authorised by the FCA must engage in a tripartite meeting between the auditor, the management and the regulator. What on earth was discussed at those meetings if high leverage was not?
The audits are currently under investigation by the Financial Reporting Council. It is extremely likely that the auditors will be fined. Noble Lords may wonder where those fines go. For the audit failure investigations before 2016, the fines went to the professional body that authorised the incompetent auditor. It is a bit like a mugger being found guilty and the judgment being that they should make the cheque payable to the muggers’ association. That is what happened.
Since that was exposed by some of us, it all changed in 2016. Now, the fines go to the Treasury. Why should the Treasury benefit from the collapse of London Capital & Finance? Will the Minister give an undertaking that, as and when the fines are levied, they will be given to investors—that they will go in the pot out of which investors will be compensated and not be kept by the Treasury?
I have one other point. The London Capital & Finance administrators are in a feeding frenzy. They have already charged fees of more than £25 million, and those fees are expected to double. Can the Minister tell us what the Government are doing to curb the rapacious appetite of insolvency practitioners and other advisers, because they are removing money from investors who have already suffered?
My Lords, as the noble Lord, Lord Sikka, found out the hard way, this is a money Bill. That means that we cannot amend it, but it raises a series of questions, especially about the regulator’s responsibilities. I intend to focus my time on those issues.
First, as I have done before, I congratulate Dame Elizabeth Gloster on her report on LCF and the regulator, the FCA. It pulled no punches. She and her team did a service not just to the victims of LCF but to all those working to eliminate abusive behaviour from our financial services industry. Not only should her recommendations be enforced—I await a detailed update from the Minister on that process; he promised it so I assume that it will come in his summation—but, frankly, they have pushed to the length of her remit.
They recommend that LCF and the FCA are not adequate to deal with the situation that has been exposed not just by this scandal but by the many other scandals about which other noble Lords have spoken today. This needs to be a launch pad for deeper change than what Dame Elizabeth was, within her remit, able to examine. I regret that, in what was actually a very useful report, the Commons Treasury Committee did not in the end require the Government to tackle many of the fundamentals.
I will focus on only two of the fundamentals, or we will be here all day. The first absolutely fundamental issue that I want to pursue is the failure of the FCA to act on information provided to it early in the day, when much of the abuse could have been halted in its tracks. Dame Elizabeth notes in detail the anonymous letter that the FCA received and ignored at the time of the first VOP application. That letter
“raised allegations of fraud and other irregularities in respect of LCF”—
I am quoting from the Gloster report.
Dame Elizabeth’s report also detailed further calls to the contact centre at the FCA—that is the main route for passing on information on misbehaviour—in July of 2016 and of 2017. All those calls and contacts were ignored. Action was taken only when, in October 2018, the intelligence team in the FCA, which appears to be completely divorced from the various contact mechanisms through which individuals report concerns to the FCA, “stumbled across”—that is a quote from the intelligence team—a report on another firm that happened to mention LCF. If it had not been in that report, even at that late date the LCF fraud problem would not have been identified.
As your Lordships may know, I am quite involved with the issue of whistleblowing. This pattern of ignoring information is not an exception; it is the norm at the FCA. I fear that even better training, which is one of the primary recommendations, will do little to help. The FCA treats information it receives from individuals slightly differently if it believes that they are whistleblowers under the definition of PIDA—in other words, if they are employees making a protected disclosure—or from other sources, but that difference is only to the extent of taking care to protect the identity of a whistleblower; otherwise, the information follows an almost identical parallel route.
In both cases, the contacts are handled by staff trained, in effect, to manage a complaints line, where the goal is to pacify the caller, who is typically regarded—I have had many discussions with the relevant people at the FCA—as a troubled individual with emotional and mental health problems. They are very kind to those people, but none of the staff has the financial expertise to recognise when they are tripping across a serious financial issue and piece of misbehaviour. Frankly, a few weeks’ training will not change that.
If I were to bring before this House the equivalent US regulator, your Lordships would find that information from contacts is triaged by expert and senior financial investigators. I am told that a minimum of five years’ investigative experience is required to take up that role, because in the US such information is treasured as vital to keep clean an industry in which the abuse of customers is a constant temptation. To get that same approach in the UK would mean turning the culture in our regulators on its head and changing the staffing profile. Frankly, it would require a whole new way of defining and handling whistleblowers, regarding them as a much broader source of information. As your Lordships know, actual whistleblowers under the PIDA definition not only find that their information is often ignored but typically are left to career-destroying retaliation by powerful employers.
I have a Private Member’s Bill before the House to create an office of the whistleblower, which could lead to many of the needed changes, but it needs the Government to make the decision that they need to step in and change that whole culture and the structure, and to put in place an appropriate framework to make sure that we look at those who pass on information and those who blow the whistle as key players in keeping clean a system such as financial services, which has so much power and money. It is, as they say in the States, the civil army that enables the regulator to keep the industry clean.
My second fundamental issue is the regulatory perimeter. The LCF case illuminates how few financial transactions engaged in by small businesses, and often by ordinary people, are actually regulated activities. The Minister said that nothing LCF did was actually a regulated activity. Indeed, this case demonstrates how a company that acquires an authorisation, and therefore is presumed by the public, businesses and ordinary people to be regulated, uses that FCA imprimatur as a false cover for the mis-selling of services.
To illustrate how limited the regulatory perimeter was in the LCF case, if you apply that perimeter, the Financial Services Compensation Scheme covered only £57.6 million of the £237 million in losses that arose from the collapse of LCF.
In recent years we have endured one scandal after another that has fallen outside the regulatory perimeter, including asset stripping by the global restructuring group of RBS, the mis-selling of interest rate caps to SMEs—I could go on for the next half hour. All of these have left victims, because the FCA took the position that it could not act to stop abuse because it was beyond the perimeter. In the end, in these high-profile events the FCA typically gets forced by public pressure and Parliament to do something and some compensation occurs, but that is not a satisfactory system.
The FCA also constantly falls back on the new senior management regime, which it cites as a strength. If ever a scheme proved to be a busted flush, it is the senior management regime. As others have pointed out, it has not been effective; it has not even been used, as far as I can tell, in the LCF case. It has been used with such a light touch—so mildly and with such deference—that frankly, it no longer has any credibility within the financial services industry. No one fears it and no one respects it. We really need to move to a global standard whereby one regulates organisations, not just activities. Without that, the UK will continue to be seen as a natural home for financial rogues who can exploit that perimeter.
I will finish by raising a couple of quick questions about the Bill itself. I join others in saying to the Minister, why does he believe that, in a case where the regulator was so much at fault—Dame Elizabeth Gloster’s report does not say, “On the balance of this or on the balance of that”; it is totally damning—people should receive only 80% compensation capped at £68,000? The investors did not do wrong; indeed, they were not even greedy. They were not being offered extraordinary and exceptional returns; they all looked quite moderate. That was part of the inherent effectiveness of the mis-selling.
If I have read the Bill and the explanatory notes correctly—the Minister will correct me if I am wrong—members of defined benefit pension plans who invested in LCF will be compensated pretty much in full through the pension protection fund. However, the cost of that compensation will be picked up not by the Government but by levies, as the noble Lord, Lord Sikka, said, on the whole body of defined benefit pensioners. Why should the entire pension system be picking up the cost of maladministration by the regulator? I am completely confused.
I am even more confused when I look at pensioners who are in defined contribution arrangements who invested in LCF. They are not going to get all their money back; their compensation will be capped at the 80% limit and the £68,000 maximum. So, depending on whether you in a defined benefit scheme or defined contribution scheme, the outcome is completely different. People who had ISAs will get their compensation, but how can they reinvest it in ISAs when there is an annual ISA limit? These were ISAs they committed to five or more years previously. How on earth is that issue going to be handled? There may be a solution, but I could not work it out, and I apologise if it is my failure to read the detail sufficiently.
Lastly, why are LCF’s victims unable to challenge this Government’s compensation scheme through a full public consultation by the FCA? The Minister said that public consultations take time, but if people are going to get back only 80%, capped at £68,000, they may well have a case that they want to put to the FCA. I do not understand why people have been put in that position. Why do we have no impact assessment? These are always missing at critical points, and they are again with this Bill.
I have some sympathy for our financial regulators, which, frankly, are under resourced and understaffed, but I am alarmed that the Government seem intent on leaving essentially untouched a flawed system, rather than taking on the challenge of fundamental change to create a regulator that the rogues in the industry will genuinely fear. As many have said, LCF is not a one-off. Every time we turn around, it seems, we have a one-off exception. We need the Minister and the Government to take heed and to act.
My Lords, with just two substantive clauses this legislation is uncharacteristically straightforward by Treasury standards. It is also uncontentious in what it seeks to achieve. However, as we have heard, the circumstances surrounding the Bill raise important questions such as those asked by my noble friends Lord Davies of Brixton and Lord Sikka. I particularly thank the noble Baroness, Lady Kramer, for her contribution and for setting out how the senior management regime, in respect of which so much was promised, has failed succeed.
I will not provide another account of the events leading up to the drafting of Clause 1, but it is right that bondholders be compensated for the numerous regulatory failings in respect of London Capital & Finance. We all want to see this compensation paid out, and the sooner Royal Assent is granted, the quicker that process can get under way. I am glad that the Parliamentary Under-Secretary of State at the Department for Work and Pensions confirmed in the Commons that the Government intend to complete payments within six months of the Bill being passed. Is the Minister confident that the preparatory work has been completed to the requisite standard to allow this to happen? Are any claims likely to be settled before Christmas?
The behaviour of LCF, which, among other things, ran multiple promotions wrongly implying that its minibond products were fully regulated, was wrong. There is no doubt about it and we must not forget it. As colleagues have noted, the Financial Conduct Authority’s response, whether to early warnings or later in the process, was unacceptable, as was recognised in Dame Elizabeth Gloster’s review. The compensation burden now faced by taxpayers is arguably higher than it needed to be. Both the Government and parliamentarians should, of course, hold the FCA to account and challenge it to do better.
A variety of concerns, some specific and others more general, have rightly been raised during today’s debate, building on others voiced during the Bill’s Commons stages. For once we have little doubt that the Government agree with our discomfort. The Minister, Guy Opperman, did not mince his words when, at the beginning of the Second Reading debate in the other place, he urged the FCA to
“take a good long, hard look at itself”.—[Official Report, Commons 8/6/21; col. 905.]
The body has accepted the findings of Dame Elizabeth’s report in full and is under new leadership.
Concerns about the FCA’s willingness to hold bad actors to account are not new, nor will they go away overnight. However, during lengthy discussions on parliamentary scrutiny of the regulator during the passage of the Financial Services Bill, all sides agreed that it was for those independent bodies to determine how they ran their affairs. None of us should be happy about the events of the past, but we must allow the FCA to implement its reform programme and demonstrate an ability to do better in the future. It might be easier for concerned colleagues to trust the FCA if the Minister could confirm that, in the words of Mr Opperman, there has been “suitable input from Government”. Has the Treasury, as part of this legislative process, reiterated its views on the matter to the FCA? Does the Minister believe that the message has been heard loud and clear?
As the Minister outlined at the start of the debate, Clause 2 amends the Pensions Act 2004 and grants the Secretary of State a new power to lend money to the board of the Pension Protection Fund. It is a response to the November 2020 ruling of the High Court, which determined that claims arising from so-called pension liberation fraud fall within the remit of the Fraud Compensation Fund. We welcome the speed at which the Government are legislating on this matter, although there are questions about how the levy on pension schemes will function and what Ministers are doing to crack down on frauds and scams. My colleague Pat McFadden MP asked a series of questions that did not receive satisfactory responses. I will ask the Minister some of those questions and, if he is unable to answer them today, I hope he will commit to writing.
The levy on pension schemes, which funds compensation arising from such cases, is a flat rate. This means that schemes with a large number of members but where individual pension pots are relatively modest could end up paying a significant proportion of the overall sum. Why have the Government not formulated a more proportionate means of collecting the funds? Is that one of the trade-offs of legislating on this matter as quickly as we are?
Pat McFadden also asked whether Ministers believed that there was a causal link between the greater pension freedoms introduced in recent years and the increased incidence of scams and financial fraud. Does the Treasury believe that there is such a link and, if so, what steps are being taken to crack down on such behaviour? In so far as some scams are carried out online, will the Treasury commit to work with DCMS to ensure that the upcoming online safety Bill contains relevant safeguards?
It is unfortunate that so many people have been caught up in these cases. This Bill, however, provides a means of closing the door on some unsavoury events within the financial sector. Once compensation has been delivered, in the coming months, the key objective will be to ensure that the risk of such incidents occurring again is significantly reduced. I hope that the Minister’s response will reassure the House in this regard.
My Lords, I thank all those who have contributed to this afternoon’s short but important debate, and I will address as many of the issues raised as possible. A considerable number of questions were put, not least by the noble Lord, Lord Sikka. I doubt that all will be answered, but I promise that I will do my best and will write to him and others who have participated as necessary. I particularly appreciate, however, the depth of his speech.
At the core of this Bill lies the need to ensure adequate protection for ordinary people who are saving and investing for their future: individuals who, in seeking a better return for their nest egg, have suffered a financial loss which in some cases amounts to almost all their savings. As was mentioned earlier, these are not in general wealthy individuals: the average loss, for example, for a London Capital & Finance bondholder is between £15,000 and £20,000. The impacts serve to highlight the need for a regulatory system that includes the proper protections for consumers, as has been made clear in this afternoon’s debate.
I start with the issues about the failures and regulation of the Financial Conduct Authority raised by many noble Lords, including my noble friend Lord Moylan, the noble Lord, Lord Davies, and the noble Baronesses, Lady Bennett and Lady Kramer. Quite understandably there is concern over the egregious failures in relation to LCF that have been identified and described in great detail in Dame Elizabeth Gloster’s comprehensive report. I echo the favourable comments made by the noble Baroness, Lady Kramer, at the beginning of her speech, about the thoroughness of the report—that much, I think, we can agree on. In particular, the FCA failed to properly enforce the financial promotions regime, which seeks to ensure, among other things, that communications with customers are clear, fair and not misleading—a key theme emerging from this debate. The report also raised issues about the FCA’s ability to join the dots between different pieces of supervisory intelligence to build an accurate and comprehensive picture of what was happening at LCF. In what follows I will give what I hope will be some reassurance, particularly to the noble Lord, Lord Sikka.
The FCA has now put in place a comprehensive plan to address all Dame Elizabeth’s recommendations, including through its transformation programme. I will give a bit of detail about this. It includes strengthening the senior leadership team, recruiting more staff, providing better training, and, crucially, introducing new systems to build better intelligence on firms. The FCA’s process for authorising firms has also been strengthened considerably and, following the improvements, the percentage of applications that are withdrawn has doubled. This reflects the FCA’s desire to ensure that firms start with high standards and maintain them, with the aim of reducing the time, cost and burden of dealing with firms that fail to meet its standards.
Furthermore, the FCA has committed to reporting every six months on the progress of its transformation programme. In response to the point raised by the noble Lord, Lord Tunnicliffe, I say that my colleague in the other place the Economic Secretary continues his close dialogue with the chief executive, so that the Government are fully apprised of the progress and can hold the regulator properly to account.
I would like to touch on an interesting debate on competitiveness initiated by the noble Baroness, Lady Bennett, but there is not much time to expand on it. I understand her views but I do not agree with them. There is a balance to be struck between consumer protection and competitiveness. The UK has a world-leading financial services sector, employing more than a million people nationwide. These jobs are spread across all regions of the country, with two-thirds of those working outside London. The sector also supports British businesses to expand, manage cash flow, invest in themselves and ultimately create more jobs. In 2019 alone, the UK exported £60-billion worth of financial and insurance services, with a trade surplus of £41 billion.
There has been a great deal of debate about the need to improve the competitive standing of our financial services sector. However, episodes such as the collapse of LCF serve to illustrate that our world-leading sector can succeed only if it is supported by a regulator that consumers and businesses can trust, underlying the importance of the reforms already under way at the FCA. I hope this provides a more expansive answer to the noble Baroness, Lady Bennett.
My noble friend Lord Moylan also raises some important points about regulation and about incentives in the retail investment market. I am of course happy to meet to discuss these matters further, and I will pass on this request for a meeting to my honourable friend the Economic Secretary. I would like to say a bit more to my noble friend, because more than a decade of rock-bottom interest rates has led some investors to seek alternative investments to generate returns. The high interest rates on offer from LCF should have prompted questions from potential bondholders about the risks. While some may have understood those risks and invested anyway, it appears that LCF’s disclosure materials and marketing strategy—back to communication —led others to believe that they were investing in a product far safer than it was.
In September, the FCA published the latest on its strategy for dealing with the problems and harms in the consumer investments market. The FCA’s goal is to see more people investing in mainstream investment products, and it has committed to explore regulatory changes to enable firms to provide more sales and support services to mass-market consumers investing in straightforward products, such as stocks and shares ISA wrappers.
The FCA has set up a dedicated team to help firms to develop mass-market automated advice models—or so-called robo advice—in its continued efforts to ensure that consumers can access high-quality, affordable and suitable financial advice, as well as free-to-access financial guidance, when they need it. The FCA is also taking action to address issues relating to inappropriate high-risk investments such as those mentioned by my noble friend Lord Moylan. For example, it is using data and technology to spot harms faster, continuing its campaign to help consumers to make better-informed investment decisions, and removing out-of-date permissions to reduce the risk of firms misleading consumers about the level of protection offered or giving credibility to unregulated activities.
We must also ensure that regulation targets the correct activities. On the specific issue of mini-bonds, the FCA introduced a ban on the sale of the most speculative and opaque instruments to retail investors in January 2020. The Treasury is also considering proposals to introduce further regulation of so-called non-transferable debt securities, following a consultation earlier this year. I think the noble Lord, Lord Sikka, asked for an update on the consultation. As he may know, the consultation closed on 21 July. The Treasury is considering responses and should be in a position to decide how to proceed in the autumn—later on in the autumn, it is fair to say.
