We are at one, however, with the desire to improve the position on the non-payment of tribunal awards. Proposals put forward by noble Lords opposite in Committee attempted to use the financial penalty regime to address non-payment. While the intent was clear, the effect would have been limited, in that penalties would be imposed in fewer cases than those in which awards go unpaid. While non-payment is not a matter for this Bill, I can reassure noble Lords that we are taking action to address this through research into the root causes of the problem and changes to employment tribunal process.
These government amendments are a further area where we share a common view. The noble Baroness, Lady Hayter, set out in Grand Committee her concerns about the unintended consequences that might arise in the event that a financial penalty was imposed on an insolvent business. She argued that for companies in insolvency the objective of the financial penalty regime, which is to encourage employers to have greater regard to their employment obligations, was not relevant and that there was a risk, without a specific exemption, that the tribunal may choose to levy a penalty. If that were the case, the Exchequer would then have a claim on the assets of the company, leaving less available for distribution to other creditors. The potential liability might also threaten a company rescue, as the penalty may rank as an expense of an administration.
As we have made clear, the Government do not want to fetter judicial discretion in the exercise of this power by tribunals. We agree with the noble Baroness that there may be no merit in imposing a penalty where the respondent is insolvent, but we do not believe that it is necessary to carve out an exemption in statute. Instead, Amendment 24 inserts a provision in the clause to require tribunals to have regard to the ability of the respondent to pay when deciding whether a penalty is appropriate.
Such a power, which already exists with regard to cost and deposit orders, will allow the tribunal to have regard to the circumstances of the business and the wider impacts of a decision to impose a penalty. It will also apply more widely than to just insolvent companies and so could be relevant to those on the brink of insolvency, for which the imposition of a penalty might well be the final straw.
My noble friend Lady Brinton also raised concerns in Grand Committee about the effect of the £100 floor where there is a multiple claim against a large employer, particularly in the event that the employer goes bust. We agree that there are real concerns here which the previous amendment does not wholly address in so far as it does not provide the flexibility for tribunals to impose any penalty when, in fact, one may be both appropriate and affordable. Amendment 25 therefore effectively removes the floor of £100 in respect of multiple cases only, and tribunals will be able to use their discretion both as to whether a penalty is appropriate and as to the level of that penalty, subject, of course, to the upper limit of £5,000. So, if a group of 400 employees brought a multiple equal pay claim against their employer and the tribunal found that there had been a breach, with aggravating features, the tribunal could decide impose a financial penalty. The
change we are making through this amendment will mean that instead of the requirement to impose, in those circumstances, a penalty of at least £40,000, based on the original provision that set a minimum of £100 per claimant, the tribunal will have discretion to determine what level of penalty is appropriate. The upper limit of £5,000 per claimant will continue to apply.
Amendments 26, 27 and 28 make drafting and consequential changes to the clause, but they do not alter its effect. The principles of a minimum and maximum amount of financial penalty continue to apply, with penalties levied at 50% of the value of the award in single claims and up to 50% of the value of each award in multiple claims. I believe these amendments constitute a real improvement to the drafting and effect of the clause, and I beg to move Amendment 24.
Baroness Brinton: My Lords, I rise briefly to thank the noble Viscount for the amendments that he has laid before the House today. I think they go a considerable way to allaying the concerns and fears I had.
Baroness Hayter of Kentish Town: My Lords, if it will not embarrass the Minister too much, this side must also add our thanks for these amendments which, to a certain extent, take account of the issues I raised about companies in formal insolvency which risked a penalty being made by a tribunal, given that companies in insolvency clearly have financial difficulties. This is partially dealt with by Amendment 24, and we are grateful for that.
However, there are two other issues on which I would like the Minister to respond because the amendment does not prevent a tribunal levying a penalty on a company in formal insolvency. One is that in formal insolvency, the old management is no longer there. It is not in charge; it is a new, quite separate, professional insolvency practitioner, who has been brought in to sort things out. Therefore, any penalty would not be levied on the people who had done wrong, if you like, and had caused the tribunal’s award. Nor could it act as a deterrent to repeating the breach because the company would now be in someone else’s hands. The only effect would be to deplete the assets available for the creditors, including the employees, as suggested by the Minister.
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The other point concerns the need for certainty for any prospective purchaser of the business. Even the possibility of a penalty, of some indeterminate size, being outstanding against a company for the actions of the former directors makes it that bit harder for an administrator to sell on the business, when the whole point of the insolvency process is to retain companies and maintain employment. Any additional liability could lead an insolvency practitioner to conclude that trading in administration is too risky.
We assume that the Government consider tribunal chairs best placed to make a decision on the facts in each case. However, with businesses in formal insolvency the impact of the penalty is not dependent on the circumstances of the case because the cost will never be borne by the perpetrators but by the creditors. The new clause, which we welcome, ensures that the tribunal
must consider the company’s finances, but it does not lift the threat of a penalty against the wrong target and does not bring certainty to a potential buyer.
I therefore have two questions for the Minister. First, can he confirm that the Government intend to ensure that businesses in the formal insolvency process, where there is, by definition, an inability to pay, should not have to have these penalties applied to them? Secondly, given the professional time costs involved in attending and presenting evidence to a tribunal—again indicated in the Minister’s response—will the Minister confirm that written evidence that a business is in a formal insolvency process will be sufficient to demonstrate an inability to pay?
Viscount Younger of Leckie: My Lords, I do not think that I am too easily embarrassed but I am pleased indeed that these amendments largely address the issues raised by noble Lords, particularly those opposite, in Grand Committee. I am pleased that we all, as a House, feel that there is an improvement to the provisions on the financial penalties, and I commend these to the House.
I would like to address, where I can, a number of questions raised by the noble Baroness, Lady Hayter. Where I cannot address the questions—some were a little technical—I will of course write to her and copy in other Peers who are involved. First, the noble Baroness raised the issue of the amendment failing to address the question of companies in formal insolvency. I think the gist of the question was that the levy would not be imposed on the persons who did wrong. The tribunals are well used to hearing arguments around the ability to pay and it is they, we believe, who are best placed to take a view on whether the imposition of a financial penalty is appropriate in a particular set of circumstances. It will not always be the case that a penalty should not be imposed on an insolvent business—for example, a company that has been trading in administration for many months and yet has still failed to comply with its obligations. I also take the point that there needs to be certainty for purchasers, which was a further point the noble Baroness raised. I think it is best to reply to that very specific question in writing. On that note, I commend these amendments to the House.
25: Clause 14, page 10, leave out lines 20 to 34 and insert—
“This section does not apply where subsection (3) or (4A) applies.
(2A) Subsection (3) applies where an employment tribunal—
(a) makes a financial award against an employer on a claim, and
(b) also orders the employer to pay a penalty under this section in respect of the claim.
(3) In such a case, the amount of the penalty under this section shall be 50% of the amount of the award, except that—
(a) if the amount of the financial award is less than £200, the amount of the penalty shall be £100;
(b) if the amount of the financial award is more than £10,000, the amount of the penalty shall be £5,000.
(4) Subsection (4A) applies, instead of subsection (3), where an employment tribunal—
(a) considers together two or more claims involving different workers but the same employer, and
(b) orders the employer to pay a penalty under this section in respect of any of those claims.
(a) the amount of the penalties in total shall be at least £100;
(b) the amount of a penalty in respect of a particular claim shall be—
(i) no more than £5,000, and
(ii) where the tribunal makes a financial award against the employer on the claim, no more than 50% of the amount of the award.
But where the tribunal makes a financial award on any of the claims and the amount awarded is less than £200 in total, the amount of the penalties in total shall be £100 (and paragraphs (a) and (b) shall not apply).”
27: Clause 14, page 11, line 45, leave out from “(2)” to end of line 46 and insert “, (3) or (4A) by substituting a different amount”
29: Before Clause 15, insert the following new Clause—
“Personal liability for victimisation on the ground that a worker has made a protected disclosure
After 47B of the Employment Rights Act 1996 (protected disclosure) insert—
“47BA Liability of employees and agents
(1) A worker has the right not to be subjected to any detriment by any act by an employee or agent of his employer, done on the ground that the worker has made a protected disclosure.
(2) It does not matter whether in any proceedings the employer is found not to have contravened this Act by virtue of section 47BB(4).
(3) A does not contravene this section if—
(a) A relies on a statement by the employer or principal that doing that thing is not a contravention of this Act, and
(b) it is reasonable for A to do so.
47BB Liability of employers and principals
(1) Anything done by person A in the course of A’s employment must be treated as also done by the employer.
(2) Anything done by an agent for a principal, with the authority of the principal, must be treated as also done by the principal.
(3) It does not matter whether that thing is done with the employer’s or principal’s knowledge or approval.
(4) In proceedings against A’s employer B in respect of anything alleged to have been done by A in the course of A’s employment, it is a defence for B to show that B took all reasonable steps to prevent A—
(a) from doing that thing, or
(b) from doing anything of that description.””
Lord Low of Dalston: My Lords, Amendment 29 would add to the protection given to whistleblowers, or those who raise concerns about malpractice or wrongdoing at work by inserting into the Employment Rights Act 1996 provisions which make it clear that a
worker has a right not to be subjected to a detriment by a co-worker for making a protected disclosure. It would create vicarious liability on the employer by providing that anything done by a co-worker in the course of his employment, or by an agent for a principal with a principal’s authority,
“must be treated as also done by the”,
employer or principal. The amendment also provides that it does not matter,
“whether that thing is done with the employer’s or principal’s knowledge or approval”.
However, it is a defence for the employer to show that he took all reasonable steps to prevent the co-worker behaving in that way.
It is not difficult to see the need for such provisions, which are modelled on provisions in the Equality Act 2010, given all that we had heard recently about the pressure brought to bear on whistleblowers in the NHS. I do not intend to beat the arguments to death, especially because I am delighted to be able to say that there have been constructive discussions since Committee stage, in which the Government have decided to accept the general thrust of my amendment and come forward with their Amendment 34, which we will no doubt hear about in a moment. This is very much to be welcomed. The Government having brought forward their own amendment, I am happy to withdraw my amendment in due course, provided that the Minister can give me some clarification on the following point.
A concern has been raised by some trade unions regarding the personal liability of workers as set out in proposed new subsection (1E) in government Amendment 34. This allows a defence to personal liability where the employer asked the worker to do a detrimental act against a co-worker—that is to say, where the co-worker relies on the statements of the employer and it is reasonable for them to do so. This, it is feared, impliedly creates personal liability in a way that no other part of the section does. There are some concerns that this will lead to individual workers being sued.
Perhaps it would be helpful to the House if the Minister were now to outline the purpose and scope of his amendment. I beg to move.
Viscount Younger of Leckie: I thank the noble Lord, Lord Low, for suggesting that I intervene at this early stage in the debate and set out the effect of government Amendment 34. It would introduce the principle of vicarious liability into the whistleblowing protections. It has exactly the same purpose and effect as the noble Lord’s amendment. However, we feel that the drafting of the government amendment better achieves our shared objective and mirrors the provisions in the Equality Act on vicarious liability for discrimination. I look forward to further comments that the noble Lord, Lord Low, may make. I have noted some questions that he has raised, which I will attempt to address later in this debate.
Baroness Turner of Camden: My Lords, briefly, I have tabled Amendment 30 in this group because the TUC wrote to me and pointed out, among other
things, that if you left the Bill as it stood, with the protected disclosure being limited to something in the public interest, that could well be construed to mean that a worker would not be protected if he or she made a disclosure affecting the provisions on health and safety at work. The TUC wanted to make sure that a worker would be protected if he made a disclosure in regard to the health and safety and general interests of the workforce; that is the intention of my amendment. However, when I looked at the amendment moved by the noble Lord, Lord Low, it seemed to me that it covered practically everything, including that which I was intending to cover in my amendment. Therefore, it had been my intention not to move my amendment and to say that, instead, I supported Amendment 29 absolutely and completely. That is still my position.
Lord Touhig: My Lords, I warmly welcome the Government’s approach on the prevention of detriment from co-workers as set out in Amendment 34. This seems to well support the amendment tabled in the names of the noble Lords, Lord Low of Dalston and Lord Young of Norwood Green, and myself. It is good that there has been some agreement that there should be protection from bullying and harassment by co-workers, and that our concerns have been listened to. Right at the beginning, I thank the Minister, the noble Viscount, Lord Younger of Leckie, his predecessor, the noble Lord, Lord Marland, and their officials, who have actually engaged in discussions with a number of people. We have made good progress as a result.
In Grand Committee, I referred to the evidence of staff nurse Helene Donnelly at the Mid Staffordshire NHS inquiry. She was a whistleblowing nurse who told the Francis inquiry of how she was physically threatened by colleagues after raising concerns about the standards in the accident and emergency department. Robert Francis, in his report, drew upon her case and said that Mrs Donnelly was offered no adequate support. She had to endure harassment from colleagues and eventually left for other employment. Clearly, such treatment was likely to deter others from following her example; she was aware of colleagues on whom her experience had this effect.
I do not intend to detain the House, but this lady suffered all sorts of threats; she was told by colleagues, “We know where you live”, and she became so nervous that her parents or husband had to meet her in the car park when she left the hospital at night so that she would not have to walk across the car park alone in the dark. On one occasion, another nurse followed her into the toilet in their locker room, locked the door, demanded to know if she had any problems with her and began threatening her if she did. I fear that this is an example that could be repeated in many parts of the country. It is important that we make sure that people are protected when they act in the public interest and blow the whistle.
This has come up again recently. Despite the progress that we have made over the years in supporting and protecting whistleblowers, the recent case of Gary Walker, a former National Health Service chief executive, highlights another area of the law that needs to be examined, and that is gagging clauses. Mr Walker was a former chief executive of the United Lincolnshire
Hospitals NHS Trust who raised a concern about patient safety, namely the pursuit of targets for non-urgent cases within the hospital to the detriment of urgent cases. The facts were similar to those of Mid Staffordshire, and following the publication of the Francis report, an inquiry was ordered into the United Lincolnshire Hospitals NHS Trust.
