Thursday 2 December 2021
Arrangement of Business
My Lords, Members are encouraged to leave some distance between themselves and others and to wear a face covering when not speaking.
National Health Service: Liability Costs
Question for Short Debate
My Lords, I intend to read what I have said. It is very unusual for me to do so and I hope that I will read it reasonably well. I do it because I sent a copy of what I am going to say to the Minister, as I am going to make some suggestions and I thought it only sensible that she should know what they were because trying to answer them immediately might be slightly more difficult, so it is in the hope that it will be practical that I do this.
My first appearance here as a junior advocate was in a clinical negligence case. Your Lordships will understand that that was not yesterday or the day before, and I have done a number of these cases in a more senior role since. I should say, in order to deal with the idea of any sort of specialty, that I am an honorary fellow of three royal colleges—particularly, in this area, the Royal College of Obstetricians and Gynaecologists.
In the last year the cost to the NHS of clinical negligence was £2,209.3 million, of which claimant legal costs were £448.1 million. The cost to the NHS of its own service is shown as less, but the two are not properly comparable because the NHS costs do not include the staff costs and that kind of thing. That was confirmed in a Written Answer some time ago. It is sometimes suggested that this is due to the existence of conditional fees—some doctors seem to think that conditional fees have caused this—but I point out that not a penny goes out on that basis unless fault is agreed or established on the part of the NHS.
I ask the Minister to say whether, when a fault is established or agreed against the NHS, the whole service is warned to avoid repeating it. It seems to me that that would be one of the best ways of cutting down examples of negligence. Once something has happened, it is important that everyone is warned against it happening again. These things are apt to be quite common.
One of the first cases that I did involved the death of a person in anaesthesia. The reason was that the machine that was used had two levers, one for shutting out the oxygen and the other being set to allow the oxygen in. The anaesthesiologist in charge of dealing with this child did not notice that the lever was down and the oxygen was shut off. They could not understand what was wrong and sadly the child died before they discovered it. If that happens, it should be broadcast right across the area of the NHS that is using that kind of facility so that it can be stopped immediately. That is such an obvious thing to happen. What arrangements are there in the NHS for spreading the news of a fault in order that it be not repeated?
On damages, I strongly advocate the repeal of Section 2(4) of the Law Reform (Personal Injuries) Act 1948. In my experience, two principal factors increase damages. One is that the fault occurred at or near birth, so the damages take account of the whole of life, which is why those damages are especially high. The second is that the loss of earnings resulting from the fault is large. Generally, the NHS treats all patients equally and I suggest that it would be appropriate to cap the rate at which loss of earnings can be recovered by perhaps a multiple of the current average wage. That could be made public and any patient undergoing treatment whose income was higher than the cap could, I suggest, make an insurance arrangement accordingly.
In the case where the liability of the NHS is established, there is scope for excessive claimants’ costs. I suggest that a table of allowable costs linked to the amount of damages could be used to mitigate this with a provision—I can see that there are cases requiring this—that the court should have a power in a particular case involving special difficulty not provided for in the table to award a larger figure.
I should add that over my career I have been involved in many discussions of alternatives to the judicial system: administrative systems, systems that make it automatic and so on. I have never found, or been involved in, a decision to accept anything of that sort as satisfactory. I honestly believe that the judicial system is the most efficient and fair-minded system that you can have.
One of the great difficulties is that inevitably there is a distinction between what is caused by fault and what is natural. What is caused by fault will be subject to compensation and what is natural will obviously not. Often the investigation into the cause is the centre of the investigation that normally takes place. These are humble suggestions made with a view to trying to help the NHS to devote the money that it gets to front-line services rather than paying out to people who have been harmed, more or less, in their course of treatment by the NHS.
My Lords, speaking in the presence of senior lawyers as a humble simple solicitor is always, to me at least, rather a trial. When I first came to the House of Lords, I made the serious error of speaking with what I had self-styled authority on a particular Supreme Court case. My failure to read the speakers’ list properly led me to be somewhat humiliated when the next speaker had been a member of the Supreme Court and had deliberated on the case that I was citing. I learned my lesson, so I shall be very careful in the presence of eminent lawyers in what I have to say.
In preparation for this short debate, I thought that I would supplement the usual excellent Hansard extracts and our Library briefings with some extra material gleaned from the world wide web. As a lawyer, I have become used to the new permitted advertising, hopefully tasteful, that my profession has undertaken in recent years, but I was astonished to find that under the heading of “medical negligence” it was almost impossible to find anything of an objective, instructive or helpful nature among the plethora of law firms and quasi-legal entities offering very strong encouragement to citizens to pursue medical negligence claims.
We are all of course aware of initiatives taken by some legal firms to pursue group actions, where they try to encourage us to find fault with motor cars that do not quite come up to specifications—I think that all of us have seen that. My legal training always suggested to me that a simple principle was no compensation without a proof of loss. However, that does not seem to be the case anymore, so without trespassing on the current cases, I wonder how that principle is being maintained. There have been times when I have been sitting at home and relaxing at the weekend when I have suddenly had a phone call telling me that I have had a car accident and asking whether I would like to claim large sums of money as a result.
I am not for a moment suggesting that medical negligence cases are anything but proper and necessary where the negligence is clear and should be punished or accounted for. My problem lies with the way in which claimants are sometimes encouraged to come forward: “no win, no fee”, “our 30-second claim calculator”, “getting results for you” or “no need to go to court because financial settlements are quite common” et cetera. I wonder how many times the NHS finds it cheaper and more convenient to pay out money without accepting liability after receiving threats of this kind—and threats of court action as well. No test of the issues ever takes place in such cases.
My trade union, the Law Society, has commented on government plans to introduce fixed costs for smaller claims against the NHS in changes to Civil Procedure Rules. This is against a background where, often, the legal costs in such cases far exceed the actual compensation obtained. I agree that even in smaller claims we should not restrict a solicitor’s ability to work on them to the highest standards, but, if possible, we need to avoid the need for expensive and drawn-out exercises. More generally, the way in which claims are handled by the NHS bodies, including NHS Resolution, is a cause for concern. My noble and learned friend has already highlighted the enormous sums paid out for claims and legal costs—more than £2 billion a year, 1.5% of the entire NHS budget.
A Cambridge University paper on clinical negligence and evidence, published in July this year, highlights the problems in assessing cases. It reminds us that in order to succeed in a claim against the NHS four elements must be proven in the law of tort: first, that the health provider had a duty of care to the claimant; secondly, that such a duty of care was breached; thirdly, that the breach caused the claimant some form of loss or harm; and, fourthly, that at least one of the losses caused by the provider’s breach is actionable. This is the common law and it is based on the interpretation of a greater than 50% probability that a breach of care led to private losses. I think that some medico-legal advertisers should be reminded of those elements as well.
The other problem, even when these basic hurdles are passed and liability is proven or accepted, is the question of quantum: how much? What is the level of economic and social redress or individual loss and what level of punitive damages should be awarded? In the latter case, is there evidence that punitive damages have a direct effect on improving standards and, more specifically, ensuring that those who were responsible for the negligence suffer consequences or, at the very least, change their processes or work systems to avoid further episodes? They should of course be aware of any claims or judgments that have involved them in the first place, but that is not always the case.
So far, I have been speaking as a lawyer and looking at these issues from an outside perspective. Some years ago, I was a member of a regional health authority and then a founder member of the Mental Health Act Commission.
I want to conclude by examining the ever-increasing number of claims for medical negligence and the actions that might or should be taken by the NHS to minimise them. The first must be to generally improve standards and patient safety, as my noble and learned friend referred to. This is easy to suggest, but it must be seen against a background of intense pressure on staff and the service generally, as well as resource limitations. Secondly, we need to analyse where the claims are mostly concentrated. The Public Accounts Committee has identified that a large number of high-value claims are related to maternity care. Recent figures suggest that up to 50% of the value of claims were in this field, though only 10% of the number of claims.
Thirdly, the NHS must pursue alternatives through mediation and dispute resolution. Not everybody wants to litigate, even if they are sometimes over-encouraged. Sometimes they just want to be acknowledged and have their concerns recognised, with actions taken to improve standards. Fourthly, the NHS should not prevaricate or delay settlements where the evidence is clear; dragging out proceedings for months or years increases costs on all sides. Finally, as regularly recommended, including by NHS Resolution, learning from mistakes and improvement should be priorities for health managers and professionals in the service. They should be able to lead and be more responsible for health outcomes. This is an important subject for debate and I am pleased to have been able to make a small contribution.
My Lords, I am pleased to follow my noble friend, who has made an interesting and helpful contribution, not only from the legal point of view but from that of policy. We are all grateful to my noble and learned friend for initiating this debate, which gives us an opportunity to refer to some things that would help the NHS. In the process, we might also provide some additional emotional, physical and practical help to those who suffer harm as a consequence of failings in NHS treatment.
I do not come at this as a lawyer at all. I had responsibility for the health service for a while, but I probably devoted more time and energy to thinking about this issue during the passage of the NHS Redress Act 2006, when I was the shadow Secretary of State, than at any other time. Noble Lords will be aware that we in Parliament often devote our time to such Bills in the fond expectation that someone will do something with them afterwards. That did not happen with the redress Act; it was not commenced. There was a Labour Government at the time and we had a pretty full debate on it. I do not entirely agree with the Act, but I would say two things about it.
First, I think that at the end of the day we all subscribe to the proposition that we should not go down the route of a no-fault compensation system. My view has always been that it is incredibly difficult to distinguish between harm resulting from the fact of a disease and harm resulting from the treatment for that disease. In my case, I have had radiotherapy, surgery and so on; I have consequences, but I do not think that the NHS did anything other than look after me splendidly. Radiotherapy causes damage, but I do not expect that I should be compensated for that damage.
That leaves us with a third category, where I think that we have a taxpayer responsibility: harm that results from treatment that is not up to the standard that patients have a right to expect and, as my noble friend said, that the duty of care would require. If that duty of care is breached and harm results, a liability is established. I think that we were quite clear at the time and have continued to take the view that we should focus on trying to ensure that, where harm results from a poorer standard of treatment, compensation should arise.
The second thing that came out of all this was that it is absolutely clear that what patients and their families are looking for is openness and transparency— an understanding that something went wrong, an acknowledgment of fault and a desire and willingness to learn from it and to do better in future. Very often, what you hear from patients and families is that they do not want this to happen to somebody else again. In that respect my noble and learned friend is absolutely right.
How do we learn from this? The Health and Care Bill starts here next week and there are patient safety aspects to it, but a lot of this rests on the way in which the NHS manages itself. Of course, those who are responsible for NHS services are incentivised directly by the Care Quality Commission and the way in which it conducts its reports and looks at the services provided, and by NHS Resolution itself. The way in which the NHS funds this is through the payment of what are in effect premiums to NHS Resolution, which is effectively an insurance system for the NHS and indeed for private providers of NHS services and now for general practitioners as well. It does so on the basis that the premium charged is related to an extent not only to the risks that are run but to the standard of service that is being offered. There are direct incentives from NHS Resolution to trusts to get it right and we want to sustain that.
If I may, I will make passing reference to the report from our noble friend Lady Cumberlege. I think that she might wonder, as I do, whether we cannot use NHS Resolution more, to be an agency through which categories of patients who have sustained harm can be in a scheme for compensation, rather than simply operating on the basis of claims that are brought directly before the courts.
I turn to the courts and in a sense respond to the question asked by my noble and learned friend in this debate. Out of the NHS Redress Act and subsequent thought come three things. One is that we argued in 2006 for a fact-finding phase. A lot of the costs entailed in cases brought before NHS Resolution are down to expert witnesses and legal representation. We can significantly reduce those costs if there is a shared fact-finding phase that then has to be accepted as the basis on which a negotiated settlement might emerge. That was not built into the Act at the time, but I still think that we should go down that path.
Secondly, there is the question of the discount rate. It was probably about the time I was Secretary of State that suddenly the cost to the NHS of negligence claims increased dramatically—I think that it nearly doubled—and this was simply because the discount rate changed. Very low interest rates equate to very large sums required to deliver a given standard of care, and the costs associated with it, over a long period. We cannot just go around manipulating the discount rate, and my noble and learned friend will say that there is a lot of history to all this, but I think that what we could do—I will finish with this—is at least address the issue that half the cost of claims relates unfortunately to maternity services and the consequences for neonates and very small children. These are lifelong costs and the NHS very often meets many of them, whether through its own services or through NHS continuing healthcare.
As I understand it, the court does not really take account of that. What it sets out to do is provide a sufficient sum by way of damages that would allow the family to be compensated to the extent that they can provide all the services that are required for the child. The fact that these services will be provided by the NHS is not sufficiently taken into account. We should go down the path of saying that, where the NHS comes in and looks after somebody following an acceptance of fault, the level of damages that should be paid as a consequence should be reduced.
I am grateful to have had the opportunity to say a few things on this. I think that it is very much unfinished business, not least because of the lack of action on the NHS Redress Act 2006. I hope that this will be a spur to action, following what my noble and learned friend has brought before us.
My Lords, I begin with an apology. I did not timeously put my name down for this debate, but I am extremely grateful for the opportunity to say a few words on this topic. I am particularly grateful to my noble and learned friend Lord Mackay of Clashfern for having raised this matter at debate.
I begin by simply posing one question for the Minister: when will the Government publish their consultation on this issue? I understood that it would be available by the end of the year, but that rapidly approaches.
I do not wish to indulge in repetition, but we should bear in mind that the second largest contingent liability of the United Kingdom Government is clinical negligence claims, at about £83 billion, which is slightly short of the disposal of nuclear waste. The cost on an annualised basis to the National Health Service has already been mentioned: almost 2% of its annual budget. In those circumstances, I suggest that a more radical approach to the whole issue is required rather than tinkering. I fully accept that improvements in maternity care could have a material impact on the cost of clinical negligence claims, as those long-life claims represent something like 60% of the cost to NHS Resolution. While, for example, an amendment to Section 2 of the 1948 Act would be welcome, it applies only in respect of hospital care costs, not social care costs. When you are looking at catastrophic injury in childbirth, the vast majority of the costs arise in the context of social care costs, not hospital costs. Again, it may help, but it has only a peripheral benefit.
I suggest that we begin by acknowledging the social contract that exists with those who are able to engage in a health service that is free at the point of use. That would allow us to take the whole issue of liability out of the law of tort and into some sort of administrative scheme. One of the advantages of that would be the following. One considers this from the point of view of the victim or their family, but there are two sides to this. There is also the professional reputation of those whose professional ability may be impugned by a claim based on negligence. That is why it is so often difficult to resolve these issues without recourse to the courts, although I note that NHS Resolution is able to resolve more than half these claims without litigation.
