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Westminster Hall
Tuesday 4 December 2012
[Martin Caton in the Chair]
Ford UK (Duty of Care to Visteon Pensioners)
Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Syms.)
9.30 am
Mike Freer (Finchley and Golders Green) (Con): I have not spoken under your chairmanship before, Mr Caton, so I am looking forward to today’s debate. I would like to thank my colleagues; as you can see, quite a number have turned up in support of this important debate on an issue facing the Visteon pensioners that has been going on for some time.
In understanding the situation, it is important to appreciate what Visteon was and what happened to the short-changed Visteon pensioners. Visteon was the global automotive component operation of the Ford Motor Company. Most of us will have heard of Ford, but few will have heard of Visteon. In June 2000, Visteon was spun off from Ford as part of its efforts to reduce supply chain costs. Importantly, the separation agreement provided, as part of the spin-off, that those spun off would benefit from mirrored terms and conditions and “lifetime protection”. Further to that being offered to former Ford Visteon employees, employees were advised that the Ford European works council agreement—the FEWC—guarantees
“that Visteon employees transferring their past service benefits to the Visteon Fund will receive the same benefits as at Ford, both now and in the future for all their pensionable service.”
That important point was written into the agreement. Beyond that, employees were encouraged to join the Visteon scheme and transfer their pension with statements such as
“Your accrued pension rights will be protected”,
that it was in employees’ best interests to transfer, and that pension benefits are guaranteed.
It is important to remember that Visteon was not a wholly arm’s length company after the spin-off. It remained dependent on Ford for 90% of its business, and the employees who transferred from Ford to Visteon received no new contracts. The company operated out of buildings and facilities that retained the Ford brand, and personnel cards carried by Visteon employees remained branded “Ford”. When employees qualified for a long-service dinner, the invitation had a Ford letterhead, and when employees turned up for their long-service award, the award also had the Ford emblem.
Clearly, Ford knew that it had to reduce its operating costs, which in itself is not a crime, but perhaps what it went on to do is bordering on one. There is a clear suspicion that Visteon was being set up to fail, and that pension liabilities were being deliberately detached from the main company.
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Mr Lee Scott (Ilford North) (Con): Does my hon. Friend agree that whatever may happen in coming months, Ford should just do the right thing and honour everything that it said, as he has described? It should be responsible to its former employees.
Mike Freer: My hon. Friend makes a powerful point. Anyone who has gone through the documents that the Visteon pensioners have been able to secure will see that there is a clear audit trail showing that Ford knew exactly what it was doing. It gave guarantees that it is now seeking to renege on.
Mr Charles Walker (Broxbourne) (Con): Is it not the case that in our pursuit of this matter, along with my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), Ford has sent some very reasonable people to meet us, but it continues to behave in a very unreasonable way?
Mike Freer: My hon. Friend makes another good point. We have seen over the years that when companies are seeking to renege on their pension responsibilities, they seek to delay through the courts. I suspect that many companies hope that the pensioners will die before the case is heard, and I agree that it is time that Ford met its responsibilities.
I return to the issue of Visteon being set up to fail. The Visteon UK pension plan was created 12 months after the spin-off from Ford, with a transfer value of just £230 million. That transfer value left an immediate deficit of £49 million. That deficit was not communicated to the employees. It looks as though Ford was simply shunting off its liabilities and cleaning up its main balance sheet. It could be argued that a viable spin-off company could have traded its way out, and that it could have made employee and employer contributions to rectify the deficit. Could Visteon have traded its pension fund out of trouble? Possibly—I am not an actuary, so I cannot comment.
Mr John Baron (Basildon and Billericay) (Con): I congratulate my hon. Friend on securing the debate. Ford certainly needs to answer key questions, and this will be the subject of a court case. However, we have invited other players in this sad affair, such as the Visteon management and the trustees at the time—key players when it came to the transfer—to come and meet us as a group, and they have refused. Does my hon. Friend agree that that should be considered as a negative on their part?
Mike Freer: My hon. Friend makes a good point. I do not see why the former management and trustees should not come and talk to us and explain why they believed that the actions they took were correct. If they feel those actions were right, they should come and defend them. I also correct him, because although I thank him for his congratulations on securing the debate, the true congratulations should go to our hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), who has been diligent and persistent in pursuing this case on behalf of Visteon pensioners. We should give credit where credit is due in this House.
To return to whether Visteon could be a going concern and therefore trade its way out of pension deficit, in the month before Visteon was spun off, documents submitted to the Securities and Exchange Commission identified significant risks, but those risks were not communicated
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to the employees. Ford said that it was committed to ensuring Visteon’s viability by using Visteon to supply its products. Fair enough, but Ford then implemented a unilateral price reduction and started sourcing products from newer and cheaper alternative providers.
The European works agreement, apparently, was supposed to have transferred all the benefits, but it also tied Visteon into the UK wages and benefits that the employees were entitled to. Although we can argue that the benefits of the pension scheme have not been transferred, Visteon was, of course, saddled with the legacy labour and overhead costs, and, as I have mentioned, Ford then unilaterally dropped the prices it was willing to pay. The cost base of the spin-off remained high, but Visteon’s income was cut at a stroke by Ford.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC): I congratulate the hon. Gentleman on securing the debate, and I also want to put on record my congratulations on the work done by the hon. Members for South Basildon and East Thurrock (Stephen Metcalfe) and for Swansea West (Geraint Davies) in leading the all-party group on this subject. Is it not the fact that suspicions are deepened by Visteon suffering an operating loss for every year that it existed? It never made a profit and its total committed debts by the time it ceased to operate were $955 million.
Mike Freer: The hon. Gentleman makes a good point. A company being transferred away from its parent as a loss maker is, in itself, not the issue, but it is whether the management, on both sides of the spin-off, genuinely believed that the business recovery plan was viable. I shall go on to refer to a comment made by the then chief executive of Visteon about the viability of the business post spin-off. The comment suggests that they knew exactly what they were doing, and that this was simply an exercise of dumping a liability while cleaning up the main Ford balance sheet.
Dr Hywel Francis (Aberavon) (Lab): I congratulate the hon. Gentleman on securing the debate. One key point that was made to me by trade unions at the time, 10 years ago, was that there was no serious engagement with the unions and the work force in new product development. The company was continually reminded of the need to do so, but refused.
Mike Freer:
The hon. Gentleman makes a very good point, but it is worse than just that there was no engagement. All the evidence suggests that Ford Motor Company was engaged in underhand sourcing of new products from other suppliers at cheaper rates. Indeed, those new suppliers were asked—nay, forced—to sign confidentiality agreements. Therefore, although Ford knew that Visteon was not in a position to develop new products, it was actively sourcing new products from other, cheaper suppliers without telling Visteon or certainly without telling the work force of Visteon. I think that that is duplicitous. Visteon was immediately at a competitive disadvantage compared with other suppliers, not least in relation to securing new business from Ford. Of course, as it was a spin-off, one hope would have been that it would secure new business, but having inherited the overhead of the Ford system, it was unable to do so.
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As the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) pointed out, Visteon’s trading losses were close to $1 billion before it went into administration in March 2009. It made a loss every single year.
The key issue is this: did Ford know what it was doing? This is where I want to refer to a comment made by Tim Leuliette, the chief executive of Visteon Corporation. He was interviewed by the Detroit Free Press in November 2012. He was asked:
“Did…Visteon…have a chance”
when it was spun off? He said quite clearly:
“No…The labor cost issues, and the burden and the overhead was…so out of line with reality that it was almost comical. It just wasn’t going to work. And it didn’t work.”
If the chief executive of Visteon knew that its business plan could not recover the company, I doubt that Ford did not know that as well.
Mr Charles Walker: Is this not an example of Ford, a four-letter company, behaving in a four-letter way, and is it not a disgrace?
Mike Freer: My hon. Friend is tempting me into unparliamentary language. I will resist the temptation, but I of course do share the sentiment behind his intervention.
I think that the chief executive summed the position up in one or two sentences. I cannot believe that Ford Motor Company and the management of Visteon did not know exactly what they were doing. It was simply a dumping-of-liabilities exercise.
In April 2009, matters got worse. The Visteon UK pension fund required support from the Pension Protection Fund. Some Visteon pensioners have already seen their pensions reduced by 45%. In February 2012, the protection fund took on the responsibility for paying members of the scheme. As I have already said, it seems that Ford was simply cleaning house—shunting off a loss-making division and its pension liabilities. The new business was not viable, and it knew that the pension fund was in deficit. The full facts and the full risks were hidden from the employees. What was worse in my view was that false promises were made to encourage employees to transfer their pensions.
I used to work for one of the high street banks, in the regulated side of the bank. In fact, I sold pensions. If I had made to my customers the comments that Ford Motor Company made, I would not only have been struck off as a regulated person by the Financial Services Authority, I suspect that I would have been prosecuted for mis-selling.
Rebecca Harris (Castle Point) (Con): Does my hon. Friend agree that this is the crux of the matter—that the employees were persuaded that their pensions would be secure not by some strange private equity financiers or some faceless spivs, but by their long-term employers, their trusted and respected employers, Ford? Does he agree that the moral responsibility for this therefore remains with Ford?
Mike Freer: My hon. Friend hits the nail on the head. Let me refer to an extract from the Ford personnel communication of April 2000. It clearly states:
“Your accrued pension rights will be protected.”
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Minutes of a Ford pension meeting with union representatives clearly state that it is in the interests of the employees to transfer—that the pension benefits will be the same now as in the future. It says that in black and white. I could not have got away with that as a regulated person working for a high street bank and I do not see why Ford should get away with it, either. Ford’s sleight of hand has left pensioners without the pension to which they were entitled. It looks suspiciously like they deliberately misled their employees if not mis-sold the pension transfer.
Mr Chavda is my constituent. I see him on a regular basis when I visit Homebase in my constituency, where he is now working to top up his pension. He wrote to me and said that
“it is Ford that should be liable for the losses many people are suffering as a result of the company transfer. I worked for many years for Ford and I feel cheated that after contributing in the pension scheme for many years…I am now receiving less than the amount I am entitled to.”
Mr Chavda is not alone. Ford should keep its promises and meet its responsibilities. Today’s debate is about asking Ford to do the right thing. I am sure that my hon. Friends in this place will support me.
9.45 am
Geraint Davies (Swansea West) (Lab/Co-op): I, too, congratulate the hon. Member for Finchley and Golders Green (Mike Freer) on securing the debate. I know that you, Mr Caton, have a great knowledge and awareness of this business because some of your constituents have been directly affected. Against the backcloth of news reports about global companies having to take responsibility for tax, we are here to talk specifically about Ford and its responsibilities to its former workers and employees, whose pension funds have been asset-stripped by what is basically sleight of hand.
As you will know, Mr Caton, the background in a nutshell is that Ford set up Visteon in 2000, seemingly as part of a strategy to reduce input costs and increase profits. By creating an arm’s length company that it had control of in terms of the prices that it was giving that company, it was then able to set up a pension fund that in the first instance was underfunded by some £49 million. It controlled and pressed down the prices paid to Visteon, with the net outcome that Visteon made losses in each of the 10 years of its existence, in the order of $100 million a year. The net outcome of that was that the pension fund was further suppressed, and pensioners and workers who spent decades working for Ford in good faith now find themselves short-changed.
I am glad to be accompanied by hon. Members from both sides of the House in calling on Ford to do the right thing, as part of a wider debate to bring global companies to account where they employ people and make profits, so that they provide decent products and are also decent to their work force.
Dr Francis:
On the point that there is broad cross-party support in relation to this issue, will my hon. Friend join me in congratulating the all-party group that was set up several years ago to ensure justice for Visteon pensioners and in congratulating our hon. Friend the Member for Swansea East (Mrs James) on the sterling work that she undertook in the early stages? I also
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thank him for the work that he has done, because although the Visteon plant is located in my constituency, the vast majority of the workers or former employees are located in Swansea. I have constituents from Baglan, Briton Ferry, Skewen and Cwmafan, but the vast majority are in his constituency and hers.
Geraint Davies: I am glad to have had that intervention. It is very important to remember that this issue has been bubbling for 10 years. My hon. Friend the Member for Swansea East (Mrs James) has done an enormous amount of work, and obviously my hon. Friend the Member for Aberavon (Dr Francis), who has just intervened, had the original factory in his backyard. As this situation has gone on so long, Ford may be under the misapprehension that the issue will go away. It has been mentioned that some of the pensioners may in fact die and nobody will take much notice of it. However, what we see here, on the foundation of the work that has been done in the past, is the coming together of a new all-party group. I pay my respects to the previous all-party group for keeping the issue moving, but we now have a new sense of energy.
