House Of Commons
Monday 7 December 1992
The House met at half-past Two o'clock
Prayers
[MADAM SPEAKER in the Chair]
Oral Answers To Questions
National Heritage
Local Monuments
1.
To ask the Secretary of State for National Heritage what representations he has received about the transfer of management responsibilities for local monuments from English Heritage to local authorities.
I have received numerous letters expressing concern, some of it ill-founded, about English Heritage's strategy. In fact, the document stressed that all its sites and monuments fully merit continued protection.
I am grateful to my hon. Friend for his answer. He will be aware of the importance that is attached to this subject in my constituency of Gloucester. Will he give the House an absolute assurance that in no circumstances will monuments be sold off to third parties? Will he also confirm that, whoever is responsible for their maintenance, they will be maintained to nationally agreed standards?
Yes, I can confirm those points. There is no question of a sell-off of English Heritage assets. As my hon. Friend says, his constituency contains many examples of properties—for instance, Blackfriars—that might come into the category of consideration for local management; but every case would be considered on its merits, and any case that might be acknowledged to be suitable for more local management than Savile row would, of course, be subject to the same standards of care as any other English Heritage monument.
I welcome the Minister's response. May I ask him, however, to examine carefully what his Department could do to secure a future for Kirkstall abbey, a 13th century Cistercian foundation, in my constituency?
Will the Minister support the efforts of Friends of Kirkstall abbey, who have turned to the local authority and to private sector interests to try to secure support but who know that, without Government intervention and backing, the abbey will be doomed to decay and disappear within our lifetime?I know how strongly local people feel about such monuments. Of course I undertake to examine the specific case of Kirkstall abbey.
Does my hon. Friend agree that a number of monuments could be enhanced as visitor attractions—for instance, Spofforth castle in my constituency? Will he ensure that local authorities have sufficient funds not only for the maintenance of such monuments but for the launching of projects to improve them—bearing in mind the fact that tourists from our country spend some £14·3 billion a year and that we have an obligation to provide them with visitor attractions?
It must, of course, be for local authorities to prioritise their spending. There are many ways in which funds can be found to look after monuments: many local authorities and many bodies responsible for monuments now undertake plural funding.
My hon. Friend is right to suggest that an integral part of my Department's work involves the very important tourist industry, to which all areas of our responsibility contribute—notably, the heritage aspect. He is right also to point out that many of our monuments are not achieving their full potential, either in terms of education within their local communities or in terms of attractiveness to visiting tourists. That issue could be addressed more keenly if we could get the debate on the importance of local management off the ground.British Broadcasting Corporation
2.
To ask the Secretary of State for National Heritage if he will make a statement on the future funding of the BBC.
This is one of the issues to be considered in the debate about the future of the BBC.
Will the Secretary of State comment on the strong opposition to his idea for a public service broadcasting council? Will he acknowledge that not only the BBC but the ITV companies and Channel 4 believe that syphoning off money from the BBC in that way would undermine programme quality in the long term and that the only support for the idea—apart from that of Mr. Melvyn Bragg—comes from elements within the Murdoch empire, No. 10's policy unit and the Tory Members of Parliament who want to do in the BBC?
We have launched a consultation period which will last five months and have just completed the first week. I have already received a significant number of comments and I shall analyse the reactions given in answer to the question about that subject. It is good that the question has been asked and that we are getting answers.
Will my right hon. Friend give due cognisance to the view that no matter how the BBC is to be funded in the future, it makes very little sense for the resources that are available to it to be used to fuel a bidding war for feature films when they are available through so many other sources?
The content of BBC broadcasts is one of the matters about which we have asked in the consultation document, but the decisions are essentially for the BBC itself to take.
Does the Secretary agree that the use of public funding demands an obligation to the public? Will he therefore review and enhance the present ineffective measures to preclude from the airways Sinn Fein and other aplogists for terrorism? Does the right hon. Gentleman agree also that the use of actors' voices or the interviewing of a person such as Sinn Fein Councillor Joe Austin on the pretext that he is bystander contravenes the spirit of the legislation and is offensive to the public? Will the right hon. Gentleman ensure that the legislation is tightened?
The interpretation of the notices, of which the hon. Gentleman is aware, is a matter for the broadcasters themselves. They must decide whether a person is speaking on behalf of an organisation named in the notices or is speaking in a different capacity. The notices are kept under general review. I currently have no plans to make any changes to them, although I receive representations that I should consider relaxing them.
Will my right hon. Friend consider widening the BBC's sources or revenue? Would he be willing to consider advertising as a source of revenue, as it has managed to give us a thriving independent television service?
That is just one of the questions that were raised in the Green Paper last week and to which we are already receiving replies.
Why is it that the BBC can be riddled with accountants yet allow an overspend of £58 million? Why was such a huge overspend, involving millions of taxpayers' money, not made clear in the BBC's report presented to Parliament? Where is the Coopers and Lybrand report—why has it not been published? Why have the BBC's board of governors and board of management failed to ensure that financial management systems are in place?
In the BBC's last accounting year, it balanced its books in terms of its expenditure.
With regard to the most recent revelation, the hon. Lady and the House will be aware that the audit committee of the BBC has published its view and that corrective action is being taken. The BBC recognised that there were faults in its systems and has moved to correct them as quickly as possible.When the great debate is over and a plan of what the BBC should or should not be doing in the future has been suggested for serious consideration by the House, will my right hon. Friend ensure there there is a proper, independent financial appraisal of the consequences of what is proposed?
The consultation period on the Green Paper will be concluded on 30 April next year. After that, the Government will of course be engaged in reviewing the responses that have been received and will no doubt consider them from different perspectives.
National Lottery
3.
To ask the Secretary of State for National Heritage what representations he has received from local charitable organisations expressing concern over the possible loss of income with the introduction of the national lottery scheme; and if he will make a statement.
My right hon. Friend and I have received a number of representations from charitable organisations about the introduction of a national lottery. We are considering how we might be able to help small lotteries maintain their position following the introduction of the national lottery.
I am satisfied that the Minister accepts as a fact that there will be problems for the small charitable organisations if a national lottery is introduced without proper safeguards for them. I refer especially to the hospice movement, which relies on many charities raising money for it, and to the churches and village halls, which need the protection to which the Minister refers. Will he assure the House and the country that, with the introduction of a national lottery, which will raise billions of pounds through national advertising and through the pressure on people to buy tickets, proper provision will be made to protect the charities and organisations that rely on local lotteries and on local raffles to maintain the services that they have to provide to communities?
I am pleased to give the hon. Gentleman that undertaking. We have already had constructive talks with charities and their representative organisations, and we shall continue to do so. It is important to get the problem into perspective. The charities have an annual turnover of £15 billion a year, so the effect in those terms will be marginal—although I acknowledge that the small charities to which the hon. Gentleman refers are concerned. We are addressing those problems. It is important also to recognise that we are doing what we can to discuss with colleagues in the Home Office ways in which we can improve the local lotteries, so that they are more acceptable and more able to compete.
Does my hon. Friend accept that there is strong national support for the national lottery? However, people do not want existing football pools to be undermined. What studies has my hon. Friend commissioned to discover how new money can be brought into the national lottery? That must be the successful basis on which it will operate.
My hon. Friend is absolutely right; he has put his finger on the matter. The national lottery research which we have commissioned has shown that we are looking for a completely new market. I expect that those who wish to do the football pools and those who want to bet on greyhounds will continue to do so. We are looking at a new market, the principal competition for which is more likely to be magazines, soft drinks and ice creams than hard gambling.
Is the Minister aware that there is a great deal of disquiet, not only in the House but outside, about the way in which his Department is handling the national lottery? Not only the small charities and large charities, to which my hon. Friend the Member for Normanton (Mr. O'Brien) referred, but many voluntary organisations and thousands of football pools employees in Liverpool, Cardiff, east London and elsewhere are concerned about the impact of the national lottery on jobs. Why does not the Minister shake off his coat of secrecy and publish the GAH Group report, to which he referred, to ensure that we all have an informed debate on this important issue?
There are two reasons: first, because it is an internally commissioned document; and, secondly, because it contains a good deal of commercially sensitive information. It would be wrong for the Government or anyone else to commission research and then to publish all the results from companies, organisations and individuals.
I do not accept the hon. Gentleman's proposition that there is widespread concern. There is enormous interest and there is a huge will to ensure that the national lottery succeeds, which is the most important point. We shall, of course, continue to talk to the pools industry and to hon. Members. My right hon. Friend and I will meet leaders of the pools industry later this week. We shall continue to do our best to ensure that the strong support for the national lottery, which has been very evident for many months, is recognised as soon as practicable by the publication of the Bill.As the chairman of a national charity, the National Playing Fields Association, may I assure my hon. Friend that national charities and local charities welcome the advent of the lottery, although there is concern that the level playing field between the pools industry and the national lottery is maintained? The hope is that the whole cake will become larger. Will my hon. Friend assure us that consultation will continue with the pools industry to establish that level playing field?
Of course I can give my hon. Friend that undertaking; we will continue to consult. I acknowledge my hon. Friend's work over many years for the National Playing Fields Association, whose annual conference I visited a couple of weeks ago. We shall continue to ensure that consultation takes place. The most important thing is that the national lottery is seen to be a huge success which adds a new seam of money which would not otherwise be available for a whole range of good causes.
Windsor Castle (Fire)
4.
To ask the Secretary of State for National Heritage whether he has now made an accurate assessment of the cost of the fire at Windsor castle; and if he will make a statement.
No estimate can be made of the cost of restoring Windsor castle until the damaged areas have been fully surveyed and a decision has been taken on the form that the restoration will take. However, I can tell the House that I am setting up an inquiry to assess the adequacy of fire protection measures at all royal palaces for which I have a financial responsibility.
Is there not something brutally unfair about the fact that it is estimated that at least £60 million will be paid out by taxpayers to the richest woman in Britain to repair one of her homes without any contribution from herself, when only 400 yards away from another of her homes, Buckingham palace, people have to live in cardboard boxes and pensioners will die this winter from hypothermia? Is not the truth of the matter that the Queen should pay the lot herself and not call upon impoverished taxpayers to foot the bill?
The figure of £60 million which the hon. Gentleman quotes has been generated by the media. That figure has not emanated in any way from the Government. In respect of the second part of the hon. Gentleman's question, I remind the House that the apartments that burnt in the great fire at Windsor were essentially state apartments, either those open to the public or those in which great state occasions occur. They were not apartments in which Her Majesty lives.
When my right hon. Friend carries out his estimate of the cost of restoring the state apartments at Windsor castle, will he bear in mind that the castle has been in public ownership since 1831? Will he also calculate the advantage to the public interest of the hundreds of thousands of visitors throughout the year who spend money to go to Windsor castle? Will he take that equation into account as well?
I am grateful for my hon. Friend's points, which are clearly part of the debate. They will not necessarily specifically affect the estimate, which will he a rather more nicely judged calculation.
When considering what form the replacement should take, will the Secretary of State bear in mind that Windsor castle displays the needs, tastes and artistic talents of nearly 1,000 years of English history? Will he consider the appropriateness of replacing the buildings that have been damaged and destroyed with something that is truly representative of the best of Britain today and which meets public needs, which have changed somewhat since the last part of the building was constructed?
The hon. Gentleman has identified a question which has already provoked a healthy debate, as I am sure that he would acknowledge. I hope that out of the fire, and the scar that it leaves, will emerge a reconstruction that commands widespread admiration and a sense of national achievement; however, the debate about the precise form that that should take is still going on.
In this season of goodwill, will my right hon. Friend ignore the rather bilious and malicious rhetoric of the hon. Member for Bolsover (Mr. Skinner), who must surely be the Queen's favourite beast? Will my right hon. Friend miss no opportunity to point out that we are dealing with the official home of our head of state? Will he produce comparative figures to show that we do rather better than many nations with presidencies? Will he also point out to those who talk about the works of art in Windsor castle that they are not available to be sold and that they are not Her Majesty's possessions to do with as she will? They are ours and we see most of them for much of the year.
My hon. Friend is right to draw the attention of the House to those highly relevant facts.
On Friday, the Minister claimed to have placed in the Library a report on the cause of the fire at Windsor castle. The report consisted of one and a half pages. Does the Secretary of State not realise that the public believe that that report has been doctored and that the real report lies elsewhere? Why does not the Secretary of State publish the truth about the fire, and not simply expect the public to foot a bill of up to £60 million without having their questions answered? Why has he not answered the questions that he promised to answer on 23 November? When can I expect an answer to those questions?
The hon. Lady is casting doubt on the Royal Berkshire fire service and the report that it rendered. She knows from the report who comprised the investigating team, whose members were unanimous in their agreement on the conclusions.
If the hon. Lady refers to my statement on 23 November, she will see that in the first instance there was to be a report on the origins of the fire, to which Friday's announcement applied. I have announced today that there will be a further inquiry into issues relating to fire precautions and fire prevention and aspects surrounding the fire, and that will of course take several months. On the matters on which the hon. Lady was subsequently kind enough to write me a letter, I have written a letter in reply.Does my right hon. Friend recognise the impassioned pleas of the hon. Member for Bolsover (Mr. Skinner)? Does he recognise also the pressures on the public purse? Will he think about what the hon. Member for Bolsover has said and consider privatisation?
I am grateful to my hon. Friend for having introduced yet another element into the debate, which has already ranged widely.
Arts Council
5.
To ask the Secretary of State for National Heritage what representations he has received on the amount to be made available to the Arts Council in the coming year.
I have received one letter expressing concern about the settlement for the arts in 1993–94. I have noted some more general comments in the press. In a difficult year, a 2 per cent. increase in the Arts Council's grant in aid is by no means a bad outcome.
I realise that the right hon. Gentleman is an amiable old cricket buff with tastes that are somewhat less exotic than those of his predecessor, but is he not ashamed that, unlike the right hon. and learned Member for Putney (Mr. Mellor), he does not have such a good deal for the arts this year? Why has he conceded the principle of the three-year funding regime which was established in 1989? Perhaps the right hon. Gentleman should have a word with his immediate predecessor to find out how he was able to stand up firmly for the arts.
The issue of three-year funding goes rather more widely than my Department, although I am flattered that the hon. Gentleman should think that I should be able to change the Government's total policy from within my Department. Funding for 1993–94 will be 17·5 per cent. above the funding that was available in 1989–90.
What progress is being made in diversifying art funding, in view of the great success in spreading interest in the arts, both in the business community and in the community at large?
I am delighted to say that good progress has been made. At the end of last month, I announced that the business sponsorship incentive scheme, which was set up in 1984, has raised more than £50 million of new sponsorship for the arts. The Association for Business Sponsorship of the Arts said last week that, despite the recession, sponsorship for the arts rose by 28 per cent. last year.
The hon. Gentleman's responsibility for the funding of the arts and for the Arts Council is probably his greatest responsibility. Will he bear in mind the important way in which the development of the funding arrangements, which have been fairly satisfactory, has proceeded over the past few years? It is up to the right hon. Gentleman to bring to bear the great pressure that the House brought in reaching the terms that were finally acceptable to the House.
I am sure that the right hon. Gentleman will share my pleasure that the arts funding in 1995–96, despite the current difficult circumstances, will in real terms be in excess of the funding that was available in 1991–92.
Youth Orchestras And Bands
6.
To ask the Secretary of State for National Heritage what support he gives to youth orchestras and bands.
In financial terms the Arts Council intends to spend £239,000 this year in support of youth activities, an increase of 200 per cent. on 1991–92. In addition, we acknowledge and encourage the many thousands of youth orchestras and bands up and down the country, whether they perform pop music, jazz, classical or other styles of music.
I thank my hon. Friend for that response. As he will know, our right hon. Friend the Secretary of State was present the other day at the Royal Albert hall to hear the superlative performances by county and borough youth orchestras, choirs and bands at the school prom. Does he accept that that was a great tribute to the young musicians, their teachers and those who initiate and support county and borough-based groupings—in many cases the local education authority? Will he talk to his colleagues at the Department for Education to ensure that, with the changing nature of LEAs in the future, such quality is not allowed to wither and that we can enhance the standards of musicianship?
Yes, that is extremely important. My hon. Friend has put his finger on a problem which has been faced. The Arts Council of Great Britain has produced a recent report stating that, although about a third of local education authorities have cut music service budgets since 1989, the majority have experienced no change and a few have expanded and improved provision.
My right hon. Friends the Secretaries of State for Education and for Wales propose in the Education Bill that there should be a two-year transitional period during which LEAs will be able to sell designated services to grant-maintained schools, which will offer sufficient time for private suppliers to move in.Does the Minister not recognise that that is a disgraceful response to a serious crisis that faces many excellent orchestras and bands around the country such as the South Glamorgan youth orchestra and the many junior orchestras and choirs which involve hundreds of young people in high-quality music? Those young people will not have that opportunity if the legislation goes through, if education is organised in the way in which the Minister and his colleagues seem to want, and if we have such a low settlement for local authorities. There will not be such a thing for the Minister to be proud of in the future unless he acts now.
I have rarely heard such arrant nonsense from any hon. Member of the House. The hon. Member for Cardiff, South and Penarth (Mr. Michael) is saying that he wishes to substitute his judgment for the judgment of the individual schools involved. Those schools will ensure that there is excellent musical provision for their pupils and that provision will continue to be made.
Broadcasting Green Paper
7.
To ask the Secretary of State for National Heritage what representations he has received about the Green Paper on broadcasting; and if he will make a statement.
I had received more than 2,000 replies by noon today. There are another five months for people to write giving their views.
Will my right hon. Friend carefully consider the wishes of those people who do not want to pay a compulsory levy to a state broadcasting company? Is he aware that among the most difficult fines for Her Majesty to enforce are those for single parents who cannot easily afford the licence fee but who are quite happy for their children to watch commercial television?
Those are exactly the sort of issues that we want to be considered as part of the debate on the future of the BBC, which, as I have said, has elicited a significant number of replies.
Will the Secretary of State consider carefully the submissions suggesting that funding for the regional broadcasting companies of the BBC, such as BBC Wales, should be cut? Such companies are easy targets for cuts. Does he recognise that those companies are very important to Wales, Scotland and the English regions, and that he must do everything in his power to protect and nourish them?
Without wishing to burden my official, Mr. Lister, who is in receipt of those letters, one of the effective ways in which people in Wales, or Scotland—I see another hon. Member nodding—would be to communicate about the consultation document. In the end, the allocation of resources is a matter for the BBC.
Is my right hon. Friend aware that I am in receipt of many letters from senior citizens in my constituency who find it extremely difficult to find the £80 to pay the licence fee but that many senior citizens who live in sheltered accommodation receive their broadcast; via a £5 licence? Will he consider that matter carefully? Perhaps the best solution would be that which has been suggested in the past—to release everyone from the compulsory licence fee and allow people to choose what they view. Funding could be either by subscription or by advertising.
The concessionary fee to which my hon. Friend refers was examined in the review in 1988. He is perfectly right that it is also part of the process in which we are now engaged.
The Secretary of State will be aware that the BBC provides 10 hours a week of programmes for S4C, the Welsh medium television channel—about a third of its programme output. Those 10 hours are funded with a portion of the licence fee. Will he give an assurance that the provision from the licence fee will be maintained and that that crucially important component in the Welsh medium programmes, including the news, will be maintained?
The hon. Gentleman may be reassured that, of course, the financing of S4C also falls within my Department.
Scientific Heritage
8.
To ask the Secretary of State for National Heritage what plans he has to secure the retention in the United Kingdom of items in the United Kingdom's scientific heritage.
In addition to scientific items retained following decisions of the reviewing committee on the export of works of art, I have accepted that natural history objects, including fossils, should be brought within our export controls.
I thank my hon. Friend for his recognition of the significance of the issue. But will he examine carefully the system for safeguarding important items of our scientific heritage and ensure that it is made more robust? Will he look at the Waverley criteria? He may agree with me that the requirement that an object must be of outstanding aesthetic importance misses the point for scientific items. Does he also agree that the requirement that an object should be more than 50 years old could mean that items from the outstandingly creative phase of British science since the war could be lost?
I acknowledge my hon. Friend's expertise on the matter. He is right that we have taken a fresh look at it both on our own initiative and as a result of changes within the European Community. The Waverley criteria have stood the test of time, but also look set to stand the test of the future. The criteria—each one of which may apply—have yielded positive results. There is a growing list of items that have been safeguarded for the nation in that way.
Media Ownership
9.
To ask the Secretary of State for National Heritage what steps he is taking to reduce the concentration of media ownership.
None, at present.
Does the Minister recall that the Government used to say that no newspaper proprietor would be permitted more than a 20 per cent. share of any satellite television company? Mr. Murdoch now has 50 per cent. of BSkyB and 35 per cent of all national newspaper circulation. So we must take it that, as they used to say in the Nixon White House, "The previous promise is inoperative." What level of ownership by a newspaper proprietor of a satellite television company will be necessary before the Minister faces up to the issues posed by Mr. Murdoch's grip on the market?
It is all very well for the hon. Gentleman to talk in those terms, but it is important to recognise that BSkyB does not have a monopoly. It is subscriber based. Indeed, it has created a ready-made market for other broadcasters to enter. Satellite television subscribers represent only about 13 per cent. of households in Britain. Those who watch satellite television on cable systems are unaffected. Ownership restrictions were thoroughly debated during the passage of the Broadcasting Bill and subsequent legislation. The Government will consider the need to change the legislation if a sound case can be proved.
May I put it to my hon. Friend—I do not necessarily wish him to come to a conclusion today—that the coming together of satellite dominance with major print ownership was not the intention of the Government or of the House. Even leaving satellite on one side, will my hon. Friend consider whether it is desirable that one proprietor should own 35 per cent. of national newspaper or whether it is a suitable case for reference to the Monopolies and Mergers Commission?
The Monopolies and Mergers Commission is required to take into account all matters that appear to be relevant, especially the need for accurate news presentation. It is for my right hon. Friend the President of the Board of Trade to decide whether to give consent to a newspaper transfer, but, as my hon. Friend knows, the Fair Trading Act 1973 contains special provisions to deal with such transfers. We keep that issue under review as it is important. One of the most important things to remember, especially with regard to satellite television, is that increasingly we are operating in an international market and we shall keep under review the interplay between that market in broadcasting and the national market in newspapers.
Does the Minister understand that one small part of the reason that there is so much public anger about journalistic standards is that the concentration of monopolistic ownership leads to circulation wars, in which people come second to proper journalistic standards and accuracy in news reporting? Is it not right that we should consider cross-ownership and the concentration of ownership—as the hon. Member for Eltham (Mr. Bottomley) rightly pointed out—to prevent monopolistic control from destroying a free press and a free media in the United Kingdom?
I recognise the hon. Gentleman's concern. We look forward to finding out what Calcutt has to say on the matter. I recognise that there is concern, although there seems to be less concern in my mail bag than there perhaps is in his, but the matter is serious and we shall keep it under review.
Attorney-General
Prosecutions (Non-Custodial Sentences)
28.
To ask the Attorney-General if he will make a statement about prosecutions in cases not leading to a custodial sentence.
Prosecuting authorities apply the principles set out in the code for Crown prosecutors. Sentencing is essentially a matter for the courts.
What discussions has the Attorney-General had with his colleagues about the question of withdrawing legal aid in cases where someone probably does not face a custodial sentence? Does he not realise that everyone has the right to maintain their good name? Ought he not to ensure that legal aid is either available in all cases or, if it is to be withdrawn, at least to consider ways in which the Crown prosecution service can be selective in the cases brought? Might it not be a better approach to saving legal aid to deny the fat fees that some Queen's counsels receive in legal aid cases, rather than to deny such aid to poor people?
On the last part of the hon. Gentleman's question, representations that have been made to me do not show that that applies in the great run of legal aid cases, although it might be said to apply in some long and detailed cases. The hon. Gentleman will appreciate that questions of legal aid are for my right hon. Friend the Lord Chancellor. The Crown prosecution service, when deciding on any case, considers carefully not only the sufficiency of evidence but whether it is in the public interest to prosecute.
Does my right hon. and learned Friend agree that it is not merely a case of using public funds to defend those accused of crimes, but often a case of using them to help the victims of crime? Has he been made aware of the evidence given to the Home Affairs Select Committee during its current inquiry into domestic violence, which shows that many such cases can be resolved without a custodial sentence, but that that requires the Crown prosecution service to bring a prosecution first?
I recognise that there is force in the considerations that my hon. Friend has just mentioned. When the Crown prosecution service considers cases of domestic violence, it does not consider sentencing but is looking to a sensible solution, including the justice of the matter, which it will take into account when considering whether it is necessary to prosecute.
Does the Attorney-General agree that the number of cases discontinued by the Crown prosecution service is on the increase? Does he welcome such an increase, especially when we bear in mind that that stops the prosecution of many petty and minor matters which have hitherto clogged up the courts?
The hon. Gentleman makes a good point. One of the principal functions of the Crown prosecution service is to review each case and, where appropriate, to keep it under review at every relevant stage. At present, it discontinues about 12·5 per cent. of cases and there is a sign that that figure is slightly on the increase, but it is not out of hand and it shows that it correctly keeps the question of reviewing cases very much in mind.
Can my right hon. and learned Friend confirm that, in cases where a non-custodial sentence is passed by a court when it is strongly felt by many people that a custodial one would have been more appropriate, he now has the power to refer the matter to the Court of Appeal for it to consider whether a more serious custodial sentence is more appropriate?
My hon. Friend draws attention to an important new power, which was introduced in 1989, which may be exerted in cases that can be tried only at the Crown court—we are therefore talking about the most serious type of case. That power is designed to maintain and improve public confidence by enabling the Court of Appeal not only to reduce over-severe sentences, but, when it appears to me or to my right hon. and learned Friend that the sentence is unduly lenient, it can be referred for reconsideration of a possibly more serious sentence.
British National Party (Literature)
29.
To ask the Attorney-General what representations he has received regarding the literature distributed from the headquarters of the British National party.
In 1992, in addition to questions raised by the hon. Gentleman himself, representations have been received from two local community organisations. The Crown prosecution service, has reported to the Law Officers its decision following a police inquiry into this matter.
Does the Solicitor-General accept that there is an air of disbelief in my constituency of Woolwich over the lack of action taken by the Government in this matter? Does he accept that that is in stark contrast to the positive action taken by the Government of Germany following the tragic murder of three Turkish residents? Is the hon. and learned Gentleman aware that two of my constituents, Rohit Duggal and Rolan Adams, have been brutally murdered? How many more black youths must be slaughtered on our streets before the Government take some action against the Nazi menace in our presence?
It is not the Government of this country who institute proceedings for criminal offences, although the Government have the power to reform the law if it is found to be inadequate. That is a matter for my right hon. and learned Friend the Home Secretary. We wholeheartedly condemn racial attacks wherever and whenever they appear, and the hon. Gentleman will remember that in the case of Rolan Adams, to which he just referred, his attacker was identified and prosecuted speedily and his murderer received a sentence of life imprisonment. A large armoury of offences in the law, including murder, manslaughter and assault covered by the Offences Against the Person Act 1861 and the Public Order Act 1986 provide effective sanctions against such attacks.
Will my hon. and learned Friend confirm that the Public Order Act 1986 makes it easier to deal with those offensive nut cases?
My hon. Friend is right. When we passed the 1986 Act we significantly extended and modernised the existing law. We extended it to cases where there was an intention to stir up racial hatred and circumstances where hatred was likely to be stirred up. In section 23 we introduced the new offence of possessing racially inflammatory material with a view to distributing it. In section 21 we introduced a new offence of
In section 22 we criminalised incitement to racial hatred in cable programmes. That demonstrates that we have been active, sometimes at the suit of requests from Opposition Members and elsewhere, to make sure that the law is kept up to date.Distributing, showing or playing a recording … of visual images or sounds which are threatening"
Does the Solicitor-General agree that what starts off as the racist platform for organisations such as the British National party, leads in Germany and in this country to racist murders? Will he discuss with the Home Secretary whether we should now legislate for the crime of racially motivated attacks, in order to underline our repugnance at the racist crimes that are probably generated by the type of literature referred to in the question tabled by my hon. Friend the Member for Woolwich (Mr. Austin-Walker)?
I listen to any arguments that hon. Members can put forward. If we are to have a specific offence of racial harassment it will just add another ingredient that the prosecution must prove before it can succeed in obtaining a conviction. I doubt whether that is the right way to proceed. I discovered the typical reaction of the British people in Leicester, South in 1983, when the candidate from the so-called British National party, who stood against me, managed to secure only 280 votes out of a total of 53,000.