I turn to the compensation matters for LCF. A number of noble Lords, including the noble Lord, Lord Sikka, and the noble Baronesses, Lady Kramer and Lady Bennett, asked: why LCF and not other firms? LCF is not the only firm to have failed and, within any healthy regulatory environment, it is inevitable that firms fail from time to time. However, this implies no complacency whatever. I have made it clear already, I hope, that we must never drop our guard on regulation but it is an important point of principle that the Government do not step in to pay compensation in respect of failed financial services firms that fall outside the Financial Services Compensation Scheme. As I have explained, this would create a moral hazard for investors and potentially lead to individuals choosing unsuitable investments, believing the Government will step in if things go wrong.
Inevitably, there will be some individuals seeking compensation in relation to other failed companies and investments. But it is important to emphasise that the situation regarding LCF is exceptional. It is the only failed firm issuing this type of opaque instrument that was authorised by the FCA. To answer the points raised, this is why LCF alone is covered by this compensation, and not the other unregulated minibonds. Let me be clear also that the fact that LCF was authorised was central to many of Dame Elizabeth’s findings. In comparison, other minibond firms such as Blackmore Bond and Basset & Gold were not authorised by the FCA. Indeed, the FCA cannot be said to have the same set of responsibilities towards failed minibond issuers that were not authorised, since the issuance of minibonds is not a regulated activity.
I turn further to the London Capital & Finance clause. The first part of the Bill will provide parliamentary authority for the Government to pay compensation to LCF bondholders. I recognise that this has been an exceptionally difficult time for bondholders, and I hope the compensation via the government scheme will offer some relief of the distress and hardship they have suffered and provide some closure on this difficult matter. The noble Baroness, Lady Kramer, asked about consultation. A consultation and impact assessment would slow down this process and create unnecessary delays to compensation payments, hence the reason for bringing into the Bill the matter of not needing that.
The noble Lord, Lord Tunnicliffe, asked about preparations to launch the scheme. The Treasury has been working closely with the Financial Services Compensation Scheme, which will administer the scheme on the Government’s behalf to ensure it can launch and begin making payments swiftly after Royal Assent. This will ensure all payments can be made within six months, and I have confidence that they will succeed in that aim.
I hope this helps with the question raised by the noble Lord, Lord Sikka: the Government expect to pay out around £120 million in compensation to approximately 8,800 bondholders in total. My maths is not too good, but I make that around £12,000 to £13,000 each. As noble Lords are aware, the purpose of the second clause of this Bill is simple: to ensure the Fraud Compensation Fund has the funds necessary to continue to pay compensation to eligible schemes that make a claim.
I turn to future pensions scams and how the Government can be sure that scams of this nature do not happen again. This was a key point raised by the noble Lords, Lord Tunnicliffe and Lord Davies. I would like to give some reassurance to noble Lords about the several measures being taken to look at this. To answer a point raised by the noble Lord, Lord Davies, about how the pensions regulator, TPR, should be strengthened: when scam cases started to emerge over a decade ago, the Pensions Regulator was faced with a very high volume of potential investigations. To target finite resources most effectively, The Pensions Regulator prioritised resources to the highest-risk cases and took steps to liaise with other agencies to disrupt this activity. There were several reasons why the Pensions Regulator may not have taken direct action on a particular case: often, another agency was already acting or best placed to act; or, the scam was no longer actively operating, and the Pensions Regulator had to consider whether the risks to savers would be mitigated by appointing a trustee. That was then; we need to look to now.
Crucially, HMRC has tightened its schemes registration process. It now carries out a detailed risk assessment of a scheme administrator before deciding whether to register the scheme and has power to deregister a scheme where it has reason to believe the pension scheme administrator is not fit and proper. Those who have defrauded through pension liberation fraud have been deregistered and the schemes transferred to independent trustees. Companies and their directors have been referred to the Pensions Regulator for enforcement action. Some cases are also being actively considered by the Pensions Ombudsman through its pensions dishonesty unit. The Pensions Ombudsman currently has 32 pensions dishonesty complaints relating to 19 different schemes. These cases are in varying stages of the pensions dishonesty unit process. The House will know that the Pensions Regulator and the Pensions Ombudsman are independent bodies, and the Government cannot comment otherwise on individual cases.
Furthermore, the Pension Schemes Act 2021 gives the Pensions Regulator stronger powers so that savers can be confident that their pensions are protected, and the regulator can act if pensions are put at risk. DWP is now planning the secondary legislation relating to Section 125 of the Act. These measures make it significantly harder for fraudsters to successfully set up pension liberation schemes with the intention of committing fraud.
We have heard about the loan in contributions today from noble Lords including the noble Lord, Lord Sikka, who raised the point about the expectation of cost recovery. The expectation is that costs will be recovered over a 10 to 15-year period to spread the costs for the schemes through the proposed levy. The reason a loan is required is that the Fraud Compensation Fund is currently funded by a levy on eligible occupational pension schemes which, as I said earlier, will not be sufficient to fund these additional pension liberation claims in the short term. It is a widely accepted principle that the pensions industry should meet the cost of protecting the pensions sector, rather than the taxpayer, which perhaps addresses some points raised by the noble Baroness. However, I understand that the costs must also be tolerable and manageable for the industry. The Government will therefore consult by the end of the autumn about the fraud compensation levy ceiling for all eligible occupational pension schemes.
Focusing on the levy, in particular the flat rate of the compensation levy, which was raised by the noble Lord, Lord Tunnicliffe, it is important to note that it is for the Pension Protection Fund to set the levy within the ceiling set in legislation, not the Government. I am told that for the 2021-22 financial year master trust schemes, to reflect their particular characteristics, are being charged an annual levy rate of 30p per member, with other eligible pension schemes being charged 75p per member.
The noble Lord, Lord Davies, raised some points about the Pension Protection Fund. Briefly, both the PPF and the Fraud Compensation Fund were established by the Pensions Act 2004. Since coming into operation in 2005, the Pension Protection Fund has taken responsibility for more than 1,000 defined benefit pension schemes, comprising more than 260,000 members. It paid out £860 million in benefits in 2019-20, the last year for which statistics are available.
I would also like to address pension freedoms, as raised by a number of noble Lords, including the noble Lords, Lord Davies and Lord Tunnicliffe, and the noble Baroness, Lady Bennett. As the House will know, pension freedoms are different from pension liberation fraud, which involves members being persuaded to transfer their pension savings from legitimate to fraudulent schemes, with promises of high investment returns or access to a loan from the pension scheme before age 55. Pension liberation fraud and pension freedoms are entirely separate issues. Pension freedoms were introduced in 2015, after these pension fraud cases. The purpose of pension freedoms is to give individuals the choice as to how to access their own hard-earned savings, as the Government believe it is right that individuals are trusted to choose how to access their pension income.
In response to the criticisms made of pensions freedoms today, I highlight that Financial Conduct Authority research has found no significant evidence of consumers drawing down their savings too quickly. The extensive retirement outcome review in June 2018 found that those withdrawing defined contribution savings had other forms of retirement income or wealth.
I turn now to points raised about the online safety matters. We heard reference to this from the noble Lords, Lord Tunnicliffe and Lord Davies. I remind noble Lords that this measure is specifically to provide a loan to the Fraud Compensation Fund, to ensure that it can compensate those who have suffered pension fraud. So, online fraud is out of scope, but I understand that the online safety Bill will not tackle fraud facilitated through paid-for advertising—a point raised, I think, by the noble Lord, Lord Davies—such as advertisements on search engines. I am aware that DCMS is considering how online advertising is regulated through its online advertising programme. I have my noble friend Lord Parkinson here, who I am sure will nod his head.
In the brief time available, I will try to answer a few final questions before concluding. One point raised by the noble Lord, Lord Sikka, was on Woodford. There are important differences that distinguish LCF from the Woodford Equity Income Fund, because Woodford operated an authorised fund, which, unlike many bonds, was regulated by the FCA and was within the remit of the Financial Services Compensation Scheme. This means that where individuals have a legitimate claim to compensation—for example, because products have been mis-sold—they are able to make a claim to the FSCS. As the noble Lord will know, the FCA is investigating what went wrong at the Woodford Equity Income Fund and considering what rule changes may be necessary to help prevent such issues arising in the future. It would be improper for me or the Government to intervene or comment before this investigation is complete.
Another point was raised by the noble Lord, Lord Sikka, on the SFO investigation. Very briefly, as he will know, the SFO launched its investigation in March 2019 and he will understand that I am not able to comment on the ongoing investigation, except to say that it is a highly complex case which the SFO is working hard to unravel. I hope that provides some reassurance.
There are some other questions but I want to address the one raised by the noble Baroness, Lady Kramer, on why compensation is set at 80% and the cap at £68,000. I answer that by saying that the government scheme appropriately balances the interests of bondholders and the taxpayer and will ensure that all LCF bondholders receive a fair level of compensation in respect of the financial loss they have suffered. With any investment, there is a risk that sometimes investors will lose money but, to answer the question, to avoid creating any misconception of moral hazard for investors and leading investors down the line that choosing unsuitable investments will lead them to receive compensation in full, a wide range of factors needs to be taken into account. These losses would not ordinarily be compensated for at 100%, and 80% is a level that has been set in terms of the LCF bondholders’ initial investment, taking it up to a maximum of £68,000.
Bearing in mind the time, I will certainly read Hansard and write a letter to answer any questions that I have not managed to address, if I feel that that is the case. I thank all noble Lords who have engaged in this debate and I commend the Bill to the House.
Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.
Telecommunications (Security) Bill
Clause 1: Duty to take security measures
1: Clause 1, page 3, line 22, at end insert—
“(1A) Regulations under subsection (1) may not be made unless a draft has been laid before, and approved by a resolution of, each House of Parliament.”Member’s explanatory statement
This amendment would require Parliamentary approval before regulations regarding the duty to take specified security measures are made.
My Lords, Amendment 1 applies the affirmative procedure to the regulations made under new Section 105B in Clause 1. It requires secondary legislation to be laid in Parliament in draft and to be subject to a debate and a vote in both Houses. Clause 1 allows the Secretary of State to introduce regulations that have wide-ranging consequences for providers, and there is no provision for any independent or specialist formal oversight of these regulations. This continues a worrying trend whereby the Government make key regulations with no meaningful parliamentary scrutiny. New Section 105A introduced by Clause 1 is wide-ranging. In fact, it covers
“anything that compromises the availability, performance or functionality of the network or service”
—I repeat: “anything”.
This means that the Secretary of State has the means to make regulations that have highly onerous provisions, laying down that any provider must take “specified measures” of any kind. This is currently under the negative procedure, which, as we have noted from these Benches on many occasions, gives a near-certain guarantee of their coming into force with a minimum of scrutiny—none, it is safe to say. In Committee, the Minister’s predecessor was adamant that additional scrutiny was not desirable. She said that this was meant for technical people and had to be explained in technical language, which it was not appropriate for Parliament to discuss. However, there is the rub: the Bill covers a huge range of potential issues and, as I said, there is no formal independent or specialist oversight of these regulations, yet the Government said that they were too technical for Parliament to have its say on them. My noble friend Lord Clement-Jones spoke about the Secretary of State having unfettered power and, as usual, he was right.
Since then, the Government have slightly changed their mind, and this is seen in Amendment 3. We welcome Amendment 3 as far as it goes, which, given that it is effectively a negative process, is not very far. It does demonstrate that the Government now believe that your Lordships’ House can review technical issues and that we are capable of this onerous task, which the Minister’s predecessor deemed us incapable of doing. Clause 1 covers virtually anything the Minister decides, and we are in danger of signing a blank cheque. Amendment 1 addresses this issue and gives Parliament particular scrutiny of how these regulations affect the communications networks that are so vital to the UK’s economy and our public life. I beg to move.
My Lords, the amendment just moved by the noble Lord, Lord Fox, is about transparency, accountability and parliamentary scrutiny. It puts Parliament into the driving seat. It deserves the support of the whole House, and I hope we will give it.
My Lords, as we start Report, I welcome the noble Lord, Lord Parkinson, to his new ministerial role. I am sure we all look forward to working with him.
I remind the House that national security must be the first duty of any Government, which is why we welcome the intention behind the Bill. As we have said repeatedly throughout the passage of the Bill, we believe that there are a number of issues with the Bill that need to be addressed, including parliamentary oversight of the new powers, which this group focuses on. As Comms Council UK said, the Bill represents an
“unprecedented shift of power from Parliament to the Minister in relation to how telecoms networks operate”
“the Minister will be able to unilaterally make decisions that impact the technical operation and direction of technology companies, with little or no oversight or accountability.”
With reference to Amendment 1, I shall not repeat the arguments made by the noble Lord, Lord Fox. Suffice it to say that we on these Benches appreciate and wish to stress the importance of parliamentary scrutiny, which we have stressed throughout the passage of the Bill.
I thank the Minister for tabling Amendments 3, 4 and 5. They are very similar to our Front-Bench amendments in Committee and reflect a key recommendation from the Delegated Powers Committee. I thank the former Minister, the noble Baroness, Lady Barran, for her work on these amendments. As noble Lords will remember, the Delegated Powers Committee called the powers in Clause 3 unacceptable and called for the negative procedure for the new telecoms security codes of practice. This important change from the Government ensures adequate parliamentary scrutiny, which is a welcome step forward.
My Lords, I thank the noble Lords, Lord Clement-Jones and Lord Fox, for the amendment standing in their names, and I thank the noble Baroness for welcoming me to the Dispatch Box in my new role.
The question underlying this group is whether the new telecoms security framework will have proper scrutiny. Noble Lords have proposed ways to strengthen that scrutiny throughout the passage of the Bill and your Lordships’ Constitution Committee and Delegated Powers and Regulatory Reform Committee have made their own recommendations, and I thank those committees for their work.
In Committee, the noble Lord, Lord Clement-Jones, invited the Government to make a trade-off, a choice, in his words, between
“a loose definition of ‘security compromise’”
“a very tight way of agreeing the codes of practice.”—[Official Report, 13/7/21; col. GC 487.]
With that in mind, I turn first to Amendments 3, 4 and 5 in my name—although I should stress, as the noble Baroness, Lady Merron, kindly did, that they also represent the work of my predecessor, my noble friend Lady Barran. We both listened to the arguments put forward in Committee and these amendments represent her views as well as mine.
We have carefully considered the concerns raised and, as the noble Lord, Lord Clement-Jones, invited us to do, we have proposed how to make that trade-off. The government amendments we have brought forward today affect Clause 3. It provides the Secretary of State with the power to issue and revise codes of practice. The code of practice is a fundamental building block of the new telecoms security framework as it will contain specific information on how telecoms providers can meet their legal duties under any regulations made by the Secretary of State.
In its report on the Bill, the DPRRC noted the centrality of codes of practice to the new telecoms security framework. The committee drew attention to the statutory effects of codes of practice and their role in Ofcom’s regulatory oversight, and because of those factors, the committee recommended that the negative procedure should be applied to the issuing of codes of practice. The noble Baroness, Lady Merron, tabled amendments in Committee to implement that recommendation. We are happy to do that. Our amendments today require the Government to lay a draft of any code of practice before Parliament for 40 days. Your Lordships’ House and the other place will then have that period of time to scrutinise a code of practice before it is issued.
We think that these changes strike the balance that noble Lords have called for today and in previous stages. I hope these government amendments demonstrate that we have listened and are committed to appropriate parliamentary scrutiny across all aspects of the framework.
Amendment 1, tabled by the noble Lords, Lord Fox and Lord Clement-Jones, would apply the affirmative procedure to regulations made under new Section 105B in Clause 1. It would require the regulations to be laid in Parliament in draft and subject to a debate and vote in both Houses.
I share the noble Lords’ desire, echoed by the noble Lord, Lord Alton of Liverpool, to ensure that Parliament has a full and effective scrutiny role in this Bill, but I fear we disagree on the best way to achieve it. The only powers in the Bill that are subject to the affirmative procedure are delegated, or Henry VIII, powers that enable the amendment of penalty amounts set out in primary legislation. The Bill currently provides for the negative procedure to be used when laying the statutory instrument containing the regulations.
In the context of these new powers, the use of the negative procedure is appropriate for three reasons. First, Parliament will have had to approve the clauses in the Bill that determine the scope of regulations—Clauses 1 and 2—and the regulations will not amend primary legislation. Secondly, evolving technology and threat landscapes mean that the technical detail in regulations will need to be updated in a timely fashion to protect our networks. Thirdly and finally, as I noted in Committee, the negative procedure is the standard procedure for instruments under Section 402 of the Communications Act. The negative procedure delivers the right balance between a nimble parliamentary procedure and putting appropriate and proportionate measures in place effectively and efficiently to secure our networks.
The two noble Lords will also be aware that the changes they propose in their amendment are not ones that the Delegated Powers and Regulatory Reform Committee made. I accept that they are keen to explore avenues for scrutiny of this framework, but that committee made its recommendation for increasing the scrutiny of this regime, and the Government have brought forward our amendments to accept it. For these reasons, we are not able to accept the noble Lords’ Amendment 1. I hope that they will be content with what we have proposed in our amendment, and may be minded to withdraw theirs.
In conclusion, the Government were asked to make a trade-off. Through the passage of this Bill, we have been invited to provide greater opportunities for Parliament to scrutinise this regime. We have listened to those concerns and we have brought forward an answer. We feel that our amendments maintain our flexibility to adapt to an ever-changing technology environment and give your Lordships’ House and the other place a greater say in its operation, so I invite the noble Lord to withdraw the amendment.