The significance of this debate, of course, is that it will put it not just on the UK airwaves but on the US airwaves that Ford is not just a whiter-than-white company. It needs to take responsibility for its employees around the world, not least the British cousins of the US workers, who have worked so hard for Ford throughout their lives in good faith and now feel that they have been shoddily treated. We all know that the matter will be carefully argued in court by very rich lawyers, but what we are saying here, and what the Ford directorship in the US needs to understand, is that a cross-party group of parliamentarians in Britain will focus on it and keep it on the agenda, and ultimately that will have an impact on the brand values that Ford relies on for its profitability. We are saying not only that this is a moral obligation, but that Ford must financially do the right thing; otherwise, it will pay the price one way or another.
James Duddridge (Rochford and Southend East) (Con): The hon. Gentleman almost anticipates the point I was going to make. Does he agree that this is not only an historical issue, but about the future of Ford Motor Company? Who in their right mind would work for an organisation that has treated its employees so dishonourably? It is about not only Visteon pensioners, but the future of Ford, the nature of its corporate and social responsibility and its future relationship with employees and customers.
Geraint Davies: That is precisely the point that needs to be made. There is great empathy with Ford in Britain. Everyone has heard of Henry Ford and thinks of the motor car as coming from Ford. As the story comes out and is amplified by more groups, people will think, “Why should I choose a Ford car over a Nissan or a Honda, who are investing hundreds of millions of pounds in new production in Britain this year?” We have a loyalty to the people who work in Britain, as well as a wish to buy the best product. If 3,000 pensions are affected, it is our responsibility to stand up and let the people we represent know what we are doing and why we are doing it. They can make judgments about which cars they choose to buy.
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The original £49 million gap in the pension fund in 2000 was alongside a significant surplus in the main Ford pension fund. We should obviously ask why; it seems an unacceptable start. Since then, the gap has grown to something like £350 million. As the hon. Member for Finchley and Golders Green said, Ford had almost a monopoly over the supply of parts coming out of Visteon, so it was in a position to drive down prices unilaterally. There was no proper market. I have a Visteon internal e-mail from December 2000, which states:
“Ford have reduced PATS prices twice this year…9.2% as part of the EWC agreement…and then reduced prices again by 10.5%. This was never agreed.”
In that one year, prices reduced by 20%. If one company is supplying a company that controls the prices, it is not surprising that costs can be transferred. In one year, 2005-06, Visteon Europe lost £700 million and Ford Europe made a £700 million profit. Who makes a profit and who makes a loss is clearly determined by Ford. It had a direct knock-on effect on the value of the pension fund, which is now £350 million in the red.
Visteon had to buy inputs from Ford. It bought materials from the Ford foundry at Leamington, for example, which it could have sourced more cheaply elsewhere, to make parts that it then sold back to Ford at a price that Ford dictated. Clearly, this was all part of a strategy for Ford to manage down its costs and gradually outsource from Visteon, to places such as Korea, in a way that did not invoke any business discontinuity that would have cost it profits. It was carefully managed, but the people who really suffered were obviously the Visteon workers.
Meanwhile, on the Visteon trustee pension directorate, a separate pension fund was set up—the Visteon engineering scheme for cherry-picked Ford personnel. One of the people we invited to speak to us, who has not as yet agreed, is Mr Phil Woodward, a company-nominated Visteon pension trustee director. He was on the trustee board, where he had a duty of care to the Visteon pensioners, and transferred his pension to the new fund, taking money out of the Visteon fund. All the transfers and the voluntary redundancies would again deflate the Visteon pension fund. At that time, he was also involved in the closure of plants in Bridgend and Belfast. There certainly seems to be a conflict of interest there.
I shall not keep hon. Members much longer, as I know many others want to speak. The simple point is that there will ultimately be a decision in court, but we are saying that, from the evidence we have received—we are happy to receive other evidence from Mr Woodward or representatives of Visteon, who have not come to us either—we believe that there is a duty of care to our constituents who have been sold down the river. We will not let this rest until we get justice for the pensioners.
9.55 am
Mr John Whittingdale (Maldon) (Con):
It is a pleasure to serve under your chairmanship, Mr Caton. I know that you would probably rather be in the body of the Chamber, since you, too, have many constituents affected by this very sad affair. I congratulate my hon. Friend the Member for Finchley and Golders Green (Mike Freer) on his success in securing the debate—a number
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of us entered the ballot, but he was the one lucky enough to be selected. We have an opportunity for the many Members who represent people who have suffered as a result of what has occurred to speak. As others have done, I would like to single out my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), who has led the campaign so well and ensured that it remains in the public eye. I must first apologise to my hon. Friends and other Members. I have to chair a Select Committee at 10.15 am, so I will be brief. I am grateful to be called early. I will not repeat the facts that were set out so ably by my hon. Friend the Member for Finchley and Golders Green and the hon. Member for Swansea West (Geraint Davies).
The saga is fairly clear, but it is always important to bear in mind the real distress caused to individuals. I shall mention two. Mr McDonald of Danbury in my constituency was employed by Ford for 33 years and then spent four years working for Visteon. He believed the assurances given to him about the pay, conditions and pension entitlements, which would mirror those that he had enjoyed during his time at Ford, and he therefore agreed for his pension to be transferred. Another of my constituents, Mr Sharpe of Heybridge, was employed by Ford for 27 years and by Visteon for three months. Both those individuals have seen their pension reduced by 50%. They believed that the Pension Protection Fund would offer some protection, which I hope the Minister will say a little about in his reply. The PPF suggested that it would guarantee that such people would receive 90% of their pensions, but that has proved not to be the case, as a result of how the rules work and the cap that has been applied.
Sir Bob Russell (Colchester) (LD): My hon. Friend is an experienced parliamentarian. Does he agree that a turnout such as the one today indicates that the issue is not restricted only to Visteon plants? Visteon pensioners are spread far and wide. As someone who has witnessed many parliamentary debates, does he agree that the story that has unfolded is not so much “Ford” as “fraud”?
Mr Whittingdale: I agree with the hon. Gentleman; like him, I have attended debates in Westminster Hall where there have often been only one or two Members plus a Minister and the Whip on duty. The fact that so many Members turned out this morning demonstrates, first, the wide area from which Visteon employees have come, and, secondly, the strength of the feeling among many Members that Visteon pensioners have been treated badly and that justice must be done.
I shall quickly turn to another aspect of the case that I hope the Minister will talk about. The PPF has not protected my constituents in the way that they hoped it would—of course, the Pensions Regulator was not there at the time. We have met representatives of the Pensions Regulator, and I think it would be fair to say that it dropped heavy hints that if the powers that are available now had been available at the time, the transfer would have been looked at extremely closely, because, as has been mentioned, the sum transferred into the Visteon pension fund left it in deficit from the start.
As my hon. Friend the Member for Finchley and Golders Green said, not only was the pension fund in deficit, but the arrangement between Ford and Visteon
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meant that Visteon was almost bound to fail. It never made a profit. The pension fund became steadily further in deficit. Visteon was unviable from the start and it was almost inevitable that sooner or later it would go into administration.
Court cases are pending, so we must await their outcome, but I think that all of us feel that whether those cases prove that Ford has a continuing legal liability to its former employees is not, in a sense, the main thing. We all feel strongly that Ford has a strong moral obligation. It is a blue-chip company with a worldwide reputation. It is trusted, but how it has behaved to its former employees tarnishes that reputation. As has been said, that will reflect on how people view it, unless it does the right thing and gives justice to the people who gave it such devoted service for so long. The issue is not going away. We will continue to campaign until Ford meets its moral obligations.
Martin Caton (in the Chair): Order. We have progressed quite far in the debate, but I remind Members that cases have been set down for trial and we must be careful not to invade territory that might prejudice those cases. No one has been out of order so far, and I am sure that no one will be, but will speakers please bear that in mind?
10 am
Nia Griffith (Llanelli) (Lab): Thank you, Mr Caton.
We need to remember the utter devastation that the goings-on at Ford and Visteon visited on some of our constituents. Having worked all their life and put by their money, they do not expect to be treated in such a way that their pension is 50% down on what they had hoped. In the days when workers could choose which factory to work in, some might have chosen Ford specifically because it was a reputable company, with a decent salary and a decent pension contribution scheme, only to be told a few years later that the figures did not add up and that they were not going to get what they thought.
Workers were told that they had no option but to transfer their pension. They were told that it was not legally possible for Visteon UK employees to remain in the Ford pension scheme post-spin-off. They either had their pension frozen until they were 65 or they transferred it, being told that it would continue to grow as per the existing terms and conditions. There has therefore been a terrible betrayal. Again and again in the documentation, we read sentences such as:
“Your accrued pension rights will be protected”.
Workers were told by Ford that their “pension benefits are guaranteed”. That was also stated in an e-mail, in which the answers had been approved by the director of personnel for Ford Britain. A letter dated August 2000 from Brian Smith, the human resources manager, clearly stated:
“For employees transferred to Visteon from Ford on 1 May 2000, the new Visteon Scheme will provide exactly the same benefits as the Ford Fund, now and in the future”.
Jonathan Edwards: Is the hon. Lady aware of a question-and-answer document circulated particularly to employees in the Swansea plant? It included the question:
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“If I stay with Visteon will my pension be secure?”
“Visteon has committed to mirror the terms and conditions of Ford. This means that…your pension”
will “be secure”. Is that not a case of deliberate misinformation or, even worse, deception?
Nia Griffith: Indeed. We often hear the word “mis-selling” used in relation to financial products, but that is far too kind a word, which suggests some kind of mistake. I call it a complete rip-off, a complete betrayal and an absolute disgrace in relation to what people were told and what the reality turned out to be. Clearly, somebody knew what was going on.
Sir Peter Bottomley (Worthing West) (Con): Is the hon. Lady saying—if she is, I agree—that the people in Ford knew that the Visteon pension scheme was not as soundly based as the Ford one? Does she think that the main board in the United States is aware of this history in detail?
Nia Griffith: I am coming to that point. In fact, it was the Ford actuarial team that decided the amount of the transfer. The initial £49 million deficit in Visteon’s pension funding was clearly determined by Ford.
Can anyone imagine that there were not already thoughts, in some big boardroom in Ford, about how it could get rid of its liabilities—that nobody had in mind the thought that its biggest problem was the pension deficit and how to fund it for the future, and wondered what it could do to get rid of that? Can anyone tell me that they really believe that Ford had not already thought of hiving off the bits in the supply chain for which it could get cheaper prices, thinking that it could use its 90% purchasing power over Visteon UK to force down prices, before it embarked on the separation plan? It seems clear to me that Ford was determined to drive down prices even further than what it had agreed in the separation plan.
I agree with the hon. Gentleman that there was a very determined plan from the beginning. To me, it seems that there was a cunning plan: Ford wanted to maximise profits and to drive down costs on the backs of the workers in Visteon UK plants. Once it had managed to hive off certain sectors and to form Visteon, we heard that Ford was starting to drive down prices to ones that were significantly lower than those in the original separation agreement.
We also found that Ford tried to source components elsewhere. There were the dreaded confidentiality agreements: “Don’t tell Visteon that you’re making the bits that we get from them now, and that you’ll stockpile them so that we have them ready for when we get rid of Visteon altogether.” Do not tell me that somebody was not already thinking about that right back before 2000. If we look at the whole thing from beginning to end, there was a distinct plan of maximising profits for Ford and trying to get rid of the parts of the company providing components that it could find more cheaply elsewhere.
For Ford to do that on the backs of workers who worked loyally for it for 20 or 30 years is absolutely despicable and totally morally reprehensible. I fully concur with my hon. Friend the Member for Swansea
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West (Geraint Davies), who said that people have to make ethical choices about from whom they buy products. People need to know how Ford has treated the Visteon workers.
Geraint Davies: People should also know that the lot of Visteon workers in the UK is far worse than those in Germany or the United States. That suggests that there has been a carefully choreographed judgment about where Ford can get away with ripping off workers. The view was that it could do it in the UK—covertly lining up alternative suppliers, and telling them not to tell Visteon that that was done to knock Visteon out—and the whole thing really stinks.
