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Lords Chamber

Volume 837: debated on Monday 15 April 2024

House of Lords

Monday 15 April 2024

Prayers—read by the Lord Bishop of Newcastle..

Death of a Former Member and a Member

Announcement

My Lords, I regret to inform the House of the death of the noble Lord, Lord Hoyle, on 6 April 2024. On behalf of the House, I extend our condolences to the noble Lord’s family and friends. I also regret to inform the House of the death of the noble Lord, Lord Rosser, on 10 April 2024. On behalf of the House, I extend our condolences to the noble Lord’s family and friends.

Steel: Port Talbot

Question

Asked by

To ask His Majesty’s Government what assessment they have made of the social impact of the Port Talbot steel works blast furnace’s closure on the surrounding communities.

My Lords, the Government recognise the impact of transforming the Port Talbot steelworks. This is why we have established a transition board with membership from the local authority, the Welsh Government and Tata. The board has £100 million of funding—£80 million from the UK Government and £20 million from Tata—for projects to support the communities affected. The UK Government are contributing £500 million towards Tata’s £1.25 billion investment, to ensure a sustainable future for Welsh steel and to safeguard up to 5,000 jobs.

I thank the Minister for those remarks, but can I have an answer to one question? What assurance have we that we have sufficient electricity to work the steel plants at full capacity? Without that, we could have large-scale unemployment. South Wales has known enough of that in the past. Also, our communities could be affected. I remember how many of our local organisations lost out because of previous unemployment, being unable to take part again. There will be all sorts of consequences if we do not have full-scale working plants, and that depends on full-scale electricity supply.

I thank the noble Lord for that point and agree with him. This is why we have invested significantly in developing the Celtic Freeport as an anchor for floating offshore wind. It will be sufficient to provide a large portion of the power for these two new electric arc furnaces.

My Lords, my union, Unite, last week voted to strike over Tata’s disastrous plan. The plan is an appalling act of industrial vandalism as far as we are concerned, with the loss of thousands of jobs devastating the local community and the local economy. As the Minister knows, Tata has other options, especially as Unite has secured a commitment from the Labour Party to invest £3 billion—not half a billion pounds—in UK steel. Will the Minister therefore urgently rethink the Government’s strategy and insist that Tata keeps at least one blast furnace going until the end of its life as a condition of investing any public money in this operation?

I must respectfully disagree. This is a very sound plan to ensure that we have a future of steel-making not just in this country but in Wales. This plan will save 5,000 jobs. It will make the steel industry profitable and result in a crucial circular economy where we take our scrap metal and turn it into real steel rather than importing steel or ore from abroad. The Opposition are keen to copy the Conservative Party in so many of our policies, so I am surprised that in this instance they refuse to do so.

My Lords, does the Minister accept that there is an outstanding record of employee work in Port Talbot, and that there has not been a significant strike for 40 years there? In these circumstances, is it not outrageous that Tata should now threaten to take back the employees’ pension and redundancy packages to try to stop any industrial action? Is it not time that the Government got a grip on this to secure the future of this vital plant?

I am grateful for that point. All of us in government are very sensitive to the people whose lives will be affected, which is why we are putting so much money into this process—£100 million in the transition board. I take this opportunity to thank Tata for its commitment to invest £1.25 billion in regenerating the area and renewing the British steel industry. I urge the unions to maintain their very strong record of good relationships, to not go on strike and to work with Tata, so that we can deliver what will be an incredible benefit for the area and the country.

My Lords, I agree with all previous speakers that it would be an utter tragedy for steel-making to disappear from Port Talbot. However, does my noble friend agree that the only way of preserving a great British steel industry, and a green steel industry at that, is for the workers to work closely with Tata Steel, and for us to further green it using the offshore floating wind projects and with the potential of advanced modular reactors on site in Port Talbot?

I thank my noble friend for that point, and she is absolutely right. If we look back six months or a year, there was very little future for steel-making in this country, and now we have one; we have a truly advanced manufacturing plan for this entire industry. This is something we should celebrate. It is a true industrial policy backed by government money, in partnership with the private sector, and supported by the extraordinary and brilliant talent of the people at Port Talbot.

My Lords, the Minister will have noticed that the Prime Minister and the leader of the Opposition visited Barrow-in-Furness recently. The reason they went there, as he knows, is to see its submarine manufacturing process. Submarines need high-strength steel—the sort of steel that comes from blast furnaces and not from electric arc ones. Where will that steel come from? From which countries will we import it?

It is very important that we have a strong defence basis; there is no question about that. The UK industry uses only about 1% of British steel. A quantity of the steel comes from Sheffield Forgemasters, which is owned by the Ministry of Defence. This plan will actually produce the right level of steel from recycled scrap, which is far more efficient for the environment, to enable us to provide for our defence needs.

My Lords, is my noble friend aware that the resources he has announced are enormously welcome? However, on the point the noble Lord, Lord Griffiths, made about electricity supply, there should be an absolute guarantee. His Majesty’s Government might consider using the site for one of our many nuclear reactors that we have talked about for the last 18 months. This would be a wonderful situation if that were included on this particular site.

I am grateful to my noble friend for that comment. The possibility of advanced modular reactors or small modular reactors operating in conjunction with offshore wind was just mentioned. The key is to build a sustainable green steel industry. That is why the Government have put so much money and thought behind this extraordinary and very powerful revolutionary plan.

My Lords, demand for steel is expected to grow tenfold in the coming years. With proper investment, the UK could again be the steel-making capital of Europe. Will the Minister consider changing the procurement rules to ensure that UK public contracts use 100% UK steel, which by itself would create and maintain hundreds, possibly thousands, of jobs?

I am always wary of insisting on local content when it comes to procurement. We want the best possible value and choice for our consumers, so I am not sure that is the answer. The point is to create a steel industry that produces steel that everyone in the world—not simply customers in the United Kingdom—wants to buy at the right price.

My Lords, we should be very grateful for the investment that Tata has made in the United Kingdom, starting with Tata Steel and then Jaguar Land Rover. These are huge, risky investments. With the big free trade agreement between the UK and India about to be signed, we should back Tata and appreciate what it has done.

I am extremely grateful to the noble Lord for making that point. The first visit of my colleague Minister Mak as a Minister in my department was to Port Talbot to meet Tata’s managers. They made it very clear that they want to manage the redundancy process as closely as possible and by using a voluntary scheme. They have a huge amount of interest in this country and have partnered with us by creating a giga-factory, which kick-started our EV car industry in a major way. I echo the noble Lord when I thank Tata for all it is doing with the United Kingdom.

My Lords, the Government’s decision to give £500 million to Tata means that 2,800 people will lose their jobs. These are desperate times. People are worried and angry. The Government’s negligence in the 1980s devastated industrial communities, and the scars of entrenched inequality are still evident today. The Port Talbot transition board has up to £100 million to invest in skills and regeneration. Seven months on, can the Minister tell your Lordships’ House if any of this has been spent and if the strategy for doing so will be set out?

I am grateful to the noble Lord for his comments. I point out that the Conservatives have not been in government continuously since the 1980s; there was a prolonged period when Labour was in power. However, the next meeting of the transition board, on 25 April, will discuss exactly that: how will that £100 million be spent on local regeneration? The Government have also invested just under £800 million in the four city deals and £150 million in the Swansea Bay area. We are also investing significant tens of millions, nearly £60 million, in the offshore wind industry in the area, so we are definitely putting our money where our mouth is.

My Lords, I will return to the question from the noble Lord, Lord Fox. What percentage of British steel will be used in the Dreadnought class, the AUKUS class submarines, Type 26s, Type 32s and fleet solid support ships? We need sovereign capability and resilience, and I have a feeling that we will be relying on France and other countries for quite a lot of this specialist steel.

The noble Lord knows far more about building warships than I ever will. All I can say, as I said earlier, is that 1% of defence requirement is provided by UK steel. We believe that this plan will allow us to produce the necessary steel for all our industries, particularly as technology develops. I say again that this is truly a first-class plan to regenerate the area and create a green steel industry for the UK. We should celebrate it while putting in a huge amount of attention to detail to ensure that we mitigate for affecting people’s lives, as much as possible.

Schools and Colleges: Special Educational Needs

Question

Asked by

To ask His Majesty’s Government what steps they are taking to ensure that, when meeting the needs of those with special educational needs in the school and college system, a legacy of training and knowledge is retained within those institutions.

My Lords, I beg leave to ask the Question standing in my name in the Order Paper and remind the House of my declared interests.

My Lords, the SEND and alternative provision improvement plan aims to create enduring and inclusive cultures in our schools and colleges, by delivering training and knowledge to improve SEND support. We are delivering teacher training frameworks for greater SEND content, a new qualification for school SENCOs, the universal services programme, national standards, teacher training bursaries for specialist SEND teachers in further education and partnerships for inclusion of neurodiversity in schools.

I thank the Minister for that reply. However, why do we not have a strategic plan to make sure that at least the most common special educational needs—I once again remind the House of my interest in dyslexia—are embedded within schools? We do not want to go through the process of parents having to spot that their child is struggling, but for the school to come to the parents and say, “You have a special educational need”, not the other way round. It is reckoned that over half of special educational needs are not spotted at school.

I would say two things to the noble Lord. First, we do not need a diagnosis for a child to be able to offer them support; it is important that a child gets support as quickly as possible. Secondly, our improvement plan is exactly the strategic plan that the noble Lord refers to.

My Lords, is it not the case that provision for special educational needs in our country would be greatly damaged by Labour’s proposed education tax? The party says it would exempt from the VAT charge those in independent schools with education, health and care plans, but there are some 100,000 in independent schools with special educational needs who lack such plans. How on earth would the state sector cope with the large number of special needs students in independent schools who would be forced to leave them, with grave damage to their education, by Labour’s education tax? I declare my interest as president of the Independent Schools Association.

My noble friend makes a very good point. As the House knows, the Government have invested very large amounts of money in increasing capacity for special school places, rising by over 60,000 places since 2010, but the sector is still using independent schools. It would put huge pressure particularly on those children and their parents.

My Lords, does the Minister accept that, notwithstanding the list she gave in response to the first Question, the underfunding in our mainstream schools system means that there are many children in mainstream schools whose needs are not being met? Does she further accept that, occasionally, those children who get plans in primary school find it difficult to find a secondary school, because secondary schools can choose not to take children with plans, thus making them undesirable to schools because they know they cannot meet their needs?

The national funding formula is structured, as the noble Baroness is aware, to make sure that funding is targeted towards pupils who need additional support. In 2024-25, over £4.5 billion, or about 10% of the formula, is allocated according to deprivation factors, and £7.8 billion, almost 18%, will be allocated for additional needs factors. Both those elements correlate with the prevalence of SEND.

My Lords, the Minister will know that there are many thousands of individual special needs teachers who go that extra mile in meeting the very individual needs of young people with special needs. What is the department doing to ensure that, where people have come up with innovative ways to address needs, learning is both retained within the institution, as in the original Question, and shared with other schools across the sector?

That is precisely what we are aiming to do through our practitioner standards. The noble Baroness will be aware that we are starting with the biggest areas of additional needs: speech, language and communication; autism; and mental health and well-being. We have a twin approach; we partly have academic researchers looking at the evidence base, but we are also working very closely with practitioners to make sure we capture the best practice, and then publish and share it.

My Lords, at the heart of my noble friend’s Question was surely the issue of teacher retention. Workload pressure is cited as the number one reason for teachers leaving the profession. The Government currently have a Workload Reduction Taskforce, which in January published its Initial Recommendations. One of those really surprised me; it was to fully implement and strengthen the recommendations of the two previous reviews, held in 2016 and 2018. Could the Minister assure us that the DfE and Ofsted will at some point publish a joint response on their success in fulfilling these recommendations, as they agreed at the time, or what confidence can the profession have that the recommendations of this current task force will be taken on board?

I can genuinely reassure the noble Baroness that teacher workload and teacher retention are incredibly high up our list of priorities within the department. It is a central focus of the team. In addition to workload, it is critical that we equip our teachers with the skills, experience and confidence they need to deal with what they are facing in the classroom. That is why, for example, the inclusion of much more content on special educational needs and disabilities in initial training and the early careers framework is so important.

My Lords, pupils with special educational needs are more than four times more likely to develop a mental health problem than other people. This means that one in seven young people with a mental health difficulty will also have another special educational need. Given the huge and increasing backlog for mental health support in schools, will the Minister tell us whether the Government will support Labour’s plan to place a mental health professional in every school?

As the noble Baroness knows, the Government have an ambitious plan in terms of the creation and development of mental health support teams in schools. We estimate that, from April 2024, those support teams will cover 4.2 million children and young people, and we think that will rise to about half of all children and young people by spring next year. The challenge, which the noble Baroness will recognise, is to make sure that the demand for mental health practitioners is balanced between the health service, schools and other parts of the economy.

My Lords, children with special needs are expelled from popular schools and transferred to less performing schools. What will the Minister do to make sure that that situation is addressed so that schools are not allowed to dump their children on another school?

We have to be very careful about talking about dumping children. I have not met a school yet that behaves like that. I want to pick up on the point made by the noble Baroness, Lady Bull. Some of the best practice I have seen is where schools are establishing small units within the school campus for children with the most disruptive behaviour and only the best teachers in the school are allowed to teach in that unit, thereby sending a strong message about how they value those children.

My Lords, according to the Government’s recent statistics, in only 49% of cases of children who have been assessed as needing an education, health and care plan are those plans produced within the 20-week statutory limit, leaving children, families and schools in limbo because they cannot access the funding required for the support the child needs. Can the Minister say what she is doing about this?

I thank the noble Baroness for her important question, which is at the centre of parents’ concerns as they worry about getting the right support for their children. We are testing a number of measures through the change programme to try to improve the quality, consistency and timeliness of the education, health and care plan process. I asked colleagues the question that the noble Baroness is asking me, and it is too early to share the learnings, but as soon as we can, I will be delighted to do so.

Police: Joe Anderson

Question

Asked by

To ask His Majesty’s Government what assessment they have made of the conduct of the police in their treatment of Joe Anderson, who resigned as the Mayor of Liverpool in 2021.

My Lords, an investigation involving Mr Anderson remains ongoing and it would therefore be inappropriate to comment while that remains the case. The police are rightly independent of government and decisions concerning investigations are operational ones for the respective police forces to make.

My Lords, the Mayor of Liverpool, Joe Anderson, was arrested on serious charges, including fraud and bribery. That was three years and four months ago. He lost his job, his reputation and his income. No charge has been made since then. Does my noble friend the Minister think that is justice?

My Lords, I am afraid I am unable to comment on whether this is justice or not. The fact is that the force has advised that this investigation remains ongoing and live. That includes ongoing investigation with the Crown Prosecution Service. By way of further context, Mr Anderson has previously challenged the decision to arrest him by way of judicial review, including with an appeal, and was unsuccessful in the courts. Since then, neither he nor anyone acting on his behalf has made a complaint to the police. However, the force has confirmed that it is seeking to conclude this investigation as expeditiously as possible.

My Lords, it is a privilege to follow the noble Lord, Lord Heseltine—one of the few Tories whose reputation is still strong in the city of Liverpool, thanks to the work following the Toxteth riots all those decades ago. I declare an interest insomuch as Joe Anderson is a friend of mine. He is a man who—as has just been said—has been destroyed. His reputation has been completely and totally destroyed, and everything that goes with it, although he has not been charged with a single thing. It reminds me of Sir Cliff Richard. Do not start charging and making allegations across anywhere to anyone if you do not have proof and cannot substantiate what you say. It is an absolute disgrace what has happened to this man.

My Lords, that is not a question: it is a statement. However, I am going to be unable to develop my theme, which is that I am afraid that I cannot comment on ongoing investigations, as the House well understands.

My Lords, we are not asking the noble Lord to comment on the investigation. Will he return to the question of justice, raised by the noble Lord, Lord Heseltine, and reflect on the words of the Liverpool-born Prime Minister William Gladstone, who said that

“justice delayed is justice denied”?

Is it not outrageous that, after all this time, this has been hanging over someone and their family? The expedition of this case is the issue that the noble Lord has raised, not whether it is right or wrong.

Secondly, as far as the politics of Liverpool is concerned, it does not help politics or good governance for a case to fester like this for so long, undoing some of the achievements of the noble Lord, Lord Heseltine, who, as Secretary of State for the Environment, came to the city of Liverpool in 1981 and said, rightly, that he did not know that conditions such as those existed in this country. He vowed to do something about it, working across the political divide. Anything that impedes those achievements would be a very negative thing for Liverpool and the country as a whole.

I hear what the noble Lord has to say on the subject, but I cannot comment on an ongoing investigation. The noble Lord is, in effect, inviting me to comment on the complexity of the investigation and various other operational aspects of it, in order to make a judgment as to whether it is delayed, denied or whatever. I cannot do that.

My Lords, I remind the House of my business connections in Liverpool, but I must ask the Minister to come back to the general question of the longevity of this investigation. We have just had a Member of the other House who was under suspicion for two and a half years, unable to do his job, and then no case was held against him. I am sorry, but this is unacceptable. We really cannot have a justice system that punishes people, guilty or not guilty, without them knowing what the case is, what the charge is, or why it has been held up for so long. The police really do have to come to some conclusion rapidly.

My Lords, as I say, that may very well be the case in the majority of investigations. I cannot comment on the specifics of this one, not least because I do not know the specifics of this one. It would be completely inappropriate for me to do so. However, I will agree that, obviously, in general, investigations should be as speedy as possible.

My Lords, does the Minister agree that there should be some maximum timeframe on this because, otherwise, it could go on for ever—and it looks like it is going to. Surely, there should be some point at which you know, at least, whether there is going to be further action taken against you.

I am afraid I do not agree with that. It depends very much on the complexity of the individual investigation. As I have said, the Merseyside police have confirmed that they intend to conclude it as expeditiously as possible. Beyond that, I can go no further.

My Lords, it is fitting that we are discussing police conduct today, 35 years, almost to the hour, since the Hillsborough disaster that killed 97 people. Today, the Labour Party has confirmed that it would introduce a Hillsborough law to ensure public authority accountability. Does the Minister agree that there is much more that we can do to achieve justice for those killed and to ensure that such a disaster never happens again?

I join the noble Lord in honouring those who died, of course; 35 years have passed since the tragedy and the impact continues to be devastating for many. The families have my sympathy. The families of the 97 have shown tremendous courage and determination and obviously their loved ones will not be forgotten. In his Statement to the other place on 6 December, the Lord Chancellor committed to a debate later this year on the Government’s response to the Bishop Jones report. It would be unwise of me to pre-empt that debate, so I shall say no more at this point.

My Lords, in view of the Minister’s repeated remarks, do I understand that he is saying that the Government have no role in influencing the police in their inquiries?

My Lords, while it is true that the Government should not be able to direct the police in inquiries such as this, as the noble Lord, Lord Heseltine, said, the amount of time that this man and his family have been under suspicion and under investigation, with rumours floating about, is not fair on any individual person, let alone a person who seeks to represent his community in high office, be it locally or nationally. We have seen far too many cases of inquiries—whether involving parliamentarians or local government officials—going on for far too long. The Government ought to have a look at this to see if something should not be done to put it right.

I absolutely hear what my noble friend has to say on the subject and I will, of course, take that comment back to the department.

My Lords, does the Minister agree that, notwithstanding the fact that he cannot comment on an individual case or its complexity, it does a disservice to the police service to be seen to be taking quite so long over this case?

Again, I would prefer not to pass judgment on the quality of the investigation that the Merseyside police have done, as the noble Baroness is asking me to do. I really do not know what the complexity of this case is. I do not know why it has taken so long to resolve. I would assume that there are very strong operational reasons, given the obviously high-profile nature of the people involved.

May I ask my noble friend about a case on which he can comment? It is that of a public figure: Ted Heath. I can sense—although I cannot see—him gritting his teeth even as I raise that name. The only reason Ted Heath was accused, with the most vicious accusations, is that he was a public figure, and a vulnerable public figure. He died years ago. Surely, this is a matter of public service that we should be doing in this House, and my noble friend would become a local hero in this House if he simply went away and told the Home Office that this would be settled once and for all and that, at last, Ted Heath’s name could be cleared.

Well, I hear what my noble friend has to say. He has heard what I have had to say on this subject on at least 20 occasions and, no doubt, I will be called back to the Dispatch Box to say it all again. As I said last time, I have gone back to the Home Office and we are looking into ways of perhaps answering the noble Lord’s question.

My Lords, I speak as someone who is proud to have been brought up, and to have gone to school, in Toxteth, and who has a huge amount of respect for Joe Anderson and all that he achieved when he was mayor. Having listened to the various comments made on all sides of this House, I hope my noble friend the Minister will agree that we should ask: is there not a better way in which we can handle situations such as this? Citing the various examples that he has heard, could he perhaps give us the opportunity of coming back when he has reflected with his colleagues in the Home Office on the points that have been raised?

I thank my noble friend for that and I will of course reflect on the points that have been made. However, as I said in my earlier answer, it would be inappropriate for government to interfere with the organisational matters of the police.