I am concerned about the use of public money, because I understand that Stephen Barclay MP, a member of the Public Accounts Committee in the other place, has received confirmation that £15 million of public money has been used to gag whistleblowers. I urge the Government to do more on this issue. An amendment on gagging clauses was laid in Committee, and I invite the Minister to look at it because, in my view—and I am sure that many in the House would agree—gagging people who work in the public service and have issues they need to bring to public attention, and using public funding to stop them from doing that, is quite improper. We should do everything we can to put a stop to it. This is not just a waste of public money: it is an abuse and a threat to our liberties.
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Lord Young of Norwood Green: My Lords, I, too, welcome government Amendment 34, which implements protections that we called for in Committee. The amendment took us a bit by surprise considering that in Committee the Government were so adamant that the amendment was not necessary and when we met the Minister just a fortnight ago, we had no indication that they had changed their mind. However, no matter when the epiphany occurred, we are delighted that the Government have now conceded that specific protection is needed. I was going to say that we should not look a gift horse in the mouth, but given the problem with horses and food standards perhaps that is not an appropriate metaphor.
As the noble Lord, Lord Low, has explained, Amendment 29 would place vicarious liability on employers for the actions of their employees where bullying or harassment of whistleblowers by their co-workers occurs. My noble friend Lord Touhig gave the details of the case involving nurse Helene Donnelly, so I will not reiterate them. However, one of the key findings of the Robert Francis inquiry into the Mid Staffordshire NHS Foundation Trust was around the culture of intimidation and lack of transparency which prevented more individuals speaking out and blowing the whistle on bad practice, which ultimately led to patient safety being put at risk.
Throughout the passage of this Bill, we have argued that the thrust of Clause 15 is to increase the barriers to protected disclosures just at the time when events from the Savile case to Mid Staffs show us that we should be making it easier, not harder, for individuals to feel able to blow the whistle on serious misconduct. We welcome the fact that on this area, as with the Government’s later amendment around good faith, and on blacklisting, the Government have listened to concerns raised across this House and in another place and have brought forward amendments to change the direction of travel. Nevertheless, as has been mentioned by other noble Lords during this debate, there is a need for the Government to clarify the extent to which
liability attaches to the worker who perpetrated the harm. The judgment of Lord Justice Elias in the case of NHS Manchester v Fecitt makes apparent the need for clarity on this point, as the case turned on the fact that protection afforded under PIDA for whistleblowers was against retributive action by the employer and not co-workers. I would be grateful if the Minister would confirm that the lack of liability attached to the worker will in no way impact on the extent of the liability now placed on the employer for the actions of their employees.
Viscount Younger of Leckie: My Lords, as I said earlier, we agree with the aims of this amendment and think that noble Lords are right to seek to mirror the equivalent provisions in the Equality Act 2010. However, the first part of the amendment does not entirely reflect the relevant provision in the Equality Act and, as drafted, that part of the amendment would not enable a whistleblower to bring a claim against a co-worker if they cause them a detriment. The equivalent provision in the Equality Act does allow for claims against co-workers and we think that it is right that the legislation is the same here.
Before I conclude, let me explain this thinking, particularly in view of the comments made by the noble Lord, Lord Low of Dalston. Individuals have a personal responsibility to make sure that they act in the right way towards people with whom they interact. The law recognises this in many different ways. For example, the law of negligence makes you personally liable if you crash your car into someone and contract law makes you liable if you misrepresent an item that you are selling to somebody. If you are a taxi driver and you crash your car into someone, or a salesman and you misrepresent an item you are selling, the principle of vicarious liability means that your employer will be liable, too. We think that the same should be true in whistleblowing. If you cause a co-worker a detriment after they blow the whistle, perhaps by bullying them, you should be liable for that conduct and your employer should be liable, too. This amendment therefore will encourage workers to behave appropriately to each other and will encourage employers to have the right processes in place to protect whistleblowers. I hope that noble Lords will agree with this approach and I ask the noble Lord, Lord Low, to withdraw his amendment.
Amendment 30 relates to the Government’s introduction of a public interest test to the whistleblowing protections. As noble Lords will be aware, the Government have introduced the test to rectify the loophole which has occurred as a result of the decision in the Parkins v Sodexho case. This decision widened the scope of the protection to include disclosures concerning breaches of personal contracts rather then being restricted to matters of public interest. This amendment would amend the test the Government have introduced. It would mean that a qualifying disclosure would have to be in the health, safety and general interest of the workforce, and this is somewhat narrower than the test which currently exists in Section 43B of the Employment Rights Act 1996. This would impose a stricter qualifying criteria than the test which will exist in Section 43B after the Government’s amendment introducing a public interest test comes into effect. The result would be less
protection for whistleblowers and this means that many may choose not to make disclosures, despite the fact that the disclosures would be in the public interest. The Government’s introduction of a public interest test is simply to amend the legislation in light of the Parkins v Sodexho ruling and return it to operating within its original remit.
Before I conclude, I want to respond to some comments that the noble Lord, Lord Touhig, made relating to the Mid Staffordshire fiasco. The Government had intended to call for evidence on vicarious liability and other whistleblowing areas following the completion of the Bill. However, the Mid Staffs inquiry has provided evidence which was previously lacking in relation to vicarious liability. It is therefore prudent to make a change now through the Enterprise and Regulatory Reform Bill to introduce protections into the whistle- blowing framework. I hope that that answers the point about the timing of our amendment alluded to by the noble Lord, Lord Young of Norwood Green.
The noble Lord, Lord Touhig, also raised the use of taxpayers’ money to gag whistleblowers. I think that he mentioned the sum of £15 million. As I am sure he is aware, the use of settlement agreements to resolve a dispute is a common practice in both the public and the private sectors as a means of avoiding the cost and stress of employment tribunals. They often involve a sum of money. However, in the cases to which he refers, they cannot buy silence as such clauses are null and void in the whistleblowing context. Therefore, I hope that the noble Lord will not press the amendment.
Lord Low of Dalston: Will the Minister respond to the point I raised about proposed new subsection (1E) and personal liability? Does he have anything to say about that?
Viscount Younger of Leckie: I thank the noble Lord for that reminder. Although I do not have anything to say about it, I will most certainly write to him to clarify the points that he raised.
Lord Low of Dalston: That would be extremely helpful. I am very grateful for the Minister’s suggestion in that regard. I echo the words of the noble Lord, Lord Touhig, in thanking the Minister and his officials for the constructive approach that they have adopted to these amendments. I am sure that the Francis report and the revelations about bullying and intimidation and a culture hostile to disclosure in the NHS have weighed with the Government. I am glad that they have taken what I think is a wise political decision to recognise the force of the arguments for importing the vicarious liability provisions of the Equality Act into the whistleblowing legislation. Indeed, I think the Minister has made the point that the Government’s amendment is a little stronger than mine. On that basis, I am very happy to withdraw the amendment.
Clause 15 : Protected disclosures
31: Clause 15, page 12, line 28, at end insert—
“(4A) The Secretary of State shall make amendments to this section under the powers of subsection (4) to provide for the definition of “workers” to include applicants.”
Lord Young of Norwood Green: Opposition Amendment 31 would use the new power introduced in Committee by the Government to amend the definition of “worker” in Section 43K of the Employment Rights Act in order to extend protections to job applicants.
The purpose of this amendment is to make clear within the Public Interest Disclosure Act, the legislation which establishes specific protection for whistleblowers, that individuals should not face discrimination from consideration for future employment because they have made a protected disclosure in the past. The blacklisting of so-called troublemakers by companies is an issue that is particularly important at the moment. Evidence of blacklisting on a vast scale, including allegations in relation to major public projects such as Crossrail and the Olympic Park, is incredibly serious. We now know of the existence of secret files on thousands of workers in the construction sector, including by the construction firm Balfour Beatty, which has confirmed that it conducted blacklisting checks on individuals seeking work on the construction of Olympic venues. Many of those affected still have no idea that they were included on the secret construction blacklist, only uncovered by the Information Commissioner’s Office in a raid in 2009. This action will have resulted in many people—possibly thousands—being denied employment and their livelihoods, many of them on the basis that they have raised concerns over issues of misconduct or health and safety in previous workplaces, where it is absolutely in the public interest and the interest of the surrounding workforce that these concerns be raised. This is a national scandal and the Government must do everything in their power now to ensure that, first, if blacklisting is proven, adequate sanctions are taken against the perpetrators and, secondly, the law is strengthened to provide greater protection for workers in the future.
The amendment would use the new power that the Government have introduced to extend protection to job applicants from discrimination by an employer on the ground that they have been a whistleblower in the past. At present, if a prospective employer accesses a blacklist or becomes aware of a job applicant’s whistleblowing history and decides on that basis not to give them a job, the applicant has no cause for legal action, a point highlighted by Mr Justice Langstaff in the case of BP v Elstone in 2010, when he stated:
“It is true that the statute does not prohibit action against a whistleblower should he be recognised as one when an applicant for employment, as it might have done”.
The Equality Act 2010 provides protection at the point of recruitment, but, just as is the case for harassment of whistleblowers by co-workers, it is crucial that PIDA—the legislation providing specific protection for whistleblowers—is brought into line with these provisions.
Since Committee stage, we have had a very fruitful discussion with the Minister on this specific point, during which the Minister indicated that the Government would be willing to look at the inclusion of job applicants within the definition of “worker” for the purposes of PIDA. This was followed up in a letter from the Minister, in which he stated that, in relation to the new power in the Bill to expand this definition, before exercising this power, the Government are planning a call for evidence on these and other issues,
“such as the need to protect job applicants who have suffered because they were blacklisted for blowing the whistle”.
I thank the Minister for listening on this important issue. I ask him to confirm to the House that this is still the Government’s intention, that the Government are minded to include job applicants within this definition, and that this review will be carried out soon after the enactment. I beg to move.
Viscount Younger of Leckie: My Lords, the issue of whistleblowers finding it hard to find a new job once they have blown the whistle against an employer was discussed in Grand Committee, and the Government agreed to take the issue away, as the noble Lord, Lord Young of Norwood Green, has said, and consider the problem that had been presented.
The Government very much understand the concerns here and, in considering this issue and looking at the provisions we are putting in place, are confident that if there is evidence showing that this problem exists, it can be addressed through secondary legislation. By taking a power to amend the definition of “worker” in Section 43K of the Employment Rights Act by secondary legislation, the Government have allowed themselves time to consider the scope of the definition of “worker” and to determine who needs to be covered. If changes, such as the inclusion of job applicants or other groups, are then necessary, these can be achieved in a relatively short time by making an order to amend Section 43K. With that in mind, I hope noble Lords will agree that there is no reason to make this decision at this point without first considering any evidence to confirm the existence of a problem. Once this Bill has completed its passage, the Government will launch a call for evidence to establish whether there is a case for reviewing the legislation, including its scope. The Government have agreed to meet the chair of the PCaW whistleblowing commission, Sir Anthony Hooper QC, and look forward to discussing whether and how we might work together.
I hope that this goes some way towards reassuring the noble Lord, Lord Young, that the Government are taking action in this area. With that in mind, I hope that he can agree to withdraw his amendment.
Lord Young of Norwood Green: I have listened carefully to the Minister’s remarks, which I welcome broadly. I trust that the secondary legislation will be affirmative legislation. I hope that he regards this issue as time critical. From listening to the tenor of his remarks, I feel that he does. We believe that the evidence is out there. Having heard the Minister’s comments and hoping that he will take into account the points I have made, I beg leave to withdraw the amendment.
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32: Clause 15, Divide Clause 15 into two clauses, the first (Disclosures not protected unless believed to be made in the public interest) to consist of subsection (1) and the second (Extension of meaning of “worker”) to consist of subsections (2) to (11).
Viscount Younger of Leckie: My Lords, government Amendment 32 is simply a matter of drafting. It divides into two clauses Clause 15, which, after the amendment made in Grand Committee, is rather long. This will make the provisions easier for people to read.
Amendment 33 is the government amendment on the good faith test in whistleblowing claims. Amendment 33 amends Part 4A of the Employment Rights Act 1996 to remove the requirement that certain disclosures be made in good faith. As a result, a claim will not fail as a result of an absence of good faith. Instead, the employment tribunal will have the power to reduce the compensation awarded to the claimant where it concludes that a disclosure was not made in good faith. This is an issue that my noble friend Lord Marland indicated we should return to on Report.
I note the argument that by introducing a public interest test the Government have inadvertently created a double hurdle for potential whistleblowers to navigate. To succeed, a claimant would need to show that they reasonably believed that the disclosure was in the public interest and that it was made in good faith. It is not the Government’s intention to make it harder for whistleblowers to speak out. It remains a government commitment that they have the right protection in law. However, I can see that by fixing the legal loophole created by Parkins v Sodexho in the way that the Government propose, there is a risk that some individuals may be concerned that it is too hard to benefit from whistleblowing protection, and therefore they will decide not to blow the whistle. We have listened to the arguments made by noble Lords on this point, but the Government remain unconvinced that the good faith test should be removed in its entirety. There are instances where it is important that the tribunal is able to assess the motives of a disclosure, even where it was in the public interest.
The judiciary tells us that the good faith test is well understood and utilised. As such, the Government have not sought to alter the substance of the test, but have reconsidered how it should affect the outcome of a claim. Currently, the good faith test can affect the success of a claim. This amendment moves the test so it will be relevant only when considering remedy. Instead of a claim failing, the judge will have the discretion to reduce a compensation award by up to 25% in the event that they find the disclosure was not made in good faith. We believe this to be an acceptable compromise, and my conversations with the noble Lord, Lord Stevenson, the noble Lord, Lord Mitchell, who is in his place, and the noble Lord, Lord Young, have assured me that this goes a good way to addressing their concerns.