Nia Griffith: Indeed. My hon. Friend is absolutely right. With Visteon workers elsewhere not being treated in the same way, we must question what went on. It seems to me that there was a massive cover-up and a real attempt to drive down prices in a way that, as I have said, was completely morally reprehensible.
10.8 am
Stephen Metcalfe (South Basildon and East Thurrock) (Con): It is a pleasure to serve under your chairmanship, Mr Caton. Thank you for calling me in this important debate. I add my congratulations to my hon. Friend the Member for Finchley and Golders Green (Mike Freer) on securing the debate. It was a joint effort, and he was the successful candidate. He opened the debate very professionally, laying out the landscape so that we can fully understand the impact of the closure of Visteon.
I thank colleagues from across the House who have supported me on the issue. My involvement goes back to 2009—before I was elected—when I heard about the closure of a business on the other side of the constituency boundary. Over the past three and a half years, I have become more deeply involved, and I have received support from many colleagues. The fundamental reason for that is that we all share the same concerns on behalf of our constituents.
When the business collapsed, there were obviously redundancies, and there were also calls for compensation and holiday pay—in due course, some of those were met—but at that point the full ramifications were not fully understood. It was not until just before the election in 2010 that I began to understand that those ramifications went much wider than people losing their jobs. Very early on in my newly elected role, a gentleman came to one of my surgeries and asked for help. He told me that Ford had failed him. He said that he was a former worker of Visteon and that his pension has been dramatically cut. He went on to tell me about other people who had had their pensions cut by up to 45%. The more I looked into the matter, the more I came to realise that Ford had a responsibility and a duty of care to and for its former employees, which is what we are here to debate today. That is why I have pursued this issue over the past two and a half years.
In our attempts to get justice for our constituents, we have held meetings with Ford and former Visteon employees, tabled an early-day motion and met Ministers, whom I am grateful to for giving us their time. I have asked questions on the Floor of the House and we have
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asked questions outside of this place. I have met the administrators, KPMG, and the Pension Protection Fund. I met a representative from the relatively new Visteon Engineering Services, which was one of the companies that spun off from Visteon before it collapsed, and which has been very evasive about coming to talk to us as a group. We have recently established an all-party parliamentary group, of which I am chairman. Through that organisation, we have started to hold evidence sessions to try to gather more detailed information. Most recently, we have, through our joint efforts, managed to secure this important debate.
After all those discussions with the various organisations, I keep coming back to the fact that Ford had the greatest responsibility for its former employees.
Rebecca Harris: Does my hon. Friend agree that the degree to which the affected pensioners, with absolute unanimity, blame Ford for the situation is quite astonishing? I have not had one constituent say that they are disappointed with the management of Visteon. As they stand outside the Ford dealership on Saturday mornings, they unanimously hold Ford responsible.
Stephen Metcalfe: Indeed. The reason for that is that while there may be issues of mismanagement within Visteon, many of the individuals whom we represent spent a lifetime working for Ford. They felt part of the Ford family, and they were transferred out of that business into a new business. They felt that they had safeguards, but when it came to it those safeguards were not worth the paper they were written on. That is why they hold Ford responsible.
Mike Gapes (Ilford South) (Lab/Co-op): I apologise for being late for this debate, but I am pleased that I am able to hear the hon. Gentleman point to his own role in establishing the all-party parliamentary group, which he has done such a lot to promote and encourage, and I congratulate him on that. As someone who has had constituents who worked at Ford over decades, I know that the points he has just made are absolutely right, and we need to pursue the matter until we get satisfaction.
Stephen Metcalfe: I thank the hon. Gentleman for his words. We are aware, and we have also been warned by you, Mr Caton, that the details of this case are the subject of legal action. The details of whether Ford is legally responsible for its former employees will be tested in court, and that is right and proper, so I do not want to talk about that.
However, I do want to discuss the reasons why Ford has a moral responsibility for this issue. May I state for the record that this is not personal? I have great respect for the individuals at Ford—for Joe Greenwell, who is the chairman of Ford of Britain and for Christophe Clark, head of Government affairs. I have always found them to be open, accessible and willing to engage with the group and come and talk to us, and I recognise that this issue is outside of their control; it is not in their hands. They are neither directly or personally responsible for the case. In return, I want them to understand that I am standing up for my constituents and trying to get justice for them and that this is not a personal attack on
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them or on Ford per se. None the less, I, like many others, believe that Ford has an obligation towards its former employees.
I must also pay tribute to the Visteon pensioners action group, which has been utterly tenacious in its pursuit of justice and completely committed to its cause. Without its dedication, this issue would have slipped off the agenda a long time ago, leaving thousands of pensioners with no hope of recompense.
As I have said, Ford has a moral obligation to its former employees, many of whom have spent a lifetime of work at the company. I became aware of the issue just after midday on 31 March 2009 when what we now know to be a very troubled company finally met its end—Visteon, a firm many will never have heard of, was placed unceremoniously into administration. When the administrators arrived, they turned off the machines, sacked the staff, turned out the lights and locked the doors, and that was that.
Many would say that Visteon was just another victim of a worldwide economic crisis and that as an automotive parts manufacturer, the collapse in car sales made its position untenable. Although those are contributing factors, the whole story is somewhat more complex. Sadly, in the wake of the collapse, there were not just hundreds of unemployed workers at every level of the business but thousands of present and future Visteon pensioners who had been seriously disadvantaged. Moreover, there are many hundreds, if not thousands, of Visteon pensioners, who have worked for Visteon, who do not yet know that they have been disadvantaged and may not find that out until they come to retire. Although VPAG and various other groups tried to get in touch with the beneficiaries of the fund, not all of them have responded, which is a great shame.
What has all this to do with Ford? Visteon was not just another business that failed to adapt to the modern world, but part of a large American corporation. Interestingly, Visteon Corporation went into chapter 11 shortly after Visteon UK collapsed. We all know that Visteon was Ford’s global parts manufacturer. It was a multi-billion dollar business, supplying everything from brake drums to radiators. It had started off as part of Ford, but soon became a separate trading arm before eventually being spun off. Why was it spun off? It is true that there seemed to be a trend in the late 1990s and early 2000s to spin off businesses and to separate out the manufacture of parts from the main business, but what was the reason behind it? The answer to that is relatively simple and the crux of why Ford has a responsibility to its employees. Ford wanted out. I have this nagging feeling that someone somewhere within Ford decided that they wanted to get out of the parts manufacturing business; it was too expensive, too labour-intensive and Ford knew that it could get the parts cheaper elsewhere. That is why Visteon was born.
We heard the evidence from my hon. Friend the Member for Finchley and Golders Green when he quoted Tim D. Leuliette, the new chief executive of Visteon Corporation—it is now out of chapter 11 and is being restructured—who, when asked whether Visteon ever had a chance, said, “No”. He told us about the labour costs, the burden, the overheads and how it was a joke. He then said:
“It was sort of like when you’ve got an uncle you know has got a problem but no one in the family wants to talk about it.”
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That is quite important, because Ford always talks of itself as a family. In 2011, it was Ford’s 100th anniversary in the UK, and Bill Ford came over to the UK and made a speech at the Science museum. There were a couple of telling remarks in his speech. He said:
“I have always thought of Ford employees, dealers, suppliers and partners as members of our extended family. My visit here has confirmed that belief—it has felt like a homecoming.”
“Ford of Britain has a proud heritage…The United Kingdom quickly became the most important market for our cars outside of the United States.”
There is no doubt that here in the UK, Ford has played an important role. If this is how Ford treats its family, I would be sad to think that it would treat other people in its family in the same way.
Sir Alan Haselhurst (Saffron Walden) (Con): I acknowledge that my hon. Friend probably has as deep an attachment to this issue as any other colleague, and many hon. Members have spoken with great knowledge about the issue today. Does he detect any way in which we can achieve anything in the court of Parliament if a favourable answer is not found in the courts of law?
Stephen Metcalfe: I thank my right hon. Friend for his intervention, and yes, that is really why we are having this debate. Ultimately we all believe that, whatever the outcome of the court case, Ford has a moral obligation and that if it does not meet that moral obligation we will continue to highlight the fact that it has failed its former employees. One of those former employees worked for Ford for 30 years before working for Visteon for only three months, but they have now suffered a significant loss in pension.
As I have said, the courts will test the legality, but the moral case stands for itself. Ford wanted out of this expensive business, and that is why it spun off Visteon. Ford talks about being a “family”, and the reason why its former employees feel so aggrieved is that, because they felt part of that “family”, they trusted their employer, Ford. Ford is a blue-chip firm with a history going back to before the first world war, and its employees were told that their pension was secure. The employees took that at face value. Of course, perhaps in hindsight they should have sought a little more clarity and explored what that promise meant, but they were allowed to take away the general impression that their rights were protected and that they were still part of the Ford “family”.
If those employees had looked a little more deeply and if they had considered the nightmare scenario of the business collapsing and the pension fund being underfunded, perhaps things might have turned out differently; perhaps they would not have transferred and perhaps it would have been more difficult for Visteon to spin off. But they did not do those things. They took Ford at its word and Visteon was floated off in a vessel that I believe was already holed below the waterline even though it was trying to make its way in the world.
Geraint Davies:
It is bad enough that Ford basically agreed terms of reference—it agreed wages and conditions, and pensions for a group of workers—but then hived them off and looked, as it were, to the future for lower costs. However, does the hon. Gentleman agree that the
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pension costs are actually historical costs that should be honoured, irrespective of what happens in the future? Those pension costs are a part of the contract of employment in the past that should be signed and sealed. The workers thought those pension costs were signed and sealed, but now they find that they have been ripped off.
Stephen Metcalfe: I agree with the hon. Gentleman. People were left with the impression that they had protection and that a pension was their right, whatever happened. They were also left with the impression that once they retired, at that point their pension was secured for them. Little did they know that it could be cut at some later date from a business that they might have been detached from for the best part of a decade, and suddenly they would turn round one day and find that, because of something they had virtually no involvement with, they are now seriously disadvantaged.
Mr David Burrowes (Enfield, Southgate) (Con): Notwithstanding the point about the courts determining a contractual issue, is it not important that Parliament has united around concern about mis-selling of interest rate deals? This is a similar scandal, in terms of not only presenting a product but actively encouraging employees to take it up. Parliament has expressed a similar scale of concern about such products.
Stephen Metcalfe: I agree with my hon. Friend entirely. That aspect of the case will be tested in court, to see what promises were made and how they were communicated to the work force. What I am championing in Westminster Hall today, with other colleagues, is the case that Ford must meet its moral obligations to its former employees. However that is achieved, I believe that Ford has a moral obligation.
We have heard about other allegations of unilateral price changes, which of course Ford denies; of the pension fund being underfunded, which could be explained as a technical issue involving different valuations; and of Ford moving work away prior to the collapse of Visteon to ensure that its supply chain was not interrupted, and it is interesting to note that Ford never lost a day’s production because of the collapse of Visteon.
However, I will return to my main point one more time before I finish. I suspect that Ford did not want the hassle, the expense or the reputational damage of shutting down its expensive British parts manufacturers or other expensive plants around the world, so it spun them off knowing that ultimately it would be able to source the parts cheaper elsewhere and knowing that Visteon UK probably had no long-term future. I believe that that was known at the time that Visteon UK was spun off.
Sir Peter Bottomley:
I referred earlier to the main board of Ford United States. My reckoning is that five of the present board members were directors from before 2000: Edsel B. Ford II; William Clay Ford Junior; Irvine O. Hockaday; Ellen Marram; and John Thornton. Homer Neal was also possibly a director from before 2000, which would make six current directors who were in that position. Could they be asked what they knew,
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if they still have the relevant papers and whether they were ignorant of what was going on in a major supplier in this country?
Stephen Metcalfe: Yes. That is a very interesting point and one that, as a group, we should pursue. We have been communicating with Ford UK and Ford Europe, but we should take this matter all the way to the main board of Ford in America.
It is interesting to note that the arrangements in the US are different from the arrangements here. The former employees of Visteon in the US have not been disadvantaged in the same way as the former employees of Visteon in the UK, and if this issue was on the doorstep of Ford’s head office and the 3,000 Visteon employees had been so disadvantaged closer to home, we might have had a different outcome.
Geraint Davies: The hon. Gentleman knows that the all-party group in support of Visteon pensioners has no power to require people to appear in front of it, but of course Select Committees can summon people. Does he agree that it would be helpful if the Minister perhaps signalled that that was something that he would encourage so that there was redress and people had to be accountable?
