That arrangement makes perfect sense from a public policy perspective. As we know, debt is a contributory cause of family breakdown, house repossessions and bankruptcy, all of which lead to additional burdens on the taxpayer, and the problem is nowhere more acute
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than in housing. I would therefore encourage all local authorities to look at the example of Thurrock to see whether they can learn lessons about how to engage in meaningful partnerships with credit unions to tackle some of the negative consequences of debt.
We should recognise that this is the time of year when debt issues are at their most acute, because Christmas is approaching. I want to highlight the reality for many of my constituents. In the main, they are ordinary, hard-working people; we are not characterised by high levels of affluence. Let me take Members for a little walk down the high street in Grays. Midway down, we come across The Money Shop, which offers services such as pawnbroking or gold to cash. It also offers a payday loan at £9.99 per £100, which sounds reasonable, and it can be if people can pay it back within a month; if they cannot, they have no choice but to take out a fresh loan. Some customers find themselves taking out a fresh loan every month and end up paying APRs of as much as 260%.
I give that example because we are in November and in the run-up to Christmas, and people will be tempted to overextend themselves. That is particularly likely if they cross Grays high street to BrightHouse. At present, the company is offering a 42-inch Philips LED TV for £16.99 a month for three years. Closer examination shows the cash price is £1,196.36 but that, under the terms of the agreement, the customer will actually pay £2,650.44.
Such businesses have arrived in Grays only in the past three years, but they are thriving because people with poor credit histories just cannot access loans from banks any more and have no choice but to enter into such punitive arrangements, seduced as they are by weekly payments that sound affordable on the face of it.
That is why credit unions are so important, and access to affordable credit will help to tackle some of these issues. Credit unions are staffed by volunteers and owned by their members, and their customers access credit on terms that ensure they will not be exploited. We all need to do our bit to raise awareness of the facilities that credit unions can supply.
I congratulate the Government on the new order, which liberates credit unions from some of the legal constraints under which they operated. It is fair to say that the legal regime has been a barrier to enabling some credit unions to achieve financial sustainability. It is really positive that they will be able to get deposits from businesses and partnerships from now on. Ultimately, credit unions can lend only what they have in deposits.
I, for one, will be engaging in a campaign to encourage more people in my constituency to open savings accounts with the credit union there. As the hon. Member for Islwyn (Chris Evans) said, one of the biggest stigmas that credit unions face is the idea that they are only for poor people. The message I want to send out is that those of us who want, and are able, to save can make deposits with credit unions, in the full knowledge that we are not only building a nest egg, but making money available for a good social purpose.
Finally, having congratulated my hon. Friend the Member for East Hampshire, I look forward to hearing from the Minister what else the Government can do to support this important sector. The legislative reform order is obviously a move in the right direction. Credit unions will be able to take advantage of the freedoms,
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to grow. However, the real challenge is for those that are growing to achieve sustainability, particularly when there are increased costs of complying with the FSA, audit requirements and so on. One of the keys to building sustainability in the sector is thinking about how we can engage credit unions to deliver some Government services, and make use of that facility to engage with the people who are hardest to reach.
3.20 pm
Mark Durkan (Foyle) (SDLP): It is a pleasure to serve under your chairmanship, Mr Streeter. I commend the hon. Member for East Hampshire (Damian Hinds) for obtaining the debate and for his good and active work as chairman of the all-party group on credit unions. I am conscious that the Minister who is to reply to the debate is from the Department for Work and Pensions because that Department has been closely involved—recently, in particular—in the long awaited LRO, which is so welcomed by credit unions in this country. However, without detracting from the positive points that have been made about the development and potential of credit unions in Great Britain, I want to highlight some points about credit unions in Northern Ireland. I am aware that there are in the Chamber not only officials from the DWP, but some with a relevant interest from the Treasury.
The LRO has long been sought by the credit union movement in Great Britain. It is great to see that advance, some of whose benefits were highlighted by the hon. Member for East Hampshire. Of course, that development, of itself, will not extend to credit unions in Northern Ireland, as he mentioned, so we have a little source of frustration. The Northern Ireland credit unions have spent many years campaigning to be able to offer as many services as their counterparts in Great Britain—their much smaller counterparts, both as to member numbers and savings. At a time when it looks as if that will now happen—at least the primary measure to permit it is coming with the draft Financial Services Bill—one frustration makes Northern Ireland credit unions a wee bit jealous: the LRO will further enhance what their counterparts in Great Britain can do compared with what they can do. Also, of course, there are issues to do with some of the details of the regulation that might come from the Financial Conduct Authority, courtesy of the Treasury’s plans in relation to the draft Bill and associated developments. Issues of context and content arise in relation to the change.
As the hon. Gentleman and other hon. Members acknowledged, the credit union movement in Ireland at large is very strong. It has a long history, well rooted in communities. It is also particularly strong in Northern Ireland. The roots of my predecessor, John Hume, were in the credit union movement: not only did he help to found the movement in my constituency, but he led it in Ireland in the 1960s. In Northern Ireland, we have 163 credit unions, 103 of which are affiliated to the Irish League of Credit Unions. Those tend to be more mature; they have been longer in existence. Some 60 credit unions are associated with the Ulster Federation of Credit Unions. The Irish league has 370,000 members and there are 148,000 borrowing members with total savings of more than £700 million and total loans of more than £430 million, so, given the size of the Northern Ireland population, we are talking about something quite significant.
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That is the situation while the credit unions are able to offer their members limited services—essentially just deposits and loans. The beauty of the measures that we hope will proceed—courtesy of the draft Bill and the consultations undertaken by the devolved Department and the Treasury in the past while, in response to the report to the Northern Ireland Assembly of an inquiry that I chaired—is the creation of at least the regulatory openings to allow credit unions in Northern Ireland to offer increased services. That is because some historic anomalies and legislative warps have limited what credit unions in Northern Ireland can do. They are not regulated by the Financial Services Authority. Therefore, they cannot offer services that are, by their nature, regulated by the FSA here.
It looks as if we may be coming to a path forward in that respect, but the credit union movement—both the Ulster federation and the Irish league—have concerns about the context and the detail of what is happening. The recent consultation was shortened to two months instead of three. People are worried that it has been rushed, and that although the changes that could be made afterwards have long been awaited, they may take place relatively quickly, before credit unions have been able to prepare themselves properly, internally and externally, for their impact, and for all the requirements. There is no point imposing change that will add to difficulties and make life hard for busy and effective credit unions.
The federation and the Irish league are also concerned about the content of some of the changes. Some of the proposed changes would take credit unions in Northern Ireland backwards in relation to existing functions. One is the planned reduction in the maximum deposit limit. Credit unions in Northern Ireland have a maximum deposit limit of £15,000. It was raised to that amount in 2006, because it needed to be. The proposal is that under the new arrangements it will be scaled back to £10,000. That will affect 48 credit unions in Northern Ireland, in which there are already people over that savings limit. That is entirely consistent with the culture of credit unions, which is about encouraging thrift through growing savings. To ask credit unions to tell some of their savers that they must take money away seems perverse.
The credit unions that belong to the Irish League of Credit Unions also offer, essentially, a free life-savings insurance service to their members. Whatever the value of a member’s savings on death, a multiple of that will go to their next of kin. Therefore, imposing the new limit will mean a significant change in the benefit that credit unions can offer their members.
Mr Nigel Dodds (Belfast North) (DUP): The hon. Gentleman is right to point out the issues affecting credit unions in Northern Ireland, and I agree with him. I have received representations on the issue of borrowing, as have several hon. Members, and it is clear that members’ borrowing ability will be adversely affected, with the effects that he suggests. In the case of Northern Ireland, which has such a mature credit union movement, would it not be a good idea for the FSA and the Government to consider the best examples of what has happened there and perhaps import those, rather than imposing what is suggested for Great Britain on Northern Ireland?
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Mark Durkan: I accept what the right hon. Gentleman says. Any changes proposed now should be about allowing and encouraging credit unions in Northern Ireland to go forward, not taking some of them backwards, and expanding their platform, rather than restricting the space in what they offer their members. He has made the point that the deposit restriction has a consequential effect, in some ways, on borrowing. Another issue, although I shall not go into it here as time does not permit, is the limit being imposed on unsecured loans. Given that there is such a high rate of saving and very healthy savings levels in credit unions in Northern Ireland, that restriction also seems perverse in its consequences.