Pandemic Preparedness

Question

Asked by

The Government continue to plan and prepare for a range of pandemic and emerging infectious disease scenarios. These include respiratory diseases such as flu and diseases spread by contact, vector-borne or through oral transmission. This built on lessons learned through Covid-19. We are working with partners to strengthen our pandemic preparedness and to build a flexible and scalable response that can be adapted to any threat that the health and social care system faces.

My Lords, that is not very reassuring. With all due respect to my noble and learned friend Lady Hallett, the remit that she has been handed is too wide, too deep, too long and too expensive, not least due to the lawyers. It seems to be looking backwards rather than forwards. We do not need to know who said what to whom in the middle of the night a few years ago; we need to know whether we have innovative vaccine labs, ventilators, the right medical staff, preparedness with PPE, supply lines and so on. I suggest to the Minister that either my noble and learned friend’s remit be cut down or he set up a quick and short inquiry, looking forward to the next pandemic, which could be with us within months. Sweden managed its inquiry in two years. This one will take too long.

I totally agree with the noble Baroness. What I am interested in as a Health Minister is what lessons we can learn so that we are better prepared next time round. My understanding is that stage 1 is going to be reported in early summer, and that should give us some of those findings. I completely agree that that is what really matters.

My Lords, an international pandemic treaty and government policies from 2021 are currently being negotiated by the World Health Assembly, aimed at preparing for the next global health emergency and preventing a repeat of what South Africa called vaccine apartheid, where countries had vastly unequal access to vaccines and drugs. Next month, World Health Organization member states are expected to vote on the final text. Where do we stand on the key issue of pathogen access and benefit sharing? Do we stand on the side of the group for equity or with those rich countries that have suggested that such an approach would undermine their sovereignty?

I think our record in this speaks for itself. I am very proud of the action that we took as a Government to make sure that the AstraZeneca vaccine was prepared quickly, put in arms quickly and offered all around the world on a not-for-profit basis very quickly. Action speaks louder than words, and that is something that we are well-prepared on. I have been involved in some of the conversations about world pandemic preparedness. There is action that we think we can take collectively as a world, but what we are not prepared to see happen is our sovereignty—the management of our health services—being ceded to other countries.

My Lords, procurement during the pandemic has left a bitter taste in the country. While many good citizens stepped up in the public interest, there are legitimate concerns that others were profiteering at that difficult time. Can the Minister give a firm commitment there would be no VIP fast lane if there were another pandemic? Are the Government putting in place a much more transparent emergency procurement system as part of their preparedness planning?

I think it is understood and accepted that the VIP fast lane was not a good way of going ahead; lessons have definitely been learned. At the same time, I refer to the fact that 97% of all procurement fit the bill and worked very well. Yes, 3% did not and lessons need to be worked on, but we should remember that, in those extraordinary times, 97% was pretty good.

My Lords, my noble friend the Minister has talked about lessons learned. Is not one lesson that was learned the terrible impact that the lockdowns had on our economy and society, children’s mental health, cancer rates and so on? In future, can we make absolutely certain, before taking any drastic step like a lockdown, that we weigh up the costs and benefits of such a policy?

Absolutely. To respond to both this question and the earlier question from the noble Baroness, Lady Deech, the other things I would like to see the inquiry look at are the lockdown and comparisons with countries such as Sweden, what lessons can be learned across the whole health system, the impact on the mental health of our children and a lot of the other areas that my noble friend mentioned.

My Lords, the WHO has identified Nipah virus as a priority candidate for the next pandemic. It belongs to the same group of viruses as the measles virus. Fortunately, Oxford University has developed a vaccine that went into human trial last week. The lesson therefore is that we should identify the organisms that are likely to cause pandemics and be prepared ahead of time with the vaccines; several other candidates have also been identified. For that to happen, we require a global conglomerate to focus on development of vaccines. Do the Government have any plans to establish one?

We definitely look to work closely with our colleagues, and I have spoken to my Health Minister counterparts on this. One of the lessons from the pandemic was that you also need to have your own capability. The work we have done on the100-day mission, and the strategic relationship we have entered into with Moderna—which can develop vaccines in as little as four to six weeks to answer some of those unknowns—is very powerful.

My Lords, it is now two years since the UK Health Security Agency replaced Public Health England. As we await the Science and Technology Committee’s report on the threat caused by zoonotic diseases such as Covid, avian flu and Ebola, can the Minister update the House on the progress the agency is making in building resilience in these areas? It reported last year on global work on developing pandemic-fighting tools but not on the nitty-gritty needed to tackle underlying problems still hampering us, such as tackling widespread health inequalities, building systems for vaccine resistance and raising public awareness of the threats we all face.

I thank the noble Baroness. The UKHSA has been working and there are four main areas we want to be responding on. First, there is the vaccine, and the 100-day mission is all about making sure that we have the vaccines quickly. We have 100 million vaccines prepositioned for flu and 250 million for other diseases. Secondly, there is the manufacturing scale-up. We have a fund in place so that we have UK domestic production capability to produce vaccines quickly. Thirdly, there is the stock of PPE, and, fourthly, there is the diagnostic capability. That is how the UK Health Security Agency is making sure we have all the bases covered.

My Lords, will the Minister turn again to the answer he gave to the noble Lord, Lord Browne of Ladyton, about the international aspects of this? Does he not accept that throwing in the slightly abusive reference to the word sovereignty is simply a kind of “get out of jail” card to ensure that, next time round, again, equitable distribution across the world will not be achieved?

Excuse me, but I think we will find that Britain was a world leader in developing a vaccine and making it available all round the world on a not-for-profit basis. If any noble Lord can come up with examples where countries have done more than we have in this space, I would be delighted to hear them. I, for one, am proud of what we did.

The noble Baroness knows better than to shout at another Member when other Members before her are also trying to get in to ask a question.

My Lords, do the Government have a preprepared communications plan for the eventuality of another pandemic—which could be next week, next year or whatever—so that it is not made up on the hoof? We remember that, in 2016, there was a big exercise in London which was forgotten about when we got to the actual pandemic. Are those provisions being put in now and preparations being made?

That is all a part of what I referred to as having a toolkit for a flexible response. The problem always in these things is that you tend to fight the next war on what happened in the last one. We have to be careful in what we do and that we are not trying to fight the next pandemic on the last one, because inevitably it will be different. Having a flexible and scalable response, including communications, is vital.

My Lords, some years ago, when I was chairman of the Public Health Laboratory Service, we had 31 public health laboratories dotted around the country. Their role was to track and trace the sources of infections. We lost those in a review of the Public Health Laboratory Service, and I resigned as a result of that. What a loss that has been. What efforts are being made now to replace those laboratories which can do the track and trace that we desperately need?

As the noble Lord mentions, one of the key pillars is having diagnostic capability. The noble Lord will be aware that, for the sequencing of all the different Covid strands, it was the UK that they were sent to because our diagnostic and sequencing ability is second to none. I am assured that that capability still exists and, with that, our ability to scale up diagnostic testing very quickly.

Victims and Prisoners Bill

Order of Consideration Motion

Moved by

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 42, the Schedule, Clauses 43 to 62, Title.

I beg to move the Motion standing in the name of my noble and learned friend Lord Bellamy on the Order Paper.

Motion agreed.

Litigation Funding Agreements (Enforceability) Bill [HL]

Second Reading

Moved by

My Lords, the Litigation Funding Agreements (Enforceability) Bill will fulfil the Government’s commitment to address the impacts of the United Kingdom Supreme Court’s judgment in the case of the King on the application of PACCAR Incorporated and others v Competition Appeal Tribunal and others. The reference for the case is 2023 UKSC 28. It was handed down in July 2023. This case is colloquially known as PACCAR, taking the name of the lead applicants in the case.

First, I will address the judgment in question. It arose out of a claim against truck manufacturers regarding anti-competitive behaviour. The Supreme Court ruling rendered many third-party litigation funding agreements—LFAs—unenforceable by bringing them into scope of the regulatory regime for damages-based agreements, or DBAs. For the sake of brevity, I will refer from time to time to these vehicles by their initials.

The Supreme Court ruling has had a detrimental impact on access to justice and the attractiveness of this jurisdiction as a global hub for commercial litigation and arbitration. This is an important sector for the United Kingdom and so we must act now. Put simply, the Bill will restore the position that existed before the Supreme Court ruling in July 2023, which was that LFAs are not DBAs and hence are enforceable.

It will accomplish this by amending the definition of a DBA in Section 58AA(3)(a) of the Courts and Legal Services Act 1990. It will also ensure that claimants can continue to access litigation funding to bring big, complex cases against larger, better-resourced corporations which they could not otherwise afford.

The restoration of the previous funding position is needed urgently to reduce uncertainty for both the future of litigation funding and for LFAs that had been entered into previously. By rendering many existing LFAs unenforceable, the position post judgment risks undesirable satellite litigation, an increased burden on the courts, and creating an unfavourable market for litigation funding, which, in turn, threatens access to justice. I will go on to explain in more detail how the Bill operates, but first will address why it matters.

Third-party litigation funding plays a key role in enabling ordinary people and small and medium-sized enterprises to bring large, costly claims against better-resourced companies and institutions. Litigation funding agreements involve a third-party funder, typically an independent financial institution. The funder finances all or part of the legal costs of a claim, in return for a share of any damages awarded. Third-party litigation funding is a niche market, which operates typically in high-value commercial, arbitration or group litigation claims, including the types of claims brought in the Competition Appeal Tribunal.

A recent example of where an LFA was used is the Post Office Horizon case—Bates v the Post Office—which had the backing of a litigation funder. Some other examples of cases where LFAs have been used include equal pay cases; motorists bringing claims against car manufacturers over false diesel emissions; and consumers bringing claims against multinational companies regarding data breaches and data misuse.

In the United Kingdom Supreme Court judgment in PACCAR, the court held that LFAs between claimants and litigation funders which entitle the litigation funder to payment based on a percentage of the damages recovered from the losing party are DBAs—damages-based agreements—as defined in Section 58AA of the Courts and Legal Services Act 1990. The principal problem is that LFAs which fall within the definition of DBAs are subject to, but generally will not comply with, the DBA Regulations 2013, as was noted in the PACCAR judgment. As such, those LFAs are rendered unenforceable against the claimant.

For many claimants, LFAs are not just an important pathway to justice; they could be their only route to redress against well-resourced corporations with deep pockets. I have no doubt that all noble Lords will have been moved by the plight of the sub-postmasters affected by the Horizon scandal, and their impressive campaign for justice. It is just one example of the importance of third-party litigation funding. Alan Bates himself has noted that, as things stand today, since the Supreme Court judgment, the sub-postmasters would not be able to bring their claim had it arisen. That is why we must remove the risk and return to the position preceding the July 2023 judgment: promoting access to justice for ordinary people by making sure that it is not the preserve only of big business, powerful institutions and the moneyed few.

The new legislation, which will apply to all proceedings, will allow the Government to deliver a return to a funding regime which promotes access to justice, as well as enhance the competitiveness of the jurisdiction and the attractiveness of a thriving United Kingdom legal sector which contributes over £34 billion per annum to the UK economy.

I return to how the Bill achieves this. The Litigation Funding Agreements (Enforceability) Bill provides that LFAs are not damages-based agreements. It should be noted that the legislation applies and extends to England and Wales only. This restores the position in place before the July 2023 judgment, making affected LFAs enforceable once again and enabling ongoing and future claims to continue to be funded by LFAs.

The Bill contains two clauses. Clause 1 amends Section 58AA of the Courts and Legal Services Act 1990. Subsection (2) amends the definition of a DBA to provide that an agreement, to the extent that it is an LFA, is not a DBA. Subsection (3) defines an LFA for the purposes of section 58AA of the 1990 Act. Subsection (4) provides that the amendments are to be treated as always having had effect. The amendment only addresses the Supreme Court’s finding that LFAs are DBAs and does not seek to reverse the finding that litigation funders provide claims management services.

Clause 2 explains the extent, commencement and short title of the Bill. Subsection (1) provides the territorial extent of the Bill, expressing that the Bill extends to England and Wales only. Subsection (2) provides the commencement provision for the Bill. The Bill will be commenced upon the day of its passing. Subsection (3) gives the shortened title by which the Bill can be referred as upon passing. This is described as the Litigation Funding Agreements (Enforceability) Act 2024.

The Bill will have retrospective effect. The legality and propriety of the proposed retrospection, including its compatibility with the European Convention on Human Rights, has been considered carefully. The Bill will achieve the important policy objective of preserving the rights of individuals to challenge alleged breaches of the law. Access to justice is an essential component of the rule of law. If the Bill were prospective only, there would be uncertainty as to the enforceability of agreements entered into before the PACCAR judgment but where the claim is concluded after the Act comes into force. This could lead to undesirable satellite litigation, which would benefit no one.

Retrospective effect will also ensure that the contractual rights and obligations agreed under LFAs entered into before the Supreme Court’s judgment continue to have effect as intended. Early commencement will minimise the period of retrospection. These provisions will remove any uncertainty about the enforceability of LFAs in cases that have settled and enable litigation funders to continue to fund cases, including existing cases.

On retrospective effect, the noble Lord, Lord Macdonald of River Glaven KC, has raised a number of points for the Government to consider. I also acknowledge the engagement which I have had with my noble friend Lord Hodgson of Astley Abbotts in relation to wider risks which may arise in some circumstances out of third-party litigation funding. I first thank the noble Lord, Lord Macdonald, for sharing his expert views, and assure him that the Government will consider them in due course. In relation to the useful engagement which I have had with my noble friend Lord Hodgson, I will come on to discuss the ambit of a review of the matter which the Government have ordered.

There are a wide variety of views about litigation funding arrangements and how they should work. That is why, alongside legislative change, the Lord Chancellor has asked the Civil Justice Council—which is the body for overseeing and co-ordinating the modernisation of the civil justice system in England and Wales, under the chairmanship of the Master of the Rolls—to undertake a review of the third-party litigation funding market in England and Wales.

The review will consider questions raised during the discussions on the PACCAR judgment, including in your Lordships’ House, such as the need for greater safeguards for claimants, regulation of the sector and the possibility of caps on the returns made to funders. The CJC will publish its terms of reference and other related documents shortly. An interim report is due by this summer—2024—and a final report by the summer of 2025. The Government will consider the way forward following that final report.

By acting swiftly to restore the previous funding position via legislation, and investigating whether that position can be enhanced through a longer-term, forward-looking review, the Government will restore and improve a vital avenue to justice for all deserving claimants, not just those with the most resources. I submit that this is a much-needed Bill to address an important issue affecting access to justice. I beg to move.

My Lords, I feel like an amuse-bouche before such a distinguished group of lawyers who have yet to speak. I will raise a very small number of points which come from my experience in business and investment and which I think are relevant, but I of course defer to the greater legal understanding of others on these points.

First, we should be very proud of the legal services industry that we have here and its quality and importance. We should retain it as a central objective for any Government and for whatever we do. Secondly, access to justice is absolutely key and an essential principle. We have to do more to provide it across the country, whether in civil or even criminal matters. Access to justice is a real foundation, but we feel that there is probably a lot more for us all to do. Making sure that members of the public have access to those things is important, and the promise of litigation funding is a key part of that.

There are four points that are very important in the context of this debate. We have heard some of them previously, when looking at other times when we have used the courts or lawyers to seek justice for other people, whether it was for vibration white finger or other things. That always comes down to the question of whether the fees, costs, contingencies or arrangements are too onerous on the people most in need of being the beneficiaries of whatever compensation or arrangements come at the end. That remains a huge issue for us—and it is very hard to dodge that, looking at the number of funding arrangements from the LFAs and wondering whether things such as the multiple of capital versus the percentage of fees can achieve those outcomes.

Even in the Horizon matter, we are looking at the level of what is gained by those who are trying to access justice. I think that some of us feel that those issues remain, so those people still lack a sense of justice because of the sums and arrangements that were come to. The retrospective arrangements in this Bill mean that everything will be retained as it should have been, and I suspect that there will many cases where the onerous terms that had to be accepted by the litigants should be looked at in some way.

The second point is that this is a business model. As someone who has looked at the public quoted company—which is being approached to put money into these companies and which has been looked at recently—and the secondaries market in this area, I know that there are some major issues with how this is developing. That is common with any sector or business activities that develop; there are consequences to creating such businesses. There are also some unintended consequences: when we look at these sorts of prospectuses over the period in which they can be tracked, we can see an increase in the costs of law. So, while we are looking at increasing access to justice because of the costs of law, they are actually accelerators of costs in litigation.

So, for a variety of reasons, there are unintended consequences, but these are complex models. Even with funds that say they turn down 96% of the people who come before them, what struck me most is that this is a market that is mainly dominated by those who can afford it and who have money. It does not extend access to justice in the way we are thinking or the way in which the Government have presented it. They have shown no evidence to this effect.

It is a good way of de-risking legal exposure in litigation—whether by passing it off to an LFA or by getting the LFA and the lawyers to do conditional fee agreements that also place that risk in other places. The people accessing these funds and these arrangements are not those from whom the Minister says the foundation of this piece of legislation has come. Other people and entities can use it to de-risk their litigation. This is not to say it does not have that purpose—and, by the way, I do not have a problem with people de-risking their legal exposure by using these arrangements. That is perfectly fine.

Thirdly, we must not say we are doing this only in order to widen access to justice. It does not. It has not done so in quite the way we had hoped, even, for example, in the context of important cases such as Horizon. We have to think about what we do in order to make that happen.

In evaluating this Bill, it is important to consider the real issues, consequences and impacts. We have to focus on making sure that we properly identify which elements extend access to justice. In that regard, the Government are to be applauded for deciding to institute a review of the wider sector and its growth. This is very important. I am not entirely convinced that the CJC is the right vehicle for this, because it is about the development of an economic market with economic activity, actors and consequences. This is currently outside its scope, which I am keen should be extended. I look forward to the Minister’s further comments on that in due course.

Finally, I have no problem with rich people using litigation funding. I just have a real problem with us not being able to get access to justice for people who do not have it. In the review, we should be much clearer about the sorts of things that can be done to achieve this objective. This is not just about LFAs. Rollover agreements will not achieve it. If we truly believe in extending access to justice, we should think about supporting other funding mechanisms. If they have sufficient public benefit, perhaps they could be extended into other areas such as the charitable and philanthropic domain. In the context of this debate, let us take this as it really is: a massively growing, active economic market that will achieve many things, but will not exclusively achieve access to justice. We should consider how we do that.

My Lords, I also welcome the Bill. It is an enormous achievement of the Lord Chancellor. We ought to be grateful that he has recognised there is a serious problem that needs to be addressed quickly and has brought forward the Bill. I am also particularly grateful to the Minister for the clear way in which he has explained it. It is important to concentrate on what this Bill does and then, subsequently, to look at some of the other issues.

In the last few years, litigation funding has become part of the way in which access to justice is obtained. In a moment, I will say a little more about this. It is important to realise that this is a worldwide market. Issues similar to ours have arisen in Australia and across the member states of the European Union. There is a massive growth in litigation about this form of funding in the United States. The scale of this industry can be seen. The current estimate of the revenue of litigation funders is approximately $17 billion.

I was surprised, I think like many, that the Supreme Court reached the decision that it did, because over the years people had realised there was a clear distinction between damages-based agreements and what litigation funding produced. So, although the Supreme Court by a majority, reversing the Court of Appeal, came to the view that the principles applicable to damages-based agreements should also apply to these, otherwise they were unlawful, it was following what has been perceived in some states, such as Alabama, North Carolina and Pennsylvania, as a degree of hostility to this industry.

Given that so many thought that this was an industry that produced access to justice, and many have acted in reliance on what they thought the law was, it is plainly right that the decision should be reversed with retrospective effect. If there are issues about that, they can no doubt be looked at subsequently, but it is plain that litigation funding does provide access to justice. One has only to look at the Horizon case, where the very complex proceedings before Mr Justice Fraser involved a lot of financing in relation to technical issues, at equal pay cases, or at some of the consumer actions that have been brought to see that litigation funding is essential.

I, like many, wish that we had legal aid. On many occasions I have spoken of the wish that HM Treasury would open its pockets or that we would devise some other scheme, but I am afraid I have been a wholly unsuccessful advocate and legal aid has declined. Therefore, when those who criticise this industry come to look at what should be done, they ought very much to bear in mind that we as a state, and most other states in the western world, are failing in providing access to justice because there is no legal aid, and this industry has come, to an extent, to the rescue.

I will come back to the social responsibilities of this industry in a moment, but it is not only about consumers. It is also very important that SMEs and other medium-sized companies, which were never within the scope of legal aid, also have access to litigation funding. I am sure that hardly anyone in this Chamber could possibly contemplate the risk of litigation. It is far too expensive. Access to justice is not something that is open to an individual in this country, unless he falls within the very narrow band of people who can get legal aid or whose wealth is to be measured in enormous terms, so it seems important to have a sense of realism that no real alternative has yet been devised to this form of providing access to justice, given the cost of litigation. However, I do not want to descend into the costs of litigation because that would be straying off the point of what the Bill seeks to do.