My Lords, it was remiss of me not to welcome the Minister formally; I have welcomed him personally, but not formally. Also, it was helpful that he was the Whip during the process thus far, and I should also welcome the new Whip to his seat. I thank the noble Lord, Lord Alton, and the noble Baroness, Lady Merron, for their contributions. The fact that this has been a short debate does not mean to say that it is not an important one. The reason it is short is because we have had the same debate so many times on so many different Bills, with not just this department but others. That is why it is an important issue and why, when the Minister says that we should strike a balance, we agree, but we think the balance is in the wrong place. That is why I am unable to withdraw this amendment and I should like to test the will of the House.
Clause 2: Duty to take measures in response to security compromises
2: Clause 2, page 4, line 30, at end insert—
“(7) In making regulations under this section and any code of practice made under section 105E the Secretary of State must take full account of the advice of the Technical Advisory Board established under section 105ZZ1 and of a Judicial Commissioner appointed under section 227 of the Investigatory Powers Act 2016 concerning the proportionality and appropriateness of any measures therein.”Member’s explanatory statement
This amendment would require the Secretary of State to take into account the advice of the Technical Advisory Board, as established in the amendment in the name of Lord Clement-Jones to insert a new Clause after Clause 14, and a Judicial Commissioner.
My Lords, in moving Amendment 2 I will speak to Amendment 7. I add my welcome to both the Minister and the noble Lord, Lord Sharpe, in their new roles.
The Minister has now accepted in his Amendment 3 that there needs to be greater parliamentary scrutiny of codes of practice. I welcome that; I am just sad that Amendment 1 did not squeak through. However, he has not accepted the need for greater technical scrutiny of these codes. As the Minister’s predecessor, the noble Baroness, Lady Barran, said in Committee,
“the whole purpose of the regulations was to specify in greater detail what the duties of providers would be.”
Likewise, she said:
“The codes of practice will provide technical guidance to assist public telecoms providers in meeting their legal obligations.”—[Official Report, 13/7/21; cols. GC 488-93.]
However, as the industry has pointed out, there are no clear mechanisms for technical feedback or expertise to be fed into the drafting of the regulations and codes of practice.
The Minister dealt with these amendments himself in Committee. On the Clause 2 regulations, he assured us:
“Advice to the Secretary of State could”—
I emphasise “could”—
“also include relevant representations by public telecoms providers … DCMS continues routinely to engage with telecoms providers about this Bill and telecoms security more widely.”
He also said that
“Clause 3 requires that any codes of practice are finalised only after consultation with affected providers.”—[Official Report, 13/7/21; col. GC 499.]
Again, he gave no assurance of exactly with whom and how the consultation will take place, and he did not explain why he thought that a specific technical advisory board set up under this Bill was not appropriate. For that reason I have no hesitation in retabling these amendments for further consideration on Report.
As the noble Baroness, Lady Merron, pointed out in Committee, there is good precedent in the Investigatory Powers Act 2016, which
“established a Technical Advisory Board to advise the Home Secretary on the reasonableness of obligations imposed on communications providers.”—[Official Report, 13/7/21; col. GC 462.]
The judicial commissioners set up under that Act could be deployed under this Bill.
This is an opportunity for the Minister to demonstrate a much firmer and more inclusive approach to technical consultation. I hope that he will accept this amendment. I beg to move.
My Lords, I thank the noble Lord, Lord Clement-Jones, for tabling Amendments 2 and 7 again on Report. I will not take up much time discussing them, not least because the Labour Front Bench tabled similar amendments in Committee better to understand what advice the Secretary of State will receive and where it will come from when making regulations under Clause 2. As the noble Lord said, we must ensure that the Secretary of State receives advice from the best experts, not just those who support the Government.
As the former Minister, the noble Baroness, Lady Barran, focused only on the incompatibility of a similar board set up by the Investigatory Powers Act, can the Minister today simply answer this question: without such a board, where will the Secretary of State receive advice, and from whom?
I thank the noble Lord, Lord Clement-Jones, for his welcome, and both him and the noble Lord, Lord Fox, for retabling these amendments. We share the noble Lords’ ambition in this area. We also want to ensure that the telecoms security framework is informed by world-leading expertise, and that all those affected by the framework have appropriate mechanisms to shape it. The noble Lords’ amendments seek to establish a technical advisory board to advise the Secretary of State on matters of telecoms security. They also state that the Secretary of State should give due consideration to this new board’s advice, and that of a judicial commissioner, before making regulations or codes of practice.
I agree with the noble Lords on the importance of the Secretary of State having access to expert advice in the exercising of these new powers. I hope I can reassure them that she can already call upon sufficient advice through existing structures, and that I can demonstrate why, as we have explained previously, these amendments are not necessary, while giving the greater detail that the noble Lord asked for.
It is worth emphasising the level of expertise that DCMS itself retains, both on the telecoms sector and on security policy. DCMS is the lead Government department for the telecoms sector and has telecoms experts embedded in it. The department has established security and resilience teams with suitably cleared individuals, including people with substantial experience in national security. More widely, the department has established procedures through which it can draw upon further expertise across government and industry. Inside government, for example, the National Cyber Security Centre undertakes regular risk assessments of current and emerging threats, and those assessments are used to inform government policy. Regulations and the code of practice made through this Bill will be informed by the NCSC’s assessments. The Government also have fora in which they discuss emerging threats and new technological developments with the industry. The NCSC’s information exchange is one example. This is a trusted community of security professionals from across the telecoms sector who come together on a quarterly basis to discuss and share information on security issues and concerns.
The noble Lord’s amendment also calls for the new board and the judicial commissioner to be consulted before the establishment of new regulations and codes of practice. We share the noble Lord’s view on the importance of consultation. That is why the Bill is clear that any code of practice must be consulted on before it is introduced. However, we still differ in our opinions on who should be consulted. The consultation requirement in the Bill will enable those directly affected by the code of practice, as well as those with an interest in it, to comment and raise concerns without the need for a technical advisory board to be established. Of course, if your Lordships’ House supports the government amendments today, the code of practice itself will be subject to scrutiny both in your Lordships’ House and in another place. Furthermore, we published an illustrative draft of the regulations in January for the purpose of early engagement with the industry, and the feedback it has provided has been invaluable in our development of the policy. We continue to engage regularly and closely with public telecoms providers and trade bodies, ensuring that any concerns are effectively communicated to us. I remind noble Lords that the Secretary of State can make these regulations and measures in a code of practice only where she actively considers that the measures are appropriate and proportionate under the wording of new subsections 105D(2) and 105D(4).
To conclude, I thank the noble Lords for bringing their amendment back. As I have said, I share their ambition to create a robust, well-informed and evidence-led framework for telecoms security. We believe that we already undertake extensive engagement with the affected groups and bodies. The Bill sets out consultation requirements but even if it did not, the Government have strong relationships with those in the sector and would continue to seek their input. That is where the advice referred to by the noble Baroness, Lady Merron, would come from, as well as from across government, the NCSC and others I have mentioned. For the reasons I have set out, we are not able to accept this amendment and I hope the noble Lord will therefore withdraw it.
My Lords, I thank the Minister for that very helpful reply. I think he has gone as far as he can, without accepting my amendment, to try to give assurance to the industry about the nature of the consultation. I still believe that something more formal is required but I am not going to quibble about the sharing of ambition. I am sure that is right. The question is whether in practice we are going to get the result we need. The proof of the pudding will be in the eating and we will see how the regulations and the codes of practice turn out in the end. In the meantime, I beg leave to withdraw the amendment.
Amendment 2 withdrawn.
Clause 3: Codes of practice about security measures etc
Amendments 3 to 5
3: Clause 3, page 5, leave out lines 13 to 16 and insert—
“(2) Before issuing a code of practice under section 105E the Secretary of State must also lay a draft of the code before Parliament.(2A) If, within the 40-day period, either House of Parliament resolves not to approve the draft of the code, the code may not be issued.(2B) If no such resolution is made within that period, the code may be issued.(2C) If the code is issued, the Secretary of State must publish it.”Member’s explanatory statement
This amendment applies a negative resolution procedure to the power to issue a code of practice under section 105E.
4: Clause 3, page 5, line 18, leave out “(2)” and insert “(2C)”
Member’s explanatory statement
This amendment is consequential on the first Government amendment to Clause 3.
5: Clause 3, page 5, line 21, at end insert—
“(5) In this section, the “40-day period”, in relation to a draft of a code, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the 2 days on which it is laid).(6) For the purposes of calculating the 40-day period, no account is to be taken of any period during which—(a) Parliament is dissolved or prorogued, or(b) both Houses are adjourned for more than 4 days.”Member’s explanatory statement
This amendment inserts a definition of the “40-day period” into Clause 3.
Amendments 3 to 5 agreed.
Clause 13: Appeals against security decisions of OFCOM
6: Clause 13, leave out Clause 13
Member’s explanatory statement
This would remove Clause 13 (Appeals against security decisions of OFCOM) from the bill.
My Lords, a lack of oversight has been a persistent theme through the passage of this Bill. Included within that is judicial oversight and the fact that under Clause 13 any appeal to the Competition Appeal Tribunal cannot take account of the merits of a case against the Secretary of State. The rationale for this, as the Constitution Committee said in its report,
“is unclear and is not justified in the Explanatory Notes.”
It further said:
“The House may wish to ask the Government to justify reducing the powers of the Competition Appeal Tribunal in respect of appeals under clause 13.”
The clause reverses the Competition Appeal Tribunal’s TalkTalk Telecom Group plc and Vodafone Limited v Office of Communications decision, which addresses, inter alia, the standard of review on an appeal to the Competition Appeal Tribunal under Section 192 of the Communications Act.
The Minister’s predecessor, the noble Baroness, Lady Barran, said in Committee in response to the Clause 13 stand part debate:
“It merely changes the standard to which they will be reviewed. Having these cases reviewed on ordinary judicial review principles, rather than taking account of the merits of the case, aims to ensure a smooth regulatory process that focuses on fair decision-making … this should reduce any incentives for providers to litigate solely for the purpose of delaying the regulatory process.”
Note the word “merely”. This is very much for the Government’s convenience. She continued:
“It is particularly important, given that these decisions relate to the security of a provider’s network, that decisions can be addressed swiftly, and providers can get back to the important work of ensuring that their networks are secure.”
This nevertheless tries to give the impression that this is for the benefit of the providers. The noble Baroness then said that:
“Clause 13 applies to appeals only against relevant security decisions … The Government consider this approach to be appropriate to ensure that Ofcom’s regulatory decisions can only be successfully challenged when they are, broadly speaking, unlawful, irrational or procedurally unfair. By reducing providers’ incentives to litigate to delay regulatory action, the provisions in the clause contribute to Ofcom’s effectiveness as a regulator.”—[Official Report, 13/7/21; cols. GC 516-17.]
Surely in these circumstances, particularly on security, the merits of security decisions are particularly important and this is the legislative equivalent of the Government marking their own homework—or perhaps I should say making it much more difficult for it to be marked. I beg to move.
My Lords, I thank the noble Lords, Lord Clement-Jones and Lord Fox, for tabling this amendment and the noble Lord, Lord Clement-Jones, for his remarks. It certainly is key that Ofcom is able to do the job that it has been entrusted to do. On the matter of providers, I would say that their primary duty has to be to ensure that the networks are secure. We should expect no less from them. I will be very interested to hear how the Minister responds to the points that have been made in respect of this amendment.
I thank the noble Lords, Lord Clement-Jones and Lord Fox, for tabling this amendment to Clause 13. I know the noble Lord, Lord Clement-Jones, in particular, has taken a keen interest in this area, not just in this Bill but in previous ones as well. I am grateful for the way that he set out the debate again today.
Clause 13 makes provision to ensure that the Competition Appeal Tribunal applies ordinary judicial review principles to appeals against certain security decisions made by Ofcom. Under such principles, those decisions can be successfully challenged only where they are unlawful, irrational or procedurally unfair. In setting the standard of appeal in this legislation, we must find a balance between giving telecoms providers a way to challenge Ofcom’s decisions should they be unfair and ensuring that the regulatory regime is effective and efficient.
Ofcom, as an experienced telecoms regulator, believes that changing the standard of appeal to judicial review principles for certain security decisions has the potential to make the regulatory process quicker and more efficient. The Government agree. We want to avoid either Ofcom or telecoms providers spending months in court.
It was never the intention of Parliament to set the standard of appeal, as it is now, to
“duly take into account the merits of the case”,
as this was dictated by EU law. In 2017 the Government changed the standard of appeal for reviewing decisions by Ofcom from a full merits approach to ordinary judicial review principles via Section 87 of the Digital Economy Act, as the noble Lord, Lord Clement-Jones, will well remember.
However, as EU law continued to apply, the Competition Appeal Tribunal subsequently decided that it had to apply a modified approach to
“duly take into account the merits of the case”.
In essence, this has prevented the provision in the Digital Economy Act, which had been approved by Parliament, taking effect. That rather unhappy outcome would continue to be the case for certain security decisions under the Bill should this clause not stand.
To be clear, Clause 13 applies the judicial review standard only to decisions such as those relating to the issuing of an assessment notice, which should be routine and quickly handled rather than being continuously delayed. It is not being applied to decisions about penalties such as those under Section 105T. Public telecoms providers will still be able to appeal those decisions as they do now, and the tribunal will
“duly take into account the merits of the case”.
Ultimately, we want public telecoms providers to spend their time addressing the security of the network. We do not want them to attempt indefinitely to delay an Ofcom decision by bringing cases against the regulator that do not stack up. We are not breaking new ground by changing to this standard of appeal. Judicial review principles are the normal standard by which most decisions of government and public bodies are legally reviewed.
Parliament has already decided that the standard of appeal for similar decisions under the Network and Information Systems Regulations 2018 should be ordinary judicial review principles. That is consistent with our policy approach in this Bill. Therefore, the Government feel that Clause 13 should stand part of this Bill as it will contribute to the efficiency of the regime and ensure that regulatory decisions are not unduly delayed. It will also ensure legislative consistency. I hope that reassures the noble Lord and that he will be content to withdraw his objection to this clause.
My Lords, I thank the Minister for his response. I am afraid it does not particularly reassure but there will be many other occasions on which we can raise the nature of judicial review, its continual erosion, the Government’s approach to judicial review and their dislike of being challenged. This is fairly thin territory on which to be debating a very large issue in terms of the future of judicial review. I am sure that my other legal colleagues will be more than able to dispute some of those issues. There are many other fish to fry of even greater importance on this Bill so I will withdraw my amendment.
Amendment 6 withdrawn.
Amendment 7 not moved.
8: After Clause 23, insert the following new Clause—
(1) The Secretary of State must publish an annual report on the impact of progress of the diversification of the telecommunications supply chain on the security of public electronic communication networks and services.(2) The report required by subsection (1) must include an assessment of the effect on the security of those networks and services of—(a) progress in network diversification set against the most recent telecommunications diversification strategy presented to Parliament by the Secretary of State;(b) likely changes in ownership or trading position of existing market players;(c) changes to the diversity of the supply chain for network equipment;(d) new areas of market consolidation and diversification risk including the cloud computing sector;(e) progress made in any aspects of the implementation of the diversification strategy not covered by paragraph (a);(f) the public funding which is available for diversification.(3) The Secretary of State must lay the report before Parliament.(4) A Minister of the Crown must, not later than two months after the report has been laid before Parliament, move a motion in the House of Commons in relation to the report.”Member’s explanatory statement
This new Clause requires the Secretary of State to report on the impact of the Government’s diversification strategy on the security of telecommunication networks and services, and allows for a debate in the House of Commons on the report.
My Lords, Amendment 8 is in my name. I am grateful to the noble Lords, Lord Fox and Lord Alton, for their support. It is, of course, the same as Amendment 24 that we saw in Committee, which requires that network diversification is reported on annually.
As we heard in Committee, there is wide cross-party support for the principle that our networks will not be secure if the supply chain is not diversified. For me, this is at the very heart of the Bill and what it should seek to address. Unfortunately, we still have a Bill that seeks to secure telecoms security yet seems to think it is possible to be silent on diversification. Even though the former Minister said in Committee that
“diversification is designed to enhance security and resilience”,—[Official Report, 15/7/21; col. GC 551.]
the Government have said that this amendment is not appropriate. The importance of the amendment could not be clearer. I remind noble Lords that, once Huawei is removed, the UK will be left with effectively only two service providers. This is a matter of the highest concern. We need and must have a diversified supply chain. That means diversity of supply at different points in the supply chain and that different networks do not all share the same vulnerabilities of a particular supplier. This is absolutely crucial for network resilience. It will also support British companies and grow British jobs.
If the Government fail to amend the Bill on this point by accepting this amendment, they are putting our national security at risk. Therefore, I will listen closely to the reply from the Minister, but I must stress that I am minded to test the opinion of this House on this matter. I beg to move.
My Lords, it is a great pleasure to follow the noble Baroness, Lady Merron. Like other noble Lords, I was remiss in not welcoming the noble Lord, Lord Parkinson of Whitley Bay, to his new role earlier on. I think that is because we have all been so familiar with seeing his face throughout the proceedings on this Bill and many others. It is a great pleasure to see him in his new role.
The Government should be convinced by the arguments that the noble Baroness, Lady Merron, just advanced, simply because of what their own advisers have told them: the lack of diversification constitutes
“an intolerable security and resilience risk.”
There was widespread agreement in Committee and elsewhere about that.
I draw the Minister’s attention to the as-yet undebated report of the International Relations and Defence Committee, on which I have the privilege to serve. The report, titled The UK and China’s Security and Trade Relationship: A Strategic Void, was published on 10 September. It refers specifically to the supply chain vulnerability measures in this Bill, but says that
“such vulnerabilities are widespread in the economy.”
“In order to retain its freedom of action towards China, the Government should conduct scenario planning on supply chain vulnerabilities and identify where action is needed to mitigate the risks.”