Amendment 37 sets out the relevant transitional provisions for the whistleblowing provisions of the Bill. The changes apply only where the qualifying
disclosure is made after the date on which this section comes into force. Amendment 92 provides for the commencement of most of the whistleblowing clauses of the Bill. I beg to move.
Lord Touhig: My Lords, on the good faith test, I certainly welcome Amendment 33, as I think it does mitigate the effects of the introduction of a public interest test as set out in Clause 15. The removal of the good faith test at the initial stages of a whistleblowing claim cuts down the number of hurdles that a whistleblower has to satisfy in order to establish a prima facie case. Having worked closely with the charity Public Concern at Work from the very first time I introduced a whistleblowing Bill when I was a Member of the other place, I know that it, too, welcomes the Government’s response here, as it certainly attempts to strengthen the protection of whistleblowers.
The publication of the Francis report, about which I spoke a moment ago, and the recent revelations about the NHS chief executive, show, in my view, that there is a compelling case for reviewing whistleblowing. We had attempted to persuade the Government in the past that the Public Interest Disclosure Act should be reviewed. I certainly welcome the Minister’s remarks. If I understood him correctly, he said that the Government will work very closely with Sir Anthony Hooper, who is to chair the commission that Public Concern at Work has now set up to look at these matters. I am very pleased that the Government will be co-operating with the commission. It will start taking evidence in March. It is in the interest of all of us that we make sure that as much information as possible goes to this commission so that if a strong case is made for further review, revision or amendment of the Public Interest Disclosure Act, we can do that together in the interest of protecting people who blow the whistle to protect us.
Lord Young of Norwood Green: My Lords, I welcome government Amendment 33, which implements an amendment tabled by my noble friend Lord Wills in Committee. This amendment addresses concerns that were raised across all sides of the House that the Government’s decision to introduce a public interest test to the Public Interest Disclosure Act would discourage whistleblowers from coming forward by placing an additional legal test on individuals in order for them to be assured of protection from retributive action by their employer.
It was already the case that in order for whistleblowers to qualify for protection under PIDA it had to be shown that the individual had made such a disclosure in good faith. Throughout the passage of the Bill, we have argued, alongside Public Concern at Work, the organisation that first lobbied for the protection of PIDA, that the combination of a public interest test with the existing good faith test will create legal uncertainty over how these two conditions should interact and potentially dissuade many more individuals from coming forward with concerns. As I and many other noble Lords have repeatedly said, now is not the time to be putting up more barriers to individuals who may blow the whistle but are scared of the consequences, as the Francis report highlighted.
The Government need to be doing all they can to foster a culture of greater openness and transparency within institutions such as the NHS in order to ensure that people feel supported and listened to when raising concerns. We welcome the move by the Government to remove the good faith test from PIDA, leaving just public interest as the primary test for any disclosure made in relation to protections under that Act. It implements what we have been calling for throughout, which is greater clarity and certainty around the Act, and we thank the Government for listening and responding to those concerns. I also endorse the points made by my noble friend Lord Touhig about the forthcoming commission and examining the need to review PIDA. Once again, I thank the noble Viscount and we will support the amendment.
Viscount Younger of Leckie: I thank noble Lords for all the discussions we have had on this important issue. We are all agreed that it is important that the legislation supports whistleblowers when making the very difficult decision to blow the whistle. The Government have outlined their reasons for this provision and I hope that it meets the concerns that noble Lords had in this area. I thank them for flagging this issue to the Government and, in particular, I thank the noble Lord, Lord Wills, whom I see in his place, for his help and advice on this matter. I hope that noble Lords agree with this approach.
33: After Clause 15, insert the following new Clause—
“Power to reduce compensation where disclosure not made in good faith
(1) Omit the words “in good faith” in the following provisions of Part 4A of the Employment Rights Act 1996 (protected disclosures)—
(a) subsection (1) of section 43C (disclosure to employer or other responsible person);
(b) paragraph (b) of section 43E (disclosure to Minister of the Crown);
(c) subsection (1)(a) of section 43F (disclosure to prescribed person).
(2) In section 43G of that Act (disclosure in other cases), in subsection (1)—
(a) omit paragraph (a);
(b) in paragraph (b), for “he” substitute “the worker”.
(3) In section 43H of that Act (disclosure of exceptionally serious failure), in subsection (1)—
(a) omit paragraph (a);
(b) in paragraph (b), for “he” substitute “the worker”.
(4) In section 49 of that Act (remedies for detriment suffered in employment), after subsection (6) insert—
(a) the complaint is made under section 48(1A), and
(b) it appears to the tribunal that the protected disclosure was not made in good faith,
the tribunal may, if it considers it just and equitable in all the circumstances to do so, reduce any award it makes to the worker by no more than 25%.”
(5) In section 123 of that Act (compensatory award for unfair dismissal), after subsection (6) insert—
(a) the reason (or principal reason) for the dismissal is that the complainant made a protected disclosure, and
(b) it appears to the tribunal that the disclosure was not made in good faith,
the tribunal may, if it considers it just and equitable in all the circumstances to do so, reduce any award it makes to the complainant by no more than 25%.””
34: After Clause 15, insert the following new Clause—
“Worker subjected to detriment by co-worker or agent of employer
(1) In section 47B of the Employment Rights Act 1996 (protected disclosures), after subsection (1) insert—
“(1A) A worker (“W”) has the right not to be subjected to any detriment by any act, or any deliberate failure to act, done—
(a) by another worker of W’s employer in the course of that other worker’s employment, or
(b) by an agent of W’s employer with the employer’s authority,
on the ground that W has made a protected disclosure.
(1B) Where a worker is subjected to detriment by anything done as mentioned in subsection (1A), that thing is treated as also done by the worker’s employer.
(1C) For the purposes of subsection (1B), it is immaterial whether the thing is done with the knowledge or approval of the worker’s employer.
(1D) In proceedings against W’s employer in respect of anything alleged to have been done as mentioned in subsection (1A)(a), it is a defence for the employer to show that the employer took all reasonable steps to prevent the other worker—
(a) from doing that thing, or
(b) from doing anything of that description.
(1E) A worker or agent of W’s employer is not liable by reason of subsection (1A) for doing something that subjects W to detriment if—
(a) the worker or agent does that thing in reliance on a statement by the employer that doing it does not contravene this Act, and
(b) it is reasonable for the worker or agent to rely on the statement.
But this does not prevent the employer from being liable by reason of subsection (1B).”
(2) In section 48 of that Act (complaints to employment tribunals), in subsection (5)—
(a) for “includes, where” substitute “includes—
(a) where”;
(b) at the end insert—
“(b) in the case of proceedings against a worker or agent under section 47B(1A), the worker or agent.””
Clause 19 : Transitional provision
35: Clause 19, page 14, line 29, at end insert—
“( ) Section (ACAS: prohibition on disclosure of information) does not apply in relation to a disclosure, or a request for information, made before that section comes into force.”
“( ) Section (Dismissal for political opinions: no qualifying period of employment) does not apply where the effective date of termination of the contract of employment in question is earlier than the date on which that section comes into force.
“Effective date of termination” here has the meaning given by section 97(1) of the Employment Rights Act 1996.”
37: Clause 19, page 14, line 37, at end insert—
“( ) Section (Disclosures not protected unless believed to be made in the public interest), (Power to reduce compensation where disclosure not made in good faith), (Worker subjected to detriment by co-worker or agent of employer) or (Extension of meaning of “worker”) does not apply to a qualifying disclosure made before the section comes into force.
“Qualifying disclosure” here has the meaning given by section 43B of the Employment Rights Act 1996.”
39: After Clause 19, insert the following new Clause—
“Employee consultation(1) Regulation 11 of the Information and Consultation of Employees Regulations 2004 (S.I. 2004 No. 3426) is amended as follows.
(2) After paragraph (1) insert—
“(1A) In any event an employer shall start the negotiation process set out in regulation 14(1)—
(a) not later than 6 April 2014 if the undertaking has 1,000 or more employees;
(b) not later than 6 April 2015 if the undertaking has 500 or more employees; and
(c) not later than 6 April 2016 if the undertaking has 250 or more employees.””
Lord Lea of Crondall: My Lords, the amendment has a great deal to do with enterprise. Perhaps I may begin with an anecdote. A British company recently wanted to take over a Swedish company, and when the MD went to Gothenburg there was a meeting over lunch with the works council. The workers’ chief representative on this body asked him the following question: “Mr Struthers, if you take over this company, do you think it will help us to increase our world market share?”. Mr Struthers reported when he got home that he had been flabbergasted; no such question had ever been put to him in such circumstances in a lifetime of working in British industry and commerce.
We in this country have reached a crisis of non-representation of employees in most of British industry and commerce. I am talking here about a lack not of co-determination, as in Holland, Germany and Scandinavia—we will no doubt have time to talk about that next month—but of the most rudimentary processes for meaningful information and consultation, IC, with the workforce generally. By that I mean, as the rubric on the IC default mechanism states,
“consultation with a view to reaching agreement”.
According to the ACAS Workplace Employment Relations Survey, WERS, the proportion of firms or enterprises with no joint consultative committee at any level increased from 65% in 2004 to 76% in 2011.
The conclusion is that the CBI pays lip service to this principle only on odd days of the week. Local team briefings and so forth are the most that is generally provided; and the research shows that the local manager often knows as little about what is happening in the company as a whole as the workers on the shop floor—and he or she is certainly in no position to engage in authoritative consultation about such questions as restructuring, which could lead, for example, to collective redundancies that are simply handed down as a fait accompli, thereby shutting the proverbial stable door.
This is the American business model of accountability exclusively to the shareholders—one might say to the share price—side by side, in case I overlook it, with rocketing increases in inequality of pay from top to bottom, with contempt for any notion that the enterprise is “one happy family”, as used to be said, or even that, “we are all in this together”.
Years ago, there used to be interest in these matters in the Department of Employment and Productivity, but now we have an ideology in the Department for Business, Innovation and Skills—I should make it clear that I am not suggesting that it is open to individual civil servants to change that ideology—that is totally orientated to the notion not only that we should remove the concept of two sides of industry but that one side of it is now without a voice or role in any sort of decision-making. Therefore, in practice, BIS does as little as possible to make progress on joint consultation. Indeed, it puts huge resources, side by side with the CBI, into killing off any real advance, particularly if it arises from EU legislation. All this is in the supposed interests of a competitive economy. What a blinkered view it is that is reflected in this ideology on what makes a modern competitive enterprise.
One model is of autocracy, with the interests of the few far outvoting the interests of the many. This ideology is more or less universal in BIS, with the notable exception of the Secretary of State, Vince Cable, who, in the light of the current debate on the scandals in top remuneration and tax avoidance, has described the IC regulations as “a potentially powerful mechanism” that,
“has been underutilised to date”.
Let me therefore try to do Mr Cable a favour, otherwise he will have to await the return of a Labour Government in two years’ time. In that broader context, it is now clear in Labour Party policy, to give one instance, that there will be worker representation on the remuneration committees of boards. You do not need to be Einstein to figure out that for that to be meaningful it is necessary for there to be a substructure for two-way communication.
One reason why the debate has got stuck is the ideology of what is called, “the British voluntary system of industrial relations”. It is true that the so-called voluntary system meant that it was not laid down by the state. However, that did not mean that there was no general system. On the contrary, it was a very substantial system, both through collective bargaining and other types of collective representation, depending on the subject, on such matters as are identified in the
default list in the IC regulations. The fashionable point being made is, “Well, what have the unions been doing about it?”. Let me be very frank and ask the Minister a direct question. Is he aware that so far as triggering the IC regulations are concerned, to which I shall refer in more detail in a moment, in the vast majority of cases union representatives cannot even get through the gate, never mind to the canteen at lunchtime? Some senior figures in the central arbitration committee have even been heard to say that this is the intention—that is, that this is a “non-union” channel, meaning that union reps should not set foot in the place unless they are recognised. Unions are therefore damned if they do, and damned if they do not.
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Research by Professors John Purcell and Mark Hall from Warwick Business School is particularly telling. If one wants effective consultation of employees as a group, documentation and pre-meetings of the employed representatives must be organised. For the CBI to imply that one is needed, but not the other, is illogical, to say the least. The CBI is in danger of grossly overplaying its hand, as it deemed the TUC to have done some 30 years ago. It is now the best part of 10 years since the TUC and the CBI were asked by the Labour Government to try to reach some agreed formula for the implementation—or transposition, in the jargon—of the regulations in this country. Experience has shown that that policy formula does not work. I doubt that the TUC or the CBI would contest that statement. The need now, at the minimum, is to provide that firms above a certain size should have a consultative body with a serious purpose. I strongly contest the notion that this obligation can ever be met by unilateral management e-mails, which are patently not the same thing at all.
Our UK regulations at present require 10% of the employees to sign a request for the body to be established. This is often referred to as the trigger. However, this entails a Catch-22 of classic proportions. The very people who might be able to help with the logistics of getting this off the ground are not allowed through the door. We know anecdotally that the whole process is an obstacle course which may have a stooge body at its end. For the individuals concerned, at a personal level there are certainly strong discouragements. These are people who, with no benefit to themselves, stick their head above the parapet for a proposition which is ridiculed by management and is very complicated to explain, out of the blue, to the average worker.
What is the immediate priority? It is to remove the trigger gradually from large companies, starting with 1,000 or more employees in 2014; 500 in 2015; and 250 or more in 2016. Removing the trigger whereby one has to gather 10% of employees’ signatures would remove the likelihood that it would be left to the employer to organise the employees. These numbers would within a couple of years take us to about half the private sector of the economy. The Office for National Statistics defines the other half of the economy—below 250 employees—as small and medium enterprises. Above that level, we have half the value added in the private sector and approaching half the employed. There are only some 6,500 firms involved in
this group—the bigger firms—out of 9 million firms in the country as a whole, but they constitute half of the private sector of the economy, employing some 10 million workers.