I have also been very grateful, when speaking on this issue on previous occasions, to His Majesty’s Opposition, the Liberal Democrats and my noble and learned friends on these Benches for the support they have given in getting this issue back and dealing with it speedily. But I wish to raise two points. As the Minister mentioned, the noble Lord, Lord Hodgson of Astley Abbotts, raised the question of regulation during the course of the debates. I too am delighted at what the Lord Chancellor has done in asking that this issue—the way in which these agreements operate—should be independently looked at.

The operation of litigation funding across many jurisdictions has been the subject of work by the European Law Institute. It established a working group and, by complete coincidence, Mrs Justice Cockerill, who at the time was the judge in charge of the commercial court, and Professor Susanne Augenhofer, were appointed as rapporteurs of this group. It is a project in which I am an assessor, so I have considerable knowledge of it, but to try to help progress this, the council of the European Law Institute has made available the core part of the report, which sets out the principles that have to be addressed, such as transparency, disclosure and whether there should be a cap. I am sure that this report, a copy of which I have provided to the Lord Chancellor and others, will give at least a head start.

This is not the time to go into the details of that. Although the noble Lord, Lord Mendelsohn, addressed many of the issues, those are really not the subject matter of this debate; however, it is essential that they be dealt with. If you look at what is happening in the United States of America and what has happened in Australia, it is plain that the issues that arise are real and need detailed consideration. I therefore very much hope that the work done by the European Law Institute, along with some of the papers written about the position in the United States, will give the group that is to consider this at least an understanding of the broad issues that have to be resolved and the principles and alternatives that should be put before Parliament for its consideration in due course.

It may be that regulation is one alternative. I personally think that regulation has not served us well in many areas. Self-regulation may be the better thing; or, simply agreeing some principles and leaving the courts to police what is effectively in front of them may be a way forward. However, this is not a matter for debate today. We need a proper report, and we will need legislation in the next Parliament to deal with this, because it is such an important issue. There is a huge amount of learning, and I think you will find that the work done by the European Law Institute in its report will be of great assistance.

Finally, I want to turn to one other issue that I think it right to mention. Many think that people make a lot of money out of litigation in one way or another. The proverbial jokes, the proverbial cartoons, do not have to be referred to—they are well in everyone’s minds. However, I want to point to the example of one of the litigation funders, which established a not-for-profit company that provided funds that could be used for litigation that would not be suitable for litigation funding but that raised broader important issues. As is mentioned in the register of interests, when the funds were provided, I gave some advice as to the many competing claims for this. But I do hope—and this is a plea to the litigation funding industry, and maybe to others who do very well out of litigation—that they look at what can be done by way of providing some assistance for small but very important cases that have wide implications, and that are not suitable for litigation funding, and whether some of the money that is made can be put into this kind of enterprise, which is so important not merely for the rule of law but for our society as a whole.

It is an illusion to think that people have access to justice in this country: most people simply do not. Those who do so well out of litigation ought maybe to put in the back of their minds doing something along these lines, for the greater good of our society. I firmly believe that others who are better advocates than me will find that HM Treasury is a very, very difficult place to go and ask for money for litigation.

My Lords, I declare my interest as a member of the Horizon Compensation Advisory Board. I am grateful to my noble friend the Minister, and to the Lord Chancellor, for securing a slot so quickly to right the consequences of the PACCAR judgment. I am impressed and surprised at the speed with which they have managed to do this. I am also grateful to my noble friend Lord Sandhurst, the noble Lord, Lord Carlile, and the noble and learned Lord, Lord Thomas—whom it is an honour to follow—for encouraging the Lord Chancellor in his speediness by moving amendments to an earlier piece of legislation.

I speak briefly to point out the sad fact that, until Alan Bates secured litigation funding in the Post Office Horizon scandal, the political process had completely failed him and other sub-postmasters. Although a substantial number of MPs, including a Cabinet Minister, Oliver Letwin, had gathered together to say that the concerns about the Post Office’s behaviour had to be independently examined, we got nowhere. Subsequently, Post Office Ministers said that they were lied to and MPs said the same thing. The turning point in the story was the fantastic judgment of Mr Justice Fraser, as he then was. I pay tribute to him. He succeeded in “blowing the bloody doors off” where the politicians had failed. That is why litigation funding is essential.

There will be questions about how litigation funding should work. Many of them will come up during this short Bill. For example, it is regrettable that the 555 sub-postmasters failed to recover their full costs from the Post Office. It was certainly regrettable that, out of a settlement of £57 million, after legal and litigation funding costs only £12 million found its way into the pockets of the sub-postmasters.

However, I do not say that the litigation funders were unfairly recompensed. They took the immense risk of taking on the country’s most trusted brand, the Post Office, which was backed by the bottomless purse of the taxpayer. That was a risk that needed a high pay-off if it succeeded, because it would have been ruinously expensive for the litigation funders if it had failed. We know, and we watched, how the Post Office did its best to spend the sub-postmasters into submission in a disgraceful display of legal bullying, so the litigation funders deserved their fees.

Yet the entire story must make us wonder whether there could be a better way. Litigation is slow and expensive. I found the comments of the noble Lord, Lord Mendelsohn, very interesting in this respect. Litigation funding must be one method of obtaining redress, but it should be considered alongside others, including the model of regulators-plus-ombudsmen recommended in various books by the chairman of the Horizon compensation advisory board, Professor Christopher Hodges, who is a friend of mine, with a properly regulated system of litigation funding that is subjected to what the noble and learned Lord, Lord Thomas, says. Regulation is needed, and with a stronger system of ombudsmen for the public sector, maybe we could avoid another Post Office scandal.

My Lords, it is a tremendous privilege to follow the noble Lord, Lord Arbuthnot. He has shown, in his conduct in connection with the Horizon case, the courage, rigour and persistence that we all should aspire to and yet do not always achieve.

Like the noble Lord, I welcome this Bill. I have fond memories as a baby barrister of taking over preparing small cases that the noble Lord, Lord Thomas of Gresford, as he now is, was far too successful to deal with by then. I used to sit in the spare bedroom at home, very early in the morning, drafting pleadings in personal injury cases. Some of them were for the defendants—the employers or their insurers—but not a small number of them were for individuals who could get legal aid to bring those cases before the county court, where I often appeared to present them if the wicked insurers did not pay up. At the end of every quarter, as I am sure the noble Lord will remember, we used to receive a payment for our civil legal aid work, from which 10% was deducted because it was legal aid. Justice was obtained by very large numbers of people through that legal process, which obviously involved solicitors instructing us as well. It was another era, and I suspect we were far too successful in the work we did for claimants and legal aid became too expensive—but there we are. We have been left with the loss of legal aid for the bulk of such cases. Litigation funding is what has replaced it and it is here to stay. I was astonished by the PACCAR ruling, because it removed the enforceability at a stroke. I do not understand how it happened—and I have read the PACCAR judgment in the Supreme Court on several occasions. There we were, with those who were funding a lot of small cases not able to recover any costs when they won.

I also recall, much later in my life as a barrister, being what one might call a jobbing, part-time chairman of the Competition Appeal Tribunal under the rigorous but agreeable presidency of the noble and learned Lord, Lord Bellamy, when the CAT, on which I sat for 10 years, started to receive cases for bulk claimants. I now declare an interest, having been involved as an adviser in two such groups of cases that went before the Competition Appeal Tribunal. One group involved people who really could not afford to bring their own cases, but, taken together, the whole claim amounted to hundreds of millions of pounds. It is right that, where justice is on the side of such claimants, they should be able to bring their claims. Above all those commercial interests, it is right that people such as postmasters and postmistresses can recover damages.

There was a time in my life as a barrister when I used to do prosecutions for the Post Office on the Wales and Chester circuit, as it was then known. I do not know if I prosecuted any Horizon cases—I think not, because I took Silk a very long time ago and did not do it after that—but there was no doubt that, when instructions were presented to me as a prosecutor and when cases were presented to a court, there was a view that on financial matters the Post Office was infallible. It had a status which had an air of infallibility around it, and that has been proved to be horribly wrong. It is absolutely right that we should be supporting, in the right circumstances, those who will allow such cases to come to court. I very strongly support the principle behind the Bill and its very short provisions.

I want to express two lurking concerns, if I may, both of which have been dealt with in this debate already, so I will be brief. The first is that lawyers are regulated by statute but litigation funders are not. There is an organisation called the Association of Litigation Funders, but I have noticed that its 2018 code of practice has barely been mentioned in any publicity about this matter. My view is to welcome the CJC inquiry very strongly and that we should be prepared, if absolutely necessary, to provide statutory legislation for litigation funders—though I suspect from what I have seen that they will be willing to move voluntarily to a proper level of regulation, which is in some ways much better than statutory legislation because it is much more flexible.

Another point that has come to light came to my attention this morning, when I received a very large amount of information from an interested party, who I think instructed the noble Lord, Lord Macdonald—who has been mentioned and for whom I have immense regard—as legal counsel to provide an opinion on whether the Bill falls within the European Convention on Human Rights. The Minister has certified that it does and that it is in the Bill, which would not be here if it did not—except in the one case that we will be discussing tomorrow. I simply ask the Minister, at the appropriate time, which may not be this afternoon, whether he has had more than the three or four hours that I have had to consider what was presented to me by another person as very opportunistic lobbying, including the opinion of the noble Lord, Lord Macdonald, and whether he will advise the House on whether there are any ECHR problems.

I note that, at the end of his opinion, the noble Lord, Lord Macdonald, described the case against the ECHR as “arguable”. That was the word that he used, I suspect with great care. We have all used it from time to time in our legal lives, and it does not express the highest level of conviction. I am sure that the House would like to be sure that we are not, by accident, falling foul of the European convention, to which, in most respects at least—I cannot help saying this—the Government are devoted.

My Lords, it is a pleasure to follow the noble Lord, Lord Carlile of Berriew, who made his points in his usual succinct style—notwithstanding that the usual channels, in what must be the paradigm case of the triumph of hope over experience, have allowed this debate between lawyers to proceed with no time limit whatever on speeches.

I begin by declaring my interest. I am a practising barrister in commercial and competition cases, which include cases where one party is supported by litigation funders; sometimes that is my client, and sometimes it is the other side.

As the House has heard, there is no doubt that third-party litigation funding is now and will remain part of our legal landscape. While this is not a debate about the merits of legal aid, there is no doubt that, in the real world, there is little prospect of a Government of any colour massively increasing the scope of civil legal aid. We must therefore be realistic about what will be in its place. Third-party litigation funding provides an important means to enable people to access justice, which is a fundamental part of the rule of law, and so to vindicate their legal right. That is the reality in the United Kingdom in 2024.

I remember doing cases where one party or the other—sometimes both—had to take out large loans or remortgage their home to fund legal costs, including the risk that they would lose and have to pay the legal costs of not only their side but the other side as well. This country usually has the “loser pays” system, which means that, if they lost, they could face financial ruin.

I therefore suggest that third-party litigation funding, together with the appropriate insurances that can be obtained, is a more attractive proposition for most litigants than taking out large loans, and therefore ought to be a more attractive proposition for society as well. As the noble and learned Lord, Lord Thomas of Cwmgiedd, explained, this is a worldwide market and an important one for the United Kingdom to remain a leader in. I suggest the real question is how we arrange our law to deal with the reality of such funding. That means we have to strike a balance: on the one hand, we want to provide access to justice, which is, as I say, an essential element of the rule of law; on the other, we do not want to see litigants given a raw deal by one-sided funding agreements, which mean that when they win, they can be left with very little.

However, it is perfectly right, as the noble Lord, Lord Arbuthnot, pointed out, to recognise that in many of these cases, the litigation funder is taking a very real risk. It is very easy after the event to say, “Oh, well that case was bound to win”. There is no such thing—I keep telling my clients this—as a case that is bound to win. Sometimes there are cases that are bound to lose, but that is a different matter. Therefore, we have to try to find a balance in this area. I very much welcome the review that the Lord Chancellor is setting up; I pay tribute to him for doing so. I hope and expect that this will be a cross-party endeavour.

PACCAR had the effect of treating many litigation funding arrangements as damages-based agreements—DBAs, as they are called in the vernacular—with the result that, unless they met the requirements of the DBA Regulations, they were unenforceable. I will not get into whether or not PACCAR was a surprising decision—I am reminded of one of AP Herbert’s “Misleading Cases”, in which losing counsel in the House of Lords seeks to avoid an order for costs on the basis that a decision of the House of Lords was an act of God, being something that no reasonable man could have predicted—but the fact is that PACCAR caused a real degree of consternation among litigation funders. It has also led to a huge amount of satellite litigation about funding agreements themselves, rather than the cases the funding agreements are there to support.

True it is that some funding agreements were renegotiated post PACCAR, so that instead of receiving a share of the damages—which is what caused the problem in PACCAR—the funder is instead paid an agreed multiple of its investment. There are, I understand, three cases of that type currently proceeding in the CAT—the Competition Appeal Tribunal. I think there are three; I am briefed in two, in one for the funded claimant and in the other for the defendant facing a funded claimant.

The fundamental point at issue is whether the decision in PACCAR should stand. The Government have concluded that it should not, and I broadly agree. I therefore support the Bill, which reverses the decision of the Supreme Court in PACCAR. As I say, that decision has been widely criticised.

I will make two other points. First, like the noble Lord, Lord Carlile of Berriew, I have my mind on other things happening this week. I gently note that this is a good example of the fact that Parliament is sovereign. There is nothing wrong with Parliament reversing a decision of the Supreme Court; ultimately it is for Parliament and not the courts to make the law in this or in any other area. The Bill is therefore perfectly constitutionally proper.

The second, and perhaps more substantive, point is this. I said that I broadly support the Bill, and I do. The reason for that slight note of caution—and it is a slight note—is that there is one issue I want to highlight. It is an issue which has been explained to me by people working in the area; it is not a matter relevant for any client for which I am acting.

The Bill as drafted restores the position ex ante—see Clause 1(4); it is retrospective in that regard. The phrase “retrospective legislation” is sometimes used to imply that the legislation is therefore, and necessarily, bad. That is not the case. The problem with retrospective legislation is not that it is bad in itself. It is that retrospective legislation should not, or at least should not without very good reason, disturb existing legal rights entered into on the faith of the law as it was.

I am concerned about the following sort of situation. Let us assume that someone had a funding agreement with funder A, which is then deemed to be unenforceable by PACCAR, so the litigant goes off and enters into a new funding agreement with funder B, which is PACCAR-compliant. The Bill, as I understand it, would revive the funding agreement with funder A and so leave the litigant with two funding agreements with two different funders on two different sets of terms. That is because the Bill operates retrospectively and does not cater for the fact that some litigants may have done all you could reasonably expect of them at the time; that is, going out to replace the unenforceable funding agreement with an enforceable funding agreement. I suggest that that does not make any sense and is not the intention of the Bill, although it seems to me, and, I think, to others, that that is what the Bill as drafted actually does. I have brought this to the attention of the Minister. I am grateful to him for his time in discussing the issue with me and to his officials for reaching out to discuss the matter with others. I am confident that a solution can be found to this perhaps niche, but none the less important, issue; otherwise, I support the Bill and look forward to participating in its further stages in your Lordships’ House.

My Lords, it is always a pleasure to follow the noble Lord, Lord Wolfson, with his niche points. I keep finding myself in debates with lawyers. I must say, they have some very interesting anecdotes that we all listen to with great interest.

It is fair to say that I am deeply suspicious of everything that this Government bring to your Lordships’ House. All the legislation seems to me to be based on some at times quite cruel intentions. I am actually a little bit more suspicious of short Bills, especially those that come so quickly to this House. At first glance, the Bill does seem fairly simple. It restores the law to what it was less than a year ago and so is quite sensible, but the more one looks at it, the more it appears to be designed to protect the profits of hedge funds, sovereign wealth funds, banks and other backers of these litigation funding agreements, without any consideration of the impact that it will have on the claimants being funded.

One illustration of this is 555 sub-postmasters who were awarded compensation of £57 million against the Post Office for the Horizon scandal. It is reported that £46 million of that money was immediately payable to litigation funders. That seems an extraordinary amount: 80% of the damages awarded. I accept that it was a probably a very difficult case, but at the same time, the sub-postmasters were left with only £20,000 each, when their damages were estimated to be well over £100,000 each. In essence, they got 20% of the £100,000 they were really owed.

It makes you ask why any claimant would agree to put up so much of their compensation. The truth is that normal people cannot afford to take a case to court without such litigation funders. I have heard that we are stuck with this system and that legal aid is not likely to come back, but it seems that we have a particular lack. The noble Lord, Mendelsohn, put it quite well. If he was the amuse-bouche before the meal, perhaps I can be the mid-meal sorbet. Legal aid at least had the benefit of enabling everyone to get justice or to try to get justice. This system means that that is not true for everybody.

There is an inequality of arms in negotiations between a potential claimant and a litigation funder. Without robust regulation and protection for claimants, a litigation funder can reap huge profits by doing nothing other than provide funding for the claimant to take their case to court. One might say that there are dangers in that: of course there are, but this is a business and there are always dangers in business. This, to me, is a failure of successive Governments—just the current Government, which fail in so many ways, but also previous Labour and Liberal Democrat Governments, eroding legal aid and the state’s role in ensuring access to justice.

This litigation-funding business is now worth tens of billions of pounds, and it is a highly lucrative industry for those engaging in it. Legal aid and access to justice have been, essentially, privatised and turned into yet another arena for exploitation by hedge funds and financiers.

This Bill is also extremely lazy, because what the Government have done is choose between two options: do nothing or reverse the PACCAR judgment. They did not put any energy into thinking about a better solution: something that would help the majority of people, not just the few who get taken up by litigation funders. So I would say, “All right, it’s not awful, as some of the legislation is, but really it’s not very good”.

My Lords, this Bill, and the Supreme Court decision which prompted it, have shone light on the somewhat arcane topic of third-party litigation funding. It is an area with which many legal practitioners frankly have little real familiarity, and with which most of the judiciary only have to deal from time to time. As stated in the Explanatory Notes to the Bill, third-party litigation funding is a niche market which typically operates in high-value claims. That is correct: it is less to do with individual smaller claims and little to do with filling gaps left by the loss of legal aid—on which I join my noble friend Lord Carlile in resisting the temptation to go down memory lane.

A rather cynical friend suggested to me that the speed with which this Bill has been produced shows how much money is at stake. However, in the shorter term, there is a need to limit the adverse consequences of the Supreme Court decision, hopefully including the need to avoid satellite litigation seeking to rectify or sever existing arrangements or to test out new arrangements trying to get round the effects of the Supreme Court decision. That is best achieved, as the Bill proposes, by stating the law to be what many people, including the losing party in the Supreme Court, said it was.

Additionally, there are clearly wider considerations and a need to preserve and improve established benefits of properly managed funding arrangements. If there are any significant concerns about commercial litigation funding, as suggested in a briefing paper that I received only today, they surely must predate the Supreme Court decision and are unlikely to be cured or made worse by this Bill.

Although the Long Title to the Bill will limit the extent of any permissible amendment, the passage of the Bill, distinguishing litigation funding agreements from damages-based agreements, should provide some opportunity to consider both types of arrangement.

Dealing specifically with damages-based agreements, these are governed by regulations made in 2013, about which, in a case in 2021, a member of the Court of Appeal said that nobody could pretend that those regulations represented the draftsman’s “finest hour”.

In a case in which I was recently involved, concerning only matrimonial property and finance, I was particularly concerned, and rather surprised, to see that the legal representative of the former wife had got her to sign what was called a damages-based agreement. The use and the terminology of such an agreement seemed quite out of place and inappropriate in matrimonial proceedings, particularly when there was no question of damages being awarded, but only allocation of the proceeds of sale of the modest family home.

However, in general, I understand that respectable practitioners favour damages-based agreements, which have advantages for both lawyer and client in sharing the litigation risks, with each doing only as well or badly as the other. In 2019, revised draft DBA regulations were produced and were, as I understand it, well received. If so, why have they been left in limbo and what is going to happen to those draft regulations now?

As to third-party funding arrangements, in an article in 2014, Professor Mulheron described the framework governing such arrangements as consisting of the 2014 code of conduct for litigation funders, its supervision by the Association of Litigation Funders, and sporadic judicial oversight of litigation funding agreements, with some unenacted legislation in the background for good measure. The experience of the subsequent 10 years does not indicate to a detached observer any consensus about whether, how and to what extent improvements can best be made.

During the Digital Markets, Competition and Consumers Bill in this House, an amendment proposing a requirement for the Government to review the litigation funding market and its regulation was not accepted by the Government. The Minister then explained that they were not blind to some of the challenges and opportunities to reform and improve the funding system. On that basis, the review by the Civil Justice Council has been commissioned. The Minister has answered the questions that I was going to ask today about the progress and scope of the review being undertaken. I am sure that it will be informed and assisted by the valuable work being done and the formulation of principles undertaken by the European Law Institute. In that context, it would also be instructive to learn what is happening in Scotland.