May Inquiry
30.
To ask the Attorney-General when he expects Sir John May to complete his inquiry into the Guildford and Woolwich pub bombings.
Sir John has now completed the phase relating to the Maguires and his report on that aspect was published on Thursday 3 December. As to the Guildford and Woolwich aspects, I refer the hon. Member to my answer to him on 26 October 1992.
In the Guildford case, unlike in the Birmingham one, everyone concerned up to a high level knew almost from the outset that they had the wrong people and rigged the evidence accordingly. Is not that the real reason why Sir John May will never be permitted to carry out his inquiry as originally intended?
I have no reason to believe that the hon. Gentleman's prejudices are accurate. The purpose of Sir John May's inquiry is to find that out. Although Sir John must balance the interests of justice in bringing to justice those alleged to have done wrong, he is continuing with his inquiry in an effective way so that it can inform the royal commission before it reports towards the middle of next year.
Overseas Development
Bosnia
36.
To ask the Secretary of State for Foreign and Commonwealth Affairs when he next intends to visit Bosnia to discuss aid matters.
The Secretary of State has no plans at present to visit Bosnia.
Do not the Government realise that unless the United Nations goes beyond its existing aid mandate and authorises action to stop ethnic cleansing in Bosnia, the Islamic nations will go in and do the job for us? How do the Government view the prospect of what might be a holy war in the centre of Europe?
Quite apart from the enormous dangers that would face our troops by any escalation of the situation caused by United Nations forces, to which my right hon. Friend the Prime Minister referred so eloquently last Thursday, the hon. Gentleman should also remember that if counter action prevented United Nations forces from delivering aid to those who are starving, 1·6 million people in Bosnia who are now receiving humanitarian support would suffer. It is important to recognise that the Jeddah meeting concluded that action should be taken forward by means of the United Nations Security Council. It was not a unilateral statement.
How much money are we sending in emergency aid to Bosnia? Will my hon. Friend assure the House that we are doing all that we can to keep the convoy routes open to humanitarian aid?
Yes. This nation is one of the largest contributors to humanitarian aid in former Yugoslavia. We have contributed more than £70 million so far this year. We have 2,400 troops in the United Nations protection force, UNPROFOR, and some 260 in the ambulance unit in Croatia.
When will the Government learn that a great deal more can be done to aid Bosnia without putting a huge army into the field? When will the air exclusion zone be enforced? When will the so-called United Nations protected areas be properly protected against continuing murder, rape and pillage, let alone new safe havens be created? Why will not the Government declare that the areas stolen by ethnic cleansing will not be internationally recognised and that there will be no let-up of sanctions until those areas are demilitarised and a majority of the refugees permitted to return home in safety? Why will not the Government use their failing EC presidency to get EC monitors or United Nations troops stationed in Kosova or Macedonia to deter a Serb military move? Are the Government simply resigned to theirs being the worst EC presidency on record?
The question is about aid, not political solutions in that very troubled land. We all agree about the outrages and objectives, but the methods of solving those objectives are difficult. The hon. Gentleman would do well to consider the advice of Lord Owen and other such people who are on the spot and know exactly what is going on.
May I give a warm welcome to the brave British convoys that are going into Bosnia and ask my hon. Friend to ensure that the aid that they are bringing to these stricken people includes medicines, so that we do not get a repeat of what happened last year at Serebenica, where an entire convoy arrived and it was found that it was not carrying one aspirin?
I have mentioned the ambulance unit in Croatia. Of the £70 million to which I referred, £3 million-worth of medical supplies and support has been given to the World Health Organisation.
Aid Target
37.
To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the time it will take to achieve the United Nations' target of 0·7 per cent. of gross national product of developed countries being spent as aid to underdeveloped countries.
We shall reach the target as soon as possible.
I invite the Minister to be more specific. Will he dare to say that the target will be reached by the end of the Government's term of office? Does he agree that if the target is not met it would be a disgrace to a developing and prosperous country such as ours?
I shall certainly give no such indication. When the Labour party was in government no such indication was given. It is impossible to bind a future Chancellor of the Exchequer. It is amazing that the hon. Gentleman is not prepared to accept how important it is that this year our spending on aid increased by 3 per cent. in real terms over last year's. Next year, there having been a tremendously stringent round this year, there will be a 1 per cent. real-terms increase on this year's spending.
Does my hon. Friend agree that the best way in which we can help developing nations is, first, to encourage them to stop killing one another and, secondly, to encourage them to make the best use of their own resources?
My hon. Friend will know of my particular interest in the Cahora Bassa dam. Now that the people of Mozambique are at peace, will he make every effort to assist in the repairing of the power lines from the dam? The work is due to start in April 1993 if finance can be found.I am happy to give my hon. Friend further information about what is happening in that area, in correspondence as I am not briefed today on the precise position. It is the Government's intention to help people to help themselves, and we have a substantial aid programme. We should bear in mind the great importance of a successful GATT round. That will increase world trade and help the third world.
However long it was going to take the Government to reach the United Nations aid target, will the Minister confirm that it will now take longer following the financial settlement for 1995–96?
I cannot possibly say how long it would have taken if we had not had the financial settlement for 1995–96, so I cannot possibly answer the question.
Does my hon. Friend agree that if we were to add our net contribution to the European Community budget, which goes largely to the underdeveloped countries in the southern part of Europe, our spending on aid would far exceed the United Nations target of 0·7 per cent?
I know that my hon. Friend feels strongly about the matter. The United Nations target of 0·7 per cent. is directed towards the section of the world which, when defined in terms of gross domestic product, would not include the southern states of the European Community.
Africa (Agricultural Aid)
38.
To ask the Secretary of State for Foreign and Commonwealth Affairs what was the level of expenditure by Her Majesty's Government in the last financial year on agricultural aid to countries in Africa.
In 1991–92 bilateral expenditure on agriculture-related activities was £44 million. In addition, the United Kingdom contributed over £11 million to multilateral organisations working specifically in the agricultural sector.
Does the Minister accept that as the autumn statement made it clear that after 1993 the aid budget would be cut in real terms, to the great disgrace of the Government and to Britain, and as at the same time humanitarian aid in Europe and elsewhere is likely to have to continue to rise, the inevitable consequence of the two factors will be the further squeezing of agricultural aid? Does not the Minister understand that unless we invest, and help developing countries invest, in the agricultural infrastructure of training, seed technology and water irrigation, we shall never be helping developing countries in the way in which they need to be helped?
The point about helping developing countries to plant seeds and grow food is well taken—of course that is true. In October this year more than £500,000 was provided for seeds and tools for Somalia. When referring to the general point of the 0·7 per cent. target, however, the hon. Gentleman should recognise the great achievements over the years and the fact that, within a reasonable period, there has been a significant improvement. In five years our contribution has risen by 8 per cent.
Does my hon. Friend accept that those of us who were concerned about the rumours of a cut in the aid budget and agricultural aid for Africa and elsewhere should write to say that we are grateful that there were no such cuts and that we are grateful for the increase announced for the next year or two? If more of us applauded in that way the Government might be able to say that they will go on making progress towards the 0·7 per cent. target.
My hon. Friend is right: the Government should get a round of applause for having protected and enhanced the aid budget. Just before the autumn statement a few weeks ago the Opposition were saying that there would be a 15 per cent. or £25 million cut, which is outrageous.
Southern Africa (Drought)
39.
To ask the Secretary of State for Foreign and Commonwealth Affairs what new initiatives are proposed to ensure speedier distribution of aid from Her Majesty's Government in drought-affected areas in southern Africa.
We are continuing to work hard with international agencies and non-governmental organisations to ensure that our assistance for the drought-affected countries of southern Africa is delivered both quickly and to the intended beneficiaries.
Although we may be encouraged that that is the right approach, the simple fact is that aid is still taking far too long to get the point where it is needed. May we have every assurance that the Government will do all in their power to ensure that aid given by the British Government reaches these points with the minimum delay—whatever the reasons for such delay?
I am not sure what the hon. Gentleman is referring to; I should be grateful for further details if I am to comment further. The facts that I have do not bear out what he suggests. Of the £51 million of bilateral aid that we have committed to the drought-affected areas of southern Africa this financial year, £45 million worth has already been disbursed. That represents more than three quarters of what we have committed.
Points Of Order
3.31 pm
On a point of order, Madam Speaker. The report by the royal commission on standards of conduct in public life published in 1976 referred to the membership of Parliament as a great honour carrying with it a special duty to maintain the highest standards—a duty which applies no less to Ministers. Can you give us a ruling on the need to separate the daily workings of Departments of State from purely party matters? I shall not refer to special cases, including the one involving the Home Office searching for records relating to President-elect Clinton, but could you make it clear—arising out of Lord Salmon's report, much discussed at the time inside and outside this House—that there must be such a separation? If there is not, Departments of State such as the Home Office and the Treasury will be seen as no more than extensions of Conservative Central Office. No matter whether we think of recent events surrounding the Chancellor or of the problem of who authorised the inquiries into President-elect Clinton's past, would it be possible for you to make it clear that there must be a separation between Departments of State and purely Conservative party matters?
This is a matter on which the House itself must debate and arrive at conclusions. Rulings on a subject as wide ranging as that which the hon. Gentleman has raised cannot come from the Chair. It is for the House itself to come to conclusions on these matters.
On a different point of order, Madam Speaker, concerning an area on which I would very much like your advice and quite possibly your help.
You will be aware that the BBC has conducted a massive survey of public opinion. We all know that public opinion surveys are quite often inaccurate, but this one was so large that there must have been an element of accuracy about it. You will know that 75 per cent. of the people interviewed believe that this House should allow them a referendum on the Maastricht treaty. We had one on joining the Common Market. This is about joining a European union—[Interruption.]Order. I am trying to listen to the hon. Gentleman's point of order.
Having seen what has happened in France, Denmark and Ireland where there have been referendums, your constituents and mine, Madam Speaker, would be miffed, to put it mildly, if the House was not able to debate such an issue. Can you say how you can help us to get something in order so that the House may debate this issue, which is important for your constituents and mine?
In short, no. The hon. Gentleman knows that that is not a matter for the Chair and he should not try such back-door methods to suggest that I should make other pronouncements. The answer from the Chair is a firm no.
Further to the point of order raised by my hon. Friend the Member for Walsall, North (Mr. Winnick) about the question of the register, you will have noticed, Madam Speaker, that, during business questions, since the election some of my hon. Friends have made requests about publication of the register. It seems to be taking a long time. We would like to see the entries. Could it be that publication is being held up because of the Chancellor of the Exchequer's entry and so on? May I draw your attention to the fact that it may also be because the President of the Board of Trade, as he calls himself, has a problem since his last entry in the register was different from his entry about Haymarket Press——
Order. I doubt that it is any of those reasons. I am sure that the Register of Members' Interests will be produced as soon as possible. The hon. Gentleman's ideas do not hold very much water.
Further to the point of order raised by my hon. Friend the Member for Walsall, North (Mr. Winnick), I appreciate your ruling, Madam Speaker. You seemed to intimate that the issue would have to be debated. May I have your assurance that not just the fact of the investigation of Bill Clinton's records within the Home Office but the fact of the existence of those records will be legitimate subjects for debate in the House?
The hon. Gentleman should look at what I said. I said that it was not a matter on which I could give advice, but that it was a matter for the House to debate should it wish to do so.
On a point of order, Madam Speaker. As you are aware, the Metropolitan police have been conducting a number of stop-and-search exercises in connection with cowardly acts of terrorism perpetrated in London. Have you been consulted by the Metropolitan police on such searches taking place well within the one-mile radius of the House of Commons and about the fact that a number of hon. Members have been stopped? There is no reason why they should not be stopped——
Quite right.
They were Conservative Members. Have you been consulted, Madam Speaker?
As the hon. Gentleman will understand, and as I am sure the entire House will appreciate, I have no intention whatever of discussing security matters across the Floor of the House.
Orders Of The Day
Social Security Bill
Considered in Committee.
[MR. GEOFFREY LOFTHOUSE in the Chair]
Clause 1
Pension Schemes: Payments By Secretary Of State Under Part I Of Social Security Act 1986
3.37 pm
I beg to move amendment No. 2, in page 1, line 14, at end insert
This is a probing amendment. We are aware of existing regulations but we are not convinced that the Government are being sufficiently diligent. Our amendment provides that the only schemes covered by the legislation will be those which, first, guarantee a minimum pension as defined by regulation. That is to ensure that it provides a pension that is at least equal to SERPs. Secondly, the schemes must fully disclose all commission and management charges to be paid in connection with the scheme. That is a self-evident right for anyone entrusting his money to others. Thirdly, the schemes will incorporate the terms of any statutory code of practice that may be in force. That code would be all-embracing and would include all measures thought necessary to protect the individual investor. As you will know from Second Reading, Mr. Lofthouse, we do not like the payment of these incentives. We think that it would be preferable not to spend so much money in an attempt to undermine SERPS. We believe that SERPS is safer and more reliable than personal pension schemes. It does not need the small-print warning that benefits can go down as well as up. It is not sold to individuals by salesmen whose standard of living depends upon their ability to talk people into signing up. The rules by which SERPS operates are subject to scrutiny in the public interest. However, if the Government are, however misguidedly, going to spend so much money on encouraging people to take out personal pensions, they have a responsibility to ensure that the schemes are of a high standard. On Second Reading, the Under-Secretary of State conceded that viability, reliability and safeguards are necessary to protect people taking out personal pensions. She read out to us the usual official jargon about continual contact between the Department and the regulators, with the regulators constantly reviewing the monitoring process, but she had to admit that it was necessary 'or the Government to produce regulations to command the confidence of those who wished to take out personal pensions. I hesitate to describe the Under-Secretary of State as timid, but, unfortunately, the reluctance with which she conceded the need to take action was matched by the timidity with which she is approaching the problem. As she said, she is consulting the regulators, but, rather than an entirely new system, all that she wants to see is a tightening up of the procedures, or possibly an enlargement of them, and more detailed monitoring than is currently possible. It would be useful if the hon. Lady would share her thoughts with us. On Second Reading, she took issue with my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) over those selling personal insurance. She compared them to lawyers who sometimes give advice not to go to court. I am sure that my hon. Friend will forgive me when I say that I was more frightened than reassured by her comparison of lawyers with what we used to know as insurance agents. To most people, they are still agents and not financial advisers. 'Salesman" is the operative word. They are like shop assistants who try to sell us the dress that suits us best, but it is from their shops that they wish to sell, not from the shops next door. The Minister was right to say that, provided that the profession is properly regulated and honourably conducted, there is nothing unique about insurance salesmen having to distinguish between best advice and their own financial interests. If there were strict regulations to enforce high standards, all would be well, but there are no such regulations, and she has acknowledged that. I should like her to expand on that statement. The Committee could do with hearing a little more of her thoughts than we heard on Second Reading. What are the complaints being made to the Government? Apart from misleading information, they no doubt include high commission and other charges imposed in the first year. May we be told more about the steps that the Government are considering taking? We feel that the Government are being far too timid, and that they need to be far more positive. I am sure that the hon. Lady does not like being called timid, and I am certain that she will respond to my queries. We want the Government to ensure that this money is given only in respect of laid-down guaranteed minimum pensions, we want the full disclosure of commission and management charges, and we want the Government to institute a statutory code of practice that is constantly reviewed and updated.'(aaa) notwithstanding the terms of subsection (aa) above, no account shall be taken in making the minimum calculation of one per cent. of earnings, referred to in the said subsection unless the earners' chosen scheme—(1) guarantees a minimum pension as defined by regulations; (2) fully discloses all commission and management charges to be paid in connection with the scheme; and (3) incorporates the terms of any statutory Code of Practice that may be in force.'.
Many members of the Select Committee are deeply alarmed about both the management of private pension schemes and the security of personal schemes. We are concerned about the amounts that are paid into them, and about the amounts that will eventually be paid out. Will the Minister give us some idea of the point at which she proposes to investigate the vast number of personal pension schemes that have been set up over the past five or six years, and also of the degree of investigation that she proposes?
The Bill seems designed, in effect, to assist such schemes in the future, and to provide them with more funds. Many of us are concerned about the methods that will be employed in the investment and control of those funds, and fear that in the future many people will be as disappointed by the pensions paid to them as are current victims of the Maxwell pension fund fraud—whose problems, as we speak, are still unresolved.
3.45 pm
I assure the hon. Member for Newcastle-under-Lyme (Mrs. Golding) that I have no intention of being provoked by allegations of timidity into adopting temerity. It would indeed be rash to rush into an entirely new regime without first establishing the extent of the problem—which I do not dismiss, and which the hon. Member for Islington, North (Mr. Corbyn) is right to identify—establishing its nature, and establishing whether existing regimes of control would result in a sufficient tightening of the rules. That applies to the fact-finding that must be carried out, the advice that must be given, training, the extent and frequency of monitoring and, perhaps, other issues.
To say that we are consulting the regulators is not merely to indulge in official jargon. I recently met the Life Assurance and Unit Trust Regulatory Organisation, the Investment Management Regulatory Organisation, the Securities and Investments Board and the Financial Intermediaries, Managers and Brokers Regulatory Organisation to discuss what may or may not be going wrong. The hon. Lady asked me what complaints the Government had received. I certainly do not want to give the impression that we have been inundated by a vast number of such complaints, indicating either widespread malpractice or inefficiency; we have not. However, personal pensions have now had some time in which to take effect. There are now 5 million pension holders, and a sufficient history has been established for us not only to examine the undoubted success of the scheme, but to ask ourselves how we can improve it. That was the reason for my rather cautious statements on Second Reading. It was not that I did not want to address problems if they were there; I did not want to rush into examining imaginary problems. I do not think that the hon. Member for Newcastle-under-Lyme really addressed the amendment. I understand her embarrassment: the amendment is a bit of a muddle. She was right to describe it as a probing amendment, for there is no way in which it could be translated into law. Let me remind the House of the purpose of the 1 per cent. additional rebate for personal pension holders over the age of 30. Personal pensions have been an enormous success. As I have said, there are now 5 million holders of them, and public demand for the choice and flexibility of provision that such pensions offer has been about 10 times greater than expected. That tremendous growth has not been at the expense of occupational schemes; the 5 million personal pension holders are largely in addition to the 11 million occupation scheme members. The 1 per cent. additional rebate is designed to ensure that it is worth while in the short term for the majority of those people to maintain their pensions. It will apply to personal pension schemes set up for a group, as well as to individual arrangements, but it is a temporary measure. In the context of this and other amendments, that must not be overlooked. We shall shortly be undertaking a review of the rebate structure for personal pensions and shall consider proposals for an age-related system. That review will also include occupational schemes—money purchase and salary related—and, if the hon. Lady will forgive the expression as she does not appear to like consultation, we intend to consult interested parties in the first half of next year. I deal now with the detail of the amendment. Amendment No. 2 seeks to make payment of the 1 per cent. additional rebate conditional on the personal pension scheme satisfying very restrictive new conditions. These conditions are the guarantee of a minimum pension, full disclosure of all commission and management charges and incorporating the terms of any statutory code of practice. The amendment would lead to an extraordinary muddle. It would apply only to schemes to which the 1 per cent. additional rebate was paid. No personal pension optant aged under 30 would benefit from the amendment. To explain that more fully, it may help to remind hon. Members how payments are made to appropriate personal pension holders. The Department pays a minimum contribution based on the person's annual earnings between the lower and upper earnings limits. These annual earnings are known as band earnings. The minimum contribution is paid after the end of the tax year direct to the personal pension provider. At present the minimum contribution is made up of the contracted-out rebate amount which is 5·8 per cent. of band earnings; the 2 per cent. incentive; and basic rate tax relief calculated on the employee's share of the contracted-out rebate amount, which is currently 2 per cent. From April the minimum contribution will consist of the new contracted-out rebate amount which is 4·8 per cent. of band earnings, basic rate tax relief calculated on the employee's share of the rebate, which will be 1·8 per cent., and, subject to the will of Parliament, the 1 per cent. addition that we are now discussing for personal pension holders aged 30 and over. The amendment does not propose that these restrictive criteria should apply to the 4·8 per cent. rebate. It therefore seems somewhat contradictory to propose them in respect of the 1 per cent. addition. I should now like to take each of the restrictions specified in turn. The first is a guarantee of a minimum pension as defined in regulations. I think that we should be clear that, although personal pensions do not provide a guaranteed minimum pension, they do provide protected rights. Personal pensions are a form of money purchase arrangement. The level of pension that is payable depends on the investment that is made, the return on that investment, and the costs. Personal pension providers have to guarantee that the minimum contribution has been invested, and the return on that investment can be considerable—so much so that, over the lifetime, personal pension holders can be in the fortunate position of receiving more than simply guaranteed minimum pension rights. It is not clear from the amendment—or from the hon. Lady's support of it—what type or level of guaranteed pension the Secretary of State is being asked to specify in regulations. Would it be a fixed amount or would it be related to an individual's salary? There would be a substantial cost in adopting the amendment. Just how great the cost would be is difficult to quantify because it would probably have to be borne through reduced pensions to the personal pension holder at the point of retirement. That is because some contributions would have to be diverted to cover the cost of insuring against the risk that the return on the investment would not fully cover the minimum pension.
I understand the Minister's point, but can she give some idea of the number of money purchase personal pension schemes where the companies involved have thus far been unable to pay the guarantee offered to the participants when they joined the scheme?
The hon. Gentleman will be aware that personal pensions have yet to come to fruition. When we say that we have millions of holders of personal pensions, we mean, not that there are 5 million drawers of those pensions, but that 5 million people have taken out personal pensions. Therefore, the data that the hon. Gentleman seeks would not help the course of the debate.
I said that the amendment would reduce choice. Some current personal pension providers would be prevented from continuing to provide personal pensions. Banks and building societies are prevented by legislation from accepting such a risk. Only life insurance companies and their salesmen would be able to do so. This would limit the market and reduce competition. The issue of providing some kind of guaranteed minimum pension for money purchase and personal schemes was discussed at considerable length during the passage of the Social Security Act 1986. The Government's view was that the difference between the two methods of providing for retirement was at the heart of the new pension opportunities provided by that Act, making guaranteed minimum payments inappropriate for personal pensions and for contracted-out money purchase schemes. I turn now to the second restriction that is proposed. The regulatory organisations lay down requirements for the disclosure of relevant information to investors—the hon. Member for Newcastle-under-Lyme acknowledged that there were already some regulations—including charges and commission. These are subject to review at present. In the circumstances, it would not be appropriate for the Government to introduce further disclosure requirements before the result of the review is known. The Securities and Investments Board has proposed new rules which will require life insurance companies to disclose the effect of charges and expenses as a penny-in-the-pound deduction from the premium. The Director General of Fair Trading is considering this proposal at present, and a report to my right hon. Friend the Chancellor of the Exchequer is expected shortly. I admit that I am unclear of the purpose of the third restriction that the Opposition seek to place. The Financial Services Act provides the statutory framework for investor protection, and the marketing of investment products is subject to rules made under the Act. The restriction therefore has no practical effect over and above existing law. I cannot recommend the amendment to the Committee. The effect of accepting it would be to reduce the level of pension and the level of competition. I do not think that the Opposition intended such a muddle when they tabled the amendment.I listened to the Minister's speech with interest. I wonder how much of the speech was her own words and how much was written for her. Does she recognise that the state earnings-related pension scheme and opting out apply largely to people at the lower end of the income scale and that people higher up the income scale are more likely to have some kind of occupational pension?
Is the Minister aware that Legal and General, which is the largest pensions insurer in Britain, recommends that men and women on an income of less than £9,000 a year should not opt out of SERPS? Much of the Minister's speech appears to contradict that. With the best will in the world, I would rather have the word of Legal and General when it comes to pension investment. It must be recognised that certain fixed costs and charges always attach to life insurance policies. The lower the income and the lower the premium payment, the higher will be the percentage that goes on commission and management fees. The Minister may be interested to know—I will not name names, but I will send her details afterwards—that last year a member of the Financial Intermediaries, Managers and Brokers Regulatory Association who operated in my home town was gaoled for submitting fraudulent applications. He made applications for personal pensions for non-existent people for which the commission was such that, for more than 18 months, he was able to pay the premiums on the applications and to net himself £68,000 in commission. Such a commission structure may at least dilute the professional opinion of the person involved in selling a pension plan. The beauty of SERPS is that it offers a guaranteed pension. In some ways, that may also be its drawback. People receive glossy brochures which promise fairly spectacular returns. I accept that they are based on statutorily limited projections. The difference between a 3·5 per cent. return and 10·5 per cent. return is substantial. Companies very rarely advise potential policyholders of the actual returns gained over the years and they very rarely seek to advertise their position in league tables. It is significant that Equity and Law, a company which consistently appears close to the top of the league of historical returns, pays no commission and has no interest in dealing with third parties or intermediaries. There may be a message there for us all. In the same vein, many private schemes provide for a payment to a widow, but seldom provide for a payment to a widower if the premium payer is female. In this day and age, and in the light of legislation from the European Court, that point should be a matter for the Department of Social Security. In the private pension scheme world, one can have a named beneficiary. However, under SERPS, if a couple are not married, the widow receives no payment. That is a major deficiency in SERPS regulations and application in this day and age when, rightly or wrongly, so many couples live together for decades without marrying. 4 pm As the Under-Secretary did last week, she again referred today to there being 5 million personal pension holders. I am sure that we all hope that that means that 5 million people will be very happy when they retire. Potentially, that is 5 million people who will know far too late that they have been ripped off. In respect of regulations, it is interesting that there is one set of responses from the Department of Social Security and another set from the Treasury. The Department of Social Security would do well to slow things down a little until the Securities and Investments Board investigation of self-regulation has been published.I wish that I had responded to that matter before I made my earlier general response. One Opposition Member is urging me to slow things down while another is urging me not to be so timid and to hurry things up. It is impossible to please both of them.
I rather prefer the approach of the hon. Member for Bradford, North (Mr. Rooney), who believes that it would be better to try to get things right and to proceed at the best pace. However, I believe that he was wrong in respect of Equity and Law. I am informed that Equity and Law pays commission. The hon. Gentleman must have the wrong company. I take the point about commission charges made by the hon. Member for Bradford, North and his point about the advice on actual returns. Both points could be addressed under the present regime; they do not require new legislation. My colleagues at the Treasury and I are consulting the regulators precisely to see whether those matters can be controlled. As the hon. Member for Bradford, North seems to believe that we are talking with two tongues, I must point out that one of my Treasury colleagues was at our last meeting with the regulators. It was not noticeable that we had a different approach to the issue. The hon. Member for Bradford, North has not done enough homework. While I absolutely take on board the need to review the way in which personal pensions are working, I do not accept that there are 5 million potential disasters in the system. The amendment will not help to devise better regulations.We all accept that discussions are taking place, and we welcome that. However, presumably discussions take place within a time scale. When will we know the results of those efforts?
We shall bring our conclusions to fruition as soon as is practicable.
I was deeply hurt and upset when the Minister said that I was not in favour of consultation—and I immediately consulted my colleagues. We have decided that I should beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment No. 3, in page 1, line 16, at end insert
'(OA) After subsection (3) of that section there shall be inserted—
"(4) In relation to money purchase contracted out schemes to which Schedule 2 to this Act applies, 1 per cent. of earnings as defined in subsection (aa) above shall be included in the calculation of the minimum contribution.".'.
With this we may take amendment No. I, in page 1, line 21, at beginning insert—
'(3) In section 7(1) of the Act of 1986, the words in lines 8 and 9 "within the period beginning on 6th April 1988 and ending on 5th April 1993" shall be replaced by the words "beginning on or after 5th April 1988".
(4) In section 7(4) of that Act, in line 2, after the words "in respect of a tax week" shalll be inserted the words "falling within the period beginning on 6th April 1988 and ending on 5th April 1993" and after paragraph (b) the words,
"The amount of payment in respect of a tax week beginning on or after 6th April 1993 is where(i) the tax year in which the tax week falls ends before such date as may be prescribed, and (ii) the earner was over the age of 30 on the 6th April with which the tax year began, 1 per cent. of any such earnings.".'.