There is also a proposal to limit the investment maturity period for any surplus sums that credit unions invest. Many credit unions in Northern Ireland are investing them very prudently, sometimes on three, four or five-year terms. The changes proposed by the Government would limit them to one-year deals. In the circumstances, the logic of Government policy should be about encouraging long-termism, prudence and sound investment in savings, so it seems perverse that credit unions in Northern Ireland are being told that they will no longer be allowed to follow the good and effective practice in which they have been engaging for years, and that they will have to move to a more varied and less reliable pattern of dealing with investments.
There are also issues with the transition to the new arrangements. Traditionally, credit unions in Northern Ireland have been registered with and regulated by the Northern Ireland Department of Enterprise, Trade and Investment, albeit for a limited number of services. Credit unions belonging to the Irish League of Credit Unions and the Ulster Federation of Credit Unions have enjoyed their relationship with DETI. They have confidence in its officials, who have important insight and rapport.
During any change or transition to the Financial Conduct Authority, given that it will involve new things, as will the new regulation for credit unions in Northern Ireland, it will be important to have a strong support programme in place. The devolved Administration should support that, but I also hope that the Treasury and DWP will be sympathetic, because the kinds of measure that we want during the transition and development period are akin to the sorts of support that the Department has been happy to give to members of the Association of British Credit Unions Ltd and credit unions in this country.
I wanted to take advantage of the debate, secured by the hon. Member for East Hampshire, to set out some of the concerns. The story of credit union development in Northern Ireland has been good and strong. We could be on the threshold of something positive, but there is a danger that unnecessary detail will detract from that potential.
3.31 pm
Tracey Crouch (Chatham and Aylesford) (Con): As always, Mr Streeter, it is a pleasure to serve under your chairmanship. I congratulate my hon. Friend the Member for East Hampshire (Damian Hinds) on securing the debate.
The hon. Member for Islwyn (Chris Evans) spoke passionately about financial literacy. He might be interested to learn that a young lady doing work experience with
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me this week is watching the debate from the Gallery. She told me before we came to Westminster Hall that, as part of her enrichment class, she has just studied the role of credit unions. I have no idea what an enrichment class is, but the fact that it is studying credit unions is a fantastic way to ensure that youngsters learn about a variety of sources—
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): The hon. Lady makes an important point. Does she agree that it is important that credit unions can operate from an early stage in schools and involve young people much more directly than by simply learning about them?
Tracey Crouch: I agree. As many providers as exist should be entitled to teach children about the variety of sources of financial awareness. I have been to primary schools in my constituency and seen big banks supporting financial education programmes, which I think is fantastic, but we should get as many people in there as possible.
I proudly declare, like many Members here, that I am a member of a credit union: Kent Savers, the county-wide credit union. I am also soon to be a member of Medway credit union, which covers part of my constituency. Like others, I am passionate about tackling high-cost credit, lending and financial inclusion, and see credit unions as part of the answer. That stems from my experience of living the high life in London as a young graduate and stupidly running up debts, from which I was saved by my bank manager, and of representing a constituency that has pockets of deprivation and associated personal debt problems.
In the current economic climate, we must pay particularly close attention to how much debt people take on as pressure inevitably increases on household budgets. As Members of Parliament, we have a duty to promote accessibility to fair and equitable credit, particularly, although not exclusively, for those on low incomes. That is why I share the enthusiasm for credit unions and believe that we must raise their profile. I am sure that I join many hon. Members here in having done so through local media.
I have met representatives of Kent Savers and Medway credit union, the latter as recently as last Friday, and have learned a great deal more about credit unions’ services, benefits and duties. Northern Irish Members will be interested to know that they spoke favourably of the credit unions in Ireland and Northern Ireland. One director is from Ireland and is helping to bring that experience to Medway.
As a mutual, a credit union has an ethos of responsibility and inclusion—traits especially welcome in Medway, which, sadly, has problems with unmanageable debt. Responsibility and inclusion go hand in hand and are crucial features in running credit unions fairly and equitably. Much is admirable in credit unions’ ability to open up opportunities to take out reasonable loans for people on low incomes or with bad credit history. The alternatives, as I have found in Medway, are far less appealing. As in the constituency of my hon. Friend the Member for Thurrock (Jackie Doyle-Price), several high-cost credit lenders have set up shops prominently situated on busy high streets. They are the antithesis of credit unions.
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Consumers took out £1.9 billion in payday loans last year, which is £500 million more than in the previous year. That trend is a concern and it is broadly reflected in the Medway area. Shockingly, at the local citizens advice bureau recently, a record £3 million in unsecured personal debt walked through the doors in one week. I have since been informed that loans and the interest associated with payday lending account for a worrying proportion of that £3 million. That is a great shame, and I have campaigned against it as a local Member of Parliament.
Such businesses deal in large sums of money and small print. They are identifiable by their glossy shop fronts, but they offer less attractive interest rates, targeting people on low incomes who are in financial difficulty. Sure, if they pay back the loan in time, the rate might be lower over 30 days than a high street bank’s overdraft charge, but the very fact that someone has gone to a payday loan company rather than a bank might indicate that they are a credit risk. No controls are placed on borrowing—a remarkable difference from credit unions.
The emergence of payday loan shops on high streets and the accessibility of easy credit on the internet appear to offer a quick fix. It might be financial inclusion of a sort, but the reality of high-cost credit is very different. It can be irresponsible on the part of the lender and self-defeating for the consumer, placing them deeper into debt and excluding them from accessing the lending market in the future, which credit unions do not do.
On Monday, I was pleased to note the Government’s response to the consumer credit and personal insolvency review. I was particularly encouraged to learn that they will consider the possibility of imposing a variable cap on the cost of high-cost credit that can be charged in the short to medium-term high-cost credit market, while talking up the credentials of credit unions as an alternative.
It is worth making the point that credit unions are more than just a lending service. To take out a loan, members must first commit to saving, which is an equally important feature of managing their finances. Given that only 20% of people in the UK reportedly put aside money each month, more clearly needs to be done to encourage saving. Credit unions offer a great opportunity to help to reverse that trend with a more innovative method of depositing cash, receiving a dividend and earning the possibility of taking out a loan. By committing to saving, members provide a cushion for those unexpected emergencies that we hear so much about from payday loan lenders, while avoiding astronomical interest rates.
I learned last week that Medway credit union is developing a Christmas savings scheme that encourages members to put aside money for Christmas essentials. Christmas is an expensive time of year. Given the pressure on families to spend, the temptation for those on low incomes to buy now and pay later is strong. However, under the scheme, reserves gradually built up over time will be on hand to cover the cost of the festive family season and steer families away from alternative high-cost credit. Most importantly, what makes the Christmas saving scheme attractive is that it is secure.
Credit unions have an important role to play for older people, who are often financially excluded. I have spoken before in this Chamber about my concerns for the financial welfare and education of our pensioners.
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Financial difficulty is not limited to younger generations seeking loans to cover rent, bills or insuring the family car. I read a worrying report called “Debt and generations” commissioned by the Consumer Credit Counselling Service, and I urge hon. Members to read it. It revealed a minority of older people with extremely high levels of debt and a notable number of older households with high repayment-to-income ratios.
For instance, 12% of over-55s have a repayment-to-income ratio of 30%, compared to only 9% of those aged 18 to 24. Also, a great many older people are less able to mitigate the effect of an unexpected bill or change in circumstance. A reduction of just £50 to their monthly income, for example, doubles the likelihood of the oldest age groups becoming financially vulnerable and, potentially, taking out costly loans to meet the shortfall. I think we all agree that it would be far more preferable for older people faced with those difficulties to approach credit unions instead.
I am conscious of the time, so I will finish by saying that the Government have taken some welcome steps with the legislative reform order and other measures. I think we all welcome those steps and I look forward to reading the Government’s study, to which their formal response on consumer credit alludes, on credit unions and how they will be encouraged to grow and prosper.
3.40 pm
Stephen Timms (East Ham) (Lab): I am delighted to see you in the Chair, Mr Streeter. I congratulate the hon. Member for East Hampshire (Damian Hinds) on securing the debate, on his work chairing the all-party group on credit unions, and on his thoughtful and well informed observations at the start of the debate. His constituency and mine have similar names, although they are rather different places. We both, however, have constituents who owe a great deal to their local credit unions. I will touch on that during my remarks.