More generally, I suggest that what will be required will be clarity without overregulation: in particular, with the benefit of hindsight, regulation that does not give rise to the sorts of problems that needed resolution by the Supreme Court and then amending legislation, as we have with this Bill. Importantly, also, it should be regulation that does not hamper or restrict the funding market.

I assume there is no reliable statistical or other information to show how much British litigation is commercially funded by those who are not members of the Association of Litigation Funders. If regulation is to remain with no more than a light touch, it is all the more important that sufficient safeguards exist and are understood to protect the consumer—and important that, wherever possible, those who seek or who recommend funding arrangements are firmly guided towards members of the ALF and funders who adhere to their code of conduct.

In the area of law with which I am most familiar, statute provides that family proceedings cannot be subject to enforceable conditional fee agreements. That, together with the demise of legal aid and also the limited costs jurisdiction, makes the availability of bespoke third-party funding all the more important in financial remedy proceedings. It is not only in the wealthier family cases that funding options have to be explored. Sometimes, a bank loan or a loan from a relative or friend will suffice; but these can give rise to distracting arguments between the litigating parties about whether or not they are so-called “soft loans”.

I need hardly say how depressing it is for the judge at or near the final hearing to be told that the funding has dried up, so that one or other party will have to continue without representation. Typically, but not invariably, it is the wife in matrimonial proceedings, with only limited or illiquid funds, who most needs help, against a spouse with deeper pockets and with the means and motives to conceal assets and to frustrate disclosure and enforcement.

The family judiciary has welcomed the availability of funding arrangements to those who need or choose to use them. I therefore suggest that, in addition to referring the matter of litigation funding to the Civil Justice Council, it could be helpful to invite the views of the Family Justice Council, if only to confirm that no problems exist or are foreseen.

Finally, to return to the contents of the Bill before the House, in his recent article in the New Law Journal Professor Dominic Regan strongly welcomed the introduction of the Bill here and its succinct drafting. Indeed, he wrote:

“I will never again hear a bad word said about those old duffers in the other House”.

As none participating in this debate would admit to anything more than early late middle age, I suggest we return the compliment and should give the Bill a Second Reading.

My Lords, I rise, rather like the Arctic roll, to complete the speeches from the Floor. I congratulate the Government on moving swiftly and decisively to introduce the Bill. I congratulate the Minister too on his very clear opening. It has been a privilege to listen to today’s speeches, with many valuable insights that have opened our minds to a lot of issues that need to be addressed.

As we have heard, the Supreme Court’s decision in PACCAR rendered unenforceable third-party litigation agreements between claimants and third-party funders who finance litigation in return for the right to payment, usually set as a percentage of the damages. It was at once clear, as we know, after that decision on 19 July this year, that most current litigation funding agreements did not comply, and that it was very hard, if not impossible, to draft one that would comply. This, as we now know, has had serious ramifications for existing and future claims. It needed swift action, which is why we must all congratulate the Government on the course that they have taken.

It is interesting and important to remember that it has been government policy for at least 10 years, and in fact rather longer, to positively favour litigation funding agreements. I remind the House, as I have done previously, that the then Parliamentary Under-Secretary of State, the noble Baroness, Lady Neville-Rolfe, said in this House, in Committee on the then Consumer Rights Bill, on 3 November 2014 that

“there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers. Blocking access to such funding would result in a collective actions regime that is less effective”.—[Official Report, 3/11/14; col. GC 583.]

As we all know, the High Court group action by which the sub-postmasters obtained the critical findings exposing the defects in the Horizon system was possible only because they obtained very large sums of funding from litigation funders. After PACCAR, such litigants, and others like them, were left without the potential for an effective civil remedy. Group actions by individuals and smaller companies in the Competition Appeal Tribunal were at a stroke bereft of the means to litigate, and, as we know, so I shall not spend time on it here, that applied to other actions in the High Court.

Legal aid, as we have heard, is no longer available for claims of this sort or for any claims for damages, other than in clinical negligence and certain other categories, nor is it likely to be reintroduced. However, let us all remember that the promise of a property-owning democracy rings hollow if citizens do not have the opportunity to assert or defend rights through the legal system. The happy functioning of society requires that individuals have a reasonable opportunity to obtain legal remedies. The recovery of compensation and a judgment is not just about money; it is about redress. It is about an individual sense of fairness, of being valued by society, and of good name and reputation. The sub-postmasters epitomise that.

In the absence of legal remedies, much of the fabric that maintains our economic system is damaged or lost. The sense of individuals that we live in a society in which harm done falls to be recompensed, or that obligations made will be honoured, or that we will not be bullied by monopolists, is an important contribution to the individual’s sense of well-being and the value we place on the society in which we live. Concern to find funding mechanisms to achieve legal remedies for these individuals, and for smaller companies and the like, who do not have the resources to achieve this is a concern to preserve social value. It is the pursuit of the public interest. A market economy in which people do not have effective access to justice and cannot enforce their rights is not worthy of the name. The market, in turn, ceases to operate fairly or efficiently. I remind this House that, in December 2019, the Conservative Party’s election manifesto rightly included a commitment to access to justice for ordinary people.

Litigation funding agreements, whatever the complicated issues they bring, are an important plank of our justice system. For the reasons my noble friend the Minister has explained, there is an unusual retrospectivity provision. Like him, I believe it to be justifiable, but no doubt we shall have to look at it in Committee to see that it really works properly and fairly.

While congratulating the Government on the Bill, we must also ensure that defendants to claims funded by such funders are not going forward improperly harassed. We must ensure that payments recovered by the funder are reasonable for the risks involved and the money laid out. Successful claimants must be left with broadly fair recompense. Those issues are complex; they require difficult balancing arguments and it would be difficult to regulate or to manage, but they are not reasons for allowing the PACCAR decision to stand. This Bill is necessary.

Like other noble Lords, therefore, I applaud the Lord Chancellor for asking the Civil Justice Council to review the current operation of such agreements and to consider the need for further regulations and safeguards. This will ensure that those who provide such funding do so on an appropriate and fair basis. Funders must not be free to take excessive proportions of recoveries or harass defendants. I do not suggest that they do, but we must ensure that they do not going forward.

In this review process, I urge that proper attention is paid to a forthcoming report, of which we have heard, by the European Law Institute. The noble and learned Lord, Lord Thomas of Cwmgiedd, is an important member of the working party, of which he has spoken. I remind noble Lords that this project seeks to develop

“principles containing safeguards in order to provide an environment in which”

third-party litigation funding

“is allowed but balances the availability of the tool with the interests of claimants and defendants and a healthy litigation market”.

Finally, I agree with the noble Lord, Lord Meston, that the Government should look again at the draft Damages-Based Agreements Regulations 2019. They came in at the time when I was just finishing my practice before retirement. It was a mystery to practitioners at the time that, after all the work that had gone into them, they were never laid. We should look again at those. Looking forward, I commend this Bill to the House.

My Lords, it is a pleasure to follow the noble Lord. I make precisely the same declaration of interest as did the noble Lord, Lord Wolfson. I occasionally advise funders and I quite frequently act in cases in which one party is funded and the other party is aggrieved by the existence of litigation funding.

I do not think anyone has spoken directly against the Bill, so I need not say too much, if anything, directly in support of it. I will just make one or two observations about the Bill and then, if I may, I will travel briefly off-piste and pick up some points made by the noble Lord, Lord Meston, about the DBA Regulations.

The reality, as a number of noble Lords have pointed out, is that there is no prospect of anything resembling a functioning legal aid system coming back into place. What follows from that is that there are very serious problems with access to justice in this country. Litigation funding unquestionably has its part to play.

In her very interesting—and, with respect, powerful—dissenting judgment in the Supreme Court PACCAR case, Lady Rose quoted an American judge:

“The realistic alternative to a class action is not 17m individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30”.

One could substitute $3,000 or even $30,000 for that sum; that is the reality. Without access to litigation funding, class actions or group actions—litigation of that type, which will sometimes be highly meritorious—simply cannot be brought.

One can test whether the practical consequences of the PACCAR decision are benign or malign by considering what probably would have happened if that decision had been handed down by the Supreme Court shortly before the litigation funders supporting Mr Bates and the other postmasters were going to take their case to trial, and shortly before a final decision had to be taken on the funding of that litigation. Almost certainly, the funders would have withdrawn. The Post Office, as one knows from what one has read about the history of that litigation and other matters, would have seized on that and sought to take advantage from it. Almost certainly, the proceedings would have been aborted. Mr Justice Fraser would never have handed down his masterful judgment and, to use the phrase of the noble Lord, Lord Arbuthnot, the doors would not have been blown off and the injustices which have horrified the country might have remained concealed. That suggests, I think, that the consequences of the PACCAR decision are not benign, and the Government are right to act in the way that they have.

I do not want to say any more about the merits of the Bill. I will make two points which involve travelling slightly off-piste. They build on what has already been said by the noble Lords, Lord Meston and Lord Sandhurst, about the 2013 DBA Regulations which were at the centre of the Supreme Court’s reasoning in the PACCAR case. Those regulations were put in place very shortly after the reforms founded on Sir Rupert Jackson’s report were enacted. Sir Rupert, in making significant changes to the conditional fee regime, strongly recommended that damages-based agreements should generally become lawful in this country. That recommendation was an important part of his overall approach to the reform of litigation in this country.

However, everyone, including the Ministry of Justice and just about every judge who has ever had to read the regulations, recognises that the 2013 regulations were badly drafted. In particular, they leave a very undesirable uncertainty about whether hybrid agreements involving an element of a damages-based agreement and an element of a more orthodox funding scheme are permissible. They leave a great deal of uncertainty as to what happens to the lawyers’ entitlement to remuneration if the client terminates the agreement in the course of the relevant litigation.

That is why the ministry instigated a review of the position, which led to the preparation of significantly better draft regulations by a group including Nick Bacon KC, a colleague of mine, who is a master in this field. There is no doubt that those draft regulations would represent a major improvement. If those draft regulations from 2019 had been put in place back then, we would not be having the current debate and there would be no PACCAR problem. Nick Bacon and his team spotted the difficulty that underlies the decision of the Supreme Court in PACCAR and drafted the new regulations to remove the relevant ambiguity and took litigation funding agreements outwith the scope of the DBA Regulations.

I am sorry to be mean to the Minister but, like the other Members of the House who spoke on the point, I would be very grateful if he were able to provide any further information or assurance as to the speed with which the ministry and the Government will move in the direction of reforming the DBA Regulations, as indicated.

My final point is a broader point about the way the Bill and the underlying regulations are structured. In this area, as in others, they operate in a completely binary way. They say that this agreement—a conditional fee agreement or a damages-based agreement—is either enforceable, if all the boxes and regulations have been ticked, or it is unenforceable. There is no middle ground whatever. There is nothing resembling the jurisdiction in the consumer credit legislation, which gives the court a power to hold that a consumer credit agreement is enforceable notwithstanding that there has been some technical non-compliance with the relevant regulations. Something of that sort would work well here because where there is the completely binary structure of enforceable or wholly unenforceable, there is trouble ahead: the stakes are raised much too high.

With this sort of structure, a party who shows that the relevant agreement is unenforceable stands to gain massively. A finding of that nature will close down the litigation and lead to a saving of millions, many of millions or hundreds of millions of pounds. You get very expensive, time-consuming, recondite satellite litigation which goes all the way to the Supreme Court and filters back down through the court system, causing judges to wrestle with difficult points. It is possible that all or most of that could be avoided if the scheme was structured so as to give the court the power to say, “Yes, this DBA or CFA is technically non-compliant with the regulations, but no detriment or prejudice has been caused and therefore we, the court, declare the relevant agreement to be enforceable”. That would be a better way forward.

My Lords, rather repetitively, I suspect, I too declare an interest as a practising commercial barrister. I agree entirely with the observation of the noble Lord, Lord Wolfson, that litigation funding now forms part of the landscape of civil litigation both domestically and internationally.

I also pass on an apology from my noble friend Lady Brinton. She is not just my noble friend, but a non-lawyer, whose contribution would have been very welcome for that reason. Unfortunately, she has had to withdraw from the debate due to a family illness.

Like others, I broadly support the Bill and applaud the speed with which it has been introduced. That is because the unexpected decision of the Supreme Court—unexpected, I say, while hesitating to use the word “surprising” suggested and then withdrawn by the noble Lord, Lord Wolfson—in PACCAR has left us in an unsatisfactory position, with nearly all LFAs unenforceable on the basis that they generally do not comply with the DBA regulations applicable to damage-based agreements, as we have heard. The regulations date from 2013.

The Secretary of State’s Written Ministerial Statement of 4 March, announcing the intention to introduce this legislation, made a number of points—points which were also made and expanded upon in opening by the noble and learned Lord, Lord Stewart. The fundamental point made is that:

“Third-party litigation funding enables people to get funding to bring big and complex claims against bigger, better-resourced corporations”

than the claimants, which those claimants

“could not otherwise afford”.—[Official Report, Commons, 4/3/24; col. 31WS.]

I agree that this is the fundamental advantage of LFAs. I also agree with the points made by the noble Lord, Lord Mendelsohn, and the noble and learned Lord, Lord Thomas of Cwmgiedd, that LFAs add to the attractiveness of the United Kingdom as an international centre for commercial litigation and arbitration. It is highly significant that the legal sector brings in, on one estimate, £34 billion a year.

Where I slightly diverge from the Government’s position is where the noble and learned Lord made the point that the sub-postmasters’ claim was possible only with the backing of a litigation funder, without at the same time qualifying that statement by pointing out that the vast majority of the damages in that case went to the litigation funder and the lawyers. For many members of the public, that fact is bordering on the offensive. It is, however, certainly right that the postmasters were able to bring their case to court only because of the availability of litigation funding. I join with others in commending the endeavours of the noble Lord, Lord Arbuthnot, for the postmasters, and the success of those endeavours, for which they owe him a great deal. It was also made absolutely clear in the ITV programme “Mr Bates vs The Post Office” that the availability of litigation funding was crucial.

I also agree with the points made not only by the noble Lord, Lord Arbuthnot, but also by the noble Lord, Lord Wolfson, as to the magnitude of the risk regularly taken by litigation funders. One of the issues that we need to address, I suggest, is how to consider that risk without that risk and its effects damaging the actual recovery of the claimants in these cases.

The truth, as this debate has exposed, is that unregulated litigation funding leaves us caught in a bit of a jungle out there. We know that the Lord Chancellor shares that view. In his press release, also issued with the MoJ and the Courts & Tribunals Service, he said that the Government were

“considering options for a wider review of the sector and how third-party litigation funding is carried out”,

and it is entirely welcome that he has now initiated the process of such a review. The Minister has explained that the review of the whole litigation funding market has been ordered. That review could consider the need for increased regulation and for safeguards for people bringing claims to court, particularly given the growth of the sector over the last decade. For my part, I do not see why we should be left with uncertainty for long. I completely agree that we need a review, but there are some principles that we may be able to address now and in the later stages of the Bill—not necessarily by amendment, but by discussion and by formulating something approaching a way forward.

The traditional rules against champerty were founded on a distrust of investors, in effect, gambling on other people’s litigation. Despite the growth of litigation funding, the grounds for that distrust have not been entirely extinguished. On the other hand, they have to be balanced against the need to enable access to justice—a point that has been made. That is a need that, I suggest, can be met by a well-regulated and fully functioning system of private sector legal funding alongside a fully functioning legal aid system. I do not share the pessimism of the noble Lord, Lord Trevethin and Oaksey, that there is no future for legal aid. There are a number of areas where LFAs simply cannot replace legal aid; they are not suitable for a great deal of the litigation that used to be handled with the benefit of legal aid, but for which it is no longer available.

A great deal has been made of the 2013 DBA regulations. As the noble Lords, Lord Meston and Lord Trevethin and Oaksey, have reminded us, those regulations did not represent the finest hour of parliamentary draftsmen. Nevertheless, they sought to introduce—and did introduce—some controls and limits on what might be arranged between clients and, generally, their lawyers. That included: a definition of the circumstances in which the funder would be paid; definitions of the reasons for payment being transparent; excluding some classes of claims from such agreements; and, most importantly, limiting the overall percentages of damages that might be payable to funders. Those areas are important, and those regulations and the feelings behind them teach us some lessons. I was interested in the proposals apparently put forward by Nicholas Bacon KC for the proposed new regulations and to hear the description from the noble Lord, Trevethin and Oaksey, of those proposals.

But what we will have now, with this Bill, is no such helpful restrictions. Litigation funders have long argued, for reasons that they plainly find attractive, that the DBA restrictions do not apply to LFAs. That argument was rejected by the majority in the PACCAR case in the Supreme Court—undoubtedly doing, in effect, great damage to the structure of the whole sector in this country—but what we are left with has other weaknesses. Not only are there no limits on the percentages of overall recovery to be received by the funders, but there are no or very limited incentives, in a case in which the client is likely to win, for the funders to hold down the amount of costs and other fees that can be charged to the client’s account and very little control for the clients over the costs to which they might, ultimately, be exposed. That point was not made directly by the noble Lord, Lord Mendelsohn, but he alluded to similar points about the lack of control for clients over litigation funding.

Because of the requirements in Clause 1(4) that the provisions of the Bill are to be

“treated as always having had effect”,

there is the full retrospectivity alluded to by a number of speakers. That means that the avenues for challenging existing LFAs, where they exist, would probably be largely closed. I understand the Minister’s argument for retrospectivity—that it will restore the status quo pre-PACCAR—but it may, at the same time, undermine potential challenges that might have been made to existing LFAs.

The noble Lord, Lord Wolfson, raised what the noble Baroness, Lady Jones, might have called the “niche issue” about the interesting problem of litigants with overlapping LFAs. I see his point. It remains to be seen whether it would arise in practice.

I agree overwhelmingly with the point made by the noble Lord, Lord Sandhurst. The whole issue of retrospectivity and its effect will need to be carefully considered in Committee.

There are tricky areas in this Bill. It is interesting that the Competition Appeal Tribunal has developed a practical and flexible scheme for considering litigation funding agreements in assessing the ability of clients to fund costs of their own and meet potential adverse costs orders. There is much to be said for consideration of that scheme.

It would be wise to consider what amendments, if any, might improve this legislation. The need for regulation seems clear and I suggest that the overall balance of opinion in this Chamber today has been to the same effect.

I have some questions for the Minister about the review. I have no wish to pre-empt it by asking questions and seeking answers that might ultimately prove embarrassing for the Government. It would be interesting to know what areas the noble and learned Lord regards as important for the review to consider. What proposals for regulation would he see as being possible? What type of regulation would he consider to be within the review’s ambit? What limits, if any, would he foresee on the reward of litigation funders and how might they operate? When will we see the terms of reference of any review? Will it be open to consider alternatives to litigation funding, as has been suggested, particularly in cases against the Government where claimants face what has been called the “bottomless purse” of the taxpayer?

My Lords, I thank the noble and learned Lord for introducing this Bill, which we support.

First, I will set the wider scene. Third-party litigation funding in the UK has experienced a huge growth since 2010, highlighting the need for comprehensive oversight and regulation. Globally, it is worth more than £13 billion a year and it is on course to grow by 9% per annum for the next five years, taking it up to £20 billion a year.

The UK’s 15 largest litigation funders saw their balance sheet assets soar tenfold to £2.2 billion in the decade to 2022, while the number of funders operating in the UK has grown fourfold to 70—of which only 16 are members of the self-regulating industry body, the Association of Litigation Funders. I noted that the noble Lord, Lord Meston, questioned what proportion of the business goes to the regulated and to the non-regulated funders.

The industry is highly profitable. The insurance company Swiss Re has estimated that the average internal rate of return on personal injury cases from 2019 to 2021 ranged from 20% to 35%. For mass tort lawsuits, profits ranged from 20% to 25%.

The Litigation Funding Agreements (Enforceability) Bill would confirm in legislation that litigation funding agreements in England and Wales are not damages-based agreements. Thus, LFAs would once again not be subject to regulation under the Courts and Legal Services Act 1990 and the Damages-Based Agreement Regulations 2013—a return to the position that existed before July 2023, when the Supreme Court ruled that LFAs could be DBAs if the funder’s remuneration was based on a percentage of the damages recovered.

Prior to the Supreme Court ruling, LFAs and the litigation funding industry were self-regulated. DBAs are a type of no-win, no-fee agreement between a client and their representative—usually their lawyer or claims management company. DBAs must adhere to the statutory and regulatory requirements set out in the Courts and Legal Services Act 1990 and the Damages-Based Agreements Regulations 2013.

In July 2023, the Supreme Court ruled in the PACCAR case, which we have heard so much about, that LFAs could constitute DBAs if the funder’s remuneration was based on a percentage of the damages recovered. The Government and the litigation funding industry both expressed concern that many LFAs would be deemed unenforceable because they did not comply with the legislative requirements for DBAs. The Government said that this uncertainty risked impacting access to justice and could damage the attractiveness of the England and Wales jurisdiction for commercial litigation and arbitration.