The amendment deals with the exclusion of occupational schemes. It attempts to prove further the reason the figure of 1 per cent. is confined to personal pension schemes. The members of the occupational pension schemes joint working group, which brings together the Association of British Insurers, the Association of Consulting Actuaries, the National Association of Pension Funds and the Society of Pension Consultants, put their case for the inclusion of all types of contracted-out pension schemes in a letter to the Secretary of State on 9 September 1992. Unlike us, they do not challenge the purpose of the additional 1 per cent. rebate, which is to dissuade individuals from leaving personal pensions and contracting back into the state earnings-related pension scheme. Indeed, they say that it is welcome because
That is not the pure doctrine of competition, but there we are and so be it. However, the group expressed two concerns. One was that giving the additional 1 per cent. of personal pensions alone might lead some individuals to leave contracted-out money purchase schemes, and, possibly, even final salary schemes, to take out personal pensions. The second concern was there could be a greater danger that employers would consider that contracted-out money purchase schemes were not worth their continued support. leading to COMPS members drifting back into SERPS. They emphasised the unfairness of that by pointing out that employers who responded in 1988 to the Government's desire for personal pensions by introducing group personal pension schemes would see their employees covered by the additional 1 per cent., whereas those who, with Government encouragement, introduced contracted-out money purchase schemes would not. Let me emphasise that it was with Government encouragement that those employers introduced and committed themselves to COMPS, installing the necessary procedures. They believed that COMPS and GPPS should receive the same protection because they were so similar that it was unfair for contracted-out salary-related schemes to be treated less favourably, and they urged the Government to establish a level playing field. Why have the Government refused to provide them with their level playing field, or at least a playing ground on which they would play downhill alongside personal pensions against SERPS? The Secretary of State, in his reply to the group's letter, pointed out that his predecessor had made it clear that the 1 per cent. additional rebate was a temporary measure pending a review, which is what the Minister said today. I am not sure whether the Secretary of State regards that as an argument against the extension of the 1 per cent. to COMPS—surely not. It cannot be that they are arguing against an extension of the 1 per cent. It is a bit like somebody standing on the river bank and telling a drowning man, or at least one who thinks he is drowning, that he will not throw in the lifebuoy that he is holding but that the drowning man need not worry because there will be a review of the availability of lifebuoys and the required standards. The Secretary of State went on to point out the differences between personal pensions and contracted-out money purchase schemes which included"some degree of stability is needed, and it is in no party's interest for there to be frequent switching between different types of pension provision."
He added that he would be surprised if some employers felt that they could no longer support COMPS. That would be an unnecessarily short-term view. On Second Reading, the Under-Secretary of State expanded further on the reason for not including contracted-out money purchase schemes. First, she told us that there were economies of scale. I wonder what that argument actually means. What economies of scale justify such discrimination? Are we to believe that the man from the Pru is a small business man? I have no doubt that the Under-Secretary has a good explanation that will satisfy the occupational pensions schemes joint working group. We should like to hear it. We should like to know what the Under-Secretary has in mind. Secondly, and reiterating the argument of the Secretary of State, there is inflexibility in the age at which benefits may be taken. This is a good point at which to ask a question which has bothered me ever since I listened to the Under-Secretary on Second Reading. Did not such schemes qualify for the initial 2 per cent? If such schemes did not qualify, I can see the logic, if not the justice, of the Government's position. If they did, why on earth were the present objections of the Government not barriers then? What has changed? What is different? Thirdly, and most importantly, the Under-Secretary said that there was a difference in the method of payment. COMPS are generally paid monthly, but personal pension contributions are made after the end of the year. That reduces the burden on the employer and throws into question whether it is appropriate at this juncture to extend to COMPS the same arrangement as that which applies to personal pensions. If the 1 per cent. were purely a subsidy to the personal pension providers, I could understand the argument and the reasons why a similar subsidy should not be paid to employers. However, I understand that the 1 per cent. is an incentive to the individual employee. Perhaps the Under-Secretary could clarify the matter. Is the 1 per cent. a subsidy to the body providing the pension, or is it an incentive to the individual? Considering the reference to expenses by the Secretary of State in his letter and the arguments of the Under-Secretary on Second Reading, it seems that the Government see it as a handout—as a way of offsetting the higher costs of the personal pension providers. It is difficult to agree with the conclusion of the Under-Secretary on Second Reading that, because of the differences between the operation of corporate schemes and personal pensions, the same arrangement should not be extended to corporate schemes. Perhaps, even at this late stage, the Under-Secretary will think again."the nature of the contract, the contributions for PPs, the ages at which the benefits may be taken and portability on changing jobs."
I shall say some words in support of the amendment moved by the hon. Member for Newcastle-under-Lyme (Mrs. Golding). I concede that her amendment is much more transparently obvious than mine. I drafted my amendment in a moment of haste after Second Reading when I was still quite roused, to use a Scots term, by the rather inadequate explanation given by the Under-Secretary.
I cannot for the life of me understand this. I have read the report of the Second Reading debate, and I have re-read it. I simply do not understand why the Government "set their face" against contracted-out money purchase schemes. It is obvious and blatant discrimination. It does not amount to an awfully big row of political beans—or pension beans, if it comes to that—in terms of making a change because the necessary administrative changes and the amounts of money would not be great. I do not have the same problem as the hon. Lady about the principle of an incentive. Back in the 1986 Committee, I said that we were relaxed about the matter. I think that the Government may, in retrospect, have overdone it in terms of the amount of money that was spent. However, I well understand the long-term aim, and I support it. The Government were right to examine the long-term implications for the SERPS expenditure, and they proposed the scheme. In the 1986 Committee, I was certainly prepared to go along with the scheme. However, when we have details such as those contained in the Bill, I cannot understand what the Government are trying to do and why there should be such discrimination. It has worrying long-term implications for the review. We are told that the problem is temporary and that we are all bothering about nothing. We are given to understand that if we are a wee bit more patient, everything will suddenly become clear. I am old enough and long enough in the tooth——The hon. Gentleman does not look it.
I am older than I look.
I have heard such assurances before. They do not inspire me with any great confidence. Indeed, if I had been tempted to be confident, the Minister's sweeping dismissal a moment ago when she said that the review would be concluded "as soon as possible"—or whatever ministerial cliche she used—would have removed the temptation. The Minister was responding to a perfectly pertinent and important question from the hon. Member for Glasgow, Garscadden (Mr. Dewar). The Government must know roughly how long the process will take. Will it take months or years? Will the matter be dealt with by the end of the parliamentary year? This is an important question because folk have to make plans. It is necessary to be careful and get the details right, otherwise people's long-term pensions could be prejudiced. There is a great deal at stake. The amendments are important. My amendment was intended to be a probing amendment. I hope that the Minister will take the opportunity to allay some of our fears. As you can see, Mr. Lofthouse, the issues worry the whole Committee.4.15 pm
I should like to respond to the issues which worry the whole Committee. I can see that the matter has at least united the Opposition—at least such hon. Members as are present. I am overwhelmed by the turnout on the Liberal Benches in support of amendment No.1.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) was slightly confused in his request to clarify the timetables. He confused the timetable for the review of the rebate structure and age-related rebates with the regulation of personal pensions. In reply to the hon. Member for Glasgow, Garscadden (Mr. Dewar) on Second Reading, I said that we were committed to having the rebate structure in place by 1996, that we would have to work to that timetable and that for the time being we saw no reason to depart from that. I cannot go further than to reiterate that for the moment. The hon. Member for Roxburgh and Berwickshire confused that reply with the reply that I gave to the hon. Member for Newcastle-under-Lyme (Mrs. Golding) about the regulation of personal pensions. Those are two entirely different issues. I shall now speak to the two amendments. I am sorry if I repeat some of my remarks on Second Reading, but the arguments that I used then on why the 1 per cent. rebate is not extended to COMPS are the same as those which I shall use today. I hope to put them in a clearer form. The hon. Member for Roxburgh and Berwickshire will recall that in my reply on Second Reading I did not read out a prepared answer but responded to the extreme brevity of the hon. Member for Newcastle-under-Lyme with quite a marathon. Amendment No. 1 seeks to extend the 1 per cent. additional rebate to all members aged 30 and over of occupational schemes who qualify for the current 2 per cent. incentive. This will include both contracted-out salary-related and money purchase schemes. Amendment No. 3 appears to seek to extend the 1 per cent. addition to members aged 30 and over of all contracted-out money purchase schemes, regardless of whether they are currently entitled to the 2 per cent. incentive. I cannot accept either of the amendments for several reasons. That will be no surprise to hon. Members. Firstly, there is absolutely no purpose in extending the rebate to salary-related occupational schemes. The Government Actuary took full account of the cost to such schemes of providing the guaranteed minimum pension when recommending the new level of the contracted-out rebate appropriate from April 1993. He advised that 4·77 per cent. was the appropriate level. The then Secretary of State my right hon. Friend the Member for Braintree (Mr. Newton), who was in the Chamber a moment ago, accepted that advice, subject only to rounding it up to 4·8 per cent. Secondly, although I accept that there are some similarities between contracted-out money purchase schemes and personal pensions, there are also many significant differences. Those have been detailed a number of times during debates on the Bill, but I shall restate them. Contracted-out money purchase schemes are set up voluntarily by an employer to meet the needs of his work force. Personal pensions are a private arrangement between an individual and a pension provider. The employer is liable for the payment of minimum contributions into a contracted-out money purchase scheme but has no such liability with a personal pension. Contracted-out money purchase scheme members receive payments into their pension account on a regular monthly basis. Personal pension holders receive the minimum contribution from the Department after the end of the tax year, when their employer submits his annual return. That clearly affects the speed at which the investment builds up. The occupational scheme member has an advantage in that respect. The level of charges is generally lower for contracted-out money purchase schemes than for personal pensions—hence the economies of scale—and the employer will often help to meet them. Lastly, the additional cost of £60 million and £25 million that would arise from accepting amendments Nos. 1 and 3 respectively cannot be justified in the current climate. I cannot commend the amendments to the Committee, but I hope that hon. Members will be able to accept my reassurances that the 1 per cent. addition is a temporary arrangement and that we will undertake a full review of the contracted-out rebate structure. The review will also consider proposals for an age-related system for personal schemes, occupational pension schemes and for contracted-out money purchase schemes and will involve full consultation with all the interested parties.Perhaps the Minister will turn her attention to the pertinent question put by my hon. Friend the Member for Newcastle-under-Lyme (Mrs. Golding). As I understand it, COMPS benefited from the 2 per cent. incentive which will end in 1993. If that is so, presumably all the Minister's present arguments for opting them out of the 1 per cent. would have applied when the 2 per cent. incentive was introduced. Is she saying that that was an error then; if not, why not?
I suspect that the hon. Gentleman is not confused but is deliberately trying to confuse the issue. The 2 per cent. was an incentive to set up personal pensions and its success has been immense. As I have said many time, there are 5 million holders. It was an incentive to individuals and to companies to consider personal pensions rather than final salary-related schemes which, as the hon. Gentleman pointed out, are not available to many modest wage earners whose employment patterns do not suit them.
The 1 per cent. additional rebate is age related and is designed to deal with a problem. We should not oblige people who have opted for personal pensions to come back into SERPS merely because there would be a financial incentive for them to do so, when they might prefer the choice and flexibility of remaining in a personal pension plan. That is an advanced measure against our review of age-related benefits. We had to do that immediately in the interim, and it is related not to the incentive but to our review.Am I to understand from what the hon. Lady has said that she is strongly opposed to people opting back into SERPS from private pension plans—hence the 1 per cent.—but she sees no danger of discouraging people in COMPS?
I am not opposed to people returning to SERPS if they want to do so, but I am opposed to creating the conditions which more or less oblige them to do so when they would prefer the choice and flexibility of something else. For the reasons that I explained—the build up, the differences and the economies of scale—I do not believe that employers would be subject to the same disincentive. On that note, I ask the hon. Member for Newcastle-under-Lyme to consider withdrawing her amendment.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
We have had some interesting exchanges, and it would be fair to say that the amendments and the exchanges on Second Reading largely dealt with the implications of the Government's intentions and how the system is working rather than demonstrating root-and-branch opposition to the Bill. It is very much in that spirit that we shall continue the proceedings today.
It may come as a relief to the Under-Secretary to hear that I shall never accuse her of being timid; that is not the word that sprung immediately to my mind as I contemplated her highly personal style. However, we have managed to reduce the number of Parliamentary Private Secretaries in attendance from three to one.My hon. Friend the Member for Dorset, South (Mr. Bruce) is mine.
Well, that explains all. Loyalty beyond the call of duty has made the hon. Gentleman stay with us and, as the only Conservative Member here apart from those on the Government Front Bench, his presence should be recognised.
I should like to refer briefly to a passage of arms on Second Reading when the Under-Secretary accused Opposition Members of being "glum as owls". I must confess that owls have always seemed to me, at least in myth, wise birds and I have no great objection to being accused of being owl-like in that sense. On Second Reading there was a dispute about whether the Opposition were cheerful during the course of the uprating statement. At one point we had the slightly comic spectacle of both the Secretary of State and the Under-Secretary standing shoulder to shoulder at the Dispatch Box trying to respond to a point of information from myself. It is perhaps a minor matter, but it should be put on record that I had suggested that some of the briefing that had led to expectations of an unfortunate outcome from the uprating statement came from the Department. I referred to press reports of a speech that I understood had been made to the 1922 Committee. The Secretary of State jumped to the Dispatch Box and ultimately interrupted his own Under-Secretary to say that no such speech had been made and that he had never addressed the 1922 Committee. On the basis of that, some arguments were made on the validity of my arguments. I shall not spend any more time on this issue except to say that I was in error and I therefore offer a qualified apology to the Secretary of State. On 10 November an article appeared on the front page of The Times under the byline of Nicholas Wood and Jill Sherman, which stated:That all turned out to be nonsense and there was no formal speech to the 1922 Committee, but that suggestion was not nonsense in terms of what I said. Obviously, a lot of the disinformation came from the Secretary of State for his own purposes. Certainly there was a meeting with a group of Back Benchers on which the press had been briefed. I make that point because I rather object to the way in which the Secretary of State was anxious to deny a detail and to avoid dealing with the substance of the point raised. I do not think that that reflects great credit upon him. I could cite other examples of similar press notices, but I hope that I have made my point. However, I am sure that the Under-Secretary will remember that, on Second Reading, during that same intervention I referred to Conservative plans to tax invalidity benefit. She replied:"Peter Lilley, the social security secretary, last night warned Conservative MPs of tight curbs on state benefits as he sought to lower expectations in advance of the Chancellor's Autumn Statement. … Last night's meeting with a group of senior backbenchers was the social security secretary's way of starting a damage limitation exercise. In a sign of the sensitivity of the package, he will meet 120 MPs over the three days before he unveils the outcome of months of hard bargaining with the Treasury."
All I can say to the Under-Secretary, again, is that unless she wishes to rise to deny that, my clear understanding from the Secretary of State is that the Government intend to tax invalidity benefit as soon as they can overcome the practical problems that made it impossible to do so this year, clearly to the regret of the Secretary of State. On Second Reading, the Under-Secretary seemed to shelter behind a barrack-room lawyer's point about where speeches had been made in order to avoid the point that she found embarrassing. 4.30 pm My hon. Friend the Member for Newcastle-under-Lyme (Mrs. Golding) did us a service in moving the amendments to clause 1. Although the Under-Secretary may sail into battle and point out that the drafting is defective and that there would be unintended consequences—it would be extraordinary if there were not because Opposition Members must often deal with complicated subjects—the amendments make a point of principle. On those, the Under-Secretary was nowhere near as persuasive or effective as she wanted to be. There was some badinage about the fact that the concern was shared by an empty Committee, but the Under-Secretary will remember that it was expressed on Second Reading by the hon. Member for Havant (Mr. Willetts), who described the Government's decision as "odd". Although that is a mild term, it suggests a spirit of scepticism. I have something in common with the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) because I, too, took the trouble to re-read the arguments. I confess that I found them extremely unconvincing. Moreover, having listened to the Under-Secretary for the past 20 minutes, none of my doubts has been resolved, nor have I been swept away by the warm solidarity of her argument. Her arguments are set out in Hansard at columns 111–12 of the Second Reading debate. One of those arguments was about economies of scale. I understand that management charges liable on an occupational pension scheme—a COMP scheme—are likely to be spread more thinly and perhaps less damagingly than management charges liable on a personal pension scheme tailored for an individual and managed for him or her. However, it is not a significant factor, given the fact that those schemes benefited from the earlier 2 per cent. arrangement. I do not regard inflexibility about age as a major factor. Indeed, I do not see its significance at all. Clearly, someone on a COMP scheme will benefit at a set age, and that cannot be varied, but it does not impact on the financial argument which the Minister was advancing. The only argument that seemed to have any force concerned how the money came in. I understand that there is a difference because an approved private pension lump sum comes at the end of the year, whereas a COMP scheme makes payments throughout the year and that money can therefore be used as it builds up over a 12-month period. I am therefore not totally indifferent to the arguments which the Under-Secretary advanced, but I find it odd that the Government have decided to exclude COMP schemes, a decision that has caused irritation and disappointment to many in the industry. Another odd concept advanced by the Under-Secretary was that people should have a choice about whether they wish to opt back into SERPS but that it should not be a choice in which there is a clear balance of advantage in favour of SERPS. In a sense, choice is almost meaningless here because it will be entirely dictated by financial advantage. I doubt whether many people will say, "My adviser has told me that there is a clear advantage in returning to SERPS but, for reasons of principle and commitment, I shall carry the financial penalty of not taking that advice". To some extent, the market is being rigged against SERPS but also against COMP schemes. That is an unfortunate game for the Minister to be playing. Although that is no justification for urging my hon. Friends to vote against the clause, it remains an unsatisfactory feature of this provision. I accept that it is only temporary, but it is important that we see as soon as possible the arrangements which the Government intend to introduce for age-related contracting-out principles in 1996. The Minister said—I am sure that it is true—that if we are to have these arrangements in April 1996, there will be a timetable from which we must work back. As I am not sufficiently conversant with the mechanics, perhaps the Minister will say when it would have to be clear what the intentions were so that there could be legislation to introduce the new scheme. It would be helpful to work back from 1996 on the assumption that the Government will adopt these arrangements. The Minister must recognise that there are genuine anxieties about the way in which personal pension plans are sold and the way in which they are managed. I do not assume that potentially there are 5 million tragedies in the sense that everyone will be dissatisfied at the end of the day. I do not think that my hon. Friend the Member for Bradford, North (Mr. Rooney) suggested that that would be the position. Undoubtedly, however, there will be some disappointments and some anxieties that perhaps could be avoided. I was interested in an article that appeared yesterday in the Independent on Sunday under the byline of Maria Scott. It dealt with some figures that had been produced by the National Provident Institution, which is one of the well-known providers. I am told that it is responsible for 340,000 personal pension holders. Clearly the NPI has a significant holding in the market, if that is the right way of putting it. It is concerned—this is the journalist's gloss, but I am sure that it is accurate—that"We may judge the accuracy of the second observation by the hon. Member for Garscadden by the accuracy of that one."—[Official Report, 30 November 1992; Vol. 215, c. 110.]—my observation about the meeting.
The company has found"most people with personal pensions will be sorely disappointed by the income that they receive in retirement unless they increase their contributions, according to NPI, one of the country's largest pension providers."
The Minister may take the view that those policyholders are merely reaping the whirlwind—in other words, if they are improvident they cannot complain at the end of the day. It is interesting, however, that NPI is saying that something is going wrong—possibly with people's expectations and perhaps with people's awareness of how personal pension schemes operate, or possibly with the continuing advice that they receive from those who initially sell them the policies. The figures are not entirely clear to me, but NPI suggests that a 40-year-old man"that the average contribution is £78 a month and that fewer than 20 per cent. of policyholders are increasing their contributions on a regular basis."
I presume that NPI anticipates that during the build-up of the pension plan there will be 5·5 per cent. inflation. It appears that the company assumes that the growth rate of the fund will be about 3 per cent., which seems to be a reasonably generous estimate. Many plans will fall short of that. The Committee will understand that with an expectation of £104 a month there will be a small increase in real terms at the end of the 20 years. I should say that there is a lump-sum calculation of £4,540 in addition—[HON. MEMBERS: "Ah".] I am not trying to mislead the Committee. I accept that it is important to make it clear that there is a lump sum. The position remains, however, that one of the most significant pension providers is saying that there will be widespread disappointment. I am sure that it does not conduct its business irresponsibly, and I do not suggest otherwise. The company points to a general malaise, which is perhaps a useful counterbalance to the rather bullish statements that we sometimes hear. The hon. Member for Havant on Second Reading made an unashamedly ideological case for the virtues of private pension provision as against those of SERPS and about the need to weight the financial package in that direction. The point is, how good will a private pension scheme be? The Minister will say that there is no answer to that and that it depends entirely on how successfully the funds are managed. But people do not realise that; for many it is a blind buy—they do not know what they are buying and they go ahead in a spirit of optimism but with little detailed knowledge of the likely outcome. There are uncertainties in SERPS, too, as we saw in 1986 when the Government, for reasons that we challenge but can at least understand, concluded that the SERPS package had to be radically restructured, to the disadvantage of those who were to get their top-up pension from the SERPS scheme. There are also uncertainties in the private pension sector, and the Committee should not ignore them. In this respect, I agreed with my hon. Friend the Member for Bradford, North. I saw the same figure in an article in The Guardian on 28 November. It referred to the fact that no one earning less than £9,000 should be advised to opt out of SERPS or go into a personal pension plan. That point is made by Legal and General—I suspect, by Mr. Ron Spill, a respected figure. Almost everyone in the industry to whom I have talked has expressed grave doubts about putting people into personal pension plans if their incomes are less than £10,000 a year. The Minister may remember her remarks on Second Reading, when she said that"planning to retire at 60 and contributing £100 a month to a personal pension could expect to receive a monthly pension of £104 (after allowing for 5·5 per cent. inflation)".
There may be occasions when it is sensible to take out a plan at that level of income, but many people would be worried about whether those on that income would find plans a good buy. I confess that I was surprised by how low the hon. Lady's figure was, and I was somewhat alarmed by what she had to say. It seemed to me to highlight the need for the sort of regulation which, perhaps clumsily and ineffectually, we were trying to achieve today in our amendment. It is worth making these points, even though they may irritate the Minister. On Second Reading, she spoke of viability, reliability and safeguards, and the need for all three. Of course I agree. They are certainly important and no one would argue about them. I am, however, a little concerned about the pace of progress on what seems to me the Minister's approach to these matters. On Second Reading there was some talk about occupational pensions and the release of the Goode committee's report in mid-1993. I do not intend to go into that here, but I shall mention what the Minister said so as to argue by analogy:"The average wage of a person taking out a personal pension is £9,750."—[Official Report, 30 November 1992; Vol. 215, c. Ill.]
—that is, the importance of not tying up occupational regulations too tightly."The Government are fully seized of that issue"
Of course there must be a balance between all these considerations, but I am alarmed by the Minister's phraseology, given what has happened recently to occupational pensions—but that is a subject for another debate on another occasion. When we come to debate the balance that must be struck between the interests of those who sell pensions and the interests of those who buy them—with all their disadvantages of not knowing about the uncertainties involved—I hope that the Minister will then agree that there is a strong argument in favour of regulation and of building in as many effective safeguards as possible. 4.45 pm This whole problem must be dealt with urgently. I recognise that the Investment Management Regulatory Organisation, the Life Assurance and Unit Trust Regulatory Organisation and the other regulatory bodies have a role to play—doubtless their recommendations and advice will be valuable—but I also hope that when the Government finally make up their mind following representations from the industry there will be a strong prejudice in favour of protecting those who pay their contributions and who will have to rely on the pensions that they are buying, which may turn out to be rather more modest than they had expected or hoped. When the Under-Secretary finally emerges from the conference room and the consultation process, I hope that we will be satisfied. Her response—I thought it florid and had a touch of pomposity—when I asked about the timetable did not greatly encourage me. We shall be watching developments carefully, but for the moment I shall not recommend opposing the clause."When the Goode Committee reports we shall take account of what it says and seek to achieve a balance between keeping the confidence of the pensions industries and the confidence in pensions, however provided, of people who take them out, and ensuring that employers do not find that they are so over-regulated that it proves a disincentive to them to set up schemes."—[Official Report, 30 November 1992; Vol. 215, c. 114.]
I am one of only three Members present who are veterans of the 1986 Social Security.Bill Committee—and a pretty miserable affair it was too, as I think that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) will confirm. In that Committee the Government turned their back on a great deal of social security legislation going back 40 years; it marked the beginning of the end of many aspects of the welfare state. The hon. Member for Langbaurgh (M r. Bates) need not look too puzzled. This Prime Minister ended single payments and the death grant and introduced the social fund and a great many other horrific developments. [Interruption.] Yes, this does not have much to do with the Bill—except that there is a link in the form of pension provision. The 1986 Act was designed to encourage the promotion of personal private pension schemes at the expense of the state earnings-related pension scheme. The linking factor is the Government's general approach, which is to reduce the real value of the state old-age pension.
I am unhappy about clause 1 for several reasons. They have to do with the value and security of pensions, and our fears about them. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) mentioned the portrayal of the Secretary of State during the run-up to the annual uprating statement. I thought that the right hon. Gentleman played a blinder. He is not here for me to congratulate him today—he was in such a bad mood last week that I am glad about that—but I should be grateful if the Under-Secretary passed on my congratulations to him. He led everyone up the garden path and into believing that there would be a massive cut in benefits, knowing full well that there would not be. At the same time, he got away with yet another year of defrauding old-age pensioners, by refusing to restore the link with earnings which was broken in 1980. Because the Secretary of State was in such a bad mood last week, he did not bother to listen to me when I said that the Labour Government's method of dealing with state old-age pensions was to link them either to the retail prices index increase or to the increase in average earnings, whichever was the higher. So, when the Minister sees the Secretary of State later to report to him on her performance today, I should be pleased if she would pass on my remarks. She should also ask him to come to the House in a better mood next time. We do not want him to bring his bad temper to the Select Committee on Social Security, where we will question him on Wednesday morning. I note that you are fidgeting, Mr. Lofthouse, so I shall return to the Bill. I have some questions about portable pension schemes and private personal schemes because there is a serious question mark over their security. The Minister made a fair point when she said that at this stage it is impossible to judge how many schemes are unlikely to be able to pay out in full what they have guaranteed or contracted to pay to the contributor at retirement age. However, she should be able to tell us the extent of monitoring and sampling by her Department on the performance of the schemes. A serious problem seems to be developing. In theory, many individual schemes have been developed, although there are patterns, and the system to monitor their performance or income from investments is totally inadequate. What sort of problems will arise in future? I ask that question because I sat through many months of investigations of company pension schemes on the Select Committee which is still examining the problems of such schemes. Those investigations revealed the inability of the public regulatory bodies and contributors to know what was happening. There was also evidence of insufficient training to enable people to understand the technicalities. That can be remedied to some extent in occupational or company schemes through a better system of election or the appointment of experts, but that does not necessarily apply to personal schemes and it is difficult to see how it could. Perhaps the Minister will deal with that in her winding-up speech. We must examine the hidden costs. The Conservative party is obsessed with developing and increasing aspects of the private welfare state for those who contribute. There is a philosophical difference between us on that. We believe in community provision with guarantees and Conservatives believe in a market economy—which has many losers, because in a competition some people win but the majority lose. The Conservatives are into removing safety nets in a big way. The Government have not told us the hidden costs to the rest of the community of these private pension schemes. Those costs are in lost national insurance contributions and lost income tax. Today's "Enterprise Money Mail" in the Daily Mail states that tax relief on pension schemes is currently running at £9 billion a year. I would not normally quote the Daily Mail either in the House or elsewhere, but I do so on this occasion partly because the newspaper was given to me by my hon. Friend the Member for Bradford, North (Mr. Rooney) and also because that was one of the few newspapers that was prepared to publish earlier than others what was going on in the Maxwell pension fund. That article shows that tax relief on pension schemes costs the rest of the community a great deal of money. That ranges wider than the tax relief on the schemes contained in the Bill, but it is a high cost. I should like to ask about the running of the schemes and investment. A person who enters a pension scheme presumably signs a contract. One hopes that he will deal with a reputable person and the scheme will work out properly. There are insufficient guarantees about that and I understand that there is no requirement for the person to be told the contents of the investment portfolio and that information is difficult to obtain. In a company or occupational scheme, which would have an investment committee, it should be possible to find out where the money has gone; although in the case of the Maxwell and Mirror Group pension funds it was almost impossible to find out where the money had gone—much of it has probably gone for good. A person who has ethical concerns about investment in the past or present in South Africa or in the arms industry will find it difficult to determine where his money has gone if the money has been invested in some other financial institution or trust. The state earnings-related pension scheme was introduced by a Labour Government as a way to improve the lot of people in retirement. It was a good step and a progressive idea. However, it was badly shortchanged by the Government in 1986 when they decided to accept actuarial advice. Instead of reflecting on how they could improve the scheme, they diminished it as part of their grand plan to increase the influence of the private pensions industry. I deeply regret that. I should like to see a pension regime that gave a much higher basic state old-age pension, real democracy in the running of occupational schemes and information for those who put their money into private personal schemes, which I do not think are necessarily secure in the long run.I should like to ask some detailed questions. The clause introduces new provisions to the 1986 Act, and some of them provide a regulation-making power to prescribe how an earner's age is to be verified. How can that be done other than by asking for a birth certificate? Why do we need a regulation-making power to stipulate that? Will the regulation-making procedure be affirmative or negative?