We have had friendly societies for a long time, since the early 18th century, when the chaos of the period brought the need for the greater security that mutual action was able to provide. The idea of working co-operatively to ensure that people are provided for in times of want and have a secure haven for their money, drawing on the resources of the community, continues to be very important.
The previous Government made a number of widely supported changes to enable the development of new dynamism and opportunity to the credit union and mutual sector. We recognised that the way the law treated credit unions in a number of respects was holding them back. That was the reason why, in 2002, the previous Government brought credit unions under the regulatory aegis of the Financial Services Authority. The hon. Member for Isle of Wight (Mr Turner) gave a good example in his intervention of that arrangement working very well. The hon. Member for East Hampshire was also right to sound a cautionary note about some of the risks for credit unions in the current re-regulation process.
The previous Government then took steps to enable credit unions to modernise while retaining what has always made them unique, starting with permitting them to communicate electronically in 2007, which was previously not allowed. We also committed to looking at how to reform the legislation on their membership,
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and that was the background, in 2008, to what became the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011, which will modernise the common bond and which has been widely welcomed during the debate. I note, however, the cautionary observations made by the hon. Member for Foyle (Mark Durkan) about the possible effects in Northern Ireland.
It is clearly right that as communities have changed, so the restrictions that the common bond places on credit unions should change, too. Allowing businesses, housing associations and social enterprises to become partners with credit unions reflects the reality of communities today and the opportunities in them.
It was not just the previous Labour Government who introduced changes to the sector. Both the former Member for Bournemouth West, Sir John Butterfill, and my right hon. Friend the Member for Croydon North (Malcolm Wicks) tabled private Members’ Bills, which helped the sector by reflecting the extent of consensus and support. Like others, I hope that the Minister will make some favourable observations about the prospects for the imminent implementation of the legislative reform order.
Partly—perhaps largely—as a result of support given to the sector by Government, there has been significant growth in the size and scale of the credit union movement, particularly over the past decade, in terms of numbers and of the amount saved, as my hon. Friend the Member for Islwyn (Chris Evans) rightly pointed out. I pay tribute to the work of the Association of British Credit Unions in supporting the sector and its consistent and effective effort on behalf of credit unions. Recent unaudited data from the association note that credit unions grew by nearly 15% in just the first six months of 2009, which reflects what was happening elsewhere, I guess, in the financial services industry.
In Westminster Hall last week, I set out the case of my constituent who was about to start her university course and was unfairly denied a bank account after she became a victim of fraud when her card was stolen. She was only able to take up her university place because the local credit union, NewCred, of which I too am a member, as are other Members, was willing to offer her an account. Because she had run into problems with her bank account, a reference was made to CIFAS—the credit industry fraud avoidance system—which meant that she could not get an account from any bank at all. NewCred was the only institution able to offer her an account, and had it not been for that she would not have been able to take up her place at university, because she would not have been able to receive her student loan cheque or have an account for it to be paid into.
Like other Members, I hope that the Minister will be able to confirm the continuation of his Department’s funding for credit unions. That has been a valuable source of support over recent years; the hon. Member for East Hampshire mentioned the figure of £73 million, which has been spoken of in this context. I also hope that the Government will support credit union access through the Post Office, to which my right hon. Friend the Member for Oxford East (Mr Smith) drew attention during an intervention.
I echo the appeal made by my hon. Friend the Member for Islwyn for the creation of a central finance facility. He has talked about the cost of setting it up, but as he
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said, such a facility is widely used elsewhere and it is estimated that consumers will have significant savings in credit costs if such an arrangement can be put in place. It might also provide a mechanism to release more than £1 billion in the Post Office card account float, which could be lent to social fund customers, as well as providing, as my hon. Friend said, the potential to significantly increase the size of credit unions. Is the Minister able to say something about that?
One major disappointment is the missed opportunity—many of us felt this—in relation to Northern Rock. My right hon. Friend the Member for Croydon North raised the issue of the extension and expansion of the mutual financial sector in his question to the Prime Minister earlier today. We have not really received an explanation of why the option of a member-led remutualisation, which was proposed by the Co-operative party, was not accepted. There are some big questions to be asked about the sale of Northern Rock. When will the Minister and his hon. Friends publish the advice of United Kingdom Financial Investments Ltd and Deutsche Bank, so that we can see exactly why a mutual Northern Rock was ruled out? I know that the Treasury said that remutualisation would have meant gifting value currently held by the Exchequer to members of the new mutual, but we have not been told whether the Treasury is gifting £250 million of Northern Rock’s existing equity to Virgin, or what the difference in principle is between those two exchanges. A mutual Northern Rock would have been very attractive.
Members have rightly touched on other aspects of financial inclusion and exclusion. My hon. Friend the Member for Walthamstow (Stella Creasy) has made great strides in advancing the argument for a cap on interest rates in the UK, and there are pros and cons to that proposal. Before the election, as I recall, the Conservative party pledged that there would be a cap on excessive store card interest rates, to protect the public and help prevent people from falling into problem debt. I was present at an event at the Barbican where the former Parliamentary Private Secretary to the Chancellor, the hon. Member for Chelsea and Fulham (Greg Hands), said that the cap would be the firm policy of the Conservative party, and it subsequently appeared in a policy document. Will the Minister let us know what the plans for that measure now are?
I welcome the strong support expressed for the credit union sector in the debate. The growth of the sector has been greatly helped by Government support in the past decade or more. I, with others, hope that the Minister will be able to confirm today that support will be maintained, and that the sector will have the potential to expand further in the period ahead.
3.50 pm
The Minister of State, Department for Work and Pensions (Chris Grayling):
It is a pleasure to serve under your chairmanship, Mr Streeter. It has been an extremely informed and useful debate. I congratulate my hon. Friend the Member for East Hampshire (Damian Hinds) on securing it, on the extensive work that he has clearly done chairing the all-party group, and on his involvement in the credit union fair today. It is with fortuitous timing that we debate this issue at the same time as the fair, which showcased the valuable work of credit unions. There is a greater focus on both events as a result, but I
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particularly pay tribute to my hon. Friend and his colleagues for their involvement in the fair—a sign of hon. Members not just talking, but acting—and showcasing work by a sector that we all agree plays a very valuable role in our society, particularly in tackling debt, which can be a massive burden on lower income families.
One of the consequences of the credit crunch is that it is now more difficult for families on low income to obtain credit. The consequence can be to trap people in poverty, which makes it more difficult for many people to improve their work situation, as it constrains job search activity and makes financial planning much harder to manage. Of course, it also denies people access to certain types of job; for example, those that include handling cash are not necessarily available to people with poor credit records. It means that people have more demands on their finances, more to lose if something goes wrong, and are therefore perhaps more cautious about changing their financial situation; for example, by leaving the relative security of the benefits system and moving into work, even though we all know that once they are established in work, they are much better off in the long run.
We are dealing with the problem of debt that entrenches people in poverty. We know that those on low incomes are at the greatest risk of ending up in debt and, as a result, are often the least equipped to cope with it. One of the principal causes of debt for those on low incomes is that the majority have few or no savings. When an unexpected financial pressure occurs—an essential household appliance stops working; for example, the fridge breaks down—they have to resort to borrowing to make ends meet. However, they are treated as high-risk borrowers by the financial services sector and have to pay a high price for their credit. We have heard very articulate arguments this afternoon about the problems that can create, and about various lenders in the marketplace. My hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) made valuable points about the risks to families on very low incomes and the huge price that they can pay for access to some of the things that those who are able to access mainstream financial services find easy.
Credit unions offer a valuable alternative service. By working within communities and helping those most in need of support, they help people to manage their financial affairs. Hon. Members play a valuable role. It has been interesting to hear how many of them give active support as members of their local credit union. As the right hon. Member for East Ham (Stephen Timms) said, successive Governments have supported credit unions and directly helped the sector to grow. We are keen to continue that support in a sustainable way; we believe that it is important. That is why we have agreed to continue providing support from the growth fund while we carry out a feasibility study into how we should help the sector to develop in the future. We have allocated £11.8 million to continue to support credit unions and other community financial institutions in this fiscal year. We want credit unions to continue to be part of the financial services landscape.
We also have a duty to ensure that credit unions operate efficiently and offer a good range of services to a wide range of people. Many credit unions are run at a loss. Many do not offer the same range of products and services. Many cannot provide services that are available in another part of the country. We have heard much
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about the legislative reform order this afternoon. As I am relatively new to the issue, I had not followed the extensive process to the degree described by my hon. Friend the Member for East Hampshire, but the order is there. It is happening. It will help to improve coverage.
