On getting Britain building again, the help to buy scheme should boost confidence; something needs to. There were only 98,000 starts in England last year and yet 230,000 households are formed each year. The numbers on housing waiting lists, the rise in demand for temporary accommodation and high rents in the private sector also point to the social and economic benefit of building more homes at below market rates. Councils, and their arm’s-length management organisations where they exist, have the capacity to build more homes, given that council housing is now self-financing. They could raise £7 billion and build up to 60,000 more homes over five years, contributing 0.6% to GDP in the process. That could be done very simply if the Government removed the borrowing cap on housing revenue accounts, relying instead on a prudential borrowing code to guarantee that only sustainable investment got the go-ahead.

Council housing has been self-financing since April last year. That is welcomed, but the average debt on a home is just over £17,000. There is scope for additional borrowing against the asset represented by that existing stock. While I understand the need for the Government to be careful about public borrowing levels, relaxing the housing borrowing cap need not be counted as public sector borrowing any longer. The UK uses a much wider measure of public debt than other countries. Council housing is now a trading activity, and international regulations already permit this to be discounted from government borrowing levels. Unfortunately, the UK does not currently adopt such an approach, and I remain puzzled as to why not.

This Budget provides many opportunities for growth. They need to be grasped. We need to manufacture more, export more and build more on our commercial strength. That is why my noble friend Lord Heseltine’s recommendation that LEPs should produce long-term strategic plans for negotiation with government was right. Also right was the recommendation to publish by the summer sector strategies in key sectors for growth—automotive, aerospace, life sciences, agritech,

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professional business services, information economy, construction, education, nuclear, oil and gas, and offshore wind. Producing these strategies is very encouraging because they cover the UK as a whole and not just London, so growth will be delivered outside financial services and London. There is a vision in this Budget. It points a clear way forward for growth. For that reason it should be commended.

2.04 pm

Lord Marlesford: My Lords, I am very glad that my right honourable friend the Chancellor stuck to plan A. It would be unthinkable to abandon it. There was no question that it would be abandoned. Yet there are some dangers. I quote one sentence from the Chancellor’s speech that is very relevant:

“I will be straight with the country: another bout of economic storms in the eurozone would hit Britain’s economic fortunes hard”.—[Official Report, Commons, 20/3/13; col. 932.]

Such a storm may have started in Cyprus. It was absolutely astonishing that the troika—the European Central Bank, the IMF and the Commission—should have agreed a package of measures that involved a levy on deposits in Cyprus’s banks: 6.5% on deposits under €100,000 and 9.9% on those above €100,000. That flew in the face of the EU-wide recognition that deposits in banks up to €100,000 are guaranteed. It was an astonishing thing to happen.

In case noble Lords feel that I am being alarmist, or that Cyprus is a mere minnow and we should not worry about it, I would remind them of a little history. On 11 May 1931, the small Austrian Creditanstalt bank failed. That triggered the financial collapse of central Europe. By 13 July, the German Danat-Bank collapsed and all German banks closed until 4 August. Between 19 and 24 August, we had a major economic crisis in Britain. Five days of Cabinet meetings failed to agree the spending cuts demanded by American bankers at the time, and that led to the collapse of the Labour Government. We cannot play these games with the eurozone trying to have it both ways. Only a few months ago, eurozone Ministers declared that they must absolutely make sure that in future there was no confusion between sovereign debt and bank debt. For Cyprus they have again produced a formula that has done precisely that. It is not surprising that the banks in Cyprus are closed.

What is the answer to that? The Chancellor pointed out that 40% of our exports are to Europe. I suggest that the Government do everything they can—Parliament as well—to focus the eyes of exporters beyond Europe. Let us make much more effort about Asia and probably also Latin America. They should become a real priority. I am not saying that the Government can do that: the Government cannot make exports but they can at least propose that as a strategic aim. We must take advantage of the Asian market. We have the inestimable advantage of having special links with Hong Kong, which is the financial centre of Asia. It is the third most important financial centre in the world after London and New York. That is something we really must look at and quickly.

I will quickly mention one or two other points. The shift in the responsibilities of the MPC is very interesting. It will become much more like the Fed. That is a very

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big responsibility and I hope it can measure up to that. It was right to stimulate the economy with some extra expenditure, but only £3 billion was given. Why so little an amount?

Here I come to the one mistake that the Chancellor made: the fuel tax. That was tempting politics but damned bad economics. Cancelling the fuel tax increases has already cost, by the Chancellor’s own figure, £6 billion. It looks as though, if it continues at this rate, it could cost up to £20 billion by the end of this Parliament. That is not a sensible way of spending money—the opportunity cost is extremely high—first, because it is being done in little slices of 3p and, as everyone knows, 3p is less than the variation in petrol or diesel prices between pumps. Secondly, all vehicles are becoming much more efficient. A vehicle that previously did 30 miles to the gallon now regularly does 40 miles to the gallon. There is therefore a natural and desirable trend for less fuel consumption as fuel costs rise. The United States would not be having its huge financial problems if it taxed road fuel at a sensible level.

There is also a serious lacuna in the Government’s thinking regarding their unwise energy policy involving massive subsidies for solar and wind power that are being passed straight on to the consumer through the levy on the electricity companies. That is a grave mistake.

I welcome the aim of the housing help to buy scheme and mortgage guarantee, but with some apprehension. As the noble Lord, Lord Desai, said, there are real dangers in the Government introducing or getting involved in subprime lending. There are echoes of Freddie Mac and Fannie Mae in America, which did precisely the same thing and whose collapse cost American taxpayers hundreds of billions of dollars.

We must recognise that you have to be delicate when dealing with the City. It currently produces 13.5% of Britain’s GDP. That does not mean that I am any sort of spokesman for the banks. Bank balance sheets are extremely fragile. The noble Lord, Lord Desai, referred to domestic debt; there is still £55 billion of credit card debt held by British banks. That is not the money that you and I spend each month and pay off; it is overrun debt on which the rates of interest are anything between 17% and 25%. The chance of it being paid back is remote, and the question that one must ask is: at what price do the banks have that debt on their balance sheets? If they have it at anything like par, that represents a serious danger. The banks sold off some of that debt about three years ago at rates of between 8p and 12p in the pound. If the outstanding debt were valued at market rather than nominal value, the banks would be safe.

2.12 pm

Lord Haskel: My Lords, many noble Lords seem to agree that we are in a difficult economic situation. Some noble Lords have explained that this is because the Government’s plans to stimulate, rebalance and grow the economy are clearly not working. Yet we are told that there is no alternative and that one day the policy will work—but at what cost? The highly respected Trussell Trust expects the number of people in the

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north-west using food banks to rise to more than 230,000. That is the cost. Is this the kind of country we want to live in?

The Minister spoke of economic realism. Blaming others and factors outside our control is not economic realism. Adapting to and embracing, not blaming, the changes is realism. Our economic problems are many and complex and each requires realistic attention.

The noble Lords, Lord Flight and Lord Bilimoria, spoke of exports. The Government have tried to help them through devaluation. However, that does not really work any more. A lot of our exports are made up partly of imports and that does little for productivity. According to the Bank of England’s analysis, the major economies in the eurozone have seen their exports grow faster since 2009 than has Britain. Why? It is partly because of the drop in exports of financial services but also because those economies have not been able to devalue because they are tied to the euro. Their only alternative is to produce more goods and services that others want to buy. Here, devaluation allows some firms to stay in business and become “zombies”. Is this why employment is increasing but productivity is plunging?

It could be that some firms are retaining skilled labour in the hope of better times to come. Meanwhile, those people are not as productive as they might be. Also, firms may be investing in things other than plant and buildings—investments that are not being measured. They are so-called intangibles such as investing in business processes and systems, writing new and better software, enhancing their brand and investing in new concepts such as big data. Has the Minister seen the research that shows that this kind of investment is growing but not counted?

The Government also have to be realistic about the fact that the financial sector is changing, not only because of the loss of trust through mis-selling, excessive pay and market manipulation but because much of its business has become trading value. Trading in value is a zero-sum game—some get richer and some get poorer—whereas trading in goods and services that people want and need benefits everyone. Trading value as our major economic activity cannot be the right course, and people have now realised this. As my noble friend Lord Eatwell put it, that is why the Government have to put far more emphasis on trading in goods and services that people want and need. That is where our efforts should be going in this Budget.

The Minister emphasised the cut in corporation tax. Of course that is welcome, but the headline rate does not change things much. It is all the other facets of tax that determine what a business really pays. The cut in employers’ national insurance, when it comes, will affect far more businesses, as will next month’s rise in business rates.

Yes, this Government talk about making efforts to adapt and embrace change in their support of our industrial sector, the supply side. The Secretary of State for Business, Innovation and Skills has fought to maintain the size and excellence of our science base. The Technology Strategy Board is being supported and strengthened. That is fine but, as my noble friend Lord Bhattacharyya asked, is it enough? My noble friend Lord Kestenbaum also made that point.

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I recently visited Bavaria and learnt that what we spend as a nation to support industry is matched by the single state of Bavaria in Germany, and it shows. What we as a country export to Germany is matched by the exports of the state of Bavaria alone. The reason is that for 50 years Bavaria locally has consistently maintained and supported the fundamental planks of a modern industrial strategy, the strategy that my noble friend Lord Kestenbaum described, involving skills, technology, innovation, procurement, infrastructure, finance and supply chains—a policy that can be roughly described as the Heseltine view. That view was expressed in his report and debated in your Lordships’ House on 6 December last year. In that debate, nearly all speakers welcomed his recommendations, and the noble Lord, Lord Shipley, did so today. They welcomed the active role of the state in promoting economic growth while devolving power to other centres away from London. In his Budget, the Chancellor, too, accepted some of those recommendations. Does this indicate a change in direction?

My noble friend Lord Bhattacharyya told us that rebalancing and growing our economy is a long-term project. It is a project done successfully by building, not destroying. There were many good things to build on in the fields of innovation, science, technology, local funding, skills and apprenticeships. Yet for short-term political gain, Ministers destroyed or talked down much of this. Indeed, they continue to do so.

If the Government want to build confidence—confidence that we can grow our way out of these economic difficulties—they must signal their commitment to continuity by indicating that all these elements, whoever created them, will be tackled and built on in the interests of our long-term economic growth and not talked down in the interest of short-term political point-scoring.

2.20 pm

Lord Sheikh: My Lords, I was able to speak in last year’s post-Budget debate. Twelve months ago, we all hoped that we would now be in a healthier economic position. We have admirably cut our deficit by a third and seen more than 1 million new private sector jobs created. However, the wider global situation, particularly in the eurozone, remains such that full recovery is still some way off and the continued growth downgrades have been inevitable. Above all else, what is important in such times is that we maintain discipline and stick to our course of austerity, particularly in the face of the confused calls from the Opposition for higher borrowing. More borrowing is not the answer to our problems.

It is crucial that we are seen to be taking the right decisions for the right people by helping those who genuinely want to get back into work, by nurturing the talent and innovation of our young people, and by helping businesses in need of assistance, as businesses form the backbone of our economy.

I am very supportive of bringing forward the £10,000 income tax threshold to next year, positively impacting on 24 million people. The more of people’s hard-earned money they are allowed to keep, the more empowered and encouraged they will feel to spend it. That will

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result in greater revenues to those parts of our economy that so desperately need them and, ultimately, in a healthier all-round cash flow to stimulate growth.

The scrapping of this year’s fuel and beer duty rises is also very welcome. Again, it is a measure that will affect the average person in their day-to-day spending and, I believe, provide that small but foundational level of help that people really do notice.

I should also like to express my support for the very difficult decision to cut further the budgets of some of our government departments. Diverting £3 billion per annum from Whitehall departments to the implementation of major infrastructure projects such as roads, railways and power stations will make more of a difference to the everyday lives of working people and create thousands of new jobs.

I also applaud the proposals concerning home ownership. These will help people to buy houses and will assist housebuilders, generate more business activity and create jobs.

I endorse the decision to protect our health, education and international development budgets, as well as the responsible decision to exempt military personnel from the caps imposed on other public sector pay rises. As someone who is interested in humanitarian matters, I am pleased to learn that we will continue to spend 0.7% of our national income on overseas development.

One area where I hold particularly strong feelings is the erosion of our competitiveness, which has without doubt been one of the fundamental causes of our continued stifled growth. This has been due to the red tape and bureaucracy implemented by the previous Government, coupled with the very challenging shift in global wealth from West to East. In short, when this Government came to power, the UK was no longer an attractive place to start a business. Much of this is already being addressed through the Enterprise and Regulatory Reform Bill, and I was heartened to hear of the Chancellor’s decision once again to reduce corporation tax. We already boast the lowest corporation tax rate in the G7, but we can now proudly say that, based on projections, as of 2015 we will also have the lowest rate in the entire G20.

Perhaps one of the most notable announcements made yesterday was the cut in companies’ national insurance contributions, removing huge barriers for smaller businesses and meaning that a third of all employers will not have to make any further national insurance payments.

I support the Government’s announcement that we will be taking forward the recommendations in the excellent report of my noble friend Lord Heseltine, No Stone Unturned: In Pursuit of Growth. I agree with the Government’s policy of taking robust action and improving our system of training and education, particularly in relation to apprenticeships and vocational training. This will enhance our manufacturing base and help in our recovery.

As someone who is widely travelled and has contributed a great deal on trade issues in your Lordships’ House, I shall now focus my remarks primarily on the export-led recovery. There is no more obvious a way to grow a country out of economic turmoil than by increasing

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trading links—in particular, levels of exports—with other countries. I have been very heartened by the efforts of UK Trade & Investment since the previous Budget. In particular, earlier this month it announced that its Trade Challenge Partner initiative will be implemented, with 99 partners drawn from trade and other membership organisations, with the aim of getting more of the members exporting overseas and further supporting those that already do.

I welcome the appointment of parliamentary trade envoys, who have the potential to make a real difference. I should like to see an expansion of the role and number of these appointments. There are plans to develop British business support networks in 20 priority high-growth and emerging markets, and I know that my noble friend Lord Green led a conference just last week to announce the establishment of the India trade network. These are exactly the kinds of initiatives that I should like to see more of. Anything that we can do to help SMEs to move into emerging markets must be embraced to the point where it is no longer viewed as a challenge for us to increase our exports but it is naturally accepted that it is in our country’s fibre to be a world leader in selling our products overseas. I hope to see this progress continue to develop as we move forward in rebalancing our economy and refocusing our efforts on what made us such a great and powerful manufacturing and trading nation many years ago.

