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That point was echoed by Mr Simon Hart, the Conservative Member of Parliament for Carmarthen West and South Pembrokeshire, who warned the Government that a reduction of 25 per cent in the number of Welsh constituencies ahead of the referendum on new powers for the Welsh Assembly was being decided,
This speaks to the second of the amendments in this group which the opposition Front Bench also supports. We acknowledge that there was a reduction in Scottish Westminster representation when powers were devolved to Holyrood. There may need to be a reduction in the number of Welsh Westminster seats following a similar pattern, but it is right that such a reduction should take place only once further primary law-making powers are transferred. For this reason we should await the outcome of the March referendum in Wales and then make a judgment. That is the tone and purpose of Amendment 30.
Putting aside the issue of the referendum, the amendment in my name and that of my noble friend Lord Bach would in effect ensure that there was no reduction in the number of seats greater than 10 per
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As we are beginning to see in debates and votes on amendments, those things which would inject a little more flexibility in the rigid rules set out in the Bill are implacably opposed by the Government. Wales appears an obvious area where sensitivity ought to be given to its special geographical characteristics as well as to its status as a small nation within a larger union in which England is the dominant force in wealth, population and political representation. The Welsh Affairs Committee stated that its concern was,
While Wales will lose 25 per cent of its MPs, Northern Ireland will see a reduction of 17 per cent, Scotland 16 per cent and England 5 per cent. Our amendment seeks to assert that a more sensible approach would be to ensure that at any one boundary review no part of the United Kingdom should experience a drop of more than 10 per cent in its number of seats. If the Government profess to be interested in fairness, it is important that the interests of each region of the United Kingdom are properly heard at its national Parliament when national representation is being debated.
As I have said, the Government's proposals would reduce at a stroke the number of MPs representing Wales by 25 per cent. As the Select Committee concluded, by any yardstick this would be a profound change to the way that Wales is represented in Parliament. Our amendment does not preclude an eventual reduction to that effect but would ensure that such a change would be gradual. I invite the Government to consider accepting this amendment. I beg to move.
Lord Touhig: My Lords, I rise to support Amendment 25ZB in the names of my noble and learned friend Lord Falconer of Thoroton and my noble friend Lord Bach, and to speak to Amendment 30 in my name and that of my noble friend Lord Anderson of Swansea. I believe that they complement each other.
On 26 January we had an excellent debate on Wales. In particular, we were able to highlight the adverse impact that the Bill will have on Welsh representation in the House of Commons. That debate was conducted in the best traditions of your Lordships' House. Powerful arguments were put for and against the question of
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I say at the outset that I do not intend to repeat the arguments I made on that occasion. My noble and learned friend Lord Falconer has pointed out that Wales will lose 25 per cent of its parliamentary representation if the Bill is not changed. Indeed, 20 per cent of the entire reduction for the whole United Kingdom will come from Wales if the Bill is not altered. On 26 January the Government were unmoved by the merits of the argument that we put to retain at least 35 Members of Parliament. Indeed, they would not even take time to reflect on the merits of the case that we put. Reluctantly, of course, I and many others therefore accept that there will be a reduction in the number of Welsh constituencies and Members of Parliament. However, I urge the Government to consider that in the first boundary review the reduction should be limited to 10 per cent. Amendment 25ZB would allow for that.
On 3 March the people of Wales will go to the polls to decide whether powers to enact primary legislation in designated areas such as health and education should be passed from the Parliament of the United Kingdom to the National Assembly for Wales. None of us knows for certain what the outcome of that referendum will be and for that reason I urge the Government to take these amendments seriously and to reflect on them. I believe it would make sense to pause and await the verdict of the people of Wales before deciding on such a drastic reduction in the number of parliamentary constituencies. Neither of the amendments before your Lordships prevents the Government from making further reductions in the number of Welsh parliamentary constituencies in the future. They simply allow the process to take place over a longer period of time. That would be the time to reflect and consider the implications of a yes vote in the referendum on our constitution. The amendments would give time to consider the impact of passing those primary powers from Parliament to the National Assembly and the impact that that would have on the work of the House of Commons and Members of Parliament.
Without taking much of your Lordships' time in repeating the arguments that I made in the debate on 26 January, it is nevertheless right to point out that even if the referendum says yes to the transfer of powers, the asymmetrical devolution system that we have in the United Kingdom means that significant areas of legislative responsibility for Wales will still rest here in the Parliament of the United Kingdom. The devolution settlement in Wales is significantly different from that of Scotland and Northern Ireland. In particular, policing and criminal justice are not devolved in Wales and remain the responsibility of the United Kingdom Government and this Parliament. In addition to policing and criminal justice, huge areas of Welsh life will continue to be determined by decisions of the United Kingdom Government and this Parliament, including pensions, benefits, taxation, levels of public expenditure, macroeconomic policy, defence and foreign affairs. Our education system in Wales is very similar to that in England. Indeed, teachers pay and rations
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My point is simple and is reflected in Amendment 30 in my name and that of my noble friend Lord Anderson of Swansea, which complements Amendments 25ZB. Until the constitutional settlement between Wales and the United Kingdom is resolved in the referendum and its impact examined, there should be no more than a reduction of 10 per cent of Welsh Members of Parliament at the appropriate boundary review. Neither amendment would prevent the Government and Parliament from looking again at the levels of Welsh representation in the other place.
This debate is doing what your Lordships' House does best: it is giving the Government an opportunity to reflect on the amendments before us and consider their merits. Amendments 25ZB and 30 would not thwart the will of the Government and the elected House. They allow time for sober reflection and to consider the constitutional impact and the impact that any transfer of powers from Parliament to the Assembly will have on the House of Commons. They would give the Government an opportunity to achieve an outcome that they have singularly failed to achieve so far with the Bill: the opportunity to gain all-party support, certainly for this part of the Bill.
Without consensus and all-party support, no constitutional change of this magnitude will stand the test of time. I hope that the Government will consider the merits of the case being put before your Lordships this evening and agree, at the very least, to accept Amendment 25ZB.
Lord Morris of Aberavon: I support the speech made by my noble and learned friend Lord Falconer of Thoroton. I also spoke on 26 January and I do not intend to rehearse again the points that I made then and others made even better. We are not against a reduction in seats, but it should take place over a longer period of time. It is utterly disproportionate that the seats in Wales are reduced in one go by 25 per cent. That is 20 per cent of the whole of the reduction in the United Kingdom. I support my noble and learned friend.
Lord Morgan: I add my support to both amendments because of the extreme unfairness and inequity with which Wales has been treated. I begin with a reflection of what the United Kingdom is. It is a very special kind of polity. It is not a federal state. It is a union state in which different nations are brought together and, through the mediation of all political parties over 100 years, a union state in which all the nations have equality. They do not seek separatism: they seek equality. Wales in this instance is being treated most unequally.
From time to time, I reflect on a famous Liberal, whose successors do not appear to be very close to his traditions-David Lloyd George. On one occasion, Lloyd George pointed out the sheer hypocrisy of a Tory Government before 1914 who claimed to be Unionists and yet somehow implied that the Irish nationalists were lesser members. He said that they
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In the status of Wales in a union state, Parliament is absolutely crucial. The representation of Wales in numbers is crucial. We had an intervention by the noble Lord, Lord Crickhowell, who is not in his place at the moment, in which he pointed out the quality of people such as Aneurin Bevan, David Lloyd George and my noble and distinguished friend Lord Kinnock sitting behind me. That was an argument for saying that if you had a group of geniuses, Wales could be represented by 10 people or even one person. There is no limit. It is the kind of argument that the noble Lord himself applied when we were discussing the amendment about the threshold for the referendum. There seemed to be no minimum: if only 5 per cent of the electorate voted in a referendum that was absolutely fine. If 40 per cent voted that was fine. Any percentage was fine.
Wales has, as I said in a previous speech, created and won recognition for its status through its power in Parliament, not just the ability of people who have represented Wales in Parliament, but the fact that collectively they are able to make a major contribution and to fulfil the wider role that parliamentary representation can have.
There is a point about the Assembly. The Scottish Parliament has greater powers, as we heard from my noble friend Lord Touhig, than the Welsh Assembly. That has been taken into account in relation to the representation of Scotland in Westminster. We do not know what will happen in the Assembly. We are therefore just second-guessing what the result might be and the sensitive relationship between the Assembly and Parliament is therefore being put at risk. The potential way in which a lesser number of MPs and a greater number of Assembly Members might be able to collaborate is also being put at risk.
This is an unfair distortion of the political process. It is unfair on the Welsh people and on Wales as a nation. When we discussed this previously, the Minister produced an argument that I hope we will not hear from him this time. He said that because Wales is being organised by the same rules as other parts of the country, the unfairness would somehow be accepted by the people of Wales as simply a part of accepting the rules. That is rather like looking ahead to next Saturday when Wales play Scotland at Murrayfield. It is like saying that Wales will be playing by the same rules as Scotland; Wales will be the same pitch but will be playing three men short. That is therefore a fair way of looking at it.
Wales is manifestly been treated far more seriously and severely than any other part of the country. It is at variance with our history and particularly at variance with the history of the previous proponents of the views of the Liberal Democrats who are supposed to be heirs of that liberal tradition. This is treating Wales with contempt. It is putting the union at risk and is likely to cause enormous anguish and a feeling that the tradition to which all parties have contributed has been wantonly betrayed.
Lord Kinnock: Contrary to the fears expressed by some noble Lords in our previous debate, the reduction by 25 per cent of the number of Welsh Members of Parliament would not immediately lead to further feelings favouring secession. The consequence would in some ways be even more serious. By cutting the number of Welsh Members of Parliament by 25 per cent, which is hugely out of proportion with anything else that is happening in any other part of the United Kingdom, the Bill, unless the amendment is accepted, will foster the feeling among the people of Wales that they are being treated as if they are second rate. The consequent response is one of alienation-the feeling of being downgraded, of being marginalised and of being dispensable.
When those feelings are nourished, sometimes by mischievous politics but also by economic and social circumstances, they develop a life of their own. I do not seek to be one of those who foster those feelings-on the contrary; I want an optimistic, forward-looking Wales, which is what I have worked for all my life-but when a central Government say that, of all the parts of the United Kingdom, one part shall lose 25 per cent of its representation in Westminster while another will lose 5 per cent and others lose 16 per cent and 17 per cent, the message that is received in Wales is entirely negative.