The amendment to the Credit Union Act 1979 effectively opens up membership of credit unions to new groups, such as housing association tenants and employees of a national company, even if some of those people live outside the geographical area served by the credit union. It was either the right hon. Member for Oxford East (Mr Smith) or the hon. Member for Islwyn (Chris Evans) who pointed out that it is important for credit unions to spread their umbrella over a wider area than they do at the moment. My hon. Friend the Member for East Hampshire made a point about credit unions becoming the bankers of the big society. He is correct to say that there is potential to drive deep into the heart of the communities that they serve.
Mr Andrew Turner: I want to point out, and I am sure that the Minister would agree, that the people who run credit unions have made a great contribution. When the Isle of Wight credit union ceased to exist, the new amalgamated credit union of Hampshire and the Isle of Wight did a great deal of work, which was carried out by individuals voluntarily in the constituencies.
Chris Grayling: I pay tribute to all those involved. This is the essence of the credit union movement, and indeed the essence of the co-operative movement as a whole. If I have one regret politically, looking back over history, it is that the co-operative movement found itself on the left of politics rather than the right. The co-operative spirit has much in common with the spirit that we on the Government side of the House represent. Many of the changes that we are putting in place are designed to try and encourage people to work together. Within the credit union movement, we find that writ large.
As a result of the changes in the review, credit unions will be able to pay a guaranteed rate of interest on members’ savings. We hope that will help them to attract more savings, and so make more affordable credit available in the community. We also want them to do more. We want them to look to the future, reach out to offer new products to many more potential members, and work to provide the services that landlords and their other partners want. We need them to become more efficient, better known and more attractive—effectively, to move to the next level of potential for the credit union movement.
Credit unions need to reduce their costs, increase their capacity, and operate more efficiently by sharing back-office activity. The right hon. Member for East Ham asked a question about that. The creation of a central financial wholesale organisation for credit unions is being examined by the feasibility study, which is looking at a wide range of different options. It is being led by a project steering committee, supported by the Department for Work and Pensions. I am pleased that the issue of Jam Jar accounts was raised. Financial products such as Jam Jar accounts are very much part of the study.
Mr Andrew Smith: I am very grateful to the Minister for giving way. He mentioned the feasibility study and the welcome agenda of work it is addressing. Can he give us any indication of when the study is likely to report?
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Chris Grayling: As the right hon. Gentleman knows, the study is being chaired by Deanna Oppenheimer of Barclays bank. She has just finalised her report with her team, and the recommendations will be presented to Ministers shortly. We hope to be able to make that information available to the House before too long. We have not seen the report yet, but there will not be long to wait. Clearly, that restricts some of my ability to provide detailed answers to questions raised today, because these are matters that will be in the report. However, I hope that it will provide a clear blueprint and a clear direction of travel for the sector for the future.
We are bringing credit unions into Jobcentre Plus offices to try to create a greater link between credit unions and the work Jobcentre Plus is doing for the unemployed. The committee consulted the Post Office on its potential role working in partnership with credit unions. That could have benefits. A number of hon. Members made the point that such a partnership would be valuable. We will know more when the study is published.
We regard the sector as enormously important. We want to see credit unions grow and develop in an effective and efficient way, delivering support to those in debt at the bottom end of the income scale, driving to the heart of communities, attracting savings from a broader range of people and sources, and absolutely at the heart of what we hope to deliver for local communities and, as my hon. Friend the Member for East Hampshire says, the big society, through the community groups that will give support right across the country.
4 pm
Sitting suspended for a Division in the House.
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Morocco
4.6 pm
Dr Andrew Murrison (South West Wiltshire) (Con): It is a great pleasure to serve under your chairmanship, Mr Streeter.
The UK and Morocco go back a long way, and it is my great pleasure to have this opportunity to discuss the Government’s policy towards one of this country’s greatest friends and allies. Fortunately, unlike France and Spain, Britain has avoided the acquisitive behaviour that so complicates their history with Morocco, with a single, brief exception in 17th-century Tangier. Our amicable relationship has been enhanced recently by the appointment of King Mohammed VI’s esteemed and able cousin, Her Highness Princess Lalla Joumala Alaoui, as ambassador to London.
In 2013 arises an opportunity to cement the relationship further, with the 800th anniversary of the first official contact between the two countries. In 1213, King John sent an emissary to petition support from Sultan Mohammed Ennassir. It would be a great pity if that opportunity were lost, and I am interested to hear what proposals the Government have to celebrate the occasion or, if they have none, whether they will give the matter some serious thought.
On Friday, Morocco goes to the polls, and they will be keenly watched in the South West Wiltshire constituency, a division with more Moroccan residents than any other outside the M25. The election will cement the “new constitution project” for a citizen-based monarchy, accepted in a referendum with a remarkably high turnout on 1 July. A polling station for that was set up in Trowbridge in my constituency, which I had the great pleasure of visiting. The new Parliament will have the task of giving statutory expression to the will of the people as expressed in the referendum. The way it conducts itself will be important in facing down the critics, the more considered of whom cite scope for interpretation of caveats to the clauses in the new constitution, the reliance of the new constitution’s articles on what are called organic laws, which have not yet been written, and recourse to special commissions chaired by the King to determine much of the change anticipated.
It is important to set the context for this year’s historic referendum and general election. Morocco has, to a large extent, stood apart from the violence and disorder of the Arab Spring. The present King, Mohammed VI, has ruled for 12 years and is generally credited with liberalising his country and shifting it towards a constitutional democracy within the historic and religious constraints of a society that remains deeply conservative and traditional. His regime contrasts sharply with that of his father, Hassan II, who presided over the post-colonial period during what became known unflatteringly as the years of lead. It is significant that King Mohammed, early in his reign, pardoned thousands of prisoners, set up an arbitration body to compensate families of opposition leaders who had disappeared and caused credible elections to take place. There has been a marked improvement in the position of women, with a quota for the Parliament that will be the envy of many in this House. The rights of women have been enhanced by the King’s family law, and he has insisted that the Berber language should be
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taught in primary schools, a measure that complements his move towards regional autonomy in Morocco, including western Sahara.
In June, King Mohammed laid out his proposals for the referendum. The King surrendered his right to appoint a Prime Minister and uprated the status of the premier to Head of Government, with the consequent right to dissolve Parliament. The King lost the right to appoint regional leaders. The new constitution endorsed by the referendum explicitly upholds human rights, promises religious freedom, prohibits torture, backs freedom of thought, opinion and expression, permits free assembly and peaceful demonstration, and should facilitate a more free press. It calls for gender equality, and gives the minority Berber language official status.
There is an interesting version of the separation of Church and state in the differentiation of the powers of the King as Head of State and as commander of the faithful, which may be of interest to those in the UK who are concerned about the established Church, and the Monarch as supreme governor. The proposals overhaul the judiciary, and even offer an ombudsman service, but reaction in the west has been mixed, with The Economist leading under the mean-spirited headline, “A very small step”. However, it is, without doubt, a step in the right direction, and one that I am sure the Minister will support.
Perhaps because of the peaceful evolutionary change that is under way in Morocco, the country has avoided much of the mayhem seen elsewhere in north Africa. It is true that there were significant protests in Moroccan cities early this year, but as far as we can tell, they were less intent on regime change than in other countries involved in the Arab Spring. The relatively few protestors who took to the streets of Rabat, Tangier and Casablanca in the run-up to the general election focused on the Makzhen or palace elite. That is said to represent a road block to reform, which organisations such as the Brookings Institution maintain is happening too slowly. If there is a criticism of what is going on in Morocco at the moment, it usually involves the rate of change, rather than the direction of travel.
As for the protests organised by the 20 February organisation and so on, it is difficult to know what significance to assign to them, given that Morocco is caught in a pincer between economically inspired unrest in Europe and the Arab Spring in north Africa and the middle east. It is also reasonable to point out that stridency among émigrés, which is generally a barometer for unrest in troubled countries, has certainly not been experienced in respect of Morocco. I get the feeling from my Moroccan community, many members of which return regularly to Morocco and certainly have family there, and through the British Moroccan association to the Moroccan Community Association, whose meetings on the parliamentary estate I attend, that the reforms that are under way are welcomed and appropriate.