We need to aspire to raise our game in international markets and to support the most vulnerable in our society as the economy charts a course to recovery. We also have to restore order to our public finances. I welcome the Government’s resolve and commitment; it is now time to deliver.

2.28 pm

Baroness Worthington: My Lords, yesterday’s Budget speech by the Chancellor contained a number of tax break announcements that are intended to stimulate our economy. These included measures for business, such as reductions in national insurance payments and a cut in corporation tax, and measures for individuals, such as an increase in the tax-free income allowance and tax relief on childcare.

However, hidden in the detail of the Budget but not mentioned by the Chancellor was an announcement relating to a Treasury electricity tax that could significantly undermine money saved by those measures. The carbon floor price was announced in 2011 and will start to be added to electricity bills from 1 April this year. The logic of the tax is to increase the cost of carbon pollution to provide a benefit for lower-carbon sources of electricity. It is claimed to be necessary because the market price for carbon, set by the balance of supply and demand for carbon emissions at a European level, has crashed to very low levels, failing to incentivise investment. To address this, the Treasury has invented a top-up tax, which is intended steadily to increase the cost of carbon pollution over this decade.

Starting in April, UK electricity companies will be required to pay a £4.94 per tonne carbon top-up tax, which is roughly equivalent to adding £2.50 per megawatt hour to wholesale electricity prices. A year later, the level will double to £9.55 a tonne or £4.77 a megawatt hour and in 2015-16 the level that was announced

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yesterday—or, rather, was not announced—doubles again to £18 a tonne or £9 a megawatt hour. Over the next three years, this single policy will raise the Treasury an estimated £4 billion to £5 billion in revenue. Yet the Chancellor forgot to mention it.

I am not against polluters paying for pollution: in fact, I am all for it. However, in the fight against climate change it is absolutely imperative that when we impose costs on the economy, we do so for very good reason. Sadly, in this case it is so badly thought through that this policy risks holding back recovery, increasing inflation and giving carbon pricing a bad name, undermining our ability to introduce more sensible policies later.

The reasons why the Government’s carbon floor price is such a bad idea are numerous and have been pointed out repeatedly since it was first mooted. Opponents include business groups, consumer groups and green groups. Everyone appears not to like this policy. The first obvious problem is that the tax fails to do anything for the environment. It does not deliver any additional environmental outcomes. The emissions it targets are already capped at an EU level and simply doing something here means that our emissions saved will be traded away across Europe.

The second, blindingly obvious, problem is that being unilateral it damages UK competitiveness at a time when we need to be boosting our competitiveness. Electricity prices are an essential input to virtually all economic activity. Steep rises in prices increase everyone’s costs and are inflationary. It is no wonder that the Budget yesterday appeared to be indicating to the Bank of England to go soft on meeting the inflation target. But the effect of this policy is likely to make it harder than ever to bring it under control.

The third problem is that rather than paying electricity companies when they invest in new low-carbon projects that come on stream, as the renewables obligation does and as the contracts for difference will, the carbon tax simply pushes up wholesale prices of electricity for everyone, rewarding those who have already invested for doing nothing new. It is a huge windfall for projects that have already received generous subsidies, be they existing wind farms or old nuclear power stations. This is of course good news for some generators but bad news for industry and consumers, who are paying twice for no good reason. The floor price is intended in a not-very-clear way to give investors confidence. However, being a finance Bill measure, no investor worth his salt is going to place any confidence in this policy lasting, especially since it has been implemented so appallingly.

Recognising that increases in electricity prices will be damaging to industries which rely on it, the Treasury has pledged to make around £250 million available to certain sectors to compensate them. That is a fraction of the revenue that the policy will raise. However, there is nothing in the Budget to compensate consumers and this comes at a time when public money to help poorer families cope with higher energy bills is at an all-time low, having been slashed by this Government.

Some may argue that the main purpose of the carbon floor price is to disincentivise the burning of coal in existing stations, which would be a noble

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endeavour. However, this policy is the equivalent of taking a sledgehammer to crack a nut and even then it may not be successful. Coal is experiencing something of a reversal of fortunes thanks to lower global prices as unused coal from the US enters the market. This, combined with high European prices for gas, is causing us to burn more coal. The disparity between the two fuels is so great in cost that even the hefty carbon floor price may not be enough to switch us out of it. It requires something in the region of a £30 a tonne carbon price for us to do that.

What would Labour have done differently? First, we know that investors in low-carbon electricity infrastructure are absolutely necessary for getting this country back to growth. They need policy certainty, which is why we are committed to introducing a decarbonisation target for the electricity sector. The Government have failed to acknowledge this and are proposing to wait until 2016 before doing so. We would also use simpler policies, such as the energy performance standard to secure the steady phasing out of unabated coal and usher in carbon capture and storage. That is simple to understand and unambiguous, and provides the clarity investors need to commit to new projects.

We would also work around the clock to achieve a solution to the low carbon price at an EU level, which is the only level where it matters. Fortunately, we still have some credibility in Europe, unlike the Tories, and we are able to control our MEPs. As we speak, the Conservative MEPs in Brussels are mustering to rebel in a vote in April that would help to rebalance the European carbon market—doing precisely what this heavy-handed policy is intended to do. The Government line is to support it. Yet, disgracefully, the party is not able to persuade its members to vote that way in this forthcoming vote.

In the short time available I have focused exclusively on one measure in the Budget. However, I have done so consciously in order to try to compensate for the Chancellor’s grave and negligent error in omitting to mention it at all. As companies and families sit down this week to try to work out how the Budget will affect them, the hidden electricity tax is unlikely to feature in their assessments. Indeed, it features in scarcely any of the mainstream media’s assessment of the impact of the Budget. Yet it is raising large sums of revenue and has a very material impact on costs.

This makes me fear that either the Chancellor simply is unaware of the detail of his Budget or he is purposefully trying to hide a significant additional cost to the consumer. Will the Minister inform the House what the Government’s assessment of the impacts of this policy are on inflation, competitiveness and the poorer households which currently are struggling to pay their electricity bills?

2.35 pm

Lord Dykes: My Lords, like others I am sure, on these occasions one puts one’s name down for a debate and then perhaps regrets it, thinking it probably will be a mistake or gloomy. I was expecting a gloomy debate because of the background to the Budget—although not the individual Budget measures announced

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yesterday, many of which are very good. I hope that I will not annoy our colleagues in the larger coalition if I say that, self-evidently, the two best single measures are the abolition of taxation under £10,000 for the lowest income tax payers and non income tax payers if they have a really low level of income, and Vince Cable’s suggestion for an expansion of the housebuilding sector being agreed at just a little above the original figures that were promulgated.

I speak as someone who, in the early 1960s, studied economics at the greatest single Keynesian school in the whole world in those days—the University of Cambridge—just by chance and good luck. I was heartened today because we have had two outstanding Keynesian speeches. Unfortunately, they came from the other Benches and I wish that it had been from these Benches. We heard the first from the noble Lord, Lord Kestenbaum, who is no longer in his place, and then the second more recently from the noble Lord, Lord Haskel. Both gave an alternative message about what now needs to be done in this country on long-term capital and investment accounts and on the long-term realism that this economy needs, and I agree with them.

On the individual measures, it is very difficult to quarrel with the Chancellor. One newspaper writer rather unkindly said that the unique thing about George Osborne was that he was even more unpopular than the austerity measures that he keeps promulgating, which was an interesting description. There will be a reduction in national insurance and the abolition of national insurance at the relevant level. There is the modest start of the housebuilding programme for the future and the reduction in corporation tax. There are many other examples, too, which are all very good and one commends each one individually.

However, the total picture is a huge problem for this Chancellor because, as we all know, this country is locked into the utterances of the past. One of the mistakes of the coalition Government was the spokesmen from the bigger of the two parties repeatedly recalling the mess left by Labour. I suppose each incoming Government always say that about a previous one. But the previous Labour Government were mostly dealing with the international worldwide financial crisis of 2007-08 and its aftermath. Gordon Brown had to handle it very speedily. The amount of taxpayers’ money was colossal in doing that task, which reduced the funds so much so that the outgoing Chief Secretary said that there was no more money left, which was a realistic description.

There was also the excessive harping on and the hysteria in this country about the eurozone’s problems, saying that they are intractable and insolvable. Indeed, I hope that the noble Lord, Lord Marlesford, will not mind my saying that it was not the Germans or the whole Council of Ministers who insisted on the capital levy for the Cypriots. That was their own part of the transactions when the council said that Cyprus had to respond with an enormous amount of money to reflect the vast amount of money that they were getting in the bailout. Germany did not impose a particular suggestion on Cyprus. The Cypriots decided that themselves. As we know, they have now changed their mind and are doing other things. We are waiting to see the details of that as a result of the non-vote in Parliament.

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Lord Marlesford: If I may very rapidly read from the Minister’s statement, it was the eurozone finance Ministers who announced the package which included that. The eurozone finance Ministers, therefore, approved that part of the package.

Lord Dykes: Yes, of course, because the Cypriot Government then submitted those suggestions to them, which were accepted. That was the sovereign decision of the sovereign country of Cyprus, which made its own suggestions in response to the request from the Council of Ministers and the German Government, and quite rightly.

The difficulty now is what we do from now on and where we go. The reality still confronts us in this economy that, to quote another source from many years ago, one has to enlarge long-term public spending on public assets with a high multiplier effect. Government spokesmen in recent years have kept on saying that public sector is bad and wicked, and private sector is good, and that we should rely on the private sector to respond to the inaction of the Government, but that never works. We all know that, and the evidence is there. Huge global corporations will make their decisions irrespective of what national Governments do. Facebook would not be particularly responsive to particular individual national Governments in the world, for obvious reasons, and neither would Microsoft, although the national subsidiaries in different countries respond to some national government decisions, as we know. Equally, sometimes very high-tech innovative companies in different countries themselves make their own decisions and have particularly good fortune such as very strong bank support and other access to capital, which enables them to be free-floating and not respond to government. However, in the vast majority of businesses, whatever their size, and in particular small companies, the reality is that you wait until the Government are expanding the economy. That is not a criticism of the way companies run businesses; if I was running one now as I used to in the old days I would do the same thing.

The noble Lord, Lord Kestenbaum, who is not in his place now, earlier mentioned economies where public sector and private sector activity is mixed up together in a constructive whole. Bavaria, mentioned by the noble Lord, Lord Haskel, is a very good example of that, where a centre-right moderate Government, over many years, never said no to public spending as long as it was on long-term investment assets. It was nothing to do with short-term current account. The British Treasury is still far too short-term obsessed. Therefore, until we change, we will be stuck in that ominous way that was so ably described by the very able business editor of the Evening Standard yesterday, when he referred again to the Chancellor. He wrote that a wiser man, earlier on,

“would have been less aggressive, less dogmatic about the rightness of his policies, so that he would have had room to manoeuvre when they seemed not to be working. But Osborne has closed down all those options so today’s Budget is the work of a man who is in a hole but continues to pretend that the only way forward is to keep digging. The public finances remain in a dire state, and even a bit of sleight of hand with the numbers can’t conceal the fact that we have made absolutely no progress over the last 12 months”.

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The terror of the slightest increase in our interest rates in this country will stop further action until there is a big change of heart.

2.43 pm

Baroness Browning: My Lords, I sense that I am going to disappoint my noble friend Lord Dykes. I am not going to be gloomy, but I have to say to my noble friend on the Front Bench that my mood today is cautious for the following reasons. My noble friend was not in the House when I made my maiden speech in 2010. I am sure that other Members present recall it very well. That was a joke. At the time, with the help of a friendly app, I gave the account of how much the country’s debt was when I stood up and how much it had increased when I sat down. I do not have that app with me today, but I took a quick look at it yesterday, and I see that we are still escalating, at £500 per second.

My concern today is primarily about the debt. There have been some very good things in the Budget. I support things that others have mentioned today, particularly raising the personal tax threshold to £10,000, and for small business, the £2,000 threshold before NI is paid by employers. I support that even more so than corporation tax coming down. For a lot of very small businesses, it is not quite the same as other companies coming in from outside and choosing to invest here. For small businesses, anything that comes off the bottom line before you make a profit is particularly helpful.

The Chancellor said yesterday that the Budget was,

“for people who realise there are no easy answers to problems built up over many years”.—[

Official Report

, Commons, 20/3/13; col. 931.]

There has been a flavour today, and it is certainly more noticeable in the House of Commons, that whenever the inheritance from the Labour Government to the coalition Government is mentioned, a sort of groan goes around, as if we really should not mention the problems that we inherited. I use this opportunity to remind the House that a Labour Treasury Minister left that note in the drawer in the Treasury for the incoming Minister that said, “There is no money left”. In fact, that was only part of the story, because it was not only that there was no money left, but there was a huge debt: a debt of such proportions, and rising, that it brought together two political parties which historically had been opponents but which felt that there was a need to work together in order to address the seriousness of that problem.

Now that the Chancellor has come forward with the Budget, I hope that people across the House will recognise that these problems are bigger than many that we have faced in our lifetime. It is as serious as that. It is also important that the Chancellor continues to spell out the size of the problem and what that means. My noble friend Lord Marlesford mentioned Cyprus. I quite agree with the comments he made about the foolishness of what was said about top-slicing bank accounts. If anything was guaranteed to cause a run not only on Cypriot banks but on banks in other parts of Europe, that surely was the trigger. We will see what happens there. However, it is the case that when

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Governments lose control of the finances of countries, they have no hesitation in popping their hands into the personal assets of the population. We have seen these measures and their effects before.

I was very encouraged that the Chancellor made reference to the work of the Monetary Policy Committee. He said that the new remit,

“makes it clear that the committee may wish to issue explicit forward guidance, including using intermediate thresholds in order to influence expectations on the future path of interest rates”.—[

Official Report

, Commons, 20/3/13; col. 935.]

I know that my noble friend on the Front Bench is only too aware that, given the state of government borrowing, it will require an increase of just a few points in interest rates for that to give us very serious problems indeed.