A very patriotic and insightful Scottish member of the Government will comprehend the implications that will reverberate over years and throughout innumerable communities of the effect on Welsh attitudes of introducing legislation in this form. Even if we do not succeed with this amendment, I beg the Government further to reflect and listen to the words of Welsh representatives and those with honourable records in Wales from their own Benches, who will convey in clear terms the risks that are being taken with the political psychology and the patriotic feelings of the people of Wales by their being treated so arbitrarily, so disproportionately and so outrageously.
Lord Rowe-Beddoe: My Lords, I echo the words of the noble Lord, Lord Kinnock, who touched on some of the points that I made in Committee. I fully support the amendment of the noble and learned Lord, Lord Falconer, and that of the noble Lord, Lord Touhig.
We have heard so much in these past hours and days about fairness and the equivalency of vote, but we are dealing with one of the most unfair pieces of legislation, as far as Wales is concerned, that I could possibly conceive. The maths do not add up-we know that. There would be a reduction of 25 per cent in the number of Welsh MPs if you wanted to do it one way and one of 20 per cent if you wanted to do it another.
I was told in a meeting the other day that Wales has been "grossly overrepresented". That might have been so. It might have been so with good reason and good cause. It might have been so since David Lloyd George's day, since Winston Churchill's Speaker's Conference and, more latterly, since 1986, when Parliament stated that that nation should have no fewer than 35 parliamentary seats.
Where is the fairness in this proposed cut? Where can it be seen to be fair? As the noble Lord, Lord Kinnock, said, the people of Wales will look at these most ferocious cuts and not understand them. The people of Wales will feel, despite everything else, that they have been expressly targeted and disadvantaged, and who will explain it to them? If it is to be the Government, might I ask with what credibility they will do so? I remind them that, with the greatest will in the world, the voice of the Government is not a great voice in Wales.
I therefore ask the Minister to consider very seriously what we are talking about. I mentioned in Committee the union, which I firmly believe will be threatened. I humbly ask the Government to look again at the amendment proposing 35 seats. If we were to have the result of the referendum in our hands, we might think a little differently. However, we do not. It would in any case take time to implement. Embedded in the amendments also is a process that would take a little longer to implement. I exhort the Government to look at the matter again.
Lord Hamilton of Epsom: I say to the noble Lord, Lord Rowe-Beddoe, that the union is threatened, and has been for some time, by devolution. Once you start the process of devolution, it becomes a ratchet, with more and more powers then transferred, in the case of Wales, to the devolved Assembly. That is a very good reason for not supporting the amendment. The Welsh have their own Assembly, whose Members deal with many local matters. I think most people would think that the referendum that is coming up in Wales was very likely to transfer further powers to the Welsh Assembly-it would be very unlikely if Wales said, "No, we don't want to have these extra powers".
We have had previous debates about very large geographical areas in Scotland. Orkney and Shetland might have only 30,000-plus electors, but they have three Members of Parliament-two in Edinburgh and one in Westminster. The same principle applies to Wales. It seems to be almost overrepresented as things stand today, and I sincerely hope that the Government will resist the amendment.
Lord Anderson of Swansea: My Lords, I was advised by a veteran politician to begin every speech with the word "finally" because it excites expectations. Wales is clearly the big loser in this proposal. The Select Committee for Welsh Affairs, an all-party committee, came out unanimously against it. It will be seen in Wales as making us a poor relation. It represents a wholly insensitive way of looking at Wales. Far from what the noble Lord, Lord Hamilton, suggested-he seems to be against devolution as such-we will not put the clock back. Indeed, devolution, moving in the way that Welsh and Scottish people want it to go, is a way of avoiding separation. Of this, finally, I am sure; this insensitivity which the coalition Government have shown will indeed be a threat to our union.
Lord Elystan-Morgan: My Lords, the contribution by the noble Lord, Lord Hamilton, is the only contribution that we have heard as yet from the Back-Benchers on my left. The case that he puts is not so much the case for union as for uniformity. He may or may not
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Many noble Lords have stressed the central point that the changes contemplated to seats in Wales are on such a massive scale as to be injurious on account of that scale alone. It is not a question of how greater they are than other parts of the country, but how much they represent the totality of seats-in other words, a quarter of the seats of the principality of Wales. In the whole of the United Kingdom, I believe that 7.6 per cent of seats will disappear. In Wales, it will be 25 per cent. That point has already been made with great eloquence and accuracy by other Members.
In addition, in losing a quarter of its seats it follows in reason that the disruptive effect-the knock-on or domino effect-on the 30 seats that remain will be much greater, and proportionally greater, than in any other part of the United Kingdom. There can be no doubt about that. The effect generally might be that each and every one of the 30 seats essentially loses its identity.
For a short period of eight years, I had the great honour of representing the county of Cardigan in the other place. Cardigan is almost as old as Wales itself. The old community from the estuary of the Dyfi to the estuary of the Teifi with Cardigan Bay on the west and the Plynlimon range on the east was created and hammered out on the anvil of time. It has distinctive characteristics. I will not go through them now, but some of them are very noble and some perhaps not so noble. The late Lord Elwyn-Jones used to say of the times he had in assizes in Cardiganshire that on the whole a Cardiganshire jury was against crime. He said, "Thank goodness they weren't dogmatic about it", but be that as it may.
I have no doubt that the Welsh scene in terms of parliamentary constituencies will be changed out of all recognition. The question has been raised by many-it was raised by my noble friend Lord Rowe-Beddoe in our debate a fortnight ago-of what the perception might be in Wales of what is happening. I believe that it will be a corporate and national reaction. It will be the feeling that Wales has been pointed out for special punishment. People say that it is one of the most anti- and non-Tory countries in the world. I think I am right in saying that the Ballot Act 1872 made it no longer necessary for tenants to vote in the presence of their landlords. Since that Act, the Conservative Party has never won a majority-I do not mean an overall majority; it has never been the leading party-of seats or votes cast for it in Wales. That will perhaps be the perception of Wales in relation to the Conservative Party.
What the perception of Wales will be in relation to the Liberal Party, I shudder to think. The Liberal Party has a proud and honourable record of standing
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The case for the special treatment of Wales is its special, individual situation as a nation. If you deny that case, you deny the essential meaning and significance of that nation, which the Liberal Democrats have to face up to. Half an hour ago, many of its members broke ranks and voted for Cornish patriotism. Will they do the same for Welsh patriotism?
Lord Kilclooney: My Lords, I express my support for this amendment. The three nations within the union that will be most severely hit by this legislation are Wales in particular, Northern Ireland secondly and Scotland. I fully understand the sentiments expressed by the noble Lord, Lord Kinnock. They reflect my own feelings in Northern Ireland. The voices of Scotland, Wales and Northern Ireland are already overwhelmingly outnumbered in the other place, but they will be even more overwhelmingly outnumbered if this legislation goes through, which will cause considerable resentment and misunderstanding. I am sorry to say that I fear that it is a decision that, if taken by the majority who come from England, will damage the United Kingdom.
When we were involved in the discussions on the future of Northern Ireland, we were always told that the majority should be magnanimous to the minority. Here is an occasion where the Conservative and Liberal Democrat majority should be magnanimous to the minorities in Scotland, Wales and Northern Ireland.
Lord Wallace of Tankerness: My Lords, it has been evident from the good debate that we have had that this group of amendments looks at the allocation of seats to nations. Indeed, the amendment moved by the noble and learned Lord, Lord Falconer of Thoroton, could apply to Scotland, Wales and Northern Ireland, although until the previous contribution from the noble Lord, Lord Kilclooney, we focused, understandably, on Wales. From the outset, I should say that I recognise the passion with which these arguments have been put. Amendment 25ZB seeks to ensure that the allocation of seats to any part of the United Kingdom will be within 10 per cent of the current allocation. It provides for an additional allocation of seats, if the Sainte-Lague process set out in rule 9 results in an allocation that reduces the number of seats by more than 10 per cent of the current allocation.
In spite of its name, the process nevertheless recognises the fairest way to allocate seats. The British Academy report explicitly refers to it as such. It is the method that the Electoral Commission uses to allocate seats to European parliamentary regions, and the Government believe that it is the right method to use in allocating
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The proposed amendment would undermine this fairness by putting an artificial floor on the process. The proposed top-up of seats would tamper with the balance struck by the Sainte-Lague method of allocating seats between the constituent parts of the United Kingdom. We do not believe that it can be right to change the result derived from a system recognised, as the British Academy report described it, as,
In practical terms, the amendment would create a reduction in stages for Scotland, Wales and Northern Ireland. When the secretaries of the Boundary Commissions were giving evidence to the Political and Constitutional Reform Committee, their clear advice was that there were advantages in making the reduction in one go. The Government consider that one reducing review would be less disruptive to constituents and Members in the other place than the continuing reductions that this amendment would introduce. I think that I have calculated properly that, under the amendment, in 2015, Wales would move from 30 to 36 and, in 2020, from 36 to 32. Only in 2025 would it would reach the level that would put it on an equal basis with other parts of the United Kingdom.
I reassure noble Lords that we are not proposing less representation for Wales than for other parts of the United Kingdom. This Bill provides that the value of a vote in Wales will be the same as the value of a vote in England, Scotland and Northern Ireland, within a 10 per cent range of tolerance. I do not see how that can be doubted. It is not like putting the Welsh team on to the field at Murrayfield next Saturday with three men less, as the noble Lord, Lord Morgan, suggests. It would be putting them on the field with three men more, if the amendment was agreed. The provisions are fair to the voters in the constituent parts of the union. Of course, there will be a reduction in the number of constituencies in Wales, as in the rest of the UK, but overall the proportion of Welsh seats in Westminster will go from 6 per cent to 5 per cent.
The Government believe that the system proposed in the Bill, whereby seats are allocated to constituent nations in a well recognised and fair process, giving electors equal value across the United Kingdom, is the best way of bringing about fairness in all parts of the United Kingdom.
Amendment 30, introduced by the noble Lord, Lord Touhig, and spoken to by the noble Lord, Lord Anderson of Swansea, would make any boundary change in Wales contingent on the National Assembly for Wales gaining enhanced legislative powers in the referendum held on 3 March. The amendment leaves open the possibility that a key objective of this Bill would not be achieved. Every elector's vote in elections to the other place would not have the same value if this amendment was agreed. As I said about the amendment from the noble and learned Lord, Lord Falconer, we are not proposing less representation for Wales. The value of a vote in Wales will be the same as the value of a vote in England, Scotland and Northern Ireland, within a 10 per cent range of tolerance. I cannot see where the unfairness is to electors in Wales.