Again, at the end of the day, litigation costs are only peripheral. I therefore strongly urge that, instead of looking at one or two individual issues such as improvement in maternity care or the repeal of Section 2, we should pause and consider a far more radical approach to the way in which we deal with the demands that arise from these cases. That may take us beyond the question of tortious liability into an area of no-fault liability, as suggested by the NHS Redress Act 2006. I am obliged to noble Lords for allowing me those few words.
My Lords, I thank the noble and learned Lord, Lord Mackay of Clashfern, for calling this important debate. I note that this is not a new issue to your Lordships’ House. My noble friends Lord Sharkey and Lord Storey have both raised questions on the failings of the current system of liability rules over the last three years. From these Benches, our starting point and what we believe should be the legislative priority must be that any patients injured by negligence are rightly entitled to compensation and their appropriate legal fees should be paid.
The fact that this debate takes us into the technical intricacies of clinical negligence cases must not distract us from the real problem at hand. As we have heard, the current system is heavily weighted against a patient or their family fighting for that justice and compensation. In our view, this needs to be changed.
I am not a lawyer and I am in awe of the legal debate that has just preceded my small contribution. I am particularly grateful to the noble and learned Lord, Lord Mackay, for his expert introduction on the legal problems in the current system of liability costs. I note most particularly the problems with the NHS Redress Act 2006, which proposed redress without recourse to civil proceedings but which, unfortunately, enabled the NHS to investigate itself. It is therefore perhaps not surprising that it has totally failed and has left patients and their families in a ghastly nightmare world of fighting for compensation following negligence against an enormous organisation that seems to have unlimited resources.
I listened with interest to the radical proposals of the noble and learned Lord, Lord Keen, which sounded very interesting. As the noble and learned Lord, Lord Mackay, outlined, unfortunately negligence does occur, and much more frequently than people understand. Comments have already been made about maternity services, where there is a particular issue. I have a particular interest in the lives of severely disabled children, some of whose conditions have resulted from clinical negligence at their birth.
So far, individual problems of trying to live with some of that negligence have not been mentioned, so I shall speak briefly about one family I know, who had to take on the NHS and were absolutely determined to use every legal technique in the book. Their child was starved of oxygen at birth and requires looking after 24 hours every day, which requires amendments to their house and support in lots of different medical areas—so it is costing the NHS money as well. As their child has started school, it has required schooling needs, transport to and from school and respite care for the family, who are doing most of this 24-hour care themselves—all running alongside a perpetual battle with NHS lawyers over the claim.
There are other horror stories, too, which have appeared in the press, about case files being lost in hospitals and staff being reluctant to come forward and speak, which tells me that there is a real cultural problem about the current system, whereby staff inside the NHS are worried about blame and the impact on their careers, and the lawyers are doing anything they can to avoid having to pay out large sums of money. The noble Lord, Lord Kirkhope of Harrogate, made a very important point about improving standards inside the NHS, but that cannot happen until the cultural attitudes about blame mean that it becomes possible to learn across the NHS from mistakes. The noble Lord, Lord Lansley, mentioned interestingly the debate about whether no-fault compensation should be applied, and the difficulties associated with that.
I come back to the patients, who do not want anyone else to have to go through the battle that they face. I absolutely echo the comments of the noble Lord, Lord Lansley, about using NHS Resolution—except that there are now five different branches of that. I really think that we need to learn from the report of the noble Baroness, Lady Cumberlege, First Do No Harm, and the imminent appointment of the first patient safety commissioner for medical devices. We hope that that will be an independent system. As we heard in Oral Questions this morning, we have yet to see the exact timing of the appointment of the first commissioner, but we are also looking to see that the SIs brought forward to your Lordships’ House will make it clear that it has to be an independent role.
I see that in negligence claims there might be some mechanism for a person independent of the NHS. It is absolutely vital that this is reviewed, and I echo the question from the noble and learned Lord, Lord Keen, on when the government recommendations will be published, as we are certainly running out of time for end of the calendar year. As this is unfinished business, it is still affecting the lives of patients and their families every day, as well as vitally reducing funds for our hard- pressed NHS as money is spent on fighting these cases.
My Lords, I, too, thank the noble and learned Lord, Lord Mackay, for securing this important debate and for his expert and insightful introduction. As the noble Baroness, Lady Brinton, stressed, your Lordships’ House has regularly over the years debated and supported measures to try to halt the steady and alarming increase in NHS litigation costs and to ensure that the lessons learned from the appalling cases of neglect that we all too often have to consider can be used to both prevent further harm and promote future patient safety.
The debate is timely, as the Commons Health and Social Care Select Committee inquiry into NHS litigation reform undertakes its crucial work, following the evidence sessions earlier this year. That is where I was able to get a lot of material for today’s debate. It is also timely because we now have the resurrected Health Service Safety Investigations Bill, scrutinised in depth by a Joint Committee of both Houses, which started its passage in this House two years ago. This time it is part of the Health and Care Bill, which we will commence work on next week.
We strongly supported the original Bill and were very disappointed when it suddenly fell off the Government’s radar. Despite efforts from across the House, Ministers were unable to explain where it had gone and why it was not being vigorously pursued in the light of the urgent imperative to embed the lessons-learned culture into the NHS.
The aim of the health service safety investigations body is to improve the quality of locally conducted investigations and, through its own high-quality investigations and better-conducted local investigations, to reduce the incidence of future harm in the NHS. This is to be achieved through an improved process of capturing and acting on learning, although the extent to which this happens will largely depend on the actions of other organisations in the system rather than the HSSIB itself.
While these benefits cannot be quantified, the expectation and hope are that they will outweigh the monetary costs incurred by the investigations, avoid costs associated with correcting or compensating for harmful incidents, and generate health gains, anticipated to be sufficient to offset the costs associated with making any necessary improvements in investigative practice and systems and/or safety. As we have heard today, those are all both urgent and pressing.
It is estimated that, if the lessons generated from HSSIB investigations could reduce patient safety incidents and in turn clinical negligence claims by just 0.3%, this would level out the £6.2 million per annum investment in its role and work, and lead to a significant reduction in current NHS litigation costs. The importance of protecting the HSSIB’s independence and its ability to provide the safe space to participants in investigations are key issues that we will pursue in the Health and Care Bill. These are obviously for the discussions that will begin next week, not for today.
On costs, the Health and Social Care Select Committee’s terms of reference point out that an additional £7.9 billion was spent on compensation from claims settled in previous years, meaning that more than £10 billion that could have been spent on patient care was spent on clinical negligence. Most worryingly, the Medical Defence Union’s evidence to the inquiry predicted that any money raised by the new health and social care levy would be entirely swallowed up by the amounts paid each year in NHS clinical negligence claims. What is the Government’s assessment of this claim? How does it impact their plans to reduce the huge NHS waiting lists for treatments? Most importantly, what money will be left for social care?
The Minister has reassured the House previously that the Department of Health and the Ministry of Justice are working closely together to identify ways of reducing costs. I look forward to receiving an update on this and other cross-government work that is being undertaken, the progress being made and intended timescales for action.
We have heard expert contributions today, covering many of the key issues that the Health Committee is examining: the legal and systemic changes needed to how compensation is awarded; how processes can be simplified so that claims can be speeded up and patients receive redress more quickly; and how adversarial legal processes can be changed and collaboration requirements between the legal advisers representing both sides of claims can be strengthened to facilitate earlier constructive engagement between the parties and end the often drawn-out and protracted processes that cause such distress and frustration to patients and their families, as we have heard today. Underlying them all is the importance of the system being able to learn from common failures—medical, procedural, training or managerial, policy or technology. The priority of better, safer care must be paramount.
One of the advantages of today’s debate is, as noble Lords have said, the valuable and timely spotlight it places on the work of NHS Resolution, the body that defends claims. It is sobering to note that, in the context of establishing the two Covid 19-specific indemnity schemes, £0.5 billion has been added to the estimate of future claims. Also, although the number of claims is expected to be down because of fewer operations and less treatment, and therefore fewer errors from potential clinical negligence, claims against primary care since NHS Resolution added this area to its portfolio in 2019 have seen a 40% increase.
Overall, we have a mixed picture. The cost of medical negligence has fallen for the second year running, although the percentage attributed to maternity claims has not changed—as noble Lords have stressed—while the cost of damages awarded has increased without a rise in the total number of cases. On maternity care, it will be helpful if the Minister can provide a progress update, either now or in writing, on the review taking place on the nearly 2,000 cases that came under review following last year’s shocking Ockenden report on the appalling failures in maternity care services at Shrewsbury and Telford maternity hospital.
The NHS Resolution 2020-21 annual report specifically refers to its work on safety to support the ambition to halve the rates of stillbirth, neonatal and maternity deaths and neonatal brain injuries occurring during or soon after birth by 2025, with an interim ambition of a 20% reduction in these rates by the end of last year. In written evidence to the health committee, the Royal College of Obstetricians and Gynaecologists and the Royal College of Medicine warn that spending on NHS litigation continues to constitute a threat to the sustainability of the NHS.
Maternity cases account for 11% of the total number of all clinical negligence claims but for 59% of the total costs in litigation by value. Overall maternity claims are valued at approximately £4.2 billion, a figure that has almost doubled since 2016-17. NHS Resolution also reports a continuing increase in claims for gynaecology in recent years, of which a large percentage are associated with the vaginal mesh scandal highlighted in the report First Do No Harm from the noble Baroness, Lady Cumberlege, referred to by other noble Lords. This issue will also be debated under the Health and Care Bill, particularly the key issue of redress systems for the victims of harm.
From today’s debate, it is clear that government action and the conclusion of the health committee’s inquiry into NHS litigation costs are urgently awaited, and that we still have a long way to go to establish and embed the joined-up patient safety learning culture across the NHS that is so urgently needed. I look forward to the Minister’s response.
I thank my noble and learned friend for bringing this debate to the House, and I thank other noble Lords for their contributions. If my noble friend Lord Kirkhope felt slightly daunted by the group around him, I do not know how he thinks I feel—but I will do my best. I am pleased that the Health and Social Care Committee in the other place is conducting an inquiry into this important issue.
There were so many good and interesting questions put forward during this debate that I am going to start by answering them. If that takes up my full 12 minutes then, frankly, I would rather have the questions than the speech.
My noble and learned friend Lord Mackay asked what had been done to improve the response to harm by the NHS before patients reach the point of making a claim. We know that poor handling when an incident or complaint occurs, or in the aftermath, can be distressing for patients and families at a time when they are vulnerable. The Government have introduced a number of measures to support the NHS in order to improve the response to patients who are harmed, including establishing the statutory duty of candour, involving patients in investigations, following an incident implementation process to investigate and learn from incidents—for example, the HSIB—and establishing a new Patient Safety Commissioner.
My noble friend Lord Lansley talked about the drive to improvement. We need to focus on the culture within NHS organisations, which is a crucial factor in determining how welcoming we are and open to concerns, complaints and feedback. NHS organisations are there to help, and there must be an effective complaints system that can provide an appropriate remedy for a person making a complaint and enable an organisation subject to a complaint to learn from its mistakes in order to improve future services. There is an NHS-wide complaints system in place in which patients have a legal right to complain, to have that acknowledged within three days and properly investigated and to receive a timely response. If complainants remain unsatisfied, they can raise their complaint with the office of the Parliamentary and Health Service Ombudsman, which will review the complaint and come to a final decision.
However, we need to learn from claims to make sure that harms are not repeated, as my noble friend Lord Lansley talked about. Learning is best undertaken at source and as close in time to the event as possible, which I think the noble Baroness, Lady Brinton, also mentioned. Our well-established safety and reporting system for all incidents facilitates rapid feedback. This means that claims are not the main source of learning for the NHS, because there are long time lags between incidents and claims, and the NHS wants to learn from all incidents, not only those where patients decide to bring a legal claim.
However, NHS Resolution is committed to helping the NHS learn from claims and is working directly with trusts to share learning and best practice across the NHS to drive safety improvement. This will help to minimise the potential for clinical errors that could lead to harm and possible future claims. An effective complaints system can provide an appropriate remedy for the person making the complaint and enable an organisation to learn from its mistakes and improve future services. There is an NHS-wide complaints system in place.
The noble and learned Lord, Lord Mackay, talked about specific clinical negligence litigation reform options. This is a long-standing, complex and sensitive issue. There are a number of drivers of cost, and for this reason we believe there is no single or quick fix. The Government are committed to addressing this issue. To understand the drivers of costs and explore ways forward, in the 2020 spending review the Government committed to publishing a consultation. The department has no plans to implement the NHS Redress Act 2006, and several of the benefits it may have delivered are being implemented through other initiatives.
My noble friend Lord Kirkhope of Harrogate talked about “delay, deny and defend” and the NHS culture which simply increases costs. NHSR aims to resolve claims promptly and fairly and for the right amount. It also has a responsibility to defend unjustified claims to secure NHS resources. Most claims are settled without court proceedings and very few go to trial. NHSR is focused on early resolution of claims where possible, including use of mediation to settle claims and resolving claims before they enter the formal litigation process. In 2020-21, 74.7% of settled claims were resolved without formal court proceedings.
My noble friend Lord Kirkhope also mentioned punitive damages. I understand punitive damages are not usually awarded in this country. Our safety systems provide for prompt learning where mistakes may have occurred. My noble friend also mentioned claimant legal costs, which frequently exceed damages for lower-value claims. That is the reason why government have proposed fixed recoverable costs, and to consider the Civil Justice Council proposals. We will consult on the next steps shortly.
I agree with my noble friend Lord Lansley that the Clinical Negligence Scheme for Trusts produces useful incentives for better safety. The NHS maternity incentive scheme has produced important improvements in safety across the country’s maternity services. My noble friend also talked about the NHS Redress Act. The maternity investigations undertaken by HSIB replace the local investigations that trusts are required to undertake for all serious incidents and identify the contributory factors that have led to harm, or the potential for harm, to patients. The Healthcare Safety Investigation Branch works closely with families to identify what went wrong and produces a final report, which it shares with the family and the trust, highlighting safety recommendations with the intention of preventing future similar events.
The department expects trusts to implement these recommendations in addition to the investigations. Trusts receive ongoing support, training and professional development in patient and family engagement through the programme. This includes how healthcare professionals can work sensitively and effectively with patients and families, and enhanced bereavement training. As of 30 September 2021, the Healthcare Safety Investigation Branch has received 3,475 referrals, of which 2,303 have progressed to full investigations that will soon be completed.