I was not looking to the Chancellor to produce an all-singing, all-dancing giveaway Budget, taking lots of risks. He needed to be cautious. However, I have one or two concerns about some areas on which I hope my noble friend will be able to reassure me. I am indebted to an article I read in MoneyWeek which outlined the history of the state pension. The state pension was introduced in 1909. The article states:

“Men aged 70 and above could claim between 2 and 5 shillings per week from the government”.


“because back then the average working man could only expect to live to 48 years of age”,

the Government were not being that generous. Here we are, over a century later, and yet the liability to the public purse on pensions has resulted in an estimated £5 trillion of pension promises. I am not for one minute suggesting that we ban the state pension. However, I am worried about the implementation of Dilnot in putting a cap on the cost of care for elderly people. I know that that is not a popular thing to say. We would all like to do it and I am sure that most noble Lords have been through that situation on a domestic front with elderly relatives. It is very difficult. However, I must say to my noble friend that, rather like the state pension when it was first introduced, I am not convinced that we have the money, and particularly that we do not have the money at this moment, to underwrite that type of benefit in order to preserve the properties of the property-owning democracy. That is a strange thing for a Conservative to say. However, that I have to think twice about this shows the serious position that I believe the finances of the country are in.

I am equally concerned not that the Chancellor introduced measures yesterday to increase the housing stock—we all recognise the problems of the housing shortage—but that the taxpayer, not the Government, will underwrite mortgages for properties up to £600,000 for people who are not able to get a mortgage in the normal way. We know that the money supply from the banks is poor at the moment, and that that is affecting people’s ability to obtain a mortgage, but, as others have said, that will need careful handling if we are not to see some of the problems that we saw over the pond in America with what happened with its housing bubble.

21 Mar 2013 : Column 722

2.51 pm

Lord Brooke of Sutton Mandeville: My Lords, I should like to add a few words to this debate in the gap. I spoke for two minutes in a Question for Short Debate on 11 December last year on the impact of multinational companies’ financial practices and UK tax policies. I shall not speak for longer now on the same subject, not least for fear of my noble friend Lady Browning doing her mental arithmetic on my costs.

I support the plea of the right reverend Prelate the Bishop of Bristol earlier on this same subject. In replying to a debate on 11 December, my noble friend Lord Marland, at col. 1050 of Hansard, said that DfID had averaged expenditure of £20 million per annum over five years to support tax regimes throughout the world. He went on to identify specifically DfID spending £11 million in Sierra Leone, £8 million in Tanzania, £8 million in Rwanda, where the tax take rose six-fold, and £21 million in Afghanistan, where the tax take used to be 4% and has now gone up to 11%. DfID is, with the support of HMRC, building up its technical capacity to help further.

At this late moment in the debate I do not expect a detailed comment of any kind in the wind-up of my noble friend the Commercial Secretary, but a reiteration of a continuing commitment to this constructive and productive programme would be both welcome and reassuring.

2.52 pm

Lord Davies of Oldham: My Lords, I am grateful for the contribution of the noble Lord, Lord Brooke, and that of the right reverend Prelate the Bishop of Bristol, who emphasised the progress towards the aid target of 0.7% of GDP, which this Government have fulfilled. It was driven towards strongly by the preceding Administration, so at least we have a note of unity across the House on the successful achievement of that position and its ring-fencing.

Another note of agreement—I am certainly happy with it and I get the impression from the debate that this might be so across the House—is that, as my noble friend Lord Desai said, this Budget does not do anything very much. That is certainly the case because the Chancellor has placed himself within a straitjacket and there is not much he can do when he is so constrained by his singular commitment to one objective. Of course, no one underestimates the challenges facing the Chancellor. We all know the difficulties over the debt and that external forces, particularly the difficulties in the eurozone, our largest overseas customer, do not help exports and the potential for an emergence from this crisis through export-led growth.

However, I cannot recall the Government or a government spokesman putting the crisis of 2008 into an international context. I cannot remember them ever since suggesting that there were difficulties other than those attributed to the Labour Administration struggling with the problems of international finance at that time. We all know that the first manifestations of crisis were in the United States, and subsequently in Europe, before Northern Rock reached a pitch at which we had to act. The international context rubs both ways.

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We need to recognise from the experience of Northern Rock some of the dangers in the Government’s proposed housing measures. A number of noble Lords emphasised their support for these measures. The noble Baroness, Lady Kramer, quoted the Business Secretary as having expressed these views in the New Statesman, and he certainly did. Why did he choose the New Statesman? It is because he thought it was read by a thoughtful, constructive audience who had already been campaigning for an emphasis on housebuilding to inject some demand into the economy and some earnings into the construction industry. We all know that the construction industry is one of the fastest to regenerate if the demand is there.

I appreciated the point made by the noble Lord, Lord Flight, and the noble Baroness, Lady Browning, a moment or two ago, that we have to be careful with regard to this issue because we know that it was overborrowing for house purchasing that precipitated the crisis in the United States. I hope the Minister will respond to the questions addressed to him by my noble friend Lord Eatwell in his contribution to the debate. What, in the Government’s view, will the guarantee scheme mean for house prices? What is the cost of the scheme over the three-year period that it is meant to obtain? How much dead weight is involved in the scheme? Will there be support for purchases that have already been made? I hope the Minister will address these points, if only because anxieties about this issue were expressed as strongly on his side of the House as on mine.

We have questions as to whether the Chancellor has matched up to the challenge before him. So far, progress has been limited to almost the point of marginality. The Chancellor has failed to hit every target that he identified when he first took office. Of course, I recognise that one or two elements in this Budget have found favour. The noble Lord, Lord Bilimoria, declaring his interest, mentioned that a penny off the pint of beer was most welcome. I cannot think how many pubs will be saved by a reduction in the price of beer by 0.3%. However, I do not have quite the experience of the industry of the noble Lord, Lord Bilimoria.

I am grateful to the noble Lord, Lord Marlesford, who also indicated that we should have reservations about the intention to freeze taxation on fuel. There will be escalating costs involved in that over time, and the noble Lord identified them very clearly. That aspect may gain the Chancellor a little short-term credibility but it raises considerable problems. The Chancellor will be aware that these little gimmicks to brighten life up for the nation are happening two years before the next election, but of course there is a lot that needs brightening up.

Something that has not featured enough in this debate is what it means for a nation to be told that its living standards, which have already decreased significantly over the past few years, are destined to be reduced over the next two years, if not longer, as well. That shows itself most in the more desperate sections of our community, among the poor, who have of course been subject to the Government’s unremitting ideological onslaught on welfare, but it also reaches right across the community save, perhaps, for those millionaires

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who stand to see a considerable increase in their incomes from the decision taken last year to cut taxation from 50% to 45%.

We have had some interesting contributions on the question of infrastructure, and I hope that the Minister will respond to the questions put by my noble friend Lord Eatwell. How much has been spent on infrastructure this year? The problem with the Budget is that it is all jam tomorrow—or not tomorrow, in fact, but some 700 days after tomorrow. It is two years before the expenditure on and investment in infrastructure is due to take place. We need to know how much was spent in 2012 and how much will be spent in 2013. I fear that the answers may be somewhat bleak.

Within this framework, perhaps I may also emphasise the anxieties expressed by my noble friend Lady Worthington on the question of electricity prices. There are within this Budget and in the Government’s policies hidden costs that will manifest themselves in the most appalling way; that is, directly on those who are least well able to cope with them. Unless one is in a position to invest significantly, the consumption of electricity is a given cost in bills that have to be met when they are presented.

On my side of the House, my noble friends Lord Kestenbaum and Lord Haskel, along with my noble friend Lord Bhattacharyya in considerable detail, emphasised the fact that we need investment. We cannot get out of this situation without it. The IMF has told the Government that they cannot get out of this situation without paying attention to growth. My noble friends pointed out that at last the penny is beginning to drop in government to a marginal extent, but for the past three years there has been an unremitting commitment to one objective to the exclusion of any considered investment related to growth. That is why we consider that the Government have a difficult case to argue.

I appreciated the contribution of the noble Lord, Lord Shipley, who shifted the debate on to the local and regional dimension and referred to the Heseltine report. It is encouraging that the Government are at least paying lip service to some of the noble Lord’s proposals. When we talk about development in the regions and the problem of the domination of London, it is worth recalling that one of the first acts of this Government was to destroy the regional development agencies. I recognise that the local enterprise partnerships are different and it may be that they are able to make progress, but there is no reason other than the wilful action of the Government at the beginning of their term why things are so very difficult in the regions at this time.

I apologise for slightly overrunning my time. I hope that the Minister will recognise that we want to put this debate in the context of a Government who are failing the nation and causing a great deal of distress among many members of our community.

3.04 pm

Lord Deighton: My Lords, I thank all noble Lords for their excellent contributions. I am still new enough in my job to find myself taking copious notes with lots of ideas to follow up on, so I welcome the debate.

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I may have a bias in my listening, but I have to say that the broad sense of the contributions suggests that this is a well crafted Budget that has delivered very well what can be delivered, given what I think everyone accepts is limited room for manoeuvre. The noble Lord, Lord Desai, said that once you have established a strategy you should stick to it so that people should not expect enormous deviation from one annual Budget to the next. I shall try to address the questions and issues that have arisen, and I shall do that in terms of subject matter so that there is some coherence rather than moving from one contributor to the next. I hope that that is acceptable to noble Lords.

On the deficit, I did not hear a compelling case for an alternative strategy to that which the Government have in place. We have pointed to the many exposures that would occur should we embark on another spending spree without getting the budget under control. I should point out that the OBR borrowing forecast shows a fall in every year of the forecast both in cash terms and as a percentage of GDP, and that is both with and without some of the special one-off changes such as the APF transfers. I concede that borrowing is falling more slowly than we would like, but that is because of the economic challenges and because we are allowing what the Economist has described as the “automatic stabilisers” to operate. Over the past three years, the UK has cut the structural deficit more than has any other G7 country.

A number of speakers such as the noble Lord, Lord Bilimoria, for example, talked about bringing down the level of public expenditure as a proportion of national income. I can confirm that the OBR forecast takes total managed expenditure down to, I think, 40.5% of GDP by 2017-18, which is the same level as it was in 2004-05. Several speakers, including my noble friend Lady Browning and the noble Lord, Lord Bilimoria, asked about the cost of borrowing. I can confirm that a 1% rise in government borrowing costs would add just over £8 billion to the annual debt interest by 2017-18. That provides some perspective on the risks we are trying to manage.

There was a lot of discussion about the impact of our weak export markets, the opportunity to switch into faster-growing ones, and how important conditions have been weighing against us. The OBR expects the euro area to contract by 0.5% in 2013, which follows a decline of 0.5% in 2012. Let me give noble Lords an example. In the year to the fourth quarter of 2012, goods export volumes to the EU fell by 2.5%, while our exports to non-EU areas grew by 1.2%. That gives a sense of the opportunity.

Some mention was made of international comparisons, particularly by the noble Lord, Lord Eatwell. With respect to Germany, I would just point out that the IMF has forecast that the UK will grow faster than Germany in both 2013 and 2014. With respect to the United States, our employment at just over 70% is now higher than in the US, where it is just over 67%. Those are some measures on which we are actually performing more strongly.

On monetary policy, I think the general mood of the debate was that noble Lords welcome a good and thorough review of this important area. I absolutely

21 Mar 2013 : Column 726

take on board the observations of my noble friend Lady Kramer, who believes that this is so important that it should be subject to a wider review. I also take on board the observations of my noble friend Lord Higgins that one of the reasons this needs to be managed extraordinarily carefully is the degree of independence that we have vested in the Bank of England, which is why I think we should welcome the clarity with which the new mandate has been defined.

I found particularly useful and interesting the contributions from those noble Lords who talked about what I would broadly describe as our industrial strategy, including, in particular, the speeches of the noble Lords, Lord Bhattacharyya and Lord Kestenbaum, as well as a number of other noble Lords. The Government are extremely interested in trying to get this right. The general sense that I got from the contributions was that while the ideas and policies are right, their scale, urgency and effective implementation need to be addressed with what I would describe as a private sector zeal. That is what I am in government trying to impart. The more we can accomplish that the better it will be. I would point to the money that has been applied to our world-leading sectors, in particular the aerospace industry. A number of noble Lords also referred to the importance of our science and research infrastructure. I absolutely accept those comments. In my own area of trying to define and improve our infrastructure, I am working with my right honourable friend the Minister for Business and Enterprise on incorporating the science base in the same way as we think about our digital or transport infrastructure. The utilisation of the Government’s own purchasing power as a way of incubating promising businesses is also an extremely valuable idea which the Government share and just need to implement effectively.

My noble friend Lord Flight reminded us of the structural change in the UK economy. If you isolate the difficulties that we have had in the financial sector, which was very large and suffered a very significant shock, and in the North Sea oil and gas sector—which is also very large and, certainly in recent years, mainly declining—you can identify in the rump of the economy some extremely promising stories for our long-term industrial future. We should not in any way ignore those.

In talking about our export markets a number of noble Lords said that we should switch to the faster-growing ones. The noble Lord, Lord Kestenbaum, in particular, and the noble Lords, Lord Desai and Lord Bilimoria, asked about our exports to the so-called BRIC economies—Brazil, Russia, India and China—and other strong emerging markets. Between 2009 and 2012 the UK’s exports to Brazil increased by 49%, to Russia by 133%, to India by 59% and to China by 96%. Those are very large numbers but, of course, come off quite a small base. My experience of the co-operation between the business department and the Foreign and Commonwealth Office is that the Government are extremely focused on working with our businesses, both big and small, to develop opportunities in those markets.

I now move on to what I would generally describe as some of the areas relating to fairness. The right reverend Prelate made a compelling case—supported

21 Mar 2013 : Column 727

by a number of other contributions from, for example, the noble Lord, Lord Davies, and my noble friend Lord Brooke—in essentially congratulating the Government and everybody who contributed on sticking to their commitment on overseas aid. Doing the right thing can sometimes be difficult but that does not diminish its importance. I think that the House offers its support to that continuation.

There was support for the childcare policies announced yesterday but also interest in how it will work for those at the lower end of the income strata. That is dealt with in the universal credit system, which has funding available to support people there.