Finally, for the avoidance of any doubt whatever, I want to be very clear that a trigger of a smaller number—for example, 5%—would be no more satisfactory than 10%. No: the system is broke, caput, dead duck. For the larger companies it simply encourages them to make mischief; removing it would be the first step in putting some substance into what is currently an empty shell.
This reform is pellucidly in the national interest. It would, over time, materially widen the scope and horizons of many millions of workers who at present are in no way recognised as being more than a cog in the wheel of industry and commerce. It will, in 10 or 20 years’ time, be seen as an absurdity that we so undervalued our fellow citizens that their citizenship had to be left outside the door of their workplace. This is not the 19th century; it is the 21st. This is a reform whose time has come.
Lord Monks: My Lords, I rise to support the amendment moved by my noble friend Lord Lea. The amendment concerns the information and consultation arrangements with which I have long been associated, first at the TUC and then at the European TUC. Its origins lie in some unexpected and sudden plant closures in the early 1990s, in particular a Renault plant over in Brussels. As a result, the European TUC pressed the European authorities to introduce a directive requiring advance information to be provided about imminent changes to representatives of the workforce, and then for consultation to take place with a view to reaching agreement. A directive was drafted to that effect.
It was a battle to persuade the then Labour Government to agree to this directive, but they did so in 2001 and the directive was enacted at European level. It is fair to say that they remained unenthusiastic about it. The TUC and the CBI were asked to come up with an agreement, and from the start it was clear that both the Government and the CBI wanted to qualify the universal right to information and consultation by introducing this minimum threshold of support. I acknowledge that it was also clear that some union leaders were apprehensive that the directive might be used to undermine the collective bargaining process, either by groups of workers using the consultation channel competitively with the negotiated channel, or by employers wishing to withdraw or to marginalise trade union recognition. This influenced the TUC to accede to the 10% threshold which is now UK law in these regulations. In view of the subsequent history, this agreement was a mistake. The law has had little effect—my noble friend referred to the recent book by Professors Purcell and Hall of Warwick Business School.
Since the law was introduced, we have had the crash of 2007-08, and of course the economy remains very fragile. Not only have the banks experienced corporate governance failures on a very large scale, but there have been more general failures too. The most spectacular has been the way that executive pay and bonuses have continued to surge upwards at double-digit rates every year. All this has been occurring at a time when
recession has been very marked for nearly everybody else; real pay levels generally have been in decline; and British performance levels on nearly all measures have been poor.
I acknowledge that Ministers in the Government have struggled to find a way to stop top executives helping themselves, and to break this culture of conspicuous excess. They have not succeeded. The Business Secretary has said that the regulations could be used to influence executive pay and bonuses. However, here lies the reason behind this amendment. Most of the companies in the UK, large and small, do not have any arrangements comparable to a German works council or a French comité d’entreprise: bodies which can hold top executives to account. Many UK companies have hidden behind the 10% threshold which, as has been explained, is a number very hard to achieve for worker representatives. It is true that unions, too, with conspicuous exceptions, have not been very active in this area, finding the 10% threshold just too arduous to jump over.
It is therefore time to revisit these provisions. The noble Lord, Lord Heseltine, has made a persuasive case to this House for the UK economy to become more like Germany’s. A hallmark of the German model is the system of works councils and collective bargaining, widely used to keep managements and workforces in close step, and to keep companies on the path of long-term, sustainable success, not simply focusing on short-term shareholder value and lavish, self-rewarding systems. The amendment aims to help the UK on to a better path than is currently the case. It is time to make this law work, to align ourselves with the most successful European economies and to change our law—and for all concerned to make that change effective.
Baroness Brinton: My Lords, I rise briefly to say that the noble Lord, Lord Lea of Crondall, has exposed a problem with the practical arrangements that have come up through the 10% trigger. I, too, studied the Warwick Business School research, which makes a valuable point—which perhaps the CBI missed—about the combination of having documentation available and also having pre-meetings so that employees can get together to discuss issues and to be well informed. This is a particular problem for very large companies on split sites. I would be grateful if the Minister would explain the response that there might be in order to overcome this problem. Even if it is not helpful to enact it in legislation, perhaps the Government might encourage the members of the CBI to relax the trigger or make the facility such that it is not such a barrier, because clearly this is an issue.
Lord Young of Norwood Green: My Lords, I will be brief because my noble friends Lord Lea and Lord Monks covered the territory very well. I was glad to see that they received some support from the noble Baroness, Lady Brinton. I doubt that the Minister will rush to fully embrace the suggestion that the 10% trigger should be changed. However, one thing that the previous Government did and that this Government have maintained is employee engagement. Many statistics demonstrate that the more companies engage with
their employees, the more they will improve their productivity. That was demonstrated in 2007-08 when companies were in serious trouble and there was a very positive response from trade unions. Therefore, there is a justification for the proposal made by my noble friend Lord Lea and supported by my noble friend Lord Monks, and I await with interest the Minister’s response.
Viscount Younger of Leckie: My Lords, I thank noble Lords for their interventions in this short debate. I will start by clarifying a point about the 10% hurdle. It does not need to be 10% of employees at a single point in time. Cumulative requests over a six-month period totalling 10% would trigger the requirement. It may be helpful for noble Lords to understand that.
I share the view of the noble Lord that employees can make an important contribution to the commercial decision-making process—an issue brought up by the noble Lord, Lord Lea of Crondall. They have a shared interest in the long-term success of the organisation, as well as having experience and knowledge that can increase operational effectiveness. The noble Lord, Lord Young, made a strong case for the inclusion of employees to this extent.
There are many ways in which employees can be consulted by their employer—formally or informally, voluntarily or as a result of statutory requirements. The Information and Consultation of Employees Regulations 2004 are one such formal mechanism. They implement a European directive and were developed through a landmark framework agreement between the CBI and the TUC. If 10% of employees request formal information and consultation arrangements, the employer is required to introduce such arrangements in accordance with the regulations. Employees can make the request direct to the employer, but, if they are concerned about raising their heads above the parapet, they can make the request to the Central Arbitration Committee and their names will be kept confidential from the employer.
It is true that the take-up of the right to formal information and consultation has been low, but I do not believe this means that we should remove the 10% trigger. If there is no demonstrable interest from employees, it is surely unreasonable to require employers to introduce information and consultation machinery. Employees are unlikely to be committed to engagement and discussions risk becoming desultory, wasting the time of all concerned. Nor should it be difficult for a workforce to secure the necessary number of signatures if formal information-sharing and consultation is of genuine value. Unions can play a role by ensuring that employees are aware of their rights and by helping them make the case more widely to colleagues. As the Parliamentary Under-Secretary of State for Trade and Industry, the noble Lord, Lord Sainsbury of Turville, said at the time, the regulations,
“balance the rights and responsibilities of employees and employers”.—[
Official Report
, 21/12/04; col. 1712.]
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I will answer some questions raised by noble Lords in this short debate. The noble Lord, Lord Lea, raised the issue of the involvement of unions. I noted that he
thought that there might be occasions when union leaders were shut out at the door—I think that was his phrase. However, as I explained, the ICE regulations apply whether or not a workplace is unionised. They provide a voluntary mechanism that empowers employees.
The noble Lord, Lord Monks, referred to the role that works councils could play in delivering restraint in directors’ pay. The Government believe that the measures for dealing with directors’ pay that are set out elsewhere in the Bill are the most appropriate way to change the current landscape in this area.
Finally, the noble Lord, Lord Lea, mentioned the findings of the 2004 Workplace Employment Relations Survey. The first findings from 2011 show that there has been growth in methods of communication that focus on the communication of information. Such communication includes meetings, staff surveys and the like. Many of these will be informal mechanisms as opposed to the formal structures provided by ICE, to which I alluded earlier. Clearly, communication is happening and has increased from 2004, when the previous WERS survey reported. Therefore, I ask the noble Lord to withdraw his amendment.
Lord Lea of Crondall: I am afraid I can describe the dialogue between this side of the House and the Government only as a dialogue of the deaf. I referred to people having no voice. The Minister referred to people getting e-mails or this, that and the other, but he did not say that they would have a voice. He said that there was progress in this field. Does he not accept the figure that I read out, which showed that there had been a 10% increase from the mid-1970s in the proportion of enterprises with zilch consultation and no machinery—no works councils and no joint consultative committees at all? The noble Lord implied that I had inaccurately said that unions were locked out at the gate, and purported to correct me.
Viscount Younger of Leckie: I did not imply that the figures were inaccurate; I just noted that the noble Lord had mentioned them. I am sure that what the noble Lord said about unions being shut out at the door was accurate, but I would be interested to hear examples of this.
Lord Lea of Crondall: That is very interesting. The impression given was that there was another route via the Central Arbitration Committee for workers who had the same obstacle to which I referred. However, the organising of workers across an enterprise is no straightforward matter for a union; you cannot just ring up one person.
The picture that HMG seem to have is quite incompatible with what the workplace employment relations survey describes. When it comes to a so-called voluntary model, it will not have escaped the Minister’s attention that in Scandinavia, the Netherlands and Germany, the works council is part of the machinery and does not require this complicated obstacle course. All I am saying is that the Minister should go away and reflect on the fact that 10 years of experience has produced progress backwards and that it is about time the Government revisited this issue, not wait for the
progress that will be made in two years’ time under the Labour Government. I beg leave to withdraw the amendment.
Clause 20 : The Competition and Markets Authority
40: Clause 20, page 15, line 8, at end insert—
“( ) In all its operations the issue of benefit or detriment to consumers shall be paramount, and where appropriate consumers shall be held to include small businesses.”
Lord Whitty: My Lords, we now move to the competition and consumer part of this Bill. I move Amendment 40 and speak to the other amendments in this group, all of which are in my name. I have been briefly promoted to the Front Bench for this section and I should declare my past and present interests. I am a former chair of Consumer Focus and of the National Consumer Council, and I am very pleased to see one of my distinguished predecessors, the noble Baroness, Lady Oppenheim-Barnes, here for this section. I am also currently an honorary vice-president of the Trading Standards Institute.
Most of this group of amendments are designed to ensure that consumer interest runs through the whole of this part of the Bill and the whole of the operations of the new Competition and Markets Authority. The Bill starts out very well. Clause 20 states commendably and unequivocally:
“The CMA must seek to promote competition”—
“for the benefit of consumers”.
It is clear in this part of the Bill that competition is not an end in itself or an ideological description of what the capitalist system should look like; it is about the benefit of consumers and avoiding detriment to them. There may be wider public interest issues in relation to mergers, cartels and anti-trust issues, but this part of the Bill deals with the competition dimension, and the definition right at the beginning relates to the benefit of consumers.
I regret, however, that once that declaration is past, the operational requirements placed on the CMA hardly mention consumers. They are not mentioned in Clause 23 on mergers, not in Clause 24 on interim measures, not in Clause 27 on cross-market issues, not in Clause 31 on anti-trust, and so on. After Clause 23, no clause mentions consumers in the main part of the Bill. There is an amendment from the Minister that does, but there is no formulation here.
Moreover, there are in this Bill 50 pages of detailed prescriptions as to how the CMA should carry out its task. I find that very odd in the first instance. Indeed, I think it was to the noble Lord, Lord Marland, that I suggested that Schedules 4 and 5 be scrapped entirely except for one paragraph, which says in effect that the CMA board should conduct its own procedures. The detailed laying down of procedures is perhaps
slightly tangential, as it offers a target to the very litigious oligopolists who have to deal with regulators. I am sure that the sector regulators, the OFT and the Competition Commission have experience of people picking up tiny bits of the regulations and catching the regulators out on these competition and cartel issues. By extension, it is also important for legal reasons that there is a reference to consumers throughout these clauses and schedules, if indeed we are maintaining them.
There is one reference to consumers, in Schedule 5, paragraph 63, which simply says “Omit section 8” of the Enterprise Act 2002, which it states promotes good consumer practice. This is very odd, and it is clear that the way the people who have designed how the CMA will operate have not ensured that consumer interest runs through the whole DNA of the new CMA. These amendments attempt to change that.
Amendment 40, the key amendment in this group, says that benefit or detriment to consumers is paramount in all operations. This is my basic theme for this evening. Incidentally, my amendment also includes a reference to small businesses. Much of the trading and some of the detriment of oligopolistic and monopolistic practices affects small businesses as much as it affects individual consumers. I have therefore explicitly put that point in. Indeed, I received a letter today from the Federation of Small Businesses very much supporting that reference.
Amendments 42 and 43 would make it explicit that the chair of the CMA is subject to the appropriate Select Committee of another place. This is partly so that it can judge whether the putative chair has consumer interest at heart in his or her approach to the job. Amendment 44 would require the CMA’s annual plan to include an assessment of the benefits to consumers of its actions and investigations. Amendment 47 would require CMA panel members to have experience or knowledge of consumer affairs. Amendment 48 takes it slightly further and would require that three members of the panel have direct experience of consumer representation or of consumer law.
It is particularly important to state this here about the panel operations, because although Schedule 4 does not prescribe any consumer experience, it prescribes a lot of other experience that people on the panel should have. It says that some should have experience of newspapers, an interesting point to which I may return at a later stage. It says that some should also have experience of communications, utilities, other business, and Northern Ireland specifically, but there is no reference to experience in the consumer world.
Amendment 51 deals with the deletion which I just mentioned: that of Section 8 in the OFT’s responsibility for promoting good consumer practice. That general requirement on the new body to inherit the OFT’s responsibilities for promoting good consumer practice surely should be located somewhere in the remit of the new body.
We need to rectify the omission of consumer references. My Amendments 41 to 44, 47, 48 and 51 need to be treated as a batch, because they all attempt to do so and to put the consumer first.