Stephen Metcalfe: Yes. I have written, and I know that other colleagues from across the House have written, to the Chairmen of various Select Committees, asking them to look at this issue, either on its own or as part of a wider inquiry into pension transfers. We can renew that call now; summoning people before a Select Committee would be a very positive step.
As I have said, I believe that people within Ford knew at the time that Visteon was spun off that there was no long-term future for Visteon. I do not want to damage my relationship with Ford; I have great respect for the company. I want it to succeed, and it has a great and noble history in this country. But even the best employers or organisations occasionally get things wrong, and on this occasion that is what has happened—Ford has got it wrong. It needs to stand up and meet its obligations. If it does so, I believe that people in this House and outside it will view Ford as being all the better for having done so.
That is why I am championing the cause of the Visteon pensioners, and why I am standing up for my constituents. I will continue to do that, and I will continue to fight until I get justice for them.
10.27 am
James Duddridge (Rochford and Southend East) (Con): Thank you, Mr Caton, for calling me to speak. It is an honour to serve under your chairmanship.
I congratulate my hon. Friend the Member for Finchley and Golders Green (Mike Freer) on securing this debate and on bringing to it his expertise, which was developed not only in his casework but in his time at Barclays bank, which is a period of time that I am very familiar with. I also thank my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe) for all the work that he has done on this issue. This debate demonstrates how, as a House, we can operate together, and how we can operate together regionally, with our friends in Wales working alongside our colleagues
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in Essex. I am also reminded of an Adjournment debate that took place back in 2009, when my hon. Friend’s predecessor, who is now Baroness Smith of Basildon, spoke very ably. Her father was actually a Visteon pensioner and I suspect that she maintains an interest in this matter.
Like other hon. Members, I have had several constituents raise this issue with me: more than five of them have done so formally; and I am sure that many more are concerned about it. I am particularly concerned about those people with deferred rights within the pension who perhaps have not looked closely at this issue, who are still of working age and who have little idea of how their Ford and Visteon pension has diminished over time.
The debate title rather summarises things; this is not a general debate on Visteon pensions, but a debate that is specifically about the duty of care of Ford UK to Visteon pensioners. As I understand it, a duty of care has the sole purpose of ensuring that a person, or in this case a company, adheres to a standard of reasonable care while performing any acts that could potentially impinge on, or detrimentally impact, others. On that basis, I do not believe that Ford has carried out its duty of care well. There are two main issues Ford needs to address: why were employees actively encouraged to transfer their pensions in the statements my hon. Friend the Member for Finchley and Golders Green mentioned, and to what degree were those involved aware of the risk factors involved in establishing the group?
There has been a lot of discussion of the legal responsibilities, and reference has been made to the court case. The moral responsibilities have also been mentioned, initially by my hon. Friend the Member for Maldon (Mr Whittingdale), and subsequently by a number of other hon. Members. However, there is also a reputational issue, because one of the most valuable things an international conglomerate has is its reputation, and Ford’s is being damaged daily because it has not dealt with this matter.
My hon. Friend the Member for Worthing West (Sir Peter Bottomley) mentioned the current board, and I had not appreciated how many of its members were around at the time. That raises questions about the board’s competence, and I very much hope that the matter is tabled at the next board meeting and that board members look not only at their financial, legal and moral obligations, but specifically at the real damage they are doing to Ford’s reputation.
A few years ago, I considered buying a Ford—I had not thought through the ethics of that in relation to my constituents. I would certainly not consider buying one now, and I would feel somewhat seedy driving around in one, given that that organisation does not treat its employees properly. It is hypocritical for a member of the Ford family to talk of a family when those he describes as its members have been so poorly treated—that is not acceptable. We need to be temperate in our language in the House of Commons, but I was sympathetic when my hon. Friend the Member for Broxbourne (Mr Walker) described Ford as a four-letter company behaving in a four-letter way. I am not sure quite which word he was referring to, given that I am a very naive and sheltered young man, but I am sure he will educate me later outside the Chamber.
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The idea of bringing the employees and the trustees from Visteon and Ford into the House of Commons is excellent, and I urge the Minister to indicate to the Department for Work and Pensions and the Work and Pensions Committee that he would welcome an inquiry into Ford’s responsibility in relation to Visteon, because that could turn up the temperature. It would be fair to say that although the people from Ford who have come along to the meetings—not all of which I have been able to attend—have been very good, there is no point talking a good game and then not delivering. It is perfectly legitimate, therefore, for us to set out to damage the reputation of Ford until the company does the right thing.
Stephen Mosley (City of Chester) (Con): We have been aware of this case for several years, and Ford has had plenty of opportunity to put things right on its own. Does my hon. Friend agree that it is now time for Parliament to take action, whether by taking up his suggestion or by taking up any other suggestion the Minister might come up with?
James Duddridge: Absolutely. As with many cases that go on for a long time, it is only when we review them for meetings and for debates such as this that we realise quite how long they have gone on for. It has been an unacceptable period, and it is quite chilling when hon. Members say that the company is perhaps waiting for the bulk of those affected to die so that when it does settle, it will be cheaper. That is truly disgusting.
10.33 am
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): I pay tribute to the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe), who has led the campaign for justice for the Visteon pensioners; my hon. Friend the Member for Swansea West (Geraint Davies), as the co-chair of the all-party group; the hon. Member for Finchley and Golders Green (Mike Freer), who secured the debate; and the other Members who have contributed to what, so far, has been a helpful debate in terms of keeping this injustice at the forefront of the public’s mind.
I am looking forward to hearing from the Minister about what the Government can do to help Visteon pensioners achieve justice. How will the Government put in place a system that ensures that such things never happen again? How will they ensure, if indeed they can, that there is justice for Visteon pensioners? Do they believe that Ford has a moral responsibility to staff who were spun off into Visteon, many of whom are here today? Does the Minister believe Ford has a duty of care to Visteon pensioners?
Hon. Members have clearly set out the case, which goes to the heart of corporate social responsibility, a term we often hear used in the limited sense of the things that companies do to show that they are good citizens. However, nothing is more fundamental to being a good citizen and a good employer than exercising a duty of care towards one’s employees.
What we have heard today is pretty shocking. Hon. Members on both sides have made it clear that Ford set out to spin out into Visteon the members of its work force involved with motor parts and that it really set the company up to fail—certainly not to succeed. My hon.
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Friend the Member for Llanelli (Nia Griffith) talked of a terrible betrayal and a complete rip-off, and, importantly, of the Ford actuarial calculation, which left the pension fund with a 17.5% deficit at the outset.
The hon. Member for Finchley and Golders Green referred repeatedly, as did other hon. Members, to the guarantee regarding pensions. “Lifetime protection” was one of the terms used—accrued pension rights were protected. How can it be, then, that several years later Visteon pensioners are getting much less than 100% of the pension they paid into their whole working lives? No wonder they feel cheated. In cases such as this, that feeling of injustice and betrayal is very strong, because a pension is a promise and a contract between employees, who pay into it, and employers, who also make their contribution. The feeling in this case—this is clear from the strength of feeling today—is that that contract has been broken, and that the Visteon pensioners have been betrayed.
What has come across clearly is that that is particularly shocking, given Ford’s stature. Ford is not some two-bit, small-scale employer; it is a recognised company and is considered a blue-chip, global brand. It has a strong reputation in the UK historically, and it has played a big role in UK manufacturing and the UK economy more widely. It has been a huge figure in the past 100 years of British economic history. For it to be involved in what appears to be such a clear case of injustice is deplorable. I say again, therefore, that I am keen to hear from the Minister what role the Government can play in bringing justice to the Visteon pensioners.
I pay tribute to the role the unions have played in keeping this issue at forefront of the public mind. At the heart of this issue is the question of whether there was a deliberate dumping exercise. My hon. Friend the Member for Llanelli and other Members have been pretty clear that Ford wanted to get rid of its pension scheme liabilities and that that was a major aspect of spinning Visteon out.
I am very proud that the previous Government put in place the Pension Protection Fund. I was not a Member of Parliament then, but it has become clear to me since taking up my shadow pensions role that the PPF is an important institution. However, there is a danger that the creation of the PPF leads employers to take the view that it will sort out their problems and pick up the bill; there is a danger of the socialisation of losses while profits remain privatised—in this case at the top of the Ford Motor Company. We must consider that issue more broadly.
Also, the issue is not just the burden that the taxpayer picks up for the PPF, potentially. The PPF charges a levy on other employers to cover payments that it must make to pensioners. Other employers will pick up the bill, in the form of a larger levy every year, if a company such as Ford is involved in what has been seen today in the House as a clear case of the dumping of liabilities. Alongside the sheer injustice of the treatment of Visteon pensioners is the broader public policy issue of the rights and responsibilities of employers with respect to their work force and wider society.
I again thank and pay tribute to hon. Members who have led the campaign and secured the debate, and I look forward to hearing from the Minister what the Government can do to ensure justice for Visteon pensioners.
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10.41 am
The Minister of State, Department for Work and Pensions (Steve Webb): It is a pleasure to take part in this debate, and I congratulate the hon. Member for Finchley and Golders Green (Mike Freer) on securing it. It is clear that hon. Members from throughout the House were keen for the subject to be debated. This occasion is Parliament at its best, with hon. Members from all parts of the country and both sides of the House standing up for their constituents, who have clearly had a raw deal. That is what we are sent here to do, and I congratulate all hon. Members who have taken part, and the all-party group on Visteon pensioners, which I have been aware of, together with the Visteon pension action group. The action group’s members have been known to stand outside pension conferences, but the first time I attended one fortunately no one knew who I was, so I got in okay. I met members in July and they told me their personal stories and explained some of the detail of the case, some of which we have heard today.
I am constrained in what I can say with a court case pending. I understand that next week, on 12 December, a judge will rule on whether a group litigation order can be made, and I should not say anything to prejudice the continuing proceedings to the detriment of those bringing the claims; but as a personal observation I think any reasonable person who has heard our proceedings today would feel that the Ford Motor Company has some serious questions to answer.
I want to comment on two relevant organisations for which I have ministerial responsibility—the Pensions Regulator and the Pension Protection Fund—and their role in relation to the Visteon pensioners. As the House will know, the powers of the Pensions Regulator came into force in 2004. One of the problems in the present case is that the spinning-off of Visteon happened in 2000. Several hon. Members have said in the debate that, after meetings, they inferred what the regulator might have done had it been in existence at that time, but unfortunately the regulator’s powers cannot be applied retrospectively. Although the Pensions Regulator does indeed have powers to take action where employers have acted to avoid supporting a pension scheme—whether UK or overseas-based—the salient events in the Visteon case happened before the regulator was established.
When Visteon went to the wall in 2009 the regulator immediately launched a thorough and meticulous investigation, taking about two years, to see whether anything could be done. The possibility of using anti-avoidance powers against Visteon group entities and/or Ford was examined. Those are, specifically, financial support directions and contribution notices. However, the key question was whether the legal tests in the Pensions Act 2004 with respect to securing additional funds and financial support for the scheme were met. Unfortunately they were not, principally because the key material actions took place before the regulator had its powers, and also because of the way Visteon was set up independently—in a technical, legal sense—of Ford. I have heard the descriptions in the debate of how close the relationship was in practice, but clearly Visteon was set up so as to be sufficiently arm’s length from Ford to make it difficult or impossible for the regulator’s powers to be used. It is right and proper that the regulator considered the matter long and hard and was not
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constrained by the fact that the parent company was not UK-based, but in the end there appeared not to be a legal power to enable it to take action.
What, then, is the position of the Visteon pensioners on becoming part of the Pension Protection Fund? I understand that when the scheme was wound up the deficit was £355 million—obviously that had grown substantially over the years—and that as at February 2012 there were just over 1,500 pensioner members of the Visteon scheme in the PPF and just over 1,000 deferred members. The hon. Member for South Basildon and East Thurrock (Stephen Metcalfe), who I know has taken a leading role in the matter, mentioned the issues that had arisen about contacting some deferred scheme members. The Department operates a pensions tracing service to try to track people down. We cover our costs for doing it, but if we can assist we shall be happy to do that.