Lord Morgan: I apologise for interrupting the Minister, but may I point out that every single argument that he has used is simply mathematical? He has considered no other aspect of Wales at all, culturally, politically or socially, and he has based that on a very selective reading of the British Academy report.
Lord Wallace of Tankerness: I do not believe that it is simply mathematical. It relates to the principle of equal value, and one value for one vote. That is not a mathematical concept but a matter of fairness. It is equally wrong to suggest that the provision does not have regard to the cultural and historical matters in Wales. I indicated that to the noble Lord, Lord Elystan-Morgan, in the previous debate. I recognise Wales as a constituent nation of our United Kingdom, but other parts of the United Kingdom have their own historical and cultural importance and ties, as indeed do parts of England as well as England as a whole. What I have not yet heard answered by anyone who has argued the case is why a vote in Swansea should carry more value than a vote in Newcastle, Coleraine or Aberdeen. Each of those other cities have their own importance and distinctiveness, and I have not yet heard an answer to why the citizens of Swansea should have a vote to the United Kingdom Parliament that is worth more than the vote of a citizen in Newcastle, Aberdeen or Coleraine.
Lord Touhig: I understand the point that the Minister is making, but how does he stand that argument up when his Government are making a deliberate exception for Orkney and Shetland? Their votes will not be equal to the rest of the votes in the United Kingdom.
Lord Wallace of Tankerness: That case has been argued, and we have had specific debates on that and an amendment from the noble Lord, Lord McAvoy. What we have said-and I think I have said it about three times already, this afternoon and in Committee-is that the Government have put into the Bill two exceptions in places with extreme geographical situations and no ready link to anywhere on the mainland. In the rest of the United Kingdom we are seeking one vote and one value.
Lord Anderson of Swansea: Because, historically, there has been a Welsh exception and no exception elsewhere. The Minister is crucifying Wales on a mathematical altar and deliberately reducing the voice of Wales in Westminster.
Lord Wallace of Tankerness: The simple answer to that is that there was an exception in respect of Scotland under the 1986 Act. I think that the noble Lord, Lord Morgan, mentioned that the 1986 Act said that there would be no fewer than 35 seats; the same Act said that there would be no fewer than 72 Scottish seats. Yet the last Labour Administration repealed that. I do not criticise them for that-indeed, I supported it. The number was reduced by some 18.5 per cent.
Lord Elystan-Morgan: I greatly respect the integrity and ability of the noble and learned Lord, but his whole argument is based, is it not, on the question of equality? He equates equality totally with arithmetical consistency. Is not that a total fallacy?
Lord Wallace of Tankerness: This is not down simply to mathematics. The principle at the core of this part of the Bill is to ensure the equality of the ballot, which all of us hold very dear indeed and which is not a purely mathematical thing. One elects one's representative to sit in the other place and, by doing that, contributes to what the Government of this United Kingdom will be. There is a merit in that vote having equal value in all parts of our United Kingdom.
Lord Howarth of Newport: Even on his own basis-that numerical equality is the only thing that really counts-the Minister is under an illusion in supposing that, by achieving numerical equality between constituencies in Swansea and Aberdeen, he necessarily creates votes of equal value. The value of votes will also depend on registration, turnout and marginality in particular constituencies. He is pursuing a chimera in this respect, while at the same time ignoring that the basis of parliamentary representation in the United Kingdom has historically been that constituencies should be expressive of communities. Communities in Swansea and Aberdeen are, of course, of equal value, but the design of their parliamentary representation should reflect their particular characters.
Lord Wallace of Tankerness: My Lords, we have rehearsed the arguments before about matters such as turnout, on which, I accept, the Government cannot legislate-and turnout will have an effect-but on the morning of the election before anyone has turned out, at least what we are seeking to do gives a greater likelihood of equality before factors such as turnout come into effect. It does not say much for the quality of the value of a vote if, before you have even gone to the polls, an imbalance is already implicit in the system.
Lord Kinnock: Does the Minister accept that he can offer what we could call the Swansea-Aberdeen question in the form in which he puts it only because, without an electoral mandate, this Government are proposing to cut the number of seats in the House of Commons at one cut by 50 seats, from 650 to 600? Were it not for that, he could certainly have his equalisation of constituencies, and even a reduction in the number of Welsh seats, without inflicting on Wales or the rest of the country all the difficulties that have rightly been identified in the course of this debate.
Lord Wallace of Tankerness: My Lords, we have had many debates on the size of the other place, and I think that we voted on it yesterday evening. Certainly, there have been many counterproposals to 600, but 600 is the number in the Bill. We have passed that point in our deliberations. It is what the other place agreed to, and it has not been defeated or changed by any debates or votes in your Lordships' House. With 600, I have not yet heard the argument why Wales should be treated preferably to other parts of the United Kingdom. It cannot be related to devolution
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Lord Morris of Aberavon: Will the Minister put on one side this dogmatic reliance upon simple arithmetic? Why, over decades, have our predecessors agreed that the magic figure of representation to meet the needs of Wales was 35? Is it not a recognition of the need of a small nation to have a voice? If a small nation is incorporated into a larger nation in a union, is there not a case for the voice of the smaller nation to be adequately represented, hence our predecessors' magic figure of 35?
Lord Wallace of Tankerness: My Lords, I would passionately defend a united kingdom, but I do not honestly believe that it is doing service to all parts of the United Kingdom if we say that some part of it needs a hand-up. I believe in each of the constituent parts of our United Kingdom-Scotland, Wales, Northern Ireland and England-having equal status. That is why, when the other place is dealing with issues such as defence or macroeconomic policies, the votes of a person in Wales should carry equal value to those of a person in Scotland, Northern Ireland and England. That is not unfairness or inequality. In fact, to do otherwise would put inequality into the system. I therefore ask the noble and learned Lord to withdraw the amendment.
Lord Falconer of Thoroton: My Lords, as the noble and learned Lord said, "I have not heard why Wales should be treated differently". Our amendment simply proposes getting to the same point as everyone else but doing it in a gradual way that does not put the union under strain. Not once did the Minister address that argument. I wish to test the opinion of the House.
27D: Clause 11, page 12, line 33, leave out from first "of" to ", and" in line 35 and insert "local government areas and the electoral wards into which they are divided under section 1 of the Local Governance (Scotland) Act 2004"
"(1) The number of holders of offices specified in Schedule 2 to this Act (in this section referred to as Ministerial offices) entitled to sit and vote in the House of Commons at any one time, whether paid or unpaid, must not exceed 95 if the number of constituencies in the United Kingdom is 650."
"(1A) If the number of constituencies in the United Kingdom decreases below 650, the limit on the number of holders of Ministerial offices entitled to sit and vote in the House of Commons referred to in section 2(1) must be decreased by at least a proportionate amount."
Lord Falconer of Thoroton: My Lords, this is about the size of the Executive. The effect of this amendment would be to reduce the size of the Executive in proportion to the reduction in the number of MPs. There is no issue that it should not happen. Not surprisingly, Mr Nicholas Clegg declared before the election:
"We'd want to reduce the power of the executive and increase the power of Parliament ... We've got to give Parliament its teeth back so that people can have pride in it again-so they can look at it and say 'yes: those MPs we elect-they're holding the government to account on my behalf'".
The effect of reducing the number of MPs by 50 without decreasing the number of officeholders entitled to sit and vote in the House of Commons by the House of
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"We have said that we will address this issue and we will, but there is plenty of time to legislate before 2015 if we need to. The Minister for Political and Constitutional Reform told the Constitution Committee, of which my noble friend and the noble and learned Lord are members, that we will bring forward proposals during this Parliament. That is in good time as the reduction in the size of the other place will not yet have taken effect. I hope that is a sufficient reassurance".-[Official Report, 26/1/11; col. 1058.]
No; that is, on the scale of reassurance, nil. Do we trust this Government to introduce measures to reduce the number of Ministers in the other place? No we do not. The only way to deal with that is if Parliament is prepared to do it by saying, "Let's reduce the number of Ministers", as Mr Nicholas Clegg, Mr David Cameron and the noble Lord, Lord Strathclyde-the triumvirate on which the Government are based-said they would. I do not trust them to do it in 20 years. In those circumstances, I invite the House to do it. I beg to move.
Lord Howarth of Newport: My Lords, my Amendment 27FA would insert a new clause after Clause 11, and after the new clause inserted by the amendment of my noble and learned friend. His new clause relates to the size of the Executive-the number of Ministers. My new clause is intimately related to that and deals with the number of Parliamentary Private Secretaries. I propose that their number should also be reduced commensurately with any reduction in the size of the House of Commons. We are talking here of the so-called payroll vote-the payroll which consists not only of salaried Ministers and one or two unsalaried Ministers, but of Parliamentary Private Secretaries. Although they are unpaid, they are always somewhat sardonically referred to as being members of the payroll vote.
In Committee, noble Lords on all sides of the House expressed their concern that the capacity of the House of Commons to hold the Executive to account would be further enfeebled if the size of the payroll vote were not to be reduced in proportion to the reduction of the size of the House of Commons. An important amendment on that matter moved by the noble Lord, Lord Norton of Louth, attracted a great deal of interest and support on all sides. Since then, I have learnt that the Speaker of the House of Commons himself has expressed concern that reducing the number of MPs without a commensurate reduction in the number of Ministers would skew the Westminster playing field in favour of the Government, as has the steady expansion of the payroll. Those sentiments were attributed to Mr Speaker Bercow in an article in the House Magazine.
Mr Cameron has appointed a lavish number of Parliamentary Private Secretaries, considerable numbers of party vice-chairmen and special representatives.
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Lord Howarth of Newport: I entirely deprecate this tendency and I am delighted that the noble Lord has drawn our attention to a continuation of a baleful tendency that has persisted for many years. In 1900, there were just 60 salaried government posts, of which only 33 were filled by Members of Parliament. In addition, there were nine Parliamentary Private Secretaries. The total payroll vote in 1900 was 42. One hundred years later, in the year 2000, which was during the period of the previous Labour Government, the payroll consisted of 129 out of 659 Members of Parliament. We should also bear in mind that other legislatures-for example, the legislatures in the United States of America and in France-do not have to supply the ministerial Bench. We should not forget that when considering the Government's claims that we are overrepresented in Parliament by comparison to other nations.