What are the financial effects of the clause? The rubric to the Bill says that clause I will cost the national insurance fund about £165 million annually from 1994–95. Past estimates have been slightly lower than the actual cost. Will the Minister tell us generally how that figure is arrived at? More puzzling is the fact that clause 5 (3) states:That smells of retrospection and perhaps the Minister will tell us about it. The administrative cost for the provision of clause 1 is £6 million, which seems to be a great deal. I do not know the percentage currently used to administer some of these benefits, but it must be about 3 per cent. My arithmetic is not up to it and I do not have a calculator, but £6 million sounds rather high for deploying an annual amount of £165 million. I may have that wrong but I ask the question innocently, as is my wont. If the answer cannot be given now, I should be quite happy——"Section 1 (3) of this Act shall he deemed always to have had effect."
rose——
It appears that I should not be happy to receive a letter about the matter; the hon. Member for Glasgow, Garscadden (Mr. Dewar) is about to tell me why I need answers to those questions now.
I was speculating, and I thought that I might put my speculation to the hon. Gentleman. Is it not the case that the £6 million is a cumulative total, referring to previous years when the payments should have been made but were not, and that is why it is retrospective in effect? What we are seeing here is the Minister in debt and looking for authority to pay her debts.
The hon. Gentleman is much more suspicious about such matters than I am. I would not dream of presuming any such thing until I was told differently by the Minister, so I await with eager anticipation the answer to the question, which I hope is arriving. The piece of paper that is arriving for the Minister looks more like a bus pass.
A time scale for the review would be helpful, so I make this third plea for one. I understand that, when we debated earlier amendments, I may have given the impression that I had confused the two reviews that are under way. The temporary nature of this clause should be known to the Government. Therefore, it should be vouchsafed to the Committee so that we can make proper and successful progress in the Committee stage.
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I must correct an earlier remark. I meant to refer to the Equitable Life Assurance Society.
Does the Minister recognise that many personal pension schemes are unit linked and where persons are in employment with a fixed retirement date, they are in the hands of fate, because they are badly affected by how the unit market stands on that day? Thank goodness, black Monday does not arrive every week, but anybody who was unlucky enough to retire on that day with such a scheme would have found himself under a considerable disadvantage compared with what would have been the position if he had retired on the previous Friday. Given the myriad of statistics that are produced on the performance of pensions, is it not incumbent on the Department to realise that it would make sense to have a standardised form of performance, to be produced by the Department on an annual basis? That would be better than people being subjected to empty promises, many from companies that have been in existence for less than five years. I have another question in a similar vein. How much will what we are talking about today—particularly with this magic date of 1996—be held back until decisions on the equalisation of retirement ages are arrived at'' What advice is being given, particularly to women under the age of 30 today, on which options to go for and what sort of purchase schemes they should be looking at with a view to the retirement age in their company, which could be anything from 55 to 70?Many points have been raised and I shall endeavour to address all of them, including those raised by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood)—my brain had caught up with me by the time that he sat down.
The debate was opened by the hon. Member for Glasgow Garscadden (Mr. Dewar) who said that neither he nor his colleagues had any objection to being compared to owls because owls were wise creatures. The most significant characteristic of an owl, and one that is well attested, is that it does not see terribly well in daylight. Owls are renowned for spending their time whizzing around in the dark hooting mournfully. That sums up the activities of the Opposition in respect of this and other Government Bills. I note their willingness to be compared to owls and I shall make sure that this comparison is widely known. The hon. Gentleman then attacked my right hon. Friend the Secretary of State. He conceded that my right hon. Friend had not addressed the 1922 Committee, but in support of his contention that my right hon. Friend had addressed a group of Tory Back Benchers, he quoted from The Times. The hon. Gentleman spoke about age earlier, and we know that he has been around this place for a long time. I cannot believe that he has not yet learnt that not everything that appears in the newspapers is 100 per cent. accurate. All those scare stories that came out before the autumn statement originated either from the Opposition or from the press, for their own ends, not from my right hon. Friend. The hon. Gentleman also spoke about our intention to tax invalidity benefit, although I have no idea what the subject has to do with the Bill. On Second Reading, my right hon. Friend and I made it clear, as we and others have done on innumerable occasions, that the taxation of invalidity benefit is essentially a matter for the Chancellor of the Exchequer, as are all taxation matters. To quote direct from my right hon. Friend on another occasion, and we all speak with one voice,There is nothing new about that. All that was new was that the Opposition and the press decided that it would be fun to start a rumour that we were to tax the benefit this year."The hon. Gentleman knows that in the literature that recipients of this benefit receive there is a statement that it has been our long-standing intention to bring that benefit into tax, but only when the difficulties of doing so can be overcome."—[Official Report, 12 November 1992; Vol. 213, c. 1020.]
rose——
The hon. Gentleman is dying to intervene, but I hope that his intervention will show some of the wisdom of the bird with which he does not object to being compared.
I am not dying—I hope that that news is not too disappointing for the hon. Lady. She and I should perhaps call a truce on animal parallels because we are wandering into dangerous territory.
What kind of animal am I?
That is exactly what the hon. Lady should not tempt me to say.
Does the hon. Lady recognise that an interesting point about the exchange on invalidity benefit in the Second Reading debate was that she refused to deal with the point, and avoided it, using the technicality of the 1922 Committee as a reason for doing so? I know that the hon. Lady will tell me that she does not discuss leaked documents, but she must be aware of the fact that there is substantial evidence about detailed preparation for the taxation of invalidity benefit. Within what time scale is this manifesto promise of the Conservative party likely to be implemented?Order. Before the Minister replies, let me point out that I cannot see what that issue has to do with the Committee stage of the Bill. I suggest that it is not further pursued by hon. Members.
In deference to your ruling, Dame Janet, I shall not refer to any leaked documents, or indeed to any other form of stolen property. I shall, as you rightly urge us, move on to the detailed points raised in the debate.
The hon. Member for Islington, North (Mr. Corbyn) and, as the hon. Member for Garscadden rightly reminded us, Conservative Members have expressed concern, both on Second Reading and today, that personal pensions should be properly regulated. I made it clear on Second Reading that I recognised that that concern was shared and that I did not underestimate the importance of getting the regulations right. Nor do I underestimate the importance of addressing all the points that were raised by Labour Members about the validity of personal pension schemes, about the amount of information that is given at the time of sale of such schemes, and its accuracy. However, like occupational schemes, personal pension schemes depend on investment. In response to the point made by the hon. Member for Islington, North, I can say that the Occupational Pensions Board has not had to revoke a certificate from a personal pension scheme because the scheme could not give it an assurance that it could cover the guaranteed minimum that it stated that it would produce and that it was obliged to produce; there is that monitoring. I also fully understand the point that if one starts calculations on various bases, one can produce a scenario that might show that a pension will not be worth what it was originally thought that it would be worth. All pensions, however, are dependent on investment. It is impossible to judge what will be the case in 20 years' time on the basis of a short-term trend or on information immediately available. We are certainly not going to go into the business of trying to guarantee or underwrite given levels of investment, but that is not unique to personal pensions. I do not want our 5 million personal pension holders to assume from today's debate that all is not well.As the Minister presumably knows, examination of occupational pension schemes by the Occupational Pensions Board normally relates to 20 per cent. of the capital. The board verifies whether that is in order, which is not the same as verifying the whole scheme. To what extent does verification go into personal schemes?
Does the Minister agree that one way of enhancing the security of both company and personal pension schemes would be to introduce a guaranteed level of gilt-edged investments within them?Certain minima operate for both occupational and personal pension schemes. In neither case is there a maximum or a guarantee at the end: there cannot be, simply because of the way in which investment works. I take the hon. Gentleman's point that it might be possible to produce a better sort of investment by insisting that it contained a gilt element of X per cent., and I hope that investments would be prudentially handled in that way. Nevertheless, I do not yet see a case for insisting that any investment organisation follow a particular path that could be laid down and curtailed.
Having said that, I shall consider what the hon. Gentleman has said. As I stated earlier, we are reviewing the whole position. I shall find out whether there is any practical way of implementing the hon. Gentleman's suggestion and let him know the outcome of my deliberations. I hope that that is acceptable to him. The hon. Member for Garscadden raised the question of income levels. He said that it probably did not pay people to take out personal pensions if they were earning less than £9,000 a year; he then upped the figure to £10,000, on the basis of discussions in which he had engaged. The essence of his argument, and that of the hon. Member for Islington, North, was that there was an income level below which it did not pay people to opt into personal pensions, and it was implied that people on incomes below that level were doing so because they had been badly advised. The technical annex to the 1986 White Paper made it clear that people with very low earnings might not be better off with personal pensions. However, the level of income is crucially dependent on the level of the return on their investments. As all pensions are a long-term investment, decisions should not be made on the basis of an isolated year or other short period. The warning is there; on the other hand, if there seems to be an investment pattern that will produce returns——I am sorry to interrupt, but I am genuinely interested in this point. I entirely accept that there are many individual exceptions, and that people must examine their personal circumstances and take advice. Let me remind the Minister, however, of the quotation from Legal and General which I gave earlier. I think that it is a fairly broad rule of thumb that those in the £9,000 or £10,000 income category should consider the balance of advantage carefully before opting into a private pension scheme. In the light of that, is the Minister not surprised by the figure of £9,750, which is given as the average earnings of people with private pension plans?
5.15 pm
As the hon. Gentleman has himself pointed out, individual circumstances will vary from the norm. I am not wholly surprised, given that it was always clear that, in introducing personal pensions, we were endeavouring to benefit people on fairly modest wages. The technical annex makes clear the need to be more careful at that point, but being more careful is not the same as assuming that in no circumstances should a personal pension be taken on.
I am sure that it will not please the hon. Member for Roxburgh and Berwickshire very much to learn that the regulations are negative procedures. As the hon. Member for Garscadden said—I almost used the word "rumbled"—the £6 million is spread over six years, from 1988–89 to 1993–94, providing an average of £1 million a year. It is just above 0·5 per cent., not just above 3 per cent. It is right that the administrative expenses associated with payments from the fund should be met from the fund; the clause simply writes in a perfectly normal provision for the meeting of such expenses. The annual cost of £165 million was based on the payment of an additional 1 per cent. to 2 million personal pension holders. The hon. Member for Roxburgh and Berwickshire also mentioned the need for a regulation-making power to verify dates of birth. In the vast majority of cases, inquiries about dates of birth should produce no difficulties; the information will already be held by the Department. It is possible that, in a few cases, the Department will not hold those details and the individual will be unable to provide a birth certificate or other verification. In those few cases, the adjudication officer will have to make a determination on the basis of the best evidence available.I asked the Minister earlier about the disclosure of information to the holders of personal schemes: I asked her how they could find out what was happening to their investments and where the money was invested. The money is often put into other trusts, which makes it very difficult for the individual to follow the normal rules governing disclosure, which are implicit in all the regulations concerning occupational and company pension schemes.
The Government—and, I am sure, the regulators—certainly want people to have access to regular information about what is happening to their schemes, as and when they require it. That already applies to those who invest in occupational pensions. There should be no difficulty about providing information about the state of their particular pot of gold—[Interruption.] Let me tell hon. Members who have poured scorn on personal pensions—at one point, they almost seemed to pour scorn on occupational pensions as well—that, following the measures that we have introduced, nearly 70 per cent. of people retire with occupational pensions. Moreover, the average value of their pensions is now nearly as great as that of the state pension. We are vastly increasing pensioner incomes. A certain number of people have always been excluded because occupational pensions were not suitable for them. The Bill is designed to ensure that they have exactly the same advantages as people with occupational pensions.
I am amazed at the scorn that is continually poured on the provision of greater choice, greater flexibility and greater incomes in retirement for ever more people.Question put and agreed to.
Clause I ordered to stand part of the Bill.
Clause 2
Payments Into National Insurance Fund Out Of Money Provided By Parliament
I beg to move amendment No. 4, in page 2, line 14, leave out from 'determine' to end of line 16.
With this we may take amendment No. 5, in page 2, line 17 leave out subsection (3).
Clause 2 provides for Treasury grants to the national insurance fund. As the Government Actuary puts it,
The amendment attempts to probe the thinking, assumptions and calculations behind the figures. One difficulty we face is that of having no firm actuarial statement for 1994–95 and, because of that, we are limited to approaching the matter through the 1993–94 figures. For 1993–94, the maximum Treasury grant to the national insurance fund is set at 20 per cent. of the estimated benefit expenditure. Will that be sufficient to achieve the Government's objective of ensuring that the estimated balance in the fund at the end of the year equals one-sixth of benefit expenditure? The Government Actuary has reported that, on certain assumptions, the figure needed will be 19·6 per cent. The assumptions are extremely important in assessing the whole operation, but what are they? I quote from paragraph 10 of the Government Actuary's report, Cm. 2097, which states:"The amount of such payments will have regard to the expenditure of the Fund in future and will be limited to a specified maximum percentage of estimated benefit expenditure in the relevant financial year. For 1993–94 this maximum is set at 20 per cent. For 1994–95 and later financial years, the prescribed percentage may be amended by the Secretary of State with the consent of the Treasury but will not exceed 17 per cent."
not merely given but "instructed"—"The income from contributions and the expenditure on benefits in the remainder of 1992/93 and 1993/94 will depend inter alia on the level of unemployment and the rate of increase of earnings. In accordance with the normal practice, working assumptions have been given to me by the Government in regard to these factors. The assumptions I have been instructed to use"—
"for the purpose of the above estimates were set out in the following terms in the Chancellor of the Exchequer's Autumn statement:
[1] the number of the unemployed [Great Britain] averages 2·74 million in 1992/93 and 2·8 million in 1993/94;
Those figures form the basis of the Government Actuary's assumptions. They are interesting and very revealing—it is no wonder that the junior Minister ducked, dived, dodged and weaved and resorted to abuse when my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), who is very sensitive, shy, retiring and easily hurt, asked her whether she was confident that the forecast of 2·8 million in 1993–94 would be held. Instead of coming clean and admitting that she was stuck with the figures because they were part of the autumn statement, she said:[2] the increase in average earnings on a year earlier is 5¼ per cent. in 1992/93 and 5 per cent. in 1993/94."
Fancy blaming the Government Actuary for the Chancellor of the Exchequer's actions! What a nerve! No wonder she did not want to answer my hon. Friend the Member for Garscadden."Our job is not to second-guess the Government Actuary but to respond to him."—[Ofacial Report, 30 November 1992; Vol. 215, c. 107.]
My hon. Friend the Member for Newcastle-under-Lyme (Mrs. Golding) makes an extremely valuable point. The Bill hides an attempt to control the independence of the Government Actuary when he makes rational assessments of the future. The Government have never forgiven him for the way in which he exposed their spending projections and proved the unviability of some of their proposals.
That is a valid point. The Actuary is not merely given information but instructed to make his assessments on the basis of Government figures.
However, it is possible that the estimates may prove to be correct—by the laws of chance the Chancellor of the Exchequer must get something right sooner or later. I am sure that my hon. Friend the Member for Islington, North (Mr. Corbyn) will concede that. Very few people have confidence in the Government's estimate of unemployment, which has been forced on the Actuary. If unemployment is higher than estimated, the cost of benefits will go up accordingly. if the estimates of the increase in earnings do not rise as much as predicted, the contribution income will be so much lower. Do the Government believe that, despite the public sector wage freeze, there will be a 5 per cent. increase in earnings in 1994, which is the figure that the Government have forced on the Actuary? Will the Minister remind us how the figure has been calculated? If unemployment is above 2·8 million and the increase in earnings is below 5 per cent., the Treasury grant required would be greater than 19·6 per cent. The Actuary himself refers to the uncertainty about the future level of unemployment and increases in earnings. If the Treasury grant were greater than 20 per cent., what action would the Government take? The figure is questionable but it is at least based on published figures. What of the reduced figure of 17 per cent. for 1994–95 and subsequent years? How was that figure reached? What are the estimates for unemployment and earnings? We need to know such figures before we proceed. Surely the figures were not produced out of a hat in the Treasury. If they were, the Minister for Social Security and Disabled People should admit it. If they were not, he should tell us how they were arrived at.We are discussing two amendments and if they were accepted, I think that hon. Members would accept that they would mean that from 1994–95 no maximum would apply to the grant which my right hon. Friend the Chancellor of the Exchequer could determine to draw from the money provided by Parliament and into the national insurance fund. I believe that the issue would be better discussed when we debate the next group of amendments dealing with the rules that apply to the Government Actuary or his deputy and the assumption that he is allowed to make.
I have done some research and, as far as I can ascertain, the establishment of the rule about the assumptions which the Government Actuary and his department—let us put them together in this case—go back to 1945 and have been pursued by successive Governments since then. That means that there is a sensible rule that standard assumptions across Government are practical and understandable by the public and the specialists involved. In this case, the Government Actuary uses the same assumptions as the Treasury about future policy. I hasten to say that the assumptions are not forecasts—they are, in essence, working assumptions which are essential. It would be a receipt for chaos if different arms of Government were to make different working assumptions, and the most sensible——rose——
If I may finish the sentence I shall of course give way—perhaps I shall even anticipate the hon. Gentleman.
All types of assumptions are made, not all of which turn out to be correct and many vary in one direction or another, but it would make sense to have a common set of assumptions for the purposes that we are discussing.I accept that, but perhaps the Minister will say a word or two on behalf of the Chancellor—I know that the Government speak with one voice so I can invite the Minister to deal with this issue. A 5 per cent. increase in earnings between 1992–93 and 1993–94 is a rather puzzling figure in view of the Government's public sector pay policy. Surely that should have been taken into account and an adjustment made.
I do not accept that. The assumptions are made a number of years ahead but they are reviewed annually and new assumptions made. It is most important that there is a common set of figures on which all those involved can work. We are sometimes wrong and sometimes right and there will of course be variations. I repeat the point, which is broadly accepted by Opposition Front-Bench Members, that the value of having a set of common assumptions outweighs any shortcomings of the system.
5.30 pm
Was the 5 per cent. assumption made before or after the public sector pay policy was devised? May I tease out a little more the Minister's idea of the difference between an assumption and an estimate? Have I understood correctly that one is false and one is true?
I am not going to be drawn into becoming a Treasury Minister at the Dispatch Box. I am talking not about estimates or assumptions generally, but about assumptions that are read in across the board of public expenditure assumptions for the years ahead as against firm forecasts, which are wholly different. We all know how many different forecasts are made from different areas, not only in Government, but outside.
rose——
I will return to the main thrust of what I was saying rather than get bogged down on this point as I am sure that the Committee wants to come to a decision on the amendment and on the clause. The main thrust of the amendment was not assumptions, which we shall discuss when dealing with another amendment, but the Opposition's concern, which I well understand and which was expressed on Second Reading, that if the outturn is different from the planning assumptions underlying the decision to set the maximum for the grant at 17 per cent. for successive years, it will not be possible to keep the fund in balance. I welcome the concern of Opposition Front-Bench Members and I understand their wish to press that concern by means of the amendment. I hope that I can ensure that I set their minds at rest.
On Second Reading, the hon. Member for Glasgow, Garscadden (Mr. Dewar) drew attention to the high level of grant assumed for 1993–94 by the Government Actuary which, at 19·6 per cent., is very close to the maximum of 20 per cent. for that year, as we all recognise. My right hon. Friend the Secretary of State pointed out in that debate that the level is high in 1993–94 because of the need to make up ground lost by the fund in 1992–93. The Committee will be aware that the Government Actuary recommends a prudential minimum balance for the national insurance fund of around two months' of benefit expenditure. A Treasury grant of up to 20 per cent. aims to ensure that the prudential minimum is maintained throughout 1993–94, but in the event that the outturn is different from the assumptions, the figure of £6·5 billion, for which we have planned as the end year balance for that year, provides in my view and in the view of most people an entirely adequate safety margin which will prevent the fund from exhausting its resources. That is the purpose of setting the figure as we have. I believe that it protects the fund and provides an ample cushion against any exigencies. Looking beyond 1993–94, it is obviously more difficult to see where we will be. The potential shortfall in the fund should be considerably less than the amount that we need to make up next year—well below 17 per cent. of annual benefit expenditure. The purpose of the grant in future years is to provide some flexibility in the management of the fund and not to guarantee its solvency under all conceivable circumstances. It must be recognised that Parliament does not provide a bottomless pit of money on which my right hon. Friend the Secretary of State can draw. We believe in the principle that an overall limit should be set on the Treasury grant, just as it was set in the days of the old Treasury supplement, which is sensible and prudent. I hope that I have been able to assure Opposition Members that the ceiling that we propose for the amount of grant for the immediately following year and for successive years is sensible and prudent. It can, of course, be adjusted if needed. I do not believe that we shall have to return to it.I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment No. 6, in page 2, line 22. leave out
'or the Deputy Government Actuary'.
With this, it will be convenient to take the following amendments: No. 7, in page 2, line 22, after 'Actuary' insert
'on the basis of such assumptions as seem appropriate to him'.
No. 8, in page 2, line 23, leave out from first 'be' to second 'the'.
We have already had a preliminary canter round part of this course in the past few minutes. The amendment is inevitably connected with the previous group. The amendment goes back to the vexed question about the duties of the Government Actuary and the assumptions on which he works. The key amendment is amendment No. 7. Clause 2 suggests that "'estimated benefit expenditure—means
We seek to add the words:"the amount estimated by the Government Actuary".
We seek to charge the Government Actuary with taking on board the proper basis on which to make forecasts rather than taking instructions from the Treasury. I understand that the Minister is likely to say that Government Departments must work on the same basis and must speak with one voice, and that that applies to the Government Actuary as certainly as it applies to the Under-Secretary of State. The Minister's argument may be superficially plausible. However, there is a public interest, which I pray in aid, in having forecasts that are plausible and which can be taken at face value as genuine attempts to predict what will happen. I realise that the Government are bound to insist that the projection is 2·8 million for the seasonally adjusted unemployment figure in the coming year because that was the figure in the autumn statement. However, it is not unfair to say that if I and the Minister were sitting over a cup of coffee in the Smoking Room—an unlikely scene—[Laughter.] I did not say which aspect of the scene was unlikely. I leave it at that. In those circumstances, the Minister and I would agree that there is no reasonable prospect of the seasonally adjusted unemployment figure for next year being down at 2·8 million. Most forecasters are looking at a seasonally adjusted figure of about 3·2 million and some have suggested more alarming scenarios. I am not in the business of spreading dissension and dismay in Government ranks. I am prepared to assume that the figure may be around 3·2 million. If the figure is 3·2 million, the whole arithmetic of the national insurance fund will be affected. To that argument can be added the other point made in the past few minutes—the assumption that earnings between 1992–93 and 1993–94 will rise by 5 per cent. If that happens, it will be a considerable defeat for the Chancellor of the Exchequer and for the Government as a whole as they are clearly looking for a very low round of wage settlements and are taking energetic steps to ensure that that occurs, at least in the public sector over which, as employer and paymaster, they have some control. I protest mildly to the Minister that there is a certain unreality about his defence. Although he shows admirable loyalty to the Chancellor, he does no great service to the compilations on which we have to consider policy and to the projections of what is likely to happen in the national insurance fund. I accept that the Minister is anxious to be helpful. He does not believe in the form of timidity practised by his colleague the Under-Secretary of State in her exchanges. The hon. Lady sometimes does herself an injustice because there is some evidence that she has a romantic side of her temperament——"on the basis of such assumptions as seem appropriate to him."
What evidence?
There is some evidence. I cannot go into that. I am spluttering—[Laughter.] I am spluttering with the excitement of it all. I have been following with great interest the hon. Lady's dealings with the present crisis in the Church of England. In her style and stance, she has taken a rather romantic approach of High Church principle. In some of the reference books that we occasionally look at to while away our time, I notice that she lists as her principal interest research into the escape of Charles II after the battle of Worcester. That certainly suggests a romantic turn of mind. Sometimes the hon. Lady does herself little good by adopting the somewhat confrontational style that she affects—and I use the word affects——
Order. The hon. Gentleman will not do himself much good if he does not come to the point.
The material that I was dealing with was probably considerably more interesting than the arithmetic of the national insurance fund.
That is not the Chair's view.
I understand your stern duty, Dame Janet, to drive us back to the national insurance fund.
I hope that the Minister for Social Security and Disabled People will deal with my point because there was a certain reluctance to do that on Second Reading. The Under-Secretary of State complained—and I can use that term fairly—that I raised the point no fewer than three times. Indeed I did and I did that because I strongly suspected that I was not going to get a satisfactory answer. That turned out to be the case. I would like a better response today. When I first raised the point, I was told, in short order, that I wouldThat was a little peremptory. The hon. Lady occasionally sounds like an old-fashioned school teacher of the kind who used to imagine that if the children enjoyed their lessons, one lost half the disciplinary profit. I do not like to be scolded in that way. However, I tried again on Second Reading, as those who follow the minutiae of our exchanges will recall. In a most inadequate reply, the hon. Lady said:"get an answer, but it will be in my good time and not at his request."
I have reread what was said because I am always willing to be corrected if that is justified. However, I can find absolutely no evidence that the hon. Lady had produced an explanation. It is significant that the Under-Secretary of State was not prepared to express a personal or ministerial opinion that the 2·8 million or 5 per cent. earnings figure was likely to hold during the next year. She was prepared to tell us where the figure came from and to point at the guilty party. However, she was not prepared to say that she believed a word of it and I do not blame her. She is not foolish. She recognised that it is extremely unlikely that those figures will survive to the end of the year. I hope that the Minister for Social Security and Disabled People will accept and concede that. Once we have that concession, I hope we can consider the interesting debate that would follow about what we should do about it and how we can place the earnings figure and unemployment projection on a more realistic basis. I am sure that you, Dame Janet, appreciate that this is an important point. Clearly if unemployment rises, contribution incomes inevitably fall and the pay-out demands on the national insurance fund increase. That is like the displacement theory when, in the fourth form, one puts things into a bath and watches the water overflow. The impact can be quite serious. I hope that the Minister will be prepared to consider those points. The other two amendments do not require great examination. They were tabled simply to allow a slightly broader platform to allow us to make one or two points. However, perhaps the Minister will deal with one or two little matters. The Minister will recall that there is an instruction in respect of the Government Actuary's report to the House. Does "instruction" have a specialist and technical meaning? Or does it mean that the poor man was told, "However squiffy this may make your calculations, this is your starting point and you had better not complain."? I want also to refer to the inclusion in subsection (4) of the reference to Deputy Government Actuary. I have no objection to the Deputy Government Actuary having his moment of glory and appearing in statute. I know who the Government Actuary is, but I do not know who his deputy is. If the Minister tells me, his name will appear in Hansard and that might be some consolation. 5.45 pm Although I do not want to detain the Committee or the Minister, I have a serious point. Why is the reference to the Deputy Government Actuary necessary? I would have presumed that all the work was carried out by the Government Actuary. However, there is of course a power to delegate to others, as there is in every Department. If the Government Actuary says to the Deputy Government Actuary, "Would you like to go and do these calculations because I really cannot bring myself to do that, given the false nature of the starting point", he is entitled to do that. If the poor man has a cold and the work must be carried out in his absence surely the Deputy Governor Actuary becomes the Government Actuary. The specific reference to Deputy Government Actuary seemed a little odd. That was the kind of point that, in my younger days in Standing Committee, might have run for a very long time. However, perhaps I should leave it at that. In respect of the other amendment that I have decided to duck, the reference to the aggregate of the amounts seemed otiose and unnecessary. No doubt that refers to the fact that the fund is an aggregation from a variety of different sources. While I doubt whether the words are necessary, I do not believe that even I could elevate that into a matter of principle."I have already taken care of that point. One of the reasons that those on the Opposition Front Bench get so muddled sometimes is that they do not listen to what is said."—[Official Report, 30 November 1992; Vol. 215, cc. 106 and 108.]