The noble Baroness, Lady Brinton, talked about an individual case. I empathise with the person involved. Obviously, I cannot comment on individual cases, but I want to reassure noble Lords that we are working to tackle these issues. We are doing so by improving safety, for example by publishing the first ever patient safety strategy to create a safety and learning culture in the NHS. We are improving maternity safety, for example by investing an additional £95 million in maternity services to support recruitment. We are improving response to harm, for example by working with the ombudsman on standards for complaints handling. We are improving learning from things that go wrong, for example through the legislative changes that we are making to the HSIB, so that investigations help organisations learn. We are improving learning from claims, for example through the safety insight work of NHS Resolution.
We are enabling healthcare staff to speak up without fear—this is so important, because I think it has been the culture throughout the NHS for many years, and certainly when I was a nurse it is what I found over and again in the various hospitals that I worked in. It is important that staff should be able to speak up. We will establish speak-up guardians in every trust, supported by the national guardian. Improving early resolution of legal claims through mediation is also extremely important.
The noble Baroness, Lady Brinton, also talked about the patient safety commissioner, which of course we talked about today in Oral Questions. I think I have nothing to add to that; anybody who was present for Oral Questions will know what I said. A campaign to fill the commissioner position is due to be launched later this year, in line with the public appointments process, and we expect to appoint the commissioner in the first half of 2022.
The noble Baroness, Lady Wheeler, talked about the importance of the Ockenden report. We are investing £95.6 million in maternity services to target the three overarching themes identified in the first Ockenden report: workforce numbers, training and development programmes to support culture and leadership, and strengthening board assurance and surveillance to identify issues earlier. Significant safety measures have been introduced in the past decade, including the NHS patient safety strategy.
The noble Baroness also talked about midwives’ evidence that improving patient safety and reducing avoidable harm is the best way to reduce litigation costs. Of course, that is true, and we must carry on doing that.
I have only two minutes left—there is never long enough, I am afraid. We recognise the importance of listening to patients. As I have said, we are appointing a new patient safety commissioner to promote the safety of patients and to champion their views, particularly in relation to medicines and medical devices, and we are looking to build on successes through the health and safety Bill. We want to establish an arm’s-length body to continue the much-lauded work of the Healthcare Safety Investigation Branch.
We announced £9.4 million of funding in the 2020 spending review to improve maternity services, including pilots to reduce the incidence of birth-related brain injuries. Some £95 million of funding will also boost workforce numbers and support culture and leadership in maternity.
The department is working intensively with the Ministry of Justice, other government departments and NHS Resolution on this complex and sensitive issue. In the 2020 spending review, the Government committed to publishing a consultation on it. While work is ongoing, I am not able to elaborate further, but we look forward to seeing the result.
I extend my thanks again to my noble and learned friend and to everybody else who contributed to this debate. If I have not answered all the questions, I will of course write to noble Lords, but I thank them for airing this debate today.
Financial Fraud: Vulnerable People
Question for Short Debate
My Lords, there do not appear to be any definite figures for the amount and extent of fraud in the UK. There is, however, general agreement that it is very, very large, that it is growing rapidly in volume and sophistication and that it can ruin people’s lives. The CPS reckons that fraud is now the most commonly experienced crime in England and Wales, with 5 million offences in the first half of this year. That is a rise of 32% on the same period last year—and all these figures, alarmingly large as they are, may well understate the case. The National Crime Agency says that fewer than 20% of cases of fraud are reported, with many victims too embarrassed to make a report and perhaps, in the financial sector, too fearful of damaging their reputation.
The question we are dealing with this afternoon asks what the Government are doing to protect vulnerable consumers from financial fraud. The FCA defines “vulnerable” as
“some-one who, due to their personal circumstances is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
The FCA also lists some of those circumstances. They include physical and mental health problems, financial problems, life events and the lack of capability and/or confidence when dealing with finances. In truth, the list probably covers most people at some point in their life. But it is clear that the young, the elderly and the digitally innocent will be at significant risk. Not surprisingly, these groups are the frequent targets of fraudsters.
Also not surprisingly, fraud has moved heavily online: some 85% of all fraud in the first half of last year was cyber-enabled and 50% of adults were exposed to fraudulent ads each month. Many of these ads are carried by social media and many promote investment scams. They often operate by mimicking a genuine website such as HMRC’s or a bank’s. They also operate by placing ads on online platforms. Last week the Times reported that TSB data showed that seven in 10 victims of investment scams were targeted through Instagram alone.
Of all the investment scams reported to TSB to the end of August this year, scams based on Instagram accounted for 62%, on Snapchat 11%, on Google 10% and on Facebook 8%. That is a 70% score for Mark Zuckerberg and Meta. Since then, Google has all but eliminated scam adverts on its search engine. It did this simply by introducing rules that required all financial advertisers to prove that they were authorised by the FCA. TSB has had no reports of people falling victim to fraud through Google since the end of August. Instagram and Facebook have not followed suit. Can the Minister say what pressure is being brought to bear on Meta by the Government? Why should Meta be allowed to profit from scam ads and expose its members to a direct risk of fraud?
It is clear that the Government understand the seriousness and scale of the problem of financial fraud, and they have made some very significant interventions. Last month they established the Joint Fraud Taskforce, a private and public sector partnership, to focus on issues considered too difficult for a single organisation to manage alone. It is to be hoped that the new organisation will be able to plot a clear course through the jungle of agencies and regulators with interests and responsibilities in the area. It might even be able to take a leading role, so perhaps the Minister could tell us a little more about the objectives and working methods of the new task force, what targets it has and to whom it is accountable?
The Home Office has also published three new fraud charters, for the retail banking, telecoms and accountancy sectors. The Payment Systems Regulator has published a voluntary code for the reimbursement of victims of authorised push-payment fraud. Not all banks have signed up to the code. As a consequence, the Government now plan to legislate to make reimbursement mandatory. All this is welcome, as is the new inclusion of online fraud measures in the Draft Online Safety Bill.
However, there is still considerable work to be done. One of the reasons for the establishment of the Joint Fraud Taskforce was the existence of many agencies and regulators with at least some responsibility in this area. I counted at least six, and there may be more. That excludes the gatekeeper, Action Fraud, which is a reporting system—the people you contact to report a fraud and who then pass on the report to other agencies so that they may take action.
Action Fraud is critical to the success of the whole system. However, in July 2019, the Times published the findings of its undercover investigation of the unit, which found that the failings of Action Fraud had been well known for years. Right from its hotline going live in 2013, Ministers had to admit that 2,500 online reports were not processed correctly due to a fault in the IT system. In 2015, the firm operating the Action Fraud call centre in Manchester went bust, leaving fraud victims waiting even longer to get through. In 2019, an undercover Times reporter exposed call handlers mocking victims as “morons” and misleading them into thinking their reports were being taken seriously when most were never looked at again.
As a result of the Times investigation, Sir Craig Mackey, a retired police chief, reviewed the organisation. He found that both Action Fraud and the National Fraud Intelligence Bureau were
“significantly hampered by an operating system that is not fully functional and their resourcing levels have not kept pace with increased reporting”.
He also found that Action Fraud failed to answer a third of the calls made to it. A year later, it was announced that steps would be taken to revamp the failed Action Fraud hotline. Police chiefs were looking for a new company to run it. That was a year ago. Can the Minister say why it took so long to take remedial action? Has a new contract been awarded and, if so, to whom?
Action Fraud, or some properly working equivalent, is vital to the fight against fraud, but as recently as this June, Martin Lewis described Action Fraud as “pointless” and said the organisation lacked the necessary funding to tackle criminals. Is Martin Lewis wrong? What reassurance can the Minister give that we now have in place an organisation that is properly run, properly funded and fit for purpose?
Reporting fraud is critical, but so is prevention. In this area, much needs to be done to rein in the social media platforms. As Martin Lewis said recently in evidence to the Joint Committee on the Draft Online Safety Bill:
“Don’t let them off the hook. We need to make big tech responsible”.
We could make a start by making Meta follow Google. We should make it ban ads for financial services by advertisers that cannot prove that they are authorised by the FCA.
My Lords, I really came to this debate as a spectator, because I wanted to hear the Government’s response to the excellent issues raised by the noble Lord, Lord Sharkey. However, there is one aspect of the way the issue was posed which gave me pause for thought. The way in which it has been framed makes me think that there is a wider issue involved.
The problems of financial fraud affect everyone, in the sense that the noble Lord reflected in his Question. I truly believe that we are all vulnerable. Characterising a subset of people as vulnerable implies that maybe the rest do not need to worry, but in one way or another, at some stage of our lives, we are all vulnerable. Those of us who have an arrogant view of our own capabilities are probably even more vulnerable than those who know their weaknesses.
Whatever is done in this area has to be part of a wider assessment of what the Government can do to provide protection. What leads on from that is that taking action on fraud is too late; action is required before the fraud takes place. The problem we have is that the system is a commercial one, in which a lot of money is involved. It is hardly surprising that fraud and crime will occur; crime goes to where the money is. We have a systemic problem of fraud; it is part of the natural operation of the system that it will arise, so action really needs to be taken much more down the line than after the event, when people suffer. It is at the early stage where the most effective action could or should be taken.
Of course, we have to talk in this context about online fraud, and we look forward to debates on the online safety Bill. The situation has been worsened by the pandemic, with our reliance on online means of communication and commerce increasing, so the opportunities for fraud have increased with it. My own interest is almost inevitably in pension fraud, which is the area that I am most familiar with. It is clear that an awful lot of fraud that occurs in this area is unreported, because people do not know or do not find out until it is too late—or they do know, but they are ashamed and feel foolish. I am not as familiar with other areas of financial fraud, but my assumption is that it is broadly the same there.
The issue raised by the noble Lord, Lord Sharkey, on the plethora of regulators is one that I very much hope that the Government will address. I am really here to hear the response from the Minister, which I look forward to with some interest.
I congratulate the noble Lord, Lord Sharkey, on securing this short debate on what is becoming an increasingly serious problem, as he so eloquently set out. I at last detect that the Government are starting to take it more seriously, and that is greatly to be welcomed, but we have a very long way to go.
This debate is about protecting vulnerable people from fraud, but I make a similar point to the noble Lord, Lord Davies. The reality is that we are all at risk from fraud. The impact of fraud is not only financial; it can leave people feeling stupid, ashamed and under attack, as they are continuously bombarded with emails, calls and texts, leading to serious anxiety and depression. That can be especially true of people who are more sophisticated; they can feel particularly stupid, which is unfair, and may not report it because of that feeling of shame. A large proportion of fraud is not reported. Nobody should feel shame about having been scammed; fraudsters are very clever at finding vulnerabilities.
Why is it so easy for fraudsters? I think the simple truth is that there is a whole range of parties who facilitate it, and who have no incentive to prevent it. Here are just a few examples. We have already heard about social media and other tech giants, which are paid by fraudsters to advertise fake investment or pension deals, as well as providing the platforms that allow fraudsters to contact and groom potential victims. The obvious question for the Minister is why the Government have agreed to include user-generated fraud in the online safety Bill but not frauds where the companies have actually been paid by the fraudsters. I read just this morning that the Prime Minister has said that the Bill will force the tech giants to remove adverts that promote people smuggling. If we can do that, why on earth can we not also force them to remove fraudulent investment adverts? This is just wrong, and I urge the Government to think again about this obvious gap. The tech giants should have a clear duty of care and liability to their users for any fraud that they facilitate.
Telecoms companies enable the scammers to bombard us with calls and texts. We probably all suffer this every day. They have no incentive to stop it—they are paid by the scammers for those calls and texts. Further, they continue to allow the spoofing of caller IDs. It is not only being scammed that is traumatic; the feeling of being constantly under attack causes a lot of anxiety. When will we see action to reduce this torrent of calls and texts? Can we not use the Telecommunications (Security) Bill to that effect? You could put out regulations under that to have a go at solving this problem.
The banks provide the means by which the scammers receive the stolen money. Some banks have made real efforts—in particular, the Confirmation of Payee process is a major step in the right direction—but fraudsters are still able to transfer the stolen money and only a relatively small proportion is reimbursed under the voluntary code. It is shocking that we are not told which banks are behaving worst in this respect. Why do we not publish those league tables?
It may be that the payments system itself aids fraudsters: instantaneous payments allow the money to be whisked away through multiple accounts and abroad, or into untraceable cryptocurrency, before the victim has even realised they are a victim, by which time it is too late to do anything about it. Have the Government considered slowing payments down, particularly when making a first payment to a new payee?
As the noble Lord, Lord Sharkey, mentioned, I understand that the Government are at last proposing to make reimbursement mandatory for authorised push payment frauds. However, I have said before that it would make more sense to make the receiving bank—the bank that has handled the stolen money for the fraudster —liable for repaying the money. That would give a real incentive to banks to stop their accounts being misused by fraudsters or their mules. On that latter point, I would be interested to hear from the Minister what the Government are proposing to do about those mules, who are often young people who themselves have been conned into laundering the stolen money.
Whatever we do, it is critical that any victim reimbursement process is clear and simple and has a single point of contact so that it does not add to the trauma that victims experience. The Financial Ombudsman Service has been ruling against banks in over 70% of appeals, which shows that the current system is simply not working. Banks try to push the blame back on the victim, which just adds to the trauma. My own view is that the victim should apply to, and be reimbursed by, their bank, which should recover automatically from the receiving bank, and it would be for the receiving bank to attempt to recover from the fraudster or those who have facilitated the fraud—the social media or telecoms company, or whoever. Section 75 of the Consumer Credit Act works broadly in a similar way. Could that not be a precedent?
Why are so few frauds investigated or prosecuted? Again, this adds to the trauma; it is traumatic if you do not feel that you are being taken seriously by the authorities. I suspect that the poor investigation and prosecution record is down to a combination of insufficient police resources, inadequate specialist training and a lack of appropriate technology. According to the Victims’ Commissioner, only about 2% of police resources is directed against fraud, despite—according to the Government’s own numbers—fraud being 42% of all crime against individuals. That is a huge disparity: 2% to 42%. Action Fraud would be better named “Inaction Fraud”—it is farcical. What plans do the Government have to make improvements in all those areas?
Fraud is also covered by a whole range of government departments: DCMS, the Home Office, the Treasury, DWP and the Foreign Office, among others. I wonder whether that fragmentation contributes to the problem. Would it not be helpful to have one Minister who was given full oversight to ensure that fraud is covered holistically, not just piecemeal?
Finally, I am delighted that yesterday the House approved my proposal for a committee of special inquiry into digital fraud. I record my thanks to the noble Lords, Lord Young of Cookham, Lord Stevenson of Balmacara and Lord Vaizey of Didcot, and the noble Baroness, Lady D’Souza, for their support in that process. I hope that the committee will be able to provide valuable insight into the problem and to make practical and achievable recommendations to assist the Government in solving this scourge, and I hope the Government will be receptive.
My Lords, there is one great advantage of there being a limited number of speakers in a short debate, which is that it really does not make a whole lot of sense for someone in my winding position to go and repeat everything that has just been so well said. I particularly want to raise two issues that I think have not been covered here, and will then make a final comment.