This amendment would give the opportunity for such discussion to take place in the House of Commons. We have to think about only the case of Newport Wafer Fab to see its importance. This was a deal of £63 million regarding the UK’s largest producer of silicon chips, which are vital in products from TVs and mobile phones to cars and games consoles. As we learned in Committee, a group of UK companies has now stepped up to the plate and hopes to acquire Newport Wafer Fab. When the Minister replies, I would be most appreciative if he would say what progress has been made on that.
My Lords, it is a pleasure to follow the noble Baroness, Lady Merron, and the noble Lord, Lord Alton, in supporting Amendment 8. The Government have talked a good game on diversification but are guilty of much compartmentalisation. They have put diversification on one side and security on the other. As the noble Baroness and the noble Lord suggested, you cannot separate the two. Without a diverse supply chain, there is no security.
The issue of having only two key suppliers, which the noble Baroness, Lady Merron, referred to, is down to the fact that there has been a market failure in this area. If the Government do not intervene proactively to right that market failure, we will not get out of the situation we are in now. The Bill is the only game in town to do that. This amendment is therefore really important. During debates on the Bill, a number of Peers highlighted the words of the Government’s integrated review of security, defence, development and foreign policy. It was clear that a
“diverse and competitive supply base for telecoms networks”
is vital to a secure future. We think these are wise words from the integrated review. As such, we are pleased to support this amendment and will be happy to vote on it in the event that the noble Baroness, Lady Merron, chooses to test the will of the House.
I thank the noble Baroness and the noble Lords, Lord Alton of Liverpool and Lord Fox, for tabling and signing this amendment relating to telecoms diversification. I hope that, during my remarks, I can convince them and other noble Lords that the Bill is not the right place for this amendment for two reasons: first, diversification extends well beyond the security focus of the Bill; and, secondly, legislating for a reporting requirement would be limiting and inflexible as our diversification work evolves. I will also outline the progress made against the diversification strategy, in both government policy and industry outcomes, to seek to reassure noble Lords that progress is being made in this important area.
The Bill will create one of the toughest telecoms security regimes in the world. It will protect our networks even as technologies evolve, future-proofing our critical national infrastructure. Throughout the passage of the Bill, there has been a great deal of debate about how diversification can help to support more secure and resilient telecoms infrastructure. While our work on diversification is intended to support our security and resilience ambitions, not all diversification is necessarily relevant to security and resilience.
The telecoms diversification work that the Government are undertaking moves the market forward by broadening the supplier base in many ways which fall beyond pure security measures; these include boosting quality, innovation, competition and choice within our critical networks. It is for this reason that we have consistently argued that it would be limiting for our 5G diversification strategy to appear on the face of this Bill. Legislating for a reporting element within the Bill, by the same token, would also be restrictive.
Furthermore, as the market and technology evolve, our desired outcomes and areas of focus will evolve too. For example, in the short term, a successful outcome could be a third major vendor in the mobile market. However, once open radio access networks are ready for deployment at scale in urban areas, our measure of success might be the level of interoperability within our networks.
At the moment, we are focusing efforts on diversifying the radio access network, which is where the most critical security and resilience risks are found. In future, a focus on other elements of telecoms infrastructure, including fixed networks, will be necessary to ensure all risks to the ways in which we communicate are tackled. Committing to reporting on specific criteria would limit us to reporting against the risks as we find them today; it would not afford us the flexibility that diversification requires.
While the Government cannot accept this amendment, I hope to reassure noble Lords that our work on diversification progresses—and at pace. The Government’s plans to diversify the market were set out in the 5G Supply Chain Diversification Strategy, which was published in November last year. We also established a diversification taskforce, chaired by my noble friend Lord Livingston of Parkhead, who of course has a wealth of experience in this field having served as the chief executive for BT Group. The taskforce’s role is to provide expert advice to the Government on this important agenda.
The taskforce set out its recommendations in the spring and many of its members have agreed to continue providing expertise as part of the Telecoms Supply Chain Diversification Advisory Council, which had its first meeting last month. Work is already underway to implement many of the taskforce’s recommendations and good progress has been made on the priorities set out in the strategy. For example, research and development was highlighted as a key area of focus, in order to promote open interface technologies that will establish flexibility in the market and allow a range of new, smaller suppliers to compete in a diverse marketplace.
That is why DCMS was delighted to announce the launch of the future radio access network competition on 2 July. Through this competition, up to £30 million will be invested in open RAN R&D projects across the UK to address barriers to high-performance open deployments. This competition is part of a wider programme of government initiatives to foster an open, disaggregated network ecosystem in the UK. This includes the Smart Radio Access Network Open Network Interoperability Centre—or SONIC Labs—a facility for testing interoperability and integration of open networking solutions, which opened in June. A number of leading telecoms suppliers are already working together through this facility.
The Government also continue to work with mobile operators, suppliers and users on a number of other important enablers for diversification, for example by developing a road map for the long-term use and provision of legacy network services, expected to be announced later this year. Alongside this, the Government have led efforts to engage with some of our closest international partners, through both multilateral and bilateral mechanisms, to build international consensus on this important issue. Through the UK’s G7 presidency, the Government made the first step in discussing the importance of secure and diverse supply chains among like-minded partners, and the foundational role that telecommunications infrastructure such as 5G plays in underpinning wider digital and technology infrastructure.
We have also seen movement in the market towards diversification objectives. The industry has taken steps to adopt open radio access networks, such as the European memorandum of understanding, co-signed by Telefónica and Vodafone. Furthermore, organisations such as Airspan, Mavenir, NEC and Vodafone have now announced UK-based open radio access network facilities. This demonstrates that the industry is working alongside the Government here in the UK to drive forward the change needed in the sector. That was further evidenced in Vodafone’s commitment to deploy 2,500 open radio access network sites using equipment provided by leading suppliers, including Samsung and NEC. This is the largest deployment of its kind anywhere in Europe and an important first step in delivering the goal of more open networks.
These commitments show a genuine and significant change in the diversification of our mobile networks. I hope they also demonstrate why placing strict legislative reporting requirements on this area of work would be premature. We are at a point of rapid exploration and experimentation in this work, and I hope that noble Lords would not want to inhibit that work before it has had time to mature.
The noble Lord, Lord Alton of Liverpool, asked about the committee report. It will not fall to me to respond to that report, as I perhaps would have done in my previous role as a Whip covering the Foreign Office, among other departments. We will, of course, reply to it in full in due course. He also asked about Newport Wafer Fab. As I am sure noble Lords will appreciate, I am not able to comment on the detail of commercial transactions or of any national security assessments on a particular case. We will continue to monitor the situation closely and, as part of this, the Prime Minister has asked the National Security Adviser to review this case. Separately, work is under way to review the wider semiconductor landscape in the United Kingdom. The National Security Adviser’s review is ongoing, drawing on expertise from across government as necessary. We will continue to monitor the situation closely and will not hesitate to take further action if needed. The Government are, of course, committed to the semiconductor sector and the vital role it plays in the UK’s economy.
For the reasons that I have set out, therefore, I am not able to accept this amendment. I hope noble Lords have been reassured by what I said, and that the noble Baroness will withdraw her amendment.
My Lords, I thank the Minister for his reply. I am, of course, disappointed that the Minister cannot see that this amendment seeks to strengthen the Bill. It gives the Government an opportunity to showcase all the things of which the Minister has apprised the House. It is important to look at this proposed new clause. It would require the Secretary of State to report on the impact of the diversification strategy, something of which the Government are proud, and it allows for a parliamentary debate, something I would have hoped the Government would welcome, but this is clearly not the case.
As the noble Lords, Lord Fox and Lord Alton, have indicated, the absence so far of an effective plan to diversify the supply chain is what makes us concerned about security in this country. The Bill is the opportunity to put that right. Therefore, I feel it is only right and proper, in the interests of the security of the country, that we press this matter to a vote and test the opinion of the House.
9: After Clause 23, insert the following new Clause—
“Provision of information to the Intelligence and Security Committee
The Secretary of State must provide the Intelligence and Security Committee of Parliament as soon as is reasonably practicable with a copy of—(a) any direction or notice (or part thereof) that is withheld from publication by the Secretary of State in the interests of national security in accordance with section 105Z11(2) or (3) of the Communications Act 2003;(b) any notification of contravention given by the Secretary of State in accordance with section 105Z18(1) of the Communications Act 2003; (c) any confirmation decision given by the Secretary of State in accordance with section 105Z20(2)(a) of the Communications Act 2003;(d) any reasons for making an urgent enforcement direction that are withheld by the Secretary of State in the interests of national security in accordance with section 105Z22(5) of the Communications Act 2003; and(e) any reasons for confirming or modifying an urgent enforcement direction that are withheld by the Secretary of State in the interests of national security in accordance with section 105Z23(6) of the Communications Act 2003.”Member’s explanatory statement
This new Clause would ensure that the Intelligence and Security Committee of Parliament is provided with any information relating to a designated vendor direction, notification of contravention, urgent enforcement action or modifications to an enforcement direction made on grounds of national security.
My Lords, I welcome the noble Lord, Lord Parkinson, to his position. I am sure we will end up speaking to each other across the Dispatch Box. I wish him all the best and good luck with the important work he will be doing as a Minister of the Crown. We all wish you well in that role.
Turning to my amendment, we appreciate that, obviously, it is sometimes difficult to strike a balance between the public availability of information, even for debate by Parliament, and national security. This amendment seeks to probe the Government’s thinking. So far, their reassurances have been somewhat lacking.
I often use, and want to use, evidence—not just what I think and others may wish to say—regarding how the Government should use the Intelligence and Security Committee. It was set up by a unanimous decision of both Houses of this Parliament because they recognised that some information is so sensitive that it cannot be put in the public domain, as that would undermine national security. No Member of this Chamber or the other place would argue with that or say that that is wrong in principle. But so far, in respect of the security aspect of telecommunications, the Government have said that the existing processes and way of doing things works. Many of us would disagree with that and feel that more reassurance needs to be offered and that the Government need to rethink this.
In moving this amendment, I will use evidence from the chair of the Intelligence and Security Committee himself. I do not need to go on about this, because he summed it up in one sentence. Speaking about the Telecommunications (Security) Bill in the other place, he said:
“It is both puzzling and exasperating that the Government are yet again refusing to use the Intelligence and Security Committee for the purpose for which it was created.”—[Official Report, Commons, 25/5/21; col 286.]
That is quite a stunning sentence. I could quote the whole speech, but for me that encapsulates it. It is for the Minister say why he is wrong. Why is the chair of the Intelligence and Security Committee wrong to say that about the powers in this Bill and the security issues that will arise in respect of telecommunications now and in future? Why is it wrong for the Intelligence and Security Committee to be the body that looks at that information for us?
Indeed, the Prime Minister himself agreed. Look at the Memorandum of Understanding of 2013, which was an appendix to the ISC’s annual report and governs the remit of the committee. That remit is agreed by the Prime Minister to be the purpose of the Intelligence and Security Committee. The memorandum states:
“The ISC is the only committee of Parliament that has regular access to protectively marked information that is sensitive for national security reasons: this means that only the ISC is in a position to scrutinise effectively the work of the Agencies and”—
listen to this—
“of those parts of Departments whose work is directly concerned with intelligence and security matters.”
The Prime Minister of the day, in the Memorandum of Understanding, is saying that departments whose work impacts on this should be within the remit of the Intelligence and Security Committee. The Minister therefore needs to explain to us why this amendment is not right.
I do not want to add much to that. I have presented evidence from the chair of the Intelligence and Security Committee and from the Memorandum of Understanding, agreed by the then Prime Minister, setting out the remit of that committee. For all of us who want to be sure that this Parliament has oversight of intelligence and security matters, this is an incredibly important issue. All of us value the security of our country, but we also understand that, at times, it is necessary for Parliament to scrutinise that. What is a sensible way to do that, one that does not compromise national security? Surely, is that through the Intelligence and Security Committee. That is what this amendment seeks to do, and it is for the Minister to explain why it is not necessary and why we should not put it to a vote.
My Lords, veterans of the National Security and Investment Bill—I am not sure there are any—will recognise this amendment: it is exactly the same argument that was put forward then. The response from BEIS was to set up a unit, within BEIS, that the relevant Minister said would have the necessary clearance to review potential national security information. It was quite clear to those in your Lordships’ Chamber at that time that that group of people would not get to see the sort of information that the ISC is cleared to see. We are in the same situation now. The Minister will say that there are people in his department who, if necessary, will be able to see the relevant information. That will not be the case and to some extent, those in the Minister’s department making decisions that refer to national security issues will be flying a little bit blind. If this is not recognised, that is regrettable. This is a really important area of security, and decisions should be made on the best available information, with the best available people reviewing that information. The clue is in the name: this is the Telecommunications (Security) Bill, and it is the Intelligence and Security Committee that is best able to review that information. That is why I support the noble Lord’s Amendment 9.
My Lords, I thank the noble Lord, Lord Coaker, for his kind words of welcome and for tabling this amendment. The important matter of parliamentary oversight has been raised a number of times in both your Lordships’ House and another place. I welcome the opportunity to clarify further how appropriate oversight of the Bill’s national security powers will be provided for both in this Bill and through existing mechanisms. The noble Lord’s amendment would require the Secretary of State to provide the Intelligence and Security Committee with copies of a directional notice when such documents, or parts of them, are withheld under Section 105Z11(2) or (3) in the interests of national security.
As regards enforcement, this amendment would also require the Secretary of State to provide the committee with copies of notifications of contraventions and confirmation decisions. Further, it would require the provision of reasons for giving urgent enforcement directions when withheld under Section 105Z22(5), as well as the reasons for confirming or modifying such directions when withheld under Section 105Z23(6).
We thoroughly agree with the need for effective scrutiny of the use of the Bill’s national security powers—that is why we have included measures to facilitate parliamentary oversight of the use of those powers. The Bill requires the Secretary of State to lay before Parliament copies of designation notices, designated vendor directions, and variations or revocations of either, unless doing so would be contrary to the interests of national security. We would expect in the vast majority of cases to lay copies of the directions and notices before Parliament. However, on very rare occasions there may be instances where the Secretary of State chooses not to do so because laying the documents would be contrary to the interests of national security. This would only be done in extremis.
We have already demonstrated our commitment to transparency with the publication of the illustrative draft designated vendor direction and designation notice last November. Indeed, it is in the Government’s interest to publish such documents as it sends a clear message to industry of our intent to use the powers in the Bill where necessary. However, while the presumption is to publish the directions and notices, it is right that we have the option to protect the UK if our national security could be put at risk through their publication.
It is worth noting that, under Section 390 of the Communications Act 2003, the Secretary of State is required to prepare and lay before Parliament annual reports on their functions under that Act. Those reports will show when the Bill’s national security powers have been exercised, whether or not copies of directions or notices are laid before Parliament. This will ensure that Parliament will always be made aware of the Secretary of State’s use of the national security powers to issue designated vendor directions and designation notices.
Having thus been made aware, the Intelligence and Security Committee will be able to request relevant information from the vital organisations it already oversees, such as the National Cyber Security Centre. Moreover, the ISC will be able to request such information at any time from the NCSC in relation to its assessment of high-risk vendors. The noble Lord is right to point to the importance of the committee. Given the cross-party support he enjoys, he knows better than most, as a former Security Minister, the important work it undertakes. The ISC will be able to do the work I have just outlined in line with its remit, as set out in the provisions of the Justice and Security Act 2013 and accompanying memorandum of understanding.
At Second Reading, the Noble Lord, Lord West, noted that the ISC had made a request for its memorandum to be formally reviewed. I understand that the chairman of the ISC has written to the Cabinet Office on these matters and that they are under consideration. Discussions and decisions regarding any changes to the ISC’s remit are of course for the Cabinet Office and the ISC to agree. That is the appropriate route for the ISC’s remit to be considered, not this Bill.
As I am sure noble Lords will appreciate, however, the advice of the security services will not be the only factor that the Secretary of State will take into account when deciding what is proportionate to include in a designated vendor direction. As well as the NCSC’s advice, the Secretary of State will consider, among other things, the economic impact, the cost to industry and the impact on connectivity of the requirements in any designated vendor direction. Those go beyond security matters and indeed fall under the work of DCMS; therefore, the Digital, Culture, Media and Sport Committee is best placed to consider those wider impacts. Hence, that is the appropriate body to oversee the Government’s use of the powers to issue designation notices and designated vendor directions, including where those directions and notices are not laid before Parliament. The Government will work with the committee to ensure that it has access to all the information it needs to carry out that oversight.
Those are the reasons why the Government cannot accept the amendment. I hope that the noble Lord will be content to withdraw it on that basis.
I thank the Minister for a generally helpful reply and for his engagement with the amendment itself, my remarks and those of the noble Lord, Lord Fox. It is helpful when a Minister engages with a debate, rather than just reading the words in front of him. The Minister did that, and that is to be welcomed.
The Minister offered reassurance on many of the issues that I raised—and they are issues. The debate has in some ways gone beyond the Bill itself and will help the debate within government about how to resolve the issue of national security and parliamentary scrutiny. Of particular importance was the Minister saying that the memorandum of understanding between the Government and the ISC is being reviewed. That MoU is crucial, and the debate we have had on this Bill and, indeed, this amendment, should inform the Government of the view of many in this House and beyond that the memorandum of understanding needs to be clarified and perhaps reviewed and changed. I ask the Minister to ensure that that review happens in the discussions that take place within government.
With those remarks, I beg leave to withdraw the amendment.
Amendment 9 withdrawn.