Two other amendments in this group deal with a slightly different issue. Amendment 52 deals with the issue, which I have raised with the Minister before, of how some of the other functions that are currently with the OFT are devolved to other organisations. Clause 22 allows the OFT to hand on and transfer functions to the CMA or Ministers, but in practice a lot of what the OFT currently does is going elsewhere: to trading standards, to Citizens Advice, to the National Trading Standards Board, which has no clear corporate identity let alone a statutory identity. The Minister has written to me, this issue has been addressed in papers on the consumer landscape, and I am not necessarily against it, but surely if we are looking at what is happening to the end of the OFT and the rise of the CMA, we ought to be clear in this Bill where those current issues are going.
Some have already happened; Consumer Direct has already gone to Citizens Advice. Some are being talked about; scams procedures are being dealt with by Trading Standards. But some are going to bodies that are themselves under serious pressure. According to UNISON members in Trading Standards—I have no reason to dispute this—Trading Standards across England and Wales has suffered a 13% cut in funding and a 15% cut in staff, which has led to a 26% cut in inspections and a 29% cut in prosecutions. If we are loading further functions on to Trading Standards, we need to ensure the resources are there to do so.
The Minister is likely to say—indeed, it may even be scheduled in our forward business—that some of this is going to be dealt with by orders under the Public Bodies Act. However, for a complete picture of what is happening to the OFT’s responsibilities, surely we need some reference in this Bill. We need to be clear where those responsibilities are going and that the new CMA, wherever it is devolved to, will ensure that those responsibilities have a national focus as well. While the day to day operation may go down to Trading Standards or to Citizens Advice, there needs to be a statutory body that is responsible for the effective overall delivery of consumer education, consumer information and inspection and for dealing with widespread consumer scams.
6.30 pm
Amendment 54 is more straightforward in the sense that it deals with the staff of the OFT and the Competition Commission. There is a reference to them being treated under TUPE or similar arrangements. My previous understanding—this was a bone of contention during the Public Bodies Bill—was that the staff would be treated with the equivalent of TUPE through Cabinet Office orders. If “similar” raises certain anxieties, I do not see why the Government are not prepared to put “equivalent” into the text of the Bill. That is a slightly separate point, which can be dealt with easily by the Minister accepting that amendment, or at least producing a form of words which means the same thing.
The bulk of these amendments are to ensure that consumer interest, including the consumer dimension of small businesses, runs through the whole of the CMA in the way that “Blackpool” runs through the stick of rock. At present, frankly, the Bill does not look like that. It is mentioned at the front but it is
not followed through. The amendments would lead to some improvement and go some way towards rectifying that. I beg to move.
Baroness Oppenheim-Barnes: My Lords, I have to start my remarks with the words, “Oh dear”. We have reached a disappointing spot in the advance of the protection of consumers, with the part of the Bill to which the noble Lord, Lord Whitty, referred leaving out, as it does, all the references that he wants to add about consumer protection. One reason is that the CMA and the consumer body are very different from what exists today. There is direct access for consumers to the Office of Fair Trading. If that is not enough and can be improved, why not improve it? The same applies to all the competition clauses throughout the Bill. They may be good—some of them probably are—but I do not see that what exists today warranted such a total and revolutionary change in the way that these matters have been discussed, enacted and valued by those consumers, consumer organisations and others who have benefitted from it in the past.
The noble Lord, Lord Whitty, spoke in particular about the phrase “promoting competition”. I am not quite sure how you promote competition—I have no idea—but what is important is to ensure that there is protection against anti-competitive practices that are directly harmful to the interests of consumers. It is as simple as that. I do not see the proposed amorphous body getting to the kernel of the problems that will affect consumers.
The noble Lord, Lord Whitty, rightly said that the trading standards departments will need a great deal more financial support than they are likely to get. They are respected by consumers and others alike. They have dealt successfully over the years and most people have thought of them as among our most trustworthy and available resources. They are being given a much more important role, which I am content about, and I am confident that they will, given the right resources, be able to carry it out. They have had the experience and, as long as they are given the opportunity to digest the role, they will know what they will be required to do in borderline cases.
Once again I come to the point about access for consumers. This will now go because the Office of Fair Trading is going. Apparently, collections will be made from the experiences of citizens advice bureaux and of the trading standards officers themselves. They will receive information about the big consumer concerns that will confront them but, once again, there is no clear process in the Bill—and certainly not the funding—for the citizens advice bureaux, which are all staffed by voluntary and diverse workers, to go to their top echelons. They will have to collate the information and carry out research on it, which they have not yet had to do to such an extent, and then pass it on to the trading standards officers. They will discuss it with them and then decide whether the matter—it could be a competition matter—should go to whichever of the respective bodies. That will be their responsibility.
As I pointed out in Grand Committee—I apologise for raising this matter again—the funding of the National Association of Citizens Advice Bureaux, which was
announced by the noble Lord, Lord Marland, at Second Reading, was going to be £1.7 million. I was able to look up the figures for 1979, when we were closing some citizens advice bureaux. The National Association of Citizens Advice Bureaux said that it needed more money, and I gave another £1.7 million then, making the amount up to £3 million altogether. In today’s money, goodness knows what that would be. Since Grand Committee, I have looked even further and have found that in 1981, while the process was still going on, I increased funding to £4 million for the citizens advice bureaux alone. If it cannot do its job properly because it has not got enough money, then the whole chain of information going down through trading standards, to the CMA, to whoever will be receiving it, will not have strong enough links. I hope that my noble friend will be able to tell us something encouraging about that.
I do not propose to say anything about the Monopolies Commission replacement part of the CMA at this stage. That may be more appropriate later.
Viscount Younger of Leckie: My Lords, Amendments 40, 41, 47 and 48 recognise the importance of consumer protection and consumer interests and I thank the noble Lord, Lord Whitty, for the opportunity to debate this important issue. I also know that the noble Baroness, Lady Hayter, has spoken strongly in favour of consumer rights and I note and acknowledge her interest in this area.
As we said in Grand Committee and in the other place, empowering and protecting consumers is a vital element of our approach to promoting growth in the UK economy. Indeed, in the coalition agreement, the Government committed to take action to protect consumers, particularly the most vulnerable, and to promote greater competition across the economy. That is why we have put consumer interests at the heart of the CMA, and in particular, by the following: first, by giving the CMA a single general duty to seek to promote competition for the benefit of consumers; secondly, to retain the OFT and Competition Commission’s markets powers that aim to make markets work better for consumers; thirdly, by giving the CMA primary expertise on unfair contract terms legislation and additional consumer enforcement powers to address business practices that distort competition or impact on consumer choice in otherwise competitive markets; and lastly, by transferring the OFT’s super-complaint function, which provides a fast track process for complaints by consumer bodies.
Given the vital role the CMA will play in protecting and promoting consumer interests, and this vast range of consumer functions, we do not consider that these amendments are required. Further, in some respects the amendments could produce the wrong result. Amendment 40 cuts across existing legislation where the CMA is required to consider a range of objectives. For example, in carrying out its regulatory appeals functions, the CMA must take into account the objectives of the sector regulators, which may include media plurality or energy security. A requirement for consumer benefit or detriment to be paramount in all its operations might therefore cast doubt on the ability of the CMA to carry out its regulatory appeals functions fairly.
Amendment 40 would also provide that “consumers” include SMEs where appropriate. While I agree with the sentiment, I do not believe that it is actually necessary to deal with SMEs in this way. The existing legislation has not to date constrained the OFT from considering business to business markets, because if there are competition issues in these markets they will usually ultimately affect end consumers as well.
With regards to Amendments 41, 47 and 48, as a core function of the CMA, I expect the board and panel members to have great expertise in consumer issues. However, it would be inappropriate to establish a legislative criterion of this kind for appointments to the CMA board and CMA panel. We should not impose unnecessary constraints on the sort of people who can be appointed to these. As is currently the case for the Competition Commission panel, we expect the CMA panel to be made up of a range of experts, such as lawyers, economists, accountants and business people. Between them, they have the range and depth of expertise to deliver on inquiries across the economy, including on consumer issues and different markets.
I now turn to Amendment 44. In the current regime, the OFT is not subject to a statutory requirement to estimate impact on consumers in relation to its work. At present the OFT and Competition Commission estimate the impact of their past work on consumers over a rolling three-year period, using a common approach. Looking backwards helps to make the impact estimates more precise, and looking over three years helps level out peaks and troughs in impact. Requiring the CMA to estimate impact of its future work would be significantly less precise and in many cases difficult to forecast. Merger cases, for example, are responsive to market developments, and the CMA cannot pre-empt the outcome of independent market inquiries. This amendment could also leave the CMA at risk of judicial review if forecasted consumer benefits were not realised, and it could incentivise CMA to underestimate, and underachieve.
On Amendment 51 we do not consider that the OFT’s function to promote “good consumer practice” needs to be transferred to the CMA. As we said during our debate in Committee, in the current regime, Section 8 of the Enterprise Act 2002 gives the OFT a general function of promoting good consumer practice, which recognises its leading role in providing consumer education, its function in relation to approving consumer codes and its international consumer advocacy work.
In the new consumer landscape, the Citizens Advice service will take the lead role in providing consumer-facing education from the OFT as well as taking over responsibility for consumer advocacy from Consumer Focus; the Trading Standards Institute will have the role of approving consumer codes. The CMA will continue to have an international consumer role—for example, to represent the UK at the OECD’s Committee on Consumer Policy. A specific provision has been made for this in paragraph 19 of Schedule 4 to the Bill.
6.45 pm
Equally, we do not consider that Amendment 53 is required. The amendment enables the Secretary of State to make a scheme in relation to the transfer
of the rights, properties or liabilities of local authorities, Trading Standards and the Citizens Advice service, to a Minister or the CMA. It does not allow for the transfer of consumer functions. Therefore, in effect the amendment would allow the Secretary of State to transfer, for example, staff or property from local authorities, Trading Standards and Citizens Advice to the CMA or a Minister without transferring the relevant consumer functions. We do not believe that this is desirable or workable.
I take note of the comments that were made by my noble friend Lady Oppenheim-Barnes. It may be an opportunity to reiterate again the aims of the Government combining the competition and consumer landscape in the reforms that they are delivering, to provide a better deal overall for consumers. The objective is to set out clearer responsibilities and to have better co-ordination between the enforcers and the consumer advisory bodies. For clarity, I should say that the Citizens Advice service will be the home for consumer advocacy, education, advice and guidance. Consumer enforcement will largely be the responsibility of Trading Standards, with the new National Trading Standards Board being responsible for prioritising national and cross-local authority boundary enforcement. The CMA will work with Trading Standards to ensure that there are no gaps in enforcement. As mentioned above, it will have primary expertise on unfair contracts terms legislation. Business education will be shared by the CMA and Trading Standards.
As was mentioned by the noble Lord, Lord Whitty, these changes will be made using two orders under the Public Bodies Act, and it is proposed that the first order laid in the House on 12 December 2012 will transfer Consumer Direct from the Citizens Advice services and modify the consumer enforcement legislation to enhance the role of Trading Standards. Finally, it is envisaged that the second Public Bodies Act order will transfer the functions of Consumer Focus to the Citizens Advice service. It will also transfer the OFT’s estate agency functions.
My noble friend Lady Oppenheim-Barnes also raised the issue of funding for the Citizens Advice service. I recognise my noble friend’s long experience in this particular area. The Citizens Advice service will be the home of consumer advocacy, as mentioned earlier, including education, advice and guidance. It will allocate an additional £3.72 million to carry out general consumer advocacy work, which was previously carried out by Consumer Focus. The Citizens Advice service will receive the appropriate budgets for energy and postal services advocacy, currently provided to Consumer Focus, once the regulated industries unit transfers to them in 2014.
I now turn to Amendments 42 and 43. There is already a system in place, introduced by the previous administration, for agreeing between Parliament and the Executive that the public appointments of government will be subject to a pre-appointment scrutiny hearing. Under this system, the Secretary of State discusses and agrees with the chair of the relevant Select Committee which appointments will have such a hearing. The Government in their response to the Liaison Committee’s report of Select Committees and public appointments
encouraged Ministers to engage with Select Committee chairs to ensure that the right appointments are receiving Select Committee scrutiny prior to appointment. The current system works well and the Government do not believe that there is any advantage in formalising this process in legislation in respect of individual roles such as the chair of the CMA. For this reason, we do not think it necessary for there to be a statutory requirement for this process.
Finally, I turn to Amendment 54. Ensuring that the new Competition and Markets Authority has the right expertise and experienced staff is essential. Clause 22 gives the Government the power to provide protection to staff in circumstances where TUPE is not engaged, and to make schemes to transfer staff to the new authority. I hope that this helps to answer the question raised by the noble Lord earlier. It would be inappropriate to accept Amendment 54 because applying the exact provisions of TUPE may not be appropriate in these circumstances. For example, the Secretary of State may wish to incorporate within any transfer scheme a provision that allows for greater flexibility in relation to post-transfer contractual variations so as to enable the CMA to seek to harmonise staff terms and conditions through agreement. This can assist the process of harmonising disparate reward packages and thus may reduce the risk of unlawful discrimination, particularly on equal pay claims, and avoid unnecessary barriers to reform.
I hope that noble Lords will forgive me for giving rather a lengthy answer to these amendments and I hope that the noble Lord will be reassured to some extent by my explanation of how the CMA will operate its consumer role. I hope that he will not press his amendment.
Baroness Oppenheim-Barnes: At the beginning of his response, my noble friend said that the fast track would be a helpful element in the Bill. I have looked everywhere but I cannot see anything about a fast track. It would be helpful if he could tell us a little more about it. Who is at the beginning of it and who is at the end, and where is the information coming from?
Viscount Younger of Leckie: I thank my noble friend for that point. Given that it is a very specific question, I will most certainly write to her.