I want to contribute to the debate about the assumptions and to the subsidiary debate about the association between the Government and the role of the Government Actuary because that raises important points.
Like my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), I question the unemployment assumptions. I understand the Minister's point that we need to make assumptions and that they must presumably be common assumptions across Government Departments if social planning is to be effective. However, assumptions should bear a close association to reality. Like my hon. Friend the Member for Garscadden, I have examined the figures in detail and I want to question the assumption that in 1993–94 unemployment will be 2·8 million in Great Britain and compare that with independent forecasts for the United Kingdom. In order to make the comparison, I assume that the Government's assumption is 2·9 million for the United Kingdom as I am advised that unemployment in Northern Ireland is 100,000. While the Government's assumption is 2·9 million unemployed for 1993–94, Phillips and Drew estimates the figure at 3·3 million; County NatWest estimates it at 3·2 million; the National Institute of Economic and Social Research estimates a lower figure of just over 3 million; the London Business School estimates a figure of 3·2 million; Liverpool university—the Government's favourite university at one stage—estimates the figure to be 3·2 million; and the ITEM Club—with which I am not too familiar—estimates the figure to be 3·3 million. Although the estimates vary, as one would expect, between the Government and the independent forecasters, the differences, of 200,000 to 300,000, are often very substantial. The significance of those differences is spelt out in great detail by the much-quoted Government Actuary in his report when, I suspect, questioning the Government's assumption, he stated:Obviously contributions will decline if people become unemployed and need national insurance benefits. For every 100,000 unemployed, we are talking about a public expenditure cost—or a cost, anyway—of £250 million. The debate may seem rather technical or even pernickety—the Minister is certainly finding it amusing—but it is important in terms of public expenditure. For every 100,000 unemployed by which the Government make a wrong assumption, the cost to the public, one way or another, is £250 million. Therefore, if some of the independent forecasters at the extreme are right in saying that unemployment next year could be 3·3 million, the difference between that and the Government's costs will be £1 billion. The costs are very important. It is therefore appropriate for one to detain the Committee again to question the Government about the nature of their assumptions. If the Government's assumptions were out by 50,000 or 60,000, although the human cost of that would be large, we might forgive them statistically, but to be wrong by such a large figure—perhaps 200,000, 300,000 or more, who knows—would undermine the Government's assumptions that they gave the Actuary. I join my hon. Friends in challenging the wage assumptions that have been made. The Minister was not able to answer my question because he dealt with another part of my intervention, but again it is not unfair to ask whether the wage assumptions were built into the analysis before the Government announced the public sector pay policy or after that. It must make a difference to the calculations. What was the difference? If I am assured by Ministers that they fully allowed for the public sector pay policy, what were the working assumptions before that policy came in? Given what we know about public sector pay, what assumptions are the Government therefore making about private sector pay? It is presumably quite a bit higher than 5 per cent. If it is right for the Government to assume a 5 per cent. norm, would it be right for trade union shop stewards and workers to assume that figure when bargaining? If the Treasury can make that assumption, why cannot wage and salary earners make that assumption? It would seem to be fair to do so. I now refer to the association between the role of the Government Actuary and that of Her Majesty's Government. There is some difficulty about that, because I notice that in the Bill the Government are happy to talk about the amount estimated by the Government Actuary or by the Deputy Government Actuary. There is an assumption in the Bill that they are the Actuary's figures, whereas the poor old Actuary himself, in words already quoted by my hon. Friend the Member for Garscadden, says:"if the average number unemployed were to be 100,000 higher … the contribution income in 1993–94 would be £150 million lower and expenditure would rise by £100 million."
by the Chancellor of the Exchequer. Given that the amounts of money are so vast, even with a variation of 1 per cent. or 2 per cent. in wages or unemployment, thus affecting Government arithmetic on public expenditure and the Committee's understanding of the Bill, in future it would not be unreasonable if the Government Actuary were able to make his or her own assumptions about those important matters. To put the matter delicately, there is always the possibility that Government assumptions about unemployment owe less to projections and more to propaganda. If the Committee is to have presented to it figures for the national insurance fund which are basically propagandist, the Committee is being misled to the tune of millions and millions of pounds, and possibly 0·75 billion. Those are serious matters in terms of public expenditure and our understanding of the national insurance fund. I again urge Ministers to cut out the nonsense about assumptions and the differences between estimates. Why cannot the assumptions be based on truth and on what, sadly, independent forecasters in their hearts know will be the likely rates of unemployment next financial year?"working assumptions have been given to me by the Government in regard to these factors. The assumptions I have been instructed to use for the purpose of the above estimates were set out"
I understand the imperative of the Opposition to talk at length about economic forecasting at the moment. I hope that, in my few remarks in drawing the debate to a conclusion, I can prove that the Opposition's comments are largely irrelevant to this matter.
I should like to refer to the Deputy Government Actuary's department and the question whether he is instructed. "Instructed" has no force whatsoever in law. He could be asked the same thing and would no doubt deliver his duty against the same background as having been instructed. In essence, one contribution outlined the considerable variation of the forecasts or assumptions, or whatever one cares to call them, from a number of independent forecasting bodies, how they vary across the range and how important it is, if we are to have a single approach to Government assumptions, that there is a single assumption by those who are playing their part. The Treasury assumptions are the ones that should be taken across the range of Government, otherwise, as I tried to show before, there would be a considerable opportunity for misunderstanding by those who look at Government assumptions as a whole. Perhaps there is that variation in outside forecasting, but, since 1945, Governments have always taken the view that there should be a single assumption. I have to confess that it comes as a surprise to me that there is not one but several Deputy Government Actuaries. That provides fairly sensible cover in case the Government Actuary is unable to perform his duties because he is indisposed or actively engaged in other tasks. Indeed, we have the same system in Government. There is a Minister, but there are three Under-Secretaries of State who fulfil that role within the Department of Social Security. A collective approach—the language at least might appeal to the Opposition—by the Deputy Government Actuary may not be entirely unacceptable to the Opposition. I now refer to the assumptions. I understand the political imperative for the Opposition to concentrate overwhelmingly on unemployment and perhaps on earnings. In terms of the overall balance of the national insurance fund, the assumptions are marginal to the calculations that are being made. The overwhelming factor when we consider the balance in the national insurance fund year on year is the payment of retirement pensions. That is the largest single factor. For example, were calculations on unemployment to be, say, 200,000 too low and earnings to be, say, 1 per cent. awry, the balance in the fund might turn out to be 14 per cent. as opposed to 17 per cent. We are not talking about the fundamental undermining of the state of the national insurance fund. I repeat that the basic calculations about a prudent approach and a comfortable cushion against the fund, protected by the grant, going into crisis are very much overstated. Certainly, the grant levels that we will apply will allow for variations in the assumption year on year. The hon. Member for Glasgow, Garscadden (Mr. Dewar) intimated that he would not press amendment No. 8, but I rest on the central argument that the assumptions would be very unlikely to alter the estimate of benefit expenditure to any significant degree. In the circumstances, I hope that the amendments will not be pressed.I can give the Minister that assurance. However, I am intrigued by the thought that the three Ministers who are gathered are so similar in personality and approach that they are interchangeable in every sense.
[Interruption.] I am sorry. The hon. Member is not a Whip; he just happens to be sitting there. Before I get into trouble, I beg to ask leave to withdraw the amendment.Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
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This will probably be the last substantive debate, but one or two matters are worth raising. Clause 2 deals with the whole problem of the fund and the Treasury contribution which the legislation authorises. There is no doubt that the Labour party accepts the need for a subvention to balance the books. As I said on Second Reading, it would be unacceptable for any benefits to be substantially cut to balance the accounts. Given the deterioration in the economy and the troubles that have attended the Government's efforts in the past few months, it would not be sensible to advocate a major increase in national insurance contributions. There is nothing between the Conservative party and the Labour party on that matter.
We broadly support the thrust of the clause. The sums are substantial—£7,500 million is not to be sniffed at. I am aware that there will be play in the figures, as we have been discussing. We might find that the 17 per cent. or, certainly, the 20 per cent. ceiling in 1993–94 will be under considerable pressure if our scepticism about the starting point of the forecast is justified. We will simply have to wait and see. Undoubtedly, we can return to the matter if the result confirms my suspicion. I should like to ask the Minister about one or two much more general matters connected with the clause and how he sees the national insurance fund. I have not re-read the Minister's speech, but I have re-read the speech of the hon. Member for Havant (Mr. Willetts), which I found interesting. I did not hear the hon. Gentleman's speech because I was absent from the Chamber at that time; however, I have taken the trouble to re-examine it. The speech raised some substantial issues which I should like the Minister to examine. There was an exchange, and hon. Members will remember that there has been continuing controversy, about the cost to the national insurance fund and the public purse of the contract-out principle and the incentive which was introduced in 1988 and which runs until 1993. I quoted in my speech the figures produced by the National Audit Office, and was taken to task by the hon. Member for Havant for relying on them. He took a poor view of that. I understand from the other remarks that have been made that it is the conventional wisdom on the Conservative Back Benches—I suspect, encouraged by those on the Front Benches—that the National Audit Office calculations were badly flawed. I invite the Minister to say a few words about that matter because I genuinely disagree with the hon. Member for Havant, whom I welcome to the Chamber, about the National Audit Office. I am not silly enough to deny that I may have misunderstood the basis of his objection, in which case I have no doubt that the Minister will be able to put me right. As I understand it, the hon. Gentleman was saying that the difficulty with the calculations was that they were a calculation of the cost of revenue forgone in the pay-as-you-go pension and benefit equation because of the money that was passed to private providers for occupational and personal pensions in the form of the contracting-out payments and the initial incentive over and above them. The hon. Gentleman gave the impression that the incentive stopped in 1993, although it could have continued. There was a slight implication that the National Audit Office was using something almost akin to sharp practice because it should have projected beyond 1993. If the NAO had projected beyond 1993, it would have come up with a different picture. The hon. Gentleman also complained that the calculation was based on the assumption that everyone would come back into SERPS in 1993, which he said was a ludicrous proposition. I agree that that is not likely to happen, and I make no complaint about that. The computation that was carried out was legitimate within the limits in which it was done. The National Audit Office took the cost of the APP rebates for the period to 1993. It did not go beyond 1993 for the simple reason that it did not have an announced contracting-out percentage figure—we now know that the figure is 4·8 per cent.—and it did not have any information about what would happen to the incentive. It might have assumed that the incentive would disappear altogether. If it had made that assumption, it would have been wrong. That underlines the difficulty of projecting beyond 1993. The National Audit Office took the cost of the APP rebates for the 1988–93 period and the current value of the futures of SERPS pensions which would not have to be paid because of the rebates, the opting out and the purchase. It came up with the figures which showed a deficit of close to £6 billion in the public purse. That seems to be a respectable enterprise, and is not undermined or invalidated by any argument about what might happen after 1993 if the information had been available. The calculation tells us what happened in those five years. Therefore, it is valid in those terms, and that is what it was represented to be.I entirely agree with the hon. Gentleman's account of how the National Audit Office set about its calculations. If I gave the impression in my speech a week ago that I thought sharp practice was involved in the calculations, I welcome the opportunity to correct that impression. I do not think that there was any sharp practice. However, it is unfortunate that the assumptions on which the calculations were based were not clearly stated. I am sure that the National Audit Office took those assumptions for the reason that the hon. Member for Glasgow, Garscadden (Mr. Dewar) has just set out—because it was the clearest basis on which to do the calculation, effectively assuming that everyone would be back in the scheme in 1993. Any other assumptions would inevitably have been speculative. To have carried out the calculations on a different basis, assuming, for example, that many people who left SERPS——
Order. This is becoming a speech, not an intervention. The hon. Member may seek to catch my eye at a later stage if he wishes.
The hon. Gentleman may want to catch your eye, Dame Janet, because I am about to say a few words about some of his other thoughts on the national insurance fund. Before he came into the Chamber, I said that I found his speech interesting. I do not know whether he would claim to be a representative Conservative Member, but he is credited, if that is the right word. to use—I use the word in a technical sense—with having some influence.
He can read.
The hon. Gentleman can do more than that. I was interested in what he said. We can continue the argument about the NAO report on another occasion, and I have no doubt we will.
I think that we are near agreement. My point is that the figures are valid, although they are limited in the sense that they are for a specific time slot. My real objection is directed not perhaps at the hon. Member for Havant but at some of his colleagues who gave the impression that, because the calculations do not continue beyond 1993, they are invalid and are not justified. The calculations are not valid in terms of the figures that were known at the time. My point is that, in any event, as we use revenue to pay pensions, invalidity benefits and unemployment benefits and if we forgo £9 billion over a five-year period, a considerable strain is placed not necessarily on national insurance contributions—we can hold them—but on general taxation revenue, which is perhaps the reason that we have the startling figures in the clause. Perhaps the Minister will comment on the National Audit Office report. It is important that proper weight is given to it. It should not be rubbished because it tells us an important part of the story so far. It may not give us the history or the future, but it brings us significantly up to date. What is the Government's view on the national insurance principle? The hon. Member for Havant expressed strong opinions about it. Those of us who were present on Second Reading will remember that he started by reminding us that under the Beveridge scheme a substantial part of the funding of the benefits came from a Treasury subvention. There was a somewhat technical argument about whether the subvention was 50 per cent. or 67 per cent. Those figures were offered to the hon. Gentleman by my hon. Friend the Member for Birkenhead (Mr. Field) in a bidding match. However, the subvention was clearly substantial. None of us objects to returning to a stage at which that level of help is necessary. The hon. Member for Havant asked some important questions about the national insurance principle. He went on to say that SERPS was a quid pro quo for getting away from the principle of flat rate contributions. He said that it was introduced merely to give some reward to those who would have to contribute more heavily according to income when previously there was a flat rate contribution. The hon. Member for Havant also said that the Government had held national insurance contributions steady, thereby putting the fund under the present strain. I give him credit for a phrase which I shall probably use at some future date about other aspects of Government policy. He said that the Government were following a policy of "purposeful immobilism". That phrase is worth preserving. I see evidence of purposeful immobilism in bodies other than the Conservative party, but it will do for a start. Such a policy has interesting consequences. The hon. Member for Havant put what he described as an unashamedly ideological view. He said that private pension provision was better. He went on from there to argue a fairly hostile case for the continuation of SERPS. He also seemed to make a hostile commentary on the national insurance contributions system. If one assumes that SERPS was introduced because it was the only way of justifying a progressive tax element, one may come close to arguing that contributions are not necessary and pensions should be entirely funded out of general taxation. My analysis may be unfair but it is an interesting line of thought. I wonder whether the Minister—I put this innocently to him—has any thoughts about the future of the national insurance principle. The hon. Member for Havant said that we were driven to a second contributory top-up pension, making it clear that he did not like such a system. I know that the Government share his dislike of that aspect of the matter, but I wonder whether they have any thoughts about the national insurance principle—or is this a matter on which no consultations are taking place and no change is expected? The Minister will be familiar with the interesting speech which Sir Peter Barclay made at a conference at York university a few months ago. I do not need to rehearse it in detail, but he put on the agenda the future of the national insurance principle. For example, he suggested that the contributions record had become a barrier for many people, especially women. Although they were entitled in every sense to a benefit, they might not have the contributions record to open the door to the benefit. I do not suggest that there are any plans afoot to abolish contributions but I thought that the matter was worth raising. That train of thought was started by reading the speech of the hon. Member for Havant. I should be glad to have the Minister's thoughts on the matter. I hope that he can oblige.6.15 pm
I welcome the suggestion of the hon. Member for Glasgow, Garscadden (Mr. Dewar) that the future of the contributory principle should be put on the agenda for discussion. My party has always advocated an integrated tax and benefits system. That would entail abolishing the contributory principle. However, we are not necessarily thirled to that. If there is scope for discussions at any level, we should be interested in taking part. I agree with the hon. Member for Garscadden that if the Government are examining the background to the national insurance scheme, it would be valuable for Opposition Members to know whether the Government have commissioned any research. I also noticed what Sir Peter Barclay said. It was a valuable contribution to the debate. It would be helpful to know whether the Government have any thoughts on the matter.
I wonder whether the Minister could help me. In my usual daft laddy way—referring to the Treasury research note—may I ask how it came about that in 1980–81 the Treasury supplement was 18 per cent. of the fund but a few short years later, in 1988, Lord—[HON. MEMBERS: "Lord Moore."] The hon. Member for Garscadden said that old age made one forget names, but it is dealing with social security that does it; it causes amnesia. It happens to us all sooner or later. In 1988, Lord Moore announced the abolition of the Treasury supplement. In 1988 the supplement had collapsed to 5 per cent. In the Social Security Act 1990 we took industrial injury benefit, statutory sick pay and statutory maternity pay out of the fund and made it a charge on the Consolidated Fund. Large sums were taken out of the national insurance fund. Only two years later we are suddenly putting another large tranche of up to 20 per cent., representing £7,500 million, into the fund by way of grant. The Minister must explain why, if it was right to abolish the supplement in 1988, there has been a huge turnaround in the way in which the Government deal with the fund. It has happened in a relatively short time in relation to the development of social security policy. The Government owe us an explanation of the rationale and thinking behind the sequence of events that has produced these circumstances. It is not inappropriate in a "clause stand part" debate to ask the Minister how the Government expect the grant proposed in the clause to operate and how it will differ from the previous supplement. One relates to levels of contributions and the other relates to levels of benefit. What are the differences in effect compared with the old supplement? My next question should perhaps be more properly addressed to Treasury Ministers. What significance will the grant have on the public sector borrowing requirement? The grant can be drawn upon after consultations with the Treasury. I shall ask a question about that in a moment. Does not the £8,000 million feature as an increase in the PSBR? Is it hidden because it is not used unless it is called upon? Does it not affect the total PSBR for that reason? It is a big sum of money and if it does not show up as an explicit addition to PSBR totals, we should be told about it. Clause 2 talks rather glibly about the Secretary of State consulting the Treasury before exercising his powers, and two cheers for the fact that the orders introduced under clause 2(8) will be subject to the affirmative procedure. Can the Secretary of State say a few words on what consultation will amount to? Is it merely a question of referring to changes of the sort that we have been discussing which concern the Government Actuary? Or, for example, could the Secretary of State decide that if he had a wee bit of extra money he could valorise the Christmas bonus, which is only £10 this year, and double it? Could he consult the Treasury about the possibility of using the grant to increase the bonus? That seems a seasonal enough suggestion. If we have £7,500 million floating around, why do we not use some of it for retirement pensions, invalidity benefits, widows' pensions, sickness pay and all the other wonderful goodies that are available to the Government via the national insurance fund? What will constitute the consultation? Can the Treasury refuse a request by the Secretary of State? If so, on what grounds? Those are important issues. I also hope that the Minister will explain why, in such a short time, there have been such momentous changes in the amounts of money—in the form of supplements or grants—flowing in and out of the national insurance fund.I shall be delighted if I can bring this short debate to an even quicker conclusion. Although I shall refer to the issue of the national insurance fund in my concluding remarks, I believe that that question contains substance for a debate which would occupy more time than we are likely to have this evening—[Hots. MEMBERS: "Take as long as you like."]—and in which other Ministers might wish to play a part.
The debate about the Government grant is set against the background of the announcement by my right hon. Friends the Chancellor of the Exchequer and the Secretary of State that there would be no increase in national insurance contributions this year, and that there would be a full uprating of benefits. Clearly, in those circumstances, resources had to be found to balance the two items. The grant from the Treasury is simply a transfer of resources that are already within the Government. A sum of money from within the Consolidated Fund can easily he transferred from the Treasury to ourselves without any increase in Government borrowing or any alteration in public finances. The hon. Member for Glasgow, Garscadden (Mr. Dewar) drew attention to the distinguished and important speech by my hon. Friend the Member for Havant (Mr. Willetts). In no sense would I wish to rubbish the National Audit Office report, not least because the distinguished Comptroller and Auditor General was a senior civil servant in the Northern Ireland Office when I was privileged to serve there and I have personal as well as professional respect for his judgment. The calculations commissioned by the National Audit Office were based on assumptions which will not necessarily prove to be valid in the longer term. The report took into account only the first six years and it did not take into account the contribution that personal pensions will make to a strong pensions industry in the next century, and the element of choice to which the personal pensions initiative has contributed. The office was hampered by the assumption that it was a short-term phenomenon and that a substantial number of people who had taken out personal pensions would contract back into SERPS. Personal pensions provide people with influence over their contributions, and I believe that my hon. Friend the Member for Havant said that we were working with the grain of society by providing that choice. I think that that philosophy will endure and will be important in the next century.I accept that the Government are anxious to encourage personal pensions, which may or may not be a good thing, but that is a different issue. I want to know whether the Minister accepts the validity of the National Audit Office figures for 1988–93 in terms of their impact on the profit and loss account of the public purse—if I may put it that simply. Having taken some advice, I am led to believe that the calculation is perfectly valid, as one would expect given the source. It would be helpful if the Minister could confirm that that is his view. If it is not, presumably the Government can produce a counter set of figures, which we would look at with interest.
I am not quarrelling with the short-term judgment of the National Audit Office. It is right that Parliament, when looking ahead to the pattern of pension provision for future years, should take a broader judgment. Therefore, short-term calculations about profit and loss in that short time span should not determine our judgments on whether we should continue the personal pensions initiative.
If I put it to the Minister another way, we can, I hope, reach agreement. Is it the case that he does not dispute that there will be a loss to the public purse or a gap of getting on for £6 billion during the period concerned? The Minister is arguing that that is a price worth paying—as he is entitled to do.
I would not choose those words. It is an investment in the future and in a pattern of pension provision which is likely to work with the grain of personal choice. As my hon. Friend the Member for Havant said, increasingly people wish to make pesonal choices about their pension provisions for the next century.
It is all very well for those of us with a clear entitlement to occupational pensions, who may not sufficiently take into account the position of manual workers and those who sometimes work irregularly. We must remind ourselves that one of the main results of the personal pensions initiative is that they have been able to make proper provision for their retirement, outside the basic state scheme, for the first time. That is much to be applauded and is well worth whatever investment we have made in launching the scheme. I said that I would mention the principle of national insurance. I believe that on Second Reading the hon. Member for Croydon, North-West (Mr. Wicks) mentioned the Gallup survey about national insurance costs prior to the 1985 reforms, in which 59 per cent. of those asked about national insurance contributions thought that they were a good thing. The Government have no plans to drop the concept of the national insurance scheme. A philosophical question is involved. We must consider whether the taxpayer alone should pay or whether there should be a system of contributions which could be adjusted to reflect changing patterns in the workplace and in society. Having grown up in the days of stamps on cards—I know that the system is more sophisticated these days—I think that many people feel that they are contributing towards their short-term benefits, health care and so on, which are based on the national insurance principle.I am following carefully what the Minister is saying. The vast majority of people to whom I speak think that the scheme is a funded one, but we all know that it is not.
6.30 pm
That is true. Many people may not even understand the concept of a funded scheme, but they believe that it represents value for money. They pay a certain amount each week or month and for that they get the guarantee of certain benefits when they need them. That concept is firmly embedded in the psychology of the country and to drop it would be a grave mistake, unless we were absolutely certain that we had something a great deal better to put in its place.
I understand that there will be a debate about this issue. I, too, have had moments of agnosticism about it in my time at the Department. However, I have tried to think it through and I believe that it would be a great folly to abandon the scheme unless we were absolutely certain that we had something better to put in its place. I have read Sir Peter Barclay's speech and a number of other contributions on the matter and no doubt we shall return to it from time to time. I hope that the Committee will now be prepared to give the clause a fair wind.
Question put and agreed to.
Clause 2 ordered to stand part of the Bill.
Clauses 3 to 5 ordered to stand part of the Bill.
Schedule agreed to.
Bill reported, without amendment; read the Third time, and passed.
Statutory Instruments, &C
Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.),
Child Support
That the draft Child Support Fees Regulations 1992, which were laid before this House on 11 th November, be approved.— [Mr. David Davis.]
Question agreed to.
Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.),
Companies (Disclosure)
That the draft Companies Act 1985 (Disclosure of Branches and Bank Accounts) Regulations 1992, which were laid before this House on 17th November, be approved.— [Mr. David Davis.]
Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.),
Companies (Fees)
That the Companies (Fees) (Amendment) Regulations 1992 S.I., 1992, No. 2876), dated 17th November 1992, a copy of which was laid before this House on 19th November., be approved.— [Mr. David Davis.]
Question agreed to.
Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.),
Companies (Branch Disclosure)
That the draft Oversea Companies and Credit and Financial Institutions (Branch Disclosure) Regulations 1992, which were laid before this House on 26th November, be approved.— [Mr. David Davis.]
Question agreed to.
European Community Documents
Motion made, and Question put forthwith pursuant to Standing Order No. 102(9) (European Standing Committees.),
Value Added Tax
That this House takes note of European Community Document No. 4204/89 and the Supplementary Explanatory Memorandum submitted to Her Majesty's Customs and Excise on 28th October 1992, relating to value-added tax and special arrangements for second-hand goods, works of art, antiques and collectors' items; notes that the proposed margin schemes for second-hand goods are similar to the existing United Kingdom schemes but with broader coverage; and welcomes the Government's aim to protect the essential interests of British traders.— [Mr. David Davis.]
Question agreed to.
Motion made, and Question put forthwith pursuant to Standing Order No. 102(9) (European Standing Committees.).
Cosmetic Products
That this House takes note of European Community Document No. 8586/92, relating to cosmetic products; and
supports the agreed common position secured by the Government on the draft Directive at the 3rd November Consumer Affairs Council of Ministers.— [Mr. David Davis.]
Question agreed to.
Transport
Ordered,
That Mr. Terry Dicks be discharged from the Transport Committee and Mr. Nick Hawkins be added to the Committee. [Sir Fergus Montgomery, on behalf of the Committee of Selection.]
Clarke Foods, Knowsley
Motion made, and Question proposed, That this House do now adjourn.— [Mr. David Davis.]
6.32 pm
On Friday 16 November, 67 employees of the Lyons Maid operation in Kirkby in my constituency were made redundant. They have not yet received any severance pay. Until today, however, there was still hope that they would be re-employed by Nestlé, which has since acquired the parent company, Clarke Foods, which was put into receivership by the National Westminster bank on 13 October.