What will Visteon scheme members get out of the Pension Protection Fund? I want to make a slight correction to the impression that might have been given that someone in the PPF can lose half their pension. The vast majority of people in the PPF will not experience anything like that, although I shall say a bit in a moment about those who potentially would lose half their pension. I want to give some figures that I am not sure have previously been in the public domain: as at March 2011, of the pensioners who are not getting 100% of the pension they would have got, about 530 get between 90% and 100%; 665 get between 80% and 90%; 30 get between 70% and 80%; 15 get between 60% and 70%; and fewer than 10 get less than 60%.
Frankly, it is wrong, and a problem, if anyone does not get their pension. I do not diminish that fact. However, I stress that the Pension Protection Fund is a significant source of provision for those whose companies have gone into liquidation. The headline figures that the fund provides are 100% and 90%. In principle someone would get 100% as a pensioner, and 90% as a deferred member; but that is 100% of a fairly standardised set of entitlements. Rather than mirror the exact scheme rules, which would be incredibly complicated because of the number of pension schemes going into the PPF, the fund has a standard set of pension scheme rules. One, in particular, which is probably to the detriment of some Visteon pensioners, is to pay indexation on a statutory basis—that is in respect of service after 1997. Where a pension scheme had indexation for pre-1997 service it is not indexed under the PPF. That is how even people who are “100%” or “90%” pensioners can find over time that they get less indexation than they would have, and their pension progressively becomes somewhat less than it would have been.
At the meeting that I had with Visteon pensioners in my office, in July, we discussed the issue of people whose pension falls far short of what it would have been. As I said, as at March 2011, 55 people were getting less than 80%. Our latest estimate is that about 75 people are affected by the cap in the Pension Protection Fund. I know that that is a matter of concern to the action group. The Pension Protection Fund cap was introduced under the previous Government. The view was taken that the scheme was essentially an insurance scheme and there should be a cap, just as with a bank account—the figure used to be £50,000 but it may be
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higher now—so that the bulk of what people had would be covered by compensation, but there was a limit and very large amounts would not be covered.
Parliament took the view that there should be such a cap so that the largest pensions would not be paid in full. I think that the thinking at the time was partly to do with what was called moral hazard. The idea was that people at the top of the company would not have an incentive to take it to the wall and then go to the PPF and find that their very large pensions were covered anyway. It was a sort of anti-moral hazard provision. However, there are of course two sorts of people who would get large pensions from the PPF. One sort is what one might loosely call fat cats: people who had very high earnings but not necessarily long service. They might be people who knew that the company was going to the wall—not in the case before us today, necessarily, but in general—so some moral hazard provision might make sense.
The other sort of people, however—this is relevant to the Visteon workers—have a relatively large pension because they worked for the company all their life. The hon. Member for South Basildon and East Thurrock mentioned someone who had worked for Ford for 30 years, and then a few months for Visteon, who suddenly found their pension substantially cut.
A number of hon. Members have come to see me about the Pension Protection Fund cap, in relation to Visteon and other cases. It is the early-retired workers, or the people who have not reached scheme pension age but are drawing their pensions, for whom the cap bites, and the bite comes not just from the cap itself but from the actuarial reduction in it. People have described it as a double cap, and because of the further complication with lump sums, Visteon pensioners have even called it a triple cap.
Over the two and a half years that I have been in my current role, I have become increasingly concerned that the cap for those who have not reached scheme pension age acts in a penal way, and not on the people it was intended to affect—the fat cats who might have had a moral hazard issue—but on long-serving workers. Although we might think about capping those who had only a short time in the scheme and earned a huge pension because they had had the rest of their life to have built up other pension rights, it is much harder to justify a cap for people who have worked all their life for one firm, made their financial plans on the basis of the pension and have nowhere to top it up from. For some people who have taken early retirement, it is not simply the fact that they have planned on that basis. Instead, they are receiving the pension when the cap comes in and the pension in payment falls substantially. That can have a knock-on effect on survivors’ rights, with someone thinking that they have provided for a widow in the event of their death only to find that the survivor’s pension is reduced as well, which can come as a jolt.
I have asked my officials to look at options for reforming the PPF cap, and one possibility is for the cap to vary with length of service. For example, there would be a floor cap and then one that increased according to how long the person had been in the scheme. I think that that would be a fairer system, and we are evaluating how it would work in practice.
One issue, as the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, is that any increase to PPF benefits is paid for by
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someone, through the levies on the other schemes that still have defined-benefit liabilities. We cannot simply jack up PPF benefits without considering the impact, but because we are talking about relatively small numbers of people I suspect that the impact on the levy would be relatively modest. I flagged this up to the Visteon pensioners when we met in July, and they might well feel that now it is December we ought to have sorted it out, but I can assure them that we have done a good deal of work. I hope that we can come forward with a legislative solution, subject to parliamentary time being available, which would help us to ensure that the cap did not penalise some of the workers who have lost out most through the whole Visteon experience.
It was mentioned that the Select Committee might be invited to investigate the issue. Although it is not the role of the Government to tell the Select Committee what to do—it is probably the other way around—we would certainly welcome any further investigation. I suggest that the all-party group continue its efforts to persuade the Select Committee to do that, and I will certainly make available our Department’s resources, and ensure that the Pension Protection Fund, the Pensions Regulator and my officials work closely with the Select Committee, should it decide to conduct such an investigation.
Dr Francis: The Minister would then welcome the Welsh Affairs Committee also having such an inquiry.
Steve Webb: Absolutely. This is like trying to grasp something that we cannot quite grasp; we are all trying to see how we can produce a fairer outcome for the Visteon pensioners. We would be happy to engage constructively with any parliamentary process that could assist with that, so I am grateful to the hon. Gentleman for that suggestion.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East raised the interesting question: does the existence of the Pension Protection Fund mean that corporate Britain is tempted, shall we say, to shovel off its pension fund liabilities and hope that someone else will pay for them? Clearly, the anti-avoidance powers of the Pensions Regulator are crucial in that regard. The Pensions Regulator did not exist when the Ford Visteon transaction took place, but it exists now, and central to its remit is protecting the Pension Protection Fund and, indirectly, the levy payers of British industry. The regulator can, and does, therefore, initiate action to require firms that have allowed their deficit to get out of control to put money in and put up collateral against the pension fund.
There is a balancing act to be struck. I hear what the hon. Gentleman says, and clearly we do not want people shovelling off their liabilities on to everyone else, but if the Pensions Regulator goes in too heavily and presses companies, particularly at a difficult time in the economic cycle, to pump more money into the pension fund, which perhaps then precipitates problems for the firm, we get criticised from the other side. It is a delicate
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balancing act, but what is good about the new regime is that it is scheme-specific. Whereas when the Ford-Visteon transaction took place there was a reactive regulatory regime in place—the Occupational Pensions Regulatory Authority—which reacted to whistleblowers but did not go out proactively, the Pensions Regulator does go out to look at schemes, and acts on a case-by-case and a risk-assessed basis. We can only speculate about what it would have done had it existed in 2000, but in similar cases now the regulator would consider whether a deficit would be properly funded, and if a parent company had tried to pass a liability on to a spin-off company, it would want to take action.
Geraint Davies: Is the Minister saying that if a global company created an arm’s length company that supplied itself, set it up with an underfunded pension fund and then unilaterally reduced the prices and therefore squeezed the pension fund still more, the Government could, under current regulations, act to stop that and to prevent the kind of injustice we have heard about today from happening in the future?
Steve Webb: I am grateful for the hon. Gentleman’s intervention. He has played an active role in the campaign. If a new pension fund is set up under trust, the trustees have a responsibility to look after the interests of the members. The scheme would have to be valued, and if there was a deficit a recovery plan would have to be agreed between the trustees and the new employer. The role of the Pensions Regulator at that point would be to sign off the recovery plan, on the grounds that it was a realistic basis on which the scheme could go forward. That could happen if, for example, a promise by the employer to make certain contributions over a period of time, or the actuarial assumptions, were considered realistic.
However, if a scheme were set up with a large deficit and the recovery plan was not credible, the Pensions Regulator could look at the parent company and require it to put up an asset as collateral or make a direct financial contribution to the scheme. Sometimes the regulator does that by passing a directions or issuing a notice, but often, as with good regulation, a mere threat is enough to get a firm to comply. Judging the effectiveness of the regulator by the number of times it uses its big stick is missing the point, because the point of the body is to spot things before they go wrong and get in there first, with enforcement as a last resort rather than as something immediately jumped to. In this sort of case, the regulator has far more power than it had back in 2000, under the previous regime.
This has been a broad debate, and for understandable reasons I have focused on the position of the pensioners. I hope that I have explained why the Pensions Regulator, while doing what it can, could not use its powers. We are, however, looking at whether the role of the Pension Protection Fund could be improved, so that the Visteon pensioners who have ended up in the fund through no fault of their own—principally those who have been capped—can get a fairer deal. That is something we will return to in the House.
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Immigration (Romania and Bulgaria)
11 am
Mr Philip Hollobone (Kettering) (Con): It is a great pleasure to serve under your chairmanship, Mr Caton. May I, through you, thank Mr Speaker for granting me the opportunity this morning to raise the important matter of immigration from Romania and Bulgaria?
My job is humbly to stand up and speak out on behalf of my constituents in Kettering, and one of their biggest concerns is the level of immigration into the United Kingdom. A large part of the inward migration flows are from the European Union, over which, seemingly, we now have virtually no control whatsoever. The numbers are getting completely out of hand, and my constituents will be horrified to learn that, from December 2013, yet another hole will be opened in Britain’s border controls with the prospect of unlimited immigration from two new accession countries to the European Union—Romania and Bulgaria, the so-called A2.
Over the past number of years, as more countries have come into the expanding European Union, more people have come to our country. The UK Statistics Authority estimates that in the second quarter of 2012 there were 1.4 million EU citizens working in the United Kingdom, with 107,000 unemployed and almost half a million economically inactive; those EU citizens have some 400,000 children. About half of that number come from the so-called A8 countries, which are eight of the 10 countries that became members of the EU in May 2004—Cyprus and Malta, and the eight central and eastern European accession countries. A derogation was included in the accession treaty to allow existing member states, of which the UK was one, to restrict those nationals’ right to work. That allowed existing EU member states to impose transitional restrictions on the free movement rights of workers from those new countries.
The transitional restrictions could have lasted for up to five years, or up to seven years in the case of “serious disturbance” to the old member state’s labour market. Disgracefully, the previous Labour Government did not apply transitional restrictions to A8 workers upon their joining the EU in 2004.
Of those countries, the biggest was Poland with a population of 38.5 million. The Czech Republic had a population of 10.5 million; Hungary, almost 10 million; Slovakia, 5.5 million; Lithuania, 3 million; Latvia, 2 million; Slovenia, 2 million; and Estonia, 1.3 million. The combined population was almost 73 million people. At the time of those countries’ accession to the EU, there were 94,000 A8 nationals living in the United Kingdom; as of the second quarter of 2012, that total is 1,079,000.
In 2003, under the previous Labour Government, the Home Office estimated that the enlargement of the European Union in May 2004 would lead to an additional 5,000 to 13,000 net immigrants every year from those 10 acceding countries. Well, that disgracefully inadequate estimate has been replaced by the fact that well over 1 million people are now resident in the United Kingdom from the 2004 accession countries.
Romania and Bulgaria, the so-called A2, acceded to the EU in 2007. Once again, the treaty allowed for transitional restrictions for up to seven years. This time, thank goodness, the UK did apply transitional restrictions
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on the free movement rights of Bulgarian and Romanian workers, with the result that such workers normally need authorisation before they start work. Thank heaven for small mercies. The problem is that those seven years are almost up—they end on 31 December 2013.
When Romania and Bulgaria acceded to the European Union in 2007, 29,000 Romanians and Bulgarians were resident in the United Kingdom. As of the first quarter of 2012, that total has risen to 155,000 despite the transitional controls. Her Majesty’s Government are not prepared to estimate how many people will come in after December 2013. How do I know that? Because I asked the Home Department a written parliamentary question on how many immigrants are expected to arrive in the UK
“from Romania and Bulgaria in the first year after transitional immigration controls are lifted.”
“The Government do not routinely produce forecasts or estimates of future levels of migration from individual countries. The difficulty in producing a reliable forecast of likely levels of migration, which would need to take account of a variety of factors, is in this instance accentuated by the fact that the United Kingdom is not the only member state that will be required to lift existing labour market restrictions on Bulgarian and Romanian nationals on 31 December 2013.”—[Official Report, 27 November 2012; Vol. 554, c. 184W.]
Mr Stewart Jackson (Peterborough) (Con): I congratulate my hon. Friend on securing this important debate.
