The truth is that the Government cannot possibly know. However, so far as your Lordships are concerned, we have a responsibility not to put on to the statute book provisions that could be seriously detrimental to the health of the nation. No part of the health of the nation is more significant than people at work and their rights there. It is not satisfactory simply to proceed with the provisions on the basis of figures that have been plucked out of the air.

The second thing that has become clear is that the Government suffer from two fundamental problems of schizophrenia. They want more entrepreneurial zeal in the economy, as we all do, but almost none of the entrepreneurs to whom it looks to generate new companies, new ideas and new ventures supports the proposal and believes it will have the effect that the Government state. A number of noble Lords with a great deal more experience of business ventures than me have made that point. I think I quote the noble

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Lord, Lord Deben, correctly as saying that he could not imagine “any circumstances whatever” in which he would seek to offer these contracts to employees in a small start-up company as a way of motivating them.

The fundamental problem that the Government have with the proposal—the basis upon which it has been put forward is that it will stimulate in the context of the lack of growth new, vitally needed entrepreneurial zeal and companies—is that the entrepreneurs and companies to which he is looking to provide that energy do not believe that this proposal is necessary. On the contrary, almost all of them are critical because they believe that the reputational damage that it will create may undermine the cause that the Government are seeking to promote.

However, a third big tension that has come through clearly from the noble Viscount’s remarks is that the Government speak with two voices. One part of the Government celebrates the extension of employment rights and says that that is a fundamental objective of the coalition Government established in 2010, at the very same time as another part of the Government celebrates the withdrawal of those rights as being necessary to stimulate the economy in a period of economic downturn. I have a view on these matters, but surely the Government should make up their mind which is true. Is the extension of employment rights essential to stimulate the economy to provide greater flexibility and protection for those at work, or is the withdrawal of those rights necessary to spur economic growth? At the moment, one Minister comes here on one day and says that it is the withdrawal of rights, and another Minister comes here on another day and says that it is the extension of rights.

The noble Baroness, Lady Brinton, referred to the Deputy Prime Minister. At the very time the Bill was going through the House of Commons, he made a speech entitled, “Greater equality for a stronger economy”. That was the title on his website. He said:

“I can also confirm today that the Government will legislate to extend the Right to Request Flexible Working to all employees”.

At precisely the same time, this legislation was brought forward: legislation that withdraws the right to request flexible working from employees who are on these employee shareholder contracts.

Are the Government not aware that there is a fundamental problem when one Minister says one thing and another Minister says another, and the two are totally at variance?

Baroness Brinton: That was indeed why I asked the noble Viscount about employee status and whether this was a new form that would circumvent that. On our Benches, we welcomed the Deputy Prime Minister’s comments about increasing flexible working rights to all employees. I remain concerned that this is under threat for the employees of perhaps around 6,000 firms that may or may not take up this particular option.

6 pm

Lord Adonis: My Lords, I note what the noble Baroness has said. I strongly support the extension of the right to request flexible working. I think what the

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Deputy Prime Minister said in that respect was a very positive step forward. I am seeking to reconcile what the Deputy Prime Minister said from the Benches 45 degrees away from me from what the noble Viscount has said, as I understand it, representing the same Government. This is about how we put together the different parts of the Government and understand what position is being presented to the House.

Finally, I will comment on what the noble Viscount did not say. He did not respond to the point about the Beecroft report. The Beecroft report is of some significance and has been referred to by other noble Lords. My understanding of the genesis of this employee shareholder proposal is that, having sought to implement the Beecroft report and having been stopped from doing so by our colleagues on the Lib Dem Benches, in particular by the Secretary of State for Business, Innovation and Skills, the Chancellor of the Exchequer then sought to bring back the proposals in a watered-down form in return for the award of shares valued between £2,000 and £50,000. Vince Cable probably now regrets having done that deal, but he did so because he believed it would be niche and insignificant, although 6,000 is on the large side, if that is the figure the Government are now putting forward. He thought that if nobody took it up, this was a deal he could just about live with.

However, the acute irony of the proposal before the House is the one which the noble Baroness, Lady Brinton, identified: that in respect of one of the fundamental rights being withdrawn—the right not to be unfairly dismissed—the Beecroft proposal for almost all employees who are likely to suffer under this scheme is significantly more generous than the shares for rights proposals encompassed in the Bill. The Beecroft proposal, as she said, required a tax-free payment related to the employee’s salary up to a maximum of £12,000. I took Beecroft to be proposing that that would be the figure for the no fault dismissal fee: £12,000. The offer that employers who are seeking to recruit employees with minimal rights need to make is £2,000. That is, £2,000 in shares, the value of which may be significantly less when they come to trade them in.

Given the choice between a firm contractual requirement to offer £12,000 for no fault dismissal, and £2,000 worth of shares that may be worthless by the time an employee comes to exercise them, Beecroft might actually turn out to be preferable. I beg leave to withdraw the amendment.

Amendment 83 withdrawn.

Amendments 84 to 92 not moved.

Amendment 93

Moved by Lord Adonis

93: Clause 27, page 36, line 5, at end insert—

“(7) This section shall only come into operation after an independent assessment of the revenue implications for HMRC, conducted by the Office for Budget Responsibility, in respect of each financial year from 2014 to 2030, is laid before both Houses of Parliament.”

Lord Adonis: My Lords, we are now on the issue of the cost of these proposals to the Exchequer. I would like to invite the noble Viscount to explain more fully to the House what he believes the revenue implications

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would be as a result of the proposals. The independent assessment by the Office for Budget Responsibility suggests very large figures might be at stake, which is why we are asking for figures to be made available in respect of each financial year up to 2030.

I quote from the policy costings document published by the OBR alongside the Autumn Statement:

“There are a number of uncertainties about this costing”—

that costing being the figure of £80 million over the current spending review period—

“The static cost is uncertain in part because of a lack of information about the current amount of CGT arising from gains on shares through their employer. The behavioural element of the costing is also uncertain for two main reasons. First, it is difficult to estimate how quickly the relief will be taken up; this could make a significant difference as the cost is expected to rise towards £1 billion beyond the end of the forecast horizon. Second, it is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning”.

I would like to invite the noble Viscount to expand on what the OBR said so that we have a better basis for understanding the potential costs of what could be an extremely expensive proposal once the tax planners get going on the opportunities available to them.

Baroness Brinton: My Lords, I apologise for referring again to the coalition agreement, but I am concerned that the tax loopholes proposed under the CGT allowances for employee shareholders conflict with the coalition agreement because the shares that a company gives to employee shareholders will not be liable to CGT.

Paul Johnson, the director of the IFS, has said:

“Just as government ministers are falling over themselves to condemn such behaviour, the same government is trumpeting a new tax policy which looks like it will foster a whole new avoidance industry”.

He refers to it as a “£1 billion lollipop”. I am prepared to negotiate the billion with Paul Johnson on the understanding that it is only likely to affect a small number of companies. Or perhaps not, because we know that advisers to companies, if they find a loophole will find a way of making it apply to everyone.

The Government have pledged in the coalition agreement to clamp down on tax loopholes and tax avoidance. The agreement says:

“We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals”.

These include exactly what I have cited earlier. Why do the Government in the draft Finance Bill 2013 create this loophole where shareholders can avoid paying capital gains tax? I quote:

“Legislation will be introduced to exempt all gains made on disposals of up to £50,000 worth of ‘employee shareholder’ shares from capital gains tax”.

The coalition agreement also says:

“We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income”.

We have pledged, as a Government, to raise capital gains tax and yet we are removing it for shares related to employee shareholders. I support the amendment because we need to understand the cost to the Treasury. I would welcome an explanation from the Minister why it is acceptable for one small group of shareholders to be exempt from CGT when the Government are moving in the opposite direction for all others.

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Lord Deben: I hope that my noble friend will be very careful in his response to this because underneath there are two falsities. The first is the schizophrenia on the side of the Opposition. On the one hand, they say that no one will be taking it up, and on the other hand they say that it might be very expensive. I do not think that the noble Lord, Lord Adonis, should get away with that argument.

I also do not want him to take too seriously the comments about exempting people from capital gains tax. I declare an interest as the chairman of a number of small companies, which are, I hope, growing. I have the feeling that there is a kind of nastiness abroad on this issue, because capital gains tax is very much a destroyer of value and of enterprise. One problem in this country is that many people do not like other people being wealthy as a result of hard work and employment. I dislike that kind of attitude very much. If that is part of the coalition agreement, it is a bad part, because we need a society in which people are encouraged to put their lives into businesses and to gain some of the benefits of that. One reason the United States is so much more successful than other countries is that it has been more sensible about that bit of its taxation. It is very stupid about a lot of other taxation, but on that bit at least it has said that there is a real reason for encouraging people to create businesses. One way of encouraging them is by giving them a lower rate of tax on capital gains and dividends than they would have elsewhere. That seems perfectly right, and one problem that we have is that we have not taken that seriously.

I am not worried about this proposal because I do not think that anyone is going to take it up and so they are not going to lose any money. However, I hope that my noble friend will be kind enough to suggest that the Government will do a great deal more to enable people, through employment, to create wealth and to take some of that wealth in a way that we do not allow them to do at the moment.

It really is sad that we have a society in which it is perfectly proper to say, “We’ve really got to stop people possibly gaining from the creation of jobs”. That is what we mean when we say that we want to make sure that nobody benefits. That is not what I want to happen—and it will not happen—but I hope that in his answers my noble friend will make sure that he does not commit the Government to not taking some pretty radical steps to remove and reduce taxation in a number of areas that will encourage job creation.

Baroness Brinton: I should like to clarify the point that I was trying to make about finding a tax loophole that provides a source of employment for many industry experts. We need a capital gains tax system which is fair and which certainly encourages growth. I do not think that we would suggest anything other than that from these Benches. The concern arises when, on the one hand, the Government say that they want to make a clear, open and transparent level playing field but then, on the other, they create a category that appears to have a built-in loophole.

Lord Deben: I am sorry if I misunderstood my noble friend, and of course I accept what she has just said. I find it very hard when the guns are turned on

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this issue because of the loose use of the words “tax loophole”. This is not a tax loophole; it is a decision—a mistaken decision, I think—to encourage people to do something through a tax concession. I repeat: it is not a tax loophole. I shall tell noble Lords what a tax loophole is. It is Amazon organising itself so that it runs people out of the high streets of Britain by ensuring that it does not pay proper taxes. A tax loophole—I declare an interest as being concerned with the business of packaging recovery—is when Amazon can put packaging on the marketplace and not pay the proper price of so doing. That is what a loophole is. It is not a loophole if the Government specifically say that in particular circumstances people will pay a lower rate of tax. That is a proper use of the taxation system. For goodness’ sake, do not let us use the term “loophole” in this instance. There are some very big loopholes which we ought to be stopping and, for me, Amazon is the biggest example of a company that does not pay proper tax wherever it operates.

Baroness Brinton: I apologise for intervening again and I thank the noble Lord for his contribution. There is absolutely no doubt that we agree about Amazon. Perhaps I may give an illustration from the early 1990s of the sort of loophole that I was alluding to. The Conservative Government of the day created generous tax facilities for investors in the business expansion scheme. When the scheme was originally devised, it was intended for small high-growth companies—where have I heard that before in this debate? Investors would get those tax benefits because they were investing in something that carried a slightly higher risk. I confess, as the bursar of a Cambridge college, that within two or three years every Oxbridge college, and subsequently every university in the country, used the business expansion scheme, and that tax benefit was quickly closed down by the Government, who described it as a tax loophole.

It is exactly that sort of loophole that I want to avoid. I absolutely understand the Government saying that it is supposed to be a niche group of companies that will apply for this, although I still wait to hear which ones they are. However, I would not want to see some sort of tax provision that suddenly made this proposal attractive to the majority of companies in this country. That was not the intention and it certainly has not been the tenor of the debate.

6.15 pm

Lord Deben: I do not disagree with that. However, I think that this proposal is going to be so unattractive to so many companies that that particular problem will not arise.

Viscount Younger of Leckie: My Lords, first, I am most grateful to my noble friend Lord Deben for extolling the virtues of employee ownership, which is very much part of the debate today.

This amendment stipulates that the clause should come into effect only once an independent assessment, conducted by the Office for Budget Responsibility, is laid before both Houses setting out the impact on the Exchequer for each financial year between 2014 and 2030.

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The OBR’s role is to provide independent scrutiny and certification of the Government’s policy costings ahead of the Budget and the Autumn Statement. The OBR certified the costing of this measure submitted by HMRC using the methodology set out in the policy costings document published at the Autumn Statement, which is available on the HM Treasury website.

The main duty of the OBR is to examine and report on the sustainability of the public finances. The OBR performs this duty independently, with complete discretion to determine the content of its publications and its work programme of research and analysis.

The Government do not publish annual breakdowns of the cost of operating specific tax measures beyond the end of the forecast period, and this has been the case for some time. This will apply to the employee shareholder status in the same way as it applies to the cost of operating any other specific tax measures.

The noble Lord, Lord Adonis, is understandably concerned about the need to support the Government’s agenda for fiscal sustainability. I emphasise that we believe that investment in policies such as this one—aimed at reducing costs on business and increasing productivity —is exactly what is needed at this time. Strong, sustainable and balanced growth is the key to long-term fiscal sustainability. However, I assure the noble Lord that if further provisions are needed to limit its overall costs, we will have the opportunity to include these at a later date.