The first is the regulatory perimeter, which determines which activities the FCA regulates and therefore when it will or will not tackle financial misbehaviour by financial firms. The perimeter sets a boundary on regulated activities and has been given as the reason why the FCA has failed to act in so many scandals: the asset-stripping scandal of the RBS Global Restructuring Group, which destroyed small businesses and their owners by undervaluing their assets in order to seize them; the mis-selling of interest rate caps to small businesses; the abuse of the Libor-setting system, which mispriced trillions of loans across the globe; and endless investment scandals, of which London Capital & Finance is just one of the more recent.
I join the noble Lords, Lord Davies and Lord Vaux, in saying that ordinary people, even savvy people, usually have absolutely no idea that the financial product promoted or sold to them is unregulated, particularly since other activities carried out by the same firm may indeed be regulated. Pretty much everybody other than a highly sophisticated multinational with a phalanx of lawyers is exposed to financial fraud in one way or another today. Of course, we need some special protection for people defined as vulnerable, as described by my noble friend Lord Sharkey. But, as others have said, today everyone needs financial products just to participate in normal life, so rules based on caveat emptor—buyer beware—which is the backbone of the current system, are simply not good enough.
I have long argued that regulating activities is a charter for mis-selling. If the FCA authorises any activity carried out by a financial company, it should regulate all its activities so that the line is clear. In other words, regulate the firm and all the activities it is involved with. Other countries do it without serious problems.
Following the LC&F debacle, the FCA’s relatively new CEO Nikhil Rathi said that the FCA would change its approach to tackle more effectively the issues of fraud risks that sit outside the perimeter of regulation, but he gave no detail. Will the Minister tell us whether there has been progress? Mr Rathi also insisted that he needed more investment and resources to take on the task. Will he get them? At one time the senior managers regime was touted as a possible tool for tackling such fraud and abuse of clients, but the FCA has used that with such deference that it no longer receives any respect. Will the FCA get new duties and powers?
My second issue is that of whistleblowers and the dreadful way we treat them in the UK. The United States is probably the exemplar of how to value financial whistleblowers. Regulators and enforcement agencies in the US have told me that whistleblowers are the citizens’ army that enables them to clean up and deter bad behaviour in an industry where money creates so many temptations. They are the canaries in the mine, to pick up the point made by the noble Lords, Lord Davies and Lord Vaux: early action is absolutely critical when fraud begins to arise.
Financial whistleblowers in the US are protected from both retaliation and financial ruin. California has just enacted another step, a new law called “Silenced No More”, to prohibit the use of non-disclosure agreements that are so often embedded in any employee settlement as a gagging clause. Now the EU is moving in the US direction. The UK, once a leader in protecting whistleblowers, is now one of the most risky developed countries in which to speak out. I have complained before that whistleblowers to the FCA are assumed to be troubled people, not vital informers. They are triaged by call handlers trained in dealing with complaints and with minimal financial knowledge. In contrast, in the US a senior financial investigator does the triage to capture early and critical leads.
The protection that the UK regulator offers a whistleblower is simply anonymity: it will not disclose their name to their employer. But most employee whistleblowers are easily identified both by their specialist knowledge and because most will have raised concerns with line managers and others before turning to the regulator. The regulator then stands aside and offers no support if they are penalised, demoted or fired, and will not even give evidence to an employment tribunal—and woe betide the whistleblower who has to go public and reveal themselves to the press, or even to give evidence to Parliament, because the regulator will not act. The norm for whistleblowers in the UK is years of legal battle and financial and career ruin. Even when settlements are made, typically they rarely cover the extortionate costs of bringing the various cases and attempting to resist retaliation.
Whistleblowing protection, little though it is in the UK, is limited to employees. Advisers, clients and accountants—indeed, anyone else—have no protection at all. I heard just this morning from an IFA who has identified potential fraud at a major insurance company and has been unable to report it to the FCA whistle- blowing team, although they attempted to do so, because he/she—I will disguise their identity—is not an employee. If he/she speaks out, he/she will effectively be put out of business as an IFA.
I have a Private Member’s Bill before the House to create an office of the whistleblower to turn this issue around. But I am not precious. What I want to hear from the Minister today is that the Government will now take serious action and come up with legislation of their own if they dislike mine. If we are going to end financial fraud, we have to unleash all the power of that citizens’ army I talked about.
I will make one last comment, because the next piece of legislation that will be used to deal with at least a subset of these issues—online financial fraud—is the draft Online Safety Bill. I have read the various briefings and it is completely beyond me to understand why actions that facilitate fraud through adverts or cloned websites will not be prohibited by the Bill. I cannot understand why, in the draft, paid-for advertising is explicitly carved out of the scope of the Bill. I have no idea what pressures were brought, but frankly the Government ought to dismiss them, and I would say to the Minister that if she and her colleagues do not make changes to the Bill, I think I can guarantee that both Houses of Parliament will. We have had enough of fraud and we need strong, clear action and leadership. I hope the Minister in her answers today will indicate that that will happen.
I too thank the noble Lord, Lord Sharkey, for securing this debate. I am afraid I will be repeating some of the figures that have been quoted, but most of my comments will be directed to what has or has not happened as far as the Government are concerned during the period of the pandemic.
As the noble Lord, Lord Sharkey, said, the Crown Prosecution Service has said that fraud is now the most commonly experienced crime in England and Wales. Using data from the crime survey for England and Wales, the Office for National Statistics reported that there were 5 million fraud offences in the year ending June 2021, and that this represented a 32% increase compared with the previous year. There were large rises in consumer and retail fraud, advance fee fraud and fraud that just comes under the category of “other fraud”.
In contrast, the ONS highlighted that crimes such as theft and robbery saw falls during periods of lockdown. It said that the data may show
“fraudsters taking advantage of behaviour changes related to the pandemic”,
such as increased online shopping and increased savings. Some 26% of offences resulted in the loss of money or property with no or only partial reimbursement. The National Fraud Intelligence Bureau reported a 36% rise in fraud offences in the year ending June 2021 compared with the previous year, which included a 34% increase in online shopping and auction fraud and a 51% increase in financial investment fraud.
Some people are of course more at risk of becoming a victim of financial fraud—for example, individuals with a mental health problem or dementia. People who have experienced mental health problems are three times more likely than the rest of the population—23% versus 8%—to have been a victim of an online scam. Age UK has highlighted the impact of fraud on older people in England and Wales and, based on an analysis of Crime Survey for England and Wales data between 2017 and 2019, has said that an older person becomes a victim of fraud every 40 seconds. Age UK has said that alongside financial losses, becoming a victim can also
“seriously affect quality of life and wellbeing”,
with many people experiencing a deep sense of shame, embarrassment, anxiety and loss of independence following a scam—and that of course often leads to non-reporting.
The people engaged in such financial fraud pray on us all, as has been said, but particularly on the vulnerable. It is a premeditated, carefully planned, well-resourced and systematic activity, with those involved knowing precisely what a devastating impact they are having on their victims. They deserve everything they get and more, if and when—and it is not often enough—they are brought to justice.
I have no doubt that in their response the Government will talk about the draft Online Safety Bill, the fraud action plan, the relaunch of the Joint Fraud Taskforce and an apparent government intention to legislate to allow the Payment Systems Regulator to make reimbursement mandatory where a personal or business is tricked into sending money to a fraudster posing as a genuine payee. However, the extent to which proposed legislation, plans and taskforces will address and reduce all the different types of financial fraud and the different ways and channels through which they are perpetrated, as well as providing full financial protection for victims, remains to be seen.
I hope that in their response the Government will set out the specific targets for reducing financial fraud and protecting victims financially, which the various measures that I have no doubt we will hear about in their response are expected to deliver. Certainly to date the Government’s efforts to address rising levels of fraud, not least online fraud, have been woefully inadequate, particularly during the current pandemic. Reductions in police personnel during the last decade have only made matters worse.
I tabled a Written Question in May last year asking the Government
“whether they have broadcast advertisements to warn the public, in particular those who are vulnerable, of scams related to the Covid-19 pandemic; if not, why not; and what plans they have to provide advice about how to avoid becoming a victim of such scams.”
The Written Answer—not from the Home Office—said:
“The government has not broadcast advertisements to specifically raise awareness of scams related to the Covid-19 pandemic.”
The reply went on to say:
“HMG believes the best way to ensure the public’s safety is to make sure that they know how to protect themselves … so that the public know how to spot a scam and protect themselves from them.”
The reply continued:
“We have recently launched a GOV.UK page on coronavirus related fraud and cybercrime including easy-to-follow steps for people to better protect themselves as well as signposting all relevant advice and tips.”
For this Government, too often a GOV.UK page is the remedy to all problems.
I thought at the time that that reply reflected a fair degree of complacency. Now, though, we can ask the question: has the Government’s strategy for protecting the public, particularly those who are vulnerable, from scams during the pandemic been successful? The figures that I have already quoted suggest otherwise.
In addition, according to UK Finance, the public were conned out of £753.9 million in the first six months of this year alone, up 30% on the same period in 2020. The banks have already warned that the period up to Christmas and new year is likely to be the “busiest ever” for criminals looking to trap unsuspecting victims as the pandemic has pushed shoppers online.
It is of course a matter for the Government what they say in their response. But I hope that, if they are going to tell us what they intend and plan to do, and how much money they have spent and will spend, they will also answer the question: why was more effective action not taken to warn the public and particularly vulnerable people of the increased danger of financial fraud from scams and fraudsters during the Covid-19 pandemic? I do not wish to suggest for a single moment that broadcasting advertisements raising awareness of scams during the pandemic—which is what I asked about in my question—would have been the answer to all the problems that have materialised; clearly, it would not. But the Government’s approach has been very complacent and, frankly, it is many members of the public, including the most vulnerable, who have paid the price during the Covid pandemic, both metaphorically and literally.
My Lords, I add my thanks and congratulations to the noble Lord, Lord Sharkey, for securing this very important debate and for all the very valuable points he has raised. I of course agree that we should protect people from fraud, particularly vulnerable people who are often targeted by callous and ruthless criminals. As he said, fraud is now the most common crime type in the country, accounting for some 40% of offences in the year ending June 2021, according to the Crime Survey for England and Wales. It is estimated there were 3.9 million victims of fraud in the same period.
As the noble Lords, Lord Vaux and Lord Davies of Brixton, said, we are all vulnerable to it. I almost became a victim of it a couple of weeks ago. It was not obvious that I was being scammed at first glance, but it nearly happened to me. Of course, the impact extends beyond financial losses. As the noble Lords, Lord Rosser and Lord Sharkey, said, the emotional and long-lasting harm that people can suffer is horrendous. Fraudsters can be very sophisticated and will exploit any means they can to trick innocent people out of their hard-earned money.
The noble Lord, Lord Rosser, is absolutely right to point out the vulnerabilities during Covid, with so many people at home online, as opposed to out and about. For those who are very vulnerable, those impacts can be felt all the more, so we are focused on stopping unscrupulous fraudsters in their tracks and supporting victims so they can recover and protect themselves in future.
We are aiming to step up the whole-system response to fraud, which is the right way. While it is vital that we crack down on criminals behind scams, fixing the law enforcement response is just one part of the solution, as noble Lords have pointed out during today’s debate. To disrupt organised criminals and safeguard the most vulnerable, we need to prevent it from happening in the first place, as noble Lords have said. But we cannot, as government, do it alone. That is why the Home Office is working across government, law enforcement and the private sector—the private sector is really important in this—to better protect the public, reduce the impact on victims and ensure fraudsters are brought to justice.
To improve our collective response, we are leading work on the development of a comprehensive fraud action plan, which the noble Lord, Lord Rosser, knew I would mention, and we will it publish early next year. This will commit key partners in the public and private sectors to do more to tackle fraud. The plan will focus on public engagement to ensure that everyone, including those most at risk, understands the threat and therefore how best to protect themselves.
We know that those most vulnerable to fraud can become repeat victims—that is the horror of this. Despicably, they are placed on what is called a “suckers list” that is then sold on by ruthless fraudsters. It is essential that we improve victim support and make sure that everyone gets the information and help they need to protect themselves.
That is why we as the Home Office are working with the City of London Police to deliver a nationwide rollout of the National Economic Crime Victim Care Unit. It provides an important additional layer of support for people who report a fraud or cybercrime to Action Fraud—on which, more later—where their cases are not investigated by local police, and helps prevent repeat victimisation. The unit is currently supporting 20 forces, with a further rollout planned. As of October this year, it has helped support more than 160,000 victims, and since the start of this year has assisted in recovering almost £1.5 million that people had lost.
It is also very important that we bolster the local support available to vulnerable victims. To do that, the Home Office is supporting National Trading Standards in the rollout of fraud multiagency safeguarding hubs in England and Wales. These local hubs will improve the quality of care for fraud victims by bringing together multiple agencies that can work together to support them, making it easier for victims to navigate their way to getting the help they need. The national rollout follows a successful pilot in Lincolnshire and North Yorkshire during which more than £8 million was saved for individuals and society.
We continue to work extensively with the private sector effectively to “design out” fraud and stop vulnerable people being targeted in the first place. In October, we published three voluntary charters with the retail banking, telecommunications and accountancy sectors. These are partnership agreements to find innovative solutions that will drive down the level of fraud. New initiatives include: a pilot dynamic direct debit system that would introduce a banking authorisation step in applications for new telecommunications contracts, including mobile phone contracts, that have been applied for fraudulently or used for fraudulent purposes; a cross-sector plan to protect customers who have been subject to a data breach from becoming victims of fraud; and leveraging new technology to tackle the fraudulent practice of sending fake company text messages, known as “smishing”.
The progress of these charters will be closely monitored by the Joint Fraud Taskforce, mentioned by the noble Lord, Lord Sharkey, which is chaired by the Security Minister and brings together senior partners from across the public and private sectors. We also intend to develop a suite of charters with other sectors that have a role to play in protecting vulnerable people from fraud, including tech and social media firms.
The noble Lord, Lord Sharkey, and others talked about the harms of the online world. The online safety Bill will provide further protection against fraud. Companies in scope will be required to take action to tackle fraud where it is facilitated through user-generated content. We expect this to have a particular impact on frauds such as romance scams, which cause significant psychological harm to victims.