Does my hon. Friend find it frankly disingenuous, even reprehensible, for the Home Secretary to complain about the likely effects of such changes when she has not introduced measures either to measure those effects or to consider whether we can vary the free movement directive? As my hon. Friend may know, I moved a ten-minute rule Bill in the House on 31 October to introduce a de facto workers’ registration scheme mark 2, as the Spanish have.
Mr Hollobone: I am delighted by my hon. Friend’s intervention, and I commend him on the work he does for his constituents in Peterborough and on the courage he displayed in taking up the issue of immigration in the House. I was honoured and delighted to support his ten-minute rule Bill of 31 October that would have changed the freedom of movement that EU nationals currently enjoy in our country. For understandable reasons, he speaks for the British people on such issues.
I absolutely agree with my hon. Friend that we should do what the Spanish Government are doing. Faced with calamitous levels of unemployment, the Spanish have begun to interpret the free movement directive much more robustly. All EU citizens and family members in Spain have to register with the authorities if they wish to reside there for more than three months. Through that process, the Spanish authorities can check whether the requirements of the directive regarding residence after that period have been fulfilled. The Spanish authorities also require notification of any change of address or marital status. That is the absolute minimum that Her Majesty’s Government should be doing in this country, with the arrival of tens of thousands more Romanians and Bulgarians after December 2013.
It is a disgrace that the Home Office will not estimate the expected number of immigrants from Romania and Bulgaria. Opening up our borders to all and sundry is
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bad enough, but it adds insult to injury not even to give the British people an estimate of how many incomers we can expect.
In the UK there are now almost 1.1 million eastern Europeans from the A8 accession countries, which have a combined population of 72.8 million. That is a rate of some 1.5%. If we apply that same rate to the entry of Romania, with 21 million, and Bulgaria, with 7 million, the 155,000 presently resident in the UK would climb to some 425,000. That means that we can expect three times more Romanians and Bulgarians than are currently resident in this country, an increase of some one third of a million over present levels, possibly within two years.
Martin Vickers (Cleethorpes) (Con): I, too, congratulate my hon. Friend on securing the debate. My constituency, according to the statistics, has a low level of immigrants compared with other areas of the UK, but the issue remains key on the doorstep among voters. My constituents would be horrified at the figures he announced. Does he agree that the social cohesion of the country is under threat, and one of the first duties of the Government is to maintain that cohesion?
Mr Hollobone: As always, my hon. Friend speaks for Cleethorpes. His constituents will be delighted at his intervention, because he rightly highlights the importance of the issue to him and to them.
In truth, host member states are permitted to require EU citizens and their family members to register with the authorities, and to impose proportionate and non-discriminatory sanctions on those who fail to do so. The UK Government fail to do that. Member states are also permitted to restrict rights of entry on grounds of public policy, public security or public health. The UK Government, however, have failed ever to test those conditions or the specific issue of proportionality that is implicit in the directive in respect of the deportation of persistent and prolific criminals who are EU citizens.
Through my humble experience as a special constable with the British Transport police on London’s underground network, I know that some eight out of 10 shoplifters arrested by the police are from eastern Europe. Can they be sent back to their country of origin for breaking our laws? No, they cannot. Well, actually, they could be—if the UK Government had the guts to enforce that measure, but they cannot be at the moment because the Home Office is not introducing the sanctions that it could.
London is the largest city in western Europe, with 7.5 million residents, compared with 3.5 million in Berlin, 3.25 million in Madrid, 2.5 million in Rome and 2 million in Paris. As one of the most cosmopolitan cities in the world and with English as its native language, of course London is a magnet for millions of people throughout the European Union, but the British people will not put up with the situation much longer. A local government Minister has said:
“The fact is, 43 per cent of the new households which want a home, is accounted for by immigration”,
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so we will see swathes of our countryside built over to accommodate the millions of new arrivals from the European Union, over whom we seemingly have little control.
Is “enough is enough” enough? My constituents want the Home Office to impose the restrictions that it can on new entrants from Romania and Bulgaria. If our constituents were given the right to vote on whether we should stay a member of the European Union, they would now vote to leave, because Britain would be better off out of the European Union and we would have control over our borders once again.
11.03 am
Mark Field (Cities of London and Westminster) (Con): I thank my old friend, my hon. Friend the Member for Kettering (Mr Hollobone), for allowing me to say a few words and for his heartfelt speech, which I am sure will be one of many on the issue in the months and years ahead.
I want to say a few words about some of the trends noticeable in my central London constituency since the accession of Romania and Bulgaria to the European Union in 2007. In spite of the current freedom-of-movement restrictions, which are due to be lifted at the end of 2013, the most obvious example has been the profound problem of organised begging centred on Marble Arch in the run-up to the 2012 Olympics.
In such matters, central London is almost a canary in a mine for future problems throughout the country. Difficulties in my constituency with particular migratory waves are magnified by the presence of Victoria coach station, through which many eastern and central European migrants arrive in Britain for the first time. Some 10 million to 12 million passengers use that facility each and every year. Significant amounts of contraband and controlled materials are brought into the UK via that route, and it has become an attractive destination for transient individuals, contributing to a large rough-sleeping population.
Last November, Westminster city council, the Met and the Romanian embassy launched Operation Chefornak to tackle antisocial behaviour and begging in Westminster, much of which, I fear, can be linked to Romanian migrants; 698 offences of begging and 922 instances of rough sleeping were recorded, and the council helped to arrange 169 repatriations, 138 of which were to Romania. That comes at colossal cost and requires enormous additional police time. The council has been proactive in raising awareness and highlighting what is not only a local but an increasingly national problem, which I fear will be even bigger after the beginning of 2014, with real consequences for the reputation of the UK.
Unfortunately, as my hon. Friend said, real limitations remain on what can be done to tackle effectively the problems caused by people congregating in a particular area if they are not committing criminal or antisocial behaviour. Many of the target-hardening options, in particular around Marble Arch, have been considered and discounted on the basis of cost, practicality or effectiveness. Given that Romanians are not subject to border controls, it is difficult to stem the source of the problem.
From our experience in the centre of London, therefore, I remain unconvinced that the Home Office has robust enough plans in place to tackle the problems that are
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likely to flow from the lifting of movement restrictions on Bulgarians and Romanians in particular, as my hon. Friend pointed out. I share his concerns, and those of my hon. Friends the Members for Cleethorpes (Martin Vickers), for Peterborough (Mr Jackson) and for Rochester and Strood (Mark Reckless), and we seek assurances from the Minister in that regard, in particular on how local authorities can be properly compensated for the financial cost to local taxpayers of national immigration decisions.
11.16 am
The Minister for Immigration (Mr Mark Harper): I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing the debate and on making his points in his usual robust fashion. I am pleased to be serving under your chairmanship, Mr Caton. I will try to address the concerns of my hon. Friend and those of my hon. Friends the Members for Peterborough (Mr Jackson) and for Cleethorpes (Martin Vickers), and of my hon. Friend the Member for Cities of London and Westminster (Mark Field), who raised a local issue—we will see how “canary in a mine” it is for the future.
To give some context, the Government’s overall position on immigration is clear. We want to bring down the unsustainable levels of immigration—net migration—that we have seen, and we are taking a range of measures. The Office for National Statistics figures published last week show that the net migration figures, including EU citizens, have actually fallen by a quarter, from 242,000 to 183,000 in the year ending in March. It is also worth remembering, as my hon. Friend the Member for Kettering accurately set out, some of the misjudgments made by the previous Government, who did not introduce transitional controls so, in effect, the United Kingdom bore the entire burden of the adjustment process.
On the latest figures, about a third of the people coming to the United Kingdom are from the EU, but 55% are from outside the EU, where our policy changes are bearing down, and about 14% are British citizens returning home. The bulk of our net migration, therefore, is from outside the EU and not from our EU neighbours. It is worth saying that to put the matter in context.
Mark Field: My hon. Friend the Member for Kettering (Mr Hollobone) referred to the reluctance of the Home Office to come up with any statistics in that regard. Is it fair to say that that is simply a case of once bitten, twice shy, and is due to a concern that such statistics might be superseded by events, as they were in 2003 and 2004 in relation to the A8 nations? Alternatively, does the Home Office have an idea in mind, but does not want to go public with it? If the latter is the case, will the Minister indicate the effect on local communities of the overall numbers expected to arrive from 2014?
Mr Harper:
I assure my hon. Friend that the reason is simply that it is genuinely a difficult exercise. The difference this time is that we had transitional controls, as have a number of other European Union countries. We are not the only country that will have to remove our transitional controls at the end of next year. A number of other countries, including Germany, for example, will be doing that. It is difficult to assess where the Romanian and
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Bulgarian citizens who wish to move to another EU member state to exercise one of their treaty rights will choose to move.
The history is relevant, because there is no point in the Government effectively making up a number that is based on poor data or making a set of assumptions, which are effectively guesses, and bandying around a number that proves inaccurate. That is not sensible. It is more mature and open to say, “It is a difficult exercise and there are a range of factors,” then people can make a judgment about whether the Government are being frank. That is more sensible than picking a number out of the air, which appears to be what happened beforehand, that is used as a defensive mechanism for a period until it is shown to be untrue. That is not a mature way of treating the matter.
Mark Reckless (Rochester and Strood) (Con): Will my hon. Friend the Minister give way?
Mr Harper: Briefly, but I want to deal with points raised by my hon. Friend the Member for Kettering.
Mark Reckless: We learned recently that my hon. Friend the Minister is making excellent progress reducing immigration from hundreds of thousands to tens of thousands a year, but is he not concerned that the potential entry of Romanians and Bulgarians into the country might set back the progress and make it significantly harder to achieve the target by 2015?
Mr Harper: My hon. Friend raises a valid concern, but the evidence is that net migration from the EU has been fairly consistent. However, we keep that matter under review. If he will allow me to answer my hon. Friend the Member for Kettering, he will see that some steps we are taking may alleviate some of his concerns.
My hon. Friend knows that the Government have adopted this policy change, but we will always implement transitional controls in respect of accession countries. We have already set out plans enabling primary legislation in respect of the accession of Croatia to the EU. I will take through the House regulations coming from that legislation, which will put in place those transitional controls. We have learned from the past. My hon. Friend mentioned that the previous Government learned from their experience and made more sensible decisions.
If people from EU member countries, including Romania and Bulgaria, want to stay in the United Kingdom beyond three months once there are no transitional controls, they have to be exercising treaty rights and be here as workers, students, or as self-employed or self-sufficient people. My hon. Friend mentioned the Government being robust about enforcing that. I will say a little bit more about that in a moment.
My right hon. Friend the Home Secretary, whom my hon. Friend mentioned in terms not as complementary as ones that I would use about her, has been working with our colleagues in the European Union to crack down on fraud and abuse of free movement rights. That concern is shared by a number of EU member states; it is not just a concern of the British Government. At the Justice and Home Affairs Council in April, a road map of actions was agreed, specifically to tackle human trafficking, sham marriages and, importantly, document
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fraud. If we can tackle document fraud, that will help strengthen our ability to deal with those entering the UK illicitly.
Mr Stewart Jackson: Will my hon. Friend the Minister give way?
Mr Harper: If my hon. Friend will forgive me, I may take an intervention from him shortly, but I want to make some progress, given that this debate was called by my hon. Friend the Member for Kettering. I do not want to leave lots of his points unanswered.
There is more work to do with our EU partners and we will continue working with like-minded member states to move this agenda forward in the European Union.
My hon. Friend knows that the Foreign Secretary has set out plans for the balance of competences review. The Home Office will lead a piece of work next year, considering the free movement of people across the EU, including the scope and consequences of that, as part of that balance of competences review. I am sure that all my hon. Friends in the Chamber, not just my hon. Friend, will take part in that balance of competences review and ensure that their views are well known to me and the Government.
My hon. Friend set out clearly what happened when the A8 states joined the EU, so I do not need to repeat that. As he correctly said, before Bulgaria and Romania joined the EU on 1 January, the previous Government, learning from the past, decided to impose transitional controls. Such controls can be applied for a maximum of seven years and can only be maintained beyond five where there is, to use the words in the treaties,
“serious disturbance of the labour market or the threat thereof.”
We did that, listening to the advice and careful evidence taken by the independent Migration Advisory Committee. We have extended those controls to the full length permitted under the treaties.