At this stage, I think it is worth picking up some points that the noble Lord, Lord Adonis, raised concerning the OBR. The OBR, with its responsibility, is right to note that predicting the take-up of new policies such as this one is very difficult. We recognise that, but its comments need clarification. First, the OBR refers to tax planning and not avoidance. Encouraging take-up of this targeted employment policy should not be misconstrued as encouraging avoidance. Secondly, any rise towards £1 billion is estimated to occur well beyond the end of the forecast period—in fact, beyond the 2020s, when national income is likely to be more than twice as high in today’s money. Finally, the draft legislation published on 11 December includes a number of anti-avoidance provisions. If further provisions are needed to address particular avoidance risks, we will have the opportunity to include them at a later date with a view to ensuring that this policy does not become disproportionately costly to the taxpayer.

Lord Adonis: Could I ask a specific question? The OBR said that it expected the cost of this policy to rise towards £1 billion beyond the end of the forecast horizon. Is that a figure that the Government accept?

Viscount Younger of Leckie: It gives me the opportunity to answer the noble Lord’s question by saying that the OBR has stated that in the long term this policy could cost up to £1 billion. That figure relates to the future period beyond the 2020s. However, there are uncertainties associated with costs so far into the future and I am sure that the noble Lord will appreciate that. The Government expect that the new employee shareholder status should help to stimulate business and entrepreneurial activity by affording businesses greater choice on the contract

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that they can offer to individuals while ensuring that appropriate levels of protection are maintained. If the policy achieves this aim, the cost, which is expected to reach £8 million in 2017-18, is proportionate. The draft legislation published on 11 December sets out a number of anti-avoidance provisions to prevent the manipulation of the capital gains tax exemption on shares received under the status. If further provisions are needed to address particular avoidance issues, as mentioned earlier, the Government will have the opportunity to include these at a later date with a view to ensuring that this policy does not continue.

My noble friend Lady Brinton raised the issue of whether the tax incentives were in effect a tax avoidance scam, if I can put it somewhat indelicately. She did not put it in that indelicate way. The Government have already included provisions to deal with various types of possible abuse in the draft legislation on capital gains tax exemption. If other forms of abuse come to light, the Government will make the necessary changes to combat that with a view to ensuring that the policy does not become disproportionately costly to the taxpayer.

Some concern has been raised, notably by my noble friend Lady Brinton about the capital gains tax exemption. This relates particularly to people taking up this new employment status, and although I touched on it slightly earlier, I shall address it directly. We believe that employee ownership is a good thing. We want people to become employee shareholders and to benefit from the exemption provided. Where it is used properly it should be seen as a measure of success and people should take advantage of this particular exemption. However, the draft Finance Bill published on 11 December takes a robust line on the potential misuse of the exemption and provides several measures that would prevent the misuse of employee shareholder employment status. There are rules to prevent those who control a company, such as company directors, holding exempt employee shareholder shares if they control 25% or more of the voting power in the company. Similarly, rules will prevent people connected to those who control the company, such as spouses or children, benefiting from the exemption. We will prohibit employees from benefiting from multiple £50,000 limits by entering into multiple consecutive employee shareholder contracts with related companies. Instead when related companies are involved, an employee will have a single £50,000 limit applying to all shares received by related companies. We will also ensure that those looking to get around the limit by using company liquidations to dispose of and then receive new exempt shares cannot do so. We will require two years to pass between the liquidation of the company and the employee receiving further exempt shares. This treatment strikes the right balance between preventing abuse and ensuring that genuine entrepreneurs are not unfairly hit.

Finally, the legislation will prevent the manipulation of share values, for example, by placing restrictions on them so that an employee can receive shares that are in fact worth more than £50,000. For the purposes of the capital gains tax exemption the value of shares will be based on an unrestricted market share. Taken together the measures and the safeguards outlined in the draft legislation will ensure that the tax benefits of a new

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employment status can be misused. I hope that that goes some way to satisfying the noble Baroness, Lady Brinton.

Lord Deben: Is not the fact that if this works, arguing about how much it costs the Treasury is not sensible? If it works, it will create jobs and make wealth, and the cost to the Treasury will be nil. If it does not work, nobody will take it up and the cost to the Treasury will be nil. It seems to me that this is not a necessary discussion. The only thing that we do not want is for it to be misused. The noble Viscount has explained how the Government intend to do that. No doubt they will do their usual thing of bringing in some more measures to stop it if that were to happen. The real fact is that this is one part of the argument that really does not hold water. We have to accept that if it does not work we have wasted a bit of time, which is not terrible, but if it does work we will have been proved wrong and I will be happy about it. The Treasury will not lose out because there will be jobs, people employed and money being made, which is really worth while.

Viscount Younger of Leckie: I am grateful to my noble friend for clarifying that and, of course, he is absolutely right. I felt that it would be helpful to the House to outline the safeguards and to reiterate that the Government have thought very carefully about these issues. Taking up some of the comments made by my noble friend Lord Deben, I emphasise again that it is a risk-reward status as the employee shareholder. The award is: yes, the opportunity is there to be given from between £2,000 and £50,000 and to be aware that if it is £20,000, £30,000, or whatever the figure might be, and the share price happened to double, the total amount, including the doubling would be free from capital gains tax. That is the reward bit, but equally, I am also realistic enough to say that it is possible that the shares might indeed be worth nothing. That is the risk, and it is best to be quite straight and open about that particular issue. With that in mind I hope that the noble Lord is willing to withdraw the amendment.

Lord Adonis: My Lords, I do not intend to press the issue today. Let me be brief in response to the noble Viscount. We face a straightforward case of schizophrenia here. One part of the Government tells us that the biggest problem facing the country is debt and another part of the Government produces a proposal, which we are debating today, for a new tax break for substantial shareholders that the Office for Budget Responsibility estimates will ultimately cost up to £1 billion a year. When we debate the entirety of Clause 27 on Report, this latest example of schizophrenia will be one of the reasons why we will seek to delete it. I beg leave to withdraw the amendment.

Amendment 93 withdrawn.

Debate on whether Clause 27 should stand part of the Bill.

Lord Adonis: My Lords, I have put down a Motion that Clause 27 should not stand part of the Bill to stimulate a last, wider debate on the issue. I note that the noble Viscount has gone over the same ground

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several times and I feel for him at having to do it yet again. Perhaps our remarks before he speaks will encourage him to make some new points that will help inform the Committee.

There are three essential points to be made on Clause 27, the first of which relates to the extension of employee share ownership. This is an objective that noble Lords in all parts of the House support. Indeed the Government had an official review—the Nuttall review—which reported last year on the extension of employee share ownership. That review made some 30 recommendations. I have the report here. Most of them were excellent recommendations, some of which the Government accepted and some of which they were unable to accept. I simply note that not one of those recommendations of the review that the Government set up specifically to promote wider share ownership related to the creation of an employee ownership scheme akin to the one that we are debating today, involved issuing shares in return for the giving up of employment rights.

The question I want to ask the noble Viscount is: if this is such a good idea, why was it not recommended by Nuttall? Secondly, I want to reiterate all the specific problems relating to the scheme, which have become very clear in our debates this afternoon. There is the problem of compulsion in respect of benefit claimants and the opening to discrimination claims, which the noble Lord, Lord Pannick, highlighted. That could mean that there will be an explosion of very expensive and difficult cases before employment tribunals because of the removal of essential rights that will leave employees with no other recourse than discrimination when they believe that they have been badly treated. There is the problem of cost which we have just debated in the previous group of amendments, and a whole set of issues that we have not debated but which were debated in the House of Commons about the status of the shares themselves, such as the voting nature of the shares and how the shares will be tradable, given that most of them are intended to be among the 6,000 companies that the noble Viscount has highlighted. There are start-up companies whose shares will not be listed, so we must ensure that there is a market in which they can sell shares and terms under which they sell them, given that they may have to sell them back to their own companies when those companies are under some stress. There is a whole set of issues relating to the working of the scheme which makes it highly problematic and which may leave small shareholders, in particular, who do have not much money themselves without resources to take independent financial and legal advice. They could be very seriously exposed.

The noble Lord, Lord Flight, told the Committee earlier that if he was 40 years younger, he would relish the opportunity to take advantage of the status and that it would have spurred him to the creation of new companies and new employment. If they were the groups we are talking about, that would be one case. But, as legislators, we are concerned that substantial numbers of employees who do not have access to financial and legal advice will be straightforwardly exploited by these provisions.

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The third point I make on the clause as a whole is that almost nobody to whom this proposal is targeted welcomes it. The Government’s own consultation showed that an overwhelming majority of those who responded, including those who responded from within the business community, either thought that this proposal was irrelevant or were actively hostile to it. The noble Viscount cited a few instances earlier of individuals who support it. However, of the 219 consultation responses, only five welcomed the proposal. Five out of 219 is about the same ratio of supporters to opponents as we have seen in your Lordships’ House as this proposal has been debated. That seems to me a compelling reason why the Government would be wise to withdraw the proposal before we debate it again at Report. I beg to move.

6.30 pm

Lord Pannick: My Lords, I agree with all that has been said by the noble Lord, Lord Adonis. Clause 27 is wrong in principle. It contains inadequate safeguards both in relation to the loss of welfare benefits for those prospective employees who do not wish to give up their statutory employment rights, and also in respect of the need for legal and financial advice for those who are prepared to give up those rights. Clause 27 will also be expensive to the Treasury if there is a take-up, or there is going to be very limited demand. I note that the noble Viscount has attempted to provide the evidence on which the Government estimate that 6,000 companies may be interested in Clause 27. I look forward to seeing that material. I, too, very much hope that the Government will listen to the debates that we have had this afternoon, and take the wise step of withdrawing Clause 27 before we come to consider it again at Report.

Lord Flight: My Lords, although I welcome the suggestion that the Chancellor might allow there to be no income tax on grants of up to £2,000, as I understand it, the spirit of the provision is more about the go-getter employee shareholders. I would suggest that if there is income tax on amounts over £2,000, this scheme will not get anywhere because the amount of tax that people pay will be quite disproportionate to the risk they are taking on their equity and to the values—as the noble Lord, Lord Pannick, pointed out—of what they are giving up. It is important to sort out by the time we return on Report precisely what the income tax position will be.

Baroness Brinton: My Lords, I am grateful for the comments of the noble Lords, Lord Adonis and Lord Pannick. I will not repeat the detail but there are three or four brief points that I would like to make.

I remain concerned about the clause in principle. After our debate today I am even more concerned about the confusion surrounding jobseeker’s allowance recipients going for job interviews and about some of the details of the eligible tax benefits. It is also clear that employers do not want it: the estimate of 6,000—given the response to the consultation to which the noble Lord, Lord Adonis, referred—really says it all. Very few employers want it.

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The noble Viscount referred to the balance of the risk and reward but there is another “r” in the equation that he did not mention. He omitted reduction—the reduction of rights for employees certainly seems to counterbalance the risk/reward of a long-term holding of shares. That remains one of the most worrying elements of this clause.

Finally, I want to reiterate the point about breaching the coalition agreement specifically in relation to flexible working. I believe that the coalition agreement talks about flexible working for all employees, not excluding one particular small cohort who may have shares that may be of value at some point in the future, but also in relation to any compensation for unfair dismissal where the proposals of the Government are worse than Beecroft.

I hope the Minister will take on board the comments that were made this afternoon. I would prefer the clause to be removed, but it will certainly need substantial amendment at Report if it is to be anywhere near fit for purpose.

Baroness Donaghy: My Lords, I have not spoken to the other amendments to the Bill although I did refer to this issue on Second Reading. Rather than repeat what has already been said extremely eloquently by previous speakers, I just want to remind the House what the Employee Ownership Association has said about this clause. They are the people who are most close to this subject and have the most interest in making sure that this area flourishes, which I think we would all want to happen. The association said:

“Our Members have three main concerns on this matter.

Firstly, proposed legislation has appeared in a Bill before the Government consultation on the possibility of deploying this model of employee ownership has finished. Indeed it has only just started.

Secondly, our Members are very aware that there is no need to reduce the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost the number of employee owners. Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of employee owners.

Thirdly, the appearance of this measure in the Growth and Infrastructure Bill appears to our Members to be completely disconnected”—

as my noble friend Lord Adonis has said—

“to the recommendations in the Nuttall Review. That Review contained a series of recommendations on how to grow employee ownership and none of those recommendations suggested the dilution of worker rights”.

I think that that says it all.

Viscount Younger of Leckie: My Lords, we have heard many opinions about this clause. The Government are taking this action to offer flexibility and choice for both companies and people, and this is the right thing to do. The Government know from their engagement with employer organisations and business that there is concern about facing weak or vexatious claims in employment tribunals. This new employment status will address some of these concerns especially in new and fast-growing companies. Importantly, this new status gives people the opportunity to own part of their company and benefit from any growth with favourable tax treatment, which was mentioned earlier in our

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debate today. Employee shareholders will receive at least £2,000 of shares in the employing company or its parent company. Gains on the first £50,000-worth of these shares will not be subject to capital gains tax. Employee shareholders will have different employment rights compared to employees and workers.