In recent years, there has been significant security and judicial co-operation between Morocco and the UK. Clearly, the ungoverned spaces of the Sahel present a threat to the west, and desertification makes it more likely that populations will move north. The Government of Morocco give every indication of appreciating the threat that that poses to peace and concord within their borders, and the danger of being seen as a repository of criminality threatening southern Europe.
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In the summer, the Foreign Secretary and the Moroccan Foreign Minister, Mr Fassi Fihri, signed a memorandum of understanding on deportation on the grounds of terrorism and national security, but the detail was left out. Can the Minister explain the practical consequences of the memorandum now, how he sees it developing, and within what time scale?
It has been reported that the streams of intelligence from north Africa have reduced in recent years and months, probably as a result of political developments, the disappearance of old lines of communications with, thankfully, vanishing regimes and general chaos in the region. If so, it means that Morocco’s significance has increased. Indeed, attacks in Casablanca and Marrakesh and the involvement of Moroccan nationals in the 2004 Madrid bombings notwithstanding, terrorist activity in and linked to Morocco has been limited, and commentators have suggested that that is due in part to effective intelligence gathering and co-operation with western agencies.
I appreciate that the Minister cannot be specific in this forum, but can he comment on the development of intelligence co-operation with Morocco? As Tehran continues to act as the bully boy of the middle east, what significance does he attach to Moroccan good sense in cutting off diplomatic relations with the monstrous Iranian regime in 2009 after it started to spread its fundamentalism to the peaceful and moderate Sunni kingdom?
There are major threats to Morocco from challenging frontier security issues, and difficult-to-regulate migration. The barely governed space of southern Algeria, Mali and Niger, and vast area of the western Sahara offers a potential nest to fundamentalist terror organisations, including al-Qaeda-affiliated groups. To what extent does the Minister believe that Morocco’s ability to engage in intelligence and security has been degraded by the Binyam Mohamed episode?
Although the UK does not provide direct bilateral aid to the western Saharan people, the European Commission’s humanitarian aid office certainly does. The UK provides direct assistance to help to promote stability and to alleviate poverty in sub-Saharan Africa, and I was informed before the election that the Government were working on the EU to direct EU stability instrument funding to help to address the security situation. Can the Minister offer a progress report? What progress has been made in establishing a new embassy in Mali and political offices in Mauritania, as heralded in January 2010 by the then Minister of State at the Foreign Office?
The previous Government showed interest in the Moroccan imam training scheme in marginalising the religious fundamentalism that is the cause of so much trouble elsewhere. The scheme was exploring whether UK imams might train in Morocco, and I wonder whether there has been any progress on that.
In 2010, the House was informed that bilateral defence activity was “modest but important”, and the most significant seems to be Exercise Jebel Sahara, which is run regularly in the region of Marrakesh. Can the Minister say how he anticipates bilateral defence activity being developed, and for what purpose?
Helped by Morocco’s association agreement with the EU, the EU accounts for 60% of Morocco’s exports, 80% of tourism receipts and most of its large income
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from foreign remittances. Given the strong prospect of a double-dip recession in the eurozone, depression in southern Europe and the country’s wide and growing trade deficit, it seems likely that the pressures on Morocco from the young, educated unemployed will increase with every chance of an escalation in civil unrest and potential for terrorists to feed off poverty and grievance. Morocco is a relatively small trading partner for the UK, in contrast with, for example, France, but what measures are being taken to improve trade in goods and services between the two countries, and how does the Minister believe that might help to avoid the turmoil elsewhere in the region with its attendant security threats?
In January, I had an Adjournment debate on the western Sahara, when the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt), responded. Can the Minister provide an update on the Government’s contribution to steering this central issue for sub-regional stability to a safe place? What has Baroness Ashton and the portentously named EU External Action Service been up to? If we must have it, it might as well do something useful in the EU’s near abroad, which the western Sahara most certainly is.
Voting arrangements for the Moroccan elections this Friday are based on Moroccan ancestry, rather than residency or citizenship. That means that a large Moroccan ex-pat community is potentially involved, although the arrangements are rather more complex than for the referendum held in the summer. There is certainly confusion at the bewildering array of parties on offer, and I regret that the very good polling stations that we saw for the referendum will not be available again on Friday. Nevertheless, I am sure that the Minister will take a keen interest in the outcome and in the Government who emerge, who will be headed for the first time by a Prime Minister who can be said to be truly head of the Government.
In a similar vein, the Minister will have noted that at the Inter-Parliamentary Union assembly at Berne in October the Speaker of the Moroccan House of Representatives, Mr Abdelwahed Radi, was elected president. Will the Minister join me in welcoming this important totemic step as Morocco moves towards a commendable new settlement based on constitutional democracy?
4.19 pm
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr Henry Bellingham): It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend the Member for South West Wiltshire (Dr Murrison) on securing this debate and thank him for the work that he does as chairman of the all-party group. I am aware of the exemplary way in which he represents a large part of the Moroccan diaspora who are based in Trowbridge, where, historically, they worked in the food processing industry. I want to set out our approach to the internal and regional issues pertinent to Morocco before dealing with the key features of our bilateral relationship.
Morocco’s determination to implement political reforms predates the Arab Spring. Indeed, the new constitution takes steps to increase the power of Parliament, advance
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gender equality and protect minority rights. My hon. Friend mentioned that the king himself has been very much involved with the issue of gender equality, which is to be applauded. We welcome Morocco’s decision to ratify the optional protocol on the convention against torture, which shows seriousness in this regard. The parliamentary elections on Friday are the first to occur under the new constitution and have the potential to herald a new era in Moroccan politics.
The UK strongly supports the ongoing process of constitutional reform and looks forward to observing free and fair elections in Morocco. There is generally a good level of freedom of expression in Morocco, but, as my hon. Friend pointed out, there are still some restrictions, particularly in relation to criticism of the monarchy, Islam and Morocco’s claim to Western Sahara. A number of high profile cases are a reminder that there is still more that the Moroccan authorities can do in that respect.
Our embassy maintains good, close working relationships with human rights institutions and civil society activists. It has run several human rights-related projects in recent years, including on penal reform and alternatives to the death penalty, and on supporting human rights institutions. Coupled with the reforms already being carried out, the recent constitutional change and Friday’s election reinforces Morocco's reputation as a leader of change in the region.
While setting an example in the region on political reform, Morocco has a major role to play in regional stability. At a time of great historic change in the Maghreb region, the need for strengthened political, economic and security relationships across the region appears all the more pressing. An improved relationship between Algeria and Morocco is vital. I therefore warmly welcome the news that the Moroccan and Algerian Foreign Ministers met in Rabat last week; it was the first meeting at this level for 14 years. According to some experts, improved trade between Maghreb countries could double the impact of any concessions made by the European Union and United States. Enhanced regional co-operation could also contribute to a more favourable dynamic for the resolution of the status of Western Sahara.
I must also acknowledge the role played by Morocco in reaching out across the Maghreb to the wider region. In relation to Syria, Morocco did not hesitate to join the calls of the international community in condemning the use of violence against civilians. Its support for political change in Libya and high-level engagement at the Libya contact group formed an important element of Arab support for the National Transitional Council.
My hon. Friend mentioned Western Sahara. Morocco has demonstrated its ability to play a constructive role in the region, and we encourage Morocco to continue its efforts, particularly with regard to Western Sahara. We fully support the efforts led by the UN to encourage all parties to reach a mutually acceptable solution that provides for the self-determination of the people of Western Sahara. The kidnapping of European aid workers from the Tindouf camps is of grave concern and it raises questions about the safety of those in the Polisario-controlled camps, as well as the threat posed by al-Qaeda in the Maghreb across the Sahel. This incident also underlines the need to find a solution to secure the futures of the refugee population.
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My hon. Friend asked about the EU’s External Action Service. I assure him that we are in close discussions with the service. I agree with him that it is important that the service does not try to replicate what members of the EU are doing, but that it works in a symbiotic, complementary way and tries to add value to the work that they are doing rather than cutting across initiatives and diplomacy that are already in place.
I am pleased to report to the House that the UK is engaged in an open dialogue with Morocco and other parties to the frozen conflict. We are committed to working with the international community to try to find a successful resolution. We cannot forget the humanitarian tragedy caused by the continued stalemate between the parties, in some cases separating family members for more than 35 years. Morocco has made commitments to providing safeguards for the human rights of all those living in the disputed territory, as noted in the UN Security Council resolution 1979 in April. Our approach to the annual renewal of the mandate for the UN peacekeeping forces in Western Sahara remains under consideration. I encourage Morocco to demonstrate firm progress against those commitments well in advance of the Security Council discussions next April.