The noble Lord, Lord Vaux, might stop shaking his head when I say to him and the noble Baroness, Lady Kramer, that we are also considering whether to impose tougher regulation on online advertising, because that may well be the gap that he talked about. We have heard the strength of feeling in the House and in the public domain. The Joint Committee on the Bill will report shortly, and we will examine its recommendations on this issue extremely carefully. The Department for Digital, Culture, Media & Sport—the DCMS—will also consult shortly on a range of proposals to tackle harms associated with advertising. It may have been the noble Lord, Lord Sharkey, or the noble Lord, Lord Vaux, who commented on Google versus Facebook/Meta. I commend Google for what it has achieved. As for discussions with Facebook, I have lost count of the number of discussions that I have had. One thing that we said way back in the day was, “Look, if you don’t sort some of these problems out, we’re going to legislate to sort them out”—and this is where we are now.
On scam calls, as part of our response to fraud the Government are working with the telecommunications industry to tackle telephone-enabled fraud and break the business model of the criminals behind it. Through our joint telecommunications sector charter, providers have agreed a nine-point action plan to tackle fraud through scam calls. This includes commitments to identify and implement techniques to block scam calls and smishing texts. To protect those most vulnerable to telephone scams, DCMS provided £1 million over three years to National Trading Standards to fund the rollout of call-blocking devices to people across the UK. These help those most in need and provide 99% protection from nuisance and scam calls.
On phishing and smishing, we have been working to reduce the threat of phishing emails that can reach the most vulnerable. Last year the National Cyber Security Centre launched its suspicious email reporting service, which of course I encourage the public to use via firstname.lastname@example.org.
The noble Lords, Lord Sharkey and Lord Vaux, both mentioned APP scams, authorised push-payment fraud, where victims are tricked into handing over their money. This targets the most vulnerable with increasingly sophisticated scams that can have such a devastating impact on their lives. The Government are clear that the public should not be left out of pocket through no fault of their own. We have been working with the financial services industry to help tackle APP fraud, including through the implementation of initiatives such as Confirmation of Payee and the creation of the contingent reimbursement model code. Most high-street banks have now signed up to this voluntary code, which was designed to offer increased protection to the most vulnerable. Victims who use these banks will be entitled to reimbursement when they have taken the required steps to protect themselves, or if it is not reasonable to expect them to do so.
We really welcome the work that the industry has undertaken to date, including through this code, but it has clear limitations, including disparity in how different banks are interpreting their obligations and the fact that it does not cover all providers. As such, the Government are now engaging with the Payment Systems Regulator, the PSR, and industry on what more can be done to better protect customers. We welcome the PSR’s recent consultation on APP scams, which set out potential measures to reduce their impact, including mandatory reimbursement of victims. We now intend to legislate to address any barriers to mandatory reimbursement when parliamentary time allows.
Faster Payments, the UK’s real-time low-value interbank payments system, has been a great UK success story. In 2008 the UK was one of the first countries to launch a 24/7 real-time payments system, which now processes more than 3 billion payments a year. However, despite the speed and resilience it offers, banks already intervene in a variety of ways when they suspect fraud, including delaying the processing of payments and contacting customers. At this point I must give a shout-out to my bank, Lloyds, which has done that to me before.
On law enforcement and action fraud, we continue to work closely with law enforcement in line with recommendations from Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. This includes working with City of London Police on a refresh and upgrade of the current action fraud service to improve victim experience and the law enforcement response.
To the question from the noble Lord, Lord Sharkey, on the contract, as I said, we are working on plans to refresh and upgrade the current action fraud service, and the competition to find a new commercial partner to deliver that service was launched in July this year. We expect the service to be improved in both usability and effectiveness, which noble Lords have pointed to. Also since last year, City of London Police have increased the number of staff in their call centre, and recent performance data has been quite encouraging, suggesting that between 94% and 98% of victims were satisfied with their service.
The noble Baroness, Lady Kramer, made a point about the FCA. HM Treasury continues to work closely with the FCA to ensure that its duties and powers are sufficient to meet the threats in the financial sector. When I thought about this debate and saw the noble Baroness’s name, I thought, “She’s going to ask about whistleblowing—but in what capacity?” This year, the FCA launched its In Confidence, With Confidence campaign to encourage individuals working in financial services to report potential wrongdoing to the FCA, reminding them of the confidentiality that is in place. I totally agree with her on her point about non-disclosure agreements; that is one that we have discussed before.
Finally, on pension fraud, it is totally unacceptable and devastating that anyone should be cheated out of their savings and their plans for retirement. The Government are absolutely committed to protecting people from pension scams and pursuing those who perpetuate them. In the last two years, we have introduced a ban on pensions cold-calling and changes to the pension scheme registration process to stop fraudsters exploiting pensioners. The inclusion on fraud in the scope of the online safety Bill will also have a strong impact on preventing investment frauds.
I think that I have responded to all the points; if I have not, I shall write to noble Lords. I thank the noble Lord, Lord Sharkey, once more for securing this important debate, and thank the not too many noble Lords who have taken part, because I think that has made it an effective discussion.
The Minister said that she would respond to any questions that she had not replied to. Will that include my question: do the Government really think that they did enough to protect vulnerable people during the pandemic, bearing in mind the substantial increase in the number of fraud cases?
National Infrastructure Commission: Baseline Report
Question for Short Debate
My Lords, it gives me great pleasure to be able to introduce this short debate on the national infrastructure assessment. As noble Lords will know, my noble friend Lord Liddle has had to scratch for transport reasons; he asked me to pass on his apologies. I declare an interest as an officer of the All-Party Group on Infrastructure and a member of the Institution of Civil Engineers.
This is a really good time to debate the infrastructure assessment. It is a baseline report, as we all know; it is the basis for the future work the NIC will be doing. It is also really good that the Government have expanded its remit to cover the transition to net zero and climate resistance, as we have been speaking about that a great deal in your Lordships’ House.
I will try to cover briefly where we are today on infrastructure, where we should be today—if I think that is different—and where we might be in 30 years’ time. Somewhere in this report, it states that we need
“bold action, stable plans and long term funding”,
which sounds just wonderful but might not always happen. At least we are trying.
The baseline report lists some of the successes. It is worth reminding ourselves that broadband circulation around the country has been good in most places and renewable electricity is getting better—we have spoken about electric vehicles. I question how much better flooding has got; drought resilience is not something we need to look at this week, but so be it. On the other hand, some good things have happened there as well.
One of the most important things the NIC has been asked to do is social research. It says that it has got better between 2017 and 2021, which is good news. I suspect there is still a great deal of work to be done there, particularly on things such as clean water and sewage, and probably on energy supplies as well. It also says that some things are not going quite so well, including emissions from electricity and heat, which are still too high—I think we know all that. Emissions from transport have not been declining; I will come back to that, as that is very serious. Asset maintenance is not so good. Five million properties are currently at risk of flooding—that is serious, and is still going on today, as we have recently heard. There is also the pollution from water and sewage. Then there is urban transport connectivity, which I will come on to.
One of the most interesting things which has come out of a briefing from the Institution of Civil Engineers is that only 10% of British adults think that the right conditions are in place for infrastructure to transition to net zero—10% is not very good. Only 31% of British adults think that the Government have a plan for net zero; they should be worried about that, and perhaps the Minister will have views on it.
However, going forward, I hope that the NIC and the Government will take forward some of these issues. I will cover just one or two of them. I will start with net zero, which noble Lords have been debating quite frequently. Other topics include transport, rail electrification—that is in the new policy document from the Government; whether it is enough we can debate—towns, transport within towns, the 20-minute city, which I shall come on to, and new road building and whether we should be doing it. We should not forget that, if every car becomes electrically driven in a few years’ time, there will still be traffic jams. They will be electric traffic jams rather than petrol or diesel ones, but they will still be traffic jams—and, again, that is why I think public transport is so important.
The NIC says that road and rail freight seems to be going quite well, especially with decarbonisation. I would question that, actually, because I think that the technology of making heavy goods vehicles not use diesel or petrol is still in its infancy. I used to be chairman of the Rail Freight Group, and rail freight has had quite a good time over the pandemic. But there needs to be an awful lot more, and really we should be electrifying the railways and trying to cover freight moving in the last mile or so to its destination, which we manifestly do not do at the moment unless we use petrol or diesel.
Turning to energy, there are problems with the sourcing of it, and with its distribution and use. Again, we have debated that frequently over the past few months. What worries me about that is that if we use electrical power to heat most of our homes, and we use electrical power to drive our transport, on road or rail—I think we have to leave air out of this, because it is a complete failure—the forecast is that we will need 10 times the amount of electrical energy that we have now. I view that as extremely serious. We can debate how it is generated, and whether it is a good thing to generate hydrogen from electricity or use electricity as it comes; that is another debate that has to come. We have another debate here on Monday evening about plug-in chargers and things like that. But the 10-times figure is one of the most serious issues we have to address.
Then there are a whole host of environmental issues. I was rather surprised that the NIC thinks that carbon capture and storage is a good idea, because I do not believe it has been demonstrated to work yet. How long will it last and what happens when it does not last any more? I may be being naive on that, but I am not convinced it is a proven technology.
The Government have an enormous amount of work to do on resilience, including on floods and storms —we had a debate about the storms in the north-east today—as well as on drought, energy, transport and the general quality of life. But what I do not understand is why we are still building on flood plains. It seems to be utterly crazy. We may be short of land—that is a different issue—but building on flood plains so that you get flooded is absolutely crazy. I am not going to speak any more about sewage, because we have talked enough about that.
However, it is interesting that the solution for Southern Water, which is one of the worst offenders and has been highly fined, is to sell the company to Macquarie bank, whose track record is that it owned Thames Water around 10 years ago and increased its debt by £2 billion and got fined £20 million itself. Does the Minister think Macquarie bank is the best possible investor to manage Southern Water and all the problems which we know it has had recently?
The last big issue, on the communities themselves, is that there has been a lot of talk recently about how far people want to travel to work, shop, go to school or whatever. Something called the 20-minute community is being talked about quite a lot. It does not just have to be in London or the suburbs around it; it can be anywhere. Maybe the NIC will start looking at something like this when it looks at the quality of life paper, which I believe will come out next year.
Finally, it is very easy to talk about building things—I am a civil engineer, so I love building things, if they are the right things. However, we also have to look at the cost and upset and everything of building new things compared with adapting existing things, which may cause less trouble and hassle. I will bring my remarks to a close. My last point is cost and deliverability. We all know the problems there, but building things small needs to be looked at. Couple that with the question of whether we will have to change our lifestyle as we go towards net zero or whether we can carry on the way we are—you can even drive to Waitrose for a box of matches.
My Lords, I am grateful to my colleague, the noble Lord, Lord Berkeley, for initiating this debate. The rules of politics and this House mean that I cannot formally call him a friend, but we have often found ourselves singing from similar hymn sheets in debates such as this. In particular, we focus on the central importance of rational economic decision-making in national life—we have certainly had some debates on HS2. We also sit on the same committee, where I am hugely grateful to him for the contribution he makes, as well as on the APPG on Infrastructure.
Adequate—preferably good—infrastructure is vital if an economy is to be able to operate effectively. Infrastructure in this sense includes communication, such as roads, rail, telephones and broadband, and utilities such as gas, electricity and water, which last covers both the necessity of adequate and pure supply and the risk of floods and drought. Some might say that adequate housing is another vital component of national infrastructure—here I should declare an interest as I am chair of your Lordships’ Built Environment Committee and we are currently conducting an inquiry into housing. But we do not need to split hairs. We all recognise that some entities constitute something reasonably described as infrastructure because they are required if economic ventures are to work. The Victorians —for whom I have a lot of admiration on the infra- structure side—understood that very well.
It is welcome that the importance of infrastructure has been recognised by the establishment of the National Infrastructure Commission, whose report we are considering today. It is under the leadership of Sir John Armitt, a very worthy chair—I know that because we served together at John Laing Construction when we were building Sizewell B in the 1990s. We might, in passing, wonder why it took so long to establish such an important body as the National Infrastructure Commission.
One answer to that question lies in a particular characteristic of infrastructure which separates it from other economic matters. In matters of infrastructure, a significant degree of national planning is necessary and desirable. In many cases, planning is not desirable; in most economic decisions the best course is to let those with ideas seek to put them into effect. If they are right then they will benefit substantially and so, by Adam Smith’s invisible hand, will the rest of us, to a lesser extent. The concept of Ministers and civil servants trying to decide what will succeed in the marketplace has rightly come to be regarded with derision. However, when it comes to, say, investment in train tracks or the electricity grid—or flooding and water resilience, in the circumstances of 2021—this is insufficient, as I think the noble Lord has explained very clearly, so a significant degree of planning is required.
For some of those contributing to today’s debate, all this theory might seem unnecessary. I say to them that they are wrong. Capitalism is the most effective method of economic advance ever discovered. Why has China become so rich? Because it has abandoned—in economic matters—the notions of communism and adopted, in a surprisingly pure form, those of capitalism. The shame is that it has limited its adoption of western ways to economic matters.
I come to the report before us. It is worthy, which is exactly what it ought to be. I have some quibbles. Thinking in terms of centuries or even decades, as we are bound to do on infrastructure, I do not think the emphasis on climate change will age entirely well. There are other challenges and of course innovation and changing weather patterns could alter matters by the time we get to the second half of the century, but we must certainly be more efficient and more careful in the use of our nation’s and the world’s resources in myriad different ways. It is wholly appropriate to assess matters in this long-term way and to look at both digital and physical aspects, as the report does so well. I welcome the report and the opportunity to debate longer-term infrastructure challenges, which is unusual but very important.
I thank the noble Lord, Lord Berkeley, for giving us this excellent opportunity to debate these important issues. It is important to bear in mind that the Climate Change Committee has recently made the point that we as a nation are nowhere near restricting our CO2 emissions to the level that we need to achieve a 1.5 degree increase, which is what is needed. My comments today will concentrate entirely on transport-related issues.
Last week, we had the shapeshifting announcement of the integrated rail plan, which was slated across the north of England as a huge disappointment. The National Infrastructure Commission’s reports, statements and conclusions are important because they identify transport as the sector that has the most potential to reduce disparities in wealth across the country. The NIC concludes that urban transport connectivity is poor in many places and that the largest towns and cities have the worst connectivity, with congestion slowing journeys. It points out that improving urban mobility and reducing congestion can boost urban productivity and hence prosperity. That makes last week’s integrated rail plan, with its downgrading of the investment potential in the north of England, all the more worrying.
The NIC report points out that 33% of total UK emissions in 2019 were transport emissions. Of those transport emissions, two-thirds came from surface transport and one-third from aviation and shipping. As the noble Lord, Lord Berkeley, has already mentioned, since 1990 surface transport emissions have stubbornly remained at similar levels despite technological improvements. That has happened simply because there is far more traffic around.
Surface transport emissions come from road transport, of course, as well as rail. However, the number of passenger journeys on rail transport has more than doubled since 1990, but, at the same time, there has been a significant reduction in emissions from railways. We can see that a transition from car ownership to public transport is vital if we are to deal with emissions issues.