Before a company offers a person an employee shareholder contract, they will need to think carefully about the implications of offering equity in their company. There are many possible implications, but the current owners will first need to be comfortable with diluting their shareholding, an issue which was raised by my noble friend Lady Brinton earlier. If the shares being offered are part of a fresh issue of shares, this will result in each existing shareholder holding a smaller share in the company. This may not be something that the existing shareholders would be willing to do, particularly if they worked hard to build the company up and invested time, money and know-how in that company.

It is important to recognise that an owner of a company, when giving shares to an employee shareholder, is giving away not only the value of the shares issued but possibly a share in the future profits and some of the control. Offering shares to employee shareholders could in some circumstances lead to a shift in the balance of power in the company. Companies will also need to consider if they can afford to issue shares to potential employee shareholders. If they can, it could impact on the dividends of existing shareholders or entail reserves being reduced.

The rewards for both parties could be significant. Let us remember that companies will have completed an extensive recruitment and selection process, ensuring that any new personnel have the right mix of skills and knowledge. Therefore they will not offer this new status of employee shareholder lightly. A growing company may consider that by offering this new status it is demonstrating a long-term commitment to that person. In turn, the employee shareholder will be able to reap the rewards of a successful company.

I reiterate that this status will not be suitable for all, just those where it makes commercial sense for both parties. We envisage such companies to be those that want to encourage a culture of engagement and shared ownership and—this is the most crucial point—where they expect significant growth and want to use this incentive to attract and retain high-calibre individuals.

Similarly, a person being offered an employee shareholder contract will need to consider the implications of being an employee shareholder. This is a most important point to emphasise. They will need to consider carefully the terms and conditions of the employment on offer and decide whether it is suitable for them in both the long and short term, as we all know that the value of shares can go both up and down. Some potential employee shareholders may not disclose at interview their long-term career plans. Perhaps they expect to stay in the role for only a short time. It may be that they are moving abroad in the future or expect to undertake further studies—that is their own business—and they may not want to invest their time in a company to realise long-term rewards. Equally, someone

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looking only for short-term work may consider that this is exactly the right kind of contract as they could benefit from any short-term growth in the share value.

To ensure that this new employment status is suitable for both the company and employee shareholder, both will need to be confident that the status is right for them. This means that the company may have to sell its growth prospects to the potential employee shareholder as both a viable investment as well as a potential employer.

It is important that we take time to understand how this new status will work in practice and I am sure that doing so will allay some concerns that have already been raised. Clause 27 establishes three clear qualifying criteria, all of which must be fulfilled before a person can be considered an employee shareholder. The first criterion is that the person must agree to become an employee shareholder—it is their choice. Secondly, the person must receive at least £2,000-worth of shares in the employing or parent company that are fully paid up at the commencement of the employment. This means that these shares will have no debts attached to them. Finally, the individual must not make any payment, in money or in other form, for the shares given. If any of these criteria are not fulfilled and the person is still taken on by the company, they are likely to be legally considered an employee. This, again, addresses the question raised by the noble Baroness, Lady Turner, earlier. This means that they will have all the employment rights of an employee.

I recognise that there have been some concerns that existing employees will be coerced into accepting a change to their employment contract that would make them employee shareholders rather than employees. The Government do not want people to be coerced into the new employment status. This is why Clause 27 establishes clear protections for existing employees. The clause creates two new employment rights—the right not to be unfairly dismissed and the right not to be subjected to a detriment if an employee turns down an employee shareholder contract. This means that if an employee chooses not to sign an employee shareholder contract and is then overlooked for promotion or disadvantaged in any other way, that person could present a claim to an employment tribunal. Secondly, if an employee does not sign an employee shareholder contract and is dismissed for refusing to do so, it would be automatically unfair.

It is clear that all parties will need to consider carefully whether this status is right for the company. Giving away equity is not to be done lightly and many will not think that this is the right course of action for them. Potential employee shareholders will need to consider whether they want to have shares in the company. To help both parties, the Government will be offering guidance on what both individuals and companies will need to consider before entering into a contract of this type. The House will not need any reminder that we discussed guidance earlier today.

Clause 27 stipulates that the minimum value of shares is £2,000 in the employing or parent company. The clause does not stipulate the type of shares that a company can issue, nor does it stipulate the type of

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shares issued. We believe that this is best decided by the companies in order to suit their commercial situation. The shares may have varying rights, but it is up to them to decide what is right for both parties. Some companies may want to offer significantly more than the £2,000 minimum value of shares. In some companies, new employee shareholders will want to be fully involved as the company grows and take an active role in the progress of the company.

The Government have considered what happens to the shares when an employee shareholder leaves the company they work for. We expect that employers and employee shareholders will agree sensible terms for the disposal and buyback of shares. These terms should normally be part of the contract that the employee shareholder signs. However, many different scenarios might result from an employee shareholder holding shares. The shares’ value may change; the shares may have been traded; in other cases, the employee shareholder may want to keep hold of the shares on leaving the employment and the company may agree to this. The Government do not want to make rules that tie the employers’ hands; they want to give them flexibility in what they and the employee shareholder decide is the best way to dispose of shares at the end of the employment relationship.

However, the Government recognise people’s concerns that employee shareholders could be at a financial disadvantage if companies decide not to offer a fair way of realising the value of their shares. The Government amended the clause in the other place to include a provision to provide power to regulate buyback where the company has undertaken to buy back shares.

6.45 pm

I shall now answer briefly some, if not all, of the questions raised by noble Lords in this debate on the clause. First, the noble Baroness, Lady Donaghy, raised the issue of who was supporting this new status. I could give many quotes but a powerful one has come from the major legal firm of Freshfields. It says:

“For companies whose shares have a real potential for significant growth over a relatively short period, the free gift of shares combined with the available capital gains tax relief may assist companies in attracting and being able to hire, or indeed retain, high calibre or skilled employees who may be prepared not only to waive the required employment rights but to accept below market salaries. This may assist small cash-strapped enterprises”.

The noble Lord, Lord Adonis, raised the issue of the consultation process. He said that he thought the consultation responses showed no or very little support for the measure—in other words, why were we continuing with it? We consulted on how to implement this option but not on whether we should proceed in principle. It is a good additional option for companies and individuals. It adds to the existing status of employee and worker and provides those taking it up with flexibility as well as with an opportunity to share the reward and risk that comes with having an interest in a growing company. We recognise, again, that not all companies will wish to use this new status, and that is entirely understandable. What is important is to give those companies which wish to take people on in this different way, and to award them share equity, an opportunity to do so.

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The noble Lord, Lord Adonis, raised the issue of the Nuttall review and asked how this fits in with the employee ownership agenda. “Why was this not recommended by Nuttall”? I think was the precise question that he asked. It is important not to confuse employee shareholders with the employee ownership agenda. Some companies may wish to offer employee shareholder contracts to their workforce to encourage ownership. It is one of many ways of encouraging ownership. The employee shareholder status is separate from the Nuttall review as it is a new employment status.

In conclusion, I return to my opening remarks. The aim of this employment status is to offer people and companies further flexibility and choice in the employment contracts they may use. Removing the clause from the Bill would deny this opportunity to companies and people who have the appetite to share in the risks and rewards of a growing company.

Clause 27 agreed.

Amendment 94 not moved.

Clause 28 agreed.

Amendment 95

Moved by Lord Flight

95: After Clause 28, insert the following new Clause—

“Guidance on employee shareholder status

The Secretary of State shall, within two months beginning with the day on which this Act is passed, set out in guidance—

(a) the preferential tax treatment applicable to employee shareholder status including illustrative examples;

(b) the respective rights of—

(i) employee;

(ii) employee shareholders; and

(iii) worker employment status;

(c) an explanation of how employee shareholder status gives individuals a share in the risk of companies; and

(d) a model employee shareholder contract for early stage companies.”

Lord Flight: My Lords, the amendment was intended to be part of the debate on Clause 27. Given that the employee shareholder status is new and that there are still differences of view about its structure, it is obvious that there will be a need for guidance and, in particular, a need for a model employee shareholder contract for early-stage companies. I beg to move.

Viscount Younger of Leckie: My Lords, in Amendment 95 my noble friend Lord Flight proposes a new clause relating to the publication of guidance on the new employment status. He makes a good point on the need for guidance. The Government agree that guidance should be available to help companies and employee shareholders fully understand all the implications of offering or accepting these contracts. It has always been our intention to publish guidance on the new status. The issue of guidance is an important one. Good, clear and accessible guidance will be vital to both companies and employee shareholders. We want to ensure that people enter into these contracts with their eyes open.

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I will outline what the Government propose to publish by way of guidance and explain what that guidance will cover. The .gov.uk website is the new centralised place for publication of government services and information. The website already has a number of pages that provide an overview of the different types of employment status—such as worker and employee—and list the rights that are attached to them. We will provide an equivalent page on the new employee shareholder status.

Within these overview pages there are links to more detailed information on each individual employment right, and these pages will also be updated to take account of the new employment status. People who look for information on employee shareholder contracts will be very clear which rights they are entitled to and which rights do not apply to the status. This will help them to decide if an employee shareholder position is suitable for them.

Changes to these pages are being revised at the moment and we will be in a position to share draft copies with you before this clause is debated on Report. The Government will also update guidance on the tax treatment of shares and capital gains tax to make it clear to employee shareholders what their obligations are and to set out how the associated capital gains tax exemption and other relevant tax treatments will work.

Any contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. We believe that contracts work best when people and companies are free to decide the terms that best suit their business needs, and to attract the right people to their companies. We will provide guidance for companies to enable them to understand the new status. Companies would do well to take note of the comments of my noble friend Lord Flight on the importance of drawing up good employment contracts that apply equally to the statuses of employees and workers.

While I understand my noble friend’s intention behind this amendment, we believe it is not necessary to legislate on this matter. To state this in the Bill would just introduce more legislation, which in turn would create more red tape for businesses. As the Government have already committed to publish guidance, I hope that with these assurances my noble friend will be willing to withdraw his amendment.

Baroness Brinton: I apologise for intervening. I am grateful for many of the points the Minister raised about guidance and other things that will come forward to us, I hope, before rather than on Report. On a technical point, I wonder whether those who raised issues in this debate could be copied into any correspondence rather than it just going to the single noble Lord who raised the point.

Viscount Younger of Leckie: My noble friend makes a very fair point. Of course I will copy in all noble Lords who should or would like to be copied in.

Lord Flight: I thank the Minister for his response. I am pleased to find that the matter is in hand. I therefore beg leave to withdraw the amendment.

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Amendment 95 withdrawn.

Clauses 29 to 32 agreed.

House resumed.

Bill reported with amendments.


Mid Staffordshire Foundation Trust Inquiry

Statement

6.55 pm

The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford): My Lords—

Lord Campbell-Savours: My Lords, will the Minister make it clear that brief interventions are required? Otherwise not everyone will be heard.

Earl Attlee: The noble Lord has taken the words out of my mouth.

Lord Hill of Oareford: My Lords, with the leave of the House I will now repeat a Statement made earlier in another place by my right honourable friend the Prime Minister. The Statement is as follows:

“Today Robert Francis has published the report of the public inquiry into the Mid Staffordshire NHS Foundation Trust.

Mr Speaker, I have a deep affection for our National Health Service. I will never forget all of the things doctors and nurses have done for my family in times of pain and difficulty. I love our NHS. I think it is a fantastic institution and a great organisation that says a huge amount about our country and who we are. I always want to think the best about it. I have huge admiration for the doctors, nurses and other health workers who dedicate their lives to caring for our loved ones.

Nevertheless, we do them—and the whole reputation of our NHS—a grave disservice if we fail to speak out when things go wrong. What happened at Mid Staffordshire NHS Foundation Trust between 2005 and 2009 was not just wrong, it was truly dreadful. Hundreds of people suffered from the most appalling neglect and mistreatment. There were patients so desperate for water that they were drinking from dirty flower vases. Many were given the wrong medication, treated roughly, or left to wet themselves and then to lie in urine for days. Relatives were ignored or even reproached when they pointed out the most basic things which could have saved their loved ones from horrific pain or even death. We can only begin to imagine the suffering endured by those whose trust in our health service was betrayed at their most vulnerable moment. That is why I believe it is right to make this Statement today.

There was a healthcare commission investigation in 2000; a first independent inquiry from Robert Francis in February 2010; and, long before that, the testimony of bereaved relatives such as Julie Bailey and the Cure the NHS campaign. They all laid bare the most despicable catalogue of clinical and managerial failures at the

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trust. But even after these reports, some really important questions remained unanswered. How were these appalling events allowed to happen and how were they allowed to continue for so long? Why were so many bereaved families and whistleblowers who spoke out ignored for so long? Could something like this ever happen again? These were basic questions about wider failures in the system—not just at the hospital but right across the NHS, including its regulators and the Department of Health. That is why the families called for this public inquiry and that is why this Government granted one. I am sure that the whole House will want to join with me in expressing our thanks to Robert Francis and his entire team for all their work over the past three years.

The inquiry finds that the appalling suffering at Mid-Staffordshire hospital was primarily caused by a “serious failure” on the part of the trust board, which failed to listen to patients and staff and failed to tackle what Robert Francis calls “an insidious negative culture involving a tolerance of poor standards and a disengagement from managerial and leadership responsibilities”. But the inquiry finds that the failure went far wider. The primary care trust assumed that others were taking responsibility and so made little attempt to collect proper information on the quality of care.

