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Office for the Supervision of Solicitors
33. Dr. Alan Whitehead (Southampton, Test): What discussions he has held with the Law Society concerning the operation of the Office for the Supervision of Solicitors. [96378]
The Parliamentary Secretary, Lord Chancellor's Department (Mr. David Lock): I met the president of the Law Society on 20 October. I discussed with him the current position at the Office for the Supervision of Solicitors and the timetable that has been laid down by my noble and learned Friend the Lord Chancellor for the improvements in the performance of the OSS up to the end of December next year.
Dr. Whitehead: I thank my hon. Friend for that answer and congratulate him on his richly deserved appointment.
What targets did he set for the Law Society and the Office for the Supervision of Solicitors at his meeting? What does he envisage happening if the targets are not met?
Mr. Lock: My noble and learned Friend the Lord Chancellor wrote to the president of the Law Society on 23 July and set the following targets: the number of unresolved cases on the office's books should be down to 6,000 by 30 December next year; subsequently, 90 per cent. of cases should be tackled within three months, and 100 per cent. within five months of receipt. He also said that the quality of decisions should not decline. We will judge that by the views of the legal services ombudsman.
The agenda is clear: reform of the OSS is essential. The Law Society is investing £10 million in reform. It must produce an acceptable quality, and a reliable and efficient system in solicitors' firms and in the office. If that does not happen, the Government will use the powers in the Access to Justice Act 1999 to enforce a proper complaints system for solicitors through the legal services ombudsman.
Mr. John Burnett (Torridge and West Devon):
I congratulate the Parliamentary Secretaries on their appointments. Will the Minister ask the Law Society whether its complaints and supervision committee has been excluded from discussions on the future of the OSS and whether the policy of handling complaints independently has been watered down? What action will the Government take to secure the independence of the OSS? Does the Minister consider the maximum compensation payment of £1,000 to be adequate? If not, what will he do, and when will he do it?
Mr. Lock:
I am grateful for the hon. Gentleman's kind words. There have been persistent rumours about the exclusion of the Law Society's complaints and supervision committee. I am assured that that is not so. Both the chairman and the lay chairman of the committee sit on the OSS change management task force. I would be interested to discover the source of the rumours.
There is no question of watering down the independent handling of complaints in firms. When the president of the Law Society spoke at its conference last week, he made it clear that client care and the proper handling of complaints in solicitors' firms should be a priority.
My noble and learned Friend the Lord Chancellor told the Law Society that he considers the present compensation limit of £1,000 for unsatisfactory professional service inadequate and proposes to increase it to £5,000.
Mr. John Bercow (Buckingham):
Does the Minister accept that urgent reform of the OSS is vital, not least to a long-suffering constituent of mine--Mr. Philip Stanton of Greenacres, Marsh road, Shabbington, Aylesbury, Buckinghamshire--who has undergone a harrowing ordeal? He will veritably dance round the political mulberry bush with the Minister if thoroughgoing and effective reform is forthcoming without delay.
Mr. Lock:
I am grateful for the hon. Gentleman's observations. He gave us all the details of the case, except for the postcode.
The hon. Gentleman is perfectly right. There has been a long history of failure by the Law Society to provide effective complaints mechanisms for clients who have not been satisfied with the way in which their cases have been handled. The problem goes back to the days of the Solicitors Complaints Bureau and to the early days of the OSS. However, this Government took powers in the Access to Justice Act 1999 to enforce the right to complain. We took effective action and the Act gives us the stick which is now being wielded.
If the hon. Gentleman wishes to see the targets, they are set out in the letter that my noble and learned Friend the Lord Chancellor has placed in the Library. I assure him that we shall monitor the performance of the OSS against those targets. Should it fail to provide the complaints system that all members of the House are entitled to expect for their constituents, we shall have no choice but to act.
The Chancellor of the Exchequer (Mr. Gordon Brown):
The challenge a year ago, amid global turbulence and predictions of recession. was to steer a course of stability. Now, with this year's pre-Budget report, the challenge is to lock in that stability and--by pressing ahead with our economic reforms--to set the course for a Britain of stability and steady growth.