Within the past hour it has been drawn to my attention that Nestlé has no intention of retaining the Kirkby plant. It argues that that plant has some technical problems which make its retention impossible. I do not wish to comment on that in detail until I have had an opportunity to discuss it with the employees at that plant; I can then consider the points that Nestlé has raised. Today's announcement will be a body blow to the people of Kirkby from which they will find it difficult to recover. We may be talking about only 67 jobs, but in a town that has one of the highest rates of unemployment in the country, those 67 jobs were precious and there were high hopes that they would be retained. We shall have to consider what steps we can take to see whether there is anything that can be retrieved in the next few weeks. My purpose in seeking a debate on the Adjournment is to highlight serious and potentially alarming concerns about the events that led up to Clarke Foods going into administrative receivership. Clarke Foods was Britain's second largest ice cream manufacturer. It was set up and controlled by Mr. Henry D. Clarke junior, a United States citizen. In March 1992, Mr. Clarke's company acquired the Lyons Maid operation from Allied-Lyons for just over £13 million. At that time, Lyons Maid had two factories, one in Greenford in the constituency of my hon. Friend the Member for Ealing, Southall (Mr. Khabra), and the other in Kirkby. I know that my hon. Friend had hoped to be here for this debate. Unfortunately, the fact that it has started earlier than expected has, I believe, caught him at his constituency surgery. I know that he will be bitterly disappointed to have missed the debate. Prior to acquiring Lyons Maid, Clarke Foods had also acquired factories in Telford, Stourbridge and Stoke-on-Trent from Hillsdown Holdings, the latter of which was closed down some six months earlier. Clarke Foods left debts reported to be between £25 million and £40 million. I understand that among the substantial creditors are the National Westminster bank, Allied-Lyons, Hillsdown Holdings and Alfa-Laval, which is apparently owed money for machinery that was purchased and delivered, but not paid for. It is also worth pointing out that part of the purchase agreement between Allied-Lyons and Clarke Foods involved a discount of £1.4 million in a fund allocated for severance payments, including pension funds at the Greenford factory, which, as had already been agreed, would close. There are persistent rumours that all the money cannot be accounted for. However, no doubt that will be covered in the receivers' report to the Secretary of State to which reference was made in the letter to me of 12 November from the Under-Secretary of State for Corporate Affairs. Clarke Foods had a working relationship with Guinness Mahon and Co. and Henderson Crosthwaite Corporate Finance Ltd. Both firms were reported in the Financial Times of 11 March as sponsoring Clarke Foods' entry into the unlisted securities market. I have spoken to representatives of Guinness Mahon and they say that their relationship with Clarke Foods was that of financial adviser and that its associate company, Henderson Crosthwaite, acted as stockbroker to Clarke Foods. One common denominator between those associated firms and Clarke Foods is Mr. Martin Riley. Mr. Riley is described by Guinness Mahon as having been a non-executive director of Clarke Foods and a director of Henderson Crosthwaite. I recognise the responsibilities that go with parliamentary privilege and I made a determined effort to contact Mr. Riley on Friday last week, through Henderson Crosthwaite and Guinness Mahon. It became clear to me, however, that I would be given no opportunity to speak to him, even though it was my stated and honest intention to give him the chance to put his side of the argument before the debate. I understand that Mr. Henry D. Clarke is currently in the United States and unavailable for comment, although at least one of his sons is still in the United Kingdom. According to the Liverpool Echo, which has thoroughly investigated this matter, it was obvious that, during the summer, Clarke Foods made serious errors of judgment and some bad management decisions. In July, by which time it must have been clear to both Mr. Clarke and Mr. Riley that Clarke Foods was in serious trouble, those men both sold their shareholdings, which, I understand, were substantial. According to Paul Foot in the Daily Mirror of 4 December 1992, that sale amounted to 310,102 shares at their peak price of £1·60 each. By the time the company went into receivership in October, share prices had fallen to 8p each. Last Friday, I spoke to a spokesman for Guinness Mahon, Mr. Duncan Campbell. He told me that Guinness Mahon did not know that there were financial problems with Clarke Foods until September this year. Courtesy of the Library, I have an article from The Sunday Times, dated 14 June 1992, headedIt includes an informative graph describing how share deals had taken place between Mr. Riley and Mr. Clarke and describes at length the problems that the company was experiencing as early as June. It says:"Clarke Foods. Directors' Share Deals".
"The approach of summer heralds ice-cream time and marks a good season for Clarke Foods, Britain's number two producer since it bought Lyons Maid from Allied-Lyons in January.
Three years ago the company, then Yelverton Investments, had its core business in properties and securities.
The transformation was due to Henry Clarke, the chairman, who had made a fortune from the frozen confection in America. In January 1991 he bought three loss-making ice-cream companies from Hillsdown Holdings.
Clarke invested heavily in new equipment and cut the workforce, pushing the three firms into the black in their first full year after the takeover. Then came the £12 million Lyons Maid coup. The company was stagnant, making heavy losses and was the perfect challenge for him. One ageing and unionised Lyons Maid factory is to close, with production shifting to the renovated factories at Stourbridge and Telford.
At that stage, there was clearly some knowledge of share dealings and the fact that, although the company was still predicting profits, there were things going on in the organisation which would have raised alarm bells with Guinness Mahon. I am not therefore convinced that I was told the full position when I spoke to Mr. Duncan Campbell on Friday. On 30 October, I wrote to the Secretary of State in support of Lyons Maid workers and their trade union, the Transport and General Workers Union, seeking an inquiry into the affair. I repeat that call tonight. The first issue that an inquiry must cover is whether Mr. Clarke and Mr. Riley were guilty of insider dealing. They must have known that Clarke Foods was in serious financial difficulty at that stage and that to dump a large shareholding on to the market would precipitate a slump in the value of the shares, thereby accelerating the firm's difficulties. An inquiry must also look into what will happen to the £1·4 million pension and severance fund. Has it been used fraudulently; if so, by whom and on what authority? A further issue for an inquiry relates to Mr. Henry D. Clarke's fitness to run a company anywhere, given his track record in the United States. In the 1960s, Mr. Clarke ran a company called the National Environmental Corporation, which was involved in house building and nursing homes. Mr. Clarke was ousted as president of that company in 1970 and was subsequently bankrupted. During the 1970s, through various companies—Clabir, Klondyke Ice Cream and the General Defense Corporation—Mr. Clarke built up yet another conglomerate with diverse interests in ice-cream and chocolate manufacture and armaments manufacturing. He was ousted as president of that group of companies in 1989 after Clabir defaulted on debentures. Given the irregular mix of products in which Mr. Clarke was involved, anybody who subsequently examined his involvement in that group of companies would have raised questions, particularly in the light of the Iran contra scandal. The following year, Mr. Clarke came to the United Kingdom and began to re-establish himself, together with his sons, in the ice-cream business. On the basis of his record in the United States, sufficient evidence should have been available to suggest that Mr. Clarke was not a fit and proper person to run a company. However, Guinness Mahon and its associate company, Henderson Crosthwaite, seem to have warmly welcomed him, despite the fragile financial basis of his operations and his track record. All that is bad enough, but last Friday I was given a copy of a letter from Mr. Ray Scannell, director of research with the Bakery, Confectionary and Tobacco Workers International Union, dated 3 December 1992. In the letter, Mr. Scannell says:Last year Clarke's pre-tax profits were up to £1·14 million and are predicted to be £3·4 million this time. Friday's price was 160p, up from 50p since its £6·8 million rights issue to buy Lyons Maid. The difficult task ahead is to improve the product range and increase sales in an increasingly competitive market. And investors will not be encouraged that late last month two directors, Henry D. Clarke Jr and Martin Riley, sold a total of 310,102 shares at 160–161p, signalling that the price may fall, although both say they are selling to buy pension plans."
Mr. Scannell concludes:"Rumours … picked up in Tampa and PA had it that Clarke, Clabir and General Defense Corporation were part of a network of CIA front companies involved in supplying the Nicaraguan contras. This is plausible. Numerous news reports have revealed that the CIA often brought in businessmen to 'own' front companies and those fronts often invested in legitimate businesses to maintain the legitimate facade for the agency. (They also sometimes were engaged in drug running)".
That letter clearly raises further questions. That admittedly inconclusive evidence has been obtained by my trade union colleagues with comparative ease. It seems odd that, before entering a business relationship with Mr. Clarke, an organisation like Guinness Mahon did not make similar inquiries. There have been weeks of anxiety for the workers and their families about their future and today any hope has been dashed by Nestlé's announcement that those jobs have no chance of being saved. The matter is so serious and the implications so vast that the Department of Trade and Industry must now agree to an inquiry, or possibly several inquiries, under the provisions vested in it under the Companies Act 1989. Will the Minister instruct the receivers, Robson Rhodes, to produce an interim report on Clarke Foods, including any preliminary evidence of fraud and insider dealing? Will he initiate a preliminary inquiry through the stock exchange on what checks or inquiries, if any, were made through Guinness Mahon or stock exchange procedures into Henry D. Clarke's fitness as a director prior to Clarke Foods being listed? I give the Minister notice that I fully intend to raise that aspect of the affair until it is fully investigated and brought out into the open. Will he consider at this stage setting up a team of inspectors to look into the share dealing issue urgently? I wish to acknowledge the Liverpool Echo and the Transport and General Workers Union for their work in investigating those disturbing issues and events. The allegations that I have made tonight cannot be attributed directly to them. There seems to have been an effort in some high and influential quarters to keep the issue quiet. On the basis of the evidence that I have collected, it would he scandalous if the issue were not looked into fully. Many people are entitled to know what went on, not least those whose employment, pensions and redundancy payments have been shattered. Employees may even have been swindled. Surely it is right that the DTI should take its responsibilities seriously and get to the bottom of what has happened. The jobs that have been lost in my constituency and that of the hon. Member for Ealing, North (Mr. Greenway) raise serious issues about the values in our society. It seems that people can operate on any basis that they choose in our economy and that jobs, redundancy payments, pension funds and people's prospects in life do not count. I know that in my constituency, and especially in Kirkby, people will be alarmed and despondent that there now seems no prospect of Nestle; saving these jobs. For several weeks, they have been hoping that that would prove possible. The values that seem to have been applied throughout the sorry saga which I have recounted—especially by Mr. Clarke, but certainly by others bring no credit on individuals and place serious responsibilities on the Government to investigate exactly what has been going on and, even at this late stage, to make efforts to save the jobs that are at stake in Kirkby and sort out the pension fund problems in Greenford. Events of the sort that I have described should not be allowed to take place without the Government accepting some responsibility to try to clear up the mess that they leave in their wake. Not least among the mess are many of my constituents, people who can ill afford to lose their jobs. They will wake up tomorrow morning in the knowledge that their last hope—that offered by Nestle—has gone."These allegations are obviously unproven, and probably unprovable. But they warrant taking an even closer look at the Clarkes. For example, what were the specific circumstances of Clabir's default? Under what terms did Clarke leave the US? Does he continue to have legal and financial obligations and/or problems here? Whose money is behind Clarke? If he had connections with the CIA, do they continue?"
6.50 pm
I congratulate the hon. Member for Knowsley, North (Mr. Howarth) on securing the Adjournment debate. Many of us have been trying to do so for some weeks, in the knowledge that there was an important issue to bring to the notice of the House. The hon. Gentleman has been successful in the ballot and he is to be congratulated on that and on all the good work that he has done.
My concern and interest lies with the Greenford plant of Clarke Foods, which lies firmly within my constituency. Of the 108 workers who have been made redundant, almost all of them are my constituents. There are one or two who live in Ealing, South and there are others in Ealing, Acton. I have had meetings with the displaced work force and I have seen several members of it separately in my constituency over a period. The Lyons Maid site, which was purchased by Clarke Foods and became the Clarke site, is one that I have known for 18 years and visited regularly. I have known it as the site of a company that produced the best ice-cream in the world. I attempted to persuade people to eat Lyons ice-cream rather than anyone else's because it was the best and was made in the best place. I was puzzled when I learnt that during the hot summers of the recent past Lyons Maid started to lose as much as £5 million a year. I still do not understand how that happened, hearing in mind the sales that the company must have had during the hot summers that we enjoyed in the late 1980s and early 1990s. In any event, the losses were made and the directors felt that they were unable to continue. As a result, they sold out to Clarke Foods. I should mention my hon. Friend the Member for Ealing, Acton (Sir G. Young), the Minister for Housing and Planning, who I know would wish to be present this evening. One or two of his constituents who worked at the Greenford plant have been made redundant. I know that he has been seeing them and helping them. Lyons Maid was sold to Clarke Foods. The work force was happy to continue in the new set-up and it gave its all, as I am sure did the work force in Liverpool. That can certainly be said of my constituents. When I met them, I was reminded of the work force at the nearby Hoover factory, which was closed. That closure was declared on a terrible day 10 years ago this week. I spoke to 1,200 members of that work force on a hoary December morning after the announcement had been made that they would lose their jobs. They were told that they would all, except the headquarters staff, lose their jobs by March. They worked with enormous dignity until the last minute of their employment. My constituents who worked at the Greenford plant have been the same. They put a great deal into Lyons Maid, first, and then Clarke Foods. They deserve better than they have had. As the hon. Member for Knowsley, North said, when Lyons Maid sold to Clarke Foods there was an allowance of £1·4 million. I am not certain how to interpret that. I do not know whether that meant that Clarke Foods acquired the company for £1·4 million less. I note that the hon. Gentleman is nodding. I do not know whether any other prospective purchasers were in line.Perhaps I can help the hon. Gentleman. According to a report that appeared recently in the Financial Times, the original sale price was discounted by £1·4 million.
I think that that is a fair transaction.
I met the directors of Lyons Maid shortly after I met the work force on the Clarke Foods site at Greenford. I promised that I would see the directors. They explained matters to me. They said clearly that they thought that the money to which I have just referred should have covered any redundancy payments. I am glad to say that at Greenford there are no problems with pensions, which are safeguarded and assured. On the other hand, the members of the work force have had no redundancy pay. Some of them worked at the site for 40 years. It cannot be morally right that suddenly they should find themselves put out of work, having lost a fortnight's pay because effectively they were put out of work by the receiver. Holidays were due to them and they received no redundancy payments. It is only natural that these people are looking to Lyons for some sort of payment. One can only appeal to Lyons—I do so again tonight—to make an ex gratia payment. The company has explained to me that it has no legal obligation to make such a payment. I am not a lawyer and I have to accept that, but when a company has employed people for a long time—some for as long as 40 years—I would hope that it might be able to find a way of making ex gratia payments to them. I think that they deserve that.I sympathise fully with the hon. Gentleman's constituents. As he has said, they worked for the company for 40 years and then they were just dismissed. Does he agree that it would be better for his constituents and other workers like them—where there is no trade union to defend their interests—if wages councils were to remain in place? The councils would be of benefit to the hon. Gentleman's constituents and to many thousands of others throughout the country, especially in the catering trade.
I do not want to be taken down that road. When my constituents were dismissed, wages councils existed. The question does not arise in this instance. I know that that point was made genuinely because I know the hon. Gentleman too well to say otherwise, but it is not valid.
I appeal to my hon. Friend the Minister to do anything that he can to secure for the workers involved the ex gratia payments that they surely deserve, or any other sort of payment that they can be given. I have written to the receiver on their behalf. I have not received an answer; I am not terribly impressed with that. It is some time since I wrote to him. He should answer letters punctually, whoever has written them.Is the hon. Gentleman aware that the former employees at the Greenford site who served for 40 years would have been entitled to about £100,000 each in combined redundancy and severance pay?
They are certainly entitled to large sums of money—hence their grievance. They are morally entitled to that money, and I should have hoped that they were legally entitled to it. Instead, they have lost everything—the wages due to them and their other benefits. It is a sorry and unjust tale. I hope that all concerned will be able to do something for people who have given their loyal and honest work over many years in—an honourable, fair-minded and genuine way.
7 pm
I congratulate the hon. Member for Knowsley, North (Mr. Howarth) on being fortunate enough to secure this important debate. I know what a doughty fighter he is for the interests of his constituents; his reputation for that is well known far beyond Knowsley. I have listened with considerable attention and concern to what he has had to say, and to the remarks of my hon. Friend the Member for Ealing, North (Mr. Greenway) and the hon. Members for Liverpool, Walton (Mr. Kilfoyle) and for Normanton (Mr. O'Brien), whom I am pleased to see here.
The appointment of receivers is always a sad event in the life of any company, especially when it results in a considerable number of employees being made redundant. I extend my sympathy to those affected by redundancy in Clarke Foods, and to their families. I know very well that this has been a bitter blow for Knowsley, and, as a north-west Member and DTI Minister responsible for the north-west, I know of the social problems involved. Clearly, the hon. Member for Knowsley, North believes that all is not well with the way in which certain aspects of Clarke Foods' affairs were conducted, particularly those related to planned redundancy payments after it took over the Lyons Maid business earlier this year. As a result, the hon. Gentleman wants the Secretary of State to authorise an investigation of Clarke Foods using his powers under the Companies Acts. I can understand that; I should have been surprised had he not pressed hard in support of his constituents' interests. Before dealing with the issues involved in an investigation, I ought to set out the facts of the matter as they are known to me. Clarke Foods (United Kingdom) Ltd. bought the Lyons Maid trading operation from Allied-Lyons in February this year. I understand that even before the sale Allied-Lyons had decided that the Lyons Maid operation needed rationalisation. Parts of that involved closing the plant at Greenford, in the constituency of my hon. Friend the Member for Ealing, North. To make the reorganisation more acceptable, the company proposed to offer enhanced redundancy terms to employees. Those would apparently have been rather more attractive than the terms that apply under the statutory redundancy payments scheme. No action had apparently been taken by the time of the purchase by Clarke Foods. It has, however, been reported that, as a result of the proposed redundancy arrangements, Clarke Foods was able to renegotiate a reduction of £1·4 million in the price that it paid to Allied-Lyons. I know that this brief outline of the facts may give rise to the assumption that Clarke Foods had, at least by implication, agreed to make available the same redundancy package as Allied-Lyons had proposed. Hon. Members may even suspect that, as has been suggested in this debate, the sum of £1·4 million was put aside for this purpose, although that is doubtful. As far as I am aware, there was never any written agreement between the company and its employees relating to the proposed redundancy package. Needless to say, if hon. Members have evidence to the contrary, I shall be happy to receive it—it should also be given to the receivers. I make no comment on the discount in the purchase price of Lyons Maid that Clarke Foods apparently negotiated. Following the sale, the proposed reorganisation of the company's trading operations did not take place. Initial indications are that that was because of substantial cash flow problems affecting Clarke Foods. Those difficulties prompted the company's backers, the National Westminster bank, to commission a report on the company's financial health from City accountants Robson Rhodes——Based on the inquiries that the Minister has made, can he tell us at what point these cash flow problems became apparent?
I cannot give the hon. Gentleman that information, because we have not instigated inquiries under the powers given to us by the Companies Acts. If the hon. Gentleman were to contact the receivers, he might acquire the information from them.
I understand that the report presented to the National Westminster bank was submitted in September. The bank was clearly unwilling to continue to support the company, and on 13 October it appointed two Robson Rhodes partners as joint administrative receivers. The receivers' primary obligation is to look after the interests of the bank that appointed them. Of course, they cannot ignore the other legitimate interests involved, including those of Clarke Foods' employees, and they did authorise a continuation of trading in the hope that income from such trading would be sufficient to meet the company's liability to the bank. However, I am informed that the financial pressures of funding the company during the trade-on period following the receivers' appointment were extreme. The success or otherwise of the post-receivership trading was always going to depend heavily on the generation and availability of funds to meet the numerous obligations implicit in trading on the business. Quite quickly, it became impossible to maintain the size of the work force, and hon. Members will know that the receivers have found it necessary to make 280 employees redundant—148 at the Greenford plant and 67 at Knowsley. Fortunately, we have in place legislative provisions to mitigate the effects of redundancy in cases such as these. Under the provisions of the redundancy payments scheme, employees who are declared redundant and who satisy the qualifying conditions are entitled to a lump sum payment calculated according to their age, length of service and rate of pay. In addition, the redundancy payment service can also pay certain debts owed to employees of insolvent employers—these include arrears of pay, accrued holiday pay and pay in lieu of notice. I understand that there has been a misconception in some quarters to the effect that the wheels of this scheme grind rather slowly. Of the 178 claims for redundancy pay received by the Department of Employment, 145 have already been paid; and there have also been 92 claims for insolvency payments, of which 79 have been paid.May I express my gratitude for that? I raised the matter the moment I knew of the problem at Greenford, and the rapid response is greatly appreciated.
I am most grateful for my hon. Friend's kind remarks. I assure him that the Departments of Employment and of Trade and Industry will do their best to respond as quickly as possible if anything further can be done to benefit those who have suffered from these distressing events.
All is not entirely lost, although I fully appreciate that the constituents of the hon. Member for Knowsley, North can derive little pleasure from the circumstances that he outlined. Hon. Members will be pleased to learn that on 16 November the receivers apparently sold the Clarke Food business to Nestle, and as a result about 300 jobs have been saved. I come now to the suggestion that this is a case into which the Secretary of State should initiate an immediate investigation under the Companies Acts. I understand the hon. Gentleman's concern, but I believe any action of this sort to be premature, pre-empting, as it would, consideration by the receivers of the relevant facts. Before I clarify certain important aspects of the receivers' role, I shall outline the responsibilities of the Department's investigation branch, because in my experience there is a significant degree of misunderstanding about how investigations are set in train and about the principles on which we act to use the powers available to us. The hon. Gentleman asked me to investigate under the various powers that we have, but the companies investigation branch follows up investigations under the Companies Act 1985, the Companies Act 1989, the Financial Services Act 1986 and the Insurance Companies Act 1982, where appropriate. The investigative powers can be used only when the Secretary of State thinks that there is good reason to do so. In a typical case, if there are sufficient grounds to suspect fraud, misfeasance or serious misconduct, inquiries may be authorised under section 447 of the Companies Act 1985, as amended by the Companies Act 1989. Those investigations are confidential and are not generally announced. Prosecutions are instituted when the investigations bring to light misconduct of a criminal nature. The reports that the Department receives when such an investigation has been authorised are confidential. We have no powers under the Act to publish them and cannot do so. That pall of secrecy which inevitably surrounds the investigation under that section of the Act creates some confusion about the circumstances in which the Department can act. It often raises in the minds of those who are suspicious the inference that perhaps we have something to hide and are trying to effect a cover-up. I assure the hon. Member for Knowsley, North that the Department has no interest whatever in covering up fraud, misfeasance or other misconduct in companies. On the contrary, in recent years we have significantly tightened the available penalties, and the circumstances in which we are able to take action against errant company directors have been significantly extended in the Company Directors Disqualification Act 1986. Hon. Members asked my Department questions about Clarke Foods and requested an inquiry. Before any decision can be taken on whether an investigation beyond that carried out by the receiver is warranted, considerably more information will be required. I shall consider any information that has been provided in the debate and I shall carefully consider submissions by any hon. Member who would like to write to me.Will the Minister confirm that the receiver has scope in his report to cover the issue of share dealing and my allegations that there is possible evidence of insider trading? Will he also confirm that, even as this stage, he could ask for an interim report?
Insider dealing is dealt with under a different section of the Companies Act, section 177. If the receiver suspects material fraud and has the evidence to back it, it is incumbent on him to present that information in his report. We would be able to take that into account in deciding whether to take action under the various powers that are available to us.
I warn hon. Members of the danger of assuming that there is something suspicious about every insolvency. Grounds for suspicion are not made stronger merely by virtue of large sums being involved. It is important and a basic principle of natural justice that Ministers who are given these heavy responsibilities, the exercise of which can have a significant impact on those who are subjected to them, must use them conscientiously and only in circumstances where we believe it to be reasonable on the facts to do so. It would be wrong for Ministers to exercise those functions arbitrarily and in cases where they did not have to satisfy themselves that there was "a serious case to answer on the Facts as revealed to us." Prima facie evidence to justify an investigation cannot be gathered in every case, even though the consequences of whatever has happened have been a disaster for many people, as is the case with several hundred constituents of hon. Members who are present for the debate. We must exercise our powers within the law and must not exceed them through excessive liberality in their interpretation. Many companies that fail do so for genuine reasons. Insolvency is not necessarily accompanied by dishonest motives, nor are all directors of failed companies guilty of misconduct. In this instance, I must satisfy myself that the ingredients of dishonest motive, or other motives of that kind, are present before I can use these rather draconian powers. It is not a pleasant experience to be investigated under the powers of the Companies Act. The rigour of such an investigation cannot be fully appreciated unless one is involved in some capacity in the process. As the Minister responsible, I have come to understand that very well in the six months or so that I have held this office. In a case such as Clarke Foods where the company has gone into administrative receivership, the administrative receiver has a duty to report to the Secretary of State if he forms the view that the conduct of a director makes him unfit to run a company. The hon. Member for Knowsley, North spoke about that. In practice, those reports are submitted to my officials in the Insolvency Service's disqualification unit. It is then a matter for the Secretary of State's discretion whether it is expedient and in the public interest to apply to the court for a disqualification order against the director who is the subject of the report. In determining the application, the court has to have regard to those aspects of conduct specifically mentioned in the Company Directors Disqualification Act 1986. These include breach of duty, misapplication of assets, responsibility for the causes of the company's failure, preferences and a breach of statutory duty. The events that the hon. Member for Knowsley, North described in respect of Mr. Clarke's other companies in the United States could not, I understand, be brought within the areas to which we have to have regard in taking decisions under legislation in this country. That is because the definition of a company for the purposes of the Act, which is set out in section 22(2), includes any company which may be wound up under part V of the Insolvency Act which applies, of course, only to companies registered in the United Kingdom.The Minister spoke about whether it would be expedient and in the public interest for the Secretary of State to recommend an inquiry on the basis of the receiver's report. Is he now saying that the record in another country of a company director in this country has no bearing whatever, even if it involves fraud or criminal acts?
I am open to correction, but my understanding of the Company Directors Disqualification Act is that the companies to which it applies are only those that are incorporated in the United Kingdom. Earlier, I said "registered": I should have said "incorporated". I shall check that matter, as I am speaking off the top of my head, and it is dangerous to do that when trying to be as helpful as possible at the Dispatch Box. If I have inadvertently misled the hon. Gentleman, I shall inform him and see what we can do to remedy the defect.
In deciding whether disqualification proceedings should be brought the Secretary of State must have regard to a number of matters. Can he satisfy the requirements about evidence placed on him by the courts? Part of the problem that we would face in this case is the acquisition of evidence to prove that which is alleged in court. When dealing with a foreign jurisdiction, it is difficult to be sure that the facts which gave rise to an offence in another country would be relevant to a prosecution for a similar offence in this country. That is because the elements of the crime, or whatever the charge, and the standards of proof may be different. A variety of factors would have to be considered. It is not certain that the evidence to be placed before the court would necessarily be as meaningful as evidence derived from experience in relation to a British company in the United Kingdom. That is my surmise of what I understood the position to be. I shall check that to ensure that my understanding is correct. We should have to take into account also whether there is a reasonable prospect of the disqualification order on the company director being made. Prosecutors always have to bear that point in mind. If they believe that their prosecution will not succeed, it will not be possible for them to bring the case before the court. We must take into account also any factors that, in the public interest, would weigh against bringing proceedings. However, if proceedings are taken and a conviction is obtained, the director is disqualified and the order that is made by the court can run for between two and 15 years. In some cases, the maximum penalty has been exacted, and that is a significant tightening of the powers in respect of misfeasance on the part of company directors, an offence that has been in existence for only four years. That shows how seriously the Government take company fraud and other malpractice. As the administrative receivers need time to consider all the relevant facts, the legislation allows them up to six months to do so. In the case of Clarke Foods, that period will elapse in April next year and I cannot anticipate what the receivers will find or whether they will consider it necessary to submit a report.Will the Minister confirm that he has the power to ask the administrative receivers to produce an interim report? In those circumstances, would it not be sensible to do so?
I can ask the receiver to produce an interim report and, if the hon. Gentleman asks me to do so, I shall; but I cannot say whether the receivers will agree to do so.
In all the circumstances, it would be more sensible not to pre-empt the outcome of the inquiries by proceeding with a Companies Act investigation at this stage. After all, if the receivers have discovered information that throws light on some criminal activities or some other breach of the law, they will bring that forward in due course. It would make it more difficult for us to take action that would succeed in the hon. Gentleman's aim of bringing miscreants to justice if that is what proves to be the case. I cannot prejudge the facts on the company. We want to ensure that all the relevant ingredients of an offence can be proved, and we shall not be able to take action until we have sufficient information to enable us to do that. I wonder how far an interim report would help to take us further down the road towards a realisation of the hon. Gentleman's objective, which is the same as mine—to ensure that if there has been wrongdoing, it is exposed and, where possible, punished. I take seriously the points made by all hon. Members in the debate and, although I cannot prejudge what may be discovered, I shall give them the promise that if we discover wrongdoing and form the view, in conscientious exercise of our power, that disqualification proceedings or further action should be taken, the Department will have no hesitation in taking it.The request made by the hon. Member for Knowsley, North (Mr. Howarth) and my hon. Friend's response are of the utmost importance. None the less, as far as I can see, they will not be putting any money back into the pockets of the work force, which is what those workers will be most concerned about. Will my hon. Friend support my moral contention that someone, somewhere, ought to support an ex gratia payment to the work force?
It would be wrong for me to give an opinion on that. If there is no legal obligation on any company to make a payment, it would be improper for Ministers to lean on it and exert what my hon. Friend calls moral pressure. It is for him to make the case, as I am sure that he has been doing and will continue to do, that his constituents deserve an ex gratia payment. However, it is not for Ministers to use their position to influence companies or private individuals to do more than the law requires. That would be to abuse the power of my office. because I would have no means to distinguish in different cases between deserving and undeserving cases, especially where there are significant elements of subjectivity.