The organisation Forward Global argues that the PACCAR judgment enables parties of LFAs prior to July 2023 to challenge these agreements in court. It argues that Clause 4 would stop sub-postmasters, who signed their LFA in March 2016, and other victims of “excessive” LFAs seeking justice. We believe that the Government must ensure that third-party funders have an appropriate and not excessive reward for the risk they take. This is of importance because excessive reward is usually at the cost of the successful claimant who has suffered the wrong.

Although the Bill itself does not expressly include any safeguards, with future safeguards or regulation of the litigation funding sector to be delayed until after the conclusion of the review by the Civil Justice Council, the Government say that the review is expected to

“expressly consider the need for further regulation or safeguards”.—[Official Report, 11/3/24; col. 1888.]

The noble and learned Lord the Minister gave an update on the progress of the review and when it is likely to report, but I did not pick up whether its terms of reference are available and would be available to Members taking part in discussions on the Bill.

During the recent passage of the Digital Markets, Competition and Consumers Bill, which is soon to have ping-pong, an amendment was proposed to require the Government to conduct a review of the litigation funding market and its regulation. The Government did not accept the amendment but, to quote the noble Lord, Lord Offord, did concede that they were

“not blind to some of the challenges and opportunities to reform and improve the funding system”.—[Official Report, 11/3/24; col. 1888.]

I think the noble Lord, Lord Meston, made this point as well.

The Association of Litigation Funders argues that Alan Bates, the lead claimant against the Post Office for the Horizon scandal, said that the backing of the litigation funders helped him and his colleagues to secure justice, expose the truth and clear their names and reputations. However, it seems that, based on Forward Global’s briefing, the funders arguably made an excessive profit. I take the point made by the noble Lord, Lord Arbuthnot, that there was very real risk in embarking on that litigation and that he believes that they did indeed deserve their fees but, as the noble Baroness, Lady Jones, argued, the sub-postmasters themselves are left with £20,000 each—a fraction of the total award. I think it was the noble Lord, Lord Marks, who said that, on first reading, those numbers look offensive and unfair to the sub-postmasters.

Speaking frankly, the suggestion by some that, if the Bill passes, it means that LFAs will escape regulation altogether is unconvincing. They should be regulated in their own right, but not by regulations that would not have been expected, by either side, to apply when the agreements were being drafted and which are generally agreed, as we have heard from a number of noble Lords, to be a dog’s dinner in drafting terms. We recognise the gravity of retrospective legislation, but without it there is no way to preserve all the agreements in cases that have now been concluded. The briefings I have received say that there is no actual problem here, because all live agreements can be renegotiated. However, it is the older agreements that would stand to damage the industry most, hence the need for the Bill.

There is also the separate issue, which has not been mentioned today, of transparency regarding who is funding the litigation. We have all had briefings, including me, from various groups saying that litigation is being used as a vehicle for circumventing international sanctions. This might be a satellite issue but it is still a real one, and I look forward to the Government addressing it.

As the noble and learned Lord, Lord Thomas, said, litigation funding arrangements raise issues that are worldwide. The issues are very similar, whether in continental Europe, the United States, Singapore or Australia, and they are covered by the Vienna-based European Law Institute, as he said. While it is not directly relevant to this Bill, the findings of that institute, and the work of the noble and learned Lord and Dame Sara Cockerill, will be of great interest and relevance. I accept his point that there is likely to be further legislation in this area within a relatively short time.

Today, we are concerned with the Bill before us. We support it and we are very conscious that most industry figures do so too. There have been comments such as this is the “beginning of the end” of the issues caused by the PACCAR ruling, and the Bill is “a great starting point” for removing these uncertainties. It is in that spirit that we support the Bill.

In conclusion, I want to reflect on my experience in business. I think I am one of three noble Lords who have taken part in this debate who is not, and never has been, a lawyer. I remember when I got promoted from engineer to chief executive, I had to start dealing with all the legal issues that came across my desk. I agree with the noble Lord, Lord Marks: it is a bit of a jungle out there. I was very grateful that my business partner was a lawyer; he managed to save me from some of the problems of managing a business. I listened very carefully to my noble friend Lord Mendelsohn when he went through the various benefits of litigation funding. I took two points from his speech. First, poorer individuals and organisations are not particularly benefiting from this way of funding. That is the political point, which I wholeheartedly endorse. The second point he made rang absolutely true for me, as a former chief executive: it is a way of managing risk. The business I ran was relatively wealthy, but we had unpredictable cash flows. Such arrangements were very beneficial, because anything can happen when you are running a business. De-risking and managing legal costs over a period of time was a very useful technique when actively running a business.

Having said that, we of course support the Bill, and I look forward to the Minister’s response to the various points that were raised.

My Lords, I am grateful to all those noble Lords who participated in this debate. I am grateful in particular to the noble Lords, Lord Ponsonby of Shulbrede and Lord Marks of Henley-on-Thames, from their Benches, for the broad support they are giving. But if a financial metaphor is not inappropriate in the circumstances, I do not take either of them to have issued the Government with a blank cheque as far as this legislation goes. If your Lordships are minded that a Committee of the whole House should be established to consider this Bill, as I will move, I look forward to your contributions, and those of the whole House, in giving the Bill the scrutiny it deserves.

The noble Lord, Lord Mendelsohn, opened the responses and in many ways set the parameters for the interesting debate that followed, setting up the question of access to justice and stressing from a historical perspective the medical legal cases arising out of the condition known as vibration white finger. That prompted me to recollect the importance of associations such as trade unions and others in providing legal assistance for their members when entering into costly litigation relating to the safety of the workplace.

It is quite correct that funding litigation is frightening for individuals and smaller companies who are contemplating it in defence of their right. It is for that reason that the Government have put forward this Bill to address the consequences of the PACCAR ruling. Legal Members of your Lordships’ House touched on that question, in particular the noble Lord, Lord Carlile of Berriew, and my noble friend Lord Wolfson of Tredegar. The noble Lord, Lord Carlile, referred to the surprising character of the judgment. Certainly, it took lots of people in the profession by surprise. It is to deal with the consequences of that decision that the Government tabled the Bill. I respectfully endorse the characterisation of the dissenting judgment by Lady Rose, which was put forward by the noble Lord, Lord Trevethin and Oaksey, as a powerful one.

The noble and learned Lord, Lord Thomas of Cwmgiedd, in a characteristically thoughtful analysis of the position, set forth what is accepted across the House with one exception—that there is no real alternative to funding of this sort in the litigation landscape as we currently find it. I do not wish to depress the House by saying that legal aid is dead. On civil cases in England and Wales, legal aid can be provided as an exceptional case funding measure, for matters out of scope where the failure to provide legal services would breach or likely breach a person’s ECHR rights. Where a matter is within legal scope or could be caught by exceptional case funding, the applicant must also pass a means and merits test.

The Ministry of Justice published the Government’s response to the means test review consultation exercise on 25 May 2023. That set out the detailed policy decisions underpinning the means test arrangement. The Government assess that their changes will increase the number of people eligible for civil legal aid in England and Wales by 2.5 million. Therefore, although there are concerns from Members across the House—particularly the noble Lords, Lord Mendelsohn, Lord Marks of Henley-on-Thames, Lord Trevethin and Oaksey, Lord Meston and Lord Carlile of Berriew, and my noble friend Lord Wolfson of Tredegar, and while legal aid will remain an important feature of how access to justice is delivered, it is the view of the Government and I think of the debate overall that we must take steps to address the necessity of third-party funding to permit access to justice for the sorts of persons, organisations and corporations which I have described.

The very interesting contribution by the noble Lord, Lord Trevethin and Oaksey, anticipated me in referring to the decision of the American judge who said that the alternative to class actions funded by funders of this sort was not 17 million individual actions but no actions at all because, as the noble Lord quoted, and as I am happy to repeat, only a lunatic or a fanatic would litigate over $30. The noble Lord also, along with my noble friend Lord Arbuthnot, put before the House a quote from “The Italian Job”. I wonder whether that is the first occasion when that particular work has been referred to in your Lordships’ counsels.

Both noble Lords—and my noble friend Lord Arbuthnot spoke with the immense moral authority that he carries with him as a result of his selfless and tireless work on behalf of the sub-postmasters—made important points about access to funding for litigation. As I quoted in opening the debate, the eponymous Mr Bates has referred to the importance of third-party litigation funding in enabling the process by which justice is arrived at to commence.

The noble and learned Lord, Lord Thomas of Cwmgiedd, referred to the manner in which, as all of us common lawyers know, definitions or concepts of enormous importance across the whole mighty edifice of the common law world can emerge from the least important-sounding or most apparently trivial causes, whether it be snails emerging from bottles of ginger beer in cafés in Paisley or other areas in which matters of huge import for the civil common law have arisen from small-scale disputes between parties.

All the noble Lords were united in their concern about the sums ultimately received by litigants and the potential sums realised by litigation funders. The best vehicle for discussion of this point will be the review by the Civil Justice Council to which reference has been made, but it is a problem of which the Government are acutely conscious.

I am grateful too for the contribution to the debate made by my noble friend Lord Wolfson of Tredegar and for his informed engagement with me at an earlier stage, to which he was good enough to refer your Lordships—an earlier stage before I rose to address the House this afternoon. I am grateful to him for his analysis of the concept of retrospection in legislation, as I am for his endorsement of the constitutional position in relation to Parliament being responsible for making law.

My noble friend Lord Sandhurst referred to the importance of maintaining a situation where defenders are not unduly harassed by litigations funded by third-party funders, and he was quite correct to make that point. I am sure that this is something that the review being carried out under the chairmanship of the Master of the Rolls will consider.

A number of specialist points were made during the debate. In relation to a series of questions posed by the noble Lord, Lord Marks of Henley-on-Thames, I look forward to engaging with the points that he made. In the first instance, I will write to him in relation to those specific points with which he concluded his submission, and I would like to do so against the basis of an understanding of the terms of reference of the forthcoming review. In relation to him and to the point echoed from the Opposition Front Bench by the noble Lord, Lord Ponsonby of Shulbrede, as your Lordships heard from me in opening, an interim report is expected in the summer; the terms of reference under which that report will be carried out will be published in due course.

The noble Baroness, Lady Jones of Moulsecoomb, expressed herself as suspicious of everything that comes out of the Government. I have to echo that by saying I am suspicious of everything that comes out of the Green Party. After all, I have to live in Scotland where we see the effects of government by the Green Party, and they are absurd where not actively malign.

I am sorry for intervening. It is a separate Green Party. It actually disaffiliated itself because of me, and I feel strongly about it.

As always, the noble Baroness has fulfilled a valuable public service.

On the question from the noble Lord, Lord Meston, on the scope of the Bill, the view of the Public Bill Office confirms that this is a one-purpose Bill. Its scope is closely connected to the enforceability of litigation funding agreements and the Public Bill Office does not think that amendments relating to the wider category of damages-based agreements would be in scope, nor would more general issues relating to litigation funding. Again, I would be happy to revert to the noble Lord with further details on those points, as I learn them.

The noble Lord, Lord Meston, along with my noble friend Lord Sandhurst and the noble Lord, Lord Trevethin and Oaksey, also posed a question on the revision of the current DBA regulations. The Government will consider the timetable to make improvements to the DBA regulations without encouraging unnecessary litigation. Any revisions to the current regulations will be subject to a statutory consultation, which is set out in Section 58AA of the Courts and Legal Services Act 1990, and to an affirmative resolution, which is set out in Section 120 of the 1990 Act.

I apologise to any noble Lords whose valuable contributions to this interesting debate I may have overlooked. To sum up, I gauge the mood of your Lordships’ House as one of concern that access to the courts, the reputation of which the House is jealous of and grateful for, should not be artificially constrained. I also recognise noble Lords’ concerns that access to justice on behalf of a less well-funded party or individual should not come at the expense of excessive profits for those responsible for funding. In my own jurisdiction of Scotland, it is a matter of daily encouragement and inspiration to enter Parliament Hall in Edinburgh and pass the portrait of a notable lawyer, of whom it was said after his death that, while he lived, no poor man in Scotland wanted for a good lawyer. It is the aspiration of the whole House that that should apply today as much as it did in previous centuries. I hope that, ultimately, the Bill passes and that the House, as a whole, accepts that it is done with the intention of furthering that aspiration.

Bill read a second time and committed to a Committee of the Whole House.

Economic Growth (Regulatory Functions) (Amendment) Order 2024

Motion to Approve

Moved by

That the draft Order laid before the House on 6 March be approved.

Relevant document: 18th Report from the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument.

My Lords, I direct noble Lords to my register of interests. I do not believe I have any specific conflicts, but I am a shareholder in various companies and so on, and it is important for me to highlight that point at the start.

The Economic Growth (Regulatory Functions) (Amendment) Order 2024 and draft guidance, issued under Section 110(1) of the Deregulation Act 2015, were laid before the House on 6 March 2024. I am aware of the amendment that has been tabled, to which I will respond in due course. I also reassure the House that I have responded to the SLSC, following a submission from Wildlife and Countryside Link, which, again, I will cover in due course.

Regulators play a vital role in shaping the UK economy through the way in which they regulate. Regulators set strategies and make decisions that significantly affect the types, the scale and the locations of economic activity in important sectors of the economy. It is therefore critical that regulation is cognisant of the requirements of growth. Efficiencies from improved regulation can translate into lower input costs and higher economic growth overall. I will be publishing a White Paper shortly that addresses the relationship of regulation and growth in greater detail; I look forward to discussing that with many noble Lords in the future.

The instrument and guidance we are debating today relate to the growth duty, a duty that requires specified regulators to have regard to the desirability of promoting economic growth when exercising certain regulatory functions. The instrument extending the growth duty will support an increase in the productivity of our businesses, drive economic performance, and grow our economy. By extending the growth duty to Ofgem, Ofcom and Ofwat, we will ensure that these critical regulators have regard to the need to promote economic growth.

It is clear that regulators can affect growth through their policy decisions. However, regulators can also affect growth through the approach they take to regulation and the wider environment that they establish, including in their relationships with regulated businesses. A good regulatory environment, emerging from the attentive and responsive stewardship of an effective regulator, can create the conditions for business confidence and investment, sensible risk-taking and innovation.

The growth duty currently applies to more than 50 regulators and came into statutory effect alongside the relevant statutory guidance on 29 March 2017 under the Deregulation Act 2015. Currently, the growth duty does not apply to the Office of Communications, also known as Ofcom; the Office of Gas and Electricity Markets, Ofgem; and the Water Services Regulation Authority, Ofwat. This instrument will extend the duty to these three regulators. These regulators oversee industry sectors which alone account for 13% of annual private UK investment and around 4% of UK GDP.

In extending the growth duty, the department has also taken the opportunity to refresh the related statutory guidance, to provide greater clarity to support regulators in their application of and reporting against the growth duty. The refreshed guidance has identified “drivers of growth” and “behaviours of Smarter Regulation”, which will assist regulators to better support sustainable economic growth. I hope that noble Lords have had a chance to read the guidance, which is an extremely well-written document.

I will talk about some of the key drivers of economic growth. I will list them, if I may: innovation, infrastructure and investment, competition, skills, efficiency and productivity, trade, and—very importantly, please take note—environmental sustainability. I understand that there is a perception that the growth duty is in conflict with environmental duties or protection of the environment. I assure all noble Lords that nothing could be further from the truth. The refreshed growth duty statutory guidance sets out in the opening paragraph the importance of ensuring

“adequate protections for consumers and the environment”.

It goes on to state:

“Natural capital and the ecosystem”

in which we live

“are fundamental to economic growth”

and therefore need to be safeguarded for economic growth to be sustained. The growth duty does not legitimise non-compliance with other duties or objectives, and its purpose is not to achieve or pursue economic growth at the expense of necessary protections.

Together, the extension of the growth duty and revised guidance will support the positive shift in the way that regulation is delivered, driving growth and paving the way for businesses to start to grow. An economy that promotes growth is one which is better able to attract businesses to our shores, to innovate and to serve households, and delivers prosperity across our nation.

The extension of the growth duty expands the remit of what Ofgem, Ofcom and Ofwat should consider when exercising their regulatory functions. Requiring these regulators to consider the growth duty will empower them to consider other areas which may not be reflected or may be only partly reflected in their duties, such as promoting innovation or trade. The growth duty is not prescriptive. It does not mandate particular actions; nor does it create a hierarchy over existing regulatory duties. The draft statutory guidance is clear that it is for regulators to balance their duties. We recognise that decisions on growth will need to be carefully considered along with other duties. The Government have also committed to review the impact of the extension of this SI within the related impact assessment and will consider the impact and effectiveness of the growth duty on investment growth, the environment and other factors in detail at the committed review point.

The refreshed guidance outlines drivers of sustainable economic growth supported by case-study examples to provide clarity to regulators within scope of the duty and help them to promote growth. For the purposes of this debate, I refer noble Lords to the previous sets of guidance, which I found to be limited in terms of the sorts of ambitions that we have, particularly when it comes to making sure that regulators understand the balance of their different duties.

The guidance also identifies behaviours that contribute to good regulatory decision-making and smarter regulation. The purpose of the guidance is to assist regulators to give appropriate consideration to the potential impact of their decisions on economic growth within the sectors they directly regulate and the broader UK economy alongside or as part of consideration of their other statutory duties. Decisions on growth will involve consideration of a regulator’s other duties; for example, they may relate to environmental or consumer protection, and there may be a need to balance multiple objectives. As independent and experienced bodies, regulators are best placed to balance their decision-making in this regard, and the revised guidance intends to encourage transparency and accountability for growth across regulators, attracting investment and, we hope, creating jobs.

Before concluding, I turn briefly to the regret amendment in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville. The amendment is concerned that the growth duty could impact Ofwat’s ability to take enforcement action against polluting companies. We are aware that water pollution levels are totally unacceptable, so we expect Ofwat to take the right decisions to protect our waterways. I reassure the House that it is not a case of growth versus the environment.

First, I confirm to the House that the growth duty does not, has not and will not legitimise non-compliance with existing protections and does not prevent Ofwat taking enforcement action. This includes environmental responsibilities and this is explicit in the revised statutory guidance. The purpose of the growth duty is to ensure that specified regulators consider the potential impact of their activities and decisions on economic growth alongside their other statutory duties. The statutory guidance is clear that this does not legitimise non-compliance with existing duties. Further, it specifically lists environmental sustainability as a driver of economic growth and reiterates that the Government are committed to the net-zero and environmental targets in the Climate Change Act 2008 and the Environment Act 2021. A well-protected and healthy population and environment lead to higher productivity and growth. Therefore, we consider that there is no tension between a regulator’s protection duties and the growth duty.

Secondly, the guidance does not in any way set restrictions on regulators about how their enforcement can and should operate. We can all agree that non-compliant activity or behaviour that undermines protections to the detriment of the environment needs to be appropriately dealt with by regulators. Regulators operate independently from the Government and are free to make enforcement decisions based on the evidence presented to them. The growth duty does not prevent any enforcement. I want to be clear that degradation of the environment does not support long-term growth, and it is not something that the growth duty seeks or permits.

In conclusion, this statutory instrument is necessary to ensure that the energy, water and communications sectors strive for maximum efficiency over a sustained period. A well-regulated system will deliver efficient outputs and drive economic growth and productivity. The refreshed guidance makes it clear that regulators should work with businesses on, among other things, the environment, trade, investment and skills to ensure sustainable medium to long-term economic growth. This ensures that current-day economic growth can be achieved without undermining the ability of future growth. Applying the growth duty to the regulators of the energy, water and communications sectors will help ensure an efficient system by encouraging pro-growth regulatory practices where these are compatible with existing duties. The refreshed growth-duty guidance will support regulators in their application of and reporting against this growth duty. The guidance will assist regulators in discharging their responsibilities under the growth duty and provide clarity for stakeholders as to what they should expect of regulators.

Amendment to the Motion

Moved by

At end to insert “but this House regrets that the new growth duty imposed on Ofwat could seriously impact its ability to take enforcement action against polluting water companies, and further regrets the failure of the Government to prioritise the sanctioning of polluters and the cleanliness of waterways.”

My Lords, I thank the Minister for his introduction to the Economic Growth (Regulatory Functions) (Amendment) Order 2024 and the draft Growth Duty: Statutory Guidance Refresh which accompanies it. I congratulate him on his enthusiasm.

Economic growth is important, but not at any cost. Although interested in the work of Ofcom and Ofgem, I am speaking this evening only to the issues as they relate to Ofwat and the water industry. I am indebted to the Wildlife and Countryside Link for its briefing and to the Secondary Legislation Scrutiny Committee for drawing this to the attention of the House. It is certainly of great interest to the public.

Many of your Lordships have expressed concern over the state of our waterways, lakes and rivers for some time. The public are also very concerned about the level of pollution continually flowing into what was once sparkling, clear water in which fish and wildlife could thrive but is now stinking and discoloured. Ofwat has struggled to ensure that the water companies fulfil their duties to provide clean water and effective disposal of sewage.

During many debates, the issue has been raised of withholding dividend payment to shareholders and bonuses to chief executives and directors of polluting water companies as a means of getting them to realise that their duties extended to the public, as well as to their shareholders. Customers of water and sewerage companies are finding their bills increasing, but the quality of the water in our waterways is decreasing daily. This order makes it harder for Ofwat to take enforcement action against polluting water companies, as this could be construed as hindering the growth of those companies. This is something of a gift to the three opposition parties in this Chamber in the run-up to the general election.