Lord Whitty: My Lords, I thank the Minister for that reply and the noble Baroness, Lady Oppenheim-Barnes, for her interventions. I am afraid that I am not hugely reassured. If the Minister is correct in saying that the issue of the consumer interest or the protection against consumer detriment runs through the Bill, it is important that that is reflected in it at various points. I did not expect him to accept all my amendments, but I thought that he might be a little more benignly disposed towards one or two of them than he appears to be. Part of the problem is that the detailed prescriptions as to how the CMA will work, running to 50 pages with no mention of consumers at all, will be seized upon by corporate lawyers and people representing those who wish to continue anti-competitive and anti-consumer activities. They will say, “You have to abide
by this and never mind about the general broad principles. That is what it says here, and it does not mention consumer detriment or protection at all”.
There is a lack of specific reference in the procedural aspects to consumer experience in terms of the membership of the board and the panels. I would not mind so much if other expertise was not mentioned, but consumer expertise is not mentioned. As the noble Baroness, Lady Oppenheim-Barnes, has said, early on there were reassuring noises that the access that consumers have to OFT services will not be diminished, but nothing in what the Minister said actually explained how that would be the case when everything else is shifting things away from the OFT down the line to trading standards offices, citizens’ advice bureaux and so forth. They may well be able to do a decent job. I hope that they will, and that they have the resources, funding and staffing needed to do so, but there must be some responsibility centrally to make sure that that happens. That is not reflected in this Bill and it is not reflected in the terms of the new CMA. I think that the Minister really ought to accept at least some of my amendments. Amendment 40 summarises all of this, and therefore I shall seek the opinion of the House.
6.53 pm
Contents 155; Not-Contents 178.
CONTENTS
Adams of Craigielea, B.
Adonis, L.
Alli, L.
Alton of Liverpool, L.
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Bakewell, B.
Bassam of Brighton, L. [Teller]
Beecham, L.
Bhattacharyya, L.
Bilston, L.
Blood, B.
Borrie, L.
Bradley, L.
Bragg, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Browne of Belmont, L.
Browne of Ladyton, L.
Campbell-Savours, L.
Carter of Coles, L.
Clancarty, E.
Clark of Windermere, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Crawley, B.
Davies of Coity, L.
Davies of Oldham, L.
Davies of Stamford, L.
Donaghy, B.
Drake, B.
Dubs, L.
Eatwell, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Ford, B.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Golding, B.
Gordon of Strathblane, L.
Goudie, B.
Grantchester, L.
Grenfell, L.
Griffiths of Burry Port, L.
Grocott, L.
Hanworth, V.
Hardie, L.
Harris of Haringey, L.
Hart of Chilton, L.
Hastings of Scarisbrick, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Hollick, L.
Hollis of Heigham, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Jones, L.
Judd, L.
Kennedy of Southwark, L.
King of Bow, B.
Kirkhill, L.
Knight of Weymouth, L.
Lea of Crondall, L.
Liddell of Coatdyke, B.
Liddle, L.
Lipsey, L.
Lister of Burtersett, B.
McAvoy, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McKenzie of Luton, L.
Mar, C.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Mitchell, L.
Monks, L.
Moonie, L.
Morgan, L.
Morgan of Ely, B.
Morris of Handsworth, L.
Morris of Yardley, B.
O'Loan, B.
O'Neill of Clackmannan, L.
Oppenheim-Barnes, B.
Parekh, L.
Patel of Bradford, L.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Reid of Cardowan, L.
Richard, L.
Rosser, L.
Rowe-Beddoe, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Scotland of Asthal, B.
Sherlock, B.
Simon, V.
Smith of Basildon, B.
Smith of Leigh, L.
Soley, L.
Stevens of Kirkwhelpington, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Touhig, L.
Truscott, L.
Tunnicliffe, L. [Teller]
Turnberg, L.
Turner of Camden, B.
Uddin, B.
Wall of New Barnet, B.
Walpole, L.
Warner, L.
Warwick of Undercliffe, B.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Wilkins, B.
Winston, L.
Worthington, B.
Young of Norwood Green, L.
NOT CONTENTS
Addington, L.
Ahmad of Wimbledon, L.
Anelay of St Johns, B. [Teller]
Armstrong of Ilminster, L.
Ashdown of Norton-sub-Hamdon, L.
Astor of Hever, L.
Attlee, E.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Best, L.
Black of Brentwood, L.
Blencathra, L.
Bonham-Carter of Yarnbury, B.
Bowness, L.
Brabazon of Tara, L.
Bradshaw, L.
Brinton, B.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Buscombe, B.
Byford, B.
Cathcart, E.
Chadlington, L.
Chester, Bp.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L.
Cormack, L.
Cotter, L.
Courtown, E.
Craigavon, V.
Crickhowell, L.
De Mauley, L.
Dear, L.
Deighton, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Dykes, L.
Eaton, B.
Eden of Winton, L.
Elton, L.
Erroll, E.
Falkner of Margravine, B.
Faulks, L.
Fellowes of West Stafford, L.
Fink, L.
Flight, L.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freeman, L.
Freud, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
Glasgow, E.
Glenarthur, L.
Gold, L.
Goodlad, L.
Goschen, V.
Grade of Yarmouth, L.
Greenway, L.
Hamwee, B.
Hanham, B.
Harris of Peckham, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Home, E.
Hooper, B.
Howard of Rising, L.
Howe, E.
Howe of Aberavon, L.
Hunt of Wirral, L.
Hussein-Ece, B.
Inglewood, L.
Jay of Ewelme, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jones of Cheltenham, L.
Jopling, L.
King of Bridgwater, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Laird, L.
Lang of Monkton, L.
Lawson of Blaby, L.
Leach of Fairford, L.
Lee of Trafford, L.
Lester of Herne Hill, L.
Lexden, L.
Lingfield, L.
Liverpool, E.
Loomba, L.
Luke, L.
Lyell, L.
MacGregor of Pulham Market, L.
Mackay of Clashfern, L.
McNally, L.
Maddock, B.
Magan of Castletown, L.
Mancroft, L.
Mar and Kellie, E.
Mawhinney, L.
Miller of Chilthorne Domer, B.
Montrose, D.
Moore of Lower Marsh, L.
Morris of Bolton, B.
Moynihan, L.
Nash, L.
Newby, L. [Teller]
Newlove, B.
Noakes, B.
Northover, B.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L.
O'Cathain, B.
Parminter, B.
Perry of Southwark, B.
Phillips of Sudbury, L.
Popat, L.
Randerson, B.
Razzall, L.
Reay, L.
Renfrew of Kaimsthorn, L.
Ribeiro, L.
Roberts of Llandudno, L.
Roper, L.
Ryder of Wensum, L.
Sanderson of Bowden, L.
Seccombe, B.
Selborne, E.
Selkirk of Douglas, L.
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Shephard of Northwold, B.
Shipley, L.
Shutt of Greetland, L.
Smith of Clifton, L.
Spicer, L.
Stedman-Scott, B.
Stewartby, L.
Stoneham of Droxford, L.
Stowell of Beeston, B.
Strasburger, L.
Taylor of Goss Moor, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Winchester, B.
Tope, L.
Tordoff, L.
Trimble, L.
Tugendhat, L.
Tyler, L.
Vallance of Tummel, L.
Verma, B.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Warsi, B.
Wasserman, L.
Wei, L.
Wheatcroft, B.
Wilcox, B.
Willis of Knaresborough, L.
Younger of Leckie, V.
7.08 pm
Schedule 4 : The Competition and Markets Authority
Amendments 41 to 44 not moved.
Lord Whitty: My Lords, Amendment 45 is a more straightforward amendment in which I am trying to save the Government from themselves. I hope they will see the sense of that.
The meaning of this amendment may be a bit obscure from reading it on paper because it simply says “leave out paragraph (g)”. It would actually delete the reference to Monitor which, as noble Lords will know, is the expanded economic regulator for the National Health Service. The Government would really be very wise not to allow the terms of this Bill and the role of the Competition and Markets Authority to get entangled in the issues of the health service. It is therefore quite strange to me that the Government have kept the reference to Monitor. Paragraph 16 gives the CMA responsibility for writing a report every year on the other regulators as to how they have conducted their concurrent competition regulations and enforcement, and how they have been using their competition powers. Given that we are constructing a new organisation it is understandable that it is going to do that.
We have had some serious issues in relation to some of the sector regulators using other powers rather than their competition powers. For example, Ofgem has tended to use its licence powers rather than competition powers and has been very resistant to a referral to the Competition Commission; one could argue that Ofwat has managed to introduce hardly any competition into the sector at all, and so on. But those are very different from the issues that are going to confront Monitor, and to ask the CMA, in looking at these other regulators, to have a periodic assessment that applies the same terms as the utilities and transport regulators to the health service seems extremely foolish.
In part, the Government recognise this because their amendment in Committee also included Monitor, in terms of the ability of the Secretary of State to instruct the CMA to take over the competition responsibilities of the sector regulators, and they dropped that. That was extremely wise. This is a lesser issue but it is important, because during all the debates on the Health and Social Care Bill, Ministers here and in another place said that while they were introducing a degree of competition into the health service, competition would not outweigh other considerations.
Competition has a place in the National Health Service. One can argue about how much but it is never paramount. I do not think that even the most ardent advocates of a change in the National Health Service would regard competition as being more important to patients and the delivery of the National Health Service than the integration of services and the assurance that the quality of services in physical and social terms was important, and the degree to which competition existed was very much a secondary or tertiary issue. To give the CMA powers of supervision of a complex regulator such as Monitor, the prime consideration of which is to deliver a National Health Service that is integrated, available and flexible for the patient, and to try to override that with competition assessments that are equivalent to those used in the gas or electricity industries or the railways is not a sensible move.
Regrettably, this is also part of a wider picture. Orders are being produced under the Health and Social Care Act that also give rise to anxieties about
the assurances given to us during the passage of the Act—I am looking particularly to the Liberal Democrat part of the coalition because the assurances were primarily directed at them—that competition would not outweigh other considerations in the regulation of the health service and that in particular the health service would not be open to the introduction of general competition policy, particularly EU competition law. That was a clear reassurance given us by the noble Earl, Lord Howe, and Ministers in another place throughout the difficult period when we were dealing with the Bill. It may be that the Government have changed their mind but certainly the combination of Monitor appearing in this Bill, supervised by the CMA, and the pushing of the boundaries of competition in some of the draft orders that are coming under the Health and Social Care Act seems to be a worrying tendency.
Tonight we are dealing with only this Bill. There is no reason at all why the effectiveness of the CMA is affected one way or another by whether it judges and marks Monitor, but the anxieties of having Monitor in that list are considerable. Any debate on the National Health Service is always highly emotive and not always entirely rational, but it would be wise for those who are promoting the role of the CMA in this respect to keep out of that area. I hope that the Minister and his colleagues will see the sense of doing just that. I beg to move.
7.15 pm
Lord Mackay of Clashfern: My Lords, this is a matter that I find rather difficult. The noble Lord, Lord Whitty, has made a pretty important point in relation to Monitor. I had a certain amount of interest in the Health and Social Care Bill, although I am not a Liberal Democrat, as it happens—
Lord Mackay of Clashfern: Yet, yes. I will not predict the future. I do think that the duties of the general competition authorities and the duty of Monitor are fairly different in their character. I look forward with interest to what my noble friend has to say because I am sure he will have a very full answer to this. Until I have heard that, at the moment I am doubtful about the wisdom of putting Monitor under the authority of the general competition authorities.
Viscount Younger of Leckie: My Lords, the Bill strengthens the regime for the competition powers that will be held concurrently by the Competition and Markets Authority and sector regulators. The CMA will have stronger powers to co-ordinate Competition Act enforcement work and sector regulators will have explicit duties to consider using the Competition Act.
As part of these arrangements, and to ensure appropriate transparency and accountability, the CMA will be obliged to publish an annual report on the operation of the concurrency arrangements and the use of concurrent competition powers by the CMA and the sector regulators with concurrent powers. Amendment 45, moved by the noble Lord, Lord Whitty, would exclude Monitor from the scope of this report.
After lengthy debate on the Health and Social Care Act, Parliament decided that Monitor should have concurrent competition powers. Under the reforms being implemented through that Act, competition will not be pursued as an end in itself. We have said that competition will be used to drive up quality and will not be based on price. Nothing in this Bill affects this—certainly not the requirement to publish a report on how the concurrency arrangements have worked and the use of concurrent powers—or the Government’s commitment that Monitor will have concurrent competition powers so that a sector-specific regulator with healthcare expertise can apply competition rules.
However, Monitor’s concurrent competition powers in relation to the provision of healthcare services in England need to be co-ordinated with the CMAs, which can apply competition law in wider markets than Monitor; for example, in cases affecting the whole of the UK and in markets for pharmaceutical products or mobility aids. It is therefore quite right that Monitor be included within the concurrency regime and the CMA’s report on concurrency in particular.
I will address the question raised by my noble and learned friend Lord Mackay of Clashfern. I hope I can go some way towards allaying his fears, particularly regarding the application of competition law in health services, which was also alluded to strongly by the noble Lord, Lord Whitty. Competition law will not apply to the NHS Commissioning Board or clinical commissioning groups in their roles as commissioners of services because the case law is clear that, where public bodies carry out an activity of an exclusively social nature, neither that activity nor the bodies’ purchase of goods or services for the purpose of that activity will generally be treated as an economic activity. Also, a significant proportion of services delivered by foundation trusts would not be subject to competition law, as these NHS services are not provided in a market. They include accident and emergency, trauma, maternity, obstetrics, critical care and many others, particularly in remote rural areas.
A foundation trust will typically deliver some services to which competition law potentially applies and some to which it will not. If the intention or effect of an agreement was to prevent, restrict or distort competition, Monitor will, in considering a case, look at the benefits to patients alongside the detrimental effects to competition. When deciding on a remedy or penalty, Monitor will take into account the beneficial deterrent effect of a formal decision and possible fine against the impact that its payment might have on the public body and ultimately the taxpayer. Therefore, I ask the noble Lord, Lord Whitty, to withdraw Amendment 45.