As a result of the exercise of patronage by Mr Cameron, possibly advised by Mr Clegg, there are now 95 Ministers in the House of Commons and 46 Parliamentary Private Secretaries. The Constitution Unit tells me that that represents more Parliamentary Private Secretaries than there have ever been. The payroll vote is 141 out of 650 Members of Parliament. A year ago, Mr Cameron, addressing the Conservative Party asked:
The answer is that it has done so on the basis of thorough, systematic and unscrupulous use of Prime Ministerial patronage. The Prime Minister is now able to answer that question he posed a year ago. Ministers in the coalition Government profess to repent themselves of this; but, like Saint Augustine, they do not intend virtue just yet. This Bill provides an opportunity for them to embark on a reformed life, but they hesitate-indeed, decline-to take that opportunity.
This is a very important constitutional issue. It is about the capacity of the House of Commons to debate with some measure of freedom, to scrutinise with some independence and to hold the Executive to account. The capacity of your Lordships' House to do that is under threat, in consequence of the coalition having a political majority in this House. The plight of both Houses of Parliament must now be a matter of intense concern. The proposed new clauses provide the opportunity to assist the House of Commons to recover its capacity to perform the function within our constitution that the people expect of it.
Lord Boateng: My Lords, patronage has oiled the wheels of the Palace of Westminster since time immemorial, and we should not inveigh too much against it, particularly those of us who have been its beneficiaries-and quite a few on all sides of the House have been. Nevertheless, these amendments are important, because they are not against patronage per se-it has its place-but they seek proportion; that is all. They seek balance in order to prevent the abuse of patronage, which we have to be vigilant in guarding against.
Those of us who take our friends and former constituents around these august halls always stop at perhaps the most important picture in the Palace of Westminster-that of Charles I being gainsaid by the then Speaker when he came to arrest the five Members. It is a wonderful picture, not least because it embodies the principle to which traditionally we have adhered ever since those times: at the end of the day, what matters above all in this place is the capacity of the Back-Bencher to make a difference and to hold the Executive to account.
We live in different times from those of Mr Speaker Lenthall, the five Members and Charles I. None of us will lose our heads as a result of how we vote. None of us will be put in the same peril as Members were in those days. Nevertheless, the exercise of the power of patronage and the threat of the withdrawal of patronage-and I am cognisant of where I stand in relation to those who sit behind me-is a real power in the hands of the Executive. We seek with these amendments to make sure that that power is exercised proportionately. As my noble friends have said, that is an important constitutional point, and this House has given considerable attention in recent weeks to the importance of upholding our constitution and its traditions. The Palace of Westminster has sent more constitutions to more countries than any other Parliament in the world. That is something of which the House should be proud, because in the main the export of constitutional democracy has been to the advantage of our world. However, I cannot think of a single instance-perhaps the Minister will help me on this-when this House has sent a constitution to a former colony or dominion and not required that at least two-thirds of those elected to power under that constitution have supported it before it comes into effect. Yet I fear, on this as on many other issues, that the strictures of the Constitution Committee have been cast to one side, the previously expressed opinions of the Prime Minister and Deputy Prime Minister on the validity of the substance of the amendment have been cast to one side, and we are about to see something of profound constitutional significance railroaded through this House. That must be a matter of regret and I hope that noble Lords on all sides of the House will think twice before they fail to support the amendments.
Lord McNally: My Lords, the debate has been dominated by realism and cynicism: realism from the noble Lord, Lord Boateng, who said that patronage had oiled the wheels of the Palace of Westminster since time immemorial, and cynicism from the noble and learned Lord, Lord Falconer, who said that he did not trust the Government.
I am grateful to noble Lords for contributing to the debate. I see myself as a transitory Minister but a long-time believer in parliamentary checks and balances on the Executive. There is no difference between us on that. In Committee, we on these Benches outlined two key points that are worth returning to now. First, we are not at all against the spirit of the amendment. Since the Government came to power, they have demonstrated on several occasions that they believe in dispersing power. For example, they moved swiftly in the other place to implement the Wright committee recommendations to establish the Backbench Business Committee, passing control of much more parliamentary time to Back-Benchers and enabling them to elect the chairs and members of Select Committees by taking these decisions away from the Whips, who had such a dead hand on parliamentary democracy for so many years. I am too delicate to name the guilty men at this moment.
Noble Lords, including the noble and learned Lord, Lord Falconer, can be reassured that the Government are not looking to extend their influence. We are not seeking to expand the so-called payroll vote as a proportion of Members in the other place. However, we are not certain that legislating for this is necessary. We have said that we will look at all legislative and non-legislative options for addressing this-and we will-but we need to look at all the ramifications. For example, it might seem an odd consequence if we were to reduce the number of Ministers in one House by increasing the number of Ministers in another-this House. If the business of government demanded a larger number of Ministers who could not sit in the other place, that would be the only alternative. Ultimately, we want to be governed by the principle that the number of Ministers must be a function of need, which is not necessarily related to the number of MPs.
Lord Forsyth of Drumlean: Is the problem not that only a fixed number of Ministers is allowed, and as a result many Ministers in this House are unpaid? Surely that is unfair given the very considerable workload that this House undertakes because the other place does not seem to get round to revising legislation. We are all very appreciative of the Front Bench, but it seems very odd that so many of them should be unpaid so that there can be more paid Ministers in the other place.
Lord McNally: That is a very valid point that could be looked at. Successive Governments have relied on the goodwill of Members of this House to take on considerable duties and responsibilities. Again, I do not rule out looking at those matters. However, now is not the time to legislate on the issue. The reduction in the size of the other place will not come into effect until the next election in 2015. It would be much better to consider these questions closer to the time, when the parliamentary landscape will be much clearer. I assure noble Lords that we are looking at this question, but it does not need to be answered-and it would be wrong to answer it-in the Bill. Therefore, I invite the noble Lord to withdraw his amendment.
I am grateful to the noble Lord, Lord Howarth, for tabling Amendment 27FA. The amendment is similar
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We do not wish to see an increase in the payroll vote as a result of the Bill, but now is not the right time to legislate on the issue. The Government believe that it would be better to consider the issues after the change in the political landscape that will be brought about by the Bill has been made clearer. As I said, the issues raised are very real ones about the relationship between the Executive and Parliament, and even in eight months, the Government have established a record that means that the realism of the noble Lord, Lord Boateng, is more appropriate than the cynicism of the noble and learned Lord, Lord Falconer. We will address these matters and I ask the noble and learned Lord to withdraw his amendment.
Lord Falconer of Thoroton: The noble Lord, Lord McNally, has the respect of the whole House. However, with regard to the two areas to which he referred, the Government's record over the past eight months has been dismal. The first issue that he mentioned was the Government's respect for Select Committees, but I have today been shown a letter sent by the Constitution Select Committee of this House, agreed by every single member of that committee, complaining about the fact that the Government did not provide a reply of any sort to their comments on this Bill. The Select Committee said that now that the proceedings are almost over, any reply would be "of no value". Therefore, the Government are wrong to claim that they have a good record on Select Committees. Secondly, as my noble friend Lord Howarth of Newport said, the Government now have the biggest payroll vote in history.
Therefore, in my view it is misplaced, first, to complain that we should admire the Government for what they have done in those respects over the past eight months, and, secondly, to ask us to trust the Government in relation to delaying the reduction in the size of the Executive proportionate to the reduction in the number of MPs. The noble Lord asked why we should do that now when it would not come into effect until 2015. However, we are legislating now to reduce the number of MPs, and therefore the obvious time to make the change is at the same time. I am completely unclear what further information is required to make a decision about this, the Government having said that they support such a reduction, and so I wish to test the opinion of the House.
Contents 161; Not-Contents 222. [The Tellers for the Contents reported 162; the Tellers for the Not-Contents reported 223; the name of a noble Lord who voted in both Lobbies has been removed from the voting lists.]
(a) for a committee to carry out a review of the effects of the reduction in the number of constituencies brought about by section 11;
(b) for the findings of the review to be published.
Lord McNally: My Lords, Amendment 28A provides for a committee to carry out a review investigating the impact of the reduction in the number of MPs from 650 to 600. The arrangements for that would be required to be made between June and November 2015-in other words, directly after the next scheduled general election.
In Committee, many noble Lords asked what the rationale was behind reducing the number of seats in the other place to 600. In response, other noble Lords, including the noble Lords, Lord Wills and Lord Lipsey, proposed setting up an independent or cross-party committee or a Speaker's Conference, the intention being to consider the size of the other place and to use the various committees' findings as a basis for determining the size of the House of Commons. We resisted those amendments because we were not persuaded that it was possible to consider the number of factors that some noble Lords suggested and arrive at a golden number that would balance all the considerations and interests. Ultimately, setting the size of the other place is a matter of judgment. We based our judgment on a variety of considerations, including the manifesto commitments of the Conservative Party to reduce the number of MPs. Members of the other place then decided that the reduction should be from 650 to 600.
We also resisted the amendments because the reviews, committees and inquiries would have delayed the boundary review and almost guaranteed that they could not have been completed in time for the next general election, scheduled for May 2015. The result of such a delay would be to use constituencies based on electoral data that would be up to 15 years old. That would fail to achieve a fundamental objective of the Bill: to create more up-to-date and equally sized constituencies and to provide that one vote has equal value throughout the UK. Continuing with the status quo would mean continuing with today's situation, where votes in small constituencies have almost twice the weight of those in larger constituencies.
However, we have listened to the proposals and have sought through the amendment to reflect the spirit of some of the amendments. That is the aim of our post-legislative review of the impact of the reduction of constituencies. Conducting the review under the terms of the amendment would allow practical evidence of the impact of the reduction to be taken into account. We believe that that would be of greater value than a review that could use only hypothetical evidence of what impact the proposed reductions might have. In addition, we have not specified in the Bill detailed terms of reference or factors that the committee should consider. That is to allow the committee flexibility to consider what is necessary and practical in the light of issues such as the time that it has available and the resources at its disposal. I beg to move.
Lord Falconer of Thoroton: My Lords, the government amendment inserts the creation of a committee to review whether the decrease in the number of constituencies is right. The committee has no end date. The committee comes into effect only after the introduction of the reduction of the number of Members of Parliament. Yesterday, during Report, the Leader of the House, the noble Lord, Lord Strathclyde, described the committee as the starting point for the changes in the reduction from 650 to 600. He was right to describe it as the starting point, because most people, looking at whether to make a major change, look at the evidence first, examine it and then reach a conclusion whether or not to act. That is why it is called a starting point. That seems sensible. This Government, however, will instead make the change and then set up the starting point-which, with respect, seems absurd. That is why our amendments make the arrangement that the committee is set up first, before the change is done.