The reforms made and the reforms to be made today reflect our resolve that Britain must leave behind the sterile, century-long conflict between enterprise and fairness--between the left, which promoted the good society at the expense of the good economy, and the right, which promoted the good economy at the expense of the good society, and too often achieved neither. Only by pursuing enterprise and fairness together--enterprise and fairness for all--can we equip all of Britain for our future and secure rising living standards for all.
Having laid the foundations with our monetary and fiscal reforms, Britain can now aspire to a new economic ambition for the next decade: a faster rise in productivity than our main competitors, as we close the productivity gap.
Making the most of our economic potential depends on employing all the talents of all the people. So, building on our education reforms and £19 billion of investment, the Government's second ambition for the next decade is that all people gain the highest qualifications that they can, with a majority of our school leavers for the first time in our history going on to degrees.
Having modernised with the new deal and with our reforms to make work pay, Britain can now reach for a third ambition in the next decade: a higher percentage of people in work than ever before.
Because a fair society and the strongest economy depend on leaving no one behind, Britain must now build on the reforms taking nearly 1 million children out of poverty and give every child the best possible start in life. So our fourth ambition is that by the end of the next decade child poverty will be reduced by half, on our way to ending child poverty within 20 years. These are decisions for a decade of reform to create a Britain of prosperity for all as together we create a Britain where there is opportunity for all.
The foundation--our first priority yesterday, today and tomorrow--is to lock in that fiscal and monetary stability. The economy of 1997 was characterised by inflationary pressures, unsustainable consumer spending and a large structural deficit in the public finances with public sector borrowing of £28 billion. Indeed, Britain was set to repeat the old, familiar cycle of boom and bust. Since then, we have created and rigorously adhered to a new framework of modern economic management: a clearly defined inflation target and clear fiscal rules backed up by legislation for an independent Bank of England and a regime of fiscal stability.
Over the past year, inflation has remained at or around our target. Today, underlying inflation is 2.1 per cent. Expectations of inflation 10 years on, which were 4.3 per cent. when we came to power, are now at 2½ per cent. Having come this far, we will not relax our discipline. Our pre-Budget report is based on meeting the inflation target of 2½ per cent. not just this year but next year and the year after that.
Early action on interest rates now prevents a return to the drastic action of the past. Those who would refuse to take the necessary pre-emptive decisions to meet our inflation target would risk returning our economy to the days of inflation out of control, unbalanced economic growth and 15 per cent. interest rates. Under this Government, Britain will not return to the boom and bust of the past.
Discipline is even more essential because of the changed global context. Last year, north America was the engine for world growth. Now this year, Europe and Japan are once again making their contribution. Although the 1998 challenge to avoid recession has been met, the new challenge is to grow while controlling inflation, and that must make us all vigilant.
I come to our economic forecasts. Last November, I said that I expected growth in 1999 to be 1 to 1½ per cent.--a forecast that I reaffirmed in the Budget that I presented last March. I have been re-reading the debates that took place at the time. There were predictions of recession from experts, and others, but the whole House will be pleased to know that, as the Government forecast, the economy has continued to grow.
The Treasury forecast is that growth this year will be1¾ per cent. I can also report to the House that the Treasury forecast for next year is that the economy will grow by2½ to 3 per cent, and that in 2001 and 2002 it will grow by 2¼ to 2¾ per cent, at all times consistent with meeting our inflation target. Britain is steering a course of stability and steady growth, and we will not take risks with the future of our economy.
In our first two years, public borrowing has been reduced by £30 billion--a cumulative fiscal tightening of 3 per cent. of gross domestic product. We will continue to lock in that fiscal tightening by keeping the public finances under control.
Our first fiscal rule--the golden rule--is that over the cycle there is a current surplus. At this stage inthe financial year, I can provide an interim update on the Budget figures. The Treasury forecast for this financial year--1999-2000--is that the current Budget will be in surplus by £9½ billion. I have said that we will not make the old mistake of confusing a cyclical surplus with a structural surplus. In subsequent years the surplus is forecast to be plus 11, 13, 13, 12 and 11. I can therefore report that, based on prudent and cautious assumptions audited by the National Audit Office, we are on course to balance the current Budget over the cycle.
Our second fiscal rule--the sustainable investment rule--is that debt is set at a sustainable and prudent level. Under the previous Government, national debt doubled from £166 billion to £348 billion. In the past three years, debt's share of national income has fallen from 44 per cent. to 42 per cent, to an estimated 38.2 per cent. at the end of this financial year and to 37 per cent. next year.