Lord Whitty: My Lords, I thank the Minister and I thank the noble and learned Lord, Lord Mackay, for his intervention, which posed the question more succinctly than I did. The Minister has not effectively answered it. He has underlined that the situation in the health service is complex, but saying that the commissioning groups and others are exempt in their monopsonic dimension as buyers does not mean that other entities in the health service are exempt as providers. The aim of the health service is to look after the interests of patients, whereas consumers in most markets are served,
with some exceptions, by greater competition. In the vast majority of situations the default position must be that consumers are better off if there is more competition. That is not the case when you need integrated and specialist services, and a whole chain of different services for different conditions in the health service. This is not equivalent to railway companies competing through franchises, or to gas and electricity companies, or even banks, competing; they are covered by the other concurrent regulators.
This situation is different and the report would have to be different. I am not against the CMA and Monitor co-operating but you should not have the CMA, with the kind of approach that it has to competition policy, being a sort of prefect, marking Monitor’s extremely complex task in relation to its competition powers. I know that I shall not persuade the Minister tonight but I ask him to reflect on this, and on how this could look to the public and to the professions in the health service. The Government are adopting an unnecessary rod for their own back and they would be wise to reconsider. However, for the moment, I withdraw my amendment.
Lord Whitty: My Lords, I beg to move Amendment 46, which also deals with concurrent regulators. There are two aspects to my amendments. Amendments 46 and 64 deal with the opposite issue to the one that I was discussing with Monitor. Amendment 69 deals with general relations between the CMA and concurrent regulators. The Government have also introduced a raft of amendments in this area and, broadly speaking, they are welcome. As they deal to a large extent with Amendment 69, I shall leave that to the end.
The first two amendments deal with the issue of the Financial Conduct Authority, which has just been established by the Financial Services Act. Strictly speaking, this is not quite about concurrent powers, but if we establish a new competition and marketing authority with wide-ranging powers across markets in different sectors, it is odd that the financial sector is not mentioned in this Bill. Some of the biggest consumer, competition and quasi-cartel issues that have arisen in the financial sector, particularly over the past few years, are among the most important issues of market structure and consumer protection. Somehow, the CMA does not seem to have a relationship with that new authority. Indeed, there are two authorities here. There is the Prudential Regulation Authority, which has some impact on the consumer side as well, but let us focus on the FCA.
If they are not to be put together at the end of a list of other concurrent regulators, there ought to be a reference somewhere in the Bill to the role that the CMA plays in relation to the FCA and the financial
sector. Its omission is very odd. Maybe the Treasury has seen off BIS in a way that bodies such as DECC, Defra, the DCMS and the Department for Transport cannot in relation to their regulators, but it is wrong. If you talk to the average consumer at the moment, the markets, consumer interests and consumer protection issues are primarily about the financial sector—from the failure of the banks through to debt and insurance issues. To exclude mention of that sector from the Bill is very odd. Simply adding it to this list may not be the correct solution, but I hope that the Minister can tell me why it is not there and how it could be included.
Amendment 69 deals with general relations between the CMA and the sector regulators. That is important because, as it stands, prior to the Government’s new amendments, Clause 46 suggests a relationship rather like that between the hammer and the nail. It actually provides for the Secretary of State to take all the competition powers from the sector regulators and hand them over to the CMA. Stated starkly in that way, it seems wrong. My amendment began from the point that the relationship should be based on co-operation and perhaps reporting systems, and should move only in extremis to the possibility of the CMA taking over those powers. As I read the noble Lord’s Amendment 70 and some other amendments, it goes a long way towards that. I shall listen to what the Minister says but I will withdraw my amendment in favour of his. I beg to move.
Viscount Younger of Leckie: My Lords, the Bill will strengthen the concurrency regime. I have already noted that the CMA will have stronger powers to co-ordinate Competition Act enforcement work and sector regulators will have explicit duties to consider using the Competition Act before taking regulatory enforcement action. We also expect that the CMA will work in close co-operation with the sector regulators in applying their concurrent powers.
Consistent with this approach, the Government also want to send a further signal about the need for strong and effective use of competition powers across the regulated sectors. They have proposed that, if the new concurrency arrangements do not work and if a regulator, other than Monitor, which the Government have excluded from the scope of the power, fails to produce better outcomes, the Secretary of State will have a power to ensure that the OFT and then the CMA take sole responsibility for applying concurrent competition powers in that regulated sector.
There was a debate in Grand Committee about providing a more explicit focus on co-operation between the CMA and regulators, and ensuring that the power is not used without early warning to the regulator. We have considered these points carefully and have therefore proposed Amendments 62, 63, 65, 66, 67, 68 and 70. These amendments require that regulators, the CMA and relevant devolved Administrations be consulted on the potential use of the power prior to the launch of a more public consultation on a proposal to use it. This ensures that there will be early discussions with regulators on any concerns giving rise to a proposed use of the power and allows them an opportunity to respond.
The amendments will also set out a purpose for the power: the promotion of competition within any market or markets in the United Kingdom for the benefit of consumers. This prevents the use of the power for any purpose other than improving the competition regime and ensures the focus of the competition regime remains benefitting consumers.
7.30 pm
Within this group are some technical amendments. Government Amendment 52 also touches on the sector regulators. It makes a consequential change to the Civil Aviation Act 2012 to refer to the CMA instead of the Competition Commission. Government Amendment 89 is a minor and technical amendment on the commencement of the reserve power, and Amendment 90 is a further minor and technical amendment on commencement.
I will now make a few points about the amendments tabled by the noble Lord, Lord Whitty, on the sector regulators. Amendment 46 would include the Financial Conduct Authority within the scope of the CMA’s concurrency report. After lengthy debate on the Financial Services Bill, Parliament decided that the FCA should have a competition remit and mandate to use its powers to promote competition, but it will not have concurrent competition powers under the Competition Act or the Enterprise Act. Instead, there are special arrangements to enable the FCA to pass issues to the CMA and for the CMA to be able to scrutinise the competition effects of the financial services regulators’ actions.
As it will not have concurrent competition powers, it would not make sense to include the FCA within the scope of the CMA’s specific report on concurrency as this would do nothing to improve transparency or accountability. We fully expect, however, that the CMA and the FCA will have a memorandum of understanding on how they work together and may well report on how they have worked together to improve competition in financial services.
Amendments 64 and 69 relate to the power to remove concurrent powers. I am pleased to see that the noble Lord agrees that such a power should exist, but I cannot agree with the form of the power he proposes. He proposes a general provision that the CMA and sector regulators work together on the basis of co-operation. The CMA, however, will have powers to carry out market investigations in the regulated sectors and can act as a second pair of eyes to the conclusions of a regulator. It will also determine regulatory appeals and references from the decisions of regulators. It therefore needs to be free to disagree with their conclusions and, as such, it would be inappropriate for it to be generally required to co-operate with them. In any case, the Bill and existing legislation already include a number of provisions on co-ordination of the CMA’s and the regulators’ functions and the OFT has a memorandum of understanding with a number of regulators.
The amendments proposed by the noble Lord, Lord Whitty, also link the use of the power to the CMA’s report on concurrency. This report, however, will be limited in scope. It ensures there is transparency around the use of concurrent powers and requires the
CMA to provide an assessment of how the concurrency arrangements have operated. While the CMA’s concurrency reports may therefore provide some relevant analysis, they are not intended to provide a full assessment of sector regulators’ performance or of whether the distribution of powers across the CMA and the regulators remains appropriate. It is therefore not right to link the use by the Secretary of State of the power to remove concurrency to this report.
Finally, these amendments would include the FCA within the list of regulators whose concurrent powers could be withdrawn by the Secretary of State. As the FCA does not have concurrent competition powers under the Competition Act and the Enterprise Act, it would not make sense to include it within the scope of the Secretary of State’s powers.
The noble Lord, Lord Whitty, raised an issue concerning the Financial Services Act 2012 introducing a new competition scrutiny regime for financial services. The Financial Conduct Authority and the CMA will have an important role to play in promoting effective competition in financial services. The FCA needs a mechanism to engage the CMA if it is to make sure that the CMA’s powers and expertise are effectively brought to bear in the financial services sector. The FCA will therefore have the power of referral to the CMA with the OFT, and then the CMA when it becomes fully operational, under a corresponding duty to respond within 90 days. The availability of the power will not prevent the FCA taking the lead in addressing competition issues where it is better placed to do so. When it receives a referral from the FCA, the CMA may have the information and analysis it needs to take action almost immediately, for example, launching a market investigation reference or bringing Competition Act enforcement proceedings.
The noble Lord, Lord Whitty, raised an issue concerning the OFT/CMA powers under the Financial Services Act. The scrutiny regime exists now for the Financial Services Authority, but this regime is now duplicative and inconsistent with how scrutiny works in other sectors. Therefore, under the Financial Services Act there will be a first tier of scrutiny under the CMA’s powers to conduct market studies which may consider the impact of regulation on the market. The OFT and the CMA will be able to rely on existing powers to give advice to the regulators.
I hope I have gone some way to answering the questions raised by the noble Lord, Lord Whitty, and I ask him to withdraw Amendment 46.
Lord Whitty: My Lords, I thank the Minister for that very full reply. As I indicated, as far as the general issue of co-operation between the CMA and the sector regulators is concerned, while his amendments do not go quite all the way and omit one or two things from my amendments, they represent a major advance and a clear requirement on the CMA, so when we come to them I certainly will not press my amendments dealing with that area. The one oddity about his reply was that, in terms of assessing whether there was a need for the Secretary of State to intervene, the concurrency report which is required under the earlier section would not be relevant or detailed enough. I would
have thought that the whole power to produce a concurrency report was so that it would identify where there were some serious failings that needed to be addressed and might need to be addressed in a fairly draconian way by the Secretary of State handing the power over the CMA, so I find that lack of linkage a bit odd. On the other hand, the totality of what the Minister said about co-operation and the process that you have to go through before you use the powers in Clause 46 is a very positive move, and I thank him for it.
As far as relations with the FCA are concerned, the Minister referred to a memorandum of understanding between the two. My recollection and, I think, that of my noble friend Lady Hayter is that during the passage of the Financial Services Bill the Government, in the form of the Treasury rather than BIS, were deeply resistant to us putting in the requirement that there should be some co-operation between the new FCA and the then competition authorities. There is no reference in this Bill to a memorandum of understanding. The Minister referred to existing powers, but with effect in both directions in terms of handing things from the FCA to the CMA and the CMA coming back to double-check the way in which the FCA is carrying out its powers in relation to the financial sector. I think this omission is significant. I am worried about it, and if anybody out there knew about it, they also would be worried. Whereas this new super-duper competition authority has clear powers and clear relationships with all sorts of markets, the one market where it is not clear that it has a relationship, a power and an ability to second-guess is the financial services area, the one area which everybody has been worried about for at least the past five years. That I find odd. While there may be the odd reference here or in preceding legislation that helps, I think the Government probably need to have another look at this, but tonight I beg leave to withdraw the amendment.
Consideration on Report adjourned until not before 8.39 pm.
Transport: HS2
Question for Short Debate
7.40 pm
To ask Her Majesty’s Government what is their latest assessment of the cost/benefit ratio, and environmental and social impact, of the HS2 scheme.
Lord Truscott: My Lords, I thank the Government Whips’ Office for its assistance in tabling this short debate. I also thank noble Lords and the Minister in advance for their participation. Your Lordships’ House last debated the high-speed rail scheme, HS2, last July and I will not repeat all the excellent points made then by the noble Viscount, Lord Astor, and other noble Lords.
I have been following this debate with interest for some time and I have read all the contributions made in your Lordships’ House and the other place, together with all the relevant documents. I came to the subject with no axe to grind. The noble Lord, Lord Adonis, who I see in his place this evening, said in the debate last July that he was not biased in his pro-HS2 decision as Secretary of State for Transport. That is quite right and neither am I biased in my views. Since I gave my S-class Mercedes to my plumber last summer, making him the happiest plumber on earth, I have become totally dependent on public transport, in particular the marvellous Great Western Railway to reach my home in Bath.
As a neo-Keynesian, I also believe in supporting large infrastructure projects when they are in the national interest. They can create jobs and boost the economy. In my former role as UK Energy Minister, I understood well enough that large projects, badly needed by society as a whole, can have an adverse environmental impact. We are a densely populated island. Demographic pressures are growing, yet we all want to see improvements in our standard of living and quality of life. Yet, my Lords, I fear that with HS2 we are in danger of developing a huge and costly white elephant, with an ill-thought-out business case, social disruption and a catastrophic environmental impact.
As I said, we are a small island; we are not even the size of France, Germany, Japan or China, all of which have high-speed rail networks. Carbon neutral at best, HS2 will do nothing to enable our country to meet its carbon reduction obligations. Since the 1930s the UK has lost 50% of its ancient woodland which now accounts for just over 2% of total woodland. When our ancient woods are gone, they are gone for ever and we cannot afford to lose any more. Future generations will not thank us for such wanton destruction for the sake of 30 minutes less travelling time to Birmingham. As the Independent on Sundaypointed out, HS2 threatens 350 unique habitats, 50 irreplaceable ancient woods, 30 river corridors, 24 sites of special scientific interest and hundreds of other important areas. Threatened species include the stag beetle, purple hairstreak butterfly, great crested newt—where is Ken Livingstone when you need him?—slow worm, black redstart, long-eared owl, Daubenton’s bat and the badger.