Is not the crux of such problems, which occur far too often, that, right at the back of the queue in all the assessments—legal, moral or whatever—are the employees? Commitments to the employees go out the window with the start of the legal arguments about the responsibility on one company in a takeover of another. In this instance, I am sure that Mr. Clarke will thrive and prosper no matter what he does but, as the hon. Member for Ealing, North (Mr. Greenway) said, the employees will suffer.
It is incontestable that the employees are already suffering. In so far as they become creditors of the company, they are not treated any differently from any other creditors. They are not disadvantaged through being employees. Through the Insolvency Act 1986, which was a significant reform of the law, we have tried to reduce the number of preferred creditors so as not to disadvantage individuals who might not be as able to defend their own interests as some of the public authorities or companies that might be preferred creditors of the company concerned.
I disagree with the hon. Gentleman's implication that, under the present law, insolvency provisions discriminate against employees. They are in the same position as other creditors, but many of their rights are protected by law—for example, under the redundancy payments schemes—and the Department of Employment will make the necessary payments to them. All hon. Members can sympathise with that. Unfortunately, I can do little more than express that sympathy, but I reiterate the promise that I gave before my hon. Friend the Member for Ealing, North intervened. If any wrongdoing is revealed, and we can take action, we shall not hesitate to do so.Small Businesses (Deregulation)
7.28 pm
Despite having the dubious distinction of once featuring in "The Guinness Book of Records" for making the longest-ever after-dinner speech, when I spoke non-stop for 12½ hours, I shall not be detaining the House for long tonight. However, I welcome the opportunity to bring the House a message from Chester, and in particular the Chester chamber of commerce. This body of men and women are men and women who, when the business community is referred to, like to be known as "the business community" or "business people" rather than business men. That is an aside, but an important one. Ministers often refer to the business community as business men, just as they refer to consumers as housewives. The business community is the business community and consumers are consumers.
The Minister knows that the business community in Chester is active and articulate because recently, in his dual role with responsibilities for corporate affairs and for the north-west, he came to Chester for a lively and useful dialogue with the chamber of commerce, in which we exchanged views, and I reckon that he learnt a great deal. The message that I bring from Chester, and from the chamber of commerce, is simply this: it is vitally important for the burdens imposed on business by Government to be kept to an absolute minimum. That applies particularly to small businesses, which form the backbone of our corporate life in Chester. Small businesses simply have not the resources to spend a lot of time filling in forms that serve little or no useful purpose. I have been in business myself. I recall that, at the time of the 1987 general election, only some 21 per cent. of new Members of Parliament had had any experience of business or manufacturing, but I know that people who are in business from day to day do not want to have to fill in endless forms. The Government can take some credit for moving in the right direction: deregulation has been an important element of Government strategy since 1979, and advances have been made, from the abolition of exchange controls to the withdrawal of some 5,000 business forms. Nevertheless, there is always the danger of new regulations creeping into the system—regulations that are either too complicated or simply unnecessary. They can come from a range of sources: national Government, local government, bye-laws and EC directives. Tomorrow, I shall present a ten-minute Bill which aims to introduce plain language to commercial contracts. Tonight, on behalf of small businesses, I urge the Minister to ensure that what regulations do exist are kept as simple as possible. I salute the Department of Trade and Industry for what has been achieved so far. Earlier today, I had the pleasure and privilege of presenting the 13th annual plain English awards. I was but a poor substitute for the Prince of Wales—or the Earl of Chester, as some of us like to think of him—who was unable to attend, and sent his apologies. I will quote those apologies, because they are relevant to the debate. The Prince of Wales wrote, from Kensington Palace:I do not quite say, "God bless the Department of Trade and Industry", but I do salute Companies house, which is an executive agency of the DTI. It produces a lot of information to help companies avoid the many pitfalls of company law. A Companies house document won an award today: it is called "10 excuses for not filling company accounts and what Companies house thinks of them". I salute the DTI agency. During my short time in the House, I have noticed that hon. Members spend a great deal of time criticising Government agencies and flinging brickbats, and I think the occasional bouquet is in order. A bouquet was certainly forthcoming today, because this no-nonsense booklet gets its point across. It carefully demolishes the 10 most common excuses for not filing company accounts—and it is put in simple language too. I am pleased to say that it is one of those Government documents that are as modern as tomorrow, while being presented in a very simple style. It has not opted for an unnecessary use of colour, but it is quite legible. The booklet begins by telling us that this is not just a "lot of red tape". It then tells us why, taking us through all the excuses that small businesses use for not filling in forms. For example, they may say, "I cannot afford it". The answer comes back,"Due to a frequent regrettable inability to prevent my presence in other locations, I find that I must convey to you my goodwill in a correspondence format. It was when I was still a juvenile future constitutional figurehead substitute that I first became sensitised by mother-tongue abuse awareness. How many of us, I wonder, when faced with pretentious gobbledegook and empty jargon, experience a kick start into despair mode? My feelings towards all of you at today's Awards are, attitudinally, those of enormous encouragement … God bless the Plain English Campaign."
There is the answer—in a couple of dozen words, not of gobbledegook but of straightforward business talk. The last of the 10 excuses for not filing accounts really sums up the no-nonsense approach of the booklet. The reply to the excuse"Can you afford not to? Apart from risking a fine and a criminal conviction, think of the impression that your failure to file accounts gives to those you do business with. And its effect on your credit rating."
is "You do now." I hope that the Minister will pass on my congratulations to the head of the London office of Companies house, Alan Bryant, on the work that he and his team did in producing such a clear leaflet. We want more clear leaflets."I didn't know I had to"
This document is obviously important to small businesses. Does it refer to the forms that are sent to small businesses, particularly those in the building trade, by water authorities demanding information about certain matters? What does the DTI say to bodies unconnected with Government that demand form filling and lengthy question answering before small businesses can operate?
I entirely agree with the hon. Gentleman. The leaflet to which I have referred is designed to encourage small businesses to file their accounts properly, and it explains to them, in straightforward business terms, why it is important for them to do so. There are many regulations that we do not like, but I think that I am right in saying that the Government are not anti-regulation; they want deregulation—fewer regulations, simpler regulations and only the necessary regulations. I regard the filing of a VAT return to Customs and Excise on a quarterly basis as a necessary evil: it has spin-off benefits for small businesses, because it can help them to keep their accounts more effectively.
The point made by the hon. Member for Normanton (Mr. O'Brien) is not answered in the leaflet, but I hope that the Minister will answer it, because I consider it valid. We want simple forms, and we want as few of them as possible. We also want as few regulations as possible. One of the problems of the Minister's very existence is that, because he exists, he has work to do. I trust that he is working for his own redundancy: we want to secure sufficient deregulation not to need a Minister for deregulation any longer, the whole thing having become sufficiently simplified for him to be able to move on to even greater things in a Government whom he already adorns with such style, distinction, acumen and scholarship. Having buttered up the Minister to such an extent, I hope that I will get the right answers from him later—otherwise Chester will want to know why not! Some of the regulations about which my constituency complain have turned out to be phantom regulations. I received a number of telephone calls, and several letters, a week or two ago, following a television report that was shown in the north west. It may have been seen in other parts of the country. It featured a European Community regulation which, apparently, would require fishermen—I suppose that, in this context, I must tolerate the use of the word "fishermen" rather than the word "fisherperson"—to wear hairnets. The programme showed fishermen wearing hairnets, looking embarrassed and running down the regulation. I was of course appalled to discover that the European Community was insisting that fishermen wear hairnets, but it turned out not to be true—it was one of many phantom regulations. The Community has agreed that there should be a high standard of cleanliness on board fishing vessels but that does not mean that fishermen must wear hairnets. It is left to member states to decide the appropriate standards of hygiene. I understand from the Department of Trade and Industry that headgear is not included. I imagine that the measure was confused with a directive agreed last year on hygiene standards for fish processing and packaging plants on land, which is an example of necessary regulation. We all want high standards of hygiene and business requires them—that is the fine line which must be drawn between unnecessary regulations and regulations that will lift standards and improve life for businesses. It was extraordinary that in the same post I received letters telling me that jams and cakes sold on charity stalls would need to comply with European Community labelling requirements. Again, I was requested to speak to the Minister in charge of deregulation to ensure that that was one of the first regulations that he repealed. It turns out that it was another phantom regulation. Food sold on charity stalls for the benefit of a society officially registered under the Industrial and Provident Societies Act 1965 or food sold for anything other than commercial gain at, for example, school fetes and church bazaars—the type of event which we are rather good at in Chester—is exempted from the general labelling requirements which are designed to assist the consumer. Therefore, it is not a regulation that needs to be withdrawn. I sometimes feel that as a country we always want to believe the worst in everything. We half want such regulations to be true so that we can complain about them, like people who enjoy collecting examples of gobbledegook because it is fun to mock them. I want to see the best in everything. I know that under their deregulation initiative, the Government are working to minimise the administrative and regulatory burdens on business and to cut unnecessary and outdated regulation by improving the focus and administration of essential regulation. We accept that some regulation is necessary but please, let us keep it to a minimum by taking into account the views of business people when framing new policies and regulations, especially with regard to the potential cost of compliance. I salute the Minister because it is one thing to say that one will take into account the views of business and welcome letters from people saying what they want, but it is another to travel to a chamber of commerce meeting—as he did—and listen to and make note of what people said and promise to take action. I shall prove how effective the Minister can be and he can confirm the veracity of what I am about to say. During the meeting at Chester college of further education there were repeated demands for a cut in interest rates. The Minister had to take a break and left the room. He returned half an hour later bringing news from the Chancellor of the Exchequer that, during the meeting, the decision had been taken to bring down interest rates by a further percentage point. He is very much a Minister who delivers, and the Chester chamber of commerce sends a serious message of gratitude. To operate effectively, businesses need rules and regulations, but they need them to be kept to an absolute minimum. Those which are enforced should be clear, simple and light.7.44 pm
We are fortunate to have the opportunity to discuss deregulation as it affects small businesses. The hon. Member for City of Chester (Mr. Brandreth) mentioned a number of reasons for deregulation, but regulations covering small businesses involve Departments other than the Department of Trade and Industry. The Under-Secretary of State for Corporate Affairs may be responsible for deregulation, but other Departments are involved in creating regulations which target small businesses.
The hon. Member for City of Chester mentioned the Treasury and told the story of how the Minister left a meeting in Chester and returned to say that the Chancellor had just announced a reduction in interest rates. Clearly, one must take the Treasury into account when considering small businesses. From time to time, there is a need for more regulation of small businesses, especially when banks are involved. On 27 October I wrote to the Chancellor of the Exchequer requesting that he take action against banks which were levying exorbitant charges on small businesses. A constituent had written to tell me that a bank had raised its charges by 500 per cent. in one quarter earlier this year. If there is a call for regulation involving small businesses, it is to ensure that banks cannot attack small businesses in such a way. Banks may be having difficulties in making ends meet, but it should not be taken out on small businesses. When considering deregulation, I hope that the Minister will consider a point made by a Treasury colleague who, in a letter to me dated 13 November—only a few days ago—wrote that it was impossible for the Government to intervene when banks applied such pressure on small businesses. He stated:If there is a need for regulation, it is on the issue of bank charges. When a small business person enters into an agreement with a bank, certain assurances are given, but the bank has the power to increase its charges without notice to the client. Although I agree with the principle beind the debate—deregulation of Government intervention in small businesses—there is sometimes a need for additional regulation and, from time to time, the Government should consider what small businesses have to face. One of the highlights of this period is the fact that small businesses are finding it difficult to make ends meet and to keep themselves alive. The reason is invariably that they are subcontracted to large undertakings that go into liquidation, which has an effect on small businesses. Reducing regulations is important, but the Minister should consider additional regulations where necessary. The banks impose exorbitant charges for their services. A regulation should be introduced to control bank charges and the Government should intervene to ensure that there is fair play at all times between banks and small businesses. Another question concerns Government regulations on the rating of small businesses. I realise that it is riot the Minister's Department that issues regulations in that respect for small businesses. The hon. Member for City of Chester referred to the Treasury, and I accept that Treasury regulations need to apply to small businesses. The Department of the Environment also issues regulations concerning small businesses. I hope that the Minister will analyse the regulations that apply to small businesses, especially the uniform business rate. All non-domestic rates are paid directly to the Government. Small businesses, often as a result of Government policy, find it difficult to continue in business because the rates demand means that about one third of their income is taken by rates. There is need to reconsider the regulations that control the rates for small businesses. The Government's philosophy, which I do not support, is that large companies should pay the rate poundage as small companies do. In many instances, about 30 per cent. of the profits of small companies are taken to pay the rates. For large companies, the sum needed to pay the rates may be only about 3 per cent. of their profits. There is an anomaly there. The regulations on non-domestic rates should be reconsidered. If small companies have difficulties in making ends meet, the regulations should be amended so that such companies can have a rate rebate to help them over a difficult period. Such a measure could be introduced in co-operation with local government. There is no reason why the Government should not consider a rate rebate for small businesses. I assume that there is a periodic review of how the uniform business rate applies to small businesses. The Minister should examine the possibility of giving a rate rebate to businesses that are in difficulties. I make that point because the Government encouraged people to invest in small businesses. Many people in my constituency and elsewhere mortgaged their homes and everything they had to set themselves up in business. As a result of recession and hardship, families lose everything if the businesses goes into liquidation. A little Government help in the form of a rate rebate might have got them over a difficult period. When the Minister considers the question of regulation, or deregulation, he shoould consider carefully whether there should be a rate rebate for businesses that find themselves in difficulties. The Minister should also give further consideration to the question of loans to businesses. The hon. Member for City of Chester gave the example of the Minister advising Cheshire chamber of commerce of a reduction of 1 per cent. in the bank rate. All the Minister had to do was to go outside, lift up the telephone and talk to the Chancellor of the Exchequer or to Treasury officials. The Minister should discuss with his Treasury colleagues the possibility of there being a sliding scale under which small businesses which are having difficulties could be given a concession in the form of a reduction in interest charges. Over the past few years, interest charges for small businesses have been very high. In an intervention, I spoke about the attitude of water companies. I accept that the Government can act only on the regulations for which they are responsible, but I assume that there is nothing to stop the Government considering the legislation that controls the utilities, especially the water companies. There should be a regulation that prevents the water companies from putting pressures on small businesses in the shape of the forms and questionnaires that they have to complete. Small companies should be allowed to continue in business without having such demands placed on them, expecially by the water companies. Yorkshire Water is responsible for the control of effluent in my constituency. Yorkshire Water demands that companies put money up front. In one case, a small company could not meet all the demands. Some 90 jobs were lost because the water authority could not and would not help that small company. One reason is that Yorkshire Water has a monopoly. Although I represent a constituent who is having difficulty with the water authority, I could not raise the matter in the House with any Minister. This is the only opportunity I have had to present my constituent's case. We are talking about deregulation, but there may be a case to introduce regulations to control the monopoly position of water companies and of other utilities. It is all very well for Ministers to say that there is a regulator for the water industry. The question is, who regulates the regulator? Who tells the regulator what is fair and what is wrong? Conservative Members support competition, but there is no competition in the water industry. The Minister responsible for deregulation should consider the way in which the water industry affects small businesses. A few years ago, the association that represents small businesses called for the appointment of a Minister for Small Businesses. Conservative Members often refer to the last Labour Government. However, 13 years ago the last Labour Government had a Minister responsible for small businesses, but the Government have abolished that position. I have no reason to doubt the sincerity of the hon. Member for City of Chester about small businesses. lie admitted that he was involved with small businesses before he became a Member of this House. If he believes that small businesses should be fully represented, the Government must consider appointing a Minister responsible for small businesses who would answer questions about small businesses at the Dispatch Box. The Parliamentary Under-Secretary of State for Corporate Affairs is halfway there as he is responsible for the interests of small businesses and for the regulations that apply to them. However, that does not go far enough. Perhaps we should consider the appointment of a Minister responsible for the interests of small businesses in total. This debate is significant and important and I hope that the Minister will consider the issues that cause serious concern among many people who we represent in small businesses. We have been told that at least 70 to 80 small buinsesses go into liquidation each day as a result of the recession. We must do something to help those people and we can do that by pleading with the Minister to consider the regulations and, where they need amending to help small businesses, to amend them and where they need abolishing to help small businesses, to abolish them. I hope that some action will be taken to help small businesses to survive because the Government have made it difficult for the small businesses that were encouraged to develop in the 1980s. The Government are now turning their back on them. They are not prepared to help them in any way, shape or form. I hope that the Minister will consider my points about the banks and bank charges and about water companies and water charges. I hope that the Minister will consider the need for more investigation into the difficulties that small businesses face. The Government should introduce a rebate scheme to help small businesses over difficult periods. Those are not unreasonable requests. The Government could attend to those issues without much difficulty. If the Government paid as much attention to the survival of small businesses as they paid to the survival of the pound on black Wednesday a few weeks ago, the country would be better off and small businesses would have a better opportunity to continue to be the backbone of the economy. I hope that the Minister will consider the points that I have made."I am afraid that there is nothing directly that the Government can do to help since the level of charges applied by the banks for particular services is a matter for the commercial judgment of the banks and is not something in which the Government can intervene."
8.3 pm
It is a privilege to take part in this debate about the future of small businesses. The hon. Member for the City of Chester (Mr. Brandreth) considered the effects of deregulation on the small business community and my hon. Friend the Member for Normanton (Mr. O'Brien) gave the Minister practical examples of how we might help small businesses in the British economy.
It is also a privilege to participate in this debate because the Under-Secretary of State for Corporate Affairs, who is to reply, is the Minister responsible for small businesses. I have been advised that he is also the Minister responsible for the north-west. He is also a fellow Cheshire Member. I want to focus on the protection of small businesses and my remarks will have as much bearing on the Minister's constituency and that of the hon. Member for City of Chester as they will on mine. I ask the Minister for practical help in relation to the protection of small businesses. He should use the powers of the Department of Trade and Industry to intervene in respect of what might be considered a larger fish in this particular pond. I sought an assurance from the Prime Minister in Prime Minister's Question Time that he would intervene on behalf of the future of ICI which employs 4,000 people in the constituency of my right hon. Friend the Member for Halton (Mr. Oakes) in the chlora-alkali factory in Runcorn. The great majority of my constituents work in that factory which has seen a 60 per cent. increase in its electricity prices since April 1991. If it cannot negotiate a reduction in electricity prices or benefit from bulk purchases, 4,000 jobs will go at Runcorn ICI. One can imagine the impact of that loss of productive capacity on the small businesses in Runcorn and, more generally, on the small businesses in the north-west. That loss may also have an adverse effect on the British economy and that would have a major effect on small businesses in general. Another 3,000 ICI workers are involved in associated productions with the chora-alkali factory. It has been estimated that between 10,000 and 17,000 jobs will be lost in associated production if ICI closes the factory in Runcorn. That haemorrhage of jobs will have a major impact on the small business community in the north-west and particularly in my constituency as 16,000 of my electors live in the Runcorn area. I want the Minister to focus on the following statistic when he considers how best to help small businesses in my community. In my part of the Runcorn constituency unemployment is 17·4 per cent. and that costs £13,554,000 in unemployment benefit and lost taxation. That amount of money is being taken away from the local economy and paid in unemployment benefit. It could be better spent to protect the small business community. If the Minister is horrified at that statistic, he should consider what would happen if ICI closed the chlora-alkali factory. If we consider the associated job losses in small businesses that supply ICI, we are looking at £153 million or perhaps £198 million in money lost to the Government. The Government could intervene and secure the future for ICI and, therefore, the future of small businesses in the community. The chlora-alkali factory in Runcorn uses 1 per cent. of the production of the national grid. If the factory closes, that 1 per cent. of national grid production will not be purchased and that will force up electricity prices for small businesses throughout the United Kingdom. The Minister should use his powers in the Department of Trade and Industry to intervene in that respect. I welcome the President of the Board of Trade saying that he would intervene to protect industry before breakfast, before dinner and before tea. Intervening in big business—in respect of ICI—would have a major effect on securing the future of small businesses in my constituency. I suspect that the Government may already have decided that they are not going to intervene. In a letter to the leader of Halton borough council about the future of ICI, the Parliamentary Under-Secretary of State for Employment, Viscount Ullswater, stated:The best way to respond to the potential loss of small businesses in Runcorn and elsewhere in the north-west is for the Government to intervene in a major way on behalf of ICI."Should major redundancies occur, then the Employment Service (ES) and local Training and Enterprise Councils (TECs) offer a wide range of options to help unemployed people find jobs, retrain or set up businesses on their own … 'Local Action for Employment—Tackling Job Losses', which sets out the way in which TECs, the ES and Local Action Groups are helping individuals and communities respond to job losses."
I am listening to the hon. Gentleman with great care. For greater clarification and so I can give some thought to the matter, which particular powers available to us in the DTI would the hon. Gentleman like us to use which would not fall foul of European Community competition law?
I am grateful for the Minister's intervention. I shall conclude my contribution by saying precisely why the Department of Trade and Industry should intervene and why that would be possible without offending EC regulations. The Minister should be a little more patient as I do not have much longer to speak.
ICI wrote to me and to the Minister concerned, because he is a Cheshire Member whose constituency is affected by the problem, saying:That affects small and large businesses alike and it is relevant to the debate. The second paragraph of the letter states:"You will probably also be aware of the threat which this poses to the entire sector of UK manufacturing industry which is based upon the chlora-alkali manufacture".
The hon. Member for City of Chester said that burdens placed upon businesses must be kept to an absolute minimum. I agree with that. The burden that has been placed upon ICI with regard to the price that it must pay for its electricity could have a major impact on the small business community in my constituency. When I asked the Prime Minister to intervene, he said:"In attempting to address this problem, ICI has had extensive discussions with the Generators, the RECs and the Regulator, but has been unable to find a solution within the current regulatory framework. The only possible route to a solution now lies through intervention by the Department of Trade and Industry with whom discussions continue."
PowerGen and National Power, from whom ICI directly buys its electricity, are 40 per cent. owned by the Government. The Government are the major shareholder. In consultation with the Prime Minister, the DTI could exercise its rights as the major shareholder to ensure that ICI is given a fair deal on electricity prices. To refuse to intervene in that way would condemn 4,000 direct jobs, 3,000 associated jobs in ICI, and 10,000 to 15,000 other jobs."I cannot intervene in the way in which the hon. Gentleman invites me to, and it would not be right for me to do so."—[Official Report, 19 November 1992; Vol. 214, c. 409.]
What impact would it have in Brussels if we were to do as the hon. Gentleman invites us? What would Sir Leon Brittan, the competition commissioner, have to say to the Government?
The straightforward answer is that it would be wrong for me to presume what Sir Leon Brittan might say—I am not in a position to do so. I guess that he would be very supportive. He would see nothing wrong in ICI being given a bulk-purchase discount, because bulk-purchase discounts are a feature of the business community writ large. I am sure that that feature is prominent also in France and Germany.
The Minister could give an assurance that he will intervene because of the potentially large number of job losses in the constituency of Halton, in my own constituency, and in the constituencies of Tatton, City of Chester and Ellesmere Port and Neston. I would be grateful if, at this late stage, he would intervene on behalf of small and big businesses alike. Thank you, Mr. Deputy Speaker, for giving me the opportunity to address the House.8.12 pm
It is a great pleasure to take part in the debate, Mr. Deputy Speaker. As one who is active in a small business called Featherstone Rovers, I commiserate in yesterday's result in Lancashire. St. Helens took them to pieces. Hon. Members can rest assured that Featherstone Rovers will once again represent successful small business in terms of winning rugby league cups.
The debate has been good-hearted. Behind the hype on the two Front Benches there is much common ground about how to develop small businesses and find practical ways and means to bring about partnership arrangements in the public and private sectors to develop local economies and the key role that small businesses play in local economies. I remember watching the hon. Member for City of Chester (Mr. Brandreth) as the agony aunt on TV-am when I was hospitalised for a long period. The hon. Gentleman kept me going in the mornings between the painkillers and the nurse manipulating my back. I thank him for that brief respite from the rigours of treatment. If we are to reach common agreement about the role of small business and its relationship with the public and private sectors, whether large-scale or medium-scale companies as subcontractors or directly providing goods and services, particularly in the north-west and in the Yorkshire, Humberside and northern regions, we have to accept that the small businesses that were created in the 1980s are now under great strain. Thousands have already gone to the wall. Consequently, there has been a loss of employment opportunities for people in already devastated communities, and the individuals who ran small businesses have lost not only their businesses but their homes, their life savings and their resources. On many occasions, they have lost redundancy payments. One reason for that is the Government's colossal mistake in terms of interest rates. Interest rates have come down recently, but for tens of thousands of businesses it was too late. Businesses that are still struggling need further information from the Government on what they intend to do. Businesses are hanging on by their fingertips. They need information to be able to continue and, when we come out of recession, to be involved in the development of our local industrial base. The other reason is the way in which large institutions treat small businesses. Big business, month after month, failed to pay for the goods and services provided by small companies. In my constituency, companies have literally gone to the wall or have had to shed labour simply because larger companies have regularly refused to pay for goods and services. The Government owe it to small businesses to provide greater protection when large companies use small businesses as a free banking system and thereby risk the good management and financial stability of small companies. The DTI has responsibility for small businesses and large manufacturing industries not only in the regions of Scotland and Wales but in Northern Ireland. In my area, by deliberate Government policy, large companies have suffered severe difficulties, and that has undermined the fabric of the local economy and risked substantial numbers of small businesses. When I became a Member of Parliament, my area contained more than 10 collieries either within its boundaries or in its travel-to-work area. Parkside colliery, in the constituency of my hon. Friend the Member for St. Helens, North (Mr. Evans), was the last colliery in the Lancashire coalfield to remain open, and it is now one of the 10 under threat of closure in the 90-day procedures.Will my hon. Friend consider the future of the Point of Ayr colliery in north Wales? It sells 80 per cent. of its coal to Fiddlers Ferry power station, which is also threatened and might face a similar fate as that of the Parkside miners.
My hon. Friend is absolutely right. I relate that remark to the position of subcontracting small businesses and what is happening to them during the 90-day period, to what is happening to the long-wall mining subcontractors and main contractors, and to the small companies that provide goods and services to them, and to the need for the Government to take some logical decisions.
I am listening carefully to what my hon. Friend is saying. He is following the track that I laid, which is that, although the Minister may be responsible for deregulating small businesses, there is a need for additional regulations to defend the mining machinery industry and other industries for which protection is necessary. The Minister should take that issue on board. I wonder whether my hon. Friend would consider that matter.
Order. I remind the hon. Gentleman that the debate is about deregulation as it relates to small businesses, so he should confine his remarks to that.
I am well aware of the content of the debate, and I do not intend to stray from it. It is important to highlight the fact that we can regulate to assist some small businesses and deregulate some of them when regulation does not assist them.
The regulatory body for the coal industry has failed, which has resulted in tens of thousands of jobs in small businesses and mining communities being threatened. Many of those jobs have already gone. In my constituency, and in the constituencies of my hon. Friends the Members for Wigan (Mr. Stott) and for Leigh (Mr. Cunliffe), Gullick Dobson is a classic example of a company whose future is at stake because of the way in which the electricity supply industry's regulatory body has interpreted the electricity regulations. In the past few years since the introduction of privatisation, Gullick Dobson has shed 70 per cent. of its work force and its United Kingdom market has shrunk to virtually nothing. Because of that shrinkage, the whole concept of its export market is put at risk. Its inability to have a market at home means that it cannot produce for an overseas market. Many small businesses, such as fitters' companies, shot blasters, machine tool companies and transportation companies, are linked to the long-wall mining industry. In turn, they are linked to the decisions of the regulator through the Department of Trade and Industry because the mining industry is the largest employer. Therefore, there is a direct link between deregulation of large companies and the consequences for small companies when the regulatory machinery fails. Another example of the failure of regulatory machinery which threatens the financial viability of small businesses is the regulatory body for tariffs and small users of electricity. It is scandalous that companies such as the North Western electricity board, the Merseyside and North-Western electricity board, the Eastern electricity board and the South-Eastern electricity board impose substantial tariffs that undermine the financial viability of small companies. The viability of local economies is threatened by such companies because they have a monopoly of the supply of electricity. The electricity suppliers make huge profits. Competitors abroad cannot believe their luck when they see what the British regulatory framework and the electricity supply industry do to large, medium and small businesses. It is outrageous that the regulatory body has failed to take into account the effect of the pricing policy on small businesses. Having seen that effect, the President of the Board of Trade has failed to take any action against the regulator to rein in the profit-making activities of the supply industry which undermine small businesses in the United Kingdom. Another sector in which a lack of regulation has affected small businesses is the housing investment programme of the Department of the Environment. The Minister should speak to the Secretary of State for the Environment about how the regulations have been framed and how local authorities disperse the resources for the housing investment programme. Millions of pounds which would go directly to small businesses in the private sector for housing refurbishment, housing development, new starts and new partnership schemes between the public and private sectors and the private and voluntary sectors have been held up. Those programmes will not take place as a result of the way in which the Government operate the housing investment programme. If we are serious about getting out of the recession, we must recognise that one of the main vehicles is the businesses in the building supply and construction industries. The Minister knows that small businesses in the north-west are contracted to large companies, local authorities and housing associations which work in the voluntary sector. The Minister could make a dramatic input into the recovery by persuading his colleagues in the Department of the Environment to take some action.Does my hon. Friend agree that one way of stimulating small businesses is to allow housing investment programmes to introduce capital repair schemes, which are much easier and quicker to introduce than capital projects? Capital projects may take two or three years to come to fruition.