The strategic health authority was “far too remote from the patients it was there to serve, and it failed to be sufficiently sensitive to signs that patients might be at risk”. Regulators, including Monitor and the then Healthcare Commission, failed to protect patients from substandard care. Too many doctors “kept their heads down” instead of speaking out when things went wrong. The Royal College of Nursing was “ineffective both as a professional representative organisation and as a trade union”, and the Department of Health too remote from the reality of the services that they oversee.

The way Robert Francis chronicles the evidence of systemic failure means we cannot say with confidence that failings of care are limited to one hospital. But let us also be clear about what the report does not say. Francis does not blame any specific policy; he does not blame the previous Secretary of State for Health; and he says we should not seek scapegoats. Looking beyond the specific failures that he catalogues so clearly, I believe we can identify in the report three fundamental problems with the culture of our National Health Service.

The first is a focus on finance and figures at the expense of patient care; Francis says that explicitly. This was underpinned by a preoccupation with a narrow set of top-down targets pursued in the case of Mid Staffordshire to the exclusion of patient safety or listening to what patients, relatives—and indeed many staff—were saying.

Secondly, there was an attitude that patient care was always someone else’s problem. In short, no one was accountable. Thirdly, he talks about defensiveness and complacency. Instead of facing up to and acting on data which should have implied a real cause for concern, Francis finds, all too often, a culture of explaining only the positives rather than any critical analysis. Put simply, managers were suppressing inconvenient facts in favour of looking for comfort in positive information.

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That is one of the most disturbing findings. It is bad enough that terrible things happened at that hospital, but this inquiry is telling us is that there was a manifest failure to act on the data available not just at the hospital but more widely. As Francis says:

“In the end, the truth was uncovered … mainly because of the persistent complaints made by a determined group of patients and those close to them”.

The anger of the families is completely understandable. Every honourable Member in this House would be angry—furious—if their mother or father were treated in this way, and rightly so.

The previous Government commissioned the first report from Robert Francis and, when he saw that report, the former Secretary of State, now the shadow Health Secretary, was right to apologise for what went wrong. This public inquiry not only repeats earlier findings but also shows wider systemic failings, so I would like to go further as Prime Minister and apologise to the families of all those who have suffered for the way that the system allowed such horrific abuse to go unchecked and unchallenged for so long. On behalf of the Government—and indeed our country—I am truly sorry.

Since the problems at Mid Staffordshire Hospital first came to light, a number of important steps have been taken. The previous Government set up the National Quality Board and the quality accounts system. This Government have put compassion ahead of process-driven bureaucratic targets and put quality of care on a par with quality of treatment. We have set that out explicitly in the mandate of the NHS Commissioning Board, together with a new vision for compassionate nursing. We have introduced a tough new programme for tracking and eliminating falls, pressure sores and hospital infections, and we have demanded nursing rounds every hour, in every ward of every hospital.

However, it is clear that we need to do more. We will study every one of the 290 recommendations in today’s report and respond in detail next month, but the recommendations include the three core areas—patient care, accountability and defeating complacency—on which I believe we should make more immediate progress. Let me say a word about each.

The first is how we put patient care ahead of finances. Today, when a hospital fails financially, its chair can be dismissed and the board suspended, but failures in care rarely carry such consequences. That is not right. We will create a single failure regime where the suspension of the board can be triggered by failures in care as well as failures in finance, and we will put the voice of patients and staff at the heart of the way that hospitals go about their work.

In Mid Staffordshire, as far back as 2006, there was a survey in which only about a quarter of staff said that they would actually want one of their own relatives to use the hospital they worked in. During the following two years, bereaved relatives produced case after dreadful case and campaign after chilling campaign, but those voices and horrific cases were ignored. Indeed, the hospital was upgraded to foundation trust status during that period. We need the words of patients and front-line

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staff to ring through the boardrooms of hospitals and beyond to the regulators and the Department of Health itself.

From this year every patient, every carer, every member of staff will be given the opportunity to say whether they would recommend their hospital to their friends or family. This will be published and the board will be held to account for its response. Put simply, where a significant proportion of patients or staff raise serious concerns about what is happening in a hospital, immediate inspection will result and suspension of the hospital board may well follow.

Quality of care means not accepting that bed sores and hospital infections are somehow occupational hazards and that a little of them is somehow okay. They are not okay. They are unacceptable—full stop, end of story. That is what zero harm means. I have asked Don Berwick—who has advised President Obama on this issue—to make zero harm a reality in our NHS.

Francis makes other recommendations. Today, you can give hands-on care in a hospital ward with no training at all. Francis says that that is wrong, and I agree. Some simple but profound things need to happen in our NHS and our hospitals. Nurses should be hired and promoted on the basis of having compassion as a vocation, not just academic qualifications. We need a style of leadership from senior nurses which means that poor practice is not tolerated and is driven off the wards. Another issue is whether pay should be linked to quality of care rather than just time served at a hospital. I favour this approach.

Secondly, there is accountability and transparency. The first Francis report set out clearly what happened within Stafford hospital. It should have led to those responsible being brought to book by the board, the regulators, the professional bodies—and, yes, even by the courts. But this did not happen.

Most people will want to know why on earth not. We expect hospitals to take disciplinary action against staff who abuse their patients. We expect professional regulators to strike off doctors and nurses who seriously breach their professional codes, and, yes, we expect the justice system to prosecute those suspected of criminal acts, whether they take place in a hospital or anywhere else. In Stafford, these expectations were badly let down. The system failed. That is one of the main reasons we needed this inquiry.

Now that the recommendations about systemic failure are public, the regulatory bodies in particular have difficult questions to answer. The Nursing and Midwifery Council and the General Medical Council need to explain why, so far, no one has been struck off. The Secretary of State for Health has today invited them to explain what steps they will take to strengthen their systems of accountability in the light of this report, and we will ask the Law Commission to advise on sweeping away the Nursing and Midwifery Council’s outdated and inflexible decision-making processes.

The Health and Safety Executive also needs to explain its decisions not to prosecute in specific cases. Indeed, Robert Francis makes a strong argument that the executive is too distant from hospitals and not the right organisation to be focusing on healthcare and criminal prosecutions in such cases. We will look

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closely at his recommendation to transfer the right to conduct criminal prosecutions from the Health and Safety Executive to the Care Quality Commission.

Thirdly, we must purge the culture of complacency that is undermining care in our country. This requires a clear view about what is acceptable and what is not. In our schools, we have a clear system of deciding whether a school has the right culture and whether it is succeeding or failing. It is a system based on the judgment of independent experts, who walk the corridors of the school and analyse more than just statistics. The public therefore know which schools near them are outstanding and which are failing. They have a right to know the same about our hospitals. We need a hospital inspection regime that does not just look at numerical targets but examines the quality of care and makes an open, public and explicit judgment.

So I have asked the Care Quality Commission to create a new post—a Chief Inspector of Hospitals—to take personal responsibility for this task. I want the new inspections regime to start this autumn. We will look at the law to make sure that the inspector’s judgment is about whether a hospital is clean, safe and caring, rather than just an exercise in bureaucratic box-ticking. In the mean time, I have asked the NHS Medical Director—Professor Sir Bruce Keogh—to conduct an immediate investigation into care at hospitals with the highest mortality rates and to check that urgent remedial action is being taken.

Complacency in the system has meant that all too often, patient complaints have been ignored. I am today asking the honourable Member for Cynon Valley and the Chief Executive of South Tees Hospitals NHS Foundation Trust, Tricia Hart, specifically to advise how hospitals in the NHS should handle complaints better in future.

I have talked today about some of the systemic failures, but at the heart of any system are the people who work in it and the values and vocation that they hold. As Francis says early on in his report, and it is worth me quoting in full:

‘Healthcare is not an activity short of systems intended to maintain and improve standards, regulate the conduct of staff, and report and scrutinise performance. Continuous efforts have been made to refine and improve the way these work. Yet none of them, from local groups to the national regulators, from local councillors to the Secretary of State, appreciated the scale of the deficiencies at Stafford and, therefore, over a period of years did anything effective to stop them’.

What makes our National Health Service special is the very simple principle that the moment you are injured or fall ill, the moment something happens to someone you love, you know that whoever you are, wherever you are from, whatever is wrong, however much you have in the bank, there is a place you can go where people will look after you and do everything they can to make things right again. The shocking truth is that this precious principle of British life was broken in Mid Staffordshire. We would not be here today without the tireless campaigning of the families who suffered so terribly, and I am sure that the whole House will join with me in paying tribute to their incredible courage and determination over these long and painful years.

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When I met Julie Bailey and the families again on Monday, she said to me that she wanted the legacy of their loved ones to be an NHS safe for everyone. That is the legacy that together we must secure. I commend this Statement to the House”.

My Lords, that concludes the Statement.

7.11 pm

Lord Hunt of Kings Heath: My Lords, I thank the noble Lord the Leader of the House for repeating the Prime Minister’s Statement and also for the tone that he has adopted in repeating the Statement. I remind the House of my health interest in the register.

The NHS represents the best values of this country, but what happened at Stafford was an appalling betrayal of those values. We all place trust in the National Health Service. We expect hospitals to be places of the utmost compassion and the highest standards of care. However, at Stafford patients became victims, left lying in soiled sheets, with untreated bedsores, desperately calling for help, but with no response. Relatives who pleaded for assistance were ignored or even made to feel intimidated. I join the noble Lord the Leader of the House in paying tribute to all those former patients, relatives and staff who came forward to speak out, including those who gave evidence to this and to previous inquiries. I also thank Robert Francis for his work on this and his previous inquiry.

What happened at Stafford was not typical of the NHS. Day in, day out, the vast majority of those who work in the NHS deliver great care to patients up and down the country. They are as horrified at all of this as we are. When the first investigation laid bare the facts in 2009, the then Prime Minister apologised on behalf of the Government and the NHS to the patients and families who suffered so badly at Stafford hospital. He was right to do so. I reaffirm that today and our thoughts are with all the victims and their families. What happened has no place in any NHS hospital. We must ensure that it does not and cannot happen again.

Today’s report makes clear that primary responsibility for what happened lay with the board of the hospital. However, there are wider lessons that politicians on all sides must learn, including a lesson for all parties about the dangers of frequent reorganisations of the NHS.

I should like to ask the noble Lord the Leader of the House some specific questions. First, regarding the voice of the patients, effective regulation is essential, but regulators cannot be everywhere, spotting every problem. Patients, their families and staff are everywhere, so we must ensure that they are properly heard. The challenge is to change the culture of the NHS and to support rather than to shut out people who complain. The NHS constitution offers protection for whistleblowers and we support moves to strengthen that. However, the report also highlights criticisms and concerns about both previous and current arrangements for patient bodies. Does the noble Lord agree that, whatever bodies we choose to represent patients, they need to be independent and to have the powers to be an effective voice and challenge to the system. I am sure the noble Lord will have had reported to him last night’s debate on the regulations in relation to local Healthwatch and concern that, as they were drafted, they restrict

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the activity of local Healthwatch to campaign. I wonder whether, as part of the consideration of the recommendations of the Francis review, the Government would agree to look at the remit and powers of local Healthwatch in order that we might consider strengthening them.

I move to the question of staffing. The basic requirements of any NHS hospital are that there are sufficient staff to look after patients and that they act with compassion. In too many cases at Stafford, this did not happen. Compassion should always be at the heart of nursing, and it needs to be at the heart of nurse training. We support moves to make this more central to nurse training. As Robert Francis has previously said in explaining what went wrong,

“the overwhelmingly prevalent factors were a lack of staff, both in terms of absolute numbers and appropriate skills”.

Does the noble Lord accept the report’s point that we need to consider benchmarks on staff numbers and skills? Can the noble Lord comment on any resource implications that follow from such agreement? Noble Lords will be aware that many NHS trusts are facing severe financial challenges at the moment. Do the Government consider that the NHS has enough resources to ensure that it has the right number of staff in place? This morning the Prime Minister assured the other place that funding is there, but I wonder whether we can be so confident.

My third question relates to regulation. The problems at Stafford should have been picked up much earlier. Monitor and the Healthcare Commission should have worked together much more closely. The Francis report recommends that the two should come together or evolve into a merger. I was rather surprised to read on the Health Service Journal webpage tonight that the Secretary of State has already rejected this recommendation. I was very surprised because in the Statement that the noble Lord has just repeated he said that every recommendation would be studied fully. Can he confirm whether a decision has been made that a merger of Monitor and CQC will not take place? That is a very important matter.

In his Statement the Prime Minister also said that a chief inspector of hospitals would be appointed in the autumn. Can the noble Lord confirm that legislation would be required for that, or is there to be an instruction to CQC to make such an appointment? Is it intended that the remit of the chief inspector of hospitals should cover other parts of the National Health Service? Will there be a chief inspector of primary care? Will there be a chief inspector of social care? Is it intended that the chief inspector will become in effect the boss of CQC, or is this to be a separate appointment? If it is to be a separate appointment, will this person hold independent office, or will he or she be part of the managerial hierarchy of CQC?

Robert Francis rightfully made a great deal of the importance of patient safety. He also referred to the functions of the former National Patient Safety Agency with regard to incident reporting. He said:

“More could be made of this important source of information”.