We are told that the HS2 business case is sound—it will deliver much needed capacity, including freight, connectivity at record speed and it is in the national interest. That is wrong, wrong and wrong again. The business case is evaporating before our eyes. Instead of a benefit to cost ratio of £2 for every £1 invested, when you strip out the Department for Transport’s dodgy calculations, it is just 40p for every £1 invested, and it will cost every household in the country over £1,000. The Department for Transport’s record in accurate forecasting is poor—witness the west coast main line franchise fiasco or HS1, the Channel Tunnel Rail Link, where again its forecasts were wildly inaccurate.
Improvements to the existing infrastructure, such as working on pinch points within current transport corridors, would be a fraction of the cost—some £2 billion compared with £33 billion and rising—without the widespread disruption predicted by a scaremongering Department for Transport. Alternative proposals to
upgrade existing lines provide a benefit to cost ratio of over 5:1. This can be achieved by rolling stock reconfiguration, operation of longer trains and targeted infrastructure investment to clear selected bottlenecks, enabling increased frequency.
I can see why some northern cities welcome HS2 as the best deal on offer. However, the fact is that HS2 will benefit London and connectivity between northern cities can be better improved by east-west connections over the Pennines and other inter-city improvements, rather than focusing on a north-south line to London. Most jobs and benefits will flow to London, as has been the case with Paris and Madrid with their high-speed rail networks. If I am not misquoting him, the noble Lord, Lord Jones of Birmingham, has rightly said that HS2 will turn Birmingham into a dormitory town for London. Meanwhile, hard-pressed commuters in the Home Counties, the south-east, south-west and East Anglia despite severe overcrowding will have all the costs but none of the benefits of HS2.
Nor do I think that Manchester, Leeds and Sheffield will be so keen when they are asked to cough up some of the £26 billion subsidy that HS2 requires or to pay the premium fares demanded of their citizens. Besides, has anyone told the Department for Transport that the north does not stop at Manchester? Liverpool and Newcastle have clearly been sidelined, let alone Scotland. Incidentally, I am grateful to the Minister for his prompt and timely replies to my Written Questions on HS2. The responses revealed that the Department for Transport has no idea how much the line would cost to expand to Scotland; nor does it have any contingency plans for Heathrow should another airport take its place as the UK’s hub.
Compensation is another issue. The Secretary of State for Transport in the other place said on 28 January last that he understood that HS2 would be “inconvenient” for some people. It can be argued that being unable to sell one’s house is more than a trifle inconvenient, quite apart from the noise and other impact of HS2 for up to 500 metres either side of the line for hundreds of miles, which will involve clearing thousands of acres of land and property. HS2 estimates that for every 100 metres of track it needs around 2.5 acres, yet just 2% of those affected will be compensated.
I hope that in his response the Minister will flesh out how the Government will keep their oft-quoted promise to compensate properly those affected. I can see the attraction for the Government of announcing a massive infrastructure programme, unparalleled in peacetime, which will not involve significant expenditure until 2017-18 and not be implemented for 20 years, when Ministers will have long moved on. It has all the benefits of giving the impression of action, while doing nothing to alleviate current problems and bottlenecks on the railway network, let alone boost the economy. If the Government really want to spend such an absurd amount of money, there are other projects which they may want to consider; for example, sorting out the nation’s airport capacity.
Finally, I know the noble Earl, Lord Attlee, will be concerned that the house of his late grandfather, Clement Attlee, in Prestwood, near Great Missenden, is imperilled by HS2. Will he do us all a favour, have a change of heart on HS2 and save the old family home?
Baroness Northover: I remind noble Lords that this is a time-limited debate and when the clock reaches three, noble Lords have had their three minutes.
7.47 pm
Lord Freeman: My Lords, I am sure your Lordships are grateful to the noble Lord, Lord Truscott, for the opportunity to debate briefly the merits of high-speed rail. I am a strong supporter of high-speed rail and a strong supporter of HS2. My brief contribution this evening is based on my experience as Railways Minister between 1990 and 1994—it seems like an awfully long time ago—when I was responsible for dealing with HS1 and also on lessons learnt from that initiative which are relevant to HS2.
I want to make four brief points. First, the understandable concerns about noise and physical intrusion expressed by the people who may be affected by the construction of the line and its operation can, and must, be rationally and generously allayed in a planned and sensible financial compensation scheme. When I was responsible for the work on the line, the Government spent a lot of time listening to complaints from Members, from this House and the other place, and I hope met many of their concerns. After initial concerns on HS1, I believe that the final route was generally accepted. I know that present Transport Ministers will follow that example.
Secondly, the original HS1 route was changed to terminate at St Pancras rather than Waterloo. There was a strong argument in favour of that from my noble friend Lord Heseltine. The two main reasons were to revitalise parts of east London and to provide a link directly through to the Midlands and the north. That is provided for in a link for some trains to join HS2 from HS1, just north of St Pancras.
Finally, high-speed services will be popular, particularly with the business community; it is easier to work and discuss with other colleagues on high-speed trains because of the nature of their design. It is also easier than flying in many ways because of the congestion and difficulties in getting landing slots for short-haul flights. There should therefore be more capacity left for freight on the railways. I commend support for HS2 to this House.
7.51 pm
Lord Adonis: My Lords, the benefit/cost ratio for HS2 is strong, and stronger still once the high-speed lines extend north from Birmingham to Manchester, Sheffield and Leeds, with high-speed trains proceeding on conventional tracks through to Liverpool, Newcastle, Glasgow and Edinburgh. The proposed “Y” network—London to Birmingham, then north-west to Manchester and north-east to Leeds—encompasses much of the economic heart of England in one integrated high-speed network of 330 route miles.
I obviously appreciate that some who live on or near the 330 route miles are opposed to HS2. The golden rule of high-speed rail is that everyone wants the stations but no one wants the line. However, the business case is robust and the Government are right to proceed.
There have been claims that the benefit/cost ratio is too optimistic. Actually, for transport infrastructure such as HS2, connecting densely networked population and economic centres, BCRs tend to be too pessimistic because they have difficulty in capturing wider economic benefits. The Jubilee line extension to Canary Wharf and Stratford was approved with a BCR of just 0.95, less than half that of HS2. Traffic forecasts for the M25, when planned in the 1970s, grossly underestimated usage; it was dubbed the “road to nowhere”—famous last words.
In assessing the case for HS2, it is vital to understand that the status quo is not an option. Critics talk as if the choice were £33 billion for HS2 or a few billion for upgrading existing infrastructure. Sadly, this is false. Patching and mending a 200 year-old railway, working at capacity, is hugely expensive and disruptive. There is no need to gaze into the crystal ball. The last upgrade of the west coast main line, completed five years ago, cost £10 billion. It entailed a decade of constant disruption to passengers and freight, and it delivered only a fraction of the capacity and connectivity of HS2.
Capacity is the key issue. To provide just two-thirds of the extra capacity of HS2 from London to Birmingham by further upgrading the west coast and Chiltern lines, would cost more in straight cash terms than building HS2. For starters, with or without HS2, Euston needs to be rebuilt. It was built in the 1960s for barely half of today’s traffic levels and is falling down. Furthermore, extending HS2 to Manchester, Sheffield and Leeds relieves all three main lines from London to the north, all three of which would otherwise have to undergo massive—and massively disruptive—upgrades over the next 25 years.
There is no free lunch here. The choice is this: invest billions in a patch-and-mend of the Victorian railway, or invest a similar sum in 21st century high-speed rail technology, with far greater social and economic benefits, like pretty well every other developed nation in the world. We should invest in the future, not the past.
7.54 pm
Lord Bradshaw: My Lords, I agree entirely with what the noble Lord, Lord Adonis, has just said. The existing railway lines to the north—there are in fact four—are full. When a line is 85% full, it is impossible to run a reliable service because you get degradation with every incident.
Demand is bound to increase. There will be population growth in areas around London, Essex, Kent, Buckinghamshire and Bedfordshire. The very heavy extra freight which will come from the new port in London and from Felixstowe needs the railway. Of course, there are expanding markets. Without this, the railway is already expanding. Goodness knows what it would reach by the time we have HS2.
You cannot have incremental enhancement to existing lines. This would be very expensive and disruptive, as the noble Lord, Lord Adonis, has said. Such demand as there is for travel could be met by a new four-lane motorway, probably all the way from somewhere in Kent right through, around London and up to the north.
However, that would be colossally expensive and disruptive. Or we could have a lot more flying. The only real choice is to have a new railway.
I was working for the railways when HS1 was built. I endorse entirely what my noble friend Lord Freeman has said. There was an enormous uproar in Kent, similar to that which we now have in the Chilterns. I asked a Labour MP whose constituency straddles HS1 how many complaints he got about noise and disruption. He said, “None at all. I get lots about gay marriage but I do not get anything about that”.
The other thing we must think of is that we need a link through London. I urge the Minister to address this significantly. The present link is very constricted. It will convey very little and offer nothing to people in Kent and Essex, huge areas of population growth, who want access to HS2 as well as Heathrow. A business case is difficult to make so far in advance. There are all sorts of external benefits which are almost impossible to measure.
The scheme will be much modified. Objectors will have their say. Rushing to judicial review in advance of the parliamentary process is premature and a waste of effort.
7.57 pm
Baroness Campbell of Surbiton: My Lords, transport is not my area. However, I was pressed to find out more about the HS2 project after receiving worrying letters from disabled people, who will disproportionately suffer under the current proposals.
I shall seek to explain quickly. On reading the various government reports on HS2 and campaign literature on the issue, I was struck by the lack of detail regarding social impacts. I searched for the equality impact assessment and, again, failed to find anything that reflects any serious thinking. I came across only a short document that looks purely at passenger numbers by equality group.
For a £33 billion project, this seems grossly insufficient. A proper impact assessment, for example, would look at the population profile and pick up cultural groups or disabled people who may be forced to move away from the support of family or community. The voluntary purchase scheme applies only to properties within an arbitrary 120 metres of the line. It does not apply at all in urban areas. An elderly woman, now in residential care, is attempting to sell her home to fund that care. She was thrilled to find a couple who wanted to buy. Imagine her distress when they were turned down for a mortgage because HS2 meant the house had no value. No value—yet, at 400 metres away, she is not entitled to any compensation.
None of the schemes for compulsory or voluntary purchase, or the long-term hardship scheme, addresses the additional costs that disabled people may face because of the need to adapt new properties. This can include widening doorways or installing accessible kitchens and bathrooms. These are substantial costs that a disabled person would face if they had to move as a result of HS2.
I heard from a family where both parents are disabled. They are raising a two year-old daughter. The father is a wheelchair user and has respiratory difficulties. The
dust and mud during construction would undoubtedly worsen his condition. It has taken many years for them to earn enough to adapt their home in order to have a child. As the father says:
“It is the one place in the world where I don’t feel disabled; where we can raise our child independently”.
They are just outside the arbitrary 120 metres from the planned line itself. HS2 is destroying the future they have so painstakingly put in place. I can hardly bear to think about it.
The Minister may say there is a hardship scheme, whereby if someone meets very exacting criteria, they might just about get the value of their property, but nothing more. When I looked further, however, I found reports of people being turned down for this scheme. One family was turned down despite the likely distress that the construction would cause to their autistic son. To allay their concerns, I would be grateful if the Minister would clarify whether there has been a full equality impact assessment of the project as a whole.
In conclusion, would the Minister be prepared to meet the family I mentioned? If he listens to their concerns, I am sure that he would want an opportune and appropriate equality impact assessment. It is their story that inspired me to investigate an initiative that would normally pass me by. I found it very wanting and I am glad to be able to share my concerns with noble Lords this evening. I would not be here after 7 pm otherwise.
8.01 pm
The Lord Bishop of Liverpool: My Lords, yesterday I was at the launch of the International Festival for Business 2014, which will be held in the United Kingdom. The host city will be Liverpool. The Prime Minister was in the city in January, promoting the festival. He said:
“The United Kingdom is in a global race with a fight to win contracts around the world”.
If that is true of the UK, it is also true of Liverpool.
Business leaders in the Liverpool city region are very supportive of the Government’s HS2 scheme. However, they strongly urge the Government to include Liverpool in their plans. There is genuine anxiety that, without an HS2 spur, Liverpool will lose out to other northern cities. The chair of the local enterprise partnership, Robert Hough, has said:
“It is a question of the competitiveness of the city region. It is critical. Our case … has to be properly argued. It is an investment that will endure many decades. If we are disadvantaged now, it becomes a virtually permanent state”.
Without an HS2 spur to Liverpool, it is difficult to imagine how Liverpool will in future be able to bid successfully for such national and international business. I would be grateful, therefore, if the Minister, when he responds, could say whether the Government would reconsider an HS2 spur into Liverpool; without it, we fear a downgrading of the city with impacts on inward investment and regeneration.
8.03 pm
Lord Cormack: My Lords, it is not just Liverpool that will suffer under the present plans. Nottingham, Leicester, Derby and other cities will be bypassed. I do
not want to follow the right reverend Prelate, because I do not support HS2 and I never have. Now, of course, it threatens the county that I had the privilege to represent in the other place for some 40 years; I am receiving letters. “Staffordshire’s pain will not be Staffordshire’s gain” sums up the messages that I am receiving both by telephone and in the post.
We have to consider that this is a finite country. Our glorious, beautiful landscape is finite. The noble Lord, Lord Truscott—we are all in his debt this evening—talked about the vaster spaces in France and Spain, our continental neighbours. A thing of beauty is a joy for ever until it is destroyed; we will be destroying some of the finest and most beautiful countryside that this country has, in the Chilterns, the Midlands and beyond. To what point and to what purpose are we destroying it? The people who come to Liverpool and elsewhere come to this country not just to do business, although we hope they will come in increasing numbers. They do not come to enjoy our weather; they come, increasingly perhaps, to enjoy our cuisine; but most of all they come to enjoy our built heritage—our historic towns, villages and cities, and our cathedral cities in particular—and they come to enjoy the truly breathtaking countryside that we are privileged to have. It is our duty to pass that on to future generations.