There was also a discussion about utilising the new control framework which the Treasury is in the process of introducing on managed expenditure. As my right honourable friend the Chancellor said yesterday, it is really intended to turn unmanaged expenditure into managed expenditure. That will be implemented carefully to ensure that we manage any implications for the impact of our support policies.

The noble Lord, Lord Bilimoria, asked about the beer duty cut. That will go ahead and will come into effect next Monday. I understand from the experts in this area that any EU concerns on comparability should not be an issue.

Another subject that featured in a number of contributions, including from my noble friend Lady Browning, was pension reform and the affordability of the care caps. The Government have made it clear that we would implement those measures only if we could ensure that they would be paid for, and we would utilise some of the changes on national insurance and the three-year inheritance tax freeze to ensure that those are properly funded before they are introduced.

In the interests of time, I will move on to infrastructure. First, I confirm to the House that the Government are taking a long-term approach to capital spending as part of the 2015-16 round. That is why we have set in place the extra £3 billion a year, and we will also plan for a longer period than is customarily the case at the Treasury. In my view, one of the problems with the historical approach to capital spending has been the relatively short periods forward for which it is committed, which does not suit the longer gestation periods of some of the projects that it is intended to support. The plan of this Government is to fix that. Of course, that is on top of additional investments in capital spending in the Autumn Statement.

The noble Lord, Lord Eatwell, asked about the amounts of capital spending, and the noble Lord, Lord Davies, reiterated this question. We do not have the precise numbers for the capital spend for 2012-13 yet, but when we do I will make sure that those are passed on. I can say that public investment as a share of GDP is on average higher over this Parliament and the next than it was between 1997 and 2010.

Other questions were asked about the efficacy of our infrastructure delivery and the challenge of getting it done now rather than being eternally in a planning period. My noble friend Lord Flight referred to some of the red tape delays that we have encountered. We are now in the second phase of our Red Tape Challenge and trying to address some of those regulations that could perhaps reasonably be considered overzealous,

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which have slowed down some of those plans. For example, something I have been involved in has been looking to get the regulators of these sectors to standardise the approach to infrastructure access charges, which should make these developments much easier.

My noble friend Lord Marlesford asked whether £3 billion a year was really enough. That is £18 billion in capital spend over the next Parliament, and that is while finances are tight. The focus on managing down current spend to accommodate that expansion of capital spend, given the tightness of our fiscal position, is an extraordinary commitment to that level of spend.

The noble Baroness, Lady Worthington, gave a very detailed and passionate speech about the carbon price floor. This is a technical subject that is worthy of a much broader debate. All I can say is that the Government are extremely focused on solving this equation of how to ensure that sufficient electricity is generated in a way that meets our desire to hit our environmental targets, to get it all done on time and to leave our consumers with an affordable result. That is absolutely the intention and I am certainly happy to discuss policies which do not end with that result.

We had some discussion around financial reform and access to finance. My noble friend Lady Kramer very eloquently summarised how it was important to bring together all the initiatives that will compensate for the dislocation in the banking system; for example, through the business bank. The noble Baroness referred to the reduction in stamp duty to stimulate the market, in particular for technology growth companies, so that they can grow here with equity rather than selling out earlier than would be optimal, and I absolutely support that more strategic approach to bunching those initiatives together.

Finally, we had a number of interesting contributions around the initiatives announced in the Budget with respect to housing and the support that the Government propose to give to housing. Those contributions neatly summarised the balance of the argument. On the one hand, I think people accept that this is a critical area; it can and is intended to be highly stimulative to the economy. It is an area where you can get things moving quite quickly so in that respect it is a powerful initiative in the Budget. On the other hand, there was much wise counsel, and I certainly share the caution about how this is implemented to ensure that we both understand and manage the risks involved. In answer to the question from the noble Lord, Lord Desai, about how closely we manage the household debt situation, I would note that household debt in the UK has fallen as a proportion of income from 175% in 2008 to 144% currently, so it is coming down, albeit rather slowly.

In answer to some of the specific questions asked by the noble Lord, Lord Eatwell, I say that the scheme is intended to be self-financing, so the mortgage guarantee scheme will have a price for the guarantee which will be judged to meet the expected level of losses as one would actuarially calculate them. It is intended to be a market instrument in that sense. We have between now and the beginning of next year to work that through in detail with the leading market practitioners.

Motion agreed.

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Jobseekers (Back to Work Schemes) Bill

Second Reading

3.25 pm

Moved By Lord Freud

That the Bill be read a second time.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, this Bill will ensure that, following the recent Court of Appeal judgment in the case of Wilson and Reilly versus the Secretary of State for Work and Pensions, the Government will not have to repay previous benefit sanctions to claimants who have failed to participate in mandatory back to work programmes. It will also enable the Government to impose benefit sanctions where a sanction decision has been put on hold because of the Wilson and Reilly case.

I shall briefly set out the details of the Court of Appeal’s judgment, but let us first be clear on what this case was not about. The court did not cast any doubt on the policy intention behind any of the schemes. In the words of Sir Stanley Burnton, one of the judges, the case was,

“not about the social, economic, political or other merits of the Employment, Skills and Enterprise Scheme”,

and the court noted that the use of mandation was appropriate in such schemes.

The policy intention of our schemes has been clear to all from the outset. I have said that the Court of Appeal judgment was not about the social or other merits of the employment, skills and enterprise scheme, but the judges were not silent on the broad principle underlying mandatory employment schemes. Lord Justice Pill said:

“A policy of imposing requirements on persons receiving a substantial weekly sum, potentially payable for life, is readily understandable. Equally, the means sought to achieve that end are understandable; claimants should be required to participate in arrangements which may improve their prospects of obtaining remunerative employment”.

Again, I say that the case was not about the policy intent of the schemes, which has been clear from their inception.

So what was the judgment about? The judgment centred on the Jobseeker’s Allowance (Employment, Skills and Enterprise Scheme) Regulations 2011, which for brevity’s sake I will from now on refer to as the ESE regulations. These regulations provide for most of the mandatory back to work schemes, including the Work Programme.

First, the court rejected the claimants’ argument that the ESE regulations were contrary to the European Convention on Human Rights—specifically, Article 4.2 on forced labour. Secondly, it rejected the claimants’ argument that the ESE regulations could not be enforced in the absence of a formal published policy.

However, the court found against DWP on two grounds. It found that the ESE regulations did not describe the programmes that they underpinned in enough detail. It also upheld the High Court’s ruling that letters sent to claimants when they were mandated to an ESE scheme were insufficiently detailed to comply with Regulation 4 of the ESE regulations. We have since laid new regulations and issued revised letters so

21 Mar 2013 : Column 730

that we can continue to mandate claimants to our schemes and ensure their continued proper functioning in accordance with the principle of imposing requirements on jobseekers in return for paying them benefit.

Your Lordships will not be shocked to learn that the department fundamentally disagrees with the court’s verdict in respect of the two latter grounds, which is why it has applied for permission to appeal to the Supreme Court the Court of Appeal’s judgment in respect of those two grounds. The arguments that we will make before the Supreme Court, if we are granted permission—

Lord Foulkes of Cumnock: If the department was so upset and disagreed with the decision, why did it take it so long to bring legislation before Parliament?

Lord Freud: I will come on to explain that in a little.

The arguments that we will make before the Supreme Court, if we are granted permission, will not be affected by this Bill. However, we need the Bill to provide certainty that the Government are not in a position where we will have to repay previous benefit sanctions, and can impose sanctions where decisions have been stayed, in respect of claimants who have failed to take part in employment programmes without good reason. We have made it clear that we will take steps to ensure that claimants cannot expect a sanction refund as a result of this judgment, and there is a compelling public interest for taking those steps.

The Bill does not overturn previous appeals that have succeeded on the basis of good cause and it does not prevent claimants from appealing a sanction on the basis of good reason. Instead, it ensures that claimants who have failed to participate with no good reason do not obtain an undeserved windfall payment. We estimate that such a windfall could cost the public purse up to £130 million. That is money that would be better spent on people who take their responsibilities seriously, and it is in the public interest that we ensure this.

There is also an important public interest, as the Court of Appeal recognised, in getting people back to work by ensuring that jobseeker’s allowance is paid only to those who are actively seeking employment and who engage with attempts made by the state to achieve that end, and that those who do not do so face the appropriate consequences. The Bill will protect this public interest by ensuring that those who have not engaged with attempts made by the state to return them to work face the appropriate consequences, rather than receiving an undeserved windfall.

The Government respect the general principle that Parliament should not legislate to reverse the effects of the judgments of the court for past cases unless the situation is exceptional. However, it is entirely proper to enact such legislation if there is a compelling reason to do so. There is a compelling reason here on three grounds: first, the cost involved; secondly, the claimants affected do not deserve a windfall payment; and, thirdly, this is an unusual case in social security legislation where a court or tribunal decision has a retrospective effect.

The Bill will provide that any decision to reduce jobseeker’s allowance under the ESE regulations cannot be challenged on the grounds that those regulations

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were invalid or the notices given under them inadequate. It makes similar provision in relation to the mandatory work activity regulations in respect of notices given under those regulations.

I have said that we fundamentally disagree with the court’s verdict with respect to the lawfulness of the ESE regulations and the notices given under them. We believe that those regulations were correctly drafted. They were drafted to be flexible enough to encompass a wide range of programmes designed to support jobseekers into work. There was no clear and identified need to go further than the ESE regulations in order to lawfully mandate claimants to our schemes.

The Merits of Statutory Instruments Committee, as it was then called, published a report that covered the ESE regulations on 5 May 2011. The Merits Committee had a number of concerns, including the quality of the Explanatory Memorandum. To go off on a tangent, I want to acknowledge that there was a period when we were not servicing the Merits Committee adequately, and I have taken steps since then to improve that position. The Merits Committee had concerns, but the possibility that the ESE regulations were unlawful was not one of them. The committee drew attention to the fact that the regulations,

“interpret the Act very broadly so that future changes to the Scheme could be made administratively without any reference to Parliament”.

However, it did not go on to suggest that they went beyond the primary powers.

The Joint Committee on Statutory Instruments also considered the ESE regulations at its meeting on 15 June 2011. I am sorry to report that no fewer than three instances of defective drafting were identified, which the department acknowledged. However, the committee did not raise even the possibility that the ESE regulations were unlawful. The Social Security Advisory Committee, whose independent and informed advice we value greatly and with which we have a very constructive relationship, also considered the ESE regulations. Among other issues, it made a point about the breadth of the powers, but it did not suggest that they went beyond the primary powers. Similarly, those primary powers in the Welfare Reform Act 2009 received full scrutiny. The Delegated Powers and Regulatory Reform Committee regarded the delegations in the relevant part of the Act and the associated scrutiny procedure as unexceptionable.

We consider that the primary powers do not require that the regulations set out the fine details of the scheme. We believe that it is undesirable to do so, as a wide variety of possible arrangements could be made, depending on the nature of the labour market conditions in particular parts of the country. We also need to be able to respond to changing conditions and challenges quickly and effectively.

We believe that the flexibility that the ESE regulations provided was rational and desirable, and it must be remembered that the High Court ruled that the regulations were lawful. We therefore cannot agree with the Court of Appeal’s judgment. We also believe that the letters issued to claimants provided sufficient information on the consequences of not participating in our schemes. In addition to the information provided in the letter, claimants would have also discussed the precise details

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of the scheme with their jobcentre adviser, including what was expected of them and the consequences of not upholding their side of the bargain.

Nevertheless, following the High Court judgment, we revised all referral notices to comply with the judgment and sent letters clarifying the position to the then claimants impacted by the decision. That allowed us to continue to operate the schemes as intended—an intention that has been clear to all from the scheme’s inception, based on principles which the effects of the Court of Appeal judgment undermines and which the Bill is intended to protect.

It is right that we are able to operate our schemes as intended, giving jobseekers the opportunity to improve their chances of moving into work, with appropriate consequences for those who fail to take up that opportunity. It is right that government resources are targeted on those claimants who are actively seeking employment and taking all reasonable steps to improve their chances of securing employment and that resources are not wasted on those who have not met their responsibilities.

To pick up the question asked by the noble Lord, as soon as the judgment was handed down, the department explored all the options and avenues available to it to ensure the protection of the public interest. Once the decision to pursue emergency legislation was taken, that required legal advice, the appropriate consent prior to introduction and preparing the Bill products. We also engaged the Opposition, who rightly gave the matter thorough consideration. I am sure that all noble Lords will appreciate the time that that has taken.

Lord Foulkes of Cumnock: As I understand it, this lay in the department without any suggestion of legislation for more than a month. If the department had been really concerned about it, the legislation could have been dealt with through the normal procedure. Instead, both the other place and your Lordships’ House are faced with emergency legislation, which is entirely unsatisfactory for examining such an important Bill in detail. All the subsequent stages will be dealt with on Monday. That is not adequate scrutiny. Does the noble Lord not feel some guilt or embarrassment at having to deal with it in this way?

Lord Freud: My Lords, obviously, it is never desirable to have emergency legislation where one can avoid it. It would be desirable to run this through a more normal process, but we are caught by time constraints. The point that the noble Lord made about delay is accounted for by the various steps that we have had to take in that period.

In conclusion, the Bill guarantees some fundamental principles, which are about helping us to move people into employment and protecting the public purse. I commend the Bill to the House and I beg to move.

Amendment to the Motion

Moved by Lord McKenzie of Luton

At end to insert “but that this House deplores the Government’s incompetence in failing to provide sufficient information about its back to work schemes, which led to the need to introduce legislation with

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retrospective effect; deplores the need to introduce fast-track legislation when it took the Government four weeks to introduce the Jobseekers (Back to Work Schemes) Bill into Parliament and in spite of the Constitution Committee’s ongoing concerns about the fast-tracking of legislation; seeks assurances that the appeals process will be robust, speedy and efficient, and that the criteria of the independent report to be prepared under clause 2 will be strengthened to include greater details regarding the number of sanctions, the nature of those affected, the appeals process, the support available to those affected and the effectiveness of the hardship and mitigation provisions; and further seeks assurances that adequate legal advice will be provided to those affected by the introduction of this legislation”.