Under the current regulations, Bulgarian and Romanian nationals have to retain authorisation from the UK Border Agency before they take employment in the UK and they must also get authorisation to take lower-skilled employment in the agriculture and food processing sectors, under the seasonal agriculture workers scheme and the sectors- based scheme. The numbers given permission to work under those arrangements have not increased over the period in which they have been enforced. Excluding SAWS, the number of Bulgarian and Romanian nationals issued with accession worker cards was 2,618 in 2011, 2,776 in 2008 and 2,097 in 2007. That has been fairly consistent.
Mr Jackson:
My hon. Friend the Minister knows that I have a great deal of respect for him. He brings his skills to every portfolio. He has an even more difficult job now than in his previous role as the Deputy Prime Minister’s human shield. However, he is somewhat missing the point. Yes, of course, we are concerned about criminal
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records checks, for example, but those of us who are expressing concern about this issue are focusing on the sheer weight of numbers and the impact on the economy and the labour market. That is the key issue. Hon. Members’ greatest concerns are about the numbers, which have not been properly thought through.
Mr Harper: My hon. Friend mentioned his ten-minute rule Bill, as did my hon. Friend the Member for Kettering. I was in the main Chamber when he presented that thoroughly and carefully. We are considering that. I look forward to meeting him next week to talk about that and, no doubt, other issues connected to it.
To paraphrase my hon. Friend, the point is to use all the tools at our disposal. First, to put matters in context, Bulgaria and Romania may be different from the A8 countries. For example, 1.7 million of the 2.2 million Romanians who live in another EU member state have chosen to live in just two member states: Italy and Spain, notwithstanding all their economic difficulties. People can draw from that what they want; I am not making a forecast off the back of it
All hon. Members want to know that the Government want to use all the powers at our disposal. They may not be aware—this is a relatively new initiative—that we have set up a ministerial Cabinet committee, which the Prime Minister has asked me to chair, that will look at the rules on legal and illegal migrants’ access to public services and benefits, across the piece, working with colleagues across Departments. The committee will consider the pull factors, which are particularly important for EU nationals, where we do not have the same controls for those coming from outside the EU. We are at the beginning of that process, but I hope the fact that we have set it up and that it is being chaired by the Immigration Minister shows that we take these matters seriously, and I hope that that provides at least a little bit of comfort to hon. Friends.
My hon. Friend the Member for Cities of London and Westminster mentioned the operation that we have been carrying out with UKBA, working with the police, local authorities and other partners to identify EU nationals who are rough sleeping and not exercising a treaty right and, therefore, do not have the right to be in the UK. We look at enabling them to return home and, if they do not do so voluntarily, we will consider using our powers to administratively remove them.
My hon. Friend can rest assured that, where we have the power to act, we will look at using that power. We will look at the pull factors that entice people to come to the UK and ensure that things are being applied fairly, so that we are not unwarrantedly popular among our EU partners. Of course, I am sure we will return to this issue again over the coming months. I am happy to engage in debate with hon. Friends and to meet them and discuss any of their concerns. I will meet my hon. Friend the Member for Peterborough shortly. I hope that I have at least addressed some of the issues.
11.30 am
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Gangs and Youth Violence (2011 Riots)
[Mr Gary Streeter in the Chair]
2.30 pm
Ms Karen Buck (Westminster North) (Lab): I am extremely grateful to have the opportunity of the debate today, which I secured for two reasons. First, given that the riots of 2011 were so dramatic and one of the most momentous events in modern British history, justifying the recall of Parliament, it strikes me as somewhat extraordinary that we have not found an opportunity in the 15 months since to discuss them, their aftermath and what actions can and should be taken to ensure that such violence is not repeated. The Government gangs strategy was released in November last year, so we are at its anniversary, and the Government have reviewed progress, but we have not had an opportunity to discuss the events, certainly in Government time. I find that extraordinary, and I am grateful for the attendance of hon. Friends who represent boroughs affected by the riots for the most part, or by serious gang and youth violence, to talk about some of the effects on their communities.
Secondly, for a related reason, I very much want the opportunity to stress to the Minister, in the hope of reassurance, that the modest amount of money that has been invested in tackling gangs and serious youth violence over the past year, whether through the Home Office or the Mayor’s office, should continue beyond March next year at its present level at least. I will refer to that as I move on in my contribution.
Gangs and serious youth violence have been a feature of our cities for far too long. They are distinct but overlapping phenomena with similar roots. As I am sure colleagues will mention in their contributions, certain elements of the 2011 riots were specific to the time and place in which they occurred but, in general, the factors driving the gang and serious youth violence of recent years, which exploded into the riots, have the same stem. If we are to understand what happened and, ideally, to prevent and bear down on such phenomena in future, we need to understand both of them.
Acres of debate have been generated in the media and academia since the 2011 riots, which is one reason why not having the opportunity to discuss such findings to any extent in Parliament has been unfortunate. So much of the media coverage, however, was extremely unhelpful to our understanding. A lot of the reporting was wrapped up in language that betrayed the worst stereotypes, with talk of “feral youth” or “the underclass”, and reinforced a powerful sense of “the other”, a modern enemy within in our society. That distracts us from understanding the causes of such behaviour.
I was struck by some of the media commentary on the trials and convictions of 18 young people involved in the death of Sofyen Belamouadden at Victoria station in 2010, which casts a different light on some of our analysis of the problem. I met the principal of the college concerned a fortnight ago to discuss some of the issues. Paul O’Shea, that inspirational principal of St Charles sixth-form college, which was attended by almost all those involved in the murder, described his experience thus:
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“All but two of the 18 were four-A-level kids. We had nothing in our files to suggest they could behave like this. Their attendance rates were high, and one of the boys had that very morning been given two achievement certificates.”
The idea that we can happily stereotype all young people involved in gang or serious youth violence, or indeed in the riots, as members of a feral underclass is demolished by that very experience, which requires us to think more carefully. As the Centre for Social Justice report was labelled, it is “Time to Wake Up”.
We have to accept that such issues are complex and multifaceted, with emotional, cultural, economic and social causes. We have to grapple with ancient impulses. The behaviour of teenage boys in particular has caused grief to adults for 2,000 years, although now we have to deal with some of the new tools that create new means by which behaviour can be channelled through very rapid communication. As I describe it to myself, the space-time between impulse and action is completely eradicated, which has important implications. What happens through the use of the BlackBerry Messenger service, YouTube or social media has fundamentally changed not how behaviour is expressed but how it can be organised and how young people organise themselves.
Heidi Alexander (Lewisham East) (Lab): My hon. Friend is talking about some of the new technology that can lead to the fast propagation of some of the behaviours associated with serious youth violence. Does she agree that the issue is not only about the speed with which such behaviour can be spread, but about the material online that can escalate and foment a situation, leading to greater problems of retaliation between different gangs or competing groups involved in serious youth violence?
Ms Buck: I absolutely agree. My hon. Friend has been a powerful advocate of our better understanding of social media and how they can interact with long-standing patterns of behaviour and yet change that behaviour, increasing the ability of groups to taunt and confront each other through the posting of gang videos. She is absolutely right.
From all the analyses from across the political spectrum, left and right, from politicians, the media, think-tanks and academia we have a whole range of different contributory factors. Family breakdown, unemployment, the absence of effective role models—in particular for young men—poor relationships between young people and the police, the role of social media, excessive consumerism and poverty have all been analysed and put into the mix. We have yet, however, to translate our understanding of all such different factors into a comprehensive strategy for responding to the violence that has plagued our streets generally and to ensure that there is no repetition of the terrible events of 2011. Are we doing enough to translate our understanding of the causes of such behaviour into a specific understanding of, for example, where flashpoints can occur, postcodes, the role of social media or how adult criminals are directing the behaviour of younger members of the gangs? Such adults are sometimes directing from inside prison or even from outside the country. Young people involved in gang behaviour often say that they are dealt with by the police—quite rightly—but adult serious criminal behaviour is often behind the drug dealing or other criminal activity underpinning some gang behaviour,
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and those adults are not gone after or challenged. Work is being done in all those respects but I can fairly say that it is patchy, inconsistent and simply not good enough to insure against a repetition of the events of 2011.
In London, the number of people who died on our streets as a result of gang and serious youth violence peaked in 2008. It would be extremely unwise, however, for any of us to feel that that might have been a high-water mark for gang and serious youth violence, because it clearly was not. Serious youth violence was surging in 2011, up to and after the riots, and that would have been a more important element of media commentary had the riots not, understandably, distracted so much of our attention. We are only just beginning to appreciate the role of serious sexual violence, and the way in which girls are being drawn into the gang structure and abused.
It is estimated that around 250 gangs are operating in London alone, and that around 88% are involved in violence. Some 18% of individuals in gangs are linked to drug supply, 20% to stabbings, 50% to shootings and 14% to rapes. The Minister may say that we are calling for additional public spending to respond to some of the challenges, but the reverse is true. I want less to be spent on the consequences of that serious criminal activity, and on holding young people in youth offending institutions and prisons. A place in a youth offending institution sometimes costs £60,000 of public money a year. If only a fraction of that could be invested in prevention strategies, we would make a contribution to tackling the deficit as well as criminal behaviour.
When gang violence leads, as it has done, to serious concern about flashpoints in Pimlico, Parliament should regard that as a wake-up call. I am pleased to see the hon. Member for Cities of London and Westminster (Mark Field) in his place, and he may make a contribution. That was a powerful wake-up call for people on Westminster city council because Pimlico is not the sort of place normally associated with the gang culture.
When a Westminster head teacher tells me that
“Hearing gun shots from my office yesterday really brought home to me how close we are to yet another tragedy”,
that should be a wake-up call. When a busy Oxford street store is the scene of a confrontation ending in a teenager’s murder, as happened last Christmas, we are reminded that gang violence cannot be swept out of sight and consigned to the usual suspect areas, such as Tottenham, Hackney and Lambeth. It can explode into everyone’s consciousness.
Given that background, we might have expected the problem to continue in summer 2012, perhaps with a repeat of the riots, and certainly a continuation of that surging youth violence that we saw throughout 2010 and 2011, but the picture is much more complicated. There has been a significant fall in serious youth violence locally in Westminster and across the Metropolitan police area with falls of nearly one third in knife injuries and 21% in gun-related incidents. The number of young people arrested has also fallen, gratifyingly, in recent times. But that makes my case more, not less pressing. If recent months are not to turn out to be an aberration, we must understand what contributory factors bore down on that youth violence, and how we can continue them.
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We are definitely seeing the benefits of gang initiatives in my constituency and Met-wide, supported by some outstanding individuals and organisations which are delivering results with better information sharing, such as through the Gang Multi-Agency Partnership—the GMAP process, which monitors individual and gang activity—gang mediation and intensive family support.
I pay tribute to some of those involved in that work, because they do not receive sufficient recognition. They include Matt Watson, who runs Westminster’s gangs unit, and his team; the outgoing Commander Bray in Westminster, under whose watch a police gangs unit was set up and maintained despite all the other pressures on local policing; front-line gang workers, such as Twilight Bey and the Pathways to Progress team; Manni Ibrahim and the youth workers at clubs such as the Avenues, Paddington Boys, the Feathers and others, who have had to deal with the realities of gang violence on the front line; schools and colleges that have worked together; parent and family groups, such as the Tell It Like It Is campaign and Generation to Generation; and individuals who are doing creative work trying to tackle youth unemployment, such as Circle Sports.
It would be good to describe that as an infrastructure, but it would be unreasonable because, important as that work is, and invaluable as those individuals are, it is held together by gossamer threads. We simply do not know how much of the fall in serious youth crime in the last few months is due to the combination of statutory and community activity, and how much is due to other factors. That is an important challenge for Ministers. We may simply be seeing a lull in violence in the aftermath of the riots, when so many people were convicted and imprisoned and the shock waves went to communities in cities up and down the country.
The Centre for Social Justice report warned that the arrest strategy of recent months has weakened the leadership of some of the more responsible elders in gangs and created a greater risk of a more anarchic gang structure growing up in its wake. I do not know whether that will happen, but nor does anyone else, and that is part of the problem. What I do know is that we cannot afford to relax our grip for one moment. There is no evidence that the tide has turned, and in many respects, the underlying conditions for some of that behaviour are worsening because of factors such as the disproportionate cut suffered by the youth services as local government has been squeezed, and the pressure on family poverty and homelessness.