That is illustrative of the lack of care which has been taken about these changes, and it is a serious matter. This should not be dealt with in a flip or unthought-out way. A committee without an end date, without a process for choosing a chair, and with the most limited terms of reference is by no means ideal. We accept that there should be a committee. If this hardly thought-out piece of work is what is being offered, we will take it because nothing else is on offer. I would have hoped that the Government could have tried a little harder.
Lord Williamson of Horton: In this case, as in many others, timing-in particular, the timing of this review-is the principal question. That is apparent from the amendments tabled by the noble and learned Lord, Lord Falconer. I sometimes think that it would have been instructive if, when we started the whole of this great debate on the Bill, we had installed a couple of clocks on the wall of the Chamber-not clocks to keep a record of the length of our speeches but to show the number of hours and minutes remaining until a referendum on 5 May, and until the completion of the constituency and boundary changes in October 2013.
It is those periods and the Government's fear that proposals might prejudice them which have determined the fate of many proposed amendments. In the case of this amendment, as the noble Lord, Lord McNally, said, there have been a lot of questions about the decision to move to 600 Members of the House of Commons, the reasons for that change and a demand for some independent study of the consequences. The most comprehensive of those was the amendment moved yesterday, which was not accepted, by the noble Lord, Lord Wills. In Committee, I myself proposed an amendment that would have deferred the coming into force of Clause 11 until the end of the Boundary Commissions' work, thus providing some time in which
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We should therefore consider the proposal of the noble Lord, Lord McNally, on its merits as a proposal for post-legislative scrutiny-which is what it is now. For myself, I think that it would be useful to have it in the Bill. It is a requirement that there should be a committee to carry out a review of the effects of the reduction and the changes to the constituencies; otherwise we may very well not get one at all, ever. Who knows what Government will be in power from 2015? It will be useful to have a review to draw some conclusions. I do not think that we should overrate its importance, but I think that it would be useful to do that.
I am aware that yesterday the noble and learned Lord, Lord Falconer of Thoroton, described Amendment 28A as "almost contemptible". I do not agree with that. However, I was extremely glad that he included the word "almost". I think that it is reasonable to have this proposal which the Government have now put forward in the Bill, and I hope that it will pass this evening.
Lord Grocott: My Lords, I would be grateful if the noble Lord, Lord McNally, would respond on just one point of fact. As we know, one of the major justifications that the Government have offered for the reduction in the number of MPs is-to quote either the Prime Minister or the Deputy Prime Minister-to reduce the costs of democracy. Can the noble Lord confirm to us that among the issues reviewed in five years' time, according to this amendment, will be an assessment of the savings to the Exchequer from the reduction in the number of Members of the House of Commons, and whether that assessment will weigh those savings against the costs of increasing the size of the House of Lords?
Lord McNally: My Lords, I am grateful for the contribution of the noble Lord, Lord Williamson. I have noticed as this debate has gone on over the days that the comments of the noble and learned Lord, Lord Falconer, have got increasingly strident. However, I am happy to be thought of as one of the old contemptibles in this respect. I think that we are moving closer to what has been the objective all along, as the noble Lord, Lord Williamson, recognised-the urgency of giving the electorate the opportunity of opting for fair votes in fairly drawn constituencies. That has been the thrust of the Bill throughout. That is why we resist these amendments.
As for the question from the noble Lord, Lord Grocott, yes, I fully imagine that a cost-benefit analysis will be included in any post-legislative review-as the noble Lord, Lord Williamson, termed it-that is undertaken. By that time we will also have the full benefit of the reform of this House which my right honourable friend the Deputy Prime Minister will propose in the draft Bill that he will shortly bring forward.
If these amendments were accepted, there would be a real risk that the deliberations of the committee and the publication of its review would interfere with, and even potentially undermine, the ongoing boundary review. That could result in fighting the next general election on the basis of unequal constituencies which are based on electoral data that are 15 years out of date. The cynics might even suggest that that has been the motivation behind much of what the Labour Party has been about these last-five months, is it? Secondly, if the review were conducted on the basis of an anticipated reduction of constituencies, the advantage of taking into account what the Bill's actual effect had been would be lost.
If we put in train the review next month it will be little more than a continuation of the debate that we have had over the past few weeks. Although I know that many noble Lords will be suffering withdrawal symptoms, I think that we should resist this proposal. We have had a very thorough discussion and debate on the reasons that the Government had in mind when they provided for this reduction of the size of the other place. Noble Lords opposite have returned many times to the Government's rationale, probing carefully at each stage of the Bill's passage through this House.
The culmination of these debates was yesterday, when we debated the proposal for a committee of inquiry moved by the noble Lord, Lord Wills, and the amendment that effectively retained the number of constituencies in the other place moved by the noble and learned Lord, Lord Falconer. Noble Lords tested the opinion of the House on both those amendments and both those amendments were disagreed. Given that, I feel that it is now right that we press on with the boundary review and consider its impact when we have the hard evidence of the impact that it has had. That would have two advantages. First, it would move on from the useful debates that we have had about what might be the case, to see what actually was the case. Secondly, it would allow the aim of the Bill to be achieved, which all sides of the House have said that they are in favour of-that the next election will be based on more equally sized constituencies and the most up-to-date electoral data available. I therefore ask the noble and learned Lord to withdraw his amendment to my amendment.
Lord Falconer of Thoroton: My Lords, there is force in what the noble Lord says about the rejection yesterday of the amendments on a committee of inquiry. I therefore beg leave to withdraw my amendment.
Lord Forsyth of Drumlean: I think that the import of my amendments is perfectly clear and very simple, and I appreciate that noble Lords will be thinking about the dinner break and the Statement that is to follow, so I shall try to keep my remarks relatively brief.
I raised this matter on Second Reading. I did not feel that I wanted to get involved in the Committee stage because I felt that there was something of a logjam there already. I do not know who will be replying to this debate, but I am very much looking forward to an answer to the question that I raised on Second Reading, which is how we explain reducing the size of the House of Commons-the point that has just been made by the noble Lord, Lord Grocott-in the interests of saving public expenditure and economy while at the same time greatly enlarging the size the House of Lords.
I have been in this House for rather more than 12 years and I have grown to love it. If I do not know what I think about something, I come and listen to debates in this House. The arrival of new Members is something that we all welcome. Since the general election they have been arriving at the rate of about three a week, which means that there have been 115 new appointments to this House. Many have taken their seats recently and I hope they do not think that what they have seen over the past few weeks is typical. That is because the great thing about this House is that we proceed on the basis of argument. In the last Parliament, when we were in opposition, it was impossible to defeat the Government unless we were able to persuade our Liberal friends and the Cross-Benchers, and therefore the nature of the House was focused very much on debate and argument. The changes in the composition of the House have put the Opposition in a position where it is now difficult for it to win on the basis of reasoned argument if the Government are not prepared to listen and take account of it. The changes in the size and composition of the House have had an unexpected effect in that they have changed the nature of the debate in this Chamber, and that is something which the Government need to reflect upon.
There must be a physical limit to the size of this House. I am told by the Information Office that there are now 830 Peers. I do not know what argument one can make to explain how it is that a House of Commons of 600 should be matched by a House of Lords of
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Aside from the ability of the House to do its job, which it does extremely well, I am also worried about the reputation of this place. If we become a kind of parking place for people who wish to continue their career in politics and if the numbers are so excessive compared with the House of Commons, I believe that that will attract considerable public criticism. Indeed, some of the mischief makers in the media have started already. Michael Crick on "Newsnight" the other night suggested that nobody down the Corridor would lose their jobs because they were all going to be appointed to this House. That is a disaster in terms of our public perception and in terms of the Government's overall message, which is that they wish to reduce the cost of Parliament and its impact on the taxpayer.
I am pleased to see that my noble friend Lord McNally is to reply to the debate because he may well remember that last year I asked him a Question about the size of the House of Lords. I asked him if he was not concerned that if this House became so large relative to the House of Commons, that would be damaging to its reputation. He said that he was very much aware of that and he agreed with me. Since then, the House has increased in size by more than 100, which is rather like Caligula complaining about the composition of the Senate after appointing his horse to the membership as a consul. The Government, if they are serious about maintaining the reputation of the House, and if they agree that the size of this House relative to that of the House of Commons is an issue, really need to give us an indication of what is going on.
In response to the noble Lord, Lord Grocott, my noble friend suggested that we should wait for the proposals on reform. I await those proposals with great interest, but I hope my noble friend will forgive me if I make the observation that those who think that an elected House would be a good idea may want to reflect on what happened to our procedures during the Committee stage of this Bill and consider what the impact might be in the future. Further, those who feel that the Opposition should perhaps have given way earlier to the views of the Commons might want to reflect on how we would all behave if we were elected and had constituents. I suggest that we would be gridlocked on legislation like this, perhaps spending a whole Session on one Bill. So I look forward to seeing what the proposals are, but I find it very difficult to understand, if one is going to make a radical change
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It may well be that the Deputy Prime Minister has found the Holy Grail for reform of this place, but observing this disparate series of constitutional reforms, it looks to me a bit like someone taking apart a fine clock and the wheels building up on the table. I have a horrible feeling that when the clock is put back together again, there will be some wheels that do not quite work and the clock will not actually tell the time of day.
I appreciate that moving this amendment in this Bill is a little opportunistic, and I know that the purists will argue that the size and composition of the House of Lords is in no way connected to the other place, that we are a separate House and they should not be linked. But there does seem to be a link in so far as the Government are proposing a reduction in the size of the House of Commons at the same time as increasing the size of this House. We did have a Royal Commission which was set up by the previous Government and very ably chaired by my noble friend Lord Wakeham. To be fair, the Royal Commission said that there should not be a limit set on the size of the House but that it thought it should be around 550 Peers, and put forward some persuasive arguments in support of that proposal. It also said that the peerage should be separated from the right to sit in this House, and that the power to appoint people to this place should be removed from the Prime Minister and should instead go to a statutory appointments commission. I think that my noble friend Lord Steel of Aikwood has now had three goes at bringing forward a Bill which would establish a statutory appointments commission, but that Bill has been unable to find the support necessary to bring it forward.
In the interests of maintaining the reputation of this House, I believe that it is important that the Government indicate how many more people they think can be appointed to this place. They should also explain to us how it is that they are increasing the size of this House while, at the same time, arguing for a reduction in the size of the House of Commons and how they believe that we can protect the reputation and standing of this House, which is very high in the country. That is in part because of the way that we have conducted our affairs, which I believe are being undermined by the way in which this House has been treated.