Within public transport, rail expansion is of course important, but it takes a while to build a railway; it is much quicker to get people on to buses and to improve a bus fleet from an environmental point of view. We have the technology to move to electric and hydrogen buses.
The Government’s bus strategy has welcome and ambitious aims, but the price tag that they have attached to it is far too modest. The first round of bids is in for funding, which is to be spent largely on zero-carbon buses. There are more than 70 local authorities. Roughly 40 of them have made bids. Four of them alone will mop up the total funding that has been made available. The Government promised us 4,000 zero-emission buses. That sounds really good, but we have to bear in mind that there are 38,000 buses on the road, so what will happen about the other 34,000? The Government still have a roads programme of £27 billion. A quarter of that amount, if spent on zero-emission buses, would deal with the whole problem.
Realistically, we cannot deal with this topic of transport without referring to the need for a stronger government lead in the transition to electric vehicles. Their target is fine, but there is as yet no path to it. Earlier this week in Grand Committee, we considered a modest SI that started to tackle the core problem: the infrastructure for charging EVs. The SI was simply about smart charging, so really it was just about stretching the grid as far as possible—and it was pretty optimistic in what was thought to be possible. Many EV owners have no possible access to charge points at their homes, so they rely on the public realm. It is essential that the right mix of speeds of chargers in the right locations is provided. People rapidly learn where those chargers are and what suits their needs, but the big psychological stumbling block still to be tackled is long-distance routes. People will not buy EVs unless they can rely on chargers being as easily accessible and available as diesel and petrol.
The SMMT has recently produced statistics. One charger is being installed for every 52 new electric vehicles. That is not a sustainable position. The really worrying statistic is that the ratio of vehicle charge points to plug-in vehicles has deteriorated by 31% in the last year. We have one of the worst ratios in major global EV markets, behind South Korea, the Netherlands, China, France, Belgium and Japan. This has to be fixed, and it needs not just money but government leadership in terms of a structure of regulation and leadership of the private sector for investment.
My Lords, it is a great pleasure to follow my noble friend Lady Randerson, and I congratulate the noble Lord, Lord Berkeley, on securing this debate and on his excellent introduction. This is an extremely wide subject of great importance to be covered in just a one-hour debate, but we have had some excellent contributions from all sides. The noble Lord, Lord Berkeley, mentioned road and rail connectivity, and the noble Baroness, Lady Neville-Rolfe, understands the national infrastructure network across the board and spoke eloquently.
Given the breadth of the baseline report, I shall concentrate on the areas within my spokesperson’s role—wastewater management and flooding. I declare my interest as a vice-president of the LGA. Before I do that, I will just mention the issue of access to gigabit-capable broadband. The increase of coverage to 85% connection across the UK is to be welcomed, and the target of 95% connection by 2026 sounds excellent. However, this masks the dark areas of the country where there is no connection and where this is unlikely to be remedied by 2026.
Remote rural areas, especially in the national parks and deep rural hamlets, suffer from poor or no connectivity. The numbers affected are small but should not be overlooked. They will be the children struggling to do the homework that their friends in towns are easily able to complete, and the farmers trying to fill in the innumerable Defra forms. We have seen in recent days how storms can so easily bring down power lines and, again, deep rural areas are the last to be reconnected. As there is no government rural strategy, and various Ministers have repeatedly stressed that one will not be forthcoming, I make a plea for these areas not to be forgotten in the gigabit connection programme.
I turn to flood resilience and wastewater. During the passage of the Environment Act, flood resilience and waste were debated fully. Communities up and down the country have been flooded more than once. The misery that flood-water brings is truly heartbreaking; the slime and smell caused by overflowing sewage systems is difficult to describe if you have not experienced it yourself. It can destroy a lifetime’s possessions, many having emotional ties. The Government are due to invest £5.6 billion over the next six years to reduce the risk of flooding. Is the Minister able to tell us where this money is likely to be invested and the areas of the country that will benefit from this investment? I expect it to be in areas where the most difference can be made for businesses and homes, but this is likely to leave some smaller communities still at risk.
Despite recognition of climate change and the effects of building on flood plains and tarmacking over green fields, local authorities still build houses in areas where doing so will increase the risk of flooding. The noble Lord, Lord Berkeley, mentioned this. Inadequate attention is often given to how surface-water drainage will be tackled through properly engineered SUDS. Urgent attention needs to be given to how surface-water management is dealt with to prevent increasing the risk of flooding. Can the Minister give reassurance on this aspect?
Also during the passage of the Environment Act, and twice this week during Oral Questions, the issue of raw sewage being discharged by water companies has been raised. Due to the excellent work of the noble Duke, the Duke of Wellington, the Government have given commitments that water companies will in future have to be stringent in how they operate. There will be heavy fines for companies that discharge wastewater and sewage into our lakes and waterways. However, the ability to fine water companies has been in place for a while and has not deterred them. Investment in their infrastructure is long overdue, but it seems that shareholder dividends loom larger on their agenda than the Environment Agency fines. Can the Minister say exactly what conversations have taken place with water companies about improving their infrastructure to prevent future sewage spillages?
I turn now to waste, a great passion of mine. I first became aware of how important it was to reduce waste as a county councillor, when the landfill tax was introduced. This tax concentrated the minds of councillors and officers immediately, as it rose year on year. Much has been done on the recycling front during the intervening years, with many councils having doorstep collections of recyclable materials. However, many of these recyclable collections are not processed in the way the householder imagines they would be but sent for incineration. Although this can and should be through a waste-to-energy plant, supplying electricity locally, this is often not the case. Councils that ask their residents to separate their recyclable waste and collect it through a single-pass vehicle with different compartments for glass, aluminium foil, cans, paper, cardboard and plastic have much higher rates of true recycling.
I do indeed, and I am coming to that.
Each of these items can be dealt with in its own way and recycled into reusable articles, thus helping a circular economy. When I lived in Somerset, this system had been up and running for a long time. In Walthamstow, where I rent a flat, all recyclables are in one bin and much of what goes in is not currently recyclable. I know the Government are keen for this system to be rolled out countrywide. Wales has such a system, which has operated for some time, and has the second-highest recycling rate in Europe and, obviously, the highest in Great Britain. Can the Minister give an indication of when the rollout of doorstep separated recyclable waste collections will take place?
My noble friend Lady Randerson spoke passionately about transport and congestion. Reducing emissions and congestion will improve productivity. I welcome the NIC report. Much has been achieved but, goodness me, there is still an awful lot left to do.
My Lords, I congratulate my noble friend Lord Berkeley on securing this short debate. I express my thanks to the National Infrastructure Commission for its report, which provides us all with plenty of food for thought.
In his foreword, Sir John Armitt says he hopes the commission’s output will prompt discussion. Today’s debate is a good start, although we must all acknowledge that this topic requires far more than dialogue alone. We all know that improving infrastructure in its myriad forms is a complicated, long-term project. I hope we will get a sense from the Minister that the Government recognise this and share our appetite to meet the many challenges this country faces. It is also expensive. There will obviously be an important role for the private sector in innovating and delivering change, but those organisations will take their lead from central government, with many likely to fix their gaze on the Treasury and its spending plans. Value for money is and must remain an important consideration, but it seems to me that the starting point is to answer two philosophical questions: what do we want the UK to look like in 20, 50 or 100 years, and how do we get there?
For all the Government’s talk of levelling up, recent ministerial decisions about rail across the north of England seemingly fly in the face of the commission’s call for urban transport connectivity to be improved. Rather than levelling up, I worry that we will see some areas being levelled down to deliver an unsatisfactory equalisation of infrastructure, service and opportunities across the country. Indeed, Transport for London and its custodian, the Mayor of London, are concerned that transport in the capital will have to be placed into managed decline should the Government not ease the organisation’s Covid-related financial difficulties. The Treasury should surely be focused on how the quality and range of transport options can be improved for all.
Of course, it is not just transport identified by the commission as a priority for investment. The body’s list is wide ranging, and I worry that it is symptomatic of more than a decade of Conservative control in Westminster. The tragedy is that, while our Prime Minister takes an interest in infrastructure, his priorities tend to be the wrong ones: an airport in the Thames estuary, a garden bridge in London, a road bridge to Northern Ireland. Each was accompanied by warm words and promises of a brighter future. In truth, the feasibility studies and glossy brochures were a waste of public funds. By focusing on vanity projects, he was distracted from making the right decisions—initially for the people of London, and now for the country as a whole. The result is that we have fallen behind our international friends and competitors where it truly matters. Under this Government, we are not the global leaders we should be.
Problems relating to climate change, including increased risk of localised flooding and what the commission calls “unacceptably high” incidences of water and sewage-related pollution, must be met with concerted and strategic action. That will not only need hard cash but also a proper plan to ensure that resources are available to deliver the commission’s recommendations. The longest lead-time resource is undoubtedly appropriately skilled people. Cash without people is simply a recipe for inflation and disappointment. I hope the commission will study this issue as a vital contribution to the 2023 national infrastructure assessment.
The commission also draws our attention to asset maintenance issues. Those working in the public sector are cursed with the mantra that capital expenditure is good and current expenditure is bad. This results in the premature loss of capital assets as they deteriorate more rapidly due to poor maintenance. As one who was responsible for long-life assets, I know that value for money comes from the whole-life management of capital assets. I hope the commission will continue to emphasise this point in future reports.
There is much to do. The National Infrastructure Commission will now work up a detailed proposal and we look forward to following that work. While options are drawn up and costed, I hope that Ministers will undertake some of the necessary preparatory work, including gathering data, setting targets, and delivering reforms to education and training. As a nation, we are capable of so much; we have world-leading scientists, academics, engineers and architects. We have talented young people who, with the right guidance, can fill those roles and others into the future, building a Britain with much better, greener, and more resilient infrastructure. What they need—and what the country needs—is clear, strategic leadership. By the time the commission comes forward with its next assessment in 2023, we must be ready with our answers to the big questions. Until then, I hope the Minister can provide a sense that his party is learning from previous mistakes in relation to infrastructure and has a sense of where to go next.
Can I repeat some of the points I have made? First, the National Infrastructure Commission is a brilliant idea, but the problem is it does not have saliency. We as politicians should, on a cross-party basis, be helping to build its saliency so that it happens. Secondly, we mismanage the whole people issue; the people have to be related to their whole-life experience, including the skill and be able to learn new skills. Thirdly, we do not look after our assets properly. The maintenance problem comes partly from capitalism without appropriate rules, partly from the way we account for money, and it fails to take account of the real value of looking at all of an asset and all of its future. If we start to get these things right, which will need a partnership between state and private sector, we can look forward to a better value future.
My Lords, I congratulate the noble Lord, Lord Berkeley, for securing this debate. He is known with great respect throughout the House for his pursuit of certain causes célèbres, including matters relating to transport to the Isles of Scilly. I also know he is a long-standing advocate for the benefits of infrastructure and his speech indicated his clear focus on all the key issues, many of which I will be attempting to touch on this afternoon.
The Government recognise the transformative possibilities of infrastructure benefit here. That is why we have committed £130 billion to economic infrastructure since the publication of the National Infrastructure Strategy last year. However, it is fair to say that in past decades and under past Governments, the UK’s infrastructure has been plagued by stop-start public funding and policy uncertainty that has conspired to undermine private investment. In 2015, to help resolve these issues, the Government established the National Infrastructure Commission—which I will refer to as the NIC—to provide independent, expert advice. My noble friend Lady Neville-Rolfe was right to ask why it took so long. I hope to reassure the noble Lord, Lord Tunnicliffe, that the Government have a robust approach to infrastructure. We are focused not merely on capital spending but on long-term infrastructure planning, improving project delivery and supporting private investment. I will try to touch on those points as I go through my remarks.
I remind your Lordships of the crucial role of the NIC’s first national infrastructure assessment. Published in 2018, it set out a recommended long-term strategy for the country’s infrastructure over the next 30 years. That work directly underpinned our National Infrastructure Strategy, which we published last year. Alongside the strategy, the Government published their formal response to the commission’s 2018 recommendations, partially or fully endorsing the vast majority. Already those recommendations are becoming reality. For example, earlier this year we launched the UK Infrastructure Bank in Leeds, which is expected to unlock more than £40 billion-worth of infrastructure investment. Just over a month ago, the UKIB made its first investment with a £107 million loan to Tees Valley Combined Authority. Only yesterday we announced its first private sector investment, in subsidy-free solar energy.
I turn to the baseline report for the Second National Infrastructure Assessment, which is of course the main subject for today’s debate. The report highlights some areas where the Government have made significant progress, so let us start with that. First, on the delivery of gigabit-capable broadband, I mention briefly that, only yesterday, my flat was upgraded to full-fibre broadband, and the speed is much faster—that is just a bit of self-indulgence. The report draws attention to the fact that coverage is now at over 62% compared to just 10% in November 2019. The noble Baroness, Lady Bakewell of Hardington Mandeville, mentioned that rural broadband connectivity is lagging behind. The Government recognise the importance of gigabit-capable connectivity to people across all areas, but particularly in rural parts. We have committed £5 billion to support gigabit-capable coverage in the hardest-to-reach-areas where possible, so that is an ongoing programme and the noble Baroness raised a good point.
Secondly, on the transition to renewable forms of energy, the report points out that the share of electricity generated from renewable sources has grown from less than 10% in 2010 to almost 40% in 2019.
Thirdly, on our ambition for electric vehicles, the report mentions the Government’s pledge to end the sale of new petrol and diesel cars and vans in 2030, with all new vehicles required to be 100% zero emission from 2035. The noble Baroness, Lady Randerson, stated that there was not enough funding for buses along the same theme. I reassure her that £3 billion of new funding over this Parliament will be dedicated, to double the amount given since the 2015 spending review levels. The £525 million for zero-emission buses in this Parliament is in addition to wider support, including a green uplift in the bus services operator grant, and £1.2 billion of dedicated bus transformation funding.
The noble Baroness, Lady Randerson, also suggested that more needs to be done on long-range charging and charger ratios. The Government are making significant investments in electric vehicle charging, including £1.3 billion at the spending review 2020. That includes funding for a rapid changing fund to reduce people’s anxieties around long-range charging by rolling out thousands of rapid charges across our strategic road network. The UK has more rapid chargers per 100 miles than any country in Europe, according to a report. However, of course the noble Baroness is right to make that point, and there is always more to be done there—we all know that as drivers on our roads.
Fourthly, on drought resilience, which was raised. The report underlines that we have endorsed the commission’s recommendation that we increase drought resilience to reflect a one-in-500-year event.
Another positive aspect of the report is the NIC’s social research, which was raised by the noble Lord, Lord Berkeley. Understandably, people will always call for more and better infrastructure. However, this research shows growing public confidence that infra- structure will meet people’s needs over the next 30 years—this is perhaps excepting the views on net zero raised by the noble Lord. I will need to check back on that.