My main purpose this evening is to press for this order to be withdrawn. If that is not successful, then I would wish for the accompanying draft statutory guidance to be significantly amended. Unless this happens, it is extremely likely that Ofwat will be hindered in its ability to tackle freshwater pollution and other sources of environmental harm, such as unsustainable levels of abstraction.

The order significantly shifts water regulation away from environmental considerations. Over recent years, as new data is collected, it is emerging that the level of freshwater pollution and unsustainable abstraction caused by water companies has reached an all-time high. There is strong public support and political call for tighter regulation of water companies to prevent further environmental harm.

We had seen Defra appearing to be responsive to this, echoed in the 2023 Plan for Water, which pledged

“to address sources of pollution, and boost our water supplies through more investment, tighter regulation, and more effective enforcement.”

That is good so far. However, the order we are debating this evening from the Department for Business and Trade moves in the opposite direction, towards lighter regulation, in the hope of boosting economic growth. The Minister makes a very good case for this. As the Wildlife and Countryside Link says:

“Framing non-economic regulation as a burden on business rarely spells good news for the environment.”

I have the overwhelming impression that Defra has been lent on by the DBT. Has the 25-year environment plan been shelved completely? It is difficult to equate the DBT imposition of a growth duty, which is designed to lighten the burden of regulation on the water industry, with Defra’s commitment to tighten regulation of the same industry. When asked by the Secondary Legislation Scrutiny Committee about this, the DBT responded that

“the growth duty will not take precedence over other duties”,

and the Minister has reiterated that this evening. However, I remain unpersuaded, as do others. Is regulation to be tightened to help protect the quality of the water in our chalk streams, lakes and rivers, or is it to be sacrificed to increase shareholder dividends? Can the Minister help us with this dichotomy?

The court of public opinion, when consulted through polls, indicates that 80% show support for banning the payment of dividends to shareholders of polluting water companies. This runs contrary to the thrust of this order. The statutory guidance for growth makes it clear what Ofwat must do, and how, to meet the requirement under the order. I emphasise that this will make it difficult to take enforcement action against polluting water companies. The guidance states:

“Certain enforcement actions, and other activities of the regulator, can be particularly damaging to the growth. These include, for example, enforcement actions that limit or prevent a business from operating; financial sanctions; and publicity, in relation to a compliance failure, that harms public confidence”.

Public confidence is at an all-time low. Just what is the message here? Is the DBT a shareholder of the most polluting water companies? In relation to the sewage scandal, and the March 2024 storm overflow pollution figures, which caused public outrage, this guidance is breathtaking. Water companies have not been slow to challenge Ofwat in the past. This guidance to apply the growth duty provides water companies with a regulatory tool to push back against environmental compliance.

On environmental issues, the Government are back-pedalling. A Minister says one thing in public and government policy appears to do another. What we are debating this evening shows confusion, deliberate or otherwise, in approach. That is why, from these Benches, we are asking the Government to think again. I beg to move.

This statutory instrument, despite the very expert way that it has been presented by the Minister, I believe could seriously inhibit the regulation of the water industry. I cannot help but echo a number of remarks made by the noble Baroness, Lady Bakewell; they are worth repeating.

Unfortunately, under current parliamentary procedures, it is not possible in either House of Parliament to amend secondary legislation. Having considered this and other similar issues, I urge both the Government and the Opposition to consider whether a better way cannot be found for Parliament to improve secondary legislation in the way that so often happens with primary legislation.

With regard to the order, I shall comment, like the noble Baroness, Lady Bakewell, only on the inclusion of Ofwat, the water regulator, in the scope of the order and the effect the order will have on the way that Ofwat operates as the financial regulator of the water companies. As everyone in this House knows, there is wide public concern about the continuing voluminous discharges of sewage into our rivers and on to our beaches. There have been many calls for tighter regulation. Even the Department for the Environment, Food and Rural Affairs pledges in its Plan for Water—which was published only a year ago, as has been mentioned—among other laudable objectives,

“tighter regulation, and more effective enforcement”.

However, this order, coming from a different department of state, proposes lighter regulation and less enforcement. The Minister continues to deny that, but I must quote directly from the draft statutory guidance, which says on page 26 that

“certain enforcement actions … can be particularly damaging to the growth. These include, for example … financial sanctions; and publicity … that harms public confidence”.

I suggest to the Minister that the failure to fine water companies and publicise gross discharges of sewage is far more likely to harm public confidence in the system of regulation of water company monopolies. We have to admit—again, despite the Minister’s enthusiastic proposal—that the order will cause Ofwat to hesitate before fining companies or taking enforcement action, for fear of being accused of limiting economic growth.

I have also read the impact assessment, published on 9 January and signed by the responsible Minister. Unfortunately, I could not read the signature, so I do not know who it was. Ah, it was the noble Lord, Lord Johnson—I am so sorry, it was signed by our Minister in the Lords. Again, I feel I have to quote from it. It says that

“the Gross Value Added … of the water sector has shown little long-run growth”.

I am sorry to say I think that phrase sums up how the Department for Business and Trade considers the water industry. It clearly does not believe that the water industry can generate economic value for the country, but the water industry can and should contribute to an improvement in the environment that we will pass on to our children and our grandchildren—and that has value, even if it cannot be measured by the Department for Business and Trade.

It is certainly the case that most businesses and the public at large want and expect a plentiful supply of clean water, fewer leaks from pipes and a huge reduction in discharges of sewage into our waterways. There is a strong argument, which in a sense the Minister has already deployed, and I am sure will continue to deploy, that less regulation will normally produce economic growth. That may indeed be true for many sectors of the economy, but a monopoly industry where there is no competition, and which is causing so much damage to the environment, needs more regulation and enforcement, not less. So I ask the Minister to discuss with his Secretary of State whether the order really should apply to Ofwat along with the other regulatory bodies within scope of the order. My conclusion is that this order as drafted really could further damage an already degraded aquatic environment.

My Lords, it is a pleasure to follow the noble Duke, the Duke of Wellington. I speak at quite a lot of sewage rallies and in sewage debates and I always give him credit for leading the charge against the Government’s laissez-faire attitude to sewage. There is usually a slightly stunned silence that I am congratulating a Duke—but that is life.

We heard some very fine words in the opening statement about the environmental considerations not being affected and so on. I am really sorry, but it is nonsense. If you have growth, you are going to have environmental devastation. It is automatic; it happens everywhere. At the moment, we have torrents of sewage pouring into our rivers, on to our coastlines and into our chalk streams. But, instead of stopping it, this proposal aims to increase it; and instead of giving Ofwat tougher powers to regulate the water industry and turn off the tap of CEO bonuses and shareholder dividends, Ofwat is now being told that economic growth is more important than clean water.

Whenever this Government do anything, I always ask, “Who benefits?” Who benefits here, of course, are Conservative Party donors and the economic growth they are going to experience at our expense and, in this case, developers who provided almost one-third of Conservative Party funds for the previous decade. What the Government mean by “economic growth” is the ability of developers to build cheap, sell high and connect up a lot of new houses to sewerage systems that cannot even cope with existing demand without emptying the excess into our local rivers and streams.

The only way to ensure that new houses are connected to a modern, effective sewerage system is to have public ownership of water companies. The only way to ensure that our water bills are being used to build local sewers rather than offshore bank accounts is to have people in charge who work for the public good and not for private greed.

By asking Ofwat to consider economic growth, the Government are not asking it to make a judgment on whether that growth is desirable, yet a growth in pollution that requires millions to be spent on clearing it up is classed as economic growth. More money spent on medicines that fight off gastric diseases from polluted water is economic growth, as is money repeatedly spent on restocking the fish populations of rivers. Are we really saying to Ofwat that growth at any cost to the health of humans and nature is a desirable thing that it should promote?

Last year, this House defeated the Government’s attempt to allow developers to build new homes that would have added pollution to some of the most sensitive waterways in this country. From the Norfolk Broads to Devon, the Government hoped to let developers pass on the clean-up costs for pollution to local people paying their water bills. We in your Lordships’ House stopped them. I would have liked us to do the same today, but clearly it is not going to happen.

I know that I will be on the Opposition Benches pestering the next Government to change these rules back. It will not take legislation; it is something a Minister can do and I will expect them to do it. Back in 2021, when the Government stripped out the last of our amendments on stopping sewage in the Environment Bill, without timetables and targets, I said, Cassandra-like:

“This will come to haunt MPs”.—[Official Report, 9/11/21; col. 1161.]

As the noble Baroness, Lady Bakewell, mentioned earlier, this piece of legislation is a gift to the three opposition parties. At the rally I was at yesterday, all three opposition parties had a very sympathetic hearing, but, I am afraid, the Conservative MP had a very tough time, even though she was clearly very concerned about the issue. This Bill is a vote loser and the Government should remember that.

My Lords, I am grateful to the Minister for his introduction to the order. I assume that one of the objectives it to try to bring some rationality to the different range of regulatory functions that exist between the different regulators. That is perhaps a laudable objective. But it is a missed opportunity in this case, as nothing is said in this order—nor has the Minister indicated that he would like to see this—about the regulators collectively trying to do what they can to ensure that the industries for which they are responsible operate so as to be resilient and able to deal with a variety of shocks. I declare my interest as chair of the National Preparedness Commission.

This is not just about environmental sustainability, although that is one element of it. It is about their ability as industries to respond to what may befall them. At a time of heightened international crisis—I appreciate that most noble Lords are here to discuss precisely that—it is extraordinary that the Government are not taking the opportunity to use the regulatory mechanisms to try to improve the ability of our critical national infrastructure to be resilient and to respond. I hope the Minister will be able to explain why the opportunity has not been taken to extend the remit to ensure that there is a broader definition—one not just about economic growth but promoting resilience. This has, for example, been taken on board by the UK Regulators Network as one of its longer-term strategic aims.

My Lords, I will take this opportunity to pause the current business on the SI so that the Leader of the House can repeat an Oral Statement taken in the House of Commons earlier today.

My Lords, before we begin, it might be helpful for the House to know that the usual channels have extended the Back-Bench speaking time to 30 minutes.

Iran and Israel

Statement

My Lords, I intend no inconvenience to the House and those taking part in the debate in coming to the Chamber at this time. I hope that it is understood that the position was agreed by the usual channels. I will repeat the Statement made by the Prime Minister. The Statement is as follows:

“Mr Speaker, before I start, I would like to express my deepest sympathy, and, I am sure, that of the whole House, on the death of your father. He was a true giant not just of this House but the other place too”.

I am not supposed to go aside from the Statement, but I think we would all agree with that.

“I also want to express my solidarity with our Australian friends after the horrific and senseless attacks in Sydney in recent days. Our thoughts are with all those affected.

On Saturday evening, Iran sought to plunge the Middle East into a new crisis. It launched a barrage of missiles and attack drones over Iraq and Jordan and towards Israel. The scale of the attack, and the fact that it was targeted directly at Israel, are without precedent. It was a reckless and dangerous escalation. If it had succeeded, the fallout for regional security and the toll on Israeli citizens would have been catastrophic. But it did not succeed.

In support of Israel’s own defensive action, the United Kingdom joined a US-led international effort, along with France and partners in the region, which intercepted almost all the missiles, saving lives in Israel and its neighbours. We had already sent additional RAF Typhoons to the region as part of our existing operations against Daesh in Iraq and Syria. I can confirm that our forces destroyed a number of Iranian drones. We also provided important intelligence, surveillance and reconnaissance support for our partners. Our pilots put themselves in harm’s way to protect the innocent and preserve peace and stability. I spoke to the RAF earlier today. They are the best of the best and I know the whole House will join me in expressing our gratitude.

With this attack, Iran has once again shown its true colours. It is intent on sowing chaos in its own backyard and on further destabilising the Middle East. Our aim is to support stability and security because it is right for the region and because, although the Middle East is thousands of miles away, it has a direct effect on our security and prosperity at home. We are working urgently with our allies to de-escalate the situation and prevent further bloodshed. We want to see calmer heads prevail, and we are directing all our diplomatic efforts to that end.

Yesterday I spoke to my fellow G7 leaders. We are united in our condemnation of this attack. We discussed further potential diplomatic measures, which we will be working together to co-ordinate in the coming days. I will also speak to Prime Minister Netanyahu later today to express our solidarity with Israel in the face of this attack, and to discuss how we can prevent further escalation. All sides must show restraint.

Our actions reflect our wider strategy in the Middle East, which I have set out in the House previously. I believe there are three vital steps to putting the region on to a better path. First, we must uphold regional security against hostile actors, including in the Red Sea, and we must ensure Israel’s security. That is non-negotiable and a fundamental condition for peace in the region. In the face of threats such as those we saw this weekend, Israel has our full support.

Secondly, we must invest more deeply in the two-state solution. That is what we have been doing over the past six months, including working closely with the Palestinian Authority, so that when the time comes, it can provide more effective governance for Gaza and the West Bank. It is significant that other regional partners actually helped to prevent a much worse attack over the weekend. It reminds us how important the attempts to normalise relations between Israel and its neighbours really are, and it holds out precious hope for the region.

Thirdly, the conflict in Gaza must end. Hamas, which is backed by Iran, started this war. It wanted not just to kill and murder but to destabilise the whole region. This weekend, it rejected the latest hostage deal, which offered a road to a ceasefire. It is Israel’s right, and its duty, to defeat the threat from Hamas terrorists and defend its security.

I want to be clear: nothing that has happened over the past 48 hours affects our position on Gaza. The appalling toll on civilians continues to grow: the hunger, the desperation and the loss of life on an awful scale. The whole country wants to see an end to the bloodshed, and to see more humanitarian support going in. The recent increase in aid flows is positive, but it is still not enough. We need to see new crossings open for longer to get in vital supplies.

I want to take this opportunity to pay tribute to the three British aid workers who were killed in Gaza: John Chapman, James Kirby and James Henderson. They were heroes. The children of Gaza whom they were risking their lives to feed need a humanitarian pause immediately, leading to a long-term sustainable ceasefire. That is the fastest way to get hostages out and aid in, and to stop the fighting. Israelis and Palestinians alike deserve to live in peace, dignity and security, and so do people across the entire region.

In conclusion, Saturday’s attack was the act not of a people but of a despotic regime, and it is emblematic of the dangers that we face today. The links between such regimes are growing. Tel Aviv was not the only target of Iranian drones on Saturday; Putin was also launching them at Kyiv and Kharkiv. Which was the sole voice speaking up for Iran yesterday, seeking to justify its actions? Russia.

The threats to stability are growing, not just in the Middle East but everywhere, and we are meeting those threats, time after time, with British forces at the forefront. It is why our pilots were in action this weekend. It is why they have been policing the skies above Iraq and Syria for a decade. It is why our sailors are defending freedom of navigation in the Red Sea against the reckless attacks of the Iran-backed Houthi militia. It is why our soldiers are on the ground in Kosovo, Estonia, Poland and elsewhere, and it is why we have led the way in backing Ukraine, and we will continue to back it for as long as it takes. When adversaries such as Russia or Iran threaten peace and prosperity, we will always stand in their way, ready to defend our values and our interests, shoulder to shoulder with our friends and our allies. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I am grateful to the Lord Privy Seal for repeating what is a very important Statement.

At the outset, we associate ourselves with and thank the Prime Minister and the Lord Privy Seal for their genuine sympathy on the passing of our colleague from these Benches, Lord Doug Hoyle. His was a long life, well lived, and we join in the condolences of the Lord Speaker to his family. I hope noble Lords will accept that on these Benches today we also mourn the loss of another Labour colleague, Lord Richard Rosser, who served on our Front Bench for many years, including as a shadow Defence Minister. We also associate these Benches with the Prime Minister’s comments on the terrible attacks in Sydney.

The Prime Minister rightly described the British aid workers, John Chapman, James Kirby and James Henderson, who were killed in Gaza, as heroes. They lost their lives when all they wanted to do was to help others.

Iran’s actions over the weekend have, as Keir Starmer said in the other place,

“left the world a more dangerous place”.

There was clear intent to destabilise the region and fuel further tensions. Innocent civilians were targeted. It is right that these actions were swiftly condemned by the Prime Minister, the leader of the Opposition and much of the international community. We endorse the Prime Minister’s calls for restraint.

We also acknowledge the professionalism and bravery of our Armed Forces, both for their contribution to the weekend’s combined defensive action and for their ongoing work in the region. Given recent events, we welcome the decision to send additional RAF jets and refuelling tankers to bolster Operation Shader, the existing counter-Daesh operation in Iraq and Syria.

The repelling of Iran’s attack against Israel is important for several reasons. First, lives were saved, as 99% of the drones and missiles were intercepted. The attack failed. Secondly, Israel acted with strength and courage. Thirdly, the success of that defensive action gives hope that, with political will from the relevant parties, and with diplomatic support from partners, escalation can be avoided. The Foreign Secretary commented earlier that Israel should be

“smart as well as tough”.

The strength and courage that we have seen should now be harnessed to try to de-escalate action and tensions in the region.

Britain is resolute in our support for the collective security of Israel, Jordan and other partners in the region, and we urge every nation to proceed with restraint. The Prime Minister’s Statement is clear that, although the Middle East is thousands of miles away, it has a direct impact here at home, and we want to do all we can to prevent further bloodshed and conflict.

In the Statement, the Prime Minister said he had spoken to other G7 leaders and that “further potential diplomatic measures” had been discussed. Diplomacy is key to urging restraint, so we welcome those discussions. I do not know if the noble Lord the Lord Privy Seal can today say more about what actions might be expected in the coming days, given the urgency of the situation now faced. Can he confirm that the Government agree that, as a matter of principle, diplomatic premises must not be targeted and attacked?

With the Iranian regime sponsoring terrorism across the region and beyond, repressing its own population and supporting Putin’s war in Ukraine, are additional sanctions being planned? If so, how will they be enforced and their impact monitored?

Are the Government now considering proscribing the IRGC? What additional steps are being taken to limit the revolutionary guard’s ability to glorify terrorism here in the UK? I would be grateful, and it would be helpful to the House, if the Lord Privy Seal could say whether that is now being looked at.

Given Iran’s use of drones in the attack against Israel, what steps are we and our international partners taking to prevent the regime accessing western-made components?

We do not accept that there is justification at all for Iran’s attack on Israel, but we acknowledge the role that the ongoing war in Gaza has in driving regional tensions. We are now more than six months on from the dreadful Hamas terror attack, yet hostages remain separated from their families and thousands of innocent Palestinians have been killed or wounded. Many more have been displaced and more than a million people are on the brink of famine.

Over the recess period, there were some positive signs in relation to the flow of humanitarian aid into Gaza. I do not know whether the Lord Privy Seal is in a position to give us any current figures or an update on that, but could he outline what additional diplomatic and practical steps the Foreign Secretary and others are taking to ensure a continued scaling up of aid provision? He will be aware of the logistical challenges in getting aid to where it is desperately needed. UNRWA has the expertise and capability to do that, and Japan has now joined Canada and Australia in resuming payments. Can he say more about the Government’s intentions on aid distribution?

It is right that we condemn Iran’s actions and it is essential that we work with others to defend our allies in the region. It is right that we unite and seek the end of the conflict in Gaza to create a route to a sustainable peace through a two-state solution. Both the Prime Minister and the Foreign Secretary have spoken of support to the Palestinian Authority. Can the Lord Privy Seal outline what form that is likely to take and what co-operation we would expect and get from our allies? While we do these things, we must show restraint and urge others to do so as well. This is essential if we are to prevent greater violence, conflict, death and destruction.

My Lords, I too thank the Leader of the House for repeating the Statement. I join the condolences that have been expressed to the family and friends of Lord Hoyle and Lord Rosser, both of whom were great servants of Parliament and this House. I also associate these Benches with the expression of solidarity that the Government gave to our Australian friends after the horrific attacks in Sydney.

Since the appalling attack on 7 October, one of the ever-present fears has been that the conflict would spread beyond Gaza to involve the wider region. Sadly, that is exactly what happened, from Hezbollah in Lebanon to the Houthis in the Red Sea, and now the first direct attack by the Iranian regime.

On last Saturday’s attack, we join the Prime Minister in expressing our gratitude to the RAF personnel who performed their role, as usual, so professionally and successfully. We support the Government in their work, in co-operation with international partners, to stand up for Israel’s security. We also support the Government’s priority, at this point, of seeking to de-escalate the situation and prevent further bloodshed. There is nothing to be gained by further retaliation on either side. We must hope that the pressure exerted by the UK, the US, EU member states and others on the Israeli Government and on Iran results in calmer heads prevailing.

The Government are right to seek to uphold regional security, including, as the Statement points out, in the Red Sea. Can the Minister inform the House about recent activity there? Has there been any increase in Houthi attacks in parallel with the Iranian strikes on Saturday? More generally, what has been the level of Houthi attacks on naval vessels and civilian shipping in the recent weeks since we last discussed the issue in your Lordships’ House?