10: After Clause 23, insert the following new Clause—
(1) Within six months of this Act being passed, the Secretary of State must publish a long-term strategy on telecommunications security and resilience.(2) The strategy must include but is not limited to—(a) the objectives of the United Kingdom in working with NATO, Five Eyes partners, and other allies, on research and development, adoption and deployment, standards, and overall strategy;(b) how the strategy will provide security and resilience in the long term;(c) how this Act supports strategic objectives in the Integrated Review of Security, Defence, Development and Foreign Policy;(d) how this Act will complement the powers in the National Security and Investment Act 2021 in the long term and whether a review is needed;(e) whether, for the purposes of telecommunications security, an international advisory body should be set up to help coordinate, influence and develop guidance and standards;(f) how the United Kingdom, in collaboration with its allies, will monitor, horizon-scan for, and respond to, current and emerging threats;(g) whether the United Kingdom security infrastructure is adequately resourced to respond to threats against its telecommunications network;(h) how to secure the adequacy of OFCOM’s resourcing in fulfilling its functions provided in this Act.(3) The strategy must be laid before Parliament.”
In moving Amendment 10 I will also speak to Amendment 11 in the names of the noble Lords, Lord Alton, Lord Blencathra and Lord Fox, to which I have also put my name.
Amendment 10 seeks to future-proof the Bill. It strengthens the bonds with our international partners, ensures horizon-scanning and provides security and resilience in the long term. It again pushes the Government on a long-term strategy for the security and resilience of our telecoms network. What plans do the Government have for that?
I think all of us in this House understand that this is a fast-changing world, and many of us would not have predicted just a few years ago some of the challenges and threats we face now. Flexibility and adaptability are crucial, and a strategy needs to be put together alongside that. Indeed, the Government themselves have accepted that in their response to the House of Commons Science and Technology Committee document, 5G Market Diversification and Wider Lessons for Critical and Emerging Technologies. Indeed, the Government’s response says that there is a need for strategies and for the Government to look to future threats. Amendment 10 is an attempt to understand how all the Government’s various strategies—I did not count them, but they are putting forward many—will be put together to ensure that we have one overarching strategy dealing with the threats this country faces with respect to security and telecommunications, and in a way that is understandable and meets the challenges we may face in the future. As I say, the purpose of this amendment is to push the Government again on what their strategy is.
Amendment 11 is an incredibly important amendment. Leaving aside the various intellectual arguments, the policy documents that can be quoted, the evidence that can be cited and so on, the ordinary member of the public, who often gets left out of debates such as this, would say something like the following. The Five Eyes, which includes Australia and New Zealand, is one of our most important intelligence communities. Indeed, we have just signed the AUKUS deal, which does not involve all of the Five Eyes but is nevertheless important. Therefore, it is really important that within the Five Eyes there is a commonality of purpose, of understanding and of action.
If we in this country, for example, decided that X technology company was a danger to our national security, I think the ordinary person on the street, man or woman, even a child, would say, “Perhaps it might be a danger to our intelligence network, our telecommunications network, our security system”. It absolutely beggars belief that the Government are resisting an amendment which says that if one of the Five Eyes thinks that there is a problem, we should do something about it. The amendment does not even compel the Government; it merely asks them to review the situation I may have got this wrong, since I have not been in government for a while, but I am positive that if something came across the Minister’s desk, although he might not have it as an amendment in the Bill, he would review it. I fail to understand why the Government would resist an amendment that seeks to say exactly what I have said.
As I said in my previous remarks about evidence, the Government’s own document, their own recently published Global Britain in a Competitive Age: the Integrated Review of Security, Defence, Development and Foreign Policy, agrees with me. It will be interesting to see how the Minister—and I am sure other noble Lords will come forward with their own views—will ensure the future security of the UK telecoms network. If noble Lords want to check that I am not making it up, page 75 says:
“To ensure the future security of the UK telecoms network as the basis for secure and safe CNI. Under the provisions of the Telecommunications (Security) Bill”—
it quotes the Bill—
“supported by the 5G supply chain diversification strategy, we will: manage and mitigate risks from high-risk vendors; introduce a new, robust security framework for telecoms to ensure our networks are secure and resilient to future challenges;”—
“and work with partners, including the Five Eyes, to create a more diverse and competitive supply base for telecoms networks.”
I could not put it better than the Government. As spokesperson for Her Majesty’s Opposition, I fundamentally agree with the Government in that paragraph. As the noble Lord, Lord Blencathra, may also point out, the amendment says exactly the same, apart from adding a review, which should happen anyway.
I will be supporting Amendment 11, and I am interested in why the Government would seek to resist something that is included within their own document.
My Lords, it is a great pleasure to follow the noble Lord, Lord Coaker, and to endorse everything he has just said about Amendments 10 and 11.
In speaking to Amendment 11, about which I hope to seek the opinion of the House if there is not a satisfactory reply to the debate, although I hope there will be, I should say that I moved a similar amendment in Committee on 13 July. As in Committee, the amendment enjoys all-party support from across the House; I am particularly grateful to the noble Lord, Lord Blencathra, but also to the noble Lords, Lord Coaker and Lord Fox, for their support. The noble Lord, Lord Coaker, has spelled out that it would insert a new clause requiring the Government to review any telecommunications company based in foreign countries which have been banned in a Five Eyes country. It is quite straightforward. This amendment would strengthen international action and bolster UK resilience and security.
If such a provision had previously existed in statute, it might have saved this country a great deal of money over the expensive 5G Huawei debacle, which we have known was a security risk since 2013. If the House approves this amendment today, it will send a clear signal that the Bill must be further strengthened to deal with companies that have been banned in other jurisdictions, the need to dig deeper into ownership and investment of companies and the desirability of acting in concert with our Five Eyes allies. Significantly—I suppose this is another development, as the noble Lord just referred to, since Committee—there has been the, in my view, very welcome decision to create AUKUS, the security pact in the Asia-Pacific which, in addition to giving Australia greater defence capacity, also covers AI and other technologies.
At Second Reading, the noble Baroness, Lady Stroud, urged us to work
“in close partnership with our Five Eyes allies”.—[Official Report, 29/6/21; col. 727.]
She was right. The noble Baroness, Lady Merron, asked us to guard against “another costly security debacle”. She was right. My noble and gallant friend Lord Stirrup told us that we
“need to develop an approach … that constantly monitors and rebalances this equation in the context of our complex and dynamic world.”—[Official Report, 29/6/21; col. 715.]
He was right, and the amendments seek to do just that.
In Committee, I detailed many of the companies that have now been proscribed and banned in the United States of America. I would be grateful to hear from the noble Lord, Lord Parkinson—I asked this question in Committee, he will recall—if we have looked at those companies, and what action we are now taking against those that are on the list that President Biden has published. Specifically, I refer to one example, Hikvision. This is what the Foreign Affairs Select Committee of the House of Commons said in its unanimous report. The committee recommended
“that the Government prohibits organisations and individuals in the UK from doing business with any companies known to be associated with the Xinjiang atrocities through the sanctions regime. The Government should prohibit UK firms and public sector bodies from conducting business with, investing in, or entering into partnerships with such Chinese firms”.
I raised that in Committee. Have we acted in concert with principal Five Eyes allies in prohibiting Hikvision or not?
The failure to co-ordinate with allies leads to costs and uncertainty for business and endangers our national interest. The Government’s own estimate, based on the Huawei decision, is that it cost the Exchequer some £2 billion, excluding the broader economic cost of a delayed rollout of the 5G network caused by having to change horses. Earlier collective action could have prevented the later expensive U-turns.
Amendment 11 seeks to better protect our national interest in concert with our allies in the free world. I commend the amendment to the House.
My Lords, I am used to hearing powerful speeches from my noble friend Lord Alton of Liverpool, but what a delight it was to hear also the speech of the noble Lord, Lord Coaker. He spelled it out exactly: it beggars belief. I cannot believe that my noble friend, a wise and intelligent Minister, will reject this amendment.
I support Amendment 11, which does not detract from the Bill in any way; it does not sabotage the Bill or pull the guts out of it, it merely adds to our arsenal. All it asks the Government to do, as the noble Lord, Lord Coaker, pointed out, is to review the security arrangements with a telecoms provider if one of our vital, strategic Five Eyes partners bans its equipment. We are not calling for a similar immediate ban, or an eventual ban, we are just saying let us review it and come to a conclusion.
Why do I want this added? My motivation is quite simple: I believe this will be another small warning shot to China that we will start to stand up to its aggression. I share the view of the new head of MI5, Mr Ken McCallum, that Russia is an irritation but China is a threat to world peace and our whole western way of life. Yes, Russia—or Putin, more accurately—is nasty and will happily kill opponents, as we saw in Salisbury, and attempt to interfere in elections, but Russia is not capable and is afraid of the consequences of waging a world war.
China, I believe, does not share that view. It is building that massive economic and military capacity to dominate the whole world. It will overtake the USA in military capability in the next few years and has already overtaken all western powers in its attitude to using force. It is not that China wants war: it believes that war will not be necessary, since it will win when we surrender without firing a shot. If it attacks Taiwan, will the USA and the UK rush to support it? I hope so, but I do not hold my breath. China believes we do not have the moral guts to do as we did with plucky little Belgium before the First World War or Poland before the second, and guarantee their security.
To return to this amendment, it is a small symbol of our intention to begin our moral fightback—to say that we will not be bullied by China, either in our universities and supply chains or in the freedom of the seas. China has been achieving world domination by small incremental steps: making the WHO its puppet; infiltrating universities; subtly taking over international organisations; robbing African countries of all their minerals as payback for loans; and stealing every bit of technology that it can. It is, therefore, by incremental steps, such as this little amendment, that we will show that we will not be cowed—that we will resist and not become China’s slaves.
My Lords, there are many merits to the plans, set out by the noble Lord, Lord Coaker, in Amendment 10, for the Secretary of State to publish a long-term strategy on telecommunications security and resilience. However, in the interests of time, I will quickly shift my focus to Amendment 11 and disappoint the House by saying that my words will be brief. The House has heard very strong speeches, not just from the noble Lord, Lord Coaker, but from the noble Lords, Lord Alton and Lord Blencathra, and it is a pleasure to see my name alongside theirs on this amendment.
The point has been made three times: this is a very small ask of the Government. Referring back to the point made by the noble Lord, Lord Coaker, working closely with our Five Eyes partners was identified as the whole point—certainly a key objective—in the integrated review. It is one of the central pillars of our security planning. So we are not asking for something outrageous. There is a strong theme of working with our Five Eyes allies across the field of security. The UK has to work with other countries to be effective—and if not with these countries then which?
The UK’s telecoms networks face the same challenges as those of our key allies, and this amendment simply ensures that when it comes to this most crucial component of security—increasingly, communications are at the heart of all our security decisions, whether we are finding things out, transmitting information or looking at what others are doing—we take into consideration what those allies are doing. If we were not doing this, there would be a strong danger of putting a wedge between us and them. Indeed, we began to see that happening with the United States, before this Government decided to change their mind over the Huawei decision—for which some noble Lords present should take a lot of credit.
The question we have to ask ourselves, therefore—it is very difficult to understand the answers, so I look forward to the Minister’s reply—is why the Government are not adopting this amendment. The Minister may take the stance that it is not necessary. If so, it is not a problem and could be included. More worryingly, does the Minister know that this is perhaps the thin end of a wedge, and that there is a lot more technology already installed in our infrastructure across the country that the Government would have to start to remove? If there is, it would be expensive but important to do. Or perhaps the reason is the worst of all excuses: that the Government did not think of it and so are resisting suggestions from others, which is the worst sort of institutional resistance, of a kind that we see all the time.
We on these Benches, therefore, support this amendment from the noble Lord, Lord Alton, and if he sees fit to lead us through that virtual Lobby, we will be virtually beside him.
My Lords, I add a brief word of support for all the sentiments expressed so far in this debate, and for the excellent way in which they have been presented. I very much look forward to hearing my noble friend’s reply as to the problem that the Government have in accepting what seems to be their own wording into this Bill, thereby reinforcing this country’s stance against some of the most egregious regimes in the world and staying as close as we can to our Five Eyes allies.
My Lords, I thank the noble Lords, Lord Coaker, Lord Alton of Liverpool and Lord Fox, and my noble friend Lord Blencathra, for tabling these amendments, which relate to our national security strategy and engagement with our Five Eyes partners.
The Government’s first and overriding priority is to protect and promote the interests of the British people through our actions at home and overseas. That is a message central to our integrated review of security, defence, development and foreign policy, and one that Ministers in the other place have repeated during the passage of this Bill. What I have heard very clearly in this short but powerful debate is that, regardless of party or affiliation, noble Lords across the House agree that we must do what we can to protect our national security interests.
That is precisely why we have introduced this Bill. It is why we have published the integrated review and why we have such close working relationships with our allies—not only in the Five Eyes but also among our European neighbours and beyond. So I welcome the spirit in which Amendments 10 and 11 have been put forward. I say that so that noble Lords will know that we share their instincts and ambitions in this crucial area, even though we cannot support these amendments today, as I will explain.
I start by addressing Amendment 10, tabled by the noble Lord, Lord Coaker. This amendment would require the Government to publish a long-term telecoms security and resilience strategy, covering various topics, within six months of the Bill’s Royal Assent. It would require this strategy to be laid before Parliament. This amendment is similar to the one tabled by the noble Lord in Committee, except that here he has made additional reference to reporting on Ofcom resources.
As I have said, the Government take their responsibility to protect the British public very seriously. We welcome and share the noble Lord’s desire to ensure that this country is prepared to overcome future challenges to the security of our telecommunications. However, we have—as the noble Lord noted—already published and are implementing a number of strategies that will ensure that our national security in general, and the security of our telecoms networks and services in particular, are safeguarded.
I mentioned the integrated review. That overarching review sets out our commitment to security and resilience, so that that the British people are protected against threats. This starts at home, by defending our people, territory, critical national infrastructure, democratic institutions and way of life, and by reducing our vulnerability to the threat from other states, terrorism and serious and organised crime.
The noble Lord asked where the hierarchy lies. While the integrated review sets out our overall approach across government, the UK telecoms supply chain review guides our work on security and resilience in the telecoms sector specifically. The Government continue to implement the recommendations of the UK Telecoms Supply Chain Review Report, published in 2019. Alongside that, we continue our crucial work on supply chain resilience via implementation of the 5G Supply Chain Diversification Strategy, published last year, which we have debated during the passage of this Bill.
More broadly, the Government’s approach to telecoms security is informed by other cross-government priorities. In March we announced our intention to develop a comprehensive national cyber strategy as part of the integrated review. The cyber strategy will set out the UK’s approach to deterring our adversaries and ensuring that the technologies of the future are safe and secure. Furthermore, the Government intend to engage more widely with partners on the details of that strategy and publish it later this year, ensuring that our plans are aligned with funding decisions in the forthcoming spending review.
As set out in Committee, the Government are also in the process of developing a national resilience strategy that will provide a single, coherent approach to the way the UK approaches national resilience. That will be published in early 2022 and will provide a foundation on which to build a clear and co-ordinated approach to the whole range of resilience challenges.
Through his proposed Amendment 10 I think the noble Lord is seeking reassurance that the UK is working with our international partners to achieve shared objectives, and I am very happy to set out how we are doing that. The Government engage regularly with partner countries, including those mentioned in the noble Lord’s amendment: NATO and the Five Eyes allies. We are committed to a strong and deep relationship with our allies. We have held detailed and productive talks with partner Governments throughout the development of the Bill and will continue to do so as and when it is passed.
Similarly, the Government recognise that co-operation on international standards is vital to our joint efforts as we look to the future. We are working closely with the industry, the National Cyber Security Centre, Ofcom and a wide range of international partners to increase the UK’s influence and presence at major standards development organisations, such as ETSI and 3GPP.
Through his amendment the noble Lord is also, I think, seeking reassurance about the adequacy of Ofcom’s funding for its security arrangements. As the telecoms regulator, Ofcom will have a vital role to play in the compliance and enforcement arrangements for the new security framework. We are working with Ofcom to ensure that it has the required resources to meet its new responsibilities. Ofcom’s budget for telecoms security this financial year has been increased by £4.6 million to reflect that enhanced security role.
As I have explained, we will continue to ensure that our approach to telecoms security is kept up to date in response to the changes in threats and technology. For those reasons, I do not believe that Amendment 10 is necessary, and I hope that, when we come to it, the noble Lord will be content to withdraw it and to see that we are indeed working with our allies on this important area, as he rightly asked.
Amendment 11, tabled by the noble Lords, Lord Alton, Lord Fox and Lord Coaker, and my noble friend Lord Blencathra, seeks to ensure that we take account of the actions of our Five Eyes partners. It would require the Secretary of State to review decisions taken by Five Eyes partners to ban telecoms vendors on security grounds. In particular, it would require the Secretary of State to review the UK’s security arrangements with that vendor and to consider whether to issue a designated vendor direction or to take similar action in the UK.
We certainly agree that the UK Government should engage with international partners, including our important allies in the Five Eyes alliance. That is what we have been doing throughout the drafting of the Bill and what we will continue to do once it has passed. Our Five Eyes relationship is robust, and the UK is committed to a close and enduring partnership. The Five Eyes intelligence and security agencies maintain very close co-operation, including regular and routine dialogue between the NCSC and its international partners. This dialogue includes the sharing of our respective technical expertise on the security of telecoms networks and the question of managing the risks from high-risk vendors. There are mechanisms already in place for the NCSC to share this and wider information with DCMS.
We also agree with noble Lords that the Government should consider the policies of our Five Eyes partners when developing our own security policies, and we do that. However, although we take the position of our Five Eyes partners into consideration, our international interests are not limited to the Five Eyes. That is why the approach we have taken in the Bill provides the flexibility for the Secretary of State to take into consideration a variety of relevant information, which includes but is not limited to assessments of our international partners’ policies. I reassure noble Lords that the Bill enables the Secretary of State to consider a decision by a Five Eyes partner—or, indeed, by any other international partner—to ban a vendor on security grounds.