Of course, we recognise that the report also highlights some concerns, including nine key challenges on which the NIC will focus in its second national infrastructure assessment. I want to focus my remarks around three important elements of these, again raised during this short debate: net zero, flooding and transport.
First, although net zero was mentioned in rather positive terms by the noble Lord, Lord Berkeley, we recognise the report’s concerns about our journey to net zero, including in respect of decarbonising our electricity system and heating. That is why we have recently published our net-zero strategy, setting out how we plan to achieve our 2050 goals, in particular by leveraging up to £90 billion of private investment in green infrastructure by 2050.
The Government have also published the Heat and Buildings Strategy, which lays out our vision for a sustainable and affordable transition to a low-carbon heating sector. We are providing £3.9 billion over the spending review period for heat and buildings decarbonisation, including £1.8 billion for low-income households and £450 million for the new boiler upgrade scheme, which financially incentivises home owners to install heat pumps.
We have also provided significant funding to decarbonise transport. This includes confirming £6.1 billion at the spending review to support the policies and strategy in the transport decarbonisation plan. We have invested £620 million in the transition to EVs, building on the £1.9 billion committed at the previous spending review.
The noble Lord, Lord Berkeley, and my noble friend Lady Neville-Rolfe stated that there was no road map for net zero and that the UK was not reducing emissions fast enough. I note those two points. In response, I would say that the UK reduced emissions faster than any other country in the G20 between 1990 and 2019. The UK reduced its greenhouse emissions by 44% compared to just 5% for the G7 as a whole. In June 2019, the UK became the first major economy to legislate for an end of contribution to climate change by 2050. As I mentioned earlier, the recently-published net zero strategy sets out a clear pathway to reach net zero and level up the UK by supporting up 190,000 jobs in the mid-2020s and up to 440,000 jobs in the 2030s.
I agree with the noble Lord that it is part of the problem. I suspect that he may be referring to the air passenger duty and other matters. I shall write separately to him on that important matter, because I think it is fair to say that there is a balance to be struck between allowing people to travel and being sure that our aeroplane sector is fit for purpose in terms of achieving our climate change goals. I think that was probably the gist behind his question.
On flooding, we recognise that action is needed to improve surface water management as flood risk increases, so we have commissioned the NIC to conduct a study into the management of surface water flooding in England, including the role of nature-based solutions. In addition, the Government have updated their partnership funding arrangements, enabling more surface water schemes now to be delivered via their £5.2 billion investment programme.
Finally, I turn to urban connectivity, as part of the wider transport issues that I mentioned earlier. We recognise the challenges in respect to this highlighted by the report. That is why in the Budget we committed £5.7 billion over five years for London-style integrated transport settlements that will transform local networks in eight English city regions, and we have announced £1.2 billion over the spending review period for bus transformation deals.
The noble Lord, Lord Berkeley, asked whether the Government should consider the challenges and costs of delivering major infrastructure projects. He is quite right to highlight this. That is why the Chancellor set up Project SPEED to ensure that spending decisions are informed by deliverability concerns.
Moving quickly to next steps—with the Committee’s indulgence, I will go on beyond my time, but not too far—our work to create an infrastructure revolution is a remarkable cross-government effort. The Government have an established process for formally responding to the NIC’s recommendations. Once it has published the second national infrastructure assessment in the second half of 2023, we will respond as soon as practicable, although, as I have shown today, we are already engaging on these issues.
The noble Baroness, Lady Bakewell of Hardington Mandeville, asked about flood defences and where the £5.6 billion is being invested. Funding is distributed consistently across the country to wherever the risk is greatest and the benefits are highest. Defra published its flood and coastal erosion risk management investment plan in July 2021, as she may know. It provides an indicative regional breakdown of spend, including between £620 million and £750 million of investment in the north-west and £680 million to £830 million in Yorkshire and the Humber.
The noble Lord, Lord Tunnicliffe, asked about funding and urban connectivity. The Government have provided £4 billion of additional emergency funding to support TfL through the pandemic to address urban congestion. We have announced £5.7 billion to support transport networks.
I will conclude with a few ad lib-type remarks, as I want to pick up on an interesting point made by the noble Lord, Lord Berkeley, about our reflection on going to Waitrose to pick up a box of matches. We should be sure, as part of this debate on the NIC, of the vision we are looking at. This is probably not government policy, but we should look ahead—probably not too far—at how we might get our box of matches. Surely we would order a drone, which would deliver it to us. Or, if we were going to go to Waitrose, we would talk to our watch and ask a car—not our car but any driverless car—to come to our door. We would then get into the car with a coffee and a newspaper, be driven to Waitrose to buy our box of matches and then be driven back. The car would then disappear into the ether. We would then take our box of matches—perhaps rather cynically, I wonder what it might be for. Perhaps it is to light your fire in the drawing room, which adversely affects CO2, so maybe we should not go there. Anyway, the serious point is that we need to think quite positively about the changes that will definitely come to the way that we live. The noble Lord, Lord Berkeley, spoke about society and our way of life. He makes an extremely good point.
To conclude, this is an extraordinary moment—
Before my noble friend sits down, perhaps he would like to exceed his brief again and say something about the longer term. He has answered very well on some of the individual comments raised by Peers this afternoon, but the point I was trying to make is that the National Infrastructure Commission is important because it looks at the longer-term, comprehensive picture, and the need for planning is very important. As a former Treasury Minister, I know that it is not always top of the Treasury’s list.
Perhaps we might discuss on another occasion the excellent point made by the noble Lord, Lord Tunnicliffe, about capital and current expenditure. I remember talking to Education Ministers who had spent lots of capital on schools. Capital was easy, free and glamorous, but running costs were not. The capital did not provide the cheapest possible way of running things, which commercial operators care a lot about. There is a profound point underlying his question, and it would be good if we could come back to that on a future occasion.
My noble friend makes a very good point, and I hope that I have made it clear that we are thinking big and long. I mentioned 30 years, but perhaps we should look longer than that. One example is HS2. Whether we like it or not, that is an example of long-term planning—now covering four Governments, because I think it goes back to before 2010 as a concept.
That plays in nicely to my concluding remarks. We are perhaps at an extraordinary moment in this country’s history, as we make our way in the world as global Britain and build back better after Covid-19. This Government’s infrastructure revolution will, as the Prime Minister has previously put it, unleash the productive power of every part of this country and allow us to seize these opportunities with both hands. I have no doubt that the advice and guidance of the NIC will be integral to achieving all this and ultimately to helping us reach new levels of success.
Finally, as the noble Lord, Lord Berkeley, and the report put it,
“bold action, stable plans and long term funding”
are the aims. It is just a question of how we get there.
Copyright, Designs and Patents Act 1988: Sporting Events
Question for Short Debate
My Lords, I have just had a message from the noble Lord, Lord Moynihan; he is in the debate in the main Chamber so will be a little late. He apologises but hopes to be here in time.
If you take a mobile telephone into a pop concert, a theatre or a cinema, or copy a book, and try to sell what you have filmed, then you have broken the law as set out in the Copyright, Designs and Patents Act 1988. If you go to a football match, a race meeting, a golf match, an athletics event or any other sporting event and do the same thing, you will not have broken the law as sporting events are not covered by the Act. When the Act was introduced, it covered original literary, dramatic, musical or artistic works, sound recordings, films and the topographical arrangement of published editions. I do not think that anyone foresaw in 1988 what new technology would be capable of, and clearly the Act needs to be reviewed and possibly revised.
In 1988 there was a view that sport did not constitute an intellectual creation. The reason why sporting events were omitted is that debate was focused on the individual sportsmen rather than the event, with the argument that the rules of sport left only limited room for creative freedom. However, it is the event, and the copyright in the event, that is important, and that is what is required. Copyright, one must note, does not exist until the event is captured in a broadcast or a picture. It is not the sport that I am concerned about but the event.
There are two reasons why reform is needed. The first is that sporting bodies are losing valuable media rights income. The second, which is just as important if not more so, is that the lack of copyright on events has resulted in a vast expansion of illegal gambling, leading to problem gambling and gambling harm. That takes some explanation, if noble Lords will indulge me. Illicit pictures are utilised by the black-market operators as a unique selling point to attract customers who are not subject to betting regulation. These operators have zero interest in protecting potential vulnerable customers. Sporting bodies in this country, from big football clubs to small race meetings, sell their media rights for broadcast on satellite and terrestrial television, which is then sold on, often to betting shops. The total sporting industry media rights are worth in excess of £1 billion. The largest amount obviously goes to the larger football clubs but then the money trickles down to grass-roots sports throughout the country.
In this country, terrestrial broadcasters are allocated low spectrum to transmit pictures, which results in a one-second or two-second delay between the live action and the broadcast. If you fly a drone that is linked to a camera and then to a mobile telephone, or use one or more mobile telephones to record an event, you can transmit those pictures faster than television pictures as mobile telephones use a higher-spectrum frequency and therefore have up to a two-second advantage. So rogue operators are selling live pictures at a discount, and sporting bodies are losing out from the resulting diminution of their media income. This means that, when they have to renegotiate media rights, they will be offered less.
Some of the large football clubs can stop drones flying over the stadium—that is quite easy. But it is impossible for many sporting events to do so, because the drones just film a yard away from being above the event and do not actually fly over it. It is possible but difficult to enforce against drones. You can stop them from flying directly overhead an event if you can find out who is actually flying them; the problem is that the operators just move the drone slightly further away, over a neighbouring property, and the cameras are so good that they can still film the event. The cameras have a really long range that they can transmit, so it is almost impossible to figure out how to stop them.
At some horserace meetings this summer, you could see eight drones flying in a preset pattern along the course. Someone would have come along in a van and unloaded the drones, let them fly up in the air and then driven away. They were following preset patterns loaded in, so there was no way in which to find the person responsible for them, because they would disappear on the day and do not come back until later. So it is an incredibly difficult thing to do. The problem is, because they are not actually flying exactly over the event, they are not breaking any of the air navigation rules as set out by the Civil Aviation Authority. It is not just drones doing this—there are multiple mobile telephones whose content is then aggregated. There have been instances whereby 30 students have been given burner phones and paid to go to a football match, hold them up and film the match, which is then streamed and aggregated somewhere in the ether and then sold on to illegal bookmaking sites.
We do not want to criminalise the sports enthusiast for filming his favourite sporting event—that is not the point at all. You cannot ban people from filming, and nor should you, but you can follow the money. We want to stop those who are selling the pictures on, and not only debasing media rights but affecting the growth of harmful gambling. Just to take horseracing as an example, it is a huge industry, and the amount of betting that goes on is probably worth about £9 billion throughout the year. It is very profitable for bookmakers, and millions flow back into the sport via media rights—that is true of all sports—and with racing through the horseracing levy.
The betting industry has done much to solve concerns about problem gambling, but there is more to be done. The Gambling Commission has been in the forefront of pushing for changes to prevent problem gamblers from using slot machines, casinos and betting shops or betting online. However, its important work is seriously being undermined by illegal gambling sites, which are often based abroad and therefore totally unregulated. There is no point in squeezing out problem gamblers from regulated sites if they can just as easily move to an unregulated site. The reason why they can do this is that the transmission of these sporting events is done by people who sell the pictures to illegal gambling operators in this country, which are not only unregulated but can easily be accessed via the internet in this country. You can put a bet almost anywhere you want in the world, so it is almost impossible to stop that unless you have some copyright. You have to be able to follow the money because, if you do not, it is really impossible. The illegal sites beat the bookmakers and betting shops by the two seconds when the broadcast is transmitted, because many bets are put on in the running or during a game. If you have a two-second advantage, although it might take someone like me a long time to put on a bet, if you are a clever person—and an addict, as it were—you can put on a bet very quickly, and that is what is happening.
I go back to the point that unregulated problem gambling is a very serious issue which has to be addressed. Assessment of recent statistics would suggest that illegal bookmaker betting in this country is now worth about £0.5 billion. There are probably over 400,000 customers using illegal betting sites in this country; it is a serious problem. I hope that the Government will consider, when they come to legislation next year, bringing sporting events into copyright protection. That would allow the Gambling Commission the power to follow the trail of the money and shut down illegal and problem gambling.
Gambling is a serious issue and there have been lots of debates about problem gambling. I note that the Minister’s colleague, the noble Baroness, Lady Scott, said in winding up a debate on the Coroners (Determination of Suicide) Bill the other day:
“Gambling is one of our society’s major ills.”—[Official Report, 19/11/21; col. 575.]
I hope that is not a reflection of government policy because I do not think gambling, whether in horse racing or any other, is a serious ill provided it is properly regulated and we regulate against gambling harm. Illegal gambling is the problem, not legal gambling.
I believe the Government could look at this. I note that copyright protection exists in France, Belgium and Italy, so I am not asking them to look at anything that does not exist in other countries. I hope the Government will look seriously at what is happening in Europe and see whether they can address this serious problem.
My Lords, not only noble Lords here but all sorts of other people will be watching this debate this afternoon, including racing as a whole, racecourses, owners, trainers, jockeys, honest punters and—yes, there are plenty—honest bookmakers, because it covers such an important threat to the revenues keeping them in business. Following the noble Viscount’s wonderful speech, I certainly do not want to drone on, but let me give a brief lay man’s account of what is going on here.
Go to a racecourse now and you can hardly miss the drones; there are perhaps eight or 10 of them flying about all over the course, so what is going on? As the author of a work of racing fiction—Counter Coup, in all good bookshops now, as it has been for the last seven years—I would not dare dream up so implausible a plot as the reality of what is going on. In a nutshell, what is going on is tech-assisted cheating. These days, you do not have to put a bet on a horse before a race starts; you can back horses “in running” as it is called. When drones come in, they can transmit pictures of a race seconds before they appear on conventional television.
So, Joe Bloggs is sitting at home in front of his TV. He sees the favourite lengths in front coming to the last and puts a big bet on at short odds that it will win. More fool him, because his drone counterpart is a few seconds ahead and he knows that the horse just fell at the last. Therefore, he can lay that horse for as much cash as he wants with no danger or difficulty of losing his money. He lays the horse and counts his winnings. Who loses? It is the punter who backed the favourite and racecourses which do not have copyright in the pictures and therefore cannot get any money from the pictures of the product they are supplying. There is less money for racing, less money for owners—I am an owner, so I can say that with some bitterness—and less money for trainers, jockeys and legitimate bookmakers, apart from a handful of often illegal bookmakers who may be in on the game.