On that latter point, I spoke earlier on the issue of unpaid Ministers in this House. I imply no criticism at all of my noble and learned friend Lord Wallace of Tankerness, who has done a marvellous job in handling this Bill. However, in its handling it is absolutely apparent that Ministers in the other place have not quite tuned in to how this place operates. They have not given Ministers the freedom that they need in order to be able to respond to argument, which is a disaster. I know how it has happened because I plead guilty to being the same when I was down the other end of the Corridor. I had no understanding of how this place operated or of how much it contributed.
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Lord Grocott: My Lords, I simply want to say a couple of words on this because I suggested an amendment in Committee and as the noble Lord, Lord Forsyth, has said, he raised this at Second Reading. At whatever time of the night it was during Committee, I moved an amendment which, I admit, was not as good as this. I tried to find a way in which we could debate the effect of changing the size of the House of Commons and its relationship with what was happening to the size of this House.
This is an extremely important amendment. I hope that it does not embarrass the noble Lord, Lord Forsyth, if I tell him that I agreed with absolutely everything that he said about the relative size of the two Houses and the effect on this House if it grows and grows. Like him, I need to put in the caveat that this is in no way a criticism of the people who have been appointed to this House, many of whom have already made a tremendous contribution. However, there has to be a limit. I say this in the spirit in which the House is operating at the moment: I think that the noble Lord, Lord McNally, assured us on the previous amendment that the Government really were taking an overview of the three key constitutional reforms that are taking place. However, the constitutional changes are connected not just with the legislation involved in this Bill and the two Bills that are to follow. They are also affected, as the noble Lord, Lord Forsyth, has said, by the way in which the composition of this House alters, irrespective of any change in the legislation.
I conclude with my only point of disagreement with the noble Lord, Lord Forsyth. He quite rightly said that a fully elected House could easily end in gridlock. That is certainly one end of the spectrum, but there is another, which is particularly relevant to this Bill. This is no criticism whatever of the coalition, which is the first time I have been able to say that. It is that had this been a fully elected House on proportional representation, this House would have had a huge government majority. This Bill, far from being gridlocked, would then have gone through this House whipped-and how can I, as a former Chief Whip, criticise a Whip? It would have gone through quickly and almost certainly have been guillotined. I hope that when the noble Lord, Lord McNally, explains the position in relation to the two Houses, while he cannot respond on the proposals that he is bringing forward on abolishing this House in its present form and replacing it with an elected House, he will have something to say on the almost absurd disparity where, just as we are moving the House of Commons down to 600, the House of Lords exceeds 800.
Lord Howarth of Newport: My Lords, I agree with every word that the noble Lord, Lord Forsyth, said. The coalition appears to have invented a new-fangled constitutional doctrine: that the strength of the parties in the House of Lords ought to reflect the electoral support that they obtained at the last general election. It may be that the noble Lord, Lord McNally, will
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Baroness O'Cathain: First, I support my noble friend Lord Forsyth on the basis of the reputation of this House, which will be eroded significantly if we carry on like this. Secondly, it is very difficult to do the proper job that those of us who work in Committees have to do here when we find ourselves without even a place to sit, if we come in late to some of the debates here in the House. It is making the working conditions very difficult indeed. Can my noble friends in the Government give us some assurance that this will be looked at seriously, because we cannot go on like this? If we have the same number of Peers coming in over the next few months as we have had over the last few, it would make the whole place intolerable. Again, I support my noble friend in saying that there is no suggestion that the people coming in here will not do the work, but it will just be impossible to get the work done.
Lord Low of Dalston: From the Cross Benches, I must say that that was an absolutely marvellous speech from the noble Lord, Lord Forsyth. Most ingeniously, he managed to give us a wonderful warm-up for the debates that we shall no doubt have about the reform of this House. However, at this stage of the Bill, on which we have laboured for so many hours, I suggest that it might not be a good idea to go too much further into that debate. At one and the same time, he has not only done that but has also given us a wonderful valedictory on the debates we have had. He pointed to a number of factors that he rightly suggested we would do well to reflect on. The first was the great increase in the number of Members of this place, but I will not elaborate on what he said about all the disadvantages that that can entail. In a very even-handed and fair-minded way, he made some comments about what his side of the House would do well to reflect on: namely, the flexibility with which they have handled the many issues that have been raised in this debate. He also suggested that the brinkmanship, which some of us may have felt has been practised on the other side, may have also gone too far and affected the reputation and regard in which this House is held.
The noble Lord, Lord Forsyth, has therefore at a stroke pointed to a number of factors that, unless we row back from the place that we have got to, could well contaminate the debates which we are bound to have about the future shape and composition of this House. We would do very well to heed his words and, as we come to the end of these proceedings, to reflect on all the points that he has brought to our attention and perhaps row back a bit from the place that we have got to at the end of this Bill.
Lord Falconer of Thoroton: My Lords, I believe that this is a significant amendment and that the speech that the noble Lord, Lord Forsyth, made in introducing it impressed the House with its quality and seriousness. He made a number of points that obviously resonated around the Chamber. I support the amendment. With
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The anxiety that now exists throughout this House is that no regard is being shown to the good workings of the House in the context of the people who are coming here. I make it absolutely clear that every single one of the people who have come has the highest possible quality and regard. This has nothing to do with the quality of the people who have come who are all much admired and many of whom have made a real contribution to the House. It is to do with the good working of the House. If we are having a reduction in the size of the House of Commons in order to make it work well, at the same time, we should not have an increase in the size of the House of Lords that might, for the sorts of reasons referred to by the noble Baroness, Lady O'Cathain, make its workings become more difficult. In those circumstances, we support this amendment.
It is important to look briefly at the position of the Government. They justify the reduction in the number of MPs in part by the costs they incur. Mr Nicholas Clegg, the Deputy Prime Minister, stated during the Second Reading in the other place that:
I am not persuaded that cutting the size of the other place is necessarily wise; nor am I persuaded that the real way to judge whether we should cut the number of MPs is how much they cost; nor am I necessarily persuaded that that is the real motivation. But accepting all those things at face value, it is worth just considering what the cost has been of increasing the size of the House of Lords. Since the general election, the Prime Minister has appointed 116 new Peers. On the basis of an Answer given by the Chairman of Committees in 2009, each Peer costs £168,000 per year. That totals £19,656,000. According to the House Library, the Prime Minister is appointing-
Baroness O'Cathain: That figure surely includes items such as building works, security and maintenance. The fact that we are operating in this amazing building should not be added on to the cost of Peers. In any business, you would not do that.
Lord Falconer of Thoroton: I am using the figures that the noble Lord, Lord Brabazon of Tara, gave. The noble Baroness may well be right that looking at those figures again, we could take other and better figures, but these are the only figures we have at the moment because I understand that the noble Lord, Lord Strathclyde, was asked and refused to answer.
According to the House Library, the Prime Minister is appointing new Peers at a rate well in excess of any of his recent predecessors. The number of new Peers appointed in the first year by Mr Callaghan was 19; by the noble Baroness, Lady Thatcher, it was 18; by Sir John Major it was 25; by Mr Blair it was 38; and by Mr Brown it was 16. I remind the House that the
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Lord Falconer of Thoroton: I do not know what number that was. It was perhaps 30 at the most, so that would make the Prime Minister's figure double the highest figure. I do not think that anyone, except perhaps the noble Lord, Lord Trimble, would dispute that the Prime Minister has appointed Peers at a much faster rate than anyone else in recent times and as we understand the effect of the coalition agreement, he has not yet finished. The coalition agreement says:
The report of the constitution unit of University College London of 22 November 2010 estimates that fulfilling that commitment will result in a House of 977 compared to the current 786, which makes it already the largest second chamber in the world. The coalition agreement on Lords appointments would therefore mean an additional 200 Peers. Accepting the limitations on the figures, which the noble Baroness, Lady O'Cathain, has rightly pointed out-that means that there may be better figures-that would mean an additional cost of £33.5 million. Even if one took a third of that figure to deal with the capital costs, the saving of approximately £12 million each year, which is advanced as the reason for making the cull in MPs, would be dwarfed. The importance of those figures is that they perhaps undermine the justification given.
Even assuming that one put to one side the question of the unsound basis being advanced by the Deputy Prime Minister for culling the number of MPs, the views expressed by the noble Lord, Lord Forsyth, my noble friend Lord Grocott and the noble Baroness, Lady O'Cathain, are very widely shared around the House. If the trend goes on at the rate that has been said, putting aside the costs, the workings of this House will not improve but will get worse.
What the noble Lord, Lord Forsyth of Drumlean, is suggesting is not something that will cause delay in the introduction of the reduction of MPs in the other place. It is not in any sense an amendment that cuts to the quick of the Bill. He proposes that the changes will not come into force until legislation has been introduced-only introduced-into either House of Parliament to limit the number of Members of the House of Lords. He is not saying what the number should be and he is not saying how it should be calculated. He is simply saying to the Government, "Put your money where your mouth is and do something about it. What you do is a matter for you in detail but you must address the issue". That is a moderate and reasoned approach that would find favour around the House. It is a very serious issue which connects in completely with this Bill and I shall be very interested to hear what the noble Lord, Lord McNally, has to say about it.
Lord McNally: My Lords, I am grateful to all noble Lords for their contributions. Perhaps I should put the statistics given by the noble and learned Lord, Lord Falconer, into place, as I could see a few puzzled faces when he mentioned the figure of £168,000 as the cost per Peer. I thought I saw the noble Lord, Lord McAvoy, take out his pocket calculator to work out why he was getting a fair amount less than £168,000 for attending this place. As newspapers love to bandy around such figures, it is better to put on the record that expenses drawn by most Peers for attending this place average out at about one fifth of that figure. Let us not get canards about-
Lord Falconer of Thoroton: I completely accept that and I completely accept that £168,000 could not possibly be the costs that an individual Peer draws from the House. I quite understand that, without this correction, people might well have understood that that was what I was saying. However, I was saying that obviously the cost of a Peer is most certainly not simply the expenses that he or she draws but also particular costs such as the provision of a room, heat and support which go up by reference to Peers; and that comes to a lot more. The marginal costs are obviously significantly more than the expenses drawn by individual Peers.
I should also like to associate myself with the comments about the quality of newcomers. I really think that the new intake has established itself with authority and that it adds to the strength of the House. As to my own credentials for replying to this debate, before the 1997 election, I was on the Cook-Maclennan committee-the Liberal Democrats and the Labour Party-which discussed reform of this place. Indeed, at one stage in that committee we considered the concept of a great reform Act that would tie all the constitutional reforms into one great Bill. However, we backed off doing that due to the complexity of such a measure.