I was struck by a report that was published today by the Human City Institute. It says that social tenants have lost 10% of their purchasing power over the last couple of years—a total of £3 billion. Grainia Long of the Chartered Institute of Housing, who wrote the foreword to the report, said that it
“is very concerned that the combined effects of austerity and welfare reform run counter to the government’s fairness principle, and…that tenants are…disproportionately taking the strain of deficit reduction”.
That sort of upheaval and social stress cuts across some of the work that we are trying to do in tackling gang behaviour.
Long-term youth unemployment is at catastrophic levels, with unemployment of black and ethnic minority young men and women particularly worrying. The youth unemployment rate for black people has increased at
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almost twice the rate as that for white 16 to 24-year-olds since the start of the recession, and young black men are the worst affected.
Mr David Lammy (Tottenham) (Lab): Does my hon. Friend recognise that, when considering that statistic, it is important that the House realises that the situation in Britain is now worse than in the United States of America? That is how bad it has become. Black and minority ethnic communities are also seeing women, who were traditionally employed in the public sector, losing their employment. That is devastating for families who find themselves in that circumstance.
Ms Buck: My hon. Friend, who has spoken eloquently and with great knowledge about the causes of social breakdown in his constituency, is absolutely right. It is shocking that black unemployment is higher than in America. We have often seen the consequences of that in America, and we know that such social polarisation and deprivation are undoubtedly two of the many causes of gang and serious youth violence. That cannot be ignored, because such behaviour does not occur in a vacuum, and the economy is a critical element.
This debate is not about poverty and unemployment, but any Minister who believes that we should not mention them in considering long-term strategies for tackling the sort of behaviour that has led to far too many young people being murdered and maimed on our streets, and hundreds of others being imprisoned, sometimes for life, with a devastating effect on their families, is missing the big picture.
Gang membership and serious youth violence reflect the experience of troubled families and powerful peer pressure on the streets, the hopelessness and alienation of exclusion, unemployment and powerlessness, the power of an alternative identity that gangs offer to young people without community or family protection, and much more besides. Mainstream services must bend to incorporate what we have learned about prevention and gang exit. There is much evidence from the work of the London School of Economics, from “Reading the Riots”, from the work of groups in the Transition to Adulthood Alliance, from Catch22, the Brathay Trust project and Working with Men, and from Harriet Sergeant’s powerful book, “Among the Hoods”.
There may not be a grand theory of everything to explain the riots and gang and serious youth violence, but we broadly know what to do. We need to prevent young people getting drawn into gangs, offer gang members a way out and ensure that enforcement works when all else fails. The question is whether we can ensure that we do that, and that we do enough of it.
Finally, Mr Speaker—[Interruption.] I apologise. In time, perhaps, Mr Streeter. The final point is that we have no certainty at the moment about the long-term funding for the anti-gang initiatives that we already have. According to my borough, the funding for 2013-14 will be less than it was for 2012-13, and we are anticipating cuts from the Mayor of London’s contribution in the region of 12% to 20%. The chief executive of Westminster council has advised me that it receives two grants from the Home Office for 2012-13, but the ending gang and youth violence fund, which represents a sizeable proportion
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of the council’s spend on tackling youth violence, is only for the current financial year. There has been no indication of further funding from the Home Office for 2013-14.
Having said that, the Home Office peer review of Westminster’s gang programme highlighted the importance of creating a period of stability in provision. I ask the Minister to reflect on how it is possible that on one hand, the Home Office requires local authorities to provide a period of stability in gang prevention and exit programmes, but on the other hand refuses to guarantee the funding or ensure that the Mayor of London maintains at least the current levels of contribution.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): I thank my hon. Friend for giving way, and I apologise for missing some of her opening remarks. Does she accept that whereas gang crime in London was perhaps once seen as an inner-city issue, it now very much affects a number of London’s suburbs, including my borough? Notwithstanding the need to maintain funding levels for the existing series of gang projects in the main London boroughs that are hit by gang crime, it is also necessary to recognise that this is a London-wide problem, and that there are London-wide funding issues, as well as the requirement to maintain stability for the funding projects that she is outlining.
Ms Buck: I could not agree more. Many people were shocked about gang violence exploding into Pimlico, and the fact that it is creeping out into Harrow should also give us pause for thought, although I suspect that the Government’s complacency is such that they will reject that argument.
If we have learned anything, it is that, in theory at least, stop-go initiatives to prevent gang violence and deal with the stem causes of gangs, serious youth violence and the behaviour that leads to riots do not work. There must be consistency. Relationships must be built up and there has to be an infrastructure, which must be maintained. That will pay off, as we know. We only need to look at how much it cost to police and respond to the riots, and at the cost of detaining so many young people in youth offender institutions and prisons in the aftermath of that behaviour, to know that the investment will make sense economically, even before one starts to weigh up the importance to young people and their families.
I hope that the Minister will respond positively and give us a strong signal that we can at least be ensured of a continued delivery of investment from the Home Office and the Mayor’s office in programmes that keep young people off the streets and away from serious gang-related violence, for all our sakes.
2.53 pm
Mark Field (Cities of London and Westminster) (Con): I congratulate my constituency neighbour, the hon. Member for Westminster North (Ms Buck) on securing this important debate. Although I have some sympathy with her view that it is a shame that these issues are not being debated in the main Chamber, it seems that this is an appropriate place to debate matters that have a strong constituency aspect. I hope that the Minister will take on board the issues that she has raised.
I very much agree with the hon. Lady that there should be an absolute rejection of the culture of despair, which was part and parcel of the immediate response by the press and commentators to what happened—
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particularly, though not exclusively—on the streets of the capital city during August 2011. That issue of despair touches on a point made by the hon. Member for Harrow West (Mr Thomas), and today’s
Evening Standard
talks about Croydon no longer being a place that middle-class people wish to live in, which is having an impact on a number of big employers in the east Croydon area. Allianz is one such employer, but Allders department store has also closed down and Nestlé has moved out of Croydon to Crawley. There is a sense that the almost totemic aspect of the burning down of the long-standing department store in Croydon in August 2011 has had a very negative impact on Croydon as a place to live and work in. The idea of the culture of despair is to be questioned fundamentally.
The hon. Gentleman was right to say that this is not simply an issue for the inner cities, or for high-profile places such as perhaps Tottenham or parts of Hackney, which have traditionally been regarded as problem areas as far as gang culture is concerned. It is now permeating into what were once regarded as leafy suburbs—I appreciate that Harrow West does not necessarily comply with that stereotype, and the same can be said of Croydon.
I want to restrict my comments to something that is local to my constituency and say something about Westminster city council’s innovative approach to gangs and tackling youth violence, which has been touched on. The Your Choice programme was launched by the council alongside the Metropolitan police in the aftermath of the riots, starting as soon as November 2011. It was in response to an escalation in gang-related violence in the borough, and although there were lessons to be learnt from August 2011, it was part of a general process that had been happening for some years.
Your Choice is an evidence-based, multi-agency programme that involves the neighbourhood crime reduction service, the children and families services, the Metropolitan police, the probation service, and a range of other voluntary sector organisations, all trying to work together. The scheme tackles gang and youth violence through preventive measures such as early intervention in schools, gang outreach work and effective exit programmes, in order to ensure that a real difference is made to the young people who are in or at risk of joining gangs.
Fundamentally, it has two crucial aims. First and foremost, Westminster’s approach to gangs gives young people a real choice: they can engage and receive support, but if they do not, they must recognise that they face enforcement and sanctions. Secondly, the key to understanding the issue is that the local community must remain the absolute focus for the efforts, and the council provides a number of opportunities throughout the programme to capture community feedback and ensure that they are part of the solution.
To give a brief overview of how the programme operates, Your Choice currently works with more than 150 young people who are either actively involved in youth crime and gang activity, or are regarded as being at top risk of getting involved in gang violence. It has eight programmes that have been developed to tackle the complex and often multiple issues experienced by young people who are involved in or at risk of becoming
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involved in gangs. Those programmes include an outreach programme and an employment programme that gets young people into education, training or work. There is a gang-exit programme, as well as a school awareness programme and a housing scheme that quickly moves victims or perpetrators where gang violence has occurred. One scheme also focuses specifically on girls, helping to improve their self-esteem and prevent sexual exploitation. I know that that issue is very close to the hon. Lady’s heart and I will address it in more detail later. What is absolutely central to the idea of all the Your Choice programmes, as co-ordinated by Westminster city council, is the concept and notion of personal responsibility, choices and consequences.
There have been some local successes. It is important for all of us as Members of Parliament in London to note that, as well as rightly highlighting particular problems to the Home Office. Where there are successes, there are opportunities not only to praise local workers, but hopefully to find a route forward that can affect the capital and other parts of the country where gang culture is becoming sadly more prevalent. The Your Choice approach has been peer-reviewed by the Home Office and it has received commendation not only for its strategic vision and leadership, but for challenging the commissioning approach and its overall ambition.
The notable outcomes have been here on the ground. As recently as October this year, gang workers have been conducting mediation on a number of estates in the borough between parents and young people in order to try and reduce tension. The intensive outreach workers have been getting pretty good results with complex families who have never before engaged with council services.
Since the end of August, regular positive outcomes have been achieved with the Fresh Start employment scheme. I would not be naive enough to say that I did not have a lot of sympathy with what the hon. Lady said in her contribution. Of course, there is a massive problem with youth unemployment not just in this country, but in much of the western world. Broadly, the unemployment figures in this country are less negative than might have been assumed, given the broad state of an economy in which there is no growth, but there is a particular problem for under-25s. As I said, that applies not just in the UK, but in other parts of Europe, so we should not in any way suggest that a silver bullet has been produced by Westminster city council. None the less, its Fresh Start employment scheme has made some difference, even if not quite as much of a difference and not quite as quickly as we would all have hoped. One referral has secured an apprenticeship; another has obtained an interview; and two have secured permanent positions. All these men have been very difficult to engage in the past, but the council’s new approach has proven a success.
Ms Buck: I agree with everything that the hon. Gentleman is saying, and he may be coming on to this, but does he accept that the larger part of the funding that has gone into developing the Your Choice programme—and the positive outcomes that he has been talking about—is from the Home Office and the Mayor’s fund that I am so concerned about in terms of its continuation and reductions?
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Mark Field: Yes, I do accept that. I am always wary of doing too much special pleading for my own constituents or even people in London more generally, but the hon. Lady is right to say that specific problems were identified and tackled. As she rightly points out, a relatively small amount of money spent now may have such positive outcomes in terms of reduced public expenditure for years to come that that small investment should be made. We all appreciate, however, that these are incredibly difficult financial times. I have always made it a self-denying ordinance that where there are Government plans to make cuts, I will not stand up against those, because it is an amazingly difficult financial situation that we have to deal with. As a country, we are still borrowing one in every five pounds that we spend. The deficit reduction programme is, I am afraid, very much in the early stages of its achievement. We have many years of that ahead. We must get our public finances in order, but equally there are some fundamental issues that hon. Members in this debate rightly want to address.
I want to touch on the future of what is proposed with the Your Choice programme specifically as it affects Westminster city council. From the new year onwards, the following issues will arise. First and foremost is the issue of sustainable funding. We all appreciate that so much of the work that has been done in the past 15 or 16 months has relied heavily on short-term, ring-fenced, specific aspects of funding that take a significant amount of officer resource to agree and manage. The council and others are working hard, as are the Metropolitan police, to enable local authorities to submit business cases that can attract funding over a three to four-year period, but I still think that Westminster council and other local authorities in the capital require Home Office funding and support as part of the upcoming financial settlement in order to make that a reality.
There is increasing consensus that the problem of youth violence, and violence more generally, must be seen through the lens of public health. With responsibility for this area passing to local authorities, there is more scope than ever to take that slightly longer term perspective, but the varying faces of health continue to be relatively minor players in the partnership to tackle elements of youth violence. Support from both national and regional NHS commissioning bodies is still required to enable that partnership to improve. The hope is that with the health reforms bedding down, we will see, in the months and years to come, the element of stability that we all seek.
On the Home Office peer reviews, the Ending Gang and Youth Violence team are in the process of completing their reviews of the 29 priority areas for tackling gang and youth violence and have identified some 500 improvement actions. Across the country, there are areas of best practice for particular issues. The continued support and leadership from the Home Office, as well as the resources where necessary, will be crucial to ensure that we have a long-term spreading of that expertise to raise standards across the country. We do not want to get lulled into complacency and have to reinvent the wheel the next time there are riots.