The noble Lord will be aware that the Health and Social Care Act abolished the National Patient Safety Agency. As part of their consideration of the recommendations

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of Francis, I ask that the Government consider re-establishing the National Patient Safety Agency as a wholly independent organisation.

I come to the question of healthcare assistants, who do so much important work in our hospital wards and communities. Does the noble Lord agree that we need training and registration to improve standards and safety? In paragraph 1.194 of the summary of Robert Francis’s findings, he makes the point that,

“healthcare support workers … are not subject to any system of registration”.

He says firmly:

“A registration system should be created under which no unregistered person should be permitted to provide for reward direct physical care to patients currently under the care and treatment of a registered nurse or a registered doctor or who are dependent on such care by reason of disability or infirmity in any hospital or care home setting”.

I am sure the noble Lord will have been briefed that in our debates on the Health and Social Care Bill as it went through your Lordships’ House we argued strongly for there to be regulation of healthcare assistants. The Government resisted that. In their consideration of the Francis inquiry recommendations, will they now give sympathetic consideration to the registration of healthcare workers?

I come to my fourth question, which concerns foundation trusts. I am the chair of a foundation trust. I am enthusiastic for them, as I think are many noble Lords on both sides of the House. The journey to foundation status has been a beneficial process for many trusts, but in the case of Stafford it was not. Has the noble Lord made any reassessment of the current timetable for a trust to achieve foundation status and whether more flexibility is needed? Can he assure me that no pressure will be put on the NHS Trust Development Authority to speed up the authorisation of foundation trusts?

The original government intention was for all NHS trusts to become foundation trusts by 2014. I understand that that has slipped. I should be grateful if the noble Lord would confirm that the essential requirement is that a trust is ready to become a foundation trust, not having to fit a timetable that would lead to the kind of pressures that the Mid Staffordshire trust clearly felt itself under.

That brings me to targets. It was suggested, in the briefing before the report was published, that targets themselves were to blame. However, today’s report does not support that. It says that,

“it is not suggested that properly designed targets, appropriately monitored, cannot provide considerable benefit to patients”.

Does the noble Lord accept, as Francis’s analysis suggests, that the problem at Stafford was how the A&E target was managed by the hospital, and that many hospitals up and down the country have delivered excellent care while meeting the accident and emergency target? We must never go back to the bad old days when people were left waiting for hours on trolleys and 18 months for an operation.

I turn to integration. The ageing society is bringing a whole new set of demands on to the NHS: a group of elderly and infirm patients who require not just

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physical treatment for their immediate illness but much greater care and attention for their basic needs. As Francis says, we must address this new challenge that the NHS faces and ensure that we avoid a repeat of what happened at Stafford. Does the noble Lord agree that in every hospital we need to put in place the right support for the whole of a person’s needs, including for our elderly population? Does he agree that that means breaking down the barriers between healthcare and social care? Does he also agree that the cultural change that the Prime Minister referred to in relation to hospitals applies as much to community, primary and social care?

The number of noble Lords who are here at this time of night to listen to the Statement indicates that many noble Lords have a great deal of interest in this. I ask the noble Lord to pursue through the usual channels the opportunity for an early and lengthy debate on the Francis report. That would be very much appreciated by noble Lords.

We cannot turn back the clock and undo the damage at Stafford but we owe it to those who have suffered, to the people of Stafford and to the country as a whole to work together to act on this report and prevent a scandal like this from happening elsewhere. We on this side of the House will play our part in making that happen.

7.25 pm

Lord Hill of Oareford: My Lords, I am grateful for the way in which the noble Lord, Lord Hunt of Kings Heath, put his questions and responded. I agree with what he said at the outset about the NHS representing the best values of our country, his important point that these awful things are not typical of everything that goes on, and that there are many hundreds of thousands of people delivering great care. He is right to remind us of that but also right to be clear, as he was, that together we need to face up to the problems that this extremely important report from Mr Francis has uncovered. I also take the noble Lord’s point, which the Francis report mentions, about the dangers of over-frequent reorganisation. All parties need to be conscious of that, and I think that all politicians are sometimes guilty of it. One of the great lessons of all systems is that the simpler and more stable one can keep them, the better the framework in which people have to operate.

I agree with the noble Lord about the importance of patients having a strong and independent voice. I think that is the way he put it. I certainly know from the world of education that it is hugely important to find ways to ensure that parents and those who care and have to use the services can plug into the system and can help to hold those services to account, and the findings in the Francis report underline the effort that we need to make to ensure that that happens.

On the noble Lord’s specific question about Healthwatch, I know that my noble friend Lord Howe spoke yesterday evening about some of the ways in which we are trying to strengthen the role and voice of patients and the public through local Healthwatch. We are determined to ensure that local Healthwatch can act as an independent and powerful voice for

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patients in local areas, and we are creating Healthwatch England so that there is a national voice for patients as well. I agree with him about the importance of that.

I also agree with the noble Lord’s emphasis on having compassion at the heart of medicine. Again, that point came out of the Francis report.

On the question of skills, numbers and finances, the noble Lord is right to say that that question was put to my right honourable friend the Prime Minister by the Leader of the Opposition earlier on. My right honourable friend said that he believes that the resources that are going into the health service, which are increasing, are in place. I agree that we have to ensure that every ward has the right mix and number of doctors, nurses and healthcare assistants so that staff have the time and the skills to ensure that they are providing safe and effective care. I believe that the recent nursing vision, Compassion in Practice, set out new measures to help to ensure that locally, but I know that my right honourable friend the Health Secretary will study the report to see whether there are other steps that may need to be taken.

On the subject of the chief inspector, again there is an analogy with schools. Having a figure that we can identify as a champion of standards is going to be a good step forward. He or she will be part of the CQC. The precise process by which they operate will need to be sorted out in detail over the days and weeks to come, but obviously we will share that with the noble Lord and other interested Peers.

On the noble Lord’s question about the National Patient Safety Agency, I understand that that was merged into the Commissioning Board to try to make safety integral to the commissioning of care. We need to ensure that happens.

On the merging of Monitor and the CQC, another important question, the noble Lord asked for reassurance that a decision on that has not already been taken. I can say to him that it has not. We have already made clear that we aim to create more generally a single failure regime under which organisations can be held accountable for failures in care, as well as with their finances. Francis’s recommendation to merge those two organisations is one that we will consider. There are clearly questions about the balance between making sure that quality is high and money.

On the noble Lord’s important question about the registration and training of healthcare assistants, we are certainly committed to supporting healthcare assistants and support workers to provide proper, compassionate and safe care. We will take Francis’s recommendations seriously, but the report in another place also points out, rightly, that compulsory statutory regulation does not necessarily prevent poor care, and that cultural issues—one of the recurring themes of the report—are indeed central.

The noble Lord asked about the effect on the quality of care of the process of moving to foundation trust status. Like the previous Government, we believe that foundation trusts can make our hospitals more accountable and responsible and better able to take decisions. However, the move to trust status for Mid Staffs was at the expense of patient care, and that was clearly wrong. I agree with the noble Lord that it is a move that must not be rushed and that patient care

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must come first. In answer to his question: yes, there will be no pressure. The essential requirement is that they be ready.

In response to the noble Lord’s question about targets, I accept—and this is clearly the case in all sorts of areas—that there is a place for sensible targets. We also know and accept that if we have the wrong targets, or too many of them, there is sometimes the danger of perverse incentives and confusion as well. As the noble Lord said, getting that balance right is extremely important.

On integrated services, it is important to make sure that we are able to look across the piece, and that there are not the barriers that he described. Of course I recognise the amount of interest in the subject. I know how much expertise there is here, and I am very happy to see whether we can find an opportunity for a fuller debate through the usual channels, which I think would be well received by noble Lords.

7.30 pm

Earl Attlee: My Lords, I remind the House of the benefit of short questions in order that my noble friend the Leader of the House can answer as many questions as possible, which I am sure he is very keen to do. If necessary, I can help.

Baroness Jolly: My Lords, we, too, welcome the Francis report, and the many recommendations that we believe will strengthen the whole NHS. In particular, we welcome Francis’s recommendation of a statutory duty of candour: the duty of a clinician to explain and apologise when things go wrong. When and how does my noble friend see this being implemented?

Lord Hill of Oareford: As my noble friend said, Robert Francis certainly recommended a statutory duty of candour, and my right honourable friend the Secretary of State will give full consideration to that. So far, he has said that he will work through all 290 recommendations in the report, and that the Government aim to give an initial response within a month. Precisely what the timeframe will be on all these elements, I cannot say. As my noble friend will know, in the interim we created legally binding rules that require the NHS Commissioning Board to insert a contractual duty of candour into the NHS standard contract in 2013-14. That means that NHS hospitals will be required contractually to tell patients when they have been significantly harmed by a patient-safety incident during their care. Otherwise, I take my noble friend’s point on board.

Lord Campbell-Savours: My Lords, the Statement says:

“every carer, every member of staff will be given the opportunity to say whether they would recommend their hospital to their friends or family. This will be published … where a significant proportion of patients or staff raise serious concerns about what is happening in a hospital immediate inspection will result and suspension of the hospital board may well follow”.

That is a very radical proposal. My question is very simple: will a member of staff making such a report have their name published, or will their contribution be anonymous? If it is not anonymous, this system will not work.

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Lord Hill of Oareford: I understand the noble Lord’s point. Like many things in this report, we will need to consider exactly how the details of the system will work. Generally, on whistleblowing and giving people the opportunity to make their views known, we have already taken steps to try to protect and support whistleblowers. We are funding a helpline to support them, we are embedding rights in their employment contracts, and we are issuing new guidance. We will be studying the report to see whether there are any further procedural or legal measures, and I hope that we will be able to provide more information to the noble Lord in due course.

Baroness Knight of Collingtree: My Lords, would that it were only the Mid Staffordshire hospital that was guilty of the kind of wrongdoing that we have been talking about tonight. My noble friend has made a wonderful, genuinely caring, speech about what has been happening and his determination to stop it. However, I feel very strongly about this, because I have tried for years and years, from 2002 onwards, to bring cases to this House. We should sometimes listen to people, here and in the other House, who bring cases before their House to be considered.

As many Members know, I produced a long document of 26 cases of the various bad treatment of patients. I went to endless trouble to make absolutely certain that every fact I put forward was correct, and that each patient for whom I pleaded had given me full permission to raise his or her case. The noble Lord, Lord Hunt, might remember the occasion when I went to him with a long and detailed dossier of these cases. It was certainly not his fault, but a number of those 26 cases were never investigated at all, and I never got an answer. I even tried to get through this House a parents’ protection Bill, which was quietly squashed at the time. My plea to my noble friend is that he also lets Members of Parliament, in one House or the other, be heard. They do not raise cases for fun but because of their feeling for the patients or relatives who have contacted them. I ask him please to listen in future, because what they say is of crucial importance.

Lord Hill of Oareford: I very much agree with the broad point that my noble friend is making. One of the recurring themes of the report is that whomever complaints came from—family or whoever—they were not being listened to. I am sure that my noble friend will have noted the part of my right honourable friend the Prime Minister’s Statement that announced that there will be a complaints review, which will be jointly led by Ann Clwyd MP—that makes the point about Parliament being involved in this process—and Professor Tricia Hart, chief executive of South Tees Hospitals NHS Foundation Trust. We need to make sure that we have these proper mechanisms and that where there are concerns, they are raised and listened to.

Baroness Emerton: The report calls for NICE to devise tools to calculate safe staffing levels, which have already been mentioned this evening. The evidence is growing. A group of senior nurses has come together to collect the evidence. The evidence base determines that safe and cost-effective care is determined by the

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safe levels of trained staff—registered nurses—to support workers. Will the noble Lord the Leader of the House be taking from this report that NICE will be devising tools to determine safe staffing levels as an urgent requirement because until we get them right, we are not going to see safe care delivery?

On the registration of support workers, one reads in the report that patients were suffering appalling neglect and mistreatment. Hundreds of people suffered from being given the wrong drugs because support workers were not trained. Please will the noble Lord take away the recommendation on the registration of support workers as a matter of urgency?

Lord Hill of Oareford: As I think I said in my earlier response to the noble Lord, Lord Hunt of Kings Heath, the registration of support workers is something that the Government will consider as part of their response to the Francis recommendations. We need to have well trained staff at all levels.

On the noble Baroness’s other point about ratios, I am sure that my colleagues in the Department of Health will reflect on what she said. Ultimately, decisions about staffing levels and so on need to be made locally, but I know that as part of this whole debate the department will be thinking in every way it can to try to make sure that all these sensible points are acted upon.

Baroness Williams of Crosby: My Lords—

Lord Harris of Haringey: My Lords—

Earl Attlee: I think we should hear from the Labour Benches.

Lord Harris of Haringey: The noble Lord the Leader of the House has referred to the fact that there is now to be a contractual obligation of candour on healthcare organisations. Presumably Robert Francis was aware of that in framing his recommendations, feels that it is inadequate and is advocating a statutory duty of candour, which, so far, the Government have resisted. I hope that policy will change. The noble Lord the Leader of the House also talked about the importance of an independent voice for patients. Given the suggestion that has been made about merging Monitor and the CQC, will he accept that it is therefore inappropriate that Healthwatch England, the national voice of patients, should be subordinate to that monster new body? Secondly, does he also accept that it is inappropriate, if you are to have an independent voice, that local Healthwatch is subordinate to local authorities, some of the organisations that they are supposed to monitor?