Over the economic cycle we will keep debt below 40 per cent. of national income. As a result of falling levels of debt and lower long-term interest rates, interest payments are down each year by more than £4 billion--money available for public services.
For all those who have an interest in economic and monetary union, I can report--in the tradition set by my predecessor--that this year and in future years Britain will be well within the Maastricht criteria.
Having inherited a deficit of £28 billion, I can now report that, in the year ending March 1999, we repaid debt by a total of £2½ billion. This year we expect to repaydebt by a total of £3½ billion--a total of £6 billion in debt repaid in two years, at the right time in the economic cycle.
Consistent with our fiscal rules that we balance the current budget and borrow only for investment, our forecasts for public sector net borrowing in future years are minus 3, minus 3, plus 1 and plus 4. The British economy is clearly on track to meet our fiscal rules.
In the past, as figures for surpluses and deficits were reported, Budget debates too complacently focused on dividing up the national wealth. Today, in a competitive global economy, Budgets must meet the long-term challenge of helping to expand the national wealth. Indeed, living standards can continue to rise only if Britain continues modernising. Therefore, on the foundation of monetary and fiscal reform, we must build a pro-investment, pro-competition, pro-enterprise Britain to meet our first ambition to raise our productivity to the world's best.
For too long British investment has been too low, productivity increases too slow, the potential of new markets and new technologies too often squandered. Today, Britain still has only half the rate of business start-ups and only half the rate of share ownership of the United States, where nearly 50 per cent. of people own shares. The British economy needs high levels of investment and entrepreneurship, and I now propose new measures to encourage more investment and to give more people the chance to invest.
We have already cut small companies tax from 23p to 20p, introduced a starting rate of small business tax at 10p in the pound, cut mainstream corporation tax from 33 per cent. to 30 per cent. to its lowest ever level, and introduced first-year investment incentives that are of special help to manufacturing.
I now propose to go further. Under Governments of both parties, capital gains tax for every investment, from the most productive to the most speculative, has been at 40 per cent. For years as a country we have debated why long-term investment in Britain has been so low. A 40 per cent. rate of tax on long-term investment discourages the capital formation and sustained reinvestment that Britain needs to reach its full potential.
In the 1998 Budget, we took the first step, reducing capital gains tax on investments of 10 years or more. Subject to consultation on the details, the Budget will make a more radical reform to promote not just high-technology investment but long-term investment across the economy in Britain. To Britain's prospective and actual investors and entrepreneurs I say: invest for three years and the capital gains tax rate will be not 40 per cent. but 22 per cent.; invest for five years and the tax rate will be not 40 per cent. or 22 per cent. but 10 per cent.
Having cut taxes for individuals who invest in business, my second major tax reform is to cut taxes for companies which invest. In competitor countries, growing companies do well because large companies invest in them. Tomorrow, my right hon. Friend the Secretary of State for Trade and Industry will give full details of a substantial tax incentive to generate new jobs in Britain from corporate venturing. Large companies that invest in
growing companies for a specified period will, from next year, receive a tax relief of 20 per cent., underwriting one fifth of their investment, and companies which reinvest gains in new ventures will be able to defer tax on capital gains. That £100 million incentive can bring additional investment of hundreds of millions of pounds every year in Britain.
I turn now to the details of a third tax reform designed to create both a high-investment economy and a wealth-owning democracy open to all. I can announce that, under our new employee share ownership reform, all shares held by employees for five years will be exempt both from income tax and capital gains tax. From April, only four months from now, employees will be able to receive shares worth up to £3,000 in their companies, free of income tax, giving a tax saving of up to £1,200. Employees will also be able to purchase £1,500 of additional shares from their pre-tax salary, giving a tax saving of up to £600. For those who purchase shares, employers will be able to award an additional £3,000 of shares, another tax saving of up to £1,200.
This is the most generous all-employee shares incentive a British Government have ever introduced, and there is only one condition: it is open to everyone in every firm. I urge employers and employees together to consider long-term investment in their firm's success--in preference to inflationary wage rises, which in the end bring higher interest rates, choose investments in the future, which can bring real gains.