I hope that Morocco’s recent election to a non-permanent seat on the Security Council will provide a special impetus in this regard. We look forward to working with Morocco to address all threats to international peace and security during its two-year tenure. We consider Morocco to be a close ally on complex regional matters, and we will be seeking its expertise and experience.
I will say a word or two about our bilateral relationship, which we regard as very important. Since Morocco’s independence in 1956, UK-Morocco relations have grown steadily in importance. Today, nearly 400,000 British holidaymakers visit Morocco every year, and there is a renewed strength and impetus to the political relationship. The range and depth of our bilateral contacts reflects this. As a sign of our joint wish to deepen co-operation, the Foreign Secretary and the Moroccan Foreign Minister agreed a bilateral partnership agenda in March, setting out a number of key areas for closer working. Indeed, the Foreign Secretary made his first official visit to Morocco last month, demonstrating the importance that our Government place on this relationship.
In addition, the successful official visit of Their Royal Highnesses the Prince of Wales and Duchess of Cornwall last April signifies the strong civil society links between our countries. The Westminster Foundation for Democracy is involved in parliamentary exchange programmes, and the British Council has established links between 60 Moroccan and 40 British schools through the Connecting Classrooms project.
I will say a quick word about the Arab Partnership, one of the most pertinent areas of our Government’s co-operation. This initiative leads the UK’s strategic approach to the Arab Spring, working with those in the region to develop more open societies underpinned by vibrant economies. We are committed to supporting those aspirations. In Morocco, our focus is on political participation and transparency—areas that Moroccans themselves identified as key to the country’s progress. Our programme, worth approximately £500,000, is providing targeted, rapid assistance in areas where the UK can add best value.
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The Arab Partnership also works to leverage funding and support through multilateral organisations, particularly the G8 and EU, to provide a strengthened offer of support to the region. Morocco’s commitment to reform has long been recognised by the EU. Indeed, it was the first near neighbour to achieve an association agreement in 2000 and an action plan for advanced status in 2008. As far as the EU’s External Action Service is concerned, we will be working alongside it to make sure that this action plan for advanced status is moved into the next phase. The UK supports greater conditionality, both positive and negative, in the EU’s relations with all its southern neighbourhood partners. As we move forward, this is an opportunity for Morocco to demonstrate, and be rewarded for, its internal reform efforts.
My hon. Friend mentioned judicial co-operation. The Arab Spring produced new opportunities for greater partnership. We have been working with Morocco consistently over a number of years and are reaping the benefits of a reinvigorated bilateral relationship. He mentioned the memorandum of understanding with Morocco concerning the provision of assurances in respect of people subject to deportation on grounds of national security. This MOU forms one component of a wider judicial package, and it will continue to be developed and moved forward. This will pave the way for greater co-ordination to ensure the protection of citizens. I can assure my hon. Friend that we are taking this very seriously indeed. We are pleased that the Foreign Ministers were able to sign the MOU in September. The final exchange of letters is ongoing but near completion, and obviously this forms part of a much wider judicial package to increase security and co-operation between our two countries.
Let me say something about security and co-operation. As well as harmonising our judicial systems, we have been directly co-operating with Morocco on terrorism and narcotics. The bombing of the Argana restaurant in Marrakesh last April killed 17 people, including one British national, and demonstrated the shared threat that our countries face from terrorism. We have a good record of co-operating with Morocco, and the Moroccan police investigating that incident conducted their inquiries in line with post-bomb blast management provided by the UK—a good example of close and constructive co-operation between our two countries. We also sent a special police unit to aid the investigation, and we are now looking at technical work to share expertise in the use of CCTV. I hope that has answered my hon. Friend’s question about security and co-operation, and we will write to him on any additional points that may be relevant.
The security of Morocco’s borders is of direct concern to the UK given the flow of illegal drugs and migration from west Africa into Europe. Many of the drugs that flow from Latin America into Europe come via west African countries and up through north Africa. The Moroccan authorities have publicly committed themselves to tackling the cocaine trade, and they have requested assistance from the UK and Spain to combat trafficking and terrorism. Such support is part of our enhanced security and intelligence co-operation, and we will give it added impetus in the immediate future.
As my hon. Friend will know, the Government have placed a great priority on improving commercial links with many countries, and no country is too small to
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prevent us from working tirelessly to increase bilateral trade. The UK will solve its economic problems only through the export-led recovery that the Prime Minister and Chancellor have talked so much about.
We are, therefore, looking to exploit future opportunities. Morocco is an emerging economy and we are focused on building up our bilateral trade. I am pleased that International Power has recently secured energy contracts to operate a wind farm and coal-fired power stations, and I hope that other British business will follow suit. My hon. Friend will be pleased to hear that UK Trade & Investment will take an outwards trade delegation to Morocco in January, and we also hope to restructure the Moroccan British Business Council and increase its effectiveness as a vehicle for creating vibrant business opportunities. We see Morocco as an increasingly attractive investment for UK companies—four UK law firms have established offices in Casablanca this year alone—and Her Majesty’s Government can play a role in encouraging that trend.
As my hon. Friend said, Morocco is probably one of the most advanced countries in north Africa in terms of democratic reform, and the way to embed such reform is through trade and the creation of prosperity and wealth. The more ties based on trade that countries such as Morocco have, the more likely it is that the rule of law will prevail in the future and good governance will remain.
I hope that I have responded to most of my hon. Friend’s points, and that he agrees that the UK and Morocco now have the opportunity to move forward together in a reinvigorated bilateral relationship. We must look at other ways of underpinning that already excellent relationship, and opportunities will flow from working together on the UN Security Council. As the Minister responsible for the UN, I have seen a number of small countries join the Security Council as temporary rotating members. If we engage with those countries at an early stage, we can work with them on a constructive basis—I refer in particular to countries such as Gabon, Colombia and Lebanon that have sat on the Security Council over the past year. We already had a fairly good relationship with those countries, but it is now even better. Working with them at a time of so many global challenges meant that we had to sit down together a great deal, look at our mutual interests and work together on many different international initiatives.
During his recent visit to Morocco, the Foreign Secretary spent time discussing the challenges and opportunities posed by Friday’s elections at this exciting time with representatives from a range of political parties. The UK will continue to support Morocco and its people as they continue their journey of evolutionary political reform.
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Freeview Channels
4.35 pm
Mr George Howarth (Knowsley) (Lab): I am last but not least, Mr Streeter. I am grateful for the opportunity to hold this debate. The mechanism for allocating channels is particularly important to the largest private sector company in my constituency, the shopping channel QVC, which employs more than 2,000 people nationwide, the majority of whom are based in Knowsley. Most of QVC’s work force are based in the UK, even though the company could move elsewhere given the nature of its business.
Although it sounds complicated and will involve a lot of acronyms, the issue under discussion is quite straightforward. QVC’s viewing figures and revenue are dependent on viewers being able to find it. As it stands, finding QVC is easy—as long as the channel remains the same—and it has 1.1 million loyal customers and many more viewers. Control of the channel number, however, rests in the hands of an organisation owned by its competitors. Such an arrangement could work with proper forward-facing regulation, but Ofcom does not actively regulate the process of channel allocation.
There have been three attempts to change the channel’s location in recent years, and another is imminent. We know that channel changes can lead to loss of revenue in excess of 35% per home. If Freeview channels were retail premises, it would be the equivalent of allowing major supermarkets to move the location of a smaller competitor at will. The issue, therefore, is about fair competition and appropriate regulation, to allow this thriving industry to create and sustain UK jobs.
Mary Macleod (Brentford and Isleworth) (Con): I declare an interest in the debate because the headquarters of QVC will hopefully move to my constituency in the near future. My constituency is also the home of BSkyB, so I have an additional interest. On this issue, however, it seems that a group of companies is deciding the one thing that gives QVC its only competitive advantage and allows it to grow.
Mr Howarth: The hon. Lady made her point effectively and I will support her argument as my speech develops.
I have recently received helpful representations from the Interactive Media in Retail Group—IMRG—and the Electronic Retailing Association—ERA Europe. Both organisations support the case I am making today. The issue has a direct effect on QVC, but there is also a wider effect. Leaving aside QVC’s 1.1 million active customers, independent commercial broadcasters in the UK form a successful and growing sector that employs 22,000 people. Some of those broadcasters are now commercially vulnerable due to the unfair and unclear regulatory situation in respect of the Freeview platform. The allocation of Freeview channels is important to the whole of the independent commercial broadcasting industry.