It is of course right to seek a two-state solution for the benefit of both the Palestinian and Israeli people, but also for the stability that it would help bring to the wider region. In that respect, the Statement rather intriguingly refers to the involvement of “regional partners”, which it says

“helped prevent a much worse attack over the weekend”.

I realise that he may be unable to do so, but can the Leader of the House say anything further about what this actually involved?

It is depressing that it has so far proved impossible to negotiate a ceasefire in Gaza. Of course, we support all attempts to do so. In the meantime, the threat of famine continues to increase. Food shipments are also increasing, but at nowhere near a level to meet needs. Will the Government keep up the pressure to open up the additional routes by land and via Ashdod which the Israeli Government have promised, but which have so far failed to materialise, so that the threat of famine can finally be lifted?

The Statement rightly points out that Iranian drones were in action over the weekend not only in the Middle East but in Ukraine. The position there is desperately worrying and getting more so. Can the Minister update the House on the Government’s assessment of the likelihood of resumed military support from the US to Ukraine at a significant stage, particularly in the light of the Foreign Secretary’s recent visit to the United States?

There are a limited number of unilateral actions which the UK could take against Iran, but we could finally proscribe the Iranian Revolutionary Guard—a sponsor of terrorism across the region—as a terrorist organisation. Will the Government now do so?

It is clear that there is a large measure of agreement across the House about the nature of the crisis in Israel, Gaza and the wider Middle East, and about the broad approach needed to resolve it. Whether it is about strikes against the Houthi or the Royal Air Force’s action at the weekend, the convention that Parliament should have the opportunity—albeit retrospectively—to express its view formally when the UK takes military action has not been followed. We therefore urge the Government to have a debate, with a Commons vote, not least so that all the actors in the Middle East are absolutely clear about British resolve on this issue.

After Saturday’s attack, the prospect of a lasting peace in the Middle East looks further away than ever. For the UK, this must simply mean that our efforts to try to reach one are redoubled. The Government will have our full support in this endeavour.

My Lords, I thank both the noble Baroness and the noble Lord for their responses. I will not be able to deal with specifics on some of the points they raised. As the noble Lord, Lord Newby, conceded, there are certain sensitivities over who does what in particular places and times, including—obviously—particular details of our own operational activities.

I thank both parties opposite and, by the way, I must add my own and our side’s sympathy for the loss of the noble Lord, Lord Rosser. I have indicated this privately to the noble Baroness opposite. He will be greatly missed on all Benches of this House. He was the ultimate exemplar of a courteous servant of your Lordships’ House.

The noble Baroness was quite right to say that one of the few encouraging aspects thus far is that it is clear that the Iranian action, unjustified as it was, was a failure. This does not mean that its gravity can be in any way underestimated—and nobody has suggested that. I echo the Prime Minister and others in calling for restraint on all sides. This is a grim and difficult situation, where all wish to avoid further escalation. It must not be forgotten that this whole grievous episode started with a merciless lack of restraint by the Hamas terrorists who burst into the homes of civilians and murdered women, children and old people in the most brutal and despicable manner. However much we deplore and rightly express concern about ongoing developments, we must never lose sight of the real naked horror of Hamas terrorism.

Both responses asked about sanctions, specifically on the IRGC. The Prime Minister touched a little on this in his Statement in the other place. I have said before, and it is true, that we have already sanctioned more than 400 Iranian individuals and entities, including the IRGC in its entirety for roles in weapons proliferation. The noble Lord, Lord Newby, rightly referred to the very disturbing evidence—there is a good deal of it—of co-operation between Iran and Russia in the deployment of weapons in the Ukrainian theatre.

The IRGC has been involved in fomenting regional conflicts, violating human rights and terrorism. We have introduced a new Iran sanctions regime to give us more extensive power to designate, and the National Security Act—I was asked about domestic security, which we take extraordinarily seriously—implements new measures to protect the British public, including new offences for espionage and foreign interference, and tougher powers to arrest and detain people suspected of involvement in state threats.

The option of proscription of the IRGC obviously remains open to us, but the British Government’s position remains that it is not helpful to speculate on whether a group is being considered for proscription. We recognise the threat from Iran. The police, security services and courts have all the tools they need to sanction, prosecute and mitigate those threats and, as I said, the IRGC is sanctioned in its entirety.

On sanctions more generally, following the welcome convening of the G7 by the Italian Government, for which we are grateful, it was agreed in the communiqué that

“we demand that Iran and its proxies cease their attacks, and we stand ready to take further measures now and in response to further destabilizing initiatives”.

Obviously, the most effective actions are those taken on an international basis.

I was asked about diplomatic activity. There has been a great deal of diplomatic activity, including the Prime Minister speaking to G7 leaders on Sunday when, as I just said, Iran’s attack was unequivocally condemned. We have expressed our full solidarity and support to Israel and its people, and the G7 reaffirmed its commitment to its security.

I recognise the other points made—the other side of the coin, as it were. We will also strengthen our co-operation to seek to end the crisis in Gaza, working towards an immediate and sustainable ceasefire, the release of hostages by Hamas—something it refuses to do—and increased humanitarian aid to Palestinians in need. Yesterday, the Foreign Secretary spoke to his Israeli and Iranian counterparts, expressing continued support to Israel and condemning the Iranian attack, making it clear that Iran must take immediate action to de-escalate. We will continue to make those efforts.

Humanitarian aid is vital. The UK’s humanitarian support this financial year stands at over £100 million and we are working with our international partners to develop that further. As the noble Lord, Lord Newby, said, Israel has committed to significant steps to increase the amount of aid getting to Gaza, including delivery of aid through the Port of Ashdod and the Erez checkpoint, increasing the number of aid trucks to at least 500 a day, increasing capacity through the Jordan land corridor, extending the opening hours of the Kerem Shalom crossing and approving more types of aid, including fuel to enable more bakeries to open and hospitals to function.

The UK has urged Israel to take these steps for a long time and they are welcome, but, although these commitments represent significant progress, I agree with the noble Lord that we must see further action to ensure more aid actually gets over the border, as the noble Baroness emphasised. The UK is calling on Israel to make progress on the following additional action: a major change in the conduct of hostilities to protect civilians and reform of the deconfliction mechanism to ensure the safety of aid workers. The situation in Gaza is dire. The entire population faces famine.

The Houthi attacks have continued, but shipping continues to go through the Red Sea and we will continue to protect that.

As far as Ukraine is concerned, I have little time to respond—I apologise for that—but the MoD remains fully engaged with industry allies and partners to ensure continuation of supply to Ukraine. If I have the opportunity, I will write to noble Lords setting out in detail some of the actions we are taking there.

I thank both parties opposite, and I urge restraint on all in this very difficult and dangerous situation.

My Lords, the air defences were spectacularly successful and, for once, they rebutted that old air power adage, “The bomber will always get through”. However, will His Majesty’s Government heed the stark lesson for the air defences of the United Kingdom? Many weapons might be fired overnight by an aggressor, from land or sea, at the United Kingdom. What steps have the Government taken to protect London and the rest of the United Kingdom, to deter any serious attack, to retain our own air supremacy, and, indeed, to avoid facing defeat in a second Battle of Britain?

I thank the noble and gallant Lord for his remarks and I repeat what I said about the role of the Royal Air Force. The defence of the realm remains, obviously, one of the prime duties and responsibilities of His Majesty’s Government. Defence spending has been increased substantially in the various reviews since 2020, and I can certainly assure the noble and gallant Lord that the most careful consideration has been given to the continuing air defence, of all types, of our United Kingdom.

My Lords, on Saturday night, I experienced three emotions: fear, pride and hope—fear, because I have close family in Israel and I was worried for them and about them; pride, when I heard that our planes, with their brave pilots, had taken part in protecting Israel from Iranian attacks; and hope, when I heard that the royal air force of the Hashemite Kingdom of Jordan had also participated. Does my noble friend agree with me that that last point is absolutely key? If we want to see peace in the Middle East, which we all pray for and work for, we should be supporting those bilateral alliances between Israel and Jordan and Israel and Egypt, and multilateral groupings such as the Abraham accords, because that is the way, in the long run, to bring peace to this region. -

My Lords, I certainly sympathise with my noble friend. I do not have the direct engagement that he does, but it so happens that, because of family reasons—some Members of the House will know that I have connections in Egypt—a number of members of my family are in the Middle East at the moment, so I do understand those personal feelings.

The fundamental point that my noble friend makes is absolutely right: ultimately, this great region of the world, the cradle of human culture and so much of our spiritual and historic strength, needs peace. It needs people who wish for peace, and the vast majority in that part of the world crave peace. The evil people who wish to unleash violence are in a minority—and, unfortunately, in powerful positions in some places. But I wholly agree with him that the evidence of growing understanding and friendship between Israel and partner nations in the Middle East is a great sign of hope in these times.

My Lords, de-escalation is clearly in everyone’s interests, but that might well not happen. Last week, we saw the Iranians take down a neutral ship in the Strait of Hormuz. Basically, two of the world’s key maritime choke points are under threat. Have we discussed with the Americans deployment of the UK carrier? They are very stretched and have only one carrier in the region at the moment, and we need to cover both these choke points to be able to respond to the Houthis. Then, should things not de-escalate, we will have forces in place to assist in ensuring that shipping can move in that region.

My Lords, again I will not comment on specific discussions as to deployment or strategic deployment. Obviously, we are already involved in the protective operations in the Red Sea. I know that the noble Lord loves to talk about the deployment or non-deployment of UK aircraft carriers. I am very proud of the world-leading Royal Navy, which remains a great service and hopefully will be an even greater service as we go forward. I am not going to discuss the potential deployment of HMS “Prince of Wales” in any particular place, but the aircraft carrier, as he knows, will be a part of combined exercises involving NATO forces in Steadfast Defender. Obviously, its availability is obvious, but deployment is a matter for another day.

My Lords, the noble and gallant Lord, Lord Craig of Radley, has already talked about the brave pilots as part of Operation Shader and asked whether the United Kingdom is sufficiently defended. However, linked to the question asked by the noble Lord, Lord West, there is also a question about how much more naval deployment we might need in the Red Sea and the Strait of Hormuz. Our own service personnel have done a fantastic job, and we must pay them a great tribute. However, as we look to what is happening in the Middle East, do we not need to think about ensuring that we are increasing our defence positions to support trade continuing and to support our allies in the Middle East? I need to declare that I was in Israel as part of a parliamentary delegation just before Easter.

I thank the noble Baroness. The Royal Navy is one of the top five in the world. Of course there is a need to defend our country and act co-operatively with other nations. The overall Ministry of Defence equipment plan for the next decade is £288 billion, including £41.5 billion for the Royal Navy. That will include a Dreadnought, Astute and AUKUS submarines, fleet support ships, ocean surveillance capability and Type 26, Type 31 and Type 32 frigates. As far as the RAF is concerned, the plan is that it should become increasingly a digitally empowered force. The future combat air system will provide us with sixth-generation fighter jet capability, building on what is currently provided by typhoons and the F35. We are in a close partnership with the Italian and Japanese Governments in relation to future fighter capacity.

My Lords, I would like the Minister to take the long view on this. First, in relation to Gaza, it must not be forgotten that this is happening against a history of nearly two millennia of persecution. There is no other people in the world who have been persecuted for so long and against whom there is a constant existential threat. Therefore, the priority in Gaza must be for Hamas to come out of the tunnels and hospitals and release the hostages if they have them, and then you get your ceasefire.

Secondly, with Iran—taking the long view—we seem to have forgotten the nuclear plan, the JCPOA. We have taken our eye off that. Iran is within minutes of getting nuclear capability and is mad enough to use it. We must return to sanctions. If the Government are not going to ban the IRGC, then at the very least visas should not be granted to those so-called clerics that go forwards and backwards between Tehran and London and foment trouble in London. So, please, let us remember the priorities in Gaza and, secondly, stop the flow of malevolent individuals into this country.

My Lords, there is much to be desired in what the noble Baroness says. As a historian and someone with a sensitivity to all the genius of human culture, of course I understand what she says about the experience of the Jewish people. It is clear that Hamas cannot remain in charge in Gaza: the British Government have made that clear, and the Foreign Secretary has said that it is a requirement.

On her important remarks on Iranian nuclear ambitions—if there be such, and the objective observer suggests that there might be—there is no credible civilian justification for enrichment at the levels that the IAEA has reported in Iran. The British Government remain determined that Iran must never develop a nuclear weapon. We are considering next steps with our international partners and we are committed to using all diplomatic tools available to ensure Iran never develops a nuclear weapon, including using the snapback mechanism if necessary. These matters, as I said earlier, must be carried forward in co-operation with our international allies, and that is our diplomatic objective.

My Lords, I am sure that no one in your Lordships’ House would advocate escalation, but I wonder whether protesting against the idea of escalation does not come a bit too easily to the lips of Israel’s allies. Should the Government not reflect that, if you were in Tehran today, you might be quite pleased that the immediate reaction of the western allies is to call for Israel to restrain itself, when Israel is not the problem. Is it not the case that we would not think in this way about an attack on any other country in the world? It would not be our immediate response to aggression against another country that we would urge the victim to do nothing.

My Lords, that is a slight elision of what I have said from this Dispatch Box; indeed, I said that one must not forget where this whole matter began with the most atrocious eruption by terrorists into private and peaceful civilian life. The Government are absolutely clear that threats to destroy what some term the Zionist entity, the State of Israel, are wholly unacceptable and unforgivable, and can be no basis for any way of going forward to a long-term peaceful solution. We express our full solidarity and support to Israel and its people. We have reaffirmed our commitment to its security, and we condemn the Iranian action. But every human part of us would wish that somehow a road can be found to peace—and a road to peace must ultimately come from restraint and forgiveness. May all those involved see that.

My Lords, I refer the House to my registered interest as president of Conservative Friends of Israel. I join the noble Baroness, Lady Smith, and the noble Lord, Lord Newby; I have countless times called for the proscription of the IRGC. All I can say to the Lord Privy Seal is: if not now, when?

A Jewish Chronicle investigation by journalist David Rose revealed that academics at a dozen UK universities were working alongside Iranian counterparts on drone research. As a result, on 23 June 2023—10 months ago—the Prime Minister announced an inquiry into these allegations that scientists at British universities have been helping Iran develop technology that could be used to upgrade its suicide drone programme. In light of the appalling Iranian attack on Israel, can I ask the Lord Privy Seal to write to me urgently with an update on this inquiry?

Yes, I will do so. On my noble friend’s initial point about proscription, I did tell the House that the IRGC is sanctioned in its entirety. Also, if he looks at Hansard, he will see that I did say words about the consideration that is being given in international fora as to what further action might or might not be taken.

On UK universities, it is true that it appears that there has been co-operation on drone technology. My noble friend is right to say that the UK Government launched an investigation into such allegations. No universities were singled out when the investigation was announced.

We will not accept collaborations that compromise our national security. We have made our systems more robust, expanded the scope of the academic technology approval scheme to protect research from ever-changing global threats and refused applications where we have had concerns. We look at all allegations of suspected breaches of our sanctions policy. Under the new UAV trade prohibitions, it is illegal for a UK business, UK national or anyone in the UK not just to export UAVs and their components but to provide technical assistance, financial services, funds and brokering services. So I give my noble friend the assurance that this matter is being taken very seriously indeed.

My Lords, while the Government are absolutely right to condemn the attack on Israel by Iran and to place their emphasis on avoiding escalation of the conflict, I noted that the Lord Privy Seal referred to intensifying diplomatic efforts and that the Governments of Belgium, France and Germany summoned Iranian ambassadors to their places of work, so to speak. I therefore ask the Lord Privy Seal what consideration has been given by the UK Government to having immediate discussions with the Iranian ambassador in the UK to de-escalate tensions and get back to a situation in which we can forge peace, prosperity and an end to violence, particularly in Gaza. There is need for access of aid to the people there and, above all, to end all forms of conflict.

My Lords, the Foreign Secretary spoke yesterday to both the Israeli and Iranian Foreign Secretaries. He expressed to both the United Kingdom’s continuing support for Israel and condemnation of the Iranian attack. The UK Government have already summoned the chargé d’affaires of the Iranian embassy to the Foreign Office to make it clear to the Iranian authorities that they must take meaningful action to halt their reckless behaviour. They have been left in no doubt as to where we stand.

My Lords, given the situation in Gaza that the Minister mentioned, where we have had lots of assurances that aid will be allowed in but very little action, and given that this is fuelling instability in the region, made worse by attacks on Palestinian villages in the West Bank, could the UK Government perhaps make some conditions on their unequivocal support for Israel? A lasting peace will happen only if both sides are willing to discuss it. At the moment, the already inflammatory situation and worsening, so would the UK consider making conditions on its support for Israel? The situation seems to be growing out of control and the humanitarian situation will make things even worse in Gaza if there is a famine and people are starving.

My Lords, I have referred to the importance that we attach to humanitarian aid and said something of what we have discussed with the Israeli Government. However, the fundamental truth is that the Israeli Government have sought to deconflict wherever possible in relation to civilians, which is very hard in this brutal situation. It is the position of the British Government that Israel has every right to defend itself against the kinds of attacks that it has had and the further attack it had at the weekend.

Of course we wish to see restraint, but one simple step could be taken: Hamas could lay down its arms, drop its evil propaganda calling for the destruction of Israel and the killing of Jews, get out of Gaza and let the Palestinian people get on with their lives.

My Lords, like the noble Baroness, Lady Smith, I was in Israel a couple of weeks ago, and we actually saw the RAF flight that dropped aid over northern Gaza. One of the things, as the Lord Privy Seal has mentioned, is the ability to distribute the aid that is going in. We saw that it is going in, and there is some responsibility on Hamas to allow that aid to be properly distributed. Will the noble Lord assure the House that we are taking steps such that the aid that is going in should be recognised and that the conditions of hostage release have to be associated with any negotiations of a ceasefire and further support going in?

I agree with the noble Baroness on the continued holding of hostages. It is never justifiable to take or hold hostages. I repeat that Hamas can end this by taking a whole series of actions. Interfering with, and indeed seeking to abscond with, aid is equally unacceptable. Obviously, we make every effort through our counterparties to ensure that that does not happen, but Hamas’ activities do not make the delivery of humanitarian aid easy.

My Lords, I try to think of how I would feel about being told to exercise restraint, if I were living in Israel at the present time and had been subject to this attack, knowing that this evil regime, which has now come out into the light, supported these vile groups that were responsible for 7 October and other attacks. Of course, restraint is important. But I would also be worried that this evil regime is developing a nuclear capability. I very much welcome what my noble friend said—that efforts will be made internationally to deal with that—because no one in Israel can sleep safe in their bed at night knowing that this regime might have the capability of developing nuclear weapons. I think, with hindsight, that we have perhaps been a little less determined to deal with this problem, through sanctions and other matters, than we could have been.

I warmly welcome my noble friend’s Statement, which has exactly the right kind of balance and sensitivity that we have come to expect from him. But I think the points made by the noble Lord, Lord Moore, and the noble Baroness, Lady Deech, are very important.

My Lords, I fully understand that, and can sympathise with that. I sympathise with it deeply. There is a wound there which cannot be removed, but ultimately we have to find a way for wounds to heal. They cannot heal while the kinds of actions being taken by Iran continue.

Dealing with Iran is a matter for international agreement. The question of how to deal with it has been going on since the original discussions between President Obama and the Iranian Government. Attempts were made under the present US Administration to table viable deals in relation to the Iranian nuclear programme in 2022, which would have returned Iran to full compliance with its commitments and returned the US to the deal. But Iran refused to seize that diplomatic opportunity in August 2022 to conclude such a deal, and although we remain committed to a diplomatic solution, I have to say that Iran’s actions over the past months have made the prospect of progress much more difficult, which informs the other comments I made earlier.

My Lords, for highlighting the development of a nuclear capability in Iran and calling for the proscription of the IRGC, the Minister’s noble friend Lord Polak and I were sanctioned by the Iranian regime; therefore, it is not passing strange that we would press again about the proscription of the IRGC. However, can I ask specifically, first, about the 25 attempts over the past two years to kill British nationals or Iranians dissidents in this country, as recently as last month, leading to an Iranian dissident journalist bleeding on the streets of London and his three assailants able simply to leave this country immediately afterwards? How could that happen? Secondly, on the question of sanctions, companies that are making Shahed drones that are going to Moscow and then being used against Ukrainian civilians have western links. What are we doing to ensure that they are sanctioned? We look as though we are doing far too little in the face of a country that has aligned itself with North Korea, China and Russia in an axis that threatens the democracy and freedoms that we enjoy.

My Lords, I agree with much that the noble Lord said. Indeed, he is right to say that since January 2022 we have identified at least 15 threats towards the lives of UK-based individuals. We are stepping up our response to Iranian regime activities. Last December, my noble friend Lord Cameron summoned Iran’s most senior diplomat to the Foreign Office in relation to reports of Iranian plots to kill two Iran International employees. We will not tolerate these kinds of threats. The Foreign Secretary reiterated to the Iranian Foreign Minister that these threats are unacceptable and must stop.