Clause 16 of the Bill sets out a non-exhaustive list of factors the Secretary of State might take into account when she is considering issuing a designation notice. This illustrates the kinds of factors that the Government will proactively be considering on an ongoing basis as part of our work. The Government’s approach to national security needs to remain flexible and adaptable to future challenges. Every country’s approach to national security will be different; security measures taken in one particular country might not always be appropriate in another, for example due to differences in the composition of their telecoms networks or services.
The Government’s consideration of specific countries’ policies when developing their own national security policy should not therefore be mandated or set out in such a restrictive way in primary legislation.
I thank the Minister, and perhaps I am pre-empting what he is about to say, but it seems that, although he has clearly said the answer that I predicted—“not necessary”—the fact that this amendment was brought shows that it is not clear from this legislation that that is what the Minister will be doing. At the very least, whether this gets voted through or not, there is a conversation to be had when this comes back on Report that takes into consideration whether it just limits itself to Five Eyes or goes broader. Will the Minister undertake to think about those things as well, and perhaps comment on that?
The noble Lord means Third Reading.
Yes, we are of course on Report; it has been a while since we were in Committee. Yes, the noble Lord is right: we do not feel that this amendment is necessary. I hope that I am setting out how the Bill provides for the Secretary of State to do what I think noble Lords want to do, not least, as I was just explaining, in Clause 16 and the non-exhaustive list of factors referred to there. Our objection is to setting out the Five Eyes partnership specifically and restrictively when there may be other countries and allies we speak to where she will also rightly want to take that into account. It is important that the Government have the freedom to determine their own national security policies so that they remain flexible and can respond rapidly to changing threats and challenges to our telecoms networks. The Government also need to be able to determine exactly how and when they engage with their Five Eyes partners and consider their actions when developing our policies.
Noble Lords are absolutely right to speak of the importance of the Five Eyes alliance; for more than 60 years it has been doing extremely valuable work for the people of this country and, indeed, for the other partner nations in it. But the Five Eyes alliance was not created through legislation and its importance has not relied on it being set out in statute either. In fact, it would be highly unusual to refer to such an alliance in legislation and we feel that this Bill is not the right place to create such an important national security precedent. That is why we are resisting it.
The noble Lord, Lord Alton, suggested that if we had had such a provision it might have saved some time and effort in the past, in particular with reference to Huawei. The Government have always considered Huawei to pose a relatively high risk to the UK’s telecoms networks compared with other vendors. There has been a risk mitigation strategy in place since Huawei first began to supply equipment to the UK’s public telecoms providers. As he knows, in July last year, following advice from the NCSC, the National Security Council considered the impact of US sanctions in relation to Huawei and considered that further action was needed in relation to Huawei as the new US restrictions made oversight of Huawei products significantly more challenging and potentially impossible. That is an illustration of how the UK already regularly reviews security advice and requirements in response to international considerations and what other Governments are doing.
The noble Lord, Lord Alton, also asked about Hikvision. The UK is aware of reporting that has suggested links between Hikvision and human rights violations in Xinjiang. As he knows, the Government have spoken up at international organisations to condemn the ongoing situation in Xinjiang. In January, my right honourable friend the former Foreign Secretary announced a number of measures to help ensure that UK businesses and the public sector are not complicit in human rights violations or abuses there. Decisions on excluding suppliers would be made on a case-by-case basis by central government contracting authorities when undertaking procurements in line with the relevant regulations.
My noble friend Lord Blencathra raised China more broadly, and indeed the UK wants a mature, positive relationship with China based on mutual respect and trust. There is considerable scope for constructive engagement and co-operation but, as we strive for that positive relationship, we will not sacrifice either our values or our security. China is now a leading member of the world community; its size, economic power and global influence make it a vital partner in tackling the biggest global challenges, but it has always been the case that where we have concerns, we raise them, and where we need to intervene, we will.
In conclusion, I want to return to where I started these remarks. The Government view national security as their number one priority, as any responsible Government would. This debate has highlighted that there is broad agreement on the need for robust, strategic consideration of those issues. So, although I am afraid that we cannot accept the amendments in this group, I warmly welcome the intent behind them. I hope that I have reassured noble Lords sufficiently that we understand their concerns, and that they will be content not to press these amendments.
My Lords, I thank the Minister for his reply. Speaking first to Amendment 10, the Minister gave some reassurance to the House in respect of a strategy. He and I mentioned numerous strategies and I think all of us hope that somewhere along the line they are co-ordinated; otherwise, we will end up with a strategy to deal with a strategy, which is not a good place for anyone to be. I shall leave the noble Lord, Lord Alton, to deal with Amendment 11. I beg leave to withdraw Amendment 10.
Amendment 10 withdrawn.
11: After Clause 23, insert the following new Clause—
“Review of telecommunications companies based in foreign countries
(1) The Communications Act 2003 is amended as follows.(2) After section 105Z29 insert—“105Z30 Review of telecommunications companies based in foreign countriesWhere a Five Eyes partner bans the operation of a vendor of goods or services to public telecommunications providers in its country on security grounds, the Secretary of State must— (a) review the United Kingdom’s security arrangements with that company, and(b) decide whether to issue a designated vendor direction or take similar action with regard to the United Kingdom’s arrangements with that company.””
My Lords, the Minister was characteristically courteous. I am grateful to him, but I wish to test the opinion of the House.
Question for Short Debate
To ask Her Majesty’s Government what is their policy towards Iran; and what engagement they have had with the government of that country on (1) the Joint Comprehensive Plan of Action, and (2) the detention of dual nationals.
My Lords, as our proceedings on the Bill have already concluded, this Question for Short Debate becomes our last business. As a result, Back-Bench and Opposition speakers may take a little longer than as set out in today’s list and speak for up to six minutes, should they wish.
My Lords, I want to take this opportunity to discuss the British national hostages in Iran and refer briefly to the JCPOA. I had the privilege of meeting Richard, Nazanin Zaghari-Ratcliffe’s husband, and Gabriella, their daughter. The length of her imprisonment is a shocking and heartbreaking story, made even worse by the fact that her appeal was turned down just two or three days ago. But of course, it is not just Nazanin but other British nationals who are in arbitrary detention in Iran. As far as I know, four British nationals remain in this detention: Nazanin-Zaghari Ratcliffe, Anoosheh Ashoori, Morad Tahbaz and Mehran Raoof. There may be others. My first question is: why do the Government insist on keeping the names and numbers confidential? After all, the Iranians know perfectly well who they are holding in detention or some form of custody. So, what is the benefit of our not knowing how many there are altogether? The four I have mentioned may not be the total.
My second criticism of the Government is that there seems to be no strategy for the British prisoners there. They are being held as hostages. Do we have a certainty of getting them out or is the Foreign Office simply sitting there, saying, “Well, let us hope something turns up?” I do not think that would be good enough. These are heartbreaking stories of people innocent of the crimes of which they have been accused, held in detention or, in Nazanin’s case, long detention—she is now under house arrest. It is simply unacceptable that British citizens should be held in this position.
Surely, we should consider punishing the perpetrators. We talk about the Magnitsky sanctions; why do we not threaten to use them on those people in Iran who are holding our people in detention in that way? In addition, we need an independent investigation of the torture allegations. It is fairly clear that prisoners have been held in a situation where they have suffered torture. An independent investigation of that would surely help.
There is the vexed question of the £400 million we owe the Iranians. Having looked at the previous comments made by Ministers, the Government’s answer has been that they will investigate the full range of options, but the Government say they do not link the two—the prisoners and the £400 million. Surely, if we have said to the Iranians that we accept that we owe them the £400 million, I cannot see what is to be gained by then saying we will investigate the full range of options. It seems to me that if we owe them money, the least we should do is negotiate that money against the release of those prisoners. That seems clear, and I think the Iranians—I do not want to speak for them—will feel that they were promised the money and they have not got it. We should keep the promise and do it.
My next question is: are these people hostages in the eyes of the Government? The Minister talked in June about an early release of all hostages in Iran. Do we therefore recognise that they are hostages? Sometimes, Ministers tend to say something else and not to refer to them as hostages.
I understand other countries have got their prisoners out: Australia, Germany, Canada and the United States. I wonder if the Minister could throw some light on how that happened. How was it that other countries managed to get their prisoners out while we failed? Did we try hard enough? Is there something the other countries did that we did not do? The Minister should tell us.
Then, there is the issue of diplomatic protection, which was offered to Nazanin a year or two ago. What happens with this diplomatic protection? Is it in fact still there? Are we using it with full force? Have we extended that protection to the other British nationals I mentioned and, if not, why not? Are the Government saying it was just a token gesture and there is no benefit to it? If there is a benefit to it, we should make full use of the fact that we have given Nazanin diplomatic status, and act accordingly.
My next and related point is this. At Nazanin’s court hearing—not the recent one—there was no United Kingdom presence. The Government will argue they were not allowed in. The Germans sent their consular official to a trial of a German national. The official was not allowed in but he or she did manage to have a conversation with the judge, so there was something to be gained by doing that. I cannot understand why we are so reluctant to use our diplomatic presence in Iran to aid and bring comfort to the people we are talking about. I know that at one point Nazanin was not even visited by British consular officials and when her daughter sent a gift, it was brought over by a driver. The consular officials did not even take it over to give it personally. It seems that we are not doing very much; we could be doing a great deal more than we seem to have done.
Furthermore, negotiations on the JCPOA are now taking place or, at least, I think that, with the change of regime in Tehran, there is a pause. Perhaps the Minister can tell us whether that pause will soon be over. We should certainly press to ensure that Iran’s policy of taking hostages should be on the table as part of negotiations on the JCPOA. We are losing an opportunity, and we should use it, and the £400 million, as a way to put some pressure on the Iranians.
If we are talking about restoring the JCPOA—I understand that the Government are fully committed to doing that and to undoing the damage done under the Trump regime—but we cannot get the full JCPOA, can we at least argue for an interim arrangement where some of the benefits of the JCPOA will be on the table, in return for which there could be certain concessions from the Iranians? Rather than leave it as all or nothing on the JCPOA, it would be good if we could have a backstop position and seek an interim arrangement.
The Minister may not want to talk about that, because he may not wish to admit that the JCPOA may not work. Of course, we all fervently hope that it will and we can resume the position we had before President Trump got involved so mistakenly, but it would be nice to feel that we had a back-up position. In any case, it should surely be our policy to encourage some form of regional dialogue. Could we use our influence along with EU countries to try to achieve that?
Furthermore, would it not be possible for us to start engaging with Iran on both refugees from Afghanistan and the problem of drugs? We might well find some sympathy and the chance to have a proper, big conversation with the Iranian authorities, despite there being a new regime there, given that it is estimated—the Minister may correct this—that 700,000 refugees from Afghanistan have gone to Iran. More than a million have gone to Pakistan. That is quite a responsibility for the Iranians, and surely it would be worth our while talking to them about that. We are talking about nearly 2 million people who have gone to Pakistan and Iran altogether, so there is a real issue there on which we should engage with the Iranians. Then there is the question of drugs—the perennial problem of dangerous drugs being cultivated and produced in Afghanistan and then exported. The Iranian authorities might well have a joint interest with us in stemming that trade.
Then there is the question of international co-ordination. How much are we working with other countries to try to deal with the hostages? I think we joined the Canadian initiative against arbitrary detention in February, and James Cleverly said:
“We continue to work with G7 partners to enhance mechanisms to uphold international law, tackle human rights abuses and stand up for our shared values.”—[Official Report, Commons, 27/4/21; col. 234.]
My question is: how much effort are we putting into that international co-ordination? We would surely have a stronger hand to play if we worked closely with other countries, some of which also have hostages in Iran.
The danger for Nazanin, who is one of the four I mentioned who, I understand, are in house detention but not in prison, is that she might now be returned to prison. That will be a terrible thing to happen after all the years she has spent there but, given that her appeal has been refused, the prospects are not wonderful. How will the Government respond to the possibility that she might have to return to prison? The Government have been a bit coy on this issue in previous debates. “Coy” is rather a bland word; the Government have not been very forthcoming. Can they be more forthcoming? We need a far more robust approach—robust enough to put pressure on the Iranians—and we need to work with other countries to see whether we can bring out these unfortunate victims of Iranian injustice and give them the right to return to their homes.
My Lords, I draw the House’s attention to my entry in the register of Members’ interests. I am the unpaid chairman of the British Iranian Chamber of Commerce. I join the noble Lord, Lord Dubs, in condemning the cruel treatment of Nazanin Zaghari-Ratcliffe; the extension of her sentence without even a court hearing was an absolute disgrace. I have seen through my work as a trade envoy that the Government are making huge efforts to get Nazanin released. I have been in many meetings where the subject has been put very forcefully to Iranian Ministers.
It is also shameful that Iran should attempt—or appears to be attempting—to link the fate of a young, innocent woman to the tank money owed to Iran by the UK. The two should never be linked, although I have to agree with the noble Lord, Lord Dubs, that many of us are puzzled by the Government’s failure to pay the debt and meet Iran’s claim, which, after all, has been upheld by the UK courts. If it is US sanctions that are preventing the UK Government resolving this issue, that would in itself be bizarre. I would be grateful if the Minister could give us a specific reason why this money cannot be paid.
I will concentrate mainly on the JCPOA and the arguments put by the noble Lord, Lord Dubs. It would be a mistake to think of the JCPOA only as something helpful to Iran. It is immensely important to the rest of the world. That is why it would be a mistake to link the efforts to get Nazanin and others home to their families with any negotiations over the JCPOA. That agreement would have prevented Iran getting a nuclear weapon for 15 years. It was a good agreement and, I believe, extremely important.
The best way of ensuring that Iran does not acquire a nuclear weapon is for the United States to return to the agreement that it broke. Despite the confirmation from the International Atomic Energy Agency on 10 or 11 occasions that Iran was complying with the agreement, it was Donald Trump who, unilaterally and for no good reason, tore up the agreement and imposed punitive sanctions on Iran. This hit ordinary people extremely heavily and had the effect of undermining the political standing of the moderate President Rouhani, who favours engagement with the West. It confirmed the suspicions and accusations of hardliners in Tehran that the US and the West could not be trusted.
Those, like Mr Netanyahu, who claimed that President Rouhani was just some cynical PR front figure for hardliners ought to contemplate what is now happening in Tehran, where steps are being taken in the Iranian Parliament to put the former President on trial for having negotiated an agreement that has had such bad effects on Iran and Iran’s economy. The only way forward is for the US to rejoin the JCPOA and for Iran to return to the enrichment and centrifuge limits set in the agreement. Iran has indicated that all the recent steps it has taken to boost its enrichment and number of centrifuges are reversible—in other words, that it is establishing a negotiating position. To attempt new, additional demands on Iran, such as to agree a follow-up agreement on regional issues, would be totally counterproductive. Iran has not returned to the negotiating table. We need to get Iran back to that table but it will not return until the additional sanctions imposed by Trump have been removed.
I also strongly agree with what the noble Lord, Lord Dubs, said about trying to find common ground with Iran—on areas where we have a mutual interest. Indeed, Afghanistan is one such area; the Taliban are very strong enemies of Iran. Before this situation, Iran had already taken 4 million refugees and, as the noble Lord, Lord Dubs, said, has probably had another 700,000 in the last few weeks. Fighting ISIS was another area of common ground where there was initially some co-operation, but it eventually broke down. Although there had been a certain amount of mutual understanding, it was at a distance.
Narcotics are another common interest. We used to have a Metropolitan Police presence in Afghanistan. I agree that the more we find common ground, the more we might find that we make progress on other issues, such as the dual citizens who are being held so wrongly.
As I said, I have been involved in some talks with Iranian Ministers. I have worked with the families of some of the other people—not of Nazanin herself—who have been in similar situations. I know that the Government are trying extremely hard on this. Let us keep that going, but we ought also to make it a major objective to get Iran back to the negotiating table on the JCPOA. Without the JCPOA, the Middle East is an even more dangerous place.
My Lords, it is a pleasure to follow the noble Lord, Lord Lamont, with his considerable experience on this issue. I agree with his central argument on the benefit of returning to the discussions. It was depressing to read that the latest effort by the European Union envoy in meeting Iranian officials had a negative response on the return to discussions in Vienna. We hope very much that this stalling will not continue.
I shall return to that in a moment but, first, I pay tribute to the noble Lord, Lord Dubs, for his tireless work on this issue. I reread the Questions that he has asked and his contributions to debates in the House on this topic. The questions that he posed to the Minister are very valid, especially regarding the definitions of hostages and of torture. It is now incumbent on the Government to be clear as to whether they consider that international obligations on these key areas are now being breached by the Iranian officials.
After a number of years on the Front Bench, my noble friend Lady Northover has stood back as the Liberal Democrats spokesperson. I put on record my admiration for how she carried out her role. It is very relevant to refer to her work in this debate; I checked the Official Report and she has raised the case of Nazanin Zaghari-Ratcliffe in this House on 20 occasions through debates and Questions. Most recently, on 7 June, following a Question from the noble Lord, Lord Dubs, her supplementary question was very prescient as she asked about UK officials attending court cases and hearings. The Minister replied that
“we continue making the case to attend any hearings that we can”.—[Official Report, 07/6/21; col. 1190.]
However, the most depressing news about this, of course, was that the so-called appeal would not meet the international norms of good legal practice in fair and open appeal. It was held in secret, without any possibility of observation. Can the Minister confirm what representations the UK has made to Iranian officials during this process, which has now led to the intolerable position referred to—of Nazanin not knowing whether she will arbitrarily returned to prison?
With regard to the valid question on torture, the Islamic Republic of Iran has ratified the Convention against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment. It is not a far stretch to suggest that Iran’s conduct in this case is in clear breach of this international convention as well as of the optional protocol and the ICCPR that Iran has signed up to. What are the Government doing? The Foreign Secretary said in her statement:
“We are doing all we can to help Nazanin get home ... and I will continue to press Iran.”