According to a communications market report by Ofcom, non-public service broadcasters have a 28% share of the audience in UK multi-channel homes. That is a not insignificant number. Research undertaken by Deloitte shows that members of the Commercial Broadcasters Association—COBA—invested £432 million during 2009 in original UK content. Another survey,
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from 2008, showed that COBA members contributed more than £2.2 billion to the UK economy.
The Government recognise the importance of the sector and are currently undertaking a major review that is likely to lead to a new communications Bill. I welcome the rationale for that legislation, which I understand is to bring the UK’s regulatory regime into the digital age and to ensure a communications infrastructure that supports growth and innovation while protecting the public interest and consumer choice.
“one of COBA’s fundamental principles is to support light touch regulation that benefits the whole market not just a few players.”
That is why handling the allocation of Freeview channels is so important. It will signal the Government’s intentions on fostering independent dynamic businesses in the communications industry and beyond.
Andrew Miller (Ellesmere Port and Neston) (Lab): My right hon. Friend is making extremely important points. Although I am not particularly familiar with the channel in question, I certainly believe that all regulation should work on the level playing field principle, and in the circumstances he has described, it clearly does not. That underlines a view that I have stated for many years and that I hope the Minister will think about when preparing his broadcasting legislation: Ofcom should have a much broader umbrella, covering all digitised services, so that at least there is a parent body that can deal with anomalies such as the one that my right hon. Friend describes.
Mr Howarth: I am grateful to my hon. Friend for that intervention. He is very knowledgeable on these matters, particularly on regulatory issues, wearing his hat as a Select Committee Chair. I hope that the Minister takes seriously the point that he made.
The Minister for Sport and the Olympics (Hugh Robertson) indicated assent .
Mr Howarth: The Minister nods; I am pleased about that.
As well as being the largest private sector employer in my constituency, QVC employs more than 500 highly skilled people in Battersea. As the hon. Member for Brentford and Isleworth (Mary Macleod) said, the intention is to move to Chiswick Park in 2012. Therefore, this issue does not affect just my constituency. The objective must be a fair, reasonable and non-discriminatory system for channel allocation, so that independent commercial broadcasters are not unfairly damaged.
Mike Weatherley (Hove) (Con): I thank the right hon. Gentleman for initiating the debate. Could he clarify the situation? Is he saying that the allocation of channels is driven by a commercial enterprise for its own vested interests, rather than being based on viewing figures for the likes of QVC, which may therefore be pushed down the list unfairly, as against those vested interests, in the allocation of the channels?
Mr Howarth: I am grateful to the hon. Gentleman. That is exactly the point that I want to make. I will come to it in a moment.
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DMOL—Digital Television Multiplex Operators Ltd—which manages the Freeview platform and allocates channels, is owned and run by the public service broadcasters BBC, and ITV and Channel 4, as well as the infrastructure provider Arqiva. As mentioned previously, that is the equivalent of allowing a major retailer to decide where local independent competitors can site their operations.
Steve Rotheram (Liverpool, Walton) (Lab): Further to the intervention by the hon. Member for Brentford and Isleworth (Mary Macleod), is my right hon. Friend aware that ITV recently launched its own shopping channel, which adds more force to the argument about potential unfairness, because DMOL is partly owned by ITV? Does that not call into question what our hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) mentioned—the level playing field?
Mr Howarth: Absolutely. I am grateful for that supportive intervention. I understand that not only has ITV moved into that market and put itself in direct competition with QVC and any other shopping provider by those means; it used QVC to pilot the operation of that new service. That adds force to the point that was made earlier.
The national and European trade associations share my concerns. They said in a submission to me:
“Businesses need certainty as well as fair competition. QVC’s business is threatened by the current regulatory uncertainty around channel allocation and we call on the government and on Ofcom, to give some clarity so that UK firms, like QVC,”
can continue to serve their customers and grow their businesses. ERA Europe stated:
“Our members’ future business in the UK is under threat from an uncertain regulatory environment regarding channel allocation on the Freeview platform and we urge the UK government and Ofcom to be more transparent in this most important area.”
At the heart of the issue is the ability of the dominant players to allocate valuable channel numbers to commercial competitors without independent adjudication and due process. QVC is currently positioned on Channel 16 on Freeview. I note that my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) said that he does not use QVC. If he takes the trouble to tune in to Channel 16, he might find some very useful bargains, but I will leave that up to him. He should remember that when he does so, he will be supporting jobs in Knowsley.
The issue is very important. Ofcom said in relation to DMOL that
“any regulatory issues would require consideration under the relevant multiplex licences. Pursuant to the Communications Act its activities are also subject to Ofcom’s concurrent competition law powers under the Competition Act 1998.”—[Official Report, 14 November 2011; Vol. 535, c. 497W.]
That quote is from a parliamentary written answer from the Minister.
Ofcom was in contact with me directly ahead of the debate. Its briefing sheds more light on the situation. It confirms:
“The multiplex operators are subject to regulatory requirements set out in the relevant multiplex licences, which include provisions to ensure fair and effective competition. Ofcom’s formal role in relation to DMOL’s listing policy is to”
consider “compatibility with our code” on electronic programme guides
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“and consider complaints from interested parties (including DTT”—
digital terrestrial television—
“licensees such as QVC). Pursuant to the Communications Act, DMOL’s activities are also subject to Ofcom’s concurrent competition law powers under the Competition Act 1998.”
The problem is that those regulatory powers are in practice retrospective. They can apply only after the channel changes have been determined.
In relation to the electronic programme guide code, Ofcom informed me that it
“has considered from time to time whether it would be appropriate to review the Code, but has concluded on each occasion that there was no pressing need to do so. It is likely that there will be communications legislation within the next few years, and the government has indicated that it is minded to look at EPG regulation in this context. We would need to take this into account in considering the appropriate timing for any review of the Code…On behalf of multiplex operators, DMOL has initiated a detailed review of the DTT listings policies, including the criteria for how different types of channels should be listed in the EPG. It has completed a first round of consultation, and identified the need for a further consultation early next year, following detailed research it has commissioned into the views of consumers.”
Given the likely threat to jobs faced by QVC workers, the statement about there being “no pressing need” is of some concern. Saying that the regulation falls within individual multiplex licences overlooks the fact that with the exception of the utility Arqiva, the multiplex operators are also dominant channel operators and indirect competitors of independent broadcasters.
Fortunately, there is an easy to implement solution, which I am sure that the Minister will be happy to hear. DMOL should be regulated in the same way as any other broadcast television platform. For example, the equivalent operation at BSkyB, to which the hon. Member for Brentford and Isleworth referred and which reaches fewer homes, has been regulated since the late 1990s.
That is not an argument for special treatment, merely one for a level playing field, as my hon. Friend the Member for Ellesmere Port and Neston put it, so that independent broadcasters can compete fairly with all channels, including the public service broadcasters. I accept that public service channels should have special prominence with preferential channel numbers, but the current policy and practice for allocating logical channel numbers on Freeview unfairly disadvantages independent commercial broadcasters and disproportionately benefits the channels operated by DMOL shareholders.
We all want to ensure that the UK broadcast market remains dynamic and successful. Channel allocation on Freeview is about economic fairness, business certainty, jobs, encouragement of investment and legal principle. It is also about the importance of a broad and diverse UK television market.
In conclusion, I ask the Minister to consider carefully the full implications of the current DMOL channel allocation system and its lack of transparency. I am sure that with good will and an understanding of the problem, the Government and Ofcom will between them be able to resolve the situation. In practice, that means asking Ofcom to ensure that DMOL is regulated in the same way as other platforms.
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4.52 pm
The Minister for Sport and the Olympics (Hugh Robertson): First, may I say what a pleasure it is to be here under your chairmanship, Mr Streeter? Secondly, I thank the right hon. Member for Knowsley (Mr Howarth) for securing the debate and for the way he presented his concerns, which I absolutely understand. Thirdly, and in some ways most surprisingly, I apologise for not being the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage (Mr Vaizey). I hope that this is the last time I have to do so. He is, of course, the Minister for the arts and the media, but he is away on ministerial business, and on his behalf, I apologise.
I welcome the opportunity to debate the issues regarding Freeview and the allocation of channels. The debate is particularly timely, because my Department is considering the regulation on electronic programme guides as part of our communications review.