So far as drones and Russia and Ukraine are concerned, we have sanctioned 18 Iranian individuals and three entities for their involvement in the manufacture and transfer of drones used in Ukraine, as referred to briefly by the noble Lord, Lord Newby, adding to our existing sanctions on the Iranian drone programme. I referred to the illegality of assisting with these threats to our national security. At the Wassenaar Arrangement meeting in October last year, we called out Iran and Russia’s unacceptable collaboration in proliferating weapons, and as recently as last December we held Iran and Russia to account at the Security Council for this unacceptable collaboration, sharing evidence of the drones that Iran has provided to Russia to other Security Council members, and in meetings on Resolution 2231. We will continue to expose this rather desperate and, frankly, despicable alliance and to press this issue at the United Nations and elsewhere.

My Lords, I refer to my interests in the register. I am grateful to the Lord Privy Seal for the comments that he has made. He has praised the Royal Air Force and the Royal Navy and, no doubt, he will get round to mentioning the Army in a moment. Is he not aware of the widespread feeling of disappointment that there was in our armed services about the failure to increase the defence budget in the recent financial statement? In the context of widening international tensions, not just in the Middle East but in Europe itself, and China’s threats against Taiwan, is he really satisfied that we are doing enough to prepare for some of the threats that might happen in terms of international relations? A specific point has been made about drones. Three years ago, I looked at the capacity of this country to respond to drone incursions. There was some good work being done, but it was still fairly narrow. What has been done in the intervening three years? Would we as a nation be able to deal with 300 incoming drones?

My Lords, I am slightly saddened by the normally delightful noble Lord’s slightly jaundiced question. I referred to the Royal Navy and the Royal Air Force because I was asked about them, first by the noble Lord, Lord West of Spithead, and then by the noble and gallant Lord, Lord Stirrup. Of course, this Government support all the armed services. What the noble Lord left out of account is that in the spending review 2020, the MoD received an uplift of £24 billion in cash terms over four years, which was the biggest defence investment since the end of the Cold War. In 2023, we confirmed an additional £5 billion to the Ministry of Defence over two years and further funding has been cited.

We also expect, if you take into account the use of reserve funds, a further increase in spending on defence in 2024-25 over 2023-24. Some of the comparisons here are not actually comparing like for like. This Government remain committed to the long-term objective of spending at least 2.5% of GDP on defence, and the figure actually spent has been well over 2% in recent years.

My Lords, I am sure that the noble Lord will recall that an Iranian woman, Narges Mohammadi, received the Nobel Peace Prize last year for her efforts to fight for democracy and human rights in Iran. There has been a huge, brave effort on the part of many people in Iran—particularly women—to resist the misogynist, autocratic and theocratic regime. Will the Government seek to refer to the Iranian regime or the Iranian Government, rather than just using the word “Iran”, acknowledging the difference between the Iranian people and the Iranian Government or regime when speaking against their vicious attack on Israel and other actions?

Secondly, the Statement makes no reference to the Israeli attack on the Iranian embassy in Syria. That is unfortunate. Can the noble Lord reassure me that the Government are stressing to Israel the need to avoid escalatory actions, given the perilous current state of the region?

My Lords, it was not actually an attack on the Iranian embassy in Syria. I am not sure whether that embassy is the embassy of the Iranian Government or the Iranian people, but the people who were caught in Syria, in whatever way we would like to describe it, were involved actively in warlike activities against the State of Israel and were encouraging terrorism.

However, I agree with what the noble Baroness said about the courage and heroism of the people in Iran, and particularly many Iranian women. One’s heart stirs when one sees the enormous courage of those people. I am often struck by how little opportunity we are given to see Iranian women when we see the serried ranks of the IRGC and others saluting the members of the Iranian regime who have been responsible for these deplorable events in the last few days.

Economic Growth (Regulatory Functions) (Amendment) Order 2024

Motion to Approve (Continued)

My Lords, the Minister is the latest government Minister to wade into the sewage debate, but having previously tried to crack a joke about wading into sewage, I will not do it again.

Having had that interlude, we have had a chance to reflect on some of the comments that the Minister made. Some of the tricks of good government are timing and self-awareness. Those two things are absent from the extremely maladroit introduction of this order. At the centre of it is the conflation of Ofgem, Ofcom and Ofwat. As we heard from the noble Duke, the Duke of Wellington, these are very different markets. The communications market and the energy market are distinctly different from the privatised regional monopoly system which is the water industry. Because of that, the role of the regulator is substantially different. The idea, for example, of causing competition in the water market is irrelevant—there is no competition in the water market. This puts into focus the problem that is central to this order: it is inappropriate in the markets that it is seeking to address. That is at the heart of what your Lordships have said today.

We look forward to the Minister’s White Paper on competition. When the Truss Administration had their brief flurry, a whole bunch of stuff was said about growth and the “anti-growth coalition”. I am sure the Minister is smarter than the people who were using that language then. The role of growth in amongst the role of regulation is an important issue; the Minister is right to have broached it. On its seeking to influence the water market at this time—coming back to timing—this is not the moment to seek to rein back on regulation. This is the moment when we need to target regulation in the places where it is quite clearly breaking down.

The Minister sought to calm us about the effect of growth on environmental enforcement. Again, the noble Duke gave the lie to that issue by very clearly pointing out what I was going to point out in this document: that the two are very much conflated.

I will suggest a hypothetical issue: I am a regulator. I am about to implement an environmental order. This will undoubtedly affect the growth prospects of some companies in the region. Am I now inhibited by this order? The answer is: it seems so. Moreover, can the companies that receive the downside of this environmental order take it to judicial review? I believe they can. The Minister can confirm that or otherwise. So, at the very least, the environmental order is delayed.

We do not have a problem with the water industry restricting growth; we have the opposite. I cite my home river, the River Wye, as evidence of that. The unrestrained growth of the poultry industry has killed part of that river—not polluted it or made it a little bit dirty but killed it biologically. That is the effect of unrestrained growth. We need the opposite of what the Minister is talking about.

With these thoughts, I am very pleased that my noble friend has brought this amendment, and I am pleased to hear the contributions of your Lordships today. I hope the Minister will stand up and say, “We will set this aside”. If he does not say that, I hope he will say that these rules will be rewritten to make sure that the number one priority for the water industry is to solve the environmental crisis that is currently in our midst.

My Lords, I thank the Minister for introducing the regulation and all noble Lords who have spoken. Every day, we hear of sewage dumping. On average, a sewage dumping event now takes place every two and a half minutes. The lack of investment in our water systems over the past 14 years is a scandal that is increasingly hard to ignore. Billions have been extracted in shareholder dividends and millions in bosses’ bonuses, all while delivering a deteriorating system.

During the passage of the Environment Act, Conservative MPs had the opportunity to support a Labour-backed amendment that would have brought an end to sewage dumping. Of course, they did not do so. We should be extracting sewage from water supplies, not extracting value in unjustified dividends and overleveraged debt. Let us imagine the economic growth, the skilled jobs and supply chains that could have been created if, instead, this money had been funnelled into developing creaking infrastructure, repairing and upgrading pipelines, and preparing for the predicted increase in demand and increasing rainfall.

The Labour Party has long been making the case for the increasingly urgent need to invest for the long term and to improve quality in the short and medium term. So on this issue we agree with the Government that bringing these three regulators within scope of the growth duty will help to ensure they consider how best to promote growth in their sectors.

However, making the changes required by this instrument will obviously require dedicated resources within Ofcom, Ofwat and Ofgem. As the amendment to the Motion makes clear, these regulators already have a lot on their plates, so can the Minister indicate how they are expected to juggle this as well? Are the Government confident that the regulators have the capacity to deliver to the full extent that the order demands?

Like the regulators, we want to support businesses and stimulate the vital investment needed to ensure a quality service to current and future consumers. For example, Labour’s plan to establish “GB Energy” would create half a million new skilled jobs in the industries of the future, rebuild the strength of our industrial heartlands and reduce energy costs and carbon pollution. Labour is already thinking ambitiously about the long-term future of this country.

Given that the Government’s order is about long-term growth, could the Minister explain over what timeline they expect to see the benefits of the change, and over what timeline they will be reviewing its impact?

As far as Ofcom is concerned, the growth duty will also not apply to its regulatory functions under Part 3 of the Enterprise Act 2002, which concern mergers. In particular, it will ensure that Ofcom is not required to consider other factors when providing advice to the Secretary of State on the public interest considerations on media merger cases. Can the Minister explain the reasoning for that very specific exception?

In this regulator’s sector in particular, many noble Lords will know that I am passionately interested in the enormous potential for growth in our telecoms industry, especially in AI, but the world will not wait for us. We risk missing out on exploiting the potential commercial benefits from our world-leading research base if we do not have a clear industrial strategy, if we do not encourage and invest in tech start-ups and scale-ups, and if we do not develop a serious regulatory presence alongside the USA and the EU as global standards are being established.

To conclude, we support bringing the three regulators within the scope of the growth duty, but we regret—who could not?—the failure of the Government to prioritise the sanctioning of polluters and the cleanliness of waterways. Just last month, rowers in the world-famous boat race, some of the fittest people in the nation, fell sick because of their exposure to the water in the Thames. I would be hard pushed to invent a metaphor more apt to sum up why this Government have so comprehensively failed—on regulation, on public health, for young people today and in investing in their tomorrows. Labour stands ready to deliver the decade of national renewal that this country self-evidently needs.

While we support the regulation, we acknowledge the amendment to the Motion tabled by the noble Baroness, Lady Bakewell. We must address the sanctions needed against short-term profiteering by the CEOs of utility companies enriching themselves. I look forward to the Minister’s response.

My Lords, I am extremely grateful to all noble Lords for their participation in this debate. I particularly congratulate the noble Lord, Lord Leong, on what I thought was an excellent example of good rhetoric in terms of his parallels.

I shall cover some of the points in turn. I am happy to have further conversations with noble Lords about this important statutory instrument. I am grateful for the undertone of what I think the noble Lord, Lord Fox, was suggesting and the overtone of what the noble Lord, Lord Leong, was suggesting. Unfortunately, I did not hear a great deal of support from any other Member of the House; I am sorry to see that on my own Benches the enthusiasts of better regulation seem to have deserted me today.

Ultimately, the statutory guidance, which I will be happy to touch on in a few moments, is an important and useful document to help regulators by refreshing the statutory guidance that we already have. If noble Lords read the original document, as I suggested at the beginning of this debate, and compare it to what we have now, they will see that if you care about the economy, the environment and better outcomes then this is a far better document in terms of directing the regulators in how they perform and enact.

I also said—because this is a particular passion of mine—that this will enable us to have better regulation, not less regulation. This is about regulating in a better way for businesses, for the economy, for consumers and for this nation’s future growth. I said to my officials that I would like to avoid the topic of water and Ofwat and focus on the other 52 regulators and the opportunities this presents—but it is absolutely right, when we are looking at this broad waterfront of how we run our economy and how we regulate for our own safety, for trust in markets, for the consumer and for the environment, that we have this debate.

I would like to touch on the most important points relating to some of the issues raised around Ofwat. It is relevant to note that the Environment Agency has concluded 60 prosecutions, securing record fines of over £150 million against water companies. Ofwat is requiring 13 companies to return £193 million for underperformance over 2022-23. This money goes back to customers via their bills for 2023-24. The Environment Minister continues to meet underperforming water companies and there has been a great deal of press coverage of his statements over the last few weeks.

This is important. Since 2015, as I say, the Environment Agency has concluded 60 prosecutions, with fines of over £150 million. The regulators, a combination of the Environment Agency and Ofwat, have launched the largest ever criminal and civil investigations into water company sewage discharges at over 2,200 treatment works, following new data from increased monitoring. The Environment Agency can now use new powers to impose unlimited penalties for a wider range of offences.

This may surprise some noble Lords here, but the Environment Agency has been subject to the growth duty and the guidelines since 2017. This is a very important point to note. This growth duty does not derogate the power of the regulator to issue fines and to manage the industry it operates in. I want to emphasise that. Again, we are very aware of the importance of stressing this point because, if the general public and the body politic feel that this will in some way result in a bonfire of regulations, a deregulatory agenda, less regulation and fewer controls, it will not have the necessary popular support I want it to have. This is about better regulation, smarter regulation and empowering regulators to take into account the growth of the economy overall, which includes, as I said at the beginning of this debate, the strength of the environment, the power of the consumer, the broadness of choice and the principles of international trade. All these other drivers are not protective, necessarily, to a single company.

I know some statements were made about whether a regulator can adjudge on a decision that might affect a company on account of a regulation that comes into force. Of course it must, and it should: that is what regulators are doing. As I say, the Environment Agency has been subject to this—as have many agencies, including Natural England and, I believe, 48 other agencies, many of which are involved in significant specific regulation and ensuring that companies within their domain are properly managed. But there has been no comment raised about their ability to perform their functions since that date. I am very comfortable about that.

I also draw noble Lords’ attention briefly again to the statutory guidance, which I think for a guidance document on regulation is a rather wonderful thing. I will point out a few key points. The first is continually mentioned throughout the document. This is at my insistence and that of my Conservative ministerial colleagues in the Department for Business and Trade—with, of course, a high degree of collaboration with officials from Defra and other departments. It is essential to point out that the first paragraph says:

“It is a regulator’s responsibility to design rules that set a level playing field between businesses and to ensure adequate protections for consumers and the environment”.

I am very grateful to the noble Lord, Lord Fox, for mentioning the White Paper, which will, I hope, come to noble Lords’ attention over the next month. I see in this whole process a quadrille of the investor—by the way, we need huge investment in the water industry; we have had billions of pounds of it, and we want more—and the businesses themselves. Businesses face issues dealing with regulation. I want to touch briefly on some of the ways we can help ameliorate that. There is also the consumer. Regulation is, in most instances, about the consumer and ensuring that they are protected, treated fairly and that vulnerable consumers are properly looked after. They should have a choice, at the right price, that allows them to live the lives that we as Governments and politicians want them to live.

Then there is the more holistic principle of the broader environment. I stress again as a businessperson—many of us in this House have been investors and businesspeople—that at no point do we believe that a derogated environment is good for business. As the Investment Minister—I think it is important that all sides of the House hear this—my investors say very clearly to me that they do not want to invest in companies that break the rules, behave badly and get fined. They do not want to invest in companies that mistreat their consumers or have bad reputations. I am dealing with some of the best investors in the world. These are public funds that have a true ethical spirit to their activity; for example, the Canadian pension funds, or the AustralianSuper. It is not in the interests of any investor to have a poor investment in terms of how that company performs in the broader environment. That quadrille has to come together.

If you go through this document, you will continually see the principle of how the growth duty does not legitimise non-compliance with other duties or objectives. On page four it says that

“its purpose is not to achieve or pursue economic growth at the expense of necessary protections”.

To have a good, functioning market, we need strong protections to create the trust that allows the market to function. On almost every page—without being guilty of hyperbole, which sometimes I can be—is a reference to the importance of a healthy population and environment, or to the consumer and the broader environment.

I am grateful to the Minister for giving way, as I understand that it is not normal practice for Ministers to give way in a debate like this. I would be grateful if he would look again at the point made by the noble Lord, Lord Fox. I know a bit about the Wye Valley and the damage that has been done by the excessive number of nitrates going into the river. It was not so much that all those poultry producers were breaking the law; it was the sheer scale of those operations that was having such an impact. Could the Minister comment on that particular point?

I am grateful to my noble friend for the intervention. I did not realise I did not have to give way; my newness to the House probably insisted that I did so.

What is important is that we were discussing the guidance on growth for 52 or 53 regulators. This is not a debate about the Wye Valley. I have heard what the noble Lord, Lord Fox, said about that situation. I understand that the Government have announced this week an action plan and full review. I am delighted that this is a good example of where there is cause and consequence.

I want to bring us back to the guidelines. It is important that a functioning economy allows all stakeholders to operate in it. Clearly, that is the whole principle. If there is one stakeholder that is dominating its universe through its own actions, that is unacceptable in terms of creating the trust and framework we need in the market.

I return, in conclusion, to what has been a very important debate. I hope it will continue to be an important debate. I stress again that in four years we will have a full review of the growth duty so that we can see how it has been successful. One of the questions asked was: how soon will we know whether it has been successful? I hope it will start to show economic growth, in some of the points I will come to in a moment, immediately. We will certainly do a review after four years. There will be an explicit focus on ensuring that areas such as the derogation of consumer rights, the environment, or whatever it may be, will clearly be included in this.

I will touch on two final points because it is good to have this on the record. Regulators should have regard to medium- and long-term growth—not necessarily short-term growth or the profitability of the actions of any one company—by ensuring that key policy decisions and strategic choices are informed by consideration of key drivers of economic growth. This may include, but is not limited to, innovation, infrastructure and investment, competition, skills, efficiency and productivity, trade, and environmental sustainability, which I have touched on before. That is very important because, if you are running a business, you want to produce phenomenal products for the future of our nation. All too often we have had issues with regulators and the Government being slow to regulate on the innovative products we need to make this economy successful, both for our health and the economy around that.

How many times have businesses come to noble Lords—not all of your Lordships will have been approached by businesses, but many will—to complain about the lack of transparency around the regulator’s decision-making or the timeliness of its response on permitting, or to suggest that international standards could be used or that our own standards could be improved on, or to ask for more skills in regulators or for regulators to help them be skilful? It is so important that we respond to this. I am aware of the comments made around the water industry, and I hope that, to some extent, I have reassured noble Lords that this in no way derogates our responsibilities and abilities to act.

The Minister has many times referred to the wording in the draft statutory guidance refresh, which I assume can still be amended. Therefore, I ask the Minister to comment on page 26, which I quoted earlier, where it says that

“certain enforcement actions … can be particularly damaging to the growth. These include, for example … financial sanctions; and publicity”.

Surely the Minister would agree, in view of what he said, very persuasively, that those words should be looked at again. They certainly will inhibit a regulator from enforcing financial sanctions.

I am grateful to the noble Duke for those points. The relationship between the draft document and the formal document is a matter of moments before we finish the debate, so I do not think that is a possibility—but I am happy to be corrected by someone with better procedural knowledge of the House. I will deal with that in a moment, but I do not want to spend too much longer on this because I know that we want to move on.

I return to what this is about. As I say, there are 50 or so regulators covered by the statutory instrument. This is a refresh, so only three new regulators are affected, though there may be other smaller regulators that come into scope; fundamentally, it will be the main economic regulators that we have talked about. The rest of the regulators are covered by the existing statutory guidance, and the refresh improves on that. It is a very good thing, and I hope noble Lords will support us in this quest.

It is right that regulators—even the water regulator—should be pro-innovation, skilled and capable, business aware, proportionate, effective and responsive, and collaborative. I have had a number of businesses represent to me that too many regulators cross over each other and cause a great deal of confusion. They should be internationally aware, and they should be consistent, transparent and accountable. I do not see how any of us in this Chamber can suggest that these ambitions for the regulatory environment are not good. They should be reinforced. If we are to have a strong economy, we have to apply those decent, sensible, long-term economic criteria to the three main regulators.

I am happy to have further discussions as we head towards the White Paper around this. I am also happy to flag other points that noble Lords think will help in constructing a better regulatory framework to enable companies to flourish, consumers and the environment to be protected, and the overall economy of the country to see the necessary growth for the strength and wealth needed to protect our environment in the long term. I am grateful to all noble Lords for their contributions to the debate, and I commend the SI.

I thank the Minister for his response and all noble Lords for their contributions, especially the noble Duke, the Duke of Wellington, who has long been a champion of dealing with sewage overflow discharges and getting the water companies into a decent state. The economic growth of water companies will be achieved only when they invest in improving sewage overflows, ensuring developers separate surface water from foul wastewater, and when Ofwat is empowered to take stringent action against polluting water companies.

As I said earlier, my main purpose was to press for this order to be withdrawn—that was not successful—and then for the accompanying draft guidance to be significantly amended, especially as the noble Duke, the Duke of Wellington, has indicated. Growth in the water industry has a place, but regulators, especially Ofwat, must be able to take action against those water companies.

The Minister has mentioned the millions that have been returned to water customers as a result of fines, but this is paltry in comparison to the billions that have been paid to directors and shareholders of water companies, with no account taken of the sewage discharges into our waterways, instead of investing in improvements in infrastructure.

I and my colleagues on these Benches are naturally disappointed that the Minister is unable to agree to our reasonable request, and I feel certain that the public and others will be similarly disappointed. This is a matter about which I feel extremely strongly—so strongly that were it not for the fact that this is the first day back after the Recess, and that there are important votes tomorrow, I would have wished to divide the Chamber. However, I feel certain that we will be return to this issue before too long, perhaps when the White Paper is published. In the meantime, I beg leave to withdraw my regret amendment.

Amendment to the Motion withdrawn.

Motion agreed.

Growth Duty: Statutory Guidance Refresh

Motion to Approve

Moved by

That the draft Statutory Guidance laid before the House on 6 March be approved.

Relevant document: 18th Report from the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument.

Motion agreed.

House adjourned at 7.32 pm.