My hon. Friend was a member of a finance committee of a local authority before coming here. He is absolutely right. The Government have suggested that the Conservative party is the party of small business and enterprise. However, when we see Conservative Members in action, we find that they are not the party of small business. Some of their activities and the way in which they interpret things are anti-enterprise. They believe that any investment in the public sector is bad, even though that investment goes directly through the local authority and the voluntary sector into the private sector.
Most of the public sector investment is picked up by small businesses in the private sector. The Government's ideological excuses and policies are a major stumbling block to small businesses in the construction industry. The Government owe it to the industry and those who are employed in it to conduct a serious review of their policies. The President of the Board of Trade needs to talk to the Secretary of State for the Environment about the regulation of city grants. The regulations were introduced to ensure that capital projects took place in areas in which the Government deemed it necessary to build a local infrastructure. The regulations related to investment in which there was a direct input by the private sector, a direct benefit of jobs through the private sector and, especially, the creation of small businesses in the area designated by the Secretary of State for the grants. My hon. Friend the Member for Wigan and his constituents, and my other colleagues in the north-west who represent areas which are taking part in the city grants, now find that the Department of the Environment is reinterpreting the regulations, which undermines confidence about the development of joint projects with small businesses in the community. That is unacceptable. We will not argue about whether city grants should be made available. If the grants are part and parcel of the Government's policy because the major beneficiaries in the community are small businesses, why do they not just get on with it? Why do not the Government allocate the resources and say to local authorities, training agencies in the community and private firms involved in joint projects, "Here are the resources. Go away and get on with the job."? The Government should stop getting on the back of local authorities every five minutes of the day, changing decisions and rescheduling where the money should be spent. That undermines the extent to which small businesses in the community can bounce back. Opposition Members do not accept that all that is necessary to rebuild the economy of Britain is to create 1 million small businesses. It was not true in the 1980s when Mrs. Thatcher said it; it is not true now. However, small businesses must be part and parcel of the overall economic objective to work with and link in with medium-sized and large companies, with the private sector and the public sector. With such a partnership it is possible to develop job opportunities for young people, people with skills, semi-skilled people, women and ethnic minorities. Unless the Government take on that challenge we shall come back next year to unemployment at 4 million, growing desperation in the communities of the north-west and another lost opportunity. It will be another decade of young people without hope or opportunity. That is the challenge for the Government. The challenge is not to take regulation off the back of industry. It is to work side by side with industry to develop new jobs, new opportunities and new markets. If the Government can meet the challenge, they will go some way towards removing the misery of mass unemployment in our region.8.31 pm
I offer my apologies to the hon. Member for City of Chester (Mr. Brandreth) for missing the first few minutes of his speech. I was in a meeting with a Minister to discuss a case which is a spin-off from the collapse of a small business and has had an effect on the domestic affairs of some of my constituents. I am grateful for the time that I spent with the Minister discussing that matter.
I have a particular interest in small businesses engaged in high technology. It is ironic that the debate was introduced by the hon. Member for City of Chester whom, as my neighbour, I have come to know reasonably well. I noted that a review in a magazine of a piece of software manufactured by a small business described the software as being somewhat like the hon. Member for City of Chester—"erudite as it is annoying." I join the hon. Member for City of Chester in calling for deregulation and improvement of the resources and facilities available to small businesses, many of which in our area are suffering for some of the reasons that have been described by hon. Members on both sides of the House. Businesses are suffering as a result partly of the regulatory regimes in force and partly of the spin-off of changes which impact on large industries which are themselves regulated. My. hon. Friend the Member for Warrington, South (Mr. Hall) made that point in the context of ICI. My hon. Friend the Member for Makerfield (Mr. McCartney) made the point in the context of the coal industry. I recently met the Neston and Parkgate chamber of trade. The Minister represents a seat in the north-west so he will know that part of Cheshire; it is one of the nicest parts. The chamber of trade made several points which impact on the debate. It made precisely the point made by my hon. Friend the Member for Normanton (Mr. O'Brien) about bank charges. It saw the problem in two ways. The first was the lack of control of banks. Banks can levy outrageous and variable interest rates and charges associated with the activities of small businesses in an unstructured way. It also saw the problem in comparison with the system in other countries. The Minister asked in an intervention what he could do on some of the European issues. The chamber of trade made a comparison with the position in Germany. It is well known that small and large businesses in Germany can have assistance from the banking sector spread over a much longer period than is normally the case in the United Kingdom. Although that problem does not stem directly from the regulatory regime, the Minister and his colleagues from other Departments could take steps that would be of use to small businesses. The chamber of trade also noted that several small businesses in the area had been set up by people who had received redundancy payments from larger companies which had shed labour for one reason or another. One of the most common factors in my area is that companies decide to dispose of what they describe as non-core activities. Those activities still have to be undertaken and small enterprises often do so. On the face of it they are self contained but often they operate under the constraints and indirect management of the large companies for which they provide services. There is a powerful argument that contracts established between small businesses and large multinationals in such circumstances should be controlled so that the small business is not so beholden to the large multinational that it cannot conduct its affairs in a fair and competitive way. My hon. Friend the Member for Normanton also mentioned delays in payment by large companies. That is indirectly related to the regulatory regime. Small businesses often find themselves indirectly the bankers of the large multinationals by virtue of the policy of delayed payment of invoices and charges that they have incurred. That is a matter in which the Government could intervene directly by either introducing regulations or providing in the next Budget to ensure that small businesses are protected from such practices. It is clear that such practices are not only anti-competitive but can put small businesses out of existence. Another aspect of the debate emerged today in a letter from one of my constituents. Mr. Brown has a small shoe repairing business. He wrote to me today saying that the proposed regulations on Sunday trading could put him out of business. I am aware that Sunday trading is not the subject of the debate but it must be considered when the House discusses the Sunday trading proposals. Whatever regulatory regime we decide to accept, we must take into account The small business sector. We cannot base our decisions solely on the interests of large supermarket chains, but must consider those of the entire retail and supply sector.indicated assent.
I see the Minister nodding. That will be an important aspect of the Sunday trading debate.
Small businesses often tell me about their difficulties in getting what they see as a fair share of training resources. We have been told that the provision of the training and enterprise councils should have ensured that that problem did not exist. Many small businesses feel that they are disadvantaged over access to training, when compared with the local major players. Perhaps the Minister should study the regulatory regime which covers the TECs to ensure that small businesses are provided for adequately. Several hon. Members have mentioned the building industry and clearly many small building companies are in extreme difficulties. The regulatory regimes that affect them could be improved and enhanced. However, as my hon. Friend the Member for Makerfield said, their needs go far beyond the realms of this debate. The hon. Member for City of Chester referred to various phantom regulations. We can all quote chapter and verse of wonderful European Community stories, which inevitably turn out to be untrue, but are spread around by people—including some hon. Members—who do not have Europe at the centre of their hearts or wish to be at the heart of Europe. However, there are many real, and in some cases perfectly reasonable, regulations which need careful consideration. Neston is a beautiful sandstone town. I am sure that the hon. Member for City of Chester knows it, and as we both have an interest in historic buildings, I am sure that he would agree that no one would want the character of such a town to be destroyed. The small traders of Neston have a difficulty. They want to improve security and shuttering at night because of increased crime levels, which have affected many constituencies. The local authority has said, reasonably, that because of the nature of the town and the character of the buildings it would be totally improper to make the place look like Fort Knox of an evening. The town needs to retain its character. No one in the House is likely to disagree about the fact that the aspirations of both parties are reasonable. The Minister could help small businesses by seeking ways to intervene to assist financing of projects when the interests of small businesses are in conflict with those of the national heritage. I do not suggest that he should bail out large multinationals in such circumstances, but there is a powerful argume.t for better protection for the small enterprises which form the core of many of our small historic towns. As he is a Cheshire Member, I am sure that the Minister knows Neston. Perhaps there could be some improvement in the regulations governing the conduct of small businesses when they conflict with the proper interests of national heritage. The hon. Member for City of Chester and I share another interest—the development of plain English, although sometimes his version does not coincide absolutely with mine. It is clear that many small businesses suffer because the forms and documents that they have to fill in are over-complicated and require them to engage laywers unnecessarily and at great expense. There is a powerful argument for regulations to require all Government Departments to ensure that documentation, wherever possible, will not require small businesses to involve expensive lawyers. That is not a plea for keeping lawyers out of everything. I know that some of them are also small businesses, but they are in a fairly privileged position. I fundamentally disagree with the Government's handling of some local authority agencies which have recently sought to assist small businesses. A number of agencies were established by local authorities in the 1980s, under the general title of enterprise boards. I am sure that the Minister could quote chapter and verse to criticise enterprise boards, but some extremely successful experiments were conducted. Lancashire Enterprises is still working extremely well and supports small and medium-sized businesses in the area. There is a place in our society for local organisations which are accountable at a local level. There is an important difference between such organisations and some of the existing agencies. Local organisations could help to stimulate and to promote small businesses, as they have a specialist knowledge of the local area. My hon. Friend the Member for Warrington, South mentioned the number of small businesses which exist as a spin-off from larger enterprises and referred to ICI, and that was an important argument. About a week ago, my hon. Friend the Member for Birkenhead (Mr. Field) told us about the huge number of jobs that hang on the back of Cammell Laird. Similarly, in my constituency there were 500 redundancies at Shell and, a few weeks before that, another 500 at British Nuclear Fuels. Because of the nature of those industries, they require a huge number of supply companies. As I said in the media when talking about the Shell redundancies, the knock-on effect will carry on right the way down the chain to the man on the street corner who sells newspapers to people coming out of the plant. The multiplier effect is well known. The Minister may say that it is outside his brief to consider the major redundancies that hon. Members have mentioned, but the knock-on effects need careful consideration. I do not know whether that is intervention before dinner. We shall not go through that again as it was tedious when we first heard it because we did not believe it. We need some Government involvement to ensure that proper support is given to the many small businesses that are being hit by major redundancies in the north-west. Finally, it is interesting to note that hon. Members representing constituencies in the north of England have made the largest contribution to this debate. A significant number of contributions have been made by my hon. Friends. Contrary to the popular belief of those on the Government Benches, as evidenced by their jeers from time to time, our party is not opposed to enterprise and small business. Far from it, we want to see a thriving economy that, by the very nature of modern industry—given the rise of new technology companies—will be represented by small enterprises. They will need positive Government support. They do not need interfering regulations, but supportive ones, as my examples about the shutters in Neston and bank charges illustrated. The Government must also remember, as my hon. Friend the Member for Makerfield said, that the activities and management of large enterprises have an indirect effect on small businesses, perhaps through a shareholding, which is vital to the success of small businesses down the chain. I urge the Minister to consider the importance of that relationship between large and small businesses when he replies to the debate.8.51 pm
With the leave of the House, I shall reply to the debate.
First, I congratulate my hon. Friend the Member for City of Chester (Mr. Brandreth) on giving me the opportunity to be here at this time of the evening. I had feared that I would be here much later, but, unusually, we have been able to have an extended debate on this important topic. I welcome that. I welcome the fact that, as the hon. Member for Ellesmere Port and Neston (Mr. Miller) said, this debate has been dominated by the men of the north, including even the hon. Member for Jarrow (Mr. Dixon), whom I am delighted to see here. He took a fatherly interest in my career when I was in the Whips Office and I learnt a great deal from him which, should we ever go back into opposition, I shall put to good use. As that seems such an unlikely prospect, however, like so many of the qualifications that I have acquired during my life, I fear that those lessons will be condemned to eternal redundancy. I also welcome the fact that the debate has been dominated not only by Members representing the north but by those representing Cheshire, including the hon. Member for Warrington, South (Mr. Hall), whose constituency abuts mine. Who knows, but for my intervention—canvassing in his constituency during the general election—he may not have been here this evening. It is a great pleasure to welcome hon. Friends on both sides of the House to the debate and even one from the other side of the Pennines, the hon. Member for Normanton (Mr. O'Brien), who was brave enough to poke his head over the western side of that mountain chain, metaphorically speaking. I am sorry that the hon. Member for Makerfield (Mr. McCartney), which is in Lancashire, has had to leave. He informed me that he had to go to Broadmoor; I am not quite sure in what capacity, but no doubt that will be revealed in due course. I welcome all the contributions to the debate. My hon. Friend the Member for City of Chester referred to the role that he had performed on behalf of the Prince of Wales and the Earl of Chester. I am not at all surprised that he has been selected to carry out that important role, because, before he became a Member, he was the clown prince of television. If one has a reputation for being amusing, however, it is difficult to convince people that one can ever be serious. I am afraid that my hon. Friend will have to bear that burden. I am sure that it is already evident to hon. Members and to his constituents, however, that the capacity to amuse is not at all inconsistent with the ability to represent one's constituents extremely effectively. My hon. Friend has already shown me in many respects that he can do that and I wish him a long and successful career in the House. The subject of deregulation is extremely important. I must admit that I was somewhat disappointed when I assumed my office after the general election as the Minister for Corporate Affairs—in which capacity I am also responsible for company law—and took down two volumes from the bookshelf and compared their size. The 1980 Butterworth's Company Law Handbook had 486 pages, but the 1991 volume, which was the latest then available, had 3,544. That vast increase in complex legislation, no doubt much of it for desirable reasons, nevertheless demonstrates the increase in the regulatory burdens that have been put upon businesses of all kinds. Perhaps that is the most dramatic example of the way in which legislation has proliferated. In front of me on the Table are the bound volumes of the product of all our labours since I entered the House in 1983. It is a frightening prospect when one considers that we have visited those laws upon the people. No doubt there is much in those volumes that is good, but no doubt there is much that is redundant or that, in retrospect, we now believe, perhaps, we should have done in a different way. My job, although it is consistent with the desirable objective of protecting the public in a variety of ways, is to ensure that the burden of legislation and regulation is no more than is absolutely necessary in order to provide the protection that, on other grounds, we think is appropriate. So often, however, regulation remains on the statute book for years, decades and sometimes even centuries after the need for it was first appreciated and after the circumstances which gave rise to that need have long since disappeared. There are all sorts of peculiarities on the statute book today at which we might be somewhat surprised. I have discovered that some of the more peculiar ones are in respect of betting offices. The Betting, Gaming and Lotteries Act 1963 (Schedule 4) (Amendment) Order 1986 makes the following requirement in a new para 8(i):in plain English that means a television—"No apparatus for making information or other material available in the form of visual images"—
I have no idea what gave rise to that restriction on the size of the television for use in a betting shop. As there is no restriction on the number of such sets that can be displayed inside a betting shop, the more innovatory of those establishments have attempted to get around the legislation by setting up a video wall of televisions. In paragraph 10 we find the list of refreshments that may be sold on those premises which include,"shall be used on the licensed premises unless those images appear on a screen; and any screen so used shall not (a) exceed 30 inches wide."
I followed that point with interest. The Minister said that only one Yorkshireman but five Lancashiremen had taken part in the debate, which shows that one Yorkshireman is equal to five Lancashiremen.
The Minister was correct to point out that some of the regulations still on the statute book are out of date and should be erased. Does he also accept that new regulations should now be introduced to defend the interests of small businesses?In general, small businesses do not welcome greater regulation. Indeed, much of my time is spent discussing with them how we can reduce the regulatory burden on them, which serves no purpose other than to annoy. Where a case can be made for introducing regulations, we are prepared to consider it, but there must be a beneficial purpose behind proposed regulations. Moreover, the costs that they impose must be proportionate to the benefits to the public at large. It is not easy to generalise, but often in the past when we have decided to legislate or regulate we have not taken the cost into account. I am happy to say we shall now require cost-compliance assessments, where appropriate, when new regulations are proposed. That applies also to European regulations.
I hope that in future we shall make increasing use of risk assessment techniques, whereby we can try to quantify the risk which the public run by doing nothing and compare it with the cost imposed on business. After all, business is involved in wealth creation, which is also in the public's interest. If we think that the regulatory burden on business is excessive in relation to the proposed benefit to be bestowed on the public in some other way, whether it be environmental health, fire regulations or whatever, we shall take it into account in deciding whether to regulate. Often, that has not been done in the past, with the consequence that the volume of legislation with which we must now cope has been formulated without a rational basis—rational in the sense of choosing the level of regulation that we wish to impose, bearing in mind the associated costs. No regulation is justifiable unless we can perform the arithmetic of that equation, because until we know what cost we shall impose on business, we cannot take the overall view of the public interest, which is what good legislators should bear in mind.Will the Minister be more specific about the question raised by my hon. Friend the Member for Normanton (Mr. O'Brien) about bank charges? Does he believe that regulations governing bank charges to small businesses should be tightened?
That is a matter of contract between freely consenting adult partners. I do not believe that it is appropriate for the Government to become involved in such matters, because if we sought to lay down the law on that matter, it would have repercussions on other banking activities. We might then find that certain functions were not performed by banks because it would not be worth their while to do so. We might find that the costs imposed by legislation would be recouped in other undesirable ways from people who would not reap the benefits of the lower bank charges advocated by the hon. Gentleman.
It is not a simple question. It is not sensible for the Government to become involved in the detail of contracts between individual businesses, lenders and borrowers because each case has its own facets and features. If we start to second-guess those decisions, we shall take a step down a road that leads we know not where. Consequently, if the Government take an intiative of the kind proposed by Opposition Members, they may find that, far from being the friend of small business, they are the foe, because banks would be less likely to lend in those circumstances. That would significantly inhibit individuals' ability to set up small businesses, which we hope will eventually become large businesses.I am sorry to press the Minister further on that point, but I used the word "control", not the words "make lower". Does he believe that the Government should regulate or control activities regarding bank charges? I asked that question specifically because of the number of businesses that have complained about charges that have been unilaterally imposed on them from on high by the banking regime, putting pressure on those businesses. Does the Minister accept that that is an unfair practice? Against that background, does he believe that there is a place for control?
There is a multiplicity of sources of lending. If it is a profitable way of doing business, it is possible to incorporate into any contract for borrowing and lending the type of legislative clauses that the hon. Gentleman implies.
I think that it is not for Governments to lay down the forms of contract that banks should be obliged to use in lending to customers. One of the consequences of such a prescriptive approach might be to encourage banks to make loans that are not good loans. We have seen the results all too clearly and dramatically in recent years: the costs of the losses are redistributed among other customers. It is wrong for the Government to seek to second-guess such decisions, which ultimately are not costless. The repercussions of the decisions are often not foreseen, and when they come back to haunt us we regret that we took them.
Will the Minister give way?
I must move on to the more general points that I wish to make on deregulation rather than remain on the narrow issue of bank lending, important though it is to individuals. I shall press on with the few general points that I wish to make.
rose——
I shall not give way. I am sorry. I think that I have been generous in allowing hon. Members to intervene. We can argue the matter on another occasion. The hon. Gentleman may be fortunate enough to secure a debate on the Consolidated Fund Bill, to which I shall be happy to respond at about 4 am in a week's time—I say that with tongue in cheek.
The issue of deregulation goes far and wide. I shall confine myself to the general principles that apply to what the Government are seeking to do in this Parliament to take forward an important task. We wish to reduce the burdens on business and hence encourage the wealth-creating process that we all want to see. My right hon. Friend the Prime Minister has charged me in particular with the duty of making myself the most hated Minister in Whitehall—not with Opposition Members but with my Front Bench colleagues. He has authorised me to enter every Government Department and to require each individual deregulation Minister to produce a list of regulations for repeal and simplification. Anyone who knows anything about Whitehall will know that my task will not be an easy one to perform. The culture of Departments is regulatory and not deregulatory. We must change the way in which legislators and civil servants think about the way in which they do their jobs. We must get them to bear firmly in mind that, when we introduce regulations, we are often imposing a cost burden on business and, therefore, an inhibition on the wealth-creating process. The consequence is that we must each examine our own conscience and examine also the accumulation of legislation which we have inherited from our predecessors in our respective Departments. The examination must be carried out in accordance with the searching test that I have described. My right hon. Friend the Prime Minister is taking a close and personal interest in the initiative, the prime responsibility for which he has entrusted to my right hon. Friend the President of the Board of Trade, to whom he has given the task of hacking away the jungle by which we are beset. That is something that my right hon. Friend will carry out with great gusto. I hope that within a short time we shall be able to produce our first checklist of legislation for repeal or simplification to achieve a positive and worthwhile objective. In the coming months, I shall report regularly to the House. My right hon. Friend the Prime Minister also wants me to report to him every month on the progress of this initiative. That should be a signal to all my right hon. and hon. Friends that they need to take it seriously. This is an opportunity as great as, if not greater than, the one that we seized in respect of the citizens charter, which was designed to make public services more user-friendly and responsive to the citizens who, through their taxes, pay for them. In this case, we have what is probably a much greater opportunity to improve this country's wealth-creating potential and hence the employment-creating potential of the economy. I can illustrate that by giving a simple example of how we can stop onerous legislation being introduced and make the burden of legislation more suitable to the task set for it. Recently, the Home Office introduced draft fire regulations in pursuance of a new European Community directive. As originally drafted, the Association of District Surveyors estimated that it would impose a cost burden of £8 billion on industry. The deregulation advisory panel in the DTI, composed of private sector business people who will have to cope with these regulations, made representations, together with others, with the result that the Home Office has withdrawn the regulations and will significantly reduce the impact on business—without doing violence to our proper regard for the protection of the public. Premises in which people operate must of course be safe for use, but it is absurd that a one-man business operating from home should be required, as it would have been under the original draft, to reverse all the doors through which the public might pass so that they open outwards, not inwards, under illuminated signs saying, "Fire Exit". That would have happened had we not sent the draft regulations back for translation into more acceptable form. There is much that we can do; we must examine what has gone and what it is proposed shall come—not only in Britain but from the European Community. We are anxious not to over-implement the obligations that we assume through the EC, thereby imposing a competitive disadvantage on our firms. I shall not be able to answer all the points made in this debate, but I shall do my best to respond to some of them. The hon. Member for Normanton referred to several issues, including bank charges, with which we have already dealt. He asked whether we could introduce new regulations with respect to the national non-domestic rate. I am surprised that he, as a northern Member concerned about manufacturing industry, should ask for that. The new business rating system has resulted in an enormous transfer of resources from the south to the north and from service industries to manufacturing industries. Given the interest shown by Opposition Members in these subjects, I am surprised that they should be so ungracious about the system that we have introduced.Once again, the Minister has missed the point, just as he did with bank charges. The contribution from the profits of small businesses to the rates works out at between 25 and 30 per cent. The contribution from the profits of larger companies to the rates is about 2 or 3 per cent. So regulations act against small businesses. When the latter experience trouble making ends meet, they should be eligible for a rebate.
The hon. Gentleman is arguing for a form of corporation tax, which is paid according to the size of a company's profits. If he thinks carefully about that, he may realise that that will not do many small businesses a great favour. It is a big step: the abolition of the rating system as we know it—the very system that the Labour party has been arguing that we should bring back in respect of domestic properties. It will be interesting to see how the hon. Gentleman reconciles those two positions—but on another occasion. The hon. Members for Warrington, South and for Makerfield——
Will the Minister give way?
Perhaps the hon. Gentleman will forgive me if I do not, because I am about to deal with a matter of great importance to Cheshire Members. I should like to reply to the issues raised about ICI, which is a major employer in my constituency at Northwich. ICI Pharmaceuticals is also located at the other end of my constituency at Alderley Park. I have had close co-operation with ICI throughout my career in the House. I spoke to Sir Denys Henderson and his senior colleagues only last week and one of the complex topics that we discussed was energy prices.
The powers that Opposition Members imagine we have are not available to us. Electricity is now a regulated industry and the regulator's role is laid down by legislation. His job is to balance the interests of consumers and producers and to ensure that there is no discrimination. The generators and the regional electricity companies operate under licence and their operations must reflect the wider concerns of the new regulatory regime. It would be wrong for us arbitrarily to select individuals or companies to receive power on a discriminatory favourable basis. I fully understand ICI's concerns. It wants to dedicate the output of one power station, Ince power station, to Runcorn. As the hon. Member for Warrington, South said, fairly, ICI consumes 1 per cent. of the entire output of Britain's electricity generators. One of the reasons for price increases being as great as he said is that, under the previous system, ICI was able to make use of the marginal tranches of coal for which a marginal cost was levied under the special qualifying industrial users scheme introduced by the Government. The consequences of the phasing out of that scheme is that a return to normal levels of pricing from a low base gives the impression of large and unjustified price increases. I have told ICI that we shall consider its case and if we find a means of addressing its concerns which does not do violence to the general principle of competition and fair and equal dealing between customers, we shall assist. This is a complex matter, and it is not for me but for my hon. Friend the Minister for Energy. We are in close contact with ICI and shall give the greatest consideration to its arguments.I listened with great interest to what the Minister said about the regulatory framework which has dictated the 60 per cent. increase in ICI's electricity charges over the past 18 months. There is a way around the problem. Does the Minister accept that the regulatory framework was introduced by his Government on the privatisation of electricity?
I am happy to accept that, because, as a consequence, the average electricity consumer is now paying 11 per cent. less for his electricity than he was paying before the regulatory regime was introduced. We are discussing changes in the relativity of prices. Customers who previously enjoyed low electricity prices have had greater than average increases as a result of phasing out discrimination. Overall, the consumer is paying less for electricity, but by implication some consumers must be paying more. That does not sit well with the arguments of the hon. Member for Makerfield and others who asked for special treatment for British Coal.
Coal prices are the principal ingredient of electricity prices. The average price of coal produced by British Coal is £43 a tonne, compared with £33 a tonne on the spot market, and the considerable burden of that extra cost is placed on all power consumers in this country. I am happy to congratulate all those who work in our coal industry on the massive increases in productivity that have taken place over the past six years and on the enormous strides towards converting what was fast becoming an industrial museum into a modern and competitive industry. If such steps had been taken earlier, we would not be facing such severe problems now. We cannot on the one hand argue that there must be no electricity prices and on the other hand support practices that produce high-cost coal. I do not want to be led into an argument about the coal industry, because it is not a small business, and I think that you, Madam Deputy Speaker, would rightly call me to order for straying more widely than the title of the debate should allow; but, as the point was raised in the debate, I felt it right to make some reference to it in my reply. The hon. Member for Ellesmere Port and Neston made a number of points. I was particularly interested in what he said about the impact of regulations on small businesses in conservation areas and other heritage locations: I am a strong supporter of regulation in that context. I am very interested in the "built heritage" of this country, and in the maintenance of historic cities such as Chester and the many agreeable towns that can be found in Cheshire and other counties in the north-west—some of them in my constituency. We must tempter the zeal for regulation with some moderation, but I do not believe that the two need be inconsistent. I think that we can have regulation without making it too burdensome for businesses. Much of the regulation that preserves the historic continuity of our conservation areas need not impose any cost on business; in fact, to the extent that it prevents them from making costly but ugly changes to their premises, it could benefit them in terms of competition. The Government are determined to make considerable strides in the current Parliament to reduce the regulatory burden on business. If we failed to do that, we would fail in our duty, because it is by that means that we can increase the wealth-creating potential of this country—and from that will come the jobs that hon. Members on both sides of the House desire to see.Question put and agreed to.
Adjourned accordingly at twenty-two minutes past Nine o'clock.