Enterprise for all calls for a larger number of small businesses doing well, so the pre-Budget report provides details of new incentives for small businesses, which are the backbone of our economy: a new enterprise grant, enterprise incentives for managers and a new research and development tax credit targeted at small businesses, which is the most generous the country has seen and worth £150 million a year. Enterprise for all demands balanced economic growth across all the regions and the nations of Britain so, through regional development agencies and the work of the Scottish, Welsh and Northern Ireland Administrations, locally based venture capital funds will now be set up in every region of our country, from north to south.
Yesterday, the Massachusetts Institute of Technology announced that it will locate its European centre in Britain. From next year, the new regionally based enterprise centres attached to our universities will be able to draw on the management and research expertise of the new MIT-Cambridge partnership and put it to work for manufacturing and industry in every region of our country.
Enterprise for all depends on opening up competition to all, and it is time to build on the Government's decision to create a new independent Competition Authority. For cartels and anti-competitive behaviour, the Office of Fair Trading will, from March next year, be given new investigative resources and trust-busting weapons, including the power to impose fines of up to 30 per cent. of turnover. For banking and financial services, the Financial Services Authority will now, for the first time, be required to facilitate competition with a new scrutiny role for the competition authorities.
For the professions, the Government will examine how best to ensure that the rules of professional bodies donot unnecessarily restrict or distort competition. For the
regulatory system and following the Cruickshank interim report, the Government will consider how to scrutinise regulatory bodies and review existing and proposed regulations to ensure that they are promoting, not impeding, new entrants and competitive forces. For the planning system, my right hon. Friend the Deputy Prime Minister is today announcing a series of changes in planning guidelines that will, for the first time, facilitate the formation of high-tech clusters in industry. For the first time, the planning system will be required to promote competition.
For high-tech businesses that need key skills, we will reform the rules on work permits and open them up to essential workers in information technologies and to entrepreneurs. For the utilities, the forthcoming utility reform Bill will explicitly require the regulators for gas, electricity and water to promote competition. In sum, Britain will be more open to competition, fair to consumers and at the leading edge of change.
We are determined also that Britain will break out of the closed circle that has too often restricted the opportunities of enterprise to a few. We want to encourage those who start with nothing and who, in the past, thought that they could never reach higher or rise far and tell them that there is not only a chance for them to do better, but no limit to their ambitions for themselves and their children. Our poor communities do not need more benefit offices; they need more businesses creating more jobs, so we are resolved to extend the opportunities of enterprise to people and places that the economy has too often forgotten.
The new deal will now offer help for long-term unemployed men and women to become self-employed and to start a business--for the over-50s, up to £3,000 during the first year in business and in work. Help for prospective businesses will be available from a new enterprise development fund that we are creating, and we will also provide cash help for people moving from benefits into a business, including support for micro-loans for small business investment.
Our proposals will also include new scholarships for dynamic business men and women in our poorest areas to learn new management skills. To encourage the next generation of entrepreneurs, we aim to double to 200,000 the number of pupils able to benefit from entrepreneurship courses in our schools. With support that has already been pledged to us from many of our most successful business men and women, we will launch a new national campaign for enterprise under which schools and colleges will be directly partnered with local companies.
Britain needs radical improvements not only in enterprise but education, as we are ensuring. We are determined to achieve another ambition by the end of the next decade: to realise the Prime Minister's commitment to education--the highest standards in our schools, all young people gaining the highest possible qualifications, and the majority of school leavers gaining degrees. So, in addition to the university for industry, individual learning accounts, the expansion of further and higher education places by 800,000 and the meeting of new targets for literacy and numeracy in our schools, my right hon. Friend the Secretary of State for Education and Employment, who has pioneered the reforms, will
announce a major new expansion in IT education and skills, including 50,000 new college places. In the new knowledge economy, no one should be left out.
Our ambition is work for all--a higher percentage of men and women employed than ever before. After two and a half years of this Government, unemployment is lower than at any time in the past 20 years. This Government have delivered not only the new deal but new jobs: 700,000 more since 1997. The minimum wage and the working families tax credit are making work pay, but we need to go further. There are today 1 million job vacancies waiting to be filled. Vacancies are at record levels, not in one region alone but in every region of the United Kingdom. We need to equip the unemployed with all the skills that they need for the jobs that exist.