This is not legitimate betting, to which I certainly have no objection. This is foul play, and it must be stopped. One way of doing so would be to give the racecourses copyright in all pictures so that at least the droners paid up out of their ill-gotten gains. Another would be to make such filming of sporting events a criminal offence. The Government will no doubt come to their own conclusions as to which route is the easiest. What is important is that they do not conclude that both routes are difficult and therefore do absolutely nothing about this scandal of legalised fraud.
My Lords, I seek your Lordships’ permission. I had no intention whatever of being discourteous to my noble friend but equally I was trying not to be discourteous to the Minister after I spoke in the debate in the Chamber on the humanitarian issues in Afghanistan. With the agreement of the Committee and of the Chair, I will hand over now and speak in the gap, just to emphasise the important point in chapter 4.32 of the Companion that speakers should be present for the opening speech. I sincerely apologise to the Committee for that being difficult on account of the other debate overrunning. I will give way to my noble friend, who will speak now, and with the agreement of the Committee I will speak in the gap.
My Lords, I am glad we have come to that agreement. I thank my noble friend Lord Astor for initiating this debate and the noble Lord, Lord Lipsey, for his colourful perspective, although, as he says, the solutions in these matters are never easy.
Like both noble Lords, I love racing, especially on the flat, and believe that elite sport broadcast here and around the world is important to UK growth, enterprise and soft power. Over the years, I have spent a good deal of time in Asia and Europe and have been struck by the power of teams such as Manchester United and indeed Manchester City, English cricket, Welsh rugby and of course the Derby to bring people together and attract wealth and investment into Britain.
I was Intellectual Property Minister for nearly three years—happy times—mainly under David Cameron, and I helped others to understand the evolution and importance of intangible assets such as those that we are talking about. Over 4% of our GDP in 2019 was invested in intellectual property rights, and of course copyright, which we are discussing today, is the biggest intellectual property right in economic terms.
At that time, we not only had the best IP regime in the world but we prided ourselves on good enforcement of the rights, which provided certainty for business, sport, inventors, scientists and the creative industry, while the Intellectual Property Office and the IP crime unit in the City of London Police led the charge against infringements of all kinds. Some of them were very dangerous, such as counterfeit airbags and website scams. I am delighted to see the noble Lord, Lord Stevenson of Balmacara, in his seat; we did a lot of work together on trying to get IP into a decent place, and to avoid the sorts of scams that we have heard about from my noble friend today.
One offending area was autovisual content, including live match footage, which could then be streamed in from abroad by, say, Greek or Asian providers for a very low fee but not be caught by the rules on copyright and the associated licensing because of the wording of an exemption in Section 72 of the Copyright, Designs and Patents Act 1988, which followed a confusing ECJ judgment in 2011. The beneficiaries of that state of affairs seemed to be from overseas, as in the racing example that my noble friend Lord Astor has raised. While some pubs might have been getting cheaper deals, they might well at the same time have been breaching copyright laws, which was itself a big cause of concern.
Like much to do with IP, this area is very complex, as we will discover when we seek to put our towels around our heads and solve the very real problem that has been raised today. On the issue that I have mentioned, after two painful consultations, we concluded that the right thing was to remove film completely from the Section 72 exemption. We made regulations in 2016 that seemed to do the trick and reduce lawbreaking. We put a review clause in, which is something I am always very keen on in regulations, and that review is now taking place. I recall this and mention it today because of its relevance and because it has been mentioned in the excellent briefing by the Library for this debate. My strong advice to the Minister on that one is to leave well alone, because it is very complex and you can go around in circles.
I listened to my noble friend Lord Astor, who raised a new horror that perhaps could be addressed by the right regulation of copyright, which is what we were doing on that occasion. This is exactly the sort of issue that the Intellectual Property Office, of which I am a great admirer, is good at tackling. Illegal gambling is for the DCMS, of course, but in my experience they work well together and should act as my noble friend Lord Astor suggested.
He has identified a very valuable and unfair two seconds. That was the thing that struck me—the delay that allows this profit to be a completely wrong accretion of value. It is a new online harm for us to wrestle with, and regulation is no doubt needed. That is why this debate is very timely, with the legislation on that issue coming forward soon.
I very much look forward to my noble friend the Minister’s comments and hope that the two issues we have raised are not in conflict.
My Lords, I again apologise to and thank the Committee for allowing me to speak in the gap. I will be briefer than I anticipated. However, I had the pleasure and privilege of reading my noble friend Lord Astor’s notes in advance of today’s Committee and I fully endorse what he said and agree with the position he has taken.
I well remember the discussions on the relevant Bill back in 1988, because I was then Minister for Sport in Margaret Thatcher’s Government and this subject came across my desk. It was at a time when sport was very much on the fringes of government. It was in the Department of the Environment and long before the days of extensive broadcasting rights, major television deals and the lottery. They were still years away. In fact, most of the work done then in the department was on the problems caused by football hooligans bringing shame to the national game and the country. Much has changed. The advent of sport as an intellectual creation was still to come. The commercial world I have just described really happened in the 1990s.
The speech of my noble friend Lord Astor that I read is absolutely pertinent, because we have to act on this now. The noble Lord, Lord Lipsey, was right. I will not talk about the gambling side of this. They both made a strong argument in favour of bringing sporting events into copyright protection. It is worth quoting the excellent brief by the WIPO:
“IP rights … and the legal protection they give … help to secure the economic value of sport. This in turn stimulates growth of the sports industry, enables sporting organizations to finance high-profile sports events”.
We already have precedent in taking action on exactly what my noble friend is looking for, when we brought forward legislation for the London 2012 Olympic Games specifically to protect the rights of the organising committee at that time. Only recently we have had legislation to the same effect with regard to the Commonwealth Games to be held next year. There is ample precedent for us now to consider this in the wider context of sport and to follow the ideas my noble friend raised.
I close by endorsing what he said, supporting what the noble Lord, Lord Lipsey, said, and apologising once again to the Committee. In nearly 30 years I have never missed an opening speech in a debate I intended to speak in. I would normally have scratched immediately but, given that I missed just a speech I had read, I hope I have the Committee’s forgiveness for being present in the Chamber for the winding up by the Minister, who referred to the speech I gave on the appalling humanitarian situation in Afghanistan. I end with further apologies and thanks to the Committee.
My Lords, I do not feel offended at all by what happened and am very pleased that we can accommodate the noble Lord’s comments and contribution to this debate. As regards our side, he can relax on that matter.
I am very grateful to the noble Viscount, Lord Astor, for bringing this debate forward. It is one of those areas that the more you look into it, the more complicated and complex it gets. Battling with advances in technology is bedevilling us in so many areas, and it has been very illustrative to hear the cases so eloquently put by both the noble Viscount and my noble friend Lord Lipsey. I also pay tribute to the Library for the briefing that it gave us.
On the protections being called for in this area, I think that we are all looking forward to the Minister’s comments on where we have got to in what is a very technical and complicated debate. I want to add from my perspective just how important sport in its broadest context is to local economies as well as national economies. The noble Baroness, Lady Neville-Rolfe, gave an assessment of travelling to the Far East. As a long-suffering Leeds United supporter who has been on trade missions to Malaysia and China, I found the collective memory in those places of how Leeds was a great team incredible—because, until they returned to the Premiership, the length of time that Leeds were out of the top flight was quite significant. I am talking about the direct trade talks I had as leader of the council with significant businesses and how important that contribution was. In my time as leader, I was able to secure the triathlon world series coming to Leeds as the UK venue, the television rights that came with that, and the exposure of the city and the whole region that came through securing the grand départ of the Tour de France. It is very difficult to put a value on the importance of that to the sense of well-being as well as wealth growth in our local communities.
I therefore recognise the World Intellectual Property Organization’s comments about helping to secure the economic value of sport and about how that, in turn, stimulates the growth of the sports economy, enabling sports organisations to finance high-profile sports events and providing the means to promote sports development. It is absolutely critical that we look at this through the lens of sports organisations, and we should of course recognise the benefit that the sale of broadcasting and media rights brings and that it is the biggest source of revenue. We should also consider how those funds can then be used to contribute to the development of sport at grass-roots level. Do the Government have plans to encourage intellectual property revenue being directed into the development of grass-roots organisations?
The Sports Rights Owners Coalition has argued that protection against rights infringements is
“key to a sustainable financing of both professional and grassroots sports”
and, as such, it has called on the Government to
“fully recognise, protect and promote the special nature of sport and sports rights”.
We have heard of course how the UK’s Copyright, Designs and Patents Act 1988 allowed organisations that do not charge admission to show television programmes to the public without permission from the owners of film and broadcast copyright in those programmes. The Act was subject to amendment in 2016, when “film” was removed from the list of exceptions. The Explanatory Note to the regulations stated that this change would ensure that
“Section 72 will only provide a defence against infringement (in the showing or playing of a broadcast) of the rights in a broadcast per se, and will not extend to any film rights in the broadcast”.
Five years on, does the Minister believe this change provided greater clarity, as was intended? What impact has this had on the wider licensing framework? The pertinent question for the debate is this: when will the Government publish the response to their review of these changes? If there is any sense of what options for action could follow, I would be very grateful for an understanding of where this is heading.
I thank my noble friend Lord Astor for tabling what has been a very important debate. I have certainly found it constructive, interesting and informative and am grateful to those Members who have contributed. First, let me make it absolutely clear that the Government are committed to supporting sports and sporting events, as well as athletes, spectators and all those whose livelihoods are dependent on the successful running of sporting events at all levels.
The Question for Short Debate tabled by my noble friend is
“to ask Her Majesty’s Government what plans they have to amend the Copyright, Designs and Patents Act 1988 to include sporting events.”
To address this directly, I should start by explaining that the main purpose of that Act is to protect creative works and intellectual creation, innovation and invention. For copyright, this includes original literary, dramatic, musical and artistic works, as well as films, sound recordings and broadcasts. Live sporting events and athletic performances are not eligible for copyright protection.
The main reason for this is that copyright must be an intellectual creation. I am sure that the noble Baroness, Lady Blake, would argue that some of the fantastic performances of Leeds United in the 1970s were intellectual creations, but I am sorry to tell her that, in general, sporting performances are not considered intellectual creations since the rules of sport leave only limited room for real creative freedom.
Proposals to have sporting performances protected by copyright provisions raise grave concerns about the development of sport—for instance, if an athlete were able to protect their performance, or an aspect of it, from being copied by other athletes. We can see how many difficulties would be caused by going down that route.
The owner of copyright in footage of sport is the person who films it, as they have creative control of how that race, game or event is filmed. The proposal before us of having a sporting event protected directly under the CDPA would reverse this, meaning that the copyright in any film of a sporting event would be owned no longer by the person who filmed it but instead by the event’s organiser or perhaps even its participants. This would represent a significant departure from the prevailing understanding of the purpose of copyright protection, which is to protect the creator and creative industries. This would not just entail reopening the domestic copyright framework; we would also have to consider whether there would be consequences for the UK’s obligations under international legal frameworks.
The CDPA, along with the Trade Marks Acts, forms the basis of an essential form of legal protection available to sporting events. For example, trademarks are valuable assets that can build confidence and loyalty in a business by protecting things such as names and logos. This is especially important in the world of sport, where sports clubs wish to engender a sense of pride and identity in their brand—such as Leeds United—allowing them to invest in and build up a reputation in their club names and logos and then control and commercialise official club merchandise based on that brand.
In addition, films of sporting events are protected by copyright, and this is how organisers of sports traditionally create and control the intellectual property linked to their events. Footage of sporting events allows clubs to license their match or race footage to broadcasters, which of course generates a crucial source of revenue for a wide variety of sporting enterprises.
Certain forms of sports data can also be protected by IP rights, such as database rights. Anyone wishing to use that data would need to seek the permission of the rights holder. That said, copyright does not protect facts themselves, including facts around sporting events—but it can protect how facts are expressed.
My noble friend Lord Astor and the noble Lord, Lord Lipsey, both raised concerns about the use of camera drones to film sports events and using their live streams to gain an advantage over official broadcasts and betting sites. The Gambling Commission regulates nearly all commercial gambling in Great Britain, including all sports betting, and has so far found little evidence that illegal drone filming is linked to illegal gambling sites. The commission can take action against illegal operators, using its relationships with web-hosting companies and payment providers to disrupt these websites.
It is true that filming or recording sporting events is often prohibited under conditions of entry to sporting venues, as it is in cinemas. Drones may be one way of bypassing conditions of entry. The Gambling Commission believes that using unauthorised drones, much like using unauthorised phones from inside venues, is driven primarily by gamblers who are in-play betting on legal sites seeking an advantage from information that is more up to date than that available to operators or other betting exchange users who are watching an official broadcast. However, this type of courtsiding and other forms of illicit filming are not considered an offence under the Gambling Act.
Furthermore, the commission’s sports betting intelligence unit works closely with the betting industry, sports’ governing bodies and the police to protect the integrity of sport and betting. The unit will determine the most effective course of action in each case. This can lead to further investigations being carried out by the commission or the police. The commission also supported a police-led initiative on drone use in racing and invited the UK national police adviser to speak at a sports betting intelligence forum. The commission already requires gambling operators to have policies designed to manage betting integrity and regulatory risks within in-play betting.
The Government are determined to take steps to help sporting events put a stop to organisations and activities that support illegal gambling and the unauthorised use of footage protected by copyright. The Gambling Act review is taking a comprehensive look at gambling regulation in Great Britain to make sure that it is fit for the digital age, including looking at the powers the Gambling Commission has to tackle illegal operators. The Government recognise that these are issues of genuine concern to the businesses that have raised them, but they have not yet seen sufficient evidence of any harm arising to justify any intervention at this time, much less an unorthodox expansion of the copyright regime.
The Government would of course be open to receiving further quantitative evidence on the matter. If the businesses concerned were able to make a better case for government action, backed by persuasive data, of course we would consider what measures might be effective. However, an expansion of copyright-like protection in the way proposed is in our view simply not viable. Not only would it be a significant and unprecedented development, with unknown impacts and unintended consequences, but it would move the globally well-established scope of copyright well beyond the protection of creators and creative industries and fundamentally alter the nature of what subject matter is protected.
I thank my noble friend Lady Neville-Rolfe for her observations on Section 72 of the CDPA. The Government are currently analysing the review of the section and we will publish our findings in due course. I fully agree with the noble Baroness, Lady Blake of Leeds, that sports and sporting events, including grass-roots sport, are of crucial benefit to all levels of the economy. IP can and does provide sport with opportunities to develop and promote revenue and we fully agree that promoting IP rights is crucial to this. As I mentioned previously, the Government are analysing the review of Section 72 of the CDPA and we will publish our findings in due course. I also thank my noble friend Lord Moynihan for his contribution and for his experience in this field.
I end by again thanking my noble friend Lord Astor and those who have contributed to what I think has been a very good and informative debate today.
Committee adjourned at 4.40 pm.