6 Jun 2013 : Column 1273

6 Jun 2013 : Column 1273

House of Lords

Thursday, 6 June 2013.

11 am

Prayers—read by the Lord Bishop of Derby.



11.06 am

Asked by Baroness Knight of Collingtree

To ask Her Majesty’s Government what steps they have taken to cease the practice of terminations of pregnancy in NHS hospitals that are not compliant with the Abortion Act 1967.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, in 2012 the Secretary of State instructed the Care Quality Commission to inspect NHS and independent abortion providers to ensure compliance with the Abortion Act 1967. The Chief Medical Officer also wrote to all providers of abortion services, reminding them of their obligations under the Act. All allegations of illegal abortions are taken very seriously and should be reported to the police, who will, if appropriate, conduct a criminal investigation.

Baroness Knight of Collingtree: My Lords, is it not the case that early last year the Government’s own care quality inspectors found, in a number of abortion clinics, piles of forms signed by doctors authorising abortions for women they had never seen, let alone examined? Was it not also reported that other abortions were being done for non-medical reasons such as that the child coming was a girl? Why has so little been done to stop these happenings when they are so blatantly against the law of the land?

Earl Howe: My Lords, the Care Quality Commission has put in place procedures to identify pre-signing or other instances of non-compliance, and they are confident that these would now be picked up during inspections. However, my noble friend is right; there was a concern early last year that this pre-signing was happening. Since then, however, the CQC has been working directly with providers who are registered to provide termination of pregnancy services to ensure that they are complying with the requirements of the Act. It is beginning to explore how it can strengthen the registration process alongside its regular inspection activities. I therefore suggest to my noble friend that it is not a case of nothing having happened.

On sex selection, we have no evidence at all of gender-related abortions in the UK. Again, concerns were expressed about this in the press, but analysis has been done that shows that the UK birth ratio is within normal limits.

Lord Alton of Liverpool: My Lords, does the noble Earl accept that some cases were referred to the police last year where gender abortions were identified? Will

6 Jun 2013 : Column 1274

he welcome the decision of Ranjit Bilkhu and a group of Asian women in this country to set up an organisation to challenge the attitude that it is permissible to take the life of an unborn child merely because of its gender? Has he noted the Private Member’s Bill of the Member of Parliament for Congleton, Mrs Fiona Bruce, and the Early Day Motion, signed by more than 50 Members of another place, drawing attention to the need at least to collect the data where the gender of a child is known so that we can truly know whether or not this phenomenon is occurring in this country as it does in many other parts of the world, where the three most dangerous words are, “It’s a girl.”?

Earl Howe: My Lords, I am aware of all the initiatives mentioned by the noble Lord. The issue of the sex selection of foetuses is, of course, extremely serious. However, as I mentioned in my earlier Answer, following extensive investigation and analysis we do not believe that there is any evidence that this is happening in the UK. That is the prime reason why we do not agree with the noble Lord that measures should be put in place to collect data regularly on the sex of the aborted foetus. Were we to do that it would require changes to legislation. It would also require changes to clinical practice, and it has ethical implications. I hope the noble Lord will understand that we have thought about this very carefully.

Lord Mawhinney: Will my noble friend tell us how many prosecutions have taken place in the last year for terminations that fell outside the Act?

Earl Howe: I am not aware of any prosecutions in the last 12 months. The Crown Prosecution Service reviewed the evidence of the pre-signing of HSA1 forms and decided not to take further action against some individuals, but other investigations are continuing.

Lord Steel of Aikwood: I thank the Minister for the steps that have been taken to stop abuses of the 1967 Act. Will he confirm that there has been a welcome drop in the total number of abortions recently, but that there is still a problem of what are called repeat abortions, where women present who are clearly using abortion as a form of contraception, which is thoroughly undesirable?

Earl Howe: My noble friend is right. The abortion rate across England and Wales has been static since 2009. The good news is that the abortion rate for women under 18 has gone down. There was a 9.6% decrease in the rate between 2010 and 2011. On repeat abortions, the news is not so good. The proportion of repeat abortions for women who had abortions in 2011 was 36%. The figure was higher than it had been the previous year, which is a matter for concern.