Lord Hill of Oareford: On the duty of candour, I said in my response to the noble Lord’s noble friend that the suggestion about a statutory duty of candour is something that the Government will consider in their response to Francis. I pointed out that there is already a contractual duty in place, but I understand the point that he makes.

So far as Healthwatch England is concerned, I understand that that was debated at length. My noble friend Lord Howe is sitting here, and I am sure he will have heard the points that the noble Lord has made.

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Baroness Williams of Crosby: My Lords, like many others, I am sure the House would like to ask the noble Lord the Leader of the House to pass on our appreciation of the very restrained and moving Statement by the Prime Minister which in many ways reflects his own experience of the National Health Service in respect of his son, which I shared in respect of the death last year in an NHS hospital of my son-in-law. One could not have asked for better treatment.

In some ways, the tragedy of Mid Staffs is precisely that it is one of the few things that have lowered trust in the NHS, and that is a very serious outcome. The many relatives who waited for month after month and year after year for some kind of justice—there are echoes of Hillsborough in that—felt that they were not being listened to, despite the agony that they were going through.

Let me very quickly say just a word about accountability. My only criticism of the Francis report, although I have not had the opportunity to read every word of it, revolves around that word “accountability”. Accountability has to go to the very top. It cannot stop half way. I need to say quite loudly that two gentlemen have something to answer for, if only to comment on the recommendations and see if they meet the difficulties that have arisen in Mid Staffs. The first is Sir David Nicholson, the chief executive of the NHS Commissioning Board, who was present in a very senior capacity. I am not trying to blame him, but to say that I think his advice on how to avoid what happened then would be very valuable. The other person was Secretary of State in the last year of the period which the Francis report covers and is the right honourable Mr Andrew Burnham. Many of us—

Noble Lords: Order!

Earl Attlee: My Lords, I think we should hear from the Minister.

Baroness Williams of Crosby: Many of us during the course of the debate were obliged to listen to a very great deal of what I might call Twitter propaganda, and I think it is only fair to say that Mr Burnham has a responsibility to respond to this report.

A noble Lord: Too long!

Baroness Williams of Crosby: I am going to continue, so noble Lords had better get used to it.

Earl Attlee: My Lords, I think the sense of the House is that we would like to hear from the noble Lord the Leader of the House.

Noble Lords: Hear, hear!

Baroness Williams of Crosby: I shall complete my remarks.

Noble Lords: Order!

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Baroness Williams of Crosby: I have much to comment about on this front, and I am going to finish my sentence. We all need to be responsible and accountable for making sure that no Mid Staffs ever happens again. That means that we may not pass the burden of responsibility to and fro. We all have to accept our common responsibility, and if that means abandoning party statements, so much the better.

Lord Hill of Oareford: I agree about the theme, which I think we have all accepted, that there is a common responsibility. One of the themes of the report is that we should not seek to single out individuals or particular organisations for risk of not seeing the bigger picture which, as my noble friend said, is that there is a common responsibility.

Lord Cormack: My Lords, for some 35 years, my constituents in South Staffordshire had good healthcare from Stafford hospitals. It was only in this very bad period that we had these appalling stories, and we all feel ashamed. It is important to recognise that there was good healthcare before, and there must be after. In that context, will my noble friend assure me that all those appointed to boards of hospitals will receive adequate training about what their true responsibilities and powers are?

Lord Hill of Oareford: That is an extremely important point, and it is part of what the Government need to do in their response in ensuring that boards accept their responsibility and understand what it is. It is not just to do with running hospitals economically and efficiently; above all, it is to do with patient care.

Lord Patel: My Lords, I have questions relating to two areas in the Statement on which a decision has already been made. The first relates to the Prime Minister asking Sir Don Berwick to advise on zero harm. The noble Lord the Leader of the House did not answer the question asked by the noble Lord, Lord Hunt, about whether it is now the Government’s intention to re-establish the National Patient Safety Agency. I declare an interest as I was chairman of the National Patient Safety Agency for four years. I have worked with Sir Don Berwick in my hospital. The implementation of zero harm is possible in patient care in certain areas, but to implement it requires an organisation in every hospital and a national organisation to monitor it. How is it intended that that will happen? The second decision was to ask Sir Bruce Keogh, the medical director, immediately to investigate hospitals that have high mortality rates. That implies that we know which hospitals they are. Will the noble Lord the Leader comment on that? I hope that investigation will also include all higher mortality rates including still births, neonatal deaths and infant deaths.

Lord Hill of Oareford: My Lords, perhaps I responded elliptically to the noble Lord’s first point about whether we had plans to reintroduce the agency by saying that it had been merged. We do not have plans to reintroduce it. On his second question about Sir Don Berwick, it is for him now to work out how he will carry out his

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review and come back to us with his recommendations. On his third question about the immediate inquiry being carried out by Sir Bruce, mortality rates are the factor he will take into account in identifying the cases that would most benefit from his urgent attention.

Lord Willis of Knaresborough: My Lords—

Lord Wills: My Lords—

Earl Attlee: My Lords, I think we should hear from the Labour Benches.

Lord Wills: My Lords, I welcome the Minister’s emphasis on the importance of involving patients and their relatives more centrally in decisions about their own care. Does the Minister think that principle should be extended throughout the NHS, including the new policy on value-based pricing for new medicines?

Lord Hill of Oareford: I certainly take the point that that principle is one we need to apply in our response. As regards the specific question, my noble friend Lord Howe will follow up with the noble Lord.

Lord Willis of Knaresborough: My Lords, Francis quite rightly recognises the contribution made by healthcare support workers. He makes seven recommendations about how they should be included within a reinvigorated National Health Service. The report makes the claim that healthcare support workers have to be properly trained to appropriate standards. I want to ask the Leader of the House two questions. First, will those standards be set independently, by the NMC or another body, and not the department? Secondly, will he guarantee to the House tonight that, whatever those standards are, the training will be mandatory, not an optional extra?

Lord Hill of Oareford: My Lords, at the moment I cannot give the specific assurance my noble friend would like because the Secretary of State for Health has to look at all the recommendations, working out how to respond to them and the most sensible way forward. However, it is clear that the standards would need to carry weight and be recognised as doing so. I know my right honourable friend the Secretary of State will reflect on that and that my noble friend Lord Howe will have heard the points the noble Lord has made.

Baroness Masham of Ilton: My Lords, can the Leader assure me that there will not be bullying and that there will be kindness? Kindness does not cost money. Nurses should be kind and treat patients with dignity.

Lord Hill of Oareford: My Lords, I could not agree more. One of the things that are most distressing when one strips away everything to do with structures is the lack of common humanity. That is the most extraordinary thing. I agree very much with the noble Baroness about the importance of compassion.

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Council of Europe: Local and Regional Democracy

Question for Short Debate

7.53 pm

Tabled By The Earl of Dundee

To ask Her Majesty’s Government, following the United Kingdom’s recent chairmanship of the Council of Europe, what plans they have to assist local and regional democracy in Europe.

The Earl of Dundee: My Lords, in my remarks today I would like briefly to connect together three themes. The first is the huge importance of local democracy—its obvious and immediate relevance; its scope for enhancing national and international democracy; and conversely regarding the latter, its ability to reduce or remove what to some extent has lately become alienation or even mistrust. Secondly, there is the role of the Council of Europe in promoting local and regional democracy. Thirdly, there is the opportunity which our Parliament and Government now have to assist, to guide, to lead initiatives of good practice and to nurture and encourage progress.

The European Court of Human Rights was able to sharpen our focus upon local democracy. For its recognition of the right to individual petition puts state and citizen on an equal footing. However, it took the devastation of two world wars for that notion to be adopted. Previously, it had been assumed that the state would always come first even if that precedent infringed the rights of the individual. Then after European Union expansion in 2004, there was the Warsaw Summit declaration in 2005. This calls for the reinvigoration of democracy, both nationally and internationally, through its strengthening at local and grass-roots levels. Not least, therefore, have those two interventions helped to revise political theory and how we view the Council of Europe’s affiliation of 47 states. For now we evaluate the worth of political delivery much more in terms of the well-being of families, communities and people in their daily lives. To those priorities we believe governments and institutions should play second fiddle; yet at the same time we know perfectly well that thereby the role and sovereignty of nation states need not be in the least undermined or diminished.

National democracy is never short-changed by local democracy. In fact, the reverse is the case. For more often than not its quality and validity reflect a combination of local results in the first place. It follows from this that the advance of local democracy or active citizenship is no longer speculative or part of some new political advocacy. Instead, it has become a consensual matter for all of us to see how best to put it into practice within Europe’s present stage of development.

This leads to the role of the Council of Europe. Already that institution has made a wonderful and unprecedented contribution to stability, human rights and the rule of law. Its membership now includes most of central and eastern Europe. We are enormously grateful. However, its current dealings with local democracy should be changed in certain respects. Within the Council of Europe itself there should be a common

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agenda. This is lacking. Such a common agenda ought to seek to implement the Chavez report—agreeing priorities annually, undertaking activity competently and transparently and adopting administrative structures which correspond to the new approach.

Here I pay tribute to my noble friend Lady Hanham. During the United Kingdom’s six-month chairmanship of the Council of Europe last year, she was the Minister responsible for local democracy. A very good start was made in drawing attention to these prescriptions. As a result the Committee of Ministers has recently agreed to the case for much better internal co-ordination and has referred matters arising from the Chavez report to an expert group. For the reforms he encouraged I also pay tribute to Keith Whitmore, who retired last year as President of the Council of Europe’s Congress of Local and Regional Authorities.

Yet the Council of Europe’s two main branches, the congress and the parliamentary assembly, still do not work enough together. They should do so, and there ought to be an annual procedure for that. Will the Committee of Ministers call for this? What predictions this year does my noble friend make for the progress of the Chavez report itself? In what ways will she and her department be able to help that process?

Then, started in 2006, there is the Council of Europe’s Centre of Expertise for Local Government Reform. Already to states within central and eastern Europe it has provided much useful guidance on the nuts and bolts of local government systems and methods. This year it starts a new venture and facilitates a working programme between parts of the United Kingdom and parts of Croatia, a country about to become the 28th member of the European Union this July. Within the programme certain regions and cities directly work together. The agenda includes mutual trade, education and cultural exchanges and those on good practice for sustaining stable communities. It is a great pleasure for me to assist this programme as Scottish consul for Croatia, as well as in my capacity as chairman of this Parliament’s all-party group for that country. Thereafter, and between different cities and regions elsewhere in Europe, the centre aims to encourage further working synergies. Clearly, those expedients serve to strengthen local and regional democracy. What plans therefore have the Government to support them?

Germane to the quality of local democracy in Europe, there are also inquiries and policies currently embarked upon by the Government for the benefit of the United Kingdom. Two such include the well-being of communities and the promotion of active citizenship. Both considerations lie at the centre of effective local democracy. What intentions on these subjects have the Government to use, once information is available, our own United Kingdom analyses and recommendations to assist Europe? During an economic crisis some might possibly object that it is wrong to spend time and effort on local democracy at all. However, the complete opposite is surely the case. For improved local democracy reduces costs and facilitates growth, initiative and creativity. At the same time it is also what is needed to protect values and rights. The United Kingdom has much experience in this field. Last year,

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our Council of Europe chairmanship pointed the way. That direction we must now follow with confidence and vigour.

8.01 pm

Lord Judd: My Lords, I am sure that the whole House is grateful to the noble Earl for introducing this debate tonight. He has great experience and tremendous commitment to the Council of Europe, and it is good to hear him speak on the subject. There will be other speakers in this debate and in the gap who will bring a great deal of intimate knowledge and commitment to our proceedings.

Looking back on my own time, some years ago in the Council of Europe, I am convinced that it has a potentially huge contribution to make in strengthening democracy across Europe, not least in some of the former Soviet bloc countries. At the end of the Second World War, the founders of the Council of Europe—indeed, those behind the whole European initiative, including the whole European Union—not only saw democracy as key to the future stability of the continent but also saw that if democracy was to work it was not simply parliamentary institutions and elections but all the other infrastructure that was so necessary, including the rule of law and, of course, human rights. They had a searing experience of a denial of human rights that led to, and was involved in, the Second World War and saw that as absolutely basic to stability and an effective democracy. So the European Court of Human Rights, to which the noble Earl made reference, was an essential part of this.

I want to concentrate my short intervention on one very significant member of the Council of Europe—Russia. The extent of its pervasive corruption, the weakness of the courts and legal procedures at national, regional and local level, with a penal system that is appalling and enshrines some of the most barbaric treatment of prisoners possible, and the carefully neutered political role of the Duma itself, have significance for the quality of democracy and, of course, for the countries on Russia’s borders. Here I turn to the north Caucasus. I was very much involved there as rapporteur on the conflict in Chechnya to the Parliamentary Assembly of the Council of Europe. Some people say now that things are better because there is order. We have to understand that, in so far as there is an appearance of order, it is the order of tyranny, oppression and fear.

It is essential to recognise that extrajudicial killing still takes place on the say-so of those who hold power. Still intimidation of witnesses happens, and of the relatives of those who are being pursued. There is harassment across the whole nature of society for those who would wish to generate independent thinking.