It is now incumbent on the Government to state exactly what they are doing and what levers they are seeking to pull. The Iranians will know that she is the fourth Foreign Secretary to have made similar comments about this. What will be different this time?
Turning to the wider issue of the JCPOA, I had the privilege of serving on the International Relations Committee. Its report on nuclear non-proliferation and the hearings we had specifically on the JCPOA were very clear that the UK Government were correct not to follow the path of the United States but to maintain their position and to work much more closely with the E3 within Europe and the other signatories to seek a way forward for the United States to recognise its responsibilities as a signatory; and also for Iran to be open and allow much greater access, the lack of which has frustrated international inspectors in recent months. In that regard, can the Minister outline the position of the Government regarding the lack of access on the inspection of certain facilities? I understand that the Iranians are using the drone attack as a pretext for saying that there was a breach of security and damage, and for preventing the continuation of international inspections. Do the Government agree with that position, and how are we seeking to persuade the Iranians to open up access?
As the noble Lord, Lord Dubs, indicated, this is a regional issue as well. There have been some welcome signs of dialogue between the Kingdom of Saudi Arabia and Iran in recent months, looking at opening consular access and with slow but hopefully positive work towards full diplomatic relations being restored. There are a couple of areas still outstanding, which I should like the Minister to refer to. One was referred to by the noble Lords, Lord Dubs and Lord Lamont. How are the Government treating the debt issue? Do they believe that this is completely separate from the wider negotiations, or have they or the Iranians tabled this issue as part of the wider discussions with the UK and our partners on JCPOA? What is the Government’s understanding of the latest position of the United States regarding compatibility? The new US Secretary of State has made his public comments known. Do the Government agree with Antony Blinken on what Iran needs to do for restoration, or do we have a separate position? All these issues are valid and timely, and I commend the noble Lord, Lord Dubs, for raising them.
My Lords, like the noble Lord, Lord Purvis, I served on the International Relations and Defence Committee of your Lordships’ House. As the noble Lord has said, we came to the very clear conclusion that it was in Britain’s interest to sustain the JCPOA and t do everything possible to reverse the action taken by the Trump Administration. That was our clear position, and I think it was the right one.
Successive British Governments, as far back as when Jack Straw was Foreign Secretary, and of different parties, including the coalition, took the view that active diplomacy backed up by economic sanctions was the best way to head off the risk of Iran acquiring fissile material capable of arming a nuclear weapon. Those Governments sustained that policy even in the face of great pressure from the Trump Administration to renege on the JCPOA which had been agreed with Iran in 2015. I believe they were right to do so and are right now to continue doing so, in concert with the Biden Administration’s efforts to revive the JCPOA and to bring Iran back into conformity with its provisions.
Why so? Because alternative courses of action, including that chosen by President Trump of “maximum pressure,” showed no signs whatever of working and contained massive risks to the whole international community: the risk of an Iran either with nuclear weapons and the means of their delivery, or so close to that as to represent a credible threat to obtain them; a potential, indeed probable, nuclear arms race in a very volatile region; irreparable damage to the Nuclear Non-Proliferation Treaty, which is a cornerstone of international peace of security; and the possibility of another armed conflict in a region which has already seen too many of them. Frankly, that is quite a list of risks.
Of course, it takes two to tango in this attempt to revive the JCPOA. The hiatus in the Vienna talks following the Iranian presidential election leaves the diplomatic route hanging by a thread, exemplified by the visit to Tehran last week of the co-ordinator of the E3’s position. But the risks from the diplomatic route collapsing makes going the last mile worthwhile—indeed, necessary, I suggest—and I strongly support the Government’s policy of doing just that.
I also share the views expressed by the noble Lords, Lord Dubs and Lord Lamont, that we ought discreetly to look for ways in which our interests and those of Iran overlap, whether it be the future of Afghanistan, drugs or the handling of flows of refugees. I do hope that the Government will find some way of opening up channels of discussion—not linking it with any other issue but simply reflecting the fact that there is an overlap in our fundamental interests in these matters. Iran suffers as much as any country from the flow of drugs, suffers hugely from the flow of refugees, and will be a victim of any terrorist outbreaks based either on the activities of ISIS in Afghanistan or on the Taliban themselves—because they will be directed against Iran’s co-religionists, the Hazara.
In the long run, the best solution to tensions in the Gulf region remains agreement by all sides to respect each other’s sovereignty and territorial integrity, to cease meddling in each other’s internal affairs, and to work together on economic co-operation, of which there could be a massive amount. But that will be a work of years, not of weeks or months. I just hope that we will not lose sight of it, because it is the only viable way forward in a region where we have considerable political, security and commercial interests. Until we can get to that position, we will be continually faced by these crises.
As to the cruel and unjustified treatment of British-Iranian dual nationals, exemplified by the case of Nazanin Zaghari-Ratcliffe, no effort to bring that to an end should be spared by the Government. However, I have to say that linking it in any way to the nuclear issue is only too likely to prove counterproductive and unsuccessful.
My Lords, I thank my noble friend Lord Dubs for initiating this important and timely debate, and I join other noble Lords who paid tribute to him for his tireless work on this and other humanitarian issues. He is an admirable member of this House. I agree with everything said so far, I think, and it is a privilege and a challenge to follow such thoughtful and informed speeches. I will do my best.
Only three days ago, an Iranian court apparently upheld Nazanin Zaghari-Ratcliffe’s sentence of another year in prison, prolonging her cruel and unjustified detention that began in 2016. The Government say they are doing all they can to get her home, but Iran has made it clear that her freedom and that of the other dual nationals has a price: the repayment of the debt owed since Iran bought tanks that were not delivered after the Islamic Revolution in 1979. On 7 June, in an Oral Question referring to Nazanin’s case, my noble friend Lord Dubs asked about the money owed by the UK. The Minister, in his Answer, said:
“On the long-standing debt, we continue to explore options to resolve this case, but I do not want to go into details here.”—[Official Report, 7/6/21; col. 1188.]
I will not ask him to go into details of plans, and in fact I will offer him a plan at some point in this speech.
On this issue, I agree with my honourable friend Tulip Siddiq, the Ratcliffe family’s MP. She said:
“It’s time for the UK government to pay the debt we owe to Iran, stand up to their despicable hostage-taking and finally get Nazanin home.”
In preparation for this debate, I asked my colleagues in the European Leadership Network—particularly a young man called Sahil Shah, who helped me enormously—who have been working since 2018 to preserve the JCPOA across Europe, Asia and the United States, to come up with a plan. I have a proposal. The speakers thus far have asked enough questions of the Minister; I will not ask him any questions, but will instead put to him a proposal that, if it can be made to work, may help both to secure Nazanin’s release and to unlock the stalemate of the JCPOA talks—without linking them together.
This week, the Iranian Foreign Minister explained to lawmakers in Tehran their policy of “action for action”. He said that the US must show good will and make a serious move before Iran returns to nuclear talks. Since Trump unilaterally abrogated the JCPOA, Europe, including the UK, has strongly opposed US secondary sanctions imposed under its “maximum pressure” campaign and, to keep the deal alive, has offered multi-sector economic engagement. However, because of fear of US sanctions, which are all-pervasive, it has failed to deliver any economic engagement—including, importantly, in the humanitarian sector. As a matter of fact—or a matter of law, I should say—sanctions on humanitarian trade are against both US domestic and international law. Contrary to expectations, the Biden Administration have essentially kept to this Trumpian strategy.
The need for increased Covid aid to Iran is dire. The Delta variant hit Iran hard: a recent study by BBC Persian found 200,000 excess deaths there, and many believe that to be a gross underestimate. Neither America nor Europe will ever be secure from the virus until the world, including Iran, is secure. We already have enough petri dishes allowing the virus to run riot and develop variants. We should be picking them off where we can; Iran is one that we can pick off. It is in our interests. We should ask the US to allow Iran to use its foreign exchange reserves, which are held in key countries, to aid its pandemic response. Doing so would ease humanitarian trade during a time when the pandemic has caused immense human suffering in a population already toiling under severe economic hardship from years of sanctions. The death toll in Iran is appalling.
The IMF estimates that, because of the maximum pressure sanctions, Iran has access to only around 10% of its total foreign reserves. Iran negotiated with South Korea, Japan, Germany and Iraq—countries where it maintains foreign reserves, but also where the US maintains strong bilateral relationships and exercises its muscle. Trump successfully discouraged all four from accommodating Iran, both directly and indirectly. The Biden Administration are now doing the same. I remind noble Lords that this all should be in contravention of US domestic and international law.
Instead—this is the plan—Biden could go beyond the escrow structure that has been used to facilitate the use of Iranian oil revenues for humanitarian trade.
I remind the noble Lord of the six-minute limit.
Thank you. I have just a few sentences left, that is all.
On the condition that the reserves will not be transferred outside of the countries in which they are held, the US could recognise the authority of these four independent Governments to determine the scope of acceptable bilateral humanitarian trade with Iran. This approach could extend to the United Kingdom; we could use what we owe Iran to pay for the purchase of vaccines and other necessary medical supplies through INSTEX, which we set up with France and Germany but through which we have been unable to mobilise any trade. I commend this plan to the Minister and the Government.
My Lords, it is a pleasure and a privilege to follow the noble Lord, Lord Browne. I congratulate him on the plan that he set out, which I am sure the Government will consider.
I also congratulate the noble Lord, Lord Dubs, on securing this important debate. He is completely right to describe the kidnapping and plight of Nazanin Zaghari-Ratcliffe as heart-breaking; he is also completely right to say that the Government should examine whether Magnitsky sanctions could be used against the perpetrators. Our new Foreign Secretary was right to adopt a resolute and determined approach to securing the release of detained British citizens; she was also right to make this a high priority as soon as she was appointed.
We must be absolutely clear about the nature of this regime. This is not a democracy run by reasonable people with whom negotiation bears fruit. It is a brutal regime that executes its opponents, hangs gay men from cranes, denies women basic rights and even, as we have heard, kidnaps British citizens for use as political pawns. In the past few months, it has killed a British national and a British serviceperson in its attacks on ships in international waters. It equipped Hamas terrorists with the missiles that they rained down on civilians in Israel earlier this year, causing the terrible conflict that we saw in May. It has prolonged the brutal civil war in Syria and attacked allied forces in Iraq, while its support for Hezbollah terrorists led to last week’s carnage in Beirut and threatens another civil war.
I never accepted that relaxing sanctions on Iran would encourage the regime to behave more responsibly and reasonably, given that, under the previous sanctions regime, with its economy on its knees, the regime spent huge funds on sponsoring and supporting terrorism. It was always clear that, with sanctions relaxed and more funds at its disposal, the regime would increase the funds provided to terrorists such as Hamas and Hezbollah.
Iran has clearly broken the promises made in 2015. Experts estimate that it is now just two or three months away from acquiring enough fissile material for a nuclear weapon. It promised not to enrich uranium above 3.67% or stockpile enriched uranium higher than 3.67% for at least 15 years. However, according to the IAEA report in May, it had 62.8 kilograms of enriched uranium at 20%. At the start of September, the IAEA estimated that it had 84.3 kilograms of 20%-enriched uranium, plus an additional 10 kilograms of nearly 60%-enriched uranium. Last weekend, Mohammad Eslami, the head of Iran’s Atomic Energy Organization, announced that Iran had more than 120 kilograms of 20%-enriched uranium.
None of these actions—installing advanced centrifuges and obstructing IAEA inspectors, both before the US Administration withdrew from the JCPOA, while enriching uranium to 60% and producing uranium metal, which is a significant component of nuclear weapons—have any credible civilian applications. This is why Israel’s new Prime Minister, Naftali Bennett, said this last week:
“The Iranian nuclear program is at its most advanced point ever … the Iranians are playing for time, and the centrifuges are spinning.”
Professor Eyal Zisser said:
“The only thing separating Iran from a nuclear weapon is a political decision from its leaders … Iran has enriched enough uranium to make a bomb, and even if it hasn’t done so yet and hasn’t developed the ability to launch one on a ballistic missile, this is still just a technical matter requiring just a few weeks of effort”.
Can the Minister tell us what steps will be taken to build a concerted multilateral push against Iran to address the nuclear issue and its destabilisation of the rest of the region? Is it now time to refer back to the UN Security Council and to consider the snap-back of prior sanctions, which were clearly pivotal in bringing Iran to the negotiating table in the first place? Will the Government ensure that any new deal must include Iran committing to unfettered IAEA access to the full extent of its declared—and undeclared—nuclear facilities?
Finally, given Iran’s use of its funding to sponsor terrorism across the region, what assessment have the Government made of the case for banning Hamas in its entirety? This is a genocidal terrorist organisation opposed to any peace agreement in the Middle East. It wants to wipe Israel off the map and murder the Jews who live there. I believe that it should be banned in its entirety in the UK to prevent it raising funds in this country.
My Lords, this short debate is a helpful opportunity to attempt to offer an insight into the complex world of Iran. Some are of the view that modern-day Iran, which is now pivoting towards the East, is of the West’s making. The corrupt leadership in Iran does not represent its people, who should not be punished with policy failures and requiring long-term planning.
At the core of this evening’s short debate is the strategy to resolve the JCPOA. What is the Government’s strategy to bring this all to an end? What is made of Iran’s increasing implied threat of going military on its nuclear programme unless the world does this or the other? Is the regime trusted in negotiating in good faith?
Although the Revolutionary Guard is loyal to the regime, in practical terms the regime is more reliant on the Revolutionary Guard than the Revolutionary Guard is on the leadership, who consequently have become more assertive. Iran is in reality a de facto military Government, with all key positions controlled by commanders. They are in full control of the running of the economy of the country. The Iranian people, the West and the world are hostage. How long is the West going to allow this behaviour to continue?
Worryingly, Iran will more increasingly negotiate through hostage diplomacy; China has provided evidence just recently that it can be turned to an advantage. This is a dangerous turn of events, with the potential to get out of hand globally. A crucial question is: how will the Government respond if Iran, or any other state, continues to follow a policy of hostage-taking to achieve its goals?
I fear that the raising of dual citizens might play more into the hands of Tehran as there is an association with the return of money that is legally due for return. While the regime believes that it has right on its side, it will do nothing. I sincerely hope that I am proved wrong. The UK not returning the tank money plays into the hands of the leadership as it is an easy message to explain that it is the UK that is not abiding by the rule of law.
There still remains the recognition by Iran of Israel. It should not be forgotten that Israel also owes money from the days of the Shah, giving credence to an international coalition against it. Some are of the singular view that there is only one state that has the means to bring about resolution to the situation in Iran and the region: Israel.
In today’s climate, we should forget regional negotiations with the US at the table. We are entering a cold-war phase, with Iran having cut a 25-year deal to give first rights to Russia and China on construction, intelligence and military matters. Where does this leave us? There is, however, one core fundamental: the language of power is all that is understood. When faced with credible condemnation pressure, the leadership buckles. Will the Minister set out before the House where the Government perceive the regime’s weak points are so that we can all join in to make for a better world with Iran at the table?
My Lords, as if the continued detention of Nazanin Zaghari-Ratcliffe is not shocking enough, I want to draw attention also to the harassment, death threats, arrests and detention being suffered by the many dual nationals who work for the BBC Persian Service, based both in Iran and in London. I am hoping that the Minister can update the House this evening on what steps the Government can take to up the ante on their representations to the Iranian Government, because the problem simply has not eased up. It has escalated over the past three years, with many family members of BBC employees also now subject to interrogation and harassment.
Since 2017, the Iranian Government have pursued criminal investigations into BBC Persian staff, alleging that their work constitutes a crime against Iran’s national security. Some 152 named individuals, most of them dual nationals, are the subjects of an injunction to freeze their assets, preventing them buying or inheriting property in Iran. Recent testimonies from staff show that interrogation techniques have become more frightening and aggressive towards elderly parents, siblings and other family members. Some staff have been threatened with kidnapping. Female staff in London are being particularly targeted with online attacks, fake stories about rape and sexual harassment by male colleagues at the BBC, and fake pornographic pictures posted on social media. Staff have been unable to return to or visit Iran to see sick or dying elderly relatives, for fear of detention or worse.
The objective of the Iranian Government appears to be to coerce people to stop working for the BBC, and to undermine the independence and quality of the World Service journalism. Repeated reports, resolutions and appeals to and from the United Nations have got nowhere: indeed, some brave BBC Persian journalists who have provided testimony have been further victimised.
I am aware that the FCDO has raised concerns in bilateral discussions with Iran, and has pledged to continue to do so, but this just does not seem to be enough or achieve any change. The injunction remains in place; BBC Persian staff and their families continue to have their rights infringed, and journalists continue to be the subject of systematic and sustained attacks.
I really want to hear something more and new from the Minister on what our Government can and will do to defend the independence of the BBC Persian service and, most importantly, the lives, safety and welfare of the people who work for it, and their families.
My Lords, this has been a fascinating debate, but it has often seemed as if there have been two separate, entirely different countries that were being discussed. One showed Iran as a potential partner for peace, a potential future trading ally that has been wronged by the West and President Trump, and let down by the UK. The other, which I fear is closer to reality, is a country described in contributions by the noble Lords, Lord Austin and Lord Waverley, and the noble Baroness, Lady Coussins: it is run by a military dictatorship that remains the biggest exporter of Islamist terror in the world and reaches into our own country in the way that the noble Baroness, Lady Coussins, just set out and provides a real and credible threat to its neighbours in the region and, in the future, to our way of life.
I accept and agree with the arguments made by a number of erudite and experienced noble Lords for the resumption of the JCPOA. If the agreement is resumed, it must be effective. I would like to see it going wider than the nuclear parameters it has been set, but I fear that is unrealistic. Let us be under no illusion, however, that Iran is now breaking the agreement, forging forward towards being a nuclear power. I hope the Minister will reaffirm that the UK understands that there is no scenario in which this can be accepted and allowed to carry on.