Baroness Royall of Blaisdon: My Lords, I very much welcome the figures that the Minister gave on the number of abortions going down for younger women, and regret the figure for repeat abortions. Naturally, we must do everything possible to stop illegal abortions. However, will the Minister confirm that it is important

6 Jun 2013 : Column 1275

that women who need abortions should not be impeded in any way, and that sex education and education about relationships are terribly important? I hope that the Government will be open to accepting amendments to the forthcoming education Bill on that issue.

Earl Howe: I am sure that those issues should be discussed very thoroughly. I agree that young people should be taught about relationships. However, I also believe that access to contraception is very important. Our data show that there has been no decrease in the number of women using contraception, and that more women are turning to extremely effective measures such as long-acting contraception. It is encouraging that the abortion rate for the under-18s is coming down.

Baroness Masham of Ilton: My Lords, how many late abortions have there been for babies who may have had a handicap?

Earl Howe: The vast majority of abortions are performed at under 13 weeks. The figure was 91% in 2011. There has been a continuing increase in the proportion of abortions that are performed under 10 weeks. Again, that is positive news. I do not have detailed information on the issue which the noble Baroness asked about, but I will write to her.

Order of the Companions of Honour


11.14 am

Asked by Lord Lexden

To ask Her Majesty’s Government whether they have plans to increase the membership of the Order of the Companions of Honour.

Lord Wallace of Saltaire: My Lords, the Order of the Companions of Honour is restricted to a membership of 65 plus the Sovereign. There are no plans to increase the membership of the order, which currently carries a number of vacancies.

Lord Lexden: My Lords, in thanking my noble friend for his reply, I should perhaps make a declaration of non-interest to assure the House that I do not seek to suggest that I should be admitted to this great order. However, since there are no fewer than 24 vacancies, it is rather tempting to propose the names of admired friends—men and women from all parts of the House—although at the moment I would be slightly reluctant to include anyone from the government Front Bench, even my noble friend, for the following reason. Does he agree that anyone looking at the composition of the order today might well think that it is designed primarily for politicians, who constitute no less than half the current membership—21 out of 41? They are, of course, all most worthy recipients, but should not the order reflect more fully the glorious era of British culture and sport in which we are living? Why has no poet been appointed since 1993, no writer since 1999 and no musician since 2000, to help fill the 24 vacancies?

6 Jun 2013 : Column 1276

As for sport, should not more of its stars be appointed to join its one current representative—my noble friend Lord Coe?

Lord Wallace of Saltaire: My Lords, the Order of the Companions of Honour is only one of the orders of honour in the British honours system. Service to the state is, after all, one of the central principles under which the various orders have been created. Politicians who belong to the Order of the Companions of Honour have all provided considerable service to the state. Indeed, 16 of them are Members of this House. However, as the noble Lord has also noted, there are a number of people who have made considerable contributions in the fields of music, theatre, fiction writing, history, science and elsewhere. I am happy to say that David Hockney, with his very close connection with Saltaire, is also a member.

Lord West of Spithead: My Lords, talking of honour and recognition, I am sure the Minister is aware that, 69 years ago today, some 6,800 warships, auxiliaries and merchant ships landed British, American and Canadian forces in Normandy, and that 5,500 of those ships were British. I have to say we are not quite in that position today. Four years before—some 73 years ago this week—Operation Dynamo finished, in which we had expected to manage to withdraw some 80,000 troops of the beaten British Army from Europe, but ended up taking out more than a third of a million. In the context of honour and recognition, I am sure that the noble Lord would like to give the thanks of the House for all those people who were involved in those two operations.

Lord Wallace of Saltaire: My Lords, that is a little wide of the mark. It is appropriate to pull the subject back towards the Question by saying that the Order of the Bath has a particularly strong military connection, as the noble Lord well knows. Every time I give a tour of the Abbey, which I do from time to time as a former chorister, I remark that one sees the military banners up in Henry VII’s chapel.

Baroness Deech: What proportion of the Companions of Honour are women? Is the noble Lord satisfied that the highest honours which can be awarded, including the Order of Merit, satisfactorily represent the contribution of women to the achievements of this country?