I should point out right at the beginning that, interestingly, throughout our history there has never been an interdependence in terms of reforming the two Houses. The oft-quoted 1832 Bill was a reform of the House of Commons; it did not touch the House of Lords. The 1911 Bill was a reform of the House of Lords-it did not touch the House of Commons-as was the 1999 Act introduced by the previous Labour Government. Therefore, there is no interdependence in this regard.
I put forward another thought in this interesting debate in relation to the Wakeham commission. I now freely admit that I think we missed an enormous opportunity in not accepting the Wakeham commission's report. At that time I was a "big bang" reformer who thought that reform could be introduced quickly. I remember saying to the noble Lord, Lord Rodgers of Quarry Bank, that I could not believe that the Labour Government, given the majority that they had, would leave Lords reform on the shelf. I also said, "Wakeham is too timid. Let us wait and they will come forward with a real 'big bang' reform"-little did I know.
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However, that is in the past. The noble Lord, Lord Forsyth, asked how we could justify enlarging the House of Lords while reducing the size of the other place. The only frank answer to that is, "with great difficulty". It contrasts with what we are doing in this Bill. However, as I have said, the reason for that in part is the skill with which this House has deflected reform. We are left with a situation where it is difficult, if not impossible, for Peers to resign. We have always had to face the problem that without the ability to resign, and with Peers sitting for life, the composition of this place would be adjusted when Governments changed, and that there would always be a ratcheting upwards unless we addressed more fundamental reform.
However, the illogicality-or the lack of kilter-in what is happening should not be judged as a snapshot but, as I have said before, as part of a moving picture of dynamic reform by the Government, who will bring forward measures. As I explained, the Deputy Prime Minister is chairing a cross-party committee and one of the key issues that it is discussing is the size of the reformed Chamber. We are working to publish a draft Bill for pre-legislative scrutiny early this year.
I understand the variety of views that have been expressed. As one who wants a reform that works, I hope that the pre-legislative scrutiny committee drawn from both Houses will be broad based and will give all sides the chance to put forward their ideas and fears. I am not sure that I have ever accepted the fears about gridlock. Many countries in the world have two elected chambers and manage to work out relationships. I know that many books have been written about the dangers of gridlock developing in the United States and elsewhere but it is possible to work it out. I foresee developments emerging such as a business committee of both Houses which would do that. As I said, I sat on the Cunningham committee. I have always taken the view-the noble Lord, Lord Grocott, and I have debated this-that the relationship between the two Houses and our conventions would hold and would be tested by the two Houses, as they have always been. Therefore, these fears of doom and gloom are much exaggerated.
The Government believe that more can be done to allow Members of this House to leave permanently so that the size of the House can be reduced. The Leaders Group on Members leaving the House, chaired by my noble friend Lord Hunt of Wirral, published its report on 13 January. The Leader of the House has asked the Procedure Committee to come forward with proposals to put these recommendations into effect. I do not think that I would breach any secrets of the Procedure Committee on which my noble friend and I sit by saying that these proposals are on the agenda for our next meeting.
There is a Bill before the other place that seeks to limit the size of this House. The Parliament (Amendment) Bill was introduced by Mr Christopher Chope on
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Lord McNally: As such an experienced parliamentarian, the noble Lord knows darn well that I could not possibly give him that guarantee-but that is exactly why he asked that question. Noble Lords will have ample opportunity to discuss this House and all other matters relating to it when the Government's proposals for reforming your Lordships' House are published. As I said, I have great interest in some of these issues and would like to see them pushed forward with a real sense of urgency. In the mean time, I urge my noble friend Lord Forsyth to withdraw the amendment.
Lord Forsyth of Drumlean: My Lords, I had no intention of pressing the amendment to a vote tonight, but I have to tell my noble friend that he has not addressed the simple question I asked him. Do the Government have a view as to what the limit on the size of this House should be? I get the distinct impression in listening to his explanation of House of Lords reform and the relative sizes of the House of Commons and the House of Lords that the Government are making this up as they go along. If there is a plan for people to be able to leave the House, and if there is a plan for the size of the House, would it not be a good idea to know what the plan is before making additional appointments on such an enormous scale?
I am embarrassed by the praise being heaped upon me by Members opposite. I am in quite enough trouble already without the comments of the noble and learned Lord, Lord Falconer, although I appreciated the kind words of the noble Lord, Lord Low.
I do not enjoy moving an amendment of this kind at all. But I am concerned that not enough thought has been given, as my noble friend Lady O'Cathain pointed out, to the impact on this House of these changes. I am not being overly critical, I hope, of the Deputy Prime Minister, but if he thinks that the current gulf between the voters and Parliament will be solved by making this place larger, altering the nature of the composition of this House and altering the ways in which Parliament functions, I think he is missing what is going on in the country. We are in danger of damaging in this case a well-oiled machine. There is a case for parliamentary reform, but it is more at the other end of the building than at this end.
The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, with the leave of the House I will now repeat the Statement on banking delivered earlier in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:
"Mr Speaker, I would like to make a Statement. The near collapse of the British banking system more than two years ago still generates today deep feelings of anger and cries for retribution. I completely understand that, for the link between risk and reward that underpins our free market was completely broken. Bankers who had made the most catastrophic mistakes walked away with huge payouts and pensions. Those entrusted by us to regulate those bankers and to run our economy washed their hands. Meanwhile, the rest of the country is left paying every day for their failures. The Government have to pick up the pieces. Let me set out how we will do that.
First, we will make sure that we learn every lesson that needs to be learnt so that this never happens again. We are entirely replacing the tripartite system of regulation that was introduced in 1997 and completely failed. Next week, we will publish the detailed proposals to give the Bank of England responsibility for prudential regulation, and to create a new consumer protection and markets authority that will protect the interests of bank customers. We will then undertake pre-legislative scrutiny, as requested by this House, before introducing the Bill. I hope that it will command support from all sides.
Later this year, we will also receive the interim and final reports of the Independent Commission on Banking, which this Government established and which I asked Sir John Vickers to chair. Sir John and his fellow commissioners are asking the difficult questions that need to be asked about how we protect the British taxpayer from future bank failures so that never again is a bank too big to fail, and we look forward to receiving their recommendations.
I should make it very clear that nothing I will say today about the settlement we have reached with Britain's banks, including references to a level playing field, in any way pre-judges the outcome of the commission. That includes both the commission's recommendations and the Government's response.
The second task facing this Government is to make sure that we get the maximum sustainable tax revenues from the financial sector. HM Revenue and Customs confirms that the one-off bank payroll tax introduced in the dying months of the previous Government raised £2.3 billion net but, as my predecessor as Chancellor has pointed out, it could not be repeated without massive tax avoidance. I agree with him and we will not repeat the bank payroll tax. Instead we have implemented a new and permanent bank levy, which is why yesterday I announced an increase in that levy so that it raises £2.5 billion this year. This will bring the total raised by the new bank levy to £10 billion over the Parliament, and it means that in each and every year of this Government we will raise more in bank taxes than the previous Government raised in any year.
We have also required all the major banks operating in the UK to comply in spirit and by the letter with the code of practice on taxation. This code was announced with a fanfare, but I discovered today that only two banks had signed up to it. Today all the major banks have signed.
The third task facing the new Government was to reach a new settlement with the banks so that they contribute to Britain's economic recovery. Some prominent people in this House were predicting just 24 hours ago that my tax announcement meant that our discussions with the banks on lending were falling away. The House will be pleased to know that this prediction was wrong. This morning, the heads of the major British banks-Barclays, RBS, Lloyds and HSBC-reached a new settlement with the British Government. I want to thank John Varley, the former chief executive of Barclays, for the huge amount of time and personal commitment he has given to this project. The essentials of this new settlement are exactly as I set out last month, and I am today publishing an exchange of letters between John Varley and myself. The banks will: lend more money, especially to small business; pay more taxes; pay fewer bonuses; be more transparent about the bonuses they do pay; and make a greater contribution to our regional economy and society.
In return the Government commit to the success of a strong, resilient, stable and globally competitive financial services sector in which UK banks can compete with the best banks in the world on a level playing field and in which London is a world centre for finance. That is good for jobs and growth in our country.
I shall go through each part in detail, starting with pay and bonuses. Most of us of find the levels of pay in financial services to be completely out of kilter with what the rest of society would regard as fair or reasonable. We are determined to bring responsibility and constraint and to ensure that pay is properly taxed. Four years ago, at the height of the banking boom, the City paid £11.5 billion in banking bonuses, most of which was in cash, most of which could not be recovered when the banks collapsed, and too much of which went untaxed. The new remuneration code introduced last month and the tax avoidance measures we are taking will change that. Today I can tell the House that the four major British banks have also agreed that total bonuses for their UK-based staff will be lower than last year and lower than they would have been without today's settlement. The independent, non-executive director who chairs each bank's remuneration committee will have to confirm personally in writing to the FSA that their pay accord conforms with today's commitments. For the first time, the banks have agreed to seek explicit approval from their board's remuneration committee for the pay of the 10 highest paid employees in each of their main business units. This did not happen in banks such as RBS before the crisis, where the board was ignorant of what was going on.
We have also insisted that the banks be far more transparent about who and how they pay. From this year onwards, the four major banks have committed to disclosing the pay details not just of their executive board members, but also of the top five highest paid executives not on the board. This will mean that the salary details of at least seven executives at each bank will be published this year. That compares with five individuals in the US and Hong Kong, and only board executives in Germany and Japan. By disclosing individual pay levels, it goes further than the Walker disclosure recommendations, on which we are seeking international agreement. We will consult on whether to make it a mandatory requirement from 2012 on all large UK banks to publish the pay of both the board plus the eight highest paid senior executive officers. This would mean that Britain has the toughest and most transparent pay regime of any major financial centre in the world.
this year. Despite that constraint, which we have inherited, UKFI, the arms-length body that manages the Government's stake in these two banks, has agreed the following: for all staff at RBS and Lloyds, the maximum up-front cash bonuses will be limited to a maximum of £2,000 this year. All executive directors, including the chief executives, have agreed to receive this year's bonuses entirely in the form of shares. Directors will have to wait until 2013 to convert these shares into cash. As the Prime Minister made clear last month, the bonuses at RBS and Lloyds will in total be smaller than they were last year and so, crucially, will the compensation ratios. They will be backmarkers in the industry, instead of the frontrunners they once were.