When we talk about the inducements necessary to bring Iran back to the table, let us be clear that there is no scenario in which Iran can be allowed to become a nuclear power in the region. The G7 recently made that clear, as did the United States in its bilateral engagement with Israel a couple of weeks ago. The UK also needs to be clear that no one will allow this threshold to be reached. I hope that will be part of restoring a level of deterrence that can bring Iran back to the table effectively.
Surely deterring Iran from becoming a nuclear threat in the region and to the world and from continuing its disgraceful role as an exporter of Islamist terror is a wider issue than this sanctions/enrichment trade-off. It requires a more significant reappraisal of the West’s approach to its alliances, foreign policy and outlook in the world.
Capability is of course an issue, but the resolve to act is surely just as important. In recent years, Iran has shown what it can do with a fraction of the capability of our allies in the West. If we do not have the resolve to face down acts of aggression or the foresight to understand the scale of the threat to our liberal democracies and the rule of law in this environment, the threat Iran can pose with very little capability can spread. Look at Yemen. With a low level of resource, the Iranians have empowered an Islamist proxy to prolong a conflict that has not only caused untold suffering for Yemenis but weakened essential ties between the coalition formed against the Houthi Islamist terror group and against the Islamist expansionist terror which Iran has represented and championed since 1979.
The same currents applied in Lebanon and in Syria before that. Iran and Russia have exploited a relative lack of resolve and strategic common sense from the West, resulting in appalling misery for millions of Syrians, a refugee crisis that is further impacting on the West and the emboldening of those who would undermine our way of life.
This matters even more because of the emergence of China, which will in years ahead be able to bring world-class military capability and might to challenge any weakness in the West’s resolve. Basic hostility to our world view, plus military capability, plus ongoing weakness from the West to deter threats could pose an existential challenge to our way of life in the decades ahead. Let us hope that Iran’s acceptance into the Shanghai Cooperation Organization is largely symbolic for the moment, but it is a symbol whose importance we must countenance.
The UK has shown its ability to think creatively with the recent strength of the AUKUS alliance. Our challenge should be to apply that scale of ambition, innovative thinking and strength of partnership to the Middle East, to restore that sense of deterrence.
My Lords, I start by paying tribute first to the noble Lord, Lord Dubs, for bringing the issue of Iran and, in particular, concerns about dual nationals, especially Nazanin Zaghari-Ratcliffe, back to the Chamber, and secondly to my noble friend Lady Northover. As my noble friend Lord Purvis of Tweed pointed out, while she was our foreign affairs spokesperson in the Lords, she raised these issues on 20 occasions.
I also pay tribute to the noble Baroness, Lady Coussins, for yet again bringing to the Chamber’s awareness the concerns of nationals in another country—people working as journalists for the BBC Persian service and people working to get the truth out, who are very often the interpreters on whose behalf she is speaking. It is very easy to think that we are focusing on just one or two very narrow issues. Understanding the difficulty of journalists in speaking truth to power and getting a message out in Persian is important. So although slightly beyond the remit of this debate on the JCPOA and dual nationals, those issues are important. Will the Minister say what support the Government are giving to the BBC Persian service?
From these Benches, I support the JCPOA, as did the opening speakers. Later in the debate, slight concerns were expressed, but at the beginning I thought every speaker was going to say almost the same thing: that the JCPOA was a very important agreement. Like my noble friend Lord Purvis, the noble Lord, Lord Hannay, and the noble Baroness, Lady Coussins, I was a member of the International Relations and Defence Committee when it looked at nuclear non-proliferation. As the noble Lord, Lord Lamont, pointed out, the JCPOA was not good just for Iran. It was good for security and non-proliferation. We heard from the noble Lord, Lord Austin, that Iran has breached the agreement. It has, but what signal did the United States under Donald Trump send by pulling out of the JCPOA? As the noble Lord, Lord Browne, pointed out, President Biden does not seem to have deviated very much from the actions of President Trump. Can the Minister tell us what conversations he, the Foreign Secretary or the Prime Minister have had with President Biden or with Blinken about the JCPOA and getting the United States back on board?
The rhetoric of candidate Biden, Senator Biden, when he ran for the presidency and what is happening how may not be as in sync as they might be. Given that the United Kingdom is so keen to have global reach, part of that surely has to be in our negotiations with the United States. If we want the JCPOA to function, the E3 are important, but ensuring that the United States is back at the table is crucial. I very strongly agree with the noble Lord, Lord Hannay, that the UK’s position has been about active diplomacy and sanctions. What sort of active diplomacy are the Government pursuing at present, not just to get the US back to the table, but to get Iran back to the table? In particular, what work is the new Foreign Secretary doing to ensure that the rights of dual nationals are being secured? As we have heard, we are now on the fourth Foreign Secretary who has been dealing with Nazanin Zaghari-Ratcliffe. When he was Foreign Secretary, the Prime Minister’s words were perhaps not always as diplomatic as they might have been. Can we hope that Liz Truss will do a better job?
It is vital that we understand that some of Iran’s actions, not just in uranium enrichment but in human rights and perhaps torture, need to be looked at so that we understand, and we would like the Government to show, that while it is important that we get Iran back to the table, we also should not be afraid to call it out when there are concerns on torture.
My final point picks up on the points from the noble Lords, Lord Dubs and Lord Lamont, at the start of this debate. If the UK has a debt of £400 million to Iran and we want to show it that we are serious about our commitments, surely we should look at resolving that debt so that we can say that we have done everything we should and we are now holding it to account to deliver on the JCPOA and on the rights of dual nationals.
My Lords, I add my thanks to my noble friend Lord Dubs for initiating this debate and for consistently raising these issues on a regular basis. I join the noble Baroness and the noble Lord, Lord Purvis, in paying tribute to the noble Baroness, Lady Northover, who is retiring from the Front Bench. She has assured me that although she is retiring from the Front Bench she will continue to come to this Chamber and raise these issues. No doubt we will see her in the very near future.
The noble Baroness mentioned the fact that we are now on the fourth Foreign Secretary. However, the Minister has an incredible record of longevity in this Government and I welcome him to his place. He continues to work in support of all noble Lords, particularly in these sorts of cases.
The Government of Iran are clear that they are not prepared to act in accordance with the global rules-based order. The UK and our allies must make it clear that their lawless actions carry costs. The Iranian attack on the merchant vessel earlier this year was a flagrant breach of international law and, when viewed alongside its continued detention of dual nationals, there is an evident need, as my noble friend Lord Dubs said, for a strategy with our allies to end this pattern of behaviour.
On the comprehensive plan of action, put simply, the Trump decision to abandon the plan has not worked. In the words of Roger McShane of the Economist, by the end of President Trump’s term, Iran was closer to holding the bomb than at the beginning. I agree with the noble Lord, Lord Lamont, that President Biden is right to open the possibility of reviving the agreement and the UK, as part of the E3, must consider how we can support that process should the opportunity arise in November. I hope the Minister will give us some indication of what he thinks the prospects of that will be.
We must also recognise that without an agreement in place Iran will continue to advance its nuclear development. Given that Tehran is now hampering inspections by the International Atomic Energy Agency, there can be no ignoring the fact that the opportunity for diplomatic agreement may not always exist.
On the debt issue, I agree with my noble friend and other noble Lords that we have to separate this issue. We cannot be complicit in it being used as a bargaining tool. If it is right that we return the money—and the courts have said so—we should hear from the Minister tonight what is hampering that process. I ask him to give us some very clear indication of what is going on.
On dual nationals, the ongoing detention of Nazanin Zaghari-Ratcliffe, as well as of Anoosheh Ashoori and others, continues to be a political bargaining chip. Their imprisonment is creating an unimaginable ordeal for them and their families, and it is now obvious that the Government’s approach to securing their release has not worked. The latest developments in Nazanin’s case and her appeal at the weekend are a new setback. I hope that the Minister—and all Ministers in the FCDO—will reflect on her husband Richard’s comments that the Government are now simply engaged in “managed waiting”. The real issue here—the key question asked by my noble friend Lord Dubs—is how we are working with our allies, particularly the European Union, to ensure that we can secure their immediate and unconditional release. I look forward to hearing the Minister’s response.
My Lords, I join others in thanking the noble Lord, Lord Dubs, for once again raising the important issue of the situation of those arbitrarily detained in Iran, and the particular cases. I pay tribute to him for doing this consistently. I assure him, and indeed your Lordships’ House, that I remain, both in my capacity as Minister for Human Rights and as a member of the Government, fully committed to ensuring that we use every lever at our disposal to continue lobbying for the release of all the dual nationals in Iran.
The noble Lord asked, quite specifically, why we do not name every single individual in Iran who is subject to that detention. The simple answer is that we are engaging, quite regularly, with various members of the families of those detainees. In certain cases, it is at their request that we have not named parties publicly, but I assure the noble Lord that we continue to raise their cases, albeit at certain times quite discreetly.
I recognise the very insightful contributions by all noble Lords. If there is one natural conclusion I could reach from this debate, it is that I do not think there is anyone, wherever they sit in your Lordships’ House, who disagrees with the general thrust, both on the importance of the JCPOA and the need for Iran to act, do the right thing and release Nazanin Zaghari-Ratcliffe and other people the noble Lord named. I will come on to that in a moment or two.
I join the noble Baroness, Lady Smith, and the noble Lords, Lord Purvis and Lord Collins, in recognising the vital role, and the strength, of the relationship I had with the noble Baroness, Lady Northover. I pay tribute to her efforts and I am sure the noble Lord, Lord Collins, is quite right that we will continue to hear valuable contributions from her. I think it is important to put it on record, that, together with the noble Lord, Lord Collins, on a whole raft of issues we have enjoyed not just engaging directly and a real understanding of each other’s position, but, if it is appropriate for me to say so as a Minister of the Government, a sound friendship that helps us unravel some of the issues in a way that is extremely important when it comes to sensitive issues.
I welcome the noble Lord, Lord Purvis, to his place and look forward to engaging with him on a raft on issues. Of course, the continued role of the noble Baroness, Lady Smith, on the Front Bench is vital. Also, since we have talked about longevity in office, I believe that the noble Lord, Lord Collins, has also sustained his position, certainly during my tenure as Minister of State.
Turning first to the JCPOA deal, the nuclear deal demonstrated between 2015 and 2019 that it did and can deliver results—a point made by the noble Lord, Lord Hannay, who has great insight on these matters. However, what is also clear, as the noble Lord, Lord Austin, reminded us, is that since July 2019 it is Iran that has incrementally stepped away from compliance with the deal. This point was also made by the noble Lord, Lord Walney. Since that stepping away, the IAEA has also further confirmed that Iran has continued to produce uranium, metal-enriched up to 20% for the first time and, as we learn, alarmingly, has significantly increased its capacity to produce uranium enriched up to 60%. I hear very clearly the warnings that were sounded by the noble Lords, Lord Austin and Lord Walney, in this respect.
To underscore the severity of Iran’s action, it is unprecedented for a state without a desire to develop nuclear weapons to enrich uranium to 60%, a point made by the noble Lord, Lord Collins. Iran has no credible civilian need for such capability, which constitutes a significant step towards developing a nuclear weapon. Iran has chosen irreversibly to upgrade its nuclear capability, and it remains in clear violation of its JCPOA commitments.
I will review the detailed suggestions from the noble Lord, Lord Browne, but I say to him and to my noble friend Lord Lamont that Iran has a rich history of culture, engagement and enlightenment. Our battle, our challenge, our dispute, is not with the Iranian people but with the Iranian Government, who are persisting on this particular, most tragic path. Simply put, Iran’s nuclear programme has never been so advanced, and of course it remains deeply concerning. However, I agree with the noble Lord, Lord Hannay, who speaks with great insight and experience, that it is even more important now for peace and security in the region that Iran return to negotiations. The noble Baroness, Lady Smith, my noble friend Lord Lamont and other noble Lords, including the noble Lord, Lord Purvis, all emphasised that point.
As I have often said, the JCPOA is not perfect but it is the best framework we have to monitor and constrain Iran’s nuclear programme. The United Kingdom has rigorously abided by the terms of the agreement, and let me assure noble Lords that we remain committed to it. Iran stepped away from the negotiations in June; its reason was the election. However, it has not returned. At the UN we have seen not just the United Kingdom, the US, France and Germany but Russia and China adding their support to the need for Iran to return to the negotiations. Rather than return, it has continued advancing its nuclear programme, which is irreversibly reducing the real value of the JCPOA.
The noble Lords, Lord Walney, Lord Austin, and Lord Purvis, and my noble friend Lord Lamont, asked me specifically about the United Kingdom’s position. We align ourselves with the position that the offer on the table from the United States to lift sanctions which are inconsistent with the JCPOA in return for Iran returning to full compliance with its nuclear commitment is both fair and comprehensive, and we are working with our partners to secure that. France, Germany, Russia, China and the US have also, as I said, echoed calls for Iran to cease immediately its reckless behaviour, which is a danger to us all.
We are ready to restart negotiations. If we cannot resume talks and achieve a deal soon, we and our international partners will have to reconsider our approach. Various noble Lords, including the noble Lord, Lord Austin, raised the issue of the global human rights sanctions regime. Of course, I cannot speculate, but we are engaging diplomatically as well. One of the first meetings that my right honourable friend the new Foreign Secretary, Liz Truss, had during UNGA on 22 September was with the Foreign Minister of Iran. Let me assure the noble Baroness, Lady Smith, that the Prime Minister has also raised the issues of the JCPOA and dual nationals directly with the President of Iran.
Let me pay tribute to the role played by the noble Baroness, Lady Coussins, in respect of BBC Persia. We fully support BBC Persia, and she is aware of the representations we have made. She asked what more can be done. I will certainly take back this issue and reflect, but she is fully aware of our role as a leading voice on the Media Freedom Coalition. Perhaps there is further work we can scope in that respect, and I would be pleased to discuss further steps that can be taken in that regard.
The noble Lord, Lord Dubs, raised the issue of representation, of consular support and attending various hearings. Of course, the issue is that Iran does not recognise dual nationals, as he knows, but we have nevertheless been relentless in our pursuit of the release and safe return of British nationals detained or forced to remain in Iran. They include Anoosheh Ashoori, Morad Tahbaz and of course Nazanin Zaghari-Ratcliffe, who have been separated from their loved ones for far too long. We are engaging directly with the families in certain instances, and both the current and previous Foreign Secretaries have talked directly with Nazanin herself.
Although Iran does not recognise dual nationality and therefore continues to refuse our request for consular access, the UK Government have worked for the immediate return of detained dual British nationals at every opportunity. We have consistently raised the cases I have referred to, and indeed others, at the highest levels of the Iranian Government. Last month during the UN General Assembly, as I said, the Prime Minister discussed these very cases and their release—and with former President Rouhani at a previous UN General Assembly as well—while the Foreign Secretary pressed the issue with Foreign Minister Amir-Abdollahian.
The noble Lord, Lord Dubs, raised the issue of diplomatic protection. By exercising diplomatic protection in the case of Mrs Zaghari-Ratcliffe, we formally raised it to a state-to-state issue and we will take further action where we judge it will help secure her full and permanent release. Of course, what we have seen happen recently is tragic and my right honourable friend the Foreign Secretary issued a very strong statement on 16 October, condemning Iran’s decision to proceed with its baseless charges against Nazanin Zaghari-Ratcliffe. Her predecessor also engaged frequently on their cases with the then Foreign Minister Zarif. In Tehran, we are in touch with our ambassador, Simon Shercliff, who continues to raise these cases with Iranian interlocutors.
I take note, of course, of the wider regional issues. My noble friend Lord Lamont mentioned the situation with Afghanistan. In this respect, there has been a glimmer or degree of co-operation with the Iranian authorities on those seeking to leave Afghanistan, particularly those minorities who seek refuge within Iran. But frankly, turning back to the dual nationals, our lobbying continues at every opportunity; it helped secure the temporary release of Mrs Zaghari-Ratcliffe in March 2020 and the removal of her ankle tag in April this year. I assure noble Lords that we will not be satisfied until all these British nationals are returned home.
All noble Lords who contributed raised the issue of the IMS debt. In this respect, it is unhelpful, as the noble Lord, Lord Collins, said, to connect wider bilateral issues with those arbitrarily detained in Iran. It remains in Iran’s gift to do the right thing. In terms of the debt itself, there was an adjournment of the April hearings at the request of Iran’s Ministry of Defence. A final decision on a new date has not been made but we continue, as I said, to work on this issue and explore options. It is a 40 year-old case that we need a resolution on.
I am conscious of our time limit and there are a number of other questions. The noble Lord, Lord Dubs, normally reserves questions for the end of his contributions. Most of his contribution, rightly, was made up of specific questions. I will of course write to him on those I have not able to answer.
Let me assure all noble Lords who have participated in this important debate that we continue to press Iran. We will work with our allies and press Iran to return to nuclear negotiations around the JCPOA in Vienna at the earliest opportunity, and to full compliance with its commitments under the JCPOA. The deal on the table, we believe, is balanced. It cannot remain there indefinitely; if we cannot reach agreement soon, we will have to reconsider our approach.
On the issue of detention and torture and Iran’s commitment to the ICT, I totally agree with the noble Lords, Lord Dubs and Lord Purvis, and the noble Baroness, Lady Smith, that Iran is a signatory to that convention and needs to ensure that it upholds its obligations to it. We will explore how we can bring further focus to this important issue, including opportunities that arise, for example, within the Human Rights Council. I further and finally assure all noble Lords that the detention and treatment of British nationals in Iran remains, and will remain, a top priority for the new Foreign Secretary, for our Prime Minister and for the Government as a whole. Iran has subjected them to a cruel and inhumane ordeal over the last five years. I assure noble Lords that we will do all we can to continue to ensure and secure their release, so that they can once again be reunited with their families in the UK.
House adjourned at 8.40 pm.