3.40 pm

Lord McKenzie of Luton: My Lords, I thank the Minister for his explanation of the Bill, his officials for our meeting yesterday and the follow-up information that has now been provided, which we have the weekend to peruse.

This is a shameful day for the Government when they confront us with a Bill that is wholly retrospective in nature and which they are intent on fast-tracking through the parliamentary process. The Government have got themselves in a terrible mess because their ESE regulations purporting to introduce certain employment and training schemes have been struck down by the Court of Appeal as ultra vires and because the court judged that notices given to individuals under those regulations were inadequate. The Government ignored the advice of the Social Security Advisory Committee and, as we have heard, have not taken on board the comments of the Merits Committee and the history of defective drafting that the Minister acknowledged. I say as an aside that a longer-term issue arises from this about how we scrutinise secondary legislation, particularly some of the important stuff that comes through from the DWP.

It follows that sanctions for not complying with the ultra vires regulations which have been deducted from claimants are unlawful and that would apply to sanctions which have been stockpiled but not implemented should the DWP look to progress them. The Bill covers not only the regulations dealt with by the Court of Appeal but parallel regulations promulgated in the same manner. As we have heard, the Government have sought leave to appeal to the Supreme Court, which may yet finally settle this matter. The effect of the Bill is to cause those sanctions which are and were at the time unlawful to become lawful.

We now have the benefit of the Constitution Committee’s very robust deliberations on this Bill. So far as fast-tracking is concerned, it strongly disagrees with the Government’s assessment of the need for this. In particular, it points out that the Government were able to table amending regulations on the very day on which the Court of Appeal judgment was handed down, yet took four further weeks to get this legislation to Parliament, a point pressed by my noble friend Lord Foulkes. How does the Minister answer that point?

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Even if we accept a truncated timetable, it is to be deprecated that the Government have been obdurate in being so limiting in the opportunity we in your Lordships’ House have to scrutinise the Bill. Undue haste and lack of attention to detail were what got us in this mess in the first place, and the risk is that we will compound it by so brief a process. I pay tribute to my noble friends Lady Royall and Lord Bassam for trying to get the Government to see sense on timing, albeit to little avail. Nevertheless, we intend to do our best in the time allotted to make sure that the full ramifications of this Bill are explored.

The Constitution Committee points out that retrospective legislation is not, of itself, unlawful but that, from a constitutional point of view, it should, wherever possible, be avoided. It urges that, in doing our work on this Bill, we should consider whether retrospectively confirming penalties on individuals who, according to judicial decision, have not transgressed any lawful rule is constitutionally appropriate in terms of the rule of law. Perhaps the Minister can help us on this point. On what basis do the Government consider that the rule of law should be set aside in these circumstances? Is it the belief that individuals would have somehow got off on a technicality, that the cost implications justify it or some other reason? Do the Government consider that different standards should apply when benefit recipients are involved?

For the avoidance of doubt, I should make it clear that we do not in principle oppose such schemes as the Work Programme or mandatory work activity and, indeed, we would have been responsible for some of the primary legislation which underpins the regulations in point, but we strongly criticise how the Government have gone about implementing some of them. The Work Programme in particular seems thus far to be little short of a disaster. There is an urgent need to develop effective programmes, especially to address the needs of young people.

We also strongly hold to the view that benefit claimants have rights but also responsibilities and that it is entirely reasonable for conditionality—the obligation to engage—to apply, and that a sanctions regime should underpin this. However, that sanctions regime should be reasonable, proportionate and transparent. In this regard, the amendment to the Bill in the other place which provides for an independent review of the sanctions regime, secured only by the interventions of my right honourable friends Liam Byrne and Stephen Timms, is vital. We plan to build on this in Committee to secure a wider review. We do this in particular because of a growing unease about the extended use of sanctions, beyond their role of underpinning conditionality, as a means of controlling benefit expenditure. As Stephen Timms pointed out in another place, there is growing evidence that it is the proliferation of sanctions which is driving the explosion of food banks across our country and, like him, we will wish to secure that any review covers a range of matters, especially how sanctions are being applied to individuals who have a mental health or other fluctuating condition.

We hear denials from Ministers in another place that the DWP does not have targets for sanctions. Can

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the Minister please tell us what management statistics are kept of sanctions and how these are routinely reported within the management structure?

If we have to live with retrospection then we need to ensure that there is a robust appeals procedure. Again we should be grateful for the intervention of honourable friends in another place for securing that commitment in the Bill. We will use our time in Committee to explore the extent of this commitment. The principle in this regard ought to be that individuals are in no worse position than they would have been in respect of appeals, hardship, good cause, mitigation than they would have been had the sanctions been properly made originally. For “stockpile” cases, where a sanction has not yet been applied, we need certainty on which regime is to be applied, as of course the system changed in October of last year.

It is understood that for the stockpile cases a withheld sanction will not be applied where somebody is now in work. Given that many people fluctuate between work and unemployment, the point at which the sanction is activated is therefore of importance. Can the Minister tell us what rules will govern this? Can he also say just how the rules will apply in relation to good cause or good reason when a sanction is activated some time after the failure to comply? What would have been contemporary evidence at the earlier time may be more difficult to adduce subsequently. Similarly, in relation to mitigation, what might have been possible earlier may be more difficult now. With regard to those who have actually been sanctioned, what, if any, information is now to be provided to them, especially given the view of the court that the original communication was defective?

The Minister will be aware of the provisions in the LASPO Act which become effective from 1 April and which deny legal aid support for welfare benefits advice. What will be the position of those seeking support for sanctions which have been stockpiled but now retrospectively applied? Will the old legal aid rules apply as though the sanctions were applied in due time? Can the Minister say what, if any, are the ramifications of the Bill for national insurance credits, which may have been restricted alongside the benefits under the sanctions regime?

There are a number of further issues we would wish to explore in Committee so that the full ramifications of retrospection in this Bill are understood. There are practical as well as constitutional issues arising from the Bill. We are told that some £130 million is at risk if this legislation does not proceed. That is likely an overestimate if not all the stockpile—for example, for those in work—will not proceed. Nevertheless, we have to be mindful that, whatever the sum, there is the likelihood that it will be recouped from further benefit restrictions if the Bill does not proceed.

We acknowledge that this gives the Government a dilemma, even if one of their own making. We are in this unhappy position because of the Government’s incompetence. It does not bode well for the growing chaos which is engulfing the department as it struggles with its benefit reforms. I beg to move.

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3.50 pm

Lord German: My Lords, I want to address the Bill itself, but before I do that I want to make a few comments on the amendment before us today. When I first read the amendment’s text last evening, when it was produced, I had a bit of a flashback to earlier student days when you had composite Motions and amendments and the call for separate votes to be able to unpick the various parts. While I acknowledge that there are issues fundamental to this Bill that need to be raised, they are appropriately the issues that would and should be raised in Committee on Monday. I expect that we will deal with those issues, so the amendment as a composite presents a very difficult picture for people to decide upon. However, there is one crucial factor running throughout the amendment: the issues raised by the Constitution Committee of this House on retrospection and fast-tracking. Before I ask my noble friend to comment on that, I refer to two paragraphs in the Constitution Committee’s report—the last in respect of retrospection, and paragraph 12, which says:

“it is incumbent upon the Government to explain to Parliament why they have chosen to proceed by means of fast-track legislation and to reject the alternative options”.

I listened very carefully to my noble friend at the outset, and I hope that he comes back to that matter in his summing-up, when he may be able to give this House an explanation.

Subject to the Government providing those explanations, I support the Bill for exactly the same reasons as the Front-Bench Labour spokespeople in the other place, who said that they,

“do not want to risk an additional £130 million cut to benefit spending over the period ahead … Nor do we want to be in a position in which people who were sanctioned months ago—in many cases, well over a year ago—have to be refunded”.—[

Official Report

, Commons, 19/3/13; col. 825.]

I agree with the Labour Party Front Bench on those issues and why the Bill is before us today.

I want to say something about the nature of secondary legislation and its scrutiny. It is Parliament that passes and scrutinises regulations, and it will probably be Parliament that has to decide how it does those things in the light of any subsequent changes brought about by the courts. Of course we are not at the end of this process yet, as I have said already. There are important lessons to learn from these problems to see how we can move on in a better way.

The court determined on narrow issues and on insufficient detail and content of the schemes and regulations, and that the notices given to claimants did not specify the range of sanctions that could be used, but it upheld the policy intentions of the Government’s work schemes and backed the right to require people to take part in programmes that would help to set them into work. Up to 1 September last year, 200,000 people found work through the Government’s Work Programme. Appropriate work experience is a good thing, and it helps to build the confidence of jobseekers. Increasing employment levels in our country since May 2010 have meant that since that time nearly 250,000 fewer people now claim out-of-work benefits, in a period of huge economic difficulty. However, I

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wish to discuss the operation of these schemes. We know that there are no targets and no league tables for Jobcentre Plus on sanctions. Therefore, the key question I want to probe is how we can better undertake these tasks, which is fundamental to ensuring that we get the best out of existing programmes.

We know from the evidence provided by the DWP that the overwhelming majority of those who have been on the Work Programme are satisfied with it, but, of course, there is always room for improvement. Three-quarters of those who attended the programme said that they believed they were more attractive to potential employers and that their personal confidence had increased as a result. That is a powerful outcome for a group of people who are some distance from the labour market. Clearly, the majority think that they have got closer to it. However, the programmes could offer better outcomes in many cases. The first of these areas concerns engagement with the third sector. When the main contractors were appointed to run the Work Programme, there was much discussion about subcontracting to the third sector. I would be grateful if, when he sums up, my noble friend could tell us to what extent that engagement has occurred given the unusual skills of people in the third sector in dealing with individuals who find themselves in difficulty.

The second area that we ought to probe is the change of culture within Jobcentre Plus. There is a balance to be struck between codifying everything passed on to the JCP and giving advisers the discretion to interpret issues in the light of claimants’ circumstances. There is a question to be asked about the level of top-down instruction, which in the past has been very much the way of working. I looked up the instruction manual to ascertain what constitutes good reason or good cause for people not undertaking to do things they have been asked to do. You can read through 16 pages of guidance, plus another chapter. However, if you ask people in general what they would do in such circumstances, they reveal an all-embracing understanding of the issues. It is a very complex area and a vigorous interpretation of the guidance has led to the problems being experienced in some offices, particularly in relation to targets for sanctions, which have been mentioned today.

Ministers have had to come down hard on clear misinterpretation, but have signalled that they are pursuing the empowerment of decision-makers as a critical cultural change. There must be a role in all this for flexibility, discretion and sensitivity. The legal case behind today’s Bill has thrown up other cases. As regards the cultural shift that Ministers have outlined, a basic structure needs to be provided vis-à-vis the way Work Programme claimants are handled. That structure should have three components. First, there should be a meeting with the provider or JCP contractor. Often there is no face to face meeting between the provider and the claimant. However, it is necessary to have an intelligent conversation about their future needs. Those needs should be clearly communicated and agreed. The outcome also needs to be agreed between both parties, rather like the new contracts proposed for universal credit.

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Secondly, it is important to try to fit the placement to the person. It is important to establish the work habit, obviously, but an appropriate placement is needed that suits the requirements of both parties. Thirdly, the Government should not get in the way of serious job opportunities. They need to give people space to find their own placements. Just yesterday, I heard a case of someone with a qualification in photography who was offered a job in a do-it-yourself shop but found a more appropriate placement in a photography shop, which was accepted as an appropriate placement. I welcome the independent review process. We now need to see new detailed terms of reference. I always make the plea to my noble friend the Minister that any evaluation, rather than being considered a milestone, should be rolling so that you can learn lessons as information comes before you. I hope that we will hear more about that later. I look forward to hearing the Minister meet the concerns of the Constitution Committee, but otherwise I am happy to support the Bill.

Lord Foulkes of Cumnock: Could the noble Lord help me? I remember when the Liberal Democrats were on this side of the House all the handwringing about retrospection and fast-tracking of legislation. I am not clear from what the noble Lord said whether he is in favour of the Constitution Committee’s report or supports the Government on both retrospection and fast-tracking. Could he make that clear to the House?

Lord German: Yes, I will. It is perfectly obvious that the noble Lord’s party did the same thing when it was in power. There was retrospection in legislation. I can think of the videogames legislation, which has some very great similarities to this Bill. My plea to the Government is to answer the questions posed to them by the Constitution Committee in this debate so that we can have that explanation. I quoted the two paragraphs of the report. I am sure the noble Lord has that in front of him, so he can look at paragraphs 12 and 15. Those are the two questions I want answered.

Baroness Hollis of Heigham: In the opening stages of the noble Lord’s speech, which was very interesting, he referred to remarks from the Front Bench in the debate. I have the Hansard here. Could he give me the column reference for his quotation?

Lord German: Certainly. It was col. 825, about half way down towards the bottom of the page.

Lord Crickhowell: On the point about paragraph 12, as a member of the Constitution Committee I raise the point that in paragraph 5, and in footnote 8 beneath it, we made clear that the Government provided, both in the Explanatory Notes on the Bill and in the letter to the noble Lord, Lord McKenzie, that has been circulated, an explanation of why this fast-tracking was necessary. We were also clear that we made no comment in the report about the policy of the Bill and that this was a purely constitutional point.

Lord German: I fully accept that. The issue raised by paragraph 12 is why the Government rejected the other options.

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4.02 pm

Lord Pannick: My Lords, this Bill contravenes two fundamental constitutional principles. First, it is being fast-tracked through Parliament when there is no justification whatever for doing so. Secondly, the Bill breaches the fundamental constitutional principle that penalties should not be imposed on persons by reason of conduct that was lawful at the time of their action. Of course, Parliament may do whatever it likes—Parliament is sovereign—but the Bill is, I regret to say, an abuse of power that brings no credit whatever on this Government.

As we have heard, this morning your Lordships’ Constitution Committee, of which I am a member, issued a report on the Bill. We looked at this matter yesterday, necessarily as a question of considerable urgency. I pay particular tribute to our legal advisers, Professor Adam Tomkins and Professor Richard Rawlings, for their indispensable assistance. I am astonished that the Minister in his opening remarks made no mention whatever of our report. He mentioned other reports by other committees but he said nothing about the report of the Constitution Committee. Are the Government not interested in the report of the Constitution Committee on this important issue? Do they not wish to engage with the reasoning of the Constitution Committee on this important matter? Do they have, as the noble Lord, Lord German, asked a few moments ago, any answer to the reasoning and conclusions of the Constitution Committee? Surely, the House is entitled to know from the Minister, when he opens a debate at Second Reading on these matters, what the Government say about a report of this nature on constitutional issues.

Let me deal with the two issues in turn—first, on the fast-tracking element of the Bill. Your Lordships’ Constitution Committee published an earlier report, the 15th report of Session 2008-09, specifically on fast-track legislation. We pointed out, as is obvious, that there are real detriments when Parliament is asked to fast-track legislation. It means that there is no adequate time for committees of this House and the other place to consider and report on the implications of the proposed legislation. It means that persons and bodies outside Parliament have no proper opportunity to make representations to provide information to Members of each House. It also means that Members of the two Houses, as the Bill goes through its parliamentary stages, have no proper opportunity to consider its implications, propose amendments, reflect on matters and debate with Ministers outside the Chamber as to the proper way forward. For all those reasons, it must be obvious that fast-track legislation needs a compelling justification. It should be reserved for the most obvious cases of emergencies that of course occur from time to time. However, a compelling justification is needed.

What is the position here? It is clear; on 12 February in the Court of Appeal, the Government lost a case about jobseeker’s allowance. That is when the judgment was handed down. What did the Government do? They acted with commendable speed in one respect; on the very same day, they introduced fresh regulations that cured the legal defect prospectively from 12 February.

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The Government were able to act speedily because they knew what the judgment was going to say; they and the other parties are told by the Court of Appeal two or three days in advance the contents of the draft judgment in order for them to comment. The Government were therefore able, very properly, to act speedily.

The only remaining issue relates to the payment of benefits to those persons who refused to comply with the unlawful regulations prior to 12 February—the retrospective effect. What did the Government do? They took four weeks to address the matter. They laid the Bill before Parliament last Thursday, 14 March. Despite the fact that they took four weeks internally to decide what to do, they then told Parliament—I suppose, more accurately, they asked Parliament—to consider the Bill within just over one week, with one day in the Commons and two days for all stages in this House.

All that is in the context of there being no urgency whatever for this unseemly haste in parliamentary procedure. Why is there no urgency? It is for this reason: the problem has been cured prospectively by the fresh regulations. There is no urgency in relation to those denied benefits for the period up until 12 February, the retrospective effect, because the Secretary of State is appealing to the Supreme Court, as he is perfectly entitled to do. The law states that while an appeal is pending in the Supreme Court—while the Secretary of State is seeking permission from the Supreme Court to go there—there is no obligation on the Secretary of State to pay a penny back to the individuals who have been denied their benefits. If your Lordships are interested, it is Regulation 16 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, Statutory Instrument 991. Therefore, there is no immediate urgency.

As I said, the Secretary of State has sought permission from the Supreme Court to appeal there. Again, in stark contrast to the urgency with which he requires Parliament to address this Bill, the Secretary of State’s appeal to the Supreme Court is being conducted in the most leisurely of fashions. I shall tell your Lordships the facts. The Court of Appeal refused the Secretary of State’s application for permission to appeal on 12 February—the date of the substantive judgment. The Secretary of State has 28 days to apply to the Supreme Court for permission to appeal. When did he make his application? He made it 28 days later on 12 March, last Tuesday—the day of the deadline. The form that a party fills in when applying for permission to appeal to the Supreme Court asks whether the proposed appellant is seeking an expedited hearing and it contains a box for the answer. The Secretary of State ticked the box stating no.

As your Lordships will know, courts regularly order speedy hearings in urgent cases. I have contacted the chief executive of the Supreme Court, Ms Jenny Rowe, and she has confirmed to me what your Lordships would expect: that if an application for expedition had been made by the Secretary of State in this case, the Supreme Court would of course, as in any other case, have given it careful consideration. If appropriate, the court would have heard the matter speedily and it would, if necessary, have taken another case out of the list to accommodate this one.

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We have the quite remarkable situation that the Minister is asking Parliament to fast-track this legislation, with all the detriments that that involves, even though there is no urgency at all in that he has no duty to pay up £130 million, or whatever the figure is, while an appeal is pending, and even though he has taken four weeks to prepare the legislation, and while he is conducting the appeal proceedings in the most leisurely manner possible. Therefore, there has been a distinct lack of urgency by Ministers in bringing the legislative proposals before Parliament and no urgency whatever in the Government’s approach to the appeal in the Supreme Court. The only expedition or emergency is here in Parliament, denying us a proper opportunity to reflect on and debate the legislative proposals in a properly informed manner. Reference has already been made to the report of your Lordships’ Constitution Committee. When we considered the Bill, we set out the circumstances and concluded at paragraph 11:

“For these reasons, we are unable to agree with the Government’s assessment that it was necessary for the Bill to be fast-tracked”.

I have explained to your Lordships why I take that view.

I ask the Minister to answer three questions on this topic. First, what is the urgency, given that the prospective regulations are in place and that while an application for appeal is pending there is no duty to pay out a single penny for the period prior to 12 February? Secondly, if this matter is so urgent, why did it take four weeks to bring the Bill before Parliament, and how can it possibly be justified to give Parliament only one week to consider the issues? Thirdly, if the matter is so urgent, why wait four weeks before seeking permission from the Supreme Court to appeal and why not seek an urgent hearing in the Supreme Court?

My second objection to this Bill—I shall be more speedy on this subject—is its substance. If the Secretary of State’s appeal were to succeed, the problem would go away. Those denied benefits for the period up to 12 February were correctly denied benefit and they have no claim. But if the Supreme Court upholds the judgment of the Court of Appeal or if, as I suspect will happen if this Bill is enacted, the Government do not pursue an appeal, this Bill will impose a penalty on persons who acted lawfully under the law as it existed prior to 12 February. They are being penalised for refusing prior to 12 February to act in a manner in which they had no legal duty to act.

The Bill therefore offends against a basic constitutional principle that people should be penalised only for contravening what was at the time of their act or omission a valid legal requirement. If this Bill becomes law, Ms Reilly, the claimant in the case, and others will be penalised for failing to attend schemes when at the time of their refusal they had no legal obligation to do so. It is quite irrelevant that the people adversely affected are jobseekers. Indeed, one might think that if the victims are from the most disadvantaged section of society, it is all the more important to maintain basic elements of the rule of law.

I have seen a letter dated 18 March from the Minister to the noble Lord, Lord McKenzie, explaining the Government’s position. For reasons I do not understand,

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the letter was not sent to the chairman of the Constitution Committee but we did receive it by a very indirect route. One sentence on page 2 of the letter, the substance of which was repeated today in the Minister’s opening remarks, stands out. The Minister said:

“It would … be unfair if claimants who have failed to comply with requirements … obtained an undeserved windfall payment”.

The Minister repeated that language today.

That approach misses the central point which I have sought to emphasise. The claimants complied with all lawful requirements in existence at the date of their conduct. It may cost—who knows?—£130 million as a result. But I take the view—I hope that I am not the only noble Lord who takes the view—that the rule of law is simply priceless. One cannot put a price on complying with the rule of law and basic constitutional requirements.

Your Lordships’ Constitution Committee has drawn attention to these matters at paragraphs 13 and 14 of our report. At paragraph 15, we concluded:

“In scrutinising this Bill, the House will wish to consider whether retrospectively confirming penalties on individuals who, according to judicial decision, have not transgressed any lawful rule is constitutionally appropriate in terms of the rule of law”.

I would be assisted if the Minister would answer that point and would address the reasoning and the concern of the Constitution Committee.

I am not impressed by the arguments that the legal defects identified by the Court of Appeal may have been technical in nature. That is quite irrelevant. The point is that the Court of Appeal found—this is the law unless overturned by the Supreme Court—that the regulations were unlawful and the people who failed to turn up for job schemes were acting perfectly lawfully under the law at that time.

In conclusion, I say to your Lordships that there is no justification whatever for fast-tracking this Bill. Moreover, if that were not bad enough, its contents offend against a basic constitutional principle. I very much regret that this Government should see fit to bring forward such a legislative proposal. If the noble Lord, Lord McKenzie, chooses to divide the House on his regret Motion, or perhaps more accurately his deplore Motion, he will have my support.

4.20 pm

Baroness Hollis of Heigham: My Lords, like others in this House and like my noble friend Lord McKenzie, I have been in the Minister’s shoes. Let us be clear, therefore, that I, like him I am sure, support work programmes that skill claimants. I remember when one lone parent told me, “I have a future now”. I support them as long as DWP accepts good cause or good reason when the programmes are not appropriate. I therefore also support sanctions for people who can and should seek work but who knowingly refuse to do so without good cause, because without such sanctions the programmes become merely voluntary. I support these sanctions becoming increasingly tough so that the person knowingly refusing to comply becomes aware of the increasingly severe consequences of their actions. However, because I want to change behaviour and encourage good behaviour, I support the lifting of sanctions when the individual complies and comes

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into the Work Programme. While those sanctions last, I support a level of hardship payments so that vulnerable people—for example, children—have some degree of protection.

Such a simple, clear approach requires simple, clear communication with all claimants. I would hope that that is common ground around this House today. However, I say to the Minister that with this Bill the Government are not simply remedying some minor technical slip-up by the department, as Ministers would want us to believe. This Bill trespasses quite improperly on to new ground in four ways. Two of these have been well argued, by the noble Lord, Lord Pannick, in particular. It uses emergency legislation, normally reserved for national security issues. Why? It does so because the Government are not willing to trust the British justice system, presumably because they feel that they would lose in the Supreme Court. That is profoundly disrespectful to claimants. Therefore, we cannot scrutinise the Bill as we should, we cannot take it through the proper stages as we should, and, as the noble Lord, Lord Pannick, said, it is an abuse of Parliament. Worse, the Government make the Bill retrospective. Unlike the noble Lord, Lord German, I do not recall any retrospective social security Bill. It means, as the noble Lord, Lord Pannick, has said, that we are punishing people for actions which the courts have ruled were legal at the time they were committed.

My third objection is that the Government knew of the problem. The Social Security Advisory Committee, whose job it is to scrutinise regulations, warned that they were flaky, and the Government, as is their wont, ignored it. The Government, therefore, knowingly disregarded the very body set up to amber or red-light their regulations.

My final objection is that these so-called technical mistakes were far from technical. I ask your Lordships to remember that sanctions are not there to cut the benefit bill. They are there to change behaviour and bring people into the Work Programme. To change behaviour, you need to understand your client base and communicate effectively. That client base, at risk of sanction, is not for the most part made up of schemers, skivers or fraudsters, because that requires ingenuity, alertness and a certain competence. No; the sanctions pool includes the chaotic, the incompetent—unlike, of course, the DWP—the confused, often those with poor mental health, learning difficulties, weak organisational skills, and the functionally illiterate. It includes lone parents, the depressed, the poorly educated, and those with needy ADHD children. It includes young men, thrown out of their mother’s home by a new stepfather and now sofa surfing and living hand to mouth without any routine.

How did the Government handle this client group before the court intervened? First, they told clients that their sanctions from the Work Programme could last up to 26 weeks, but the department failed to mention that the first offence would require a sanction of only two weeks, the second of only of only four weeks, and only subsequent offences of six months. Secondly, and more importantly—and this is certainly not technical—they failed to tell claimants that they could end their sanctions by doing what the Government

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and all of us want them to do, which is to comply with the Work Programme. Thirdly, the Government in their letters failed to draw attention to the underpinning of a hardship regime which protects vulnerable people and children from, frankly, going hungry.

Not to tell people about this step approach to sanctions, not to tell them how they can end the sanctions and not to tell them that they could access a minimal hardship payment is not merely a technical failure but a travesty of our responsibility to claimants, many of whom, I repeat, have chaotic lives, poor mental and physical health, limited literacy and are highly confused and vulnerable.

The Minister assumes, as always, economic rationality, yet he knows as well as I do that most people sanctioned did not know that they could be sanctioned or what they were sanctioned for. The DWP’s own research, report 523 in 2008 and report 767 in 2011, revealed that between a half and two-thirds of those sanctioned did not know that this could happen and that, when it did, they did not know why. In some cases, because they were already having their benefits stopped to repay crisis loans, they were not even aware that they were being sanctioned at all. Benefit cuts therefore appeared to be something just arbitrarily happening to people like them to make them poorer. As the research concluded, not surprisingly the benefit sanction had little impact on their job-seeking behaviour because of the lack of clarity of communication. That is the Minister’s client base. Just think about it.

We are trying to change behaviour, rightly. We may be trying to instil sensible habits, organisation and reliability, rightly. How will that happen if the sanctioned person does not know he is being sanctioned, why he is being sanctioned, what he can do appropriately to end the sanction, or what, if he is in hardship, he and his children can do to survive in the meanwhile? He has been made, so to speak, a financial outlaw without knowing why and what the law is that he is sanctioned for breaking.

I do not challenge at all the right to sanction people who should but knowingly refuse to participate in the Work Programme. The word is “knowingly”. Those letters sent out by DWP did not tell claimants what they could and should expect if they did not comply—claimants who, above all, needed simple, clear information. The Appeal Court held that it should have done and it did not. That is not merely technical—it really is not—it is key to the moral as well as the legal validity of the entire sanctions process.

The noble Lord, Lord Freud, suggests that the Government should not have to pay out the £110 million to £130 million or so to rectify their mistakes to people who should have behaved differently and that the money would therefore have to be found elsewhere. I ask noble Lords on the coalition Benches mentally to replay this miserable tale, but this time substitute HMRC for DWP and taxpayer for claimant. If the Court of Appeal found that HMRC had acted illegally in fining—that is, sanctioning—taxpayers for, say, late submission because HMRC had failed to make taxpayers properly and fully aware of the fining/sanctioning regime, and that as a result the court argued that the fines collected were deemed to be illegal, what would

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the coalition Back-Benchers be arguing? Would they support emergency retrospective legislation to make legal what the courts found was illegal in order to avoid repaying those improperly collected fines? Somehow, I think not. Noble Lords on the Benches opposite might even be outraged that the Government were seeking to make legal what had been ruled by the courts to be illegal. They might even think that HMRC was trying to put itself above the law because it had the power to change the law by rushing a retrospective Bill through Parliament. They might think that and they would be right.

The DWP got it wrong; it is deeply regrettable, but it happens. What it must not do is rush through retrospective legislation in indecent haste to insulate itself from the consequences of its own mistakes and seek to make legal what was illegal. If any claimant tried that line, they would be sanctioned. Perhaps the department might regard our amendment as such a sanction.

4.31 pm

Lord Bach: My Lords, it is hard to think of a more unattractive, more unappealing and more unworthy Bill than this one. In its damning report, our Constitution Committee condemns the constitutional basis on which the whole Bill rests in direct and straightforward terms. Whether it is the issue of fast-tracking, of retrospection or, tellingly, a combination of the two, the report is unambiguous. I am not going to waste the time of the House by repeating the findings of the committee, rather, I shall mention comments made by two other organisations outside of this House. I certainly would not agree with the philosophy of one of those organisations because it is a campaigning group called Boycott Workfare. It puts the case about this prospective Bill rather differently from the Constitution Committee, but the implication is the same:

“This is almost unbelievably disgusting … [DWP] broke the law, now they want to retroactively change the law so that they didn’t break the law in order to keep £130 million out of the pockets of some of the poorest people in the country”.

The much criticised PCS union has surely got it right:

“The bill would set a dangerous precedent if passed—sending the message that when citizens defeat the government in court, it can overturn the court ruling retrospectively with primary legislation—effectively making the Government above the law”.

Of course, this is not the first time that the Government have behaved in this high-handed and unprincipled way, described by the noble Lord, Lord Pannick, in his brilliant speech as an abuse of power. Next week there will be a slightly more minor issue, but in my view still an important breach in the way a Government should behave. The House will debate the Government’s refusal to take any notice at all of the views of this House, reflected in a vote by this House, on a regulation arising from the legal aid Act. This state of mind and attitude towards law making is deeply worrying. The basic thing that Members of this House must do, from wherever we come, is to scrutinise Bills of this kind with particularly specific care.

It is, of course, obvious what the Government ought to do as a consequence of this debate: they should withdraw their Bill and expedite their appeal to

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the Supreme Court. However, on the assumption that they will not do the obvious thing, and that the Bill somehow becomes law, I will deal with one aspect of it, as briefly as I can. Clause 1(13) reasserts what of course should be obvious, which is that a person may,

“apply for a revision or supersession of, or … appeal against, a decision to impose a penalty”.

That is of course as it should be. We know that a person is entitled to show good cause or reason why they should not have privileges taken from them.

However, something essential to a person’s right to appeal is about to disappear. It is not, of course, mentioned in the Bill, nor is it talked about by the Government and nor is it really talked about by the media outside. It is a sort of guilty secret. It is the right to legal advice, paid for, if the person is eligible, by legal aid. Today, as we speak, a person who wished to appeal a mandatory recommendation would be entitled to legal aid to get some basic, fairly cheap, quality advice. A person seeking to appeal to the First-tier Tribunal would be entitled to legal aid for such advice. Whether it was the mandatory reconsideration or the next stage, the First-tier Tribunal, they would be entitled, if they were eligible, to legal aid. If we move forward 10 days to 1 April, that entitlement that they have now will no longer be there and they will not be entitled to legal aid. It is obvious that many of those involved in the Work Programme would be eligible for legal aid today. They are on JSA, many of them are young and many more of them will be without means in any event. Part of the value of advice is that it weeds out the hopeless case, so that the system is not clogged up with them. Another advantage is that it encourages the good case, ensuring that people are not, as in this case, being wrongly sanctioned when they otherwise might face no action. However, its greatest value is that it is fair and that it has been an important part of our legal system, and will be up until 1 April. My question to the Minister therefore is this: if the Bill is passed, will the Government ensure that all those who are sanctioned will be able to access advice, either on reconsideration or on appeal, if they want to? That is the position today and surely it should be the position in 10 days’ time.

Finally, I come back to one of the comments that my noble friend Lord McKenzie made in his speech and a question that he posed. If the Government refuse, then is it not clear that those persons whose cases have been stockpiled because of the unlawfulness of the regulations, and who want to appeal the sanctions decision made against them some time ago, will be put in a much worse position because of the Government’s incompetence? How can that be justified in these, or in any, circumstances? I look forward of course to the Minister’s reply. I hope he will reply to the questions that he has been asked by noble Lords around the House. The House is entitled to that, particularly given the circumstances of this Bill. I do not envy him his task in justifying the Bill. Whichever way you look at it, this is no way for a Government in a mature, responsible democracy, to behave towards their citizens.

4.39 pm

Baroness Lister of Burtersett: My Lords, I support the amendment in the name of my noble friend Lord McKenzie of Luton. The amendment just about says

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it all: incompetence leading to retrospective legislation; unjustified fast-tracking; and the need for various assurances, to which we will return in Committee. I simply want to add two points, as well as reflect on the implications of retrospection.

My first point is a brief social policy one. I accept the Minister’s point that the case was not about the substance of the policy, but that is the context in which it is being debated and it helps explain some of the anger that is being expressed outside this House.

Of course, as my noble friends have said, we are not arguing that there should be no sanctions. Despite all the political talk about social security having been for too long all about rights and no obligations, benefits for unemployed people have always been conditional on requirements associated with paid work, and if those conditions are not met there has always been some form of sanction. However, over recent years, those requirements have been extended to groups not previously expected to seek work, and have become increasingly onerous. At the same time, the sanctions regime has been ratcheted up further to new heights under the Welfare Reform Act 2012, while at the same time the hardship provisions are being weakened.

Cait Reilly, the young woman whose appeal has led to this Bill, was required to give up voluntary work that she was doing at a local museum, which was highly relevant to the kind of paid work she hoped to pursue, in order to participate in a sector-based work academy placement that required her to give her labour for nothing. What was the sense in that? Ms Reilly commented that she agreed that,

“we need to get people back to work but the best way of doing that is by helping them, not punishing them”.

It is hardly surprising that claimants are experiencing this sanctions regime as punishment, because it is increasingly punitive. That is one reason why we need an independent report into the sanctions regime that goes wider than the one provided for in the Bill. We will return to this matter in Committee, as my noble friend Lord McKenzie has said.

My second point concerns the human rights implications of this miserable Bill. I speak as a member of the Joint Committee on Human Rights, but I cannot speak for the committee because the fast-tracking of this Bill has made it impossible for the committee to scrutinise it, as the noble Lord, Lord Pannick, has hinted. This is also to be deplored. Although there has been no formal human rights memorandum, the Explanatory Notes contain almost a full page explaining why the Government believe that the Bill is compatible with the European Convention on Human Rights. Yet it is clear from how it is couched that the Government acknowledge that they could face a challenge on the grounds that the legislation interferes with property rights under Article 1 of Protocol 1 of the ECHR. Indeed, they implicitly accept that there is such interference when they state that,

“any such interference is justified as there are compelling public interest reasons for doing so, given the significant cost to the public purse of repaying previously sanctioned benefits, and as the aim of the proposed legislation is intended to restore the law to that which Parliament intended”.

The Government also concede that:

“A claimant might also argue that legislation which removes their right to a refund of sanctioned benefits, or allows the

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Secretary of State to impose a sanction, notwithstanding the Court of Appeal’s decision, is a breach of their right of access to court under ECHR Article 6”.

They go on to explain why they believe that this is not the case, but end by saying:

“Even if the proposed legislation would interfere with a right of access to court, the Government considers that the interference is justified for similar reasons as for Article 1 of Protocol 1”.

Reading this as one of the few non-lawyer members of the JCHR, the Government seem to be well aware that they are treading on thin ice with regard to the human rights implications of this Bill and that at the very least there is a case to answer. As it happens, the notice of objection lodged in response to the Secretary of State’s appeal to the Supreme Court argues:

“The actions of the Secretary of State and the Act, if enacted, represent an interference in these proceedings that is contrary to the rule of law as protected by Article 6”.

This legislation is in effect interfering in the proceedings of the Supreme Court and pre-empting any decision that it might make. This is a serious matter. The Minister said in his opening remarks that the Bill would not affect the case before the Supreme Court. I did not quite understand that, so perhaps he could explain more fully in his response.

The notice of objection goes on to state:

“Mr Wilson would also wish to contend that the retrospective imposition of benefits sanctions on him represents a violation of Article 1 of the First Protocol”.

It is therefore clear that serious human rights questions are raised by this Bill, but that, because it is being fast-tracked through Parliament, having been pondered over for a month in the department, as underlined by the Constitution Committee—I was not convinced by the Minister’s response on that to my noble friend Lord Foulkes—the committee charged by both Houses of Parliament to advise on such matters has been prevented from doing so. This is surely a disgrace. The committee has already been effectively circumvented by the speed of passage of the Welfare Benefits Up-rating Bill through Parliament, despite its clear implications for the social and economic human rights of children, when it will cast 200,000 more children into poverty.

I return to the Bill in question. On the day after a Budget that says we can afford to cut the cost of a pint of beer, never mind the tax cut to be enjoyed by the highest earners next month, we are told that it is justified to override constitutional and human rights principles—which the noble Lord, Lord Pannick, said were priceless—for the sake of £130 million. Of course, we are then threatened with this £130 million being taken from elsewhere in the social security budget if Parliament refuses to go along with this charade.

As a lay person, I have been trying to get my head around the implications of retrospection. It seems to me like legal science fiction where the Government are able to operate in a parallel universe where they can say that what happened did not happen by the strike of a legal pen, or, more to the point, that what did not happen—that is, adequate notification to claimants of their legal position under the sanctions regime—did in fact happen. Somehow by the stroke of that legal pen, the administrative law principles enunciated

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by Lord Justice Pill and Sir Stanley Burnton in the Court of Appeal decision of 12 February can simply be set aside.

Sir Stanley Burnton made the point that:

“There is a constitutional issue involved. The loss of jobseekers’ allowance may result in considerable personal hardship, and it is not surprising that Parliament should have been careful in making provision for the circumstances in which the sanction may be imposed”.

He also said:

“The Secretary of State cannot avoid the requirements of the Act in relation to schemes by calling them programmes. It would be absurd to conclude that a scheme is subject to the statutory requirements only if the Secretary of State decided to call it such”.

Reading the judgment and reflecting on this legislation, it struck me that the parallel universe that I mentioned could have been devised by Lewis Carroll. Noble Lords will recall the pointed exchange between Humpty Dumpty and Alice in Through the Looking Glass:

“‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean—neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master—that's all’”.

Unfortunately, in fast-tracking this legislation, the Government are proving that they are master—and abusing power, as the noble Lord, Lord Pannick, put it—and that they can make ultra vires regulations mean in retrospect what they wanted them to mean. Moreover, as the nub of the Court of Appeal judgment was that the claimants were not provided with the legal certainty required by the law, they are saying that they can create legal certainty in retrospect where legal certainty did not exist: a true Humpty Dumpty stroke if ever there was one. However, just because the Government are master, it does not make them right. I therefore hope that noble Lords will express their unhappiness with this fast-tracked, retrospective, constitutionally and human rights-dodgy legislation by supporting my noble friend’s amendment.

4.49 pm

Baroness Sherlock: My Lords, what a sorry state of affairs we find ourselves in. I almost feel sorry for the Minister, or I would if this shambles were not entirely of the Government’s own making. This debate has made clear the depressing, and I suppose rather shocking, extent of the Government’s failings. It seems as though crucial regulations underpinning the conditionality regime of the Government’s flagship, if utterly useless, Work Programme, as well as various other schemes, have been ruled unlawful by the Court of Appeal, and the Government now want to rectify the problem that they have created by forcing this Bill through Parliament at breakneck speed.

My noble friend Lord McKenzie made the point that the Constitution Committee has said clearly that it disagrees with the Government’s assessment, and we have now heard that, as it were, from the horse’s mouth in an extraordinarily powerful speech from the noble Lord, Lord Pannick. This is only the fourth time that I have spoken from the Dispatch Box in your Lordships’ House, but I suspect that if I were spared

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to do so another 400 times I would never begin to match the power of a speech like that, and I congratulate him. I am glad that it is the Minister, not me, who has to respond to it. The point that the noble Lord made, which I think is very interesting, is that the Government, having decided that the matter could take four weeks to consider from the time when they got the new regulations laid and enforced in this House, suddenly decided that there was a panic. I would like the Minister to return to this in his response.

In response to my noble friend Lord Foulkes, I think the Minister implied that the Government spent those four weeks considering all the various options before deciding on this deeply attractive one out of the collection. Will he explain why the Government did not consider the options before the decision? Presumably there were always two possible outcomes from the judgment, yes or no, so it would have been possible for them to spend time in advance of the ruling considering what they might do if they lost the case. Why did they have to wait for four weeks to consider the options and then come to Parliament to tell us that, having waited for four weeks, we had to rush through this in days? I will be interested to hear what the Minister has to say.

The shambles is even more annoying because the Government were warned. The Minister seemed to imply that the Social Security Advisory Committee did not tell them that the regulations were illegal, but perhaps he could help me. I understood that the committee drew attention to the overly wide scope of the regulation that was being used. Was that not one of the points on which the Court of Appeal found against the Government? If not, perhaps he could correct me, and I invite him to do so now if he wishes.

Lord Freud: The point that was being made by the SSAC about the width was that it meant that it was not necessary to come back to Parliament for specific approvals on particular schemes. It was not that this was likely to be against the law. The point was about parliamentary oversight.

Baroness Sherlock: I thank the Minister for explaining that, but of course it was on precisely the fact that parliamentary oversight and scrutiny of the nature of these regulations is important that I understand the Court of Appeal found against the Government. At the very least, this was a pretty heavy hint from the Social Security Advisory Committee, one that the Government managed to ignore completely.

Then there is the issue of retrospection, to which I barely need to turn after the speech from the noble Lord, Lord Pannick. As my noble friend Lord Bach noted, the worst aspect of this debacle is the combination of retrospection and fast-tracking. That is a particularly toxic mix, but it is what we are faced with. I look forward to hearing the Minister’s explanation of how the circumstances here make it necessary to bring forward this particular form of retrospection with this astonishingly foreshortened timetable, a point made by the noble Lord, Lord German. If the Minister’s response on that point is not compelling, I look forward to seeing the noble Lord join us in the Division Lobby should my noble friend Lord McKenzie decide to press his deplore Motion to a vote.

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Like my noble friend Lord McKenzie, I am grateful to my noble friends Lady Royall of Blaisdon and Lord Bassam for trying to get us a few extra days to consider this matter. At least we now have the weekend to read the papers in more detail. I am also grateful that my right honourable friends Liam Byrne and Stephen Timms in the other place managed to get the Bill changed so that it would at least guarantee appeal rights for those affected by the sanctions process and ensure an independent review of that process.

It now falls to us in this House to do two things. The first is to register that this state of affairs is not right. The amendment in the name of my noble friend Lord McKenzie of Luton simply puts on record what we on these Benches think about the mess that the Government have got themselves into and the way they propose to get themselves out of it. I very much hope that the House will support it. We will then get down to the work that this House does best: doing our best, in the limited time that we have, to scrutinise the Government’s plans to ensure that there are no more disasters lurking in the undergrowth of this fast-tracked Bill.

There is a whole series of issues to which we will have to come back in Committee on Monday. For example, we know that appeal rights are to be safeguarded, but how can those appeals be robust when there is such a long time lag between the alleged breaches and the sanction being applied? As various noble Lords have said, how will the Government ensure fair treatment of a complainant who may have said that they had perfectly good cause not to comply with the requirement of a programme but who will struggle to evidence that months after the event? There is also the question of hardship. What kind of hardship regime will apply? The hardship regime is in the process of changing. How will the Government ensure that appropriate help is given to those who would suffer hardship as a result of sanctions?

Then there is the $64,000 question posed by my noble friend Lord Bach: will the Minister guarantee that anyone wishing to challenge decisions will have the same right to access to legal advice or aid as they would have done at the time the alleged breach took place, under regulations that have been found to be lawful?

There is so much more that I would like to ask, but we will have to wait until the dog end of Monday’s sitting, to which the remaining stages of the Bill have been confined. The message from today is clear: this is a shambles. I am beginning to wonder whether the Government’s entire approach to getting people into work is not itself a shambles. The evidence is clear. The Government are failing the unemployed of this country. They are failing to create jobs. They are failing to help them get back into jobs. Their flagship Work Programme—

Lord Fink: My Lords—

Baroness Sherlock: I am so sorry, I could not catch what the noble Lord said from a sedentary position. Let me share a view with him about the Government flagship Work Programme, on which the noble Lord, Lord German, spoke so movingly.

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The Public Accounts Committee described it as follows:

“Actual performance was even below the Department’s assessment of the non-intervention rate—the number of people that would have found sustained work had the Work Programme not been running”.

It was worse than doing nothing. I do not regard that as a success. There are other ways to do this. The Minister is aware that if Labour was in power, it would create real jobs for the long-term unemployed: six months of a proper job for 25 hours a week on the minimum wage. It would be compulsory, because we have never had a problem with sanctions, provided that they are fair and robust—oh yes, and legal.

I do not suppose the Minister will see the light today on that point, so instead I look forward to hearing answers to the various questions that have been asked, especially those from the noble Lords, Lord Pannick and Lord German. Our expectations are high. As there are no sitting days between today and all the remaining stages, the Minister will have to answer all our questions today. Unfortunately, on this occasion, we cannot wait for him to write to us, unless he does so very speedily. Perhaps he will also take the opportunity to do one other thing: will he apologise to the House, to the nation and especially to all those affected for the shambles that his Government have created?

4.58 pm

Lord Freud: My Lords, I thank noble Lords for their valuable and interesting contributions. I need to register some disappointment that the noble Lord, Lord McKenzie of Luton, has tabled this regret Motion on the Second Reading of the Bill. I am saddened by that approach particularly because it contrasts to the very constructive approach of his party in another place. I hope that he does not press the Motion to a vote.

I shall deal directly with the various points raised. The first is the point about government competence. The ESE regulations were drafted to be flexible enough to encompass a wide range of programmes designed to support jobseekers into work. Introducing new regulations for each individual scheme would have been more bureaucratic and expensive. We do not agree that the regulations were ultra vires, and have applied to the Supreme Court for permission to appeal. We believe that the primary legislation does not require that the regulations set out the fine details of each different programme, and, indeed, that was the position taken by the High Court. In fact, we believe that it is undesirable to do so and that this was not Parliament’s intention since a wide variety of possible arrangements could be made depending on the nature of the labour market conditions in particular parts of the country. It is important that we have the flexibility to amend these schemes to reflect the changing labour market conditions on the ground without going through a laborious legislative process which would delay change beneficial to the claimants.

I also want to point out that the ESE regulations were considered by the House of Lords Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments and the non-parliamentary

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Social Security Advisory Committee, as I said in my opening remarks. None of those committees suggested that the regulations were outside the relevant Act’s powers. They raised different issues.

The Motion also makes reference to the High Court and Court of Appeal judgments that the letters provided did not contain sufficient information to claimants about the consequences of not participating in these schemes, a point which the noble Baroness, Lady Hollis, made with some vigour. That is not the Government’s view and that is why we have sought leave to appeal to the Supreme Court. Regulation 4(2)(e) of the ESE regulations simply required that the notice specify,

“information about the consequences of failing to participate in the Scheme”.

All our letters before the High Court explained that claimants could lose up to 26 weeks of benefit if they did not comply. That is clearly information about the consequences of failing to participate.

Claimants sanctioned under the ESE regulations knew perfectly well what was required of them. The notices that we sent to them clearly set out that they would face a benefit sanction if they failed to participate, and they have had detailed ongoing discussions with their Jobcentre Plus adviser about these schemes. The idea that these claimants failed to participate in these schemes because they knew that a court might decide that the regulations were ultra vires or the notice defective, particularly before any court case had been brought, is, quite frankly, ridiculous. There is no sensible case of unfairness to the claimants in this case.

As the noble Lord, Lord McKenzie, said in 2009 while debating the Welfare Reform Act in this very place:

“Of course there is a very easy way to avoid being sanctioned in the first place, which is to engage with the programme”.—[Official Report, 11/6/09; col. GC 136.]

These claimants failed to do so and must face the consequences of their actions. They are not deserving of a windfall payment as the result of a technical ruling by the Court of Appeal.

Lord Pannick: Will the Minister explain how it can be fair or a question of windfall when these claimants had no lawful obligation at that time to go on these courses? Surely that is the point. The Court of Appeal has so held.

Lord Freud: My Lords, it was clearly laid down in the primary legislation that that was an expectation, and they were informed by their advisers of that expectation. We are looking now at a subsequent finding by the Court of Appeal, on which we have asked for leave to appeal. However, nobody could have anticipated the finding, which is in dispute. There was a lot more information going to clients than was in that letter, because they were in communication with their advisers.

One of the fundamental points at issue here is that we are trying to design a much more flexible welfare system in which we individualise responses. That means that we do not send out loads of generic

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letters with long lines of prose about what will happen if you do this, that or the other. We are aiming to have a specific conversation with people through a flexible system.

Baroness Hollis of Heigham: My Lords, surely the Minister has accepted his own department’s research that up to two-thirds of those sanctioned did not understand that the failure to do as they were asked or told to do would result in a sanction. They did not know, and his department’s research confirms that.

Lord Freud: My Lords, I agree with the noble Baroness on this—the sanctions have not been well designed. We are redesigning the whole regime, as we did in the recent Act, to make sure that people understand what sanctions are about.

Lord Low of Dalston: My Lords, can the Minister help me on one point? I have been listening very carefully to what he said. As I understand it, he is telling us that the claimants fell foul of the legislation in terms of what it was anticipated to mean by the department. However, we all know that the meaning of legislation cannot always be anticipated with certainty when it is contested; it often requires a court decision to clarify what the legislation means. I think that the Minister is telling us that the claimants fell foul of the legislation as the Government wanted it to be interpreted but not, in fact, as it was interpreted. We have to look at what the Court of Appeal held to know what the legislation meant, not what the Minister hoped it might mean.

Lord Freud: As noble Lords know, we are seeking leave to appeal to the Supreme Court to test that specific matter. I will shortly come on to the point raised by the noble Lord, Lord Pannick, about why we have fast-tracked this Bill. However, we have explored all the avenues and have not taken a decision to fast-track lightly. We have looked at other measures to prevent this course of action but none provides a sufficient guarantee. People have been concerned about the four-week period. We have also spent a significant period discussing, through the usual channels, agreement to expedite this legislation.

Let me make clear why the retrospective legislation is necessary. The Government respect the general principle that Parliament should not legislate to reverse the effects of court judgments on past cases unless the situation is exceptional. However, it is entirely proper to enact such legislation if there is a compelling reason to do so. Perhaps I may spell out the three reasons which make this an exceptional case. First, there is significant money involved—£130 million—in very difficult, austere times. Secondly, the money would go to a group of people who neither expect nor deserve to obtain a windfall payment. These claimants knew exactly what was required of them. They failed to participate without good cause and were rightly sanctioned. Thirdly, this case is most unusual in terms of social security legislation.

Lord Foulkes of Cumnock: The noble Lord is repeating word for word what he said in his introductory speech. Why does he not reply and answer the important questions that have been raised? For example, why did

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he not ask for his appeal to the Supreme Court to be fast-tracked? Can he not answer the debate instead of repeating what he said at the beginning?

Lord Freud: I am doing my best to explain the reason why this is exceptional. I did not explain it in detail at the outset, so I am really grateful for the opportunity, reinforced by the noble Lord, to explain the exception.

The third reason why this is exceptional is to do with the nature of social security legislation. In almost all cases regarding social security decisions, the decisions of a court or tribunal are only prospective in nature. That is because the most common way in which to challenge a social security decision, including the underlying regulations, is to bring an appeal to the First-tier Tribunal. If that happens, the normal route is followed and the decision of the tribunal will not have a retrospective effect because of Section 27 of the Social Security Act 1998. It is only because there is an anomaly in the text of Section 27 that it does not apply to judicial review cases. That is something that I suspect that this Government will come back to, to clear up. It is clear from Section 27 that Parliament recognised that wholesale retrospective disruption of the social security system was not desirable. That is even more true in a case like this, when the beneficiaries of that disruption are not deserving of the windfall that they would otherwise receive. That is why this is exceptional.

I turn to the reason why we need to fast-track the Bill. I want to respond to the rather witty way in which the noble Lord, Lord Pannick, put his view that there was no urgency by explaining to him and other noble Lords that we have applied for permission to appeal to the Supreme Court. If we are not given that permission to go ahead—and that could come out any day—we immediately become liable to pay back the sanction money of £130 million. That is why there is particular urgency and that is why we are fast-tracking this legislation. We need to provide certainty to taxpayers that we will not spend this money in this way, unnecessarily. The department will endeavour to process the stockpile cases in a robust, transparent and efficient manner. While there is clearly a trade-off between robustness and speed, we will aim to do that as practically as possible.

Lord Pannick: I thank the Minister, who has been very kind. I have one more question for him. He says that it is necessary to have certainty, but why not wait until the Supreme Court rules? If the Government win, as they say they are so confident of doing, there is no problem. If they lose, they can bring emergency legislation before Parliament to clear up the matter in a few days before anyone can complain that they have not been paid out. Why not follow that route?

Lord Freud: The moment that there is a ruling—if there were to be a ruling—against the department, we would be liable from that moment to repay. What would we do? Would we obfuscate, say that we could not pay and were dealing with the paper work while we put through emergency legislation? We would be obliged to make the payments from the moment when the ruling came through. That is what this is about. It

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is why we are going ahead at this time and at this speed, which is clearly not something that we enjoy doing.

I turn to the review, which we have taken on in response to the Opposition in the other place requesting such a review. It will focus on the sanctions affected by the provisions of the Bill, which amount to roughly 25% of all JSA sanctions issued in the period. I have heard today concern from Peers about how DWP issues sanctions to JSA claimants more generally. I would like to make it clear that the department will discuss with the Opposition the terms of reference of the sanctions review. I assure noble Lords that the stockpile of claimants who are issued with a benefit sanction as a result of the legislation will receive the same information that is received by all claimants who are sanctioned for failing to participate in a scheme; namely, they will be told about their right to appeal, how to appeal and how they can go about claiming for hardship.

I will try to pick up as many of the questions that I have not dealt with as I can. I hope that the noble Lord, Lord Pannick, appreciates how closely we have studied the Constitution Committee’s report. I can tell him that Miss Reilly will not be affected by the legislation as she complied with the scheme that she was required to attend and was not sanctioned. I say to the noble Lord, Lord McKenzie, that we needed to put the regulations out within a day to keep mandating claimants going forward. The retrospective legislation required careful thought and an exploration of all the avenues. We also consulted the Opposition and the whole process took some weeks. I assure the noble Lord that there are absolutely no benchmarks or targets for sanction referrals. Sanctions will involve a temporary loss of benefit. We will not seek lump sums from people in work. We will look to use good cause and, for the more recent sanctions, good reason, but they are in practice the same.

As I said to the noble Baroness, Lady Hollis, a little earlier, the information given to claimants was not confined to what was in the letters. The sanction decision notice provides information on how to appeal and access other help. The noble Lord, Lord Bach, was concerned about legal aid. The first stage of the tribunal process is inquisitorial and legal aid is not required. It helps to ensure that everything that is relevant is considered. That is the job of the tribunal. I say to the noble Baroness, Lady Lister, that the Bill is compatible with the ECHR and will overturn some of the undesirable consequences of the judgment. That should not be done lightly but it is entirely proper to do so in the circumstances.

A number of noble Lords enjoyed having a go at the Work Programme. However, it has resulted in 200,000 people moving off benefits. The PAC report is somewhat premature in its conclusion about what is happening. I look forward to talking about that programme further in the months to come. I conclude by urging the noble Lord to withdraw—

Baroness Lister of Burtersett: I quite understand that the noble Lord has not been able to answer all the questions that were asked. However, will we get answers to those questions over the weekend?

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Lord Freud: I have done my best to answer them. We will have a chance to go through some of these issues again in detail on Monday. I urge the noble Lord to withdraw his regret Motion. I commend the Bill to the House.