Let me turn from pay to the additional support that British banks have committed to provide to the regional economy. At the end of last year, the industry pledged £1.5 billion to a new business growth fund that will invest in the kind of expanding small businesses that hold the key to Britain's more balanced economic future. Today it commits to making an additional £1.2 billion contribution to society. The four major banks commit to an additional £1 billion for the fund and an additional £200 million to capitalise the big society bank. The business growth fund contribution will be front-loaded over the next couple of years so that more help can be given to businesses sooner. This money will be additional to the lending commitments and additional to any funding already allocated from dormant bank accounts.
Finally, at the heart of today's settlement is a commitment from the four major banks, as well as Santander, to make much more money available for lending to small and medium-sized businesses. Last year, these banks lent £66 billion to such businesses; today, the banks commit to lend £76 billion this year-£10 billion more gross new lending to small and medium-sized businesses. This is a massive 15 per cent increase, materially higher than they had been planning to lend this year and materially higher than anyone who followed these discussions would have expected. It comes alongside a very welcome commitment from the banks to improve greatly their customer service to small businesses, with a free mentoring service, published lending principles, transparent appeals and improved access to trade finance. Overall gross new lending to all businesses, large and small, will increase from £179 billion to £190 billion. They make a commitment to lend even more if demand materialises. Absent this accord, the banks were actually expecting lending to fall this year.
In order to ensure that progress against these lending commitments can be monitored, the Bank of England has agreed to collect the relevant data and publish them on a quarterly basis. To help ensure that today's agreement is honoured, for the first time the pay of the chief executives of each bank, as well as the relevant business area leaders, will be linked to performance against the SME lending targets. Of course, if, even then, the banks fail to live up to their promises, the Government reserve the right to return to the issue and take further measures. However, I sincerely hope that that is not necessary.
The anger at the terrible mistakes of the banking industry and the failure of those who regulated it will long remain, and rightly so. But let us, as a country, confront this hard truth: anger and retribution will not bring one percentage point of economic growth or create one single new job. The anger will remain, and we must never make the same mistakes again, but Britain needs to move from retribution to recovery. Today we get the banks to commit, with more for lending-£10 billion more for small businesses-more for our regional economies and society, £10 billion more in taxes, lower bonuses and the most transparent pay regime in the world. In return, let us build a banking industry that creates jobs for hundreds of thousands of our citizens and competes in the world. Above all, let us make sure that the economic catastrophe
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Lord Eatwell: My Lords, I am grateful to the noble Lord for repeating the Statement made by the Chancellor of the Exchequer in another place. What a pathetic performance-not, I hasten to add by the noble Lord, who read very well, but by the Chancellor. It was described this evening by "Channel 4 News" as lying,
This was a Statement hatched in a smoke-free room in Downing Street, probably not over beer and sandwiches but maybe over smoked salmon and champagne. It sees the unwelcome resurrection of that distinguished and unlamented figure of the 1970s, Mr Solomon Binding. It is not only in their policies that this coalition Government seek to return Britain to the past; they are returning to the old methods of back-room deals masquerading as proper governance.
Let us turn to the fundamental question: what is this for? More importantly, how will it help the recovery of the UK economy? Take first the question of bonuses. The essential problem with bonuses, apart from the sheer immorality of the quantum of money involved, has been that they embody perverse incentives. They encourage excessive risk-taking and reward mediocrity. They absorb resources that could be used to rebuild bank balance sheets and expand lending to the real economy. They attract to an essentially non-productive activity people with skills that could be deployed to perform productive tasks elsewhere in the economy-less financial engineering, more real engineering. Indeed, by their grotesque distortion of pay relativities, bank bonuses devalue the hard work of talented people in the public sector, in manufacturing and industry, and in non-financial services.
What now is to be done about bonuses, over and above the measures already being enforced by the European Union, such as the requirement that bonuses be paid predominantly in shares? In the Statement the Chancellor claimed:
Will the Minister confirm that this statement is incorrect? Will he confirm that the US banks in receipt of TARP funds not only have to provide more wide-ranging disclosure of the details of remuneration, but have to do this for past years, too? This is all detailed in the
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"Nothing in this statement derogates from the obligation of the banks, and their boards and remuneration committees, to manage pay policy in a way which protects and enhances the interests of their shareholders".
Given that nothing of any matter has been achieved on bonuses, what of the much trumpeted agreement on lending? The agreement clearly states that any increased lending-any of it-must be on commercial terms. If it is on commercial terms, would it not be done anyway? After all, that is what the banks are supposed to be for. We are told that the banks will increase their gross lending to £190 billion in 2011. However, this is a deception, for gross lending is not the relevant figure. What matters is net lending-new lending minus repayments. It is net lending that defines the amount of new spending power funding the investments of British industry. If gross lending increases but repayments increase too, the net benefit to Britain will be negligible. Will the noble Lord tell us: is there an agreed target for a net increase in lending? Will refinancing of current financial facilities be deemed to be new gross lending or not?
Not too much too soon. That is less than 1 per cent of current gross lending and, moreover, it is not at all clear that this will be new money. There is nothing at all in the agreement about the cost of credit, other than the reference to "commercial terms". However, ask any small business and they will tell you that it is the price of credit, rather than its availability that is often the problem. It is so easy to avoid making a loan by pricing it out of the reach of the small business borrower.
We are told in the agreement that there is to be an appeal mechanism for those denied credit, managed by "a senior independent reviewer". Who is this reviewer to be? Who will appoint him or her? What will be the terms of reference? What sanction will there be on those banks that the reviewer deems to have failed in their commitment? Will the reviewer be able to assess all the terms of the credit, including the price? What arrangements have the Government made for the publication of the banks' lending data to include data on credit refused, so that lending behaviour can at least be subject to some public scrutiny?
This is not the way to make economic policy. Three facts must be obvious to all. First, this crisis was inflicted on the economy by the profligate lending policies of the banks. Secondly, a sustainable recovery of the British economy requires a steady secure flow of affordable credit to British industry. Thirdly, to attain this goal there must be a fundamental reform of banking in this country. Those three propositions will be shared on all sides of this House, other than probably on the coalition Front Bench. This Statement
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"With much noisy showmanship, the Conservative-Liberal Democrat coalition is puffing demands that are little more than cosmetic. A slight change in a levy on bank balance sheets and a commitment to greater small business lending and transparency in bankers' pay may play well politically. But they are no way to fix the banking system".
Lord Sassoon: My Lords, I am disappointed that the noble Lord, Lord Eatwell, recognises nothing in this Statement that moves things forward because, compared with what the previous Government did, my right honourable friend the Chancellor of the Exchequer has made enormous strides forward.
Where should I start? On the question of lending, it is precisely the gross lending target that matters. The net lending target which the previous Government imposed on a couple of banks let them off the hook. It is the significant total lending for 90 per cent of the SME market that is captured by the banks in the agreement that means we can confidently say that the banks are committed to lending 15 per cent more to the SME market this year than they did last year. Through the process of these talks, the banks have got themselves from a position of looking at flat or reducing lending this year to looking at a position of increased lending. I regret that the noble Lord, Lord Eatwell, seems to have confused gross and net lending. It is the gross figure for the whole market that matters. We have linked-in a way that the previous Government did not-the achievement of those lending targets with the pay of the key decision-makers in the banks. If they do not meet the targets, it will be reflected in their pay in a way that was never done before.
I turn to the business growth fund. Again, I regret that the noble Lord, Lord Eatwell, may be a little confused. He talked about loans from the fund, but it is an equity investment fund; it is absolutely additional funding to anything comparable that the banks have done before. As to the pace of build-up, the banks have today committed £1 billion in addition to the £1.5 billion that they had previously committed. They will front-load the commitment of that money, which will go with the pace of businesses that are growing and are in a position to receive the equity support. It is a significant fund.
The other thing that is different about the lending targets and the agreement of this Government compared with that of its predecessor is all the qualitative measures that the banks have come up with in their task force to stimulate demand and give the confidence that SME businesses need to approach the banks to ask for the money that is now clearly available. In every
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Similarly, on the question of remuneration, the noble Lord, Lord Eatwell, talks selectively about the backward-looking and one-off disclosure requirements that were linked to the TARP. Under normal US banking requirements, no more than five executives are likely to be caught by the remuneration disclosures. What we have done-to which the noble Lord did not draw attention-is focus the disclosures on the people who are running the main lines of business. It is not a question simply of bandings, but of focusing the disclosure on the people who matter, because they are taking the key decisions.
I am disappointed that the noble Lord, Lord Eatwell, appears to have spent too much time today listening to Channel 4 and reading the newspapers and not enough time concentrating on the agreement, which takes us to a completely different place from where the previous Government were. Perhaps it is regrettable that none of the noble Lords who were Ministers in the Treasury at different times under the previous Administration were here to put him right.
Lord Higgins: My Lords, the Minister repeated a very complicated and extensive Statement on what the Government propose to do. One thing is clear: they are right to get rid of the tripartite agreement that was so disastrous under the previous Government. It would seem that the Government are now adopting a very balanced view. They have a very difficult task in maximising revenue from the City while at the same time not driving people abroad who would otherwise contribute an enormous amount to the British economy.
When the previous Statement was made, I expressed concern that in the discussions that the Government were having, they confused the situation by appearing to say, "We will be soft on bonuses, provided you lend". In the event, it is clear that the Government are being extremely tough on bonuses and have reached a separate agreement on increasing the amount of lending, which is so important.
The public anger on this matter is very much related to the expression "bonus". In the public mind is the simple thought that any amount extra that is paid ought to reflect performance. However, what has been so clear in the banking sector is that bonuses continue to be paid on a huge scale while performance has been lamentable. Can my noble friend say to what extent the restrictions that are now being placed on bonuses will ensure that they reflect the performance of the various individuals and banks concerned? The idea of a pool of bonuses among the banks when their performance has been very poor is, I think, a serious problem. The bonuses for individuals seem to be related hardly at all to performance.
Finally, I welcome the fact that much tougher action has been taken with regard to the banks which have been rescued by the taxpayer and that the remuneration
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Lord Sassoon: I am grateful to my noble friend Lord Higgins for pointing out that at the heart of the failure of the system and the mess that this Government have had to pick up and sort out was the failure of the tripartite system of regulation, which of course we are sweeping away. Seeing the noble Lord, Lord McFall of Alcluith, opposite reminds me that he very perceptively characterised it as a Rolls-Royce system when it sat on the shelf but an old banger when it got on the ground. I wish that I had his turn of phrase, but the tripartite system was indeed at the heart of it.
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