In the midst of all this, there are, of course, very brave and courageous people who are trying to put things right. There are lawyers, academics and professional people who make their stand. There are, of course, voluntary and non-governmental organisations—and I think particularly of Memorial, one of the most courageous organisations that I have ever encountered, with a tremendous degree of professional competence and excellence that it has built up over the years. These

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organisations make civil society and are absolutely essential to a functioning democracy, but they are being deliberately curbed within Russia and places such as the north Caucasus.

With the quality of democracy at local, national or regional level, it is terribly important to be able to bring cases before the European Court of Human Rights. Memorial and others have done this. There are an impressive number of judgments by the court that uphold the complaints that have been brought. Those complaints go to the Committee of Ministers to see to the follow-through and the implementation by Russia of the findings of the court. For year after year the performance of the Committee of Ministers has been lamentably weak; it goes through the formalities of reprimanding or criticising Russia, but it has really not put the muscle or force of argument as it is essential that it should have done. I ask the Minister for a specific assurance that, if we are to make democracy work in these areas, we must recognise the importance of the European Court of Human Rights, which needs to be properly resourced for its work, but also make sure that the Committee of Ministers follows through and does not let Russia off the hook in its failure to implement what is recommended by the judges.

8.07 pm

Lord Greaves: My Lords, I feel a little bit out of place, in that I am not expert at all in the matters of the Council of Europe and local and regional government in Europe, or indeed the Congress of Local and Regional Authorities, although I have spent a lifetime reading about their activities of interest. I was very grateful for the extensive briefing from the House of Lords Library, which alerted me to all kinds of things.

I shall speak very briefly about these matters, to echo the generous commendation of the noble Earl, Lord Dundee, of my Liberal Democrat colleague, Keith Whitmore, for the enormous amount of work that he has done on these areas over many years, and in particular for his work as chair of the congress last year. I have a note here from the secretary-general of the congress, which says:

“First of all the tremendous work of Keith Whitmore should be mentioned … he does not seem to be appreciated enough in his home country”.

That may be so. I remember Keith when he was a bright leading light of the Young Liberals in Manchester, and a very important person in the resurrection and regeneration of liberalism in that historically very great Liberal city.

I shall say no more about that, because I am taking part in this debate as an excuse to say a few words about the north of England as a very important region in this country and in Europe. In general, the larger countries of Europe have regional governments. The systems vary a lot. In Germany, with the very strong länder, there is a fully fledged federal system entrenched in the constitution of the country. Spain is constitutionally a unitary state, but it has extensive though asymmetric devolution to autonomous democratic regions. The strongest of these, particularly Catalonia and the Basque country, approach something akin to the status of regions within a federal system.

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In France and Italy there are democratic regional authorities that are more akin to very large local authorities in their constitutional status and some of their functions. Nevertheless, they are important bodies within their spheres. Here we have a real constitutional mess. We have devolved elected bodies in Scotland, Wales and Northern Ireland. In Scotland in particular, regardless of what happens in the forthcoming referendum, the Scottish Parliament and the Scottish Government are approaching the status and powers that they would have in a fully federal system.

In the rest of England, apart from Greater London, we have nothing at all. In Greater London, we have a sort of city region with the Greater London Authority, the mayor and the London Assembly, but in the rest of England there is zilch, so our system is a bit like that of Spain except that throughout England we have nothing at all. I would argue that the north of England is a distinctive region. Anybody who visits it knows that it is a distinctive region within both this country and Europe. Socially, culturally, environmentally and economically it is regionally distinctive and forms a regional unit.

In the three subregions of the north of England—the north-east, the north-west and Yorkshire, although they may have slightly wonky boundaries at the moment, but never mind—regional bodies have developed on an ad hoc basis over the past few decades, which resulted in the regional development agencies, which had considerable influence and finance but were not democratically accountable. Regional assemblies were set up in these regions which, if they were democratic at all, were not directly democratic. They were indirectly democratic and they included representatives of business, trade unions and so on. Nevertheless, they met and they represented the regions, although it is fair to say that they did so in secrecy—not of their own volition—because nobody noticed them. I should say that I was a member of the North West Regional Assembly for a while.

In November 2004, there was a referendum in the north-east to set up a formally elected north-east regional assembly. The proposal was thoroughly trounced by some 696,000 votes to 197,000 on an almost 50% turnout. That really killed off the idea of elected democratic regional assemblies or government in the north of England for quite some time. The Conservative spokesman for the regions at that time was Bernard Jenkin—at least they had a spokesman for the regions at that time, so they must have recognised that regions existed. He said that,

“the whole idea of regional government has been blown out of the water”,

and that what was being proposed was a “toothless talking shop”. Both those statements were effectively true. The scheme that was put forward was flawed, the proposals were feeble and the Government at the time failed to put it in the context of what they wanted for the country, or at least for the north of England.

I argue that it is time to start talking about regionalism again in the north of England. I remember that back in the 1960s a group of Liberal candidates in the north-west, of whom a leading light was my noble friend

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Lord Tordoff, produced a report on regional government in the north-west. That started the ball rolling as far as our party was concerned and had considerable influence.

A body which has been founded fairly recently—it is not a Liberal body—is the Hannah Mitchell Foundation, which is based in and around Huddersfield, the general-secretary of which is Professor Paul Salveson, who is not a political colleague of mine but is a friend. The body has as its first aim,

“influencing the political agenda to support elected regional government for the North”.

Its second aim is that of developing,

“a distinct ‘Northern’ politics based on Labour, Co-operative, Radical Liberal and other progressive traditions”.

I can associate with at least three of those descriptions. Although Professor Salveson is a socialist, and says that he is, I think that a lot of his views, and the views of his foundation and of his campaigning, are ones with which radical Liberals will go along.

A serious debate has to begin again in the north of England. In particular, we need to think about the future and whether, if Scotland is to be an autonomous unit—I do not use the word “independent”—in whatever form, and if it is to have considerable financial powers and influence, effectively the people of Scotland will be running their own affairs to a very large extent. Whatever happens in the referendum, in the coming years it seems that the north of England will have to look at itself and ask, “Are we actually three subregions comprising the north-west, the north-east and Yorkshire, or should we get together as the north of England and say that we are twice as big as Scotland in population, and that if Scotland can do this, why cannot we in the north of England do it?”.

Perhaps that is the future. That is the thought I want to put in the minds of your Lordships this evening. Then we can join in with all the Europeans who talk about regional government and talk to each other from regions in Europe. We can be one of them. At the moment, we have more and more direct rule from London and it is not satisfactory.

8.15 pm

Baroness Wilcox: My Lords, I am delighted to speak tonight, albeit briefly, in support of my noble friend Lord Dundee and his championing of local democracy, the role of the Council of Europe in promoting such local democracy and the opportunity which our Parliament and Government now have to assist local democracy in Europe and to guide and lead institutions and good practice initiatives and to encourage progress.

I am a very new delegate to the Parliamentary Assembly of the Council of Europe. For the past few years—certainly for the past two years when I was the Minister for Business and Intellectual Property in this House—I seemed to be in the European Community every week. I thought that it was the biggest show in town. We worked very hard to achieve a single patent and eventually got it after we had been at it for 41 years.

Before that, when I chaired the National Consumer Council, I worked with DG11 in the European Community on consumer empowerment and rights.

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During that time, things happened in Russia—the noble Lord, Lord Judd, referred to them. I went there several times in connection with the European Community programme for the democratisation of Russia. Therefore, I felt that I would be perfectly okay when I got to the Council of Europe. However, I have been there only once and have already realised that I do not know a thing. It is enormous. Forty-seven countries are involved in it, from the Russian Federation to Iceland, Georgia, Turkey and Azerbaijan. The range, size and shape of the countries involved, which represent 800 million people, is extraordinary.

As we have heard, the work of the Council of Europe concerns human rights, the rule of law and democracy. I took great pleasure in reading Winston Churchill’s speeches and learning how this all started and how we got to where we are today. It is a great honour and delight for me to speak on this matter tonight. I have a lot to learn.

Following the UK’s recent chairmanship of the Council of Europe, the priorities of the current chair, Andorra, are very much the same: that is, improving local democracy and building people’s capacity to participate in grass-roots democracy, which chimes with our Prime Minister’s vision of a big society. Andorra wishes to ensure that democratic principles are established at the lowest level as a solid foundation for national-level democracy and the rule of law. Improved local democracy reduces costs and facilitates growth. It protects values and rights. We in the United Kingdom have much experience in this field and we can certainly lead the way in this work. What plans do the Government have for all this to happen within the area of which we are speaking?

The reason I wanted to speak tonight was not only to support my noble friend and colleague because I believe that what he is saying is absolutely right, but because I believe deeply that we need stable markets and stable economies with which to trade. We need to trade our way out of recession and this is a wonderful way for us to do it. We have the talent, the background and the knowledge to help them bring forward local and regional democracies. If we are able to do it, we will prosper. Our small and medium-sized businesses will feel safe to trade in some of the 47 countries where, at the moment, they would be terrified to trade. This is really important. The Local Government Association’s idea of a team-UK approach to the Parliamentary Assembly of the Council of Europe is a very good one. We have a wonderful opportunity which we should not miss.

8.20 pm

Lord Kirkhill: My Lords, I rise with considerable pleasure to thank the noble Earl, Lord Dundee, for introducing this debate. We do not talk about the Council of Europe often enough in this Chamber. Indeed, we do not talk about external organisations often enough. The debate gives us an opportunity to say something about this important body. I emphasise at the outset that the Council of Europe does not, as such, have a statutory authority, but it is the guardian of the Convention on Human Rights and there is, of course, the court in Strasbourg.

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A glance at the recent history of the Council of Europe gives an indication of its place in the scheme of things today. In 1989, which is going back a bit, President Gorbachev made his first major European speech. He made the speech in Strasbourg and his theme was that the Council of Europe could become Europe’s common home. What prompted him to develop that theme? Simply put, Europe’s new democracies were a considerable distance from membership of the European Union which was, without doubt, their ultimate aim. It still is, although most have now been able to join. It therefore fell to the Council of Europe to monitor their political and legal aspirations, to keep in touch with the new development and to attempt to assess the legal difficulties some of these new democracies faced, to which end the Committee on Legal Affairs traversed most of Europe much of the time, perhaps for too many months in my own case.

I am getting past making relevant contributions in your Lordships’ House and I forgot to say that the noble Earl, Lord Dundee, has played a significant role in attempting to develop within the European framework a prison system that is tolerable and humane. He has pushed very hard for change in certain areas. It is correct publicly to state that and to commend the noble Earl for those endeavours.

The recent UK chairmanship of the Council gives an opportunity to decide on future regional and local initiatives. Does the Council envisage an association with the Maghreb states? Do the Government envisage the geographic delineation of the Council to move further eastwards than it presently extends? Does the Council feel that its local government—that is to say bringing together the difficulties envisaged by some local authorities and placing the question to others for amelioration—has always been rather cumbersome and not likely to achieve any positive result? These matters should be discussed.

The Council of Europe now finds itself in a position where most of the aspirant states that were young democracies have now been able to join the European Union, which was always their principal aim. They are now much more interested in supporting initiatives of the European Union than they are of the Council of Europe. This diminishes the current role of the Council and its European responsibilities, other than maintaining and underpinning the court in Strasbourg. It is important to understand that the Council of Europe today is more criticised, rather than supported, than was ever the case in the past. These are defining days for the Council of Europe and I await with interest the Minister’s response to these few remarks.

8.27 pm

Lord Sheikh: My Lords, I thank my noble friend Lord Dundee for securing this debate. Winston Churchill was the first to speak about the benefits of creating a Council of Europe, so it is fitting that the Council was established by the treaty of London. The Council of Europe was founded upon the principles of upholding democracy and civil liberties. Since its creation, the Council has continued to adapt and expand as a means of tackling the common challenges facing the continent. The streamlining of the Council of Europe’s

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activities in support of local and regional democracy was one of the priorities of our Government’s recent chairmanship. This included efforts to reach a consensus on the establishment of a single programme of the Council of Europe’s activity on local and regional democracy, to be overseen by the Committee of Ministers. The Congress of Local and Regional Authorities has an important role to play in achieving this aim. It represents a distinct and unique form of grass-roots democracy. It also represents local authorities across all 47 member states.

In 2010, a British councillor was elected as president of the congress. It is the first time that this position has been held by a Briton. This branch of the Council of Europe, in conjunction with increased co-operation with the parliamentary assembly and with Governments, can improve the lives of citizens in member states. The priorities for each year concerning local and regional democracy should be agreed upon in an open and transparent way.

The 2011 Chaves report correctly stated that due to the challenges in an ever-changing world, the level of interrelation between local, regional, national and international institutions must be strengthened. This suggests that multi-level governance is vital for Europe to meet the global challenges facing the continent.

The Reflection Group, chaired by Felipe Gonzalez, previously stated that,

“in a multilevel governance system, each level of authority—European, national, regional and local—exercises its powers according to its own legal responsibility”.

Each decision-making body should act within its powers. The promotion of local and regional democracy should be considered as an essential priority, thereby enhancing its key role in the consolidation of democratic processes in Europe and bringing good practices to other regions of the world. I should be grateful if the Minister could inform your Lordships’ House of any recent dialogue Her Majesty’s Government have had concerning this issue with the current Andorran chairmanship of the Council of Europe.