So, I can announce that the new deal, first introduced for the under-25s, will be extended to all those over 25 years old in every part of the country. Options will include the offer of a job with a private sector employer, self-employment, work-based retraining or college training, backed up by advice, counselling and mentoring--honouring our commitment to tackle long-term unemployment.
I can also announce new choices for lone parents to gain new skills, go to college and go to work. From now on, lone parents will not only be able to train for jobs while receiving income support, but will benefit from college-based child care places for 10,000 more children--making a total of 37,000 places. All lone parents with children over the age of three will receive notice of those new choices.
In 1909, Britain created the first labour exchanges in the world in order to link potential employees to vacant jobs. Today, with 1 million vacancies throughout the country, Britain must use the most modern technology in order to match those jobs without workers to the workers who have no jobs. We shall create a national jobs phone line whereby, for the first time in every locality,the Employment Service will continuously update unemployed men and women about new vacancies that are suitable for their skills. For every constituency in the country, the Government will provide assistance to enable Members of Parliament, irrespective of political party, to bring the unemployed and potential employers together.
Our reforms since 1997 have cut youth and long-term unemployment by half. A return to full employment was once a dream. Now, it is not only a promise and a possibility, but, in the next decade, if we stay the course, it can become one of our country's proudest achievements.
As we extend opportunities to those who are out of work, we will extend the responsibility to take up the work on offer. The informal or hidden economy is draining billions of pounds in fraudulent benefit claims and unpaid taxes. That loss of revenue, this incidence of fraud, the waste of resources, cannot be allowed to continue, especially when there are jobs that benefit claimants could take.
Lord Grabiner QC will chair a task force, bringing together the Treasury, the Inland Revenue, Customs and Excise and the Departments of Social Security and for Education and Employment. He will investigate the scale of the problem and the cost to the taxpayer, recommend a plan of action and set a timetable to crack down on the hidden economy. He will examine ways to move economic activity from illegitimate to legitimate
businesses. He will consider increased fines for fraud, and new requirements specifically for those suspected of being in the hidden economy to sign on for benefit not every fortnight but every single day.
I say to the unemployed who can work: we will meet our responsibility to ensure that there are job opportunities and the chance to learn new skills; they must now meet their responsibility to earn a wage. We are ensuring that work pays more than benefits. All our measures, taken together, mark a new dividing line. The Government believe that the way to help the unemployed is by extending the new deal, not abolishing it.
As we pursue our ambitions for growth and jobs, we can and must keep our environmental commitments. Under my right hon. Friend the Deputy Prime Minister, Britain took the lead in successfully negotiating the Kyoto agreement, and I am today announcing the results of our consultation with business on the climate change levy. Our original proposal was to cut environmental pollution by 1.5 million tonnes a year by 2010. Our consultation has shown that we can cut environmental pollution even further by 2010--by more than 2 million tonnes a year--and at the same time cut the levy from £1.75 billion to £1 billion.
I have decided that renewable energy sources and combined heat and power will be exempt from the levy. The main rate per kW hour will be cut from 0.21p to 0.15p, and there will be an 80 per cent. discount to energy-intensive sectors signing energy efficiency agreements. Taken together, those changes approach a 90 per cent. discount on the levy published at Budget time in return for agreed industry action to cut emissions.
All the revenues raised will be recycled to business. I can confirm that every business will receive a tax cut of 0.3 percentage points in employer national insurance contributions. I have ensured not only that that package is revenue neutral for business and revenue neutral between manufacturing and services, but that even after the national insurance change there will be no gain to the public purse.
In the run-up to the Budget, we will consult on a new 100 per cent. first-year investment allowance for companies moving from environmentally unfriendly to environmentally friendly technologies and processes.I propose to make available not, as originally announced, £50 million, but in the first year a total of £150 million to support energy efficiency in British industry. With all those measures taken together, Britain is on track to meet our country's Kyoto target.
The fuel escalator was inherited from the previous Government. [Interruption.] The Conservatives cannot deny their history. Since 1997, the escalator has been needed to reduce the £28 billion deficit that we inherited, as we put in place our new measures to protect the environment. Those who have opposed the escalator--including some of those who originally imposed it--have to explain how, without it, they would have cut the deficit, made money available for public services and met our environmental commitments in the past two years.