The right hon. Gentleman talked about the importance of slots and the high-level listings on EPGs, and how that might impact on viewing numbers, and therefore indirectly on businesses, such as those in his constituency and the constituency of my hon. Friend the Member for Brentford and Isleworth (Mary Macleod). I absolutely understand QVC’s position and the possible impact that any decision by Digital Multiplex Operators Ltd may have on that established company. QVC is a great British company. In 18 years, it has revolutionised home shopping in the UK and grown to have about 1,500 employees in the right hon. Gentleman’s constituency and at least another 500 elsewhere.
The regulation of EPGs is, as the right hon. Gentleman correctly said, a matter for the independent regulator, Ofcom, and not directly for Ministers. While I have no powers to intervene in this case, I would like to set out the regulatory framework and what we are considering as part of the communications review. At the outset, I will give him a straightforward undertaking that I will take back what he has said today and ensure that my hon. Friend the Minister, who has responsibility for the arts and the media, is aware of his concerns.
Andrew Miller: Will the Minister add another aspect to that? While my right hon. Friend the Member for Knowsley (Mr Howarth) teased me about not being a shopper on QVC, my mother, who often gets into such debates, found it to be of invaluable service when she was at home as a disabled person. A lot of older people who are not experts on the internet, although my mother used the internet in her 90s, find television shopping a valuable tool. It would be grossly unfair to put people such as the disabled at a competitive disadvantage because of the competitive advantage of giant broadcasters.
Hugh Robertson: I can certainly give the hon. Gentleman the undertaking that I will ensure that his comments are also relayed to my ministerial colleague.
The Communications Act 2003 sets out the fact that it is Ofcom’s duty to draw up, and from time to time review and revise, a code to give guidance to platform operators about the provision of EPGs. Ofcom’s code of practice on EPGs is non-prescriptive about the order in which channels are placed, except for the public service broadcasting channels, which include the BBC’s digital services, channels 3, 4 and 5, and S4C in Wales.
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Alun Cairns (Vale of Glamorgan) (Con): I congratulate the right hon. Member for Knowsley on securing the debate. The Minister mentioned S4C. There is an exciting prospect that EPG has to provide for local television. There is some consideration being given to using channel 8 for local television, on which Channel 4 is broadcast in Wales because of the presence of S4C on channel 4 on the EPG. Does he recognise that that issue also needs to be considered in the debate?
Hugh Robertson: Absolutely. While the Government intend for the local television channel to be channel 8 in England and Northern Ireland, we are looking at what the appropriate channel is in Wales and Scotland, given exactly the issue that my hon. Friend has raised.
The right hon. Member for Knowsley is particularly concerned to see that Ofcom’s code requires that other, non-PSB channels are treated on a fair, reasonable and non-discriminatory basis. To guard against platform operators such as Freeview misusing their power in relation to broadcasters, Ofcom has the power to investigate potential breaches of competition law in the communications sector, such as exclusionary agreements and the abuse of a dominant position.
In summary, the listing of channels within EPGs is determined by individual platforms, exactly as the right hon. Gentleman said, such as Freeview, Sky, Virgin and Freesat, within the restrictions of Ofcom’s code and powers. It is not for the Government or Ofcom to specify exactly where every channel should be listed. It is important to note that anyone, including the broadcasters themselves, who is unhappy with how a platform operator has applied the EPG code has recourse to raise that with Ofcom as the appropriate regulator.
Mr George Howarth: I am grateful for the helpful way the Minister is responding to the debate. I would like to emphasise that the existing powers are retrospective, and that still creates uncertainty. I hope that he will feel able to address that aspect together with Ofcom.
Mr Gary Streeter (in the Chair): Order. I remind the Minister that he has until six minutes past 5.
Hugh Robertson: Thank you for that gentle warning, Mr Streeter, and I thank the right hon. Gentleman for his comments. I absolutely understand that and I will ensure that his point is fed into the Department’s wider review of the 2003 Act.
The right hon. Gentleman’s concerns relate specifically to Freeview, so I shall discuss the background and the set-up of the Freeview platform. The Freeview service comprises approximately 50 TV channels broadcast on digital terrestrial television, or DTT, and is free to air. A company called DTV Services Ltd, owned and run, as he said, by its shareholders—the BBC, BSkyB, Channel 4, ITV and Arqiva—is responsible for the Freeview brand.
DMOL, which is a limited company owned by the digital multiplex operators, was set up in 2007 to co-ordinate the functions of the DTT platform. Within its remit is responsibility for setting the channel numbers on Freeview. The good news is that DMOL has initiated a detailed review of the DTT listings policies, including the criteria
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for how different types of channel should be listed in the EPG. It has also commissioned in-depth research on the views of consumers. Once again, I will ensure, through the Department, that the views of the right hon. Gentleman are brought to the attention of DMOL as part of that review.
DMOL proposes to launch a consultation in February. It is asking for comments on the ordering of channels within the general entertainment genre, the creation of a transactional genre, and the ordering and location of all genres beyond general entertainment. That consultation will presumably include, among others, the mother of the hon. Member for Ellesmere Port and Neston (Andrew Miller). It is therefore essential that everyone with views about the allocation of channels responds to that consultation. I strongly encourage the right hon. Member for Knowsley and his constituents to do exactly that.
As the right hon. Gentleman does not feel that there is a level playing field between Freeview and other platforms, let me turn briefly to the way Ofcom regulates EPGs with particular reference to Freeview. The platform operators decide EPG lists. DMOL is a body formed by the multiplex licensees to co-ordinate the operation of the DTT platform and the organisation of the EPG. I must stress that EPGs on the DTT platform are regulated by Ofcom, albeit in the circumstances intimated by the right hon. Gentleman, in the same way as other platforms.
The EPG code on DTT applies to the multiplex licensees, rather than to DMOL. That means that in the event of a complaint against Freeview over its compliance with the EPG code, Ofcom would take it up with the multiplex licensees through DMOL. Ofcom would have the regulatory power to intervene, just as it could in the event of a complaint about the EPG of any other platform. In this case, it does not make sense for Ofcom to intervene even before DMOL has held its consultation and reached a final decision on its proposed changes, which is why I am encouraging the right hon. Gentleman to respond to the forthcoming DMOL consultation with as much evidence as possible.
As hon. Members will be aware, my Department is undertaking a review of the communications sector. We are looking at a broad range of areas from television and radio to broadband and spectrum issues. I should stress that the aim of that review is to stimulate growth and create opportunities in the communications sectors, and not in any way to dictate or limit the development of markets and technologies in broadcasting or other industries.
The importance of EPGs is an area to which we have started to give detailed consideration. The Secretary of State has reflected that interest:
“Position on the EPG will probably be the Government’s single most important lever in protecting our tradition of public service broadcasting. We are actively looking at how to make that situation better, if necessary using legislation.”—[Official Report, 8 September 2011; Vol. 532, c. 543.]
That is absolutely a key area in this review. I should add that not only are we interested in looking at the issue of the EPG from the perspective of public service broadcasters, but we are aware of the immense value that many of the commercial, non-PSB channels bring in providing a wide range of viewing choices and investing in more UK content. We would like to understand more about the importance that companies place on the EPG.
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There is some evidence that the position on the EPG can affect the viewing figures of a particular channel, and that may have some indirect commercial impact. For example, MTV’s slot was moved up 150 channel places on the Sky platform, from the top of the music section to the middle of the third page general entertainment section. Research published by the media consultancy Attentional suggests that the Sky audience for MTV increased by as much as 150%.
The communications review is already under way, having been kicked off by a letter from the Secretary of State in June. We have already received more than 160 responses to that letter, many of which touched on the issue of EPG and channel prominence. We are very much in listening mode ahead of the publication of the Green Paper early next year and are grateful for the opportunity to hear some of the issues today. As I said to the right hon. Member for Knowsley, I will ensure that his contribution is fed into that review.
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It is important that interested parties continue to feed in their views. I am pleased that QVC was among those that responded to the open letter from the Government and I encourage it to continue to engage with that process as it moves forward.
Let me finish by expressing my thanks to the right hon. Gentleman for his contribution. Although the Government do not have a direct role in allocating EPG places, and I do not think that anybody in this Chamber would encourage us so to do, I promise him that I will take on board what he has said today and ensure that it is fed into the review. I encourage him and his constituents to continue to engage with the review as it moves forward.