The Chaves report also stated that the elevation of local and regional democracy in Europe is a fundamental part of the democracy pillar and highlights the synergies required between the Committee of Ministers, the Conference of Ministers responsible for local and regional authorities, and the congress. It is for these reasons that the Chaves report should be fully implemented.

The reforms instigated and continued under the British chairmanship of the Council of Europe with regard to local and regional democracy aim at avoiding duplication, suppressing red tape and maximizing the utility of resources. The Kiviniemi report recommended budget austerity as a result of the current economic crisis. The report also called for greater visibility of the Council of Europe’s work on local and regional democracy. Greater transparency will lead to citizens having increased confidence in the workings of the Council of Europe.

It is important that an annual report be published recording the allocation of funds and the priorities for the coming year. This will lead to greater value for the

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taxpayer and more efficient spending. I am pleased that the Department for Communities and Local Government regularly publishes transparency reports on its website, showing how and where any sum of more than £250 is spent.

In order to strengthen local democracy and give value for money to European taxpayers, efforts to reform the Council of Europe’s work on local and regional democracy must continue. Achieving strong local governance is vital to the Council of Europe’s democracy agenda. The Council’s support for improving local democracy is in accordance with the European Charter of Local Self-Government and the “Twelve Principles of Good Governance at Local Level”. It follows that reinforcing local democracy will lead to the reinforcement of the local economies of Europe. It is therefore vital to continue the process of streamlining the Council of Europe’s activities in support of local and regional democracy. I look forward to learning more on the progress of the single programme as proposed by Her Majesty’s Government.

Finally, I support the comments of my noble friend Lady Wilcox regarding more trade with European countries.

8.34 pm

Lord Prescott: My Lords, I congratulate the noble Earl on securing this debate on the Council of Europe, in which we have had some activities in the past. He referred to his concern about democracy in its national context, and I, as he knows, have been actively involved in the national democracy in one particular country, Armenia. He will recall that the elections were held for the President of that country. I was the leader of the Labour delegation and appointed to be the rapporteur for Armenia for one of the committees of the House. I went to that country during those elections to observe. I have to tell the noble Earl that the result created a riot; 10 people were killed and 130 were thrown in jail, under the threat that they were usurping the powers of the state. I was sent by the Council of Europe to see what had happened and what we could do about it.

My main influence related to the fact that Armenia had entered into an obligation under the human rights convention to observe the democratic process. I could see, on a very quick visit there, that most of those rights had not been observed. It was an eastern European country coming out of being a communist state and wanted a kind of social democratic European stature. It was therefore concerned to make the changes. I also found that I had to convince the President and the rest of Armenia’s Parliament to rewrite the laws on public protest. I got the 130 people out of jail. The election law was rewritten, as were the laws regarding the press and freedom. Even the judiciary was changed in that process. I congratulate the Parliament in that country for seeking to do those things very quickly.

What was the power and influence that enabled that to happen? It happened largely because the country had signed up to an agreement, and I was able to say, “You have an obligation under your membership of the Council of Europe, and you must observe them, or I will have to report back to the Council that you are

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not observing them. The Council of Ministers would have to take some kind of action”. When European rights were being used to bring about a more democratic framework, there was a stupid argument going on in the other House about whether prisoners should have the vote and whether, therefore, we should withdraw from the convention on human rights.

What may be different in this country is certainly different there. Funnily enough, in Armenia they do not give prisoners the vote, but on the prisoner issue a number of routes can be pursued. It is the people who want to make the issue to leave Europe. Most of them thought they were in the European Union. It had to be pointed out to them in the debate that this was not the European Union but the Council of Europe, and it was different. Those circumstances are a very important part of maintaining democratic accountability.

What is the position now? We have gone through all sorts of manoeuvres and changes and the Court still accepts that we have got it wrong and wants to hear an alternative from us. What is the alternative? What are the Government doing? Are they going to observe the convention on human rights? If not, they can leave the Council of Europe, because the obligation is on Britain to observe human rights. I do not know where the Government stand on this at the moment. Perhaps the noble Baroness can tell us.

Next week I return to Armenia with a delegation to observe the new presidential elections. I certainly hope that it will go much better. I certainly have more confidence that these changes will make the election more democratic than it was on the last occasion. I am encouraged by the independent group of observers at last year’s election, who reported a 62% turnout—a pity we could not get that here, but let us leave that aside—and a quiet and peaceful, vibrant election. Fabulous. I hope that will happen when I observe the presidential election. Unfortunately, one of the presidential candidates was shot in the shoulder last week, but he has insisted that the election takes place. I am waiting to see, since it will be a cold part of the year. I hope it will be a very colourful and peaceful election.

The Council of Europe can play an important part in the democratic process. Sometimes we forget that, but they have obligations, particularly in eastern Europe, to measure up to the democratic accountability that they promised. Any of us who have had influence and been to these eastern European countries—I will leave Russia out of it for the moment—know that accountability is definitely needed. The Council of Europe can fulfil that role; it is a centre of democratic accountability. It can be used effectively, as it was in Armenia. There is still a lot of work to do, but it is not going to phase itself out and is desperately needed if we want democracy to continue in all parts of Europe.

8.39 pm

Lord Liddle: My Lords, this has been a very interesting debate. It is always an education as well as a pleasure to listen to the noble Earl, Lord Dundee. This was true on this occasion as it has been on other occasions when I have heard him speak in this House. I join my colleague, my noble friend Lord Kirkhill, in commending him for his work in the Council of Europe.

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The Council of Europe is one of the great achievements of the post-war settlement. It was the first immediate product of Churchill’s great call for Europe to unite. We have had many references to Churchill in the discussion tonight. “Europe unite” is still a very relevant call, not on the basis of conquest, as people such as Hitler and Napoleon had tried, but on the basis of democracy and human rights. In that cause, the Council of Europe has played a vital role. I wish the noble Baroness, Lady Wilcox, well in her new role at the Council. Strasbourg is a lovely place to go to, but this is also a very important role, as I think several speakers tonight have demonstrated.

The Council of Europe has gone through several cycles in its life. It was very important right at the start, in the post-war era, then lost importance with the process of European integration through the coal and steel community and then the European Community. At that time a lot of cynics talked about it as a talking shop for superannuated politicians, and like all international organisations there are always problems of efficiency in the way they are run.

The Council never lost its relevance, particularly because of the convention and the European Court of Human Rights. It is good that all we have heard in this debate is praise for this role. So often in our national life, all we get are brickbats thrown at us. It is important that while there is always a case for looking at how we can do things better and reform them, the essential principles are vital for the future.

As my noble friend Lord Kirkhill reminded us, in the period when communism was beginning to collapse and Gorbachev made his great speech about the Council of Europe being Europe’s common home—incidentally, I do not think my noble friend’s speech was the speech of a man who does not have a lot more speeches to make in this House; it was a wonderful speech to listen to—that was a turning point in the Council’s life. It had a very important role post the fall of communism. I saw it when I was an adviser at No. 10 and went to the Baltic states and saw the vital role that the Council of Europe was playing in helping the Russian minorities in Latvia and Estonia to establish their human rights. Without the Council’s intervention, that would have been much more difficult.

With the enlargement of the European Union, there are questions about what the Council’s role now is. Of course, even with an enlarged EU, there is still a lot of Europe beyond the Council, and therefore it has an important and crucial role for the future. My noble friend Lord Judd reminded us—this is relevant to the post-communist world in that part of the globe—that democracy is not just about holding elections but about human rights and the rule of law. As part of that, the promotion of local government and local democracy is crucial.

In many of these countries, local government is seen not as a democratic organ but as an instrument of the central state—an instrument of central administration to keep control, to sustain a political machine with jobs and favours, and to make sure that, when the elections come round, they go the right way. I saw that at first hand in some of the countries that I visited a decade or so ago.

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We have to be insistent that local government is not administration; it is about democracy and about communities deciding their future for themselves. Sometimes, to be frank, I think we should remember that in our own country as well. Democracy is not just about majority rule. It is important that the protection of minorities is pursued. On a visit to Ukraine, I saw the way in which the Tartars are treated in the Crimea. It is very important that these minorities are protected.

I wish to make a couple of points on what noble Lords have said and I should like the Minister to expand on them. What is her view of what my noble friend Lord Judd said in his eloquent speech about the role of the Council of Europe in the North Caucasus?

The noble Lord, Lord Greaves, made a very interesting speech, with which I totally agreed. I endorse his compliments on Keith Whitmore’s role but I think that the rest of his speech is for another day.

My noble friend Lord Kirkhill made an important point about the Council of Europe and the Maghreb. This will be one of the biggest challenges facing Europe in the future. The question is: what relationship could we have with those states?

The noble Earl, Lord Dundee, posed questions about the implementation of the Chavez report, about whether the way in which the Council operates at present is internally coherent, and about promoting the work of bilateral exchanges. Those seem to be very relevant questions.

At the end of the debate, we heard from my noble friend Lord Prescott about the real value of what the Council does. I suppose that its real value can be seen in situations such as that in Armenia, with my noble friend turning up on the doorstep to make sure that things do not go too awry. I do not mean that as a joke; I mean it seriously. That is one of the Council’s values—that people of great distinction can give advice and hold people to the standards that they say they adhere to. That is absolutely crucial.

This has been an excellent debate, and we look forward to the Minister’s reply.

8.47 pm

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, I hope that I shall be able to give your Lordships a reply. I think that I am going down with a parliamentary bug. I shall do my best but if I squeak at noble Lords, I hope they will forgive me.

First, like other noble Lords, I thank my noble friend Lord Dundee for tabling this debate. It has, as usual, been a really good debate, with contributions from people who know what they are talking about and who have been closely involved in this subject. My noble friend is a significant member of the Council of Europe and the parliamentary assembly. I am enormously grateful to him because he provided me with great support during our chairmanship of the Council of Europe, when I tried to streamline—as my noble friend Lord Sheikh said—Council of Europe elements.

An effectively operating local democracy is an essential feature of every modern democratic state. Good democratic governance is a foundation on which can

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be built prosperous and stable societies where there is respect for fundamental freedoms, human rights and the rule of law. The issue of human rights is very germane to the Council of Europe.

It is for each individual state to decide its own governance arrangements, taking into account its own circumstances, traditions and culture. Across Europe there is, rightly, a wide diversity in the form that local and regional democratic governance takes, but throughout there are common principles at heart. This is the context in which states can work together to improve, strengthen and update their own democratic governance. All speakers today have demonstrated why that is important.

As noble Lords know, and have said, the Council of Europe is potentially well placed to provide a framework and mechanisms to support this development of democracy. We referred to the Government’s chairmanship of the Council of Europe. There were two main areas in which we wanted to achieve success. Our top priority was to reform the European Court of Human Rights, the importance of which we recognise. We successfully agreed measures to improve the working of the court.

The second was to streamline the Council of Europe’s activities on local and regional democracy. As the noble Lord, Lord Sheikh, said, the great thing about the Council of Europe is that its three elements managed to work entirely separately, not coming together at all. In many cases, these elements were doing exactly the same thing without joining together. It was becoming really important, to get the best out of them, to try to bring them together. Their usefulness was seriously impaired through a lack of co-ordination and collaboration between the three elements: the Committee of Ministers, the parliamentary assembly and the congress.

As noble Lords have heard, these weaknesses were not straightforward. As has been said, there are now 47 member states in the Council of Europe. To try and get 47 member states to agree wholeheartedly to anything was not the easiest thing that we have ever done. In fact, the most we could do was to try and ensure that streamlining took place and that there was far more co-ordination and co-operation between them. The noble Lord, Lord Sheikh, made a powerful speech about what we were trying to do to ensure that everything came together.

Tribute has been paid to Keith Whitmore, who was president of the congress. He was particularly well regarded and helpful when we were trying to do what we wanted to do. Bearing in mind that he was president of the whole congress, he was not able to do anything politically, but he helped us sensibly and sensitively with what we were trying to do. We cannot underestimate what he did. Keith never lost sight of the big picture and that is very important. I also want to put on record how we were helped by the UK delegation to the parliamentary assembly, particularly my noble friend Lord Dundee, and by the contribution of the honourable Member for Mansfield in the other place.

Concerns were raised by the noble Lords, Lord Prescott and Lord Kirkhill, about where we go from here. I accept that there is still considerable room for improvement in the way in which congress and the Council of Europe work together. All the elements are

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now in place to make things better. The noble Earl asked about the future. The 47 states, through their ambassadors and after more than a year of discussion, agreed in November the programme of intergovernmental work on local and regional democracy. That implements much of the substance of the Chavez report, which was set in train by the Council of Europe precisely to see how it could work better. We have been co-operating with that, and there is now the prospect of Committee Ministers co-operating better in the future. With our influence still there in congress, I believe that we can continue to make progress.

There have been so many stirring speeches. The noble Lord, Lord Judd, strongly drew attention to the lack of democracy in some parts of eastern Europe. I say to the noble Lord that one of the elements of the work of the Council of Europe is to educate emerging nations in democracy. The fact that they are sucked into the Council of Europe is becoming absolutely essential, because it gives them confidence and security not to be blown off-course and sucked back into the communist system. That is really important for us all for the future.