Having cut the deficit and introduced our new environmental policies, we are now in a position--instead of the pre-announced 6 per cent. escalator--to make our decisions Budget by Budget, with the following commitment: if there are any real terms rises in road
fuel duties, they will be lower and the revenues will go straight to a ring-fenced fund for the modernisation of roads and public transport.
Now that the return-leg exemption from air passenger duty has been declared in breach of single market law, I am today starting a pre-Budget consultation on replacing it with a new lower rate for lower fares. The changes will be revenue neutral.
Today I am also implementing recommendations that have come from Martin Taylor to prevent, detect and punish tobacco smuggling. Smuggling now costs us £2.5 billion a year. The pre-Budget report contains details of our decisions--new scanners at major ports to detect contraband goods, new cigarette pack marks, and new and tougher fines and penalties for those who smuggle and those who sell smuggled goods.
Our next ambition is to reduce and then abolish child poverty in Britain. The promise of the next decade should not be just for some children but for every one of Britain's children. By April, child benefit for the first child will be £15. By the next April, for the typical family, child benefit and the children's tax credit will be £23. With our 10p starting rate of income tax and the cut from 23p to 22p in the basic rate, the tax burden--national insurance and income tax--for the average family will be cut to its lowest level for 25 years.
Our intention is to integrate the children's tax credit and the child elements of the working families tax credit and income support into one single credit paid direct to the mother, and built on the foundation of universal child benefit. At today's prices, that would mean child payments starting at £15 a week, in contrast to £11 in 1997, and, for the poorest child, rising to more than £40 a week.
Our pre-Budget consultations will also examine whether through the working families tax credit or other measures we can give more help to the mother who wishes to stay at home in the first months after her child is born. Government must do more, but Government on their own cannot win the war against child poverty--it can be won only by the combined energies of public, private and voluntary sectors working together. We need not only cash but care. Therefore, the pre-Budget report will consult on new reforms to support the community organisations that are closest to people and where dedicated staff and volunteers can offer one-to-one help.
First, we will set up a new children's fund which will provide project grants for community action to tackle all aspects of child poverty. Secondly, so that we can develop new and innovative ways to support families and children, sure start will now see resources devolved not just tolocal government but to local partnerships led by neighbourhoods and the voluntary sector.
Thirdly, for too long the voluntary sector has been held back by outdated tax laws. We propose that, in future, for every £1 a British citizen donates to charity, the Government will contribute to that charity an additional 28p. For every £1 contributed through payroll giving, the Government will contribute 50p worth of tax relief. There will now be tax relief not just for cash donations but for gifts of quoted shares. The British people's willingness to give can give all our children a better chance, and all of us a better society.
From a platform of a stable economy and sustainable finances, we are delivering £40 billion extra for health and education. It is only by continuing our policies for
stability and steady growth that we will be able to achieve a further ambition for Britain--to build the best public services for the long term. In our second comprehensive spending review, to be completed next year, we will match investment with reform, increasing the amount of resources available for the NHS and education in our public services. I can announce two decisions that can be made now.
Through the windfall levy, 5,000 schools throughout Britain have already been modernised. With the addition of a further £150 million to the £4 billion already allocated for schools capital, my right hon. Friend the Secretary of State for Education and Employment will be able to treble that figure. By 2001, the number of schools modernised or being modernised will total 15,000--half the schools of Britain--benefiting more than 5 million pupils.
There is a strong public health case for year-on-year, real term increases in the price of cigarettes. While we will now make our decisions Budget by Budget, I can announce a new approach: the extra revenues from a 5 per cent. real terms rise in cigarette duties would go straight to additional investment in the national health service, worth £300 million a year--that is £300 million extra for hospitals and health care which could start next April.
I have a further announcement to make. From this week, the £100 winter allowance is being paid to every pensioner household in Britain. My right hon. Friend the Secretary of State for Social Security will announce later today that the winter allowance will be paid not just this year but next year, and every year from now on. For pensioners with incomes above benefit level who are not wealthy, we propose a better deal on savings. The elderly especially will benefit from my proposal to cut the starting rate of tax on savings from 20p to 10p--some 1.5 million pensioners will benefit.
3.31 pm
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