Lord Wallace of Saltaire: That is an extremely good question. We are very conscious of the imbalance in gender terms of almost all the orders and honours which are awarded. Only four of the 41 members of the Order of the Companions of Honour are women. However, nearly half the honours awarded in the latest New Year Honours List—47%—were awarded to women, although the majority of those were at what one has to call the lower levels of honours, not the higher. That, of course, partly reflects the continuing imbalance in society and the economy. Since John Major’s changes in 1993, it is open to all British citizens to nominate people for honours. There were 3,000 nominations last year. I encourage everyone to think very actively who else, particularly among distinguished women, might be nominated for orders.

6 Jun 2013 : Column 1277

Baroness Trumpington: My Lords, the Minister will be aware that there is to be a debate later in this Session about making Alan Turing a non-criminal. Despite the fact that he made an enormous contribution to this country’s future, would his criminal conviction, as things stand, prevent him being made a Companion of Honour?

Lord Wallace of Saltaire: My Lords, my briefing assured me that honours were not to be withdrawn from people who have died, and I think that the awarding of honours to people who have died would also be outwith the honours system as it is currently understood. However, we would all strongly agree that Alan Turing suffered quite appalling discrimination. Both my parents-in-law worked with the noble Baroness at Bletchley Park.

Lord Campbell-Savours: My Lords, does not the nature of this Question indicate the scale of the disconnect between the people of this country and the politicians?

Lord Wallace of Saltaire: Not entirely. The honours list in recent years has included an ever larger number of people who provide public service, often without reward, at the lower levels. I processed up the Abbey on Tuesday morning behind a lollipop lady who was there because we were demonstrating different forms of public service to the country. I am happy to say that the number of teachers, including head teachers, who receive awards has been increasing in recent years. Eight head teachers received senior honours in the latest honours list.

Baroness Scotland of Asthal: My Lords, what is the ethnic balance among those in the order?

Lord Wallace of Saltaire: Amartya Sen, I have to say. The issue of ethnic balance is also one of which the various honours committees are extremely well aware. I think 6% of those in the latest honours list were members of ethnic minorities. We are conscious that we have to look actively at that issue. Again I would say to everyone here and to all those whom noble Lords know outside, we encourage public nominations. Perhaps I may also add, as someone who lives in Yorkshire, the English regions are underrepresented. If you live in London, Scotland, Northern Ireland or Wales, you have a better chance of being honoured than if you live in Yorkshire or the north-east.

Garden Cities


11.22 am

Asked by Lord Stoneham of Droxford

To ask Her Majesty’s Government when they will publish the prospectus for the establishment of new garden cities.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, very large-scale new housing developments are difficult, complex projects that involve long-term

6 Jun 2013 : Column 1278

investment. This is illustrated by the fact that no developments of more than 10,000 homes have been delivered since the new towns programme. We are working with areas such as Bicester, which have expressed an interest in significant future housing growth that incorporates garden city principles such as high standards of quality and design, varied architecture, and provision of green space and gardens.

Lord Stoneham of Droxford: May I encourage my noble friend to be a little more specific? The Government promised a prospectus in their housing strategy published in November 2011. Unless the Government publish their prospectus for garden cities this summer or within at least two years of promising to do so, is there not a danger that people will question the Government’s determination to tackle the past decade’s undersupply of housing and avoid the possibility of a house price boom in the next 10 years?

Baroness Hanham: My Lords, the Question is very apt but it relates almost entirely to big developments because garden city developments are not in their nature small. The noble Lord will know that these sites are very complicated. The garden city principles were enumerated by the Deputy Prime Minister in his speech to the National House-building Council last November. He said that we should build places which,

“draw on the best of British architecture and design, which have their own identity and character”,

and have a crucial role in keeping the countryside intact. He said that garden cities enable people to live sustainably and to move easily between work and home. Those are very large principles and demonstrate that a development needs to be large to bring all that in.

Baroness Sharples: Can my noble friend say whether allotments will be included in these plans?

Baroness Hanham: My noble friend never misses an opportunity to mention allotments. Of course, if allotments were proposed—and they could be—within these plans, I am sure they would be considered by the local authority. In any case, as my noble friend knows, no allotment ground can be vacated without the Secretary of State’s permission.

Lord Best: Does the Minister agree that some major and new settlements can take place within urban areas, incorporating all the good principles that she has mentioned—the Olympic Village being one such example and, now, even the big King’s Cross redevelopment? Will plenty of encouragement be given in any prospectus that comes out for urban-based new settlements?

Baroness Hanham: My Lords, I readily accept what the noble Lord has said. Housing is not going to be confined to new areas. It will of course take place in conjunction with cities or towns, and indeed I think that Cranbrook and Bicester would fill those requirements. I totally agree with the noble Lord on that point.

Lord Taylor of Goss Moor: I should say that I have various declared interests and draw the House’s attention to them. I have had a long-term belief that creating new communities relieves the pressure to surround

6 Jun 2013 : Column 1279

existing communities with undesirable development, while still delivering the housing, workplaces and services that people need. The Deputy Prime Minister and the Prime Minister have both promised the prospectus, which would give a lead to organisations and local authorities in understanding what the Government want. Can the Minister explain why that has not yet happened and can she give any indication of when it will?

Baroness Hanham: My Lords, I have indicated that the principles laid out in the prospectus and draft prospectus are already being dealt with and are already being incorporated into the proposals and designs for these larger sites. The local infrastructure fund, which has recently been set up by my department, helps with the sort of matter that the noble Lord has raised—that of the additional pressures placed on local communities—by providing funding for things such as schools and opening up roads.

Lord Christopher: I have heard what the noble Baroness has said about the issues arising from garden cities, but would it not greatly speed up the provision of houses if major developers were required to develop properly and genuinely the sites for which they already have planning permission?

Baroness Hanham: My Lords, I think that these are all different matters—we have completely different proposals being put forward. Yes, some of the developments will be where planning permission has already been given, some will be where discussions have already taken place and some will be on new sites. We have to ensure that we are flexible but insistent that these are good developments for the future and that we are not just building anonymous estates that do not bring any sense of community.

Lord Flight: My Lords, do the Government have any plans for the refurbishment of some of the new towns built around London after the Second World War where the fabric of some of the buildings is now decaying fast?

Baroness Hanham: My Lords, I think that it would be for local authorities to make plans for any refurbishment of that kind within their housing plans. As the noble Lord knows, the Government have a programme to bring back in empty housing and, as I said, the wider programmes for the refurbishment of larger areas are a matter for local authorities.

Lord Greaves: My Lords, can the Minister tell us the difference between a garden city and an eco-town?

Baroness Hanham: My Lords, garden cities are what we are dealing with at the moment. Eco-towns were not very successful, but we hope that the larger developments that we are working with will get off the ground.

6 Jun 2013 : Column 1280

Lobbyists: Register


11.29 am

Asked by Baroness McIntosh of Hudnall

To ask Her Majesty’s Government when they will introduce a register of lobbyists.

Lord Wallace of Saltaire: My Lords, the Government have repeatedly made clear their commitment to introducing a statutory register of lobbyists. We will introduce legislation to provide for a lobbying register before the Summer Recess.

Baroness McIntosh of Hudnall: My Lords, we probably all agree that this is a difficult matter and that it is gratifying to learn from the Minister that the Government have plans to do something about it. I am sure he will agree that it is a pity that we are having this discussion now in the glare of further unwelcome and, on the whole, ill intentioned media attention, particularly as the coalition agreement, as I understand it, committed in 2010 to,

“regulate lobbying through introducing a statutory register of lobbyists”.

Does he further agree, however, that the regulation of lobbying is a separate issue from reforming funding of political parties? Can he confirm that the Government will not conflate these two matters in any legislation they now bring forward?

Lord Wallace of Saltaire: The Government do not intend to conflate these matters although there is a degree of overlap between the two. The Government intend to look at the question of third-party funding of political activities, including the issue of campaign groups which are not affiliated with political parties spending money during election campaigns. The Electoral Commission has annotated that some £3 million was spent during the last election by a number of organisations with the intention to influence the election.

Lord Forsyth of Drumlean: My Lords, the Minister has indicated that he sees a need, quite rightly so, for the ability to remove from this House people who have been convicted of serious criminal offences. Can we take it that he will now abandon his long-standing opposition to the Steel Bill, which this House has sought to introduce on several occasions and which would have provided for this very measure?

Lord Wallace of Saltaire: My Lords, discussions are under way on that question and it is likely that a Bill will be introduced in the next Session which will deal with a number of such issues to do with parliamentary behaviour and what is called parliamentary housekeeping.

Lord Martin of Springburn: My Lords, would journalists who have credentials in both Houses be entitled to be on the register for lobbyists? In other words, will they be allowed dual membership?

6 Jun 2013 : Column 1281

Lord Wallace of Saltaire: My Lords, one of the reasons why it has taken much longer than we intended to produce a statutory register of lobbyists is because the definition of who is a lobbyist is extremely difficult. The Labour Government before this Government also struggled with that. As all who have studied this area will know, the issue is whether one simply limits the register to third-party lobbyists—those who are professional lobbyists working on behalf of someone else—extends it to the category of lobbyists for for-profit companies such as the entire public affairs sector of a major company or beyond there to those who lobby for non-profit organisations such as Oxfam, Christian Aid or the RSPCA. That takes one into an extremely wide area which is difficult to define.

Baroness Hayter of Kentish Town: Given that it has been over a year since the consultation concluded, we welcome the announcement today that there will be a Bill before the Summer Recess. However, will the Minister now ensure that his department replies to the letter from my honourable friend in the other place, Jon Trickett, asking for immediate cross-party talks on this issue? There is agreement about the need for a register and for a code of conduct. Cross-party talks on those issues in the immediate future would be welcome. Can the Minister confirm that he will do that?

Lord Wallace of Saltaire: I take the point. Of course, as in all delicate legislation of this kind, the wider the consensus we can get the better. The lobbying area is immensely more complex than I understood before I began to go into it. This is one of the many areas where we need to work together as widely as we can.

Lord Tyler: On the answer that he has just given, can my noble friend confirm that the Labour Party, which, after all, failed over 13 years to deal with this problem, is prepared to co-operate fully so that we can take the whole issue under consideration? All three parties committed themselves to taking big money out of politics. Can he confirm that the Government’s objective is to have maximum transparency and simplicity so that our fellow citizens can see precisely where influence and access are being bought? In that context, can he also indicate that that should be the objective even if sometimes that big money is being used in a tax-efficient way?

Lord Wallace of Saltaire: My Lords, every three months I am amazed by the detail in which the Government Whips’ Office on behalf of the Cabinet Office Propriety and Ethics Team goes through my diary and asks me exactly who I met and when. This Government are extremely tight in terms of looking at who has contact with all members of the ministerial team. The problem, of course, is that we meet all sorts of people. I have one or two friends from school or university who are now working in major public affairs organisations. If I meet them as part of that friendship, do we also happen to overlap into other matters? There are many difficult issues around how this can be taken and where to draw the line.

6 Jun 2013 : Column 1282

Lord Wigley: My Lords, does the Minister accept that there is nothing intrinsically wrong in lobbying provided that it is undertaken within a proper framework that is transparent and that, if done properly, it can serve the interests of Members of all parties in both Chambers? One thinks of disability lobbying, for example. Is it not in the interests of lobbyists themselves, as well as Members of both Chambers, that a new framework is introduced?

Lord Wallace of Saltaire: My Lords, I could not have put it better on behalf of the Government, and I note the consensus on a cross-party basis to that effect. The noble Lord may have seen the story in the Financial Times yesterday to the effect that public affairs consultants are thinking of taking to the European Court of Human Rights the case that to submit them to a statutory register—but only those who are third-party lobbyists—would be an infringement of their human rights. I think that that will be an interesting case to try to get the European Court of Human Rights to take.

Lord Wills: My Lords, the Minister said that the Government are looking to regulate third-party funding in election campaigns. Can he confirm that that will include referendum campaigns?

Lord Wallace of Saltaire: I cannot confirm that, but I imagine that it would. Discussions are still under way, but I take the point. Clearly, there are slightly different rules for referendum campaigns, and as I recall from previous referendums, there have been umbrella bodies which have had to declare their funding. We are thinking much more about the sort of campaign groups which we have seen growing up, be they animal welfare groups, low tax groups and so on, trying to intervene. Again, we want to make sure that everything is as transparent as possible in the political process. I will come back to the noble Lord on the referendum issue.

Planning: Onshore Wind


11.37 am

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, with the permission of the House, I would like to repeat the Answer to an Urgent Question asked in the other place.

“The coalition agreement pledged to decentralise power to local people and give local people far more ability to shape the places in which they live. Through a series of reforms, this coalition Government are making the planning process more accessible to local communities, because planning works best when communities themselves have the opportunity to influence the decisions that affect their lives. However, current planning decisions on onshore wind are not always reflecting a locally led planning system.

Following a wide range of representations, including the letter of January 2012 to the Prime Minister from 100 honourable Members, and in light of the Department of Energy and Climate Change’s call for evidence, it

6 Jun 2013 : Column 1283

has become clear that action is needed to deliver the balance expected by the National Planning Policy Framework on onshore wind. We need to ensure that protecting the local environment is properly considered alongside the broader issues of protecting the global environment.

Today, my right honourable friend the Secretary of State for Energy and Climate Change has published the response to his call for evidence on onshore wind. This sets out how the Government have listened and are responding to what has been said. My right honourable friend the Secretary of State for Communities and Local Government has this morning in support set out our intentions for planning. Let me set these out.

We have set out clearly in the National Planning Policy Framework the importance of early and meaningful engagement with local communities. The submissions to the call for evidence have highlighted the benefits of good quality pre-application discussion for onshore wind development and the improved outcomes that can have for local communities. We will amend secondary legislation to make pre-application consultation with local communities compulsory for the more significant onshore wind applications. This will ensure that in more cases community engagement takes place at an earlier stage and may assist in improving the quality of proposed onshore wind development. This will also complement the community benefits proposals announced by my right honourable friend the Secretary of State for Energy and Climate Change today.

The National Planning Policy Framework we published last year includes strong protections for the natural and historic environment. Yet some local communities have genuine concerns that when it comes to wind farms, insufficient weight is being given to environmental considerations such as landscape, heritage and local amenity. We need to ensure that decisions get the environmental balance right in line with the framework and, as expected by the framework, any adverse impact from a wind farm development is addressed satisfactorily.

We have been equally clear that this means facilitating sustainable development in suitable locations. Meeting our energy goals should not be used to justify the wrong development in the wrong location. We are looking to local councils to include in their local plans policies that ensure that adverse impacts from wind farm developments, including cumulative landscape and visual impact, are addressed satisfactorily. Where councils have identified areas suitable for onshore wind, they should not feel they have to give permission for speculative applications outside those areas when they judge the impact to be unacceptable.

To help ensure planning decisions reflect the balance in the framework, my department will issue new planning practice guidance shortly to assist local authorities and planning inspectors in their consideration of local plans and individual planning applications.

This will set out clearly that: first, the need for renewable energy does not automatically override environmental protections and the planning concerns of local communities; secondly, decisions should take into account the cumulative impact of wind turbines and properly reflect the increasing impact on, first, the

6 Jun 2013 : Column 1284

landscape and, secondly, local amenity as the number of turbines in the area increases; thirdly, local topography should be a factor in assessing whether wind turbines have a damaging impact on the landscape—that is, recognising that the impact on predominantly flat landscapes can be as great or greater than on hilly or mountainous ones; and that great care should be taken to ensure heritage assets are conserved in a manner appropriate to their significance, including the impact of proposals on views important to their setting.

We will be writing to the Planning Inspectorate and councils to flag up that new guidance will be available shortly”.

That concludes the Statement.

11.42 am

Baroness Worthington: My Lords, I awoke this morning to find out from Twitter that the Secretary of State, Ed Davey, has just made another one of his grand bargains, this time with DCLG on onshore wind. I have to say that my heart sank. Yet again, it is a terrible bargain. In return for changes to planning laws that will undoubtedly make it more difficult to build wind farms, he has won an increase in the amount of money that communities can receive. Can the Minister explain what the benefit of that money will be if this pandering to a vocal minority ensures that planning laws are changed so that none of them gets built? Will these new rules also apply to planning applications for shale gas fracking?

11.43 am

Baroness Hanham: My Lords, the unusual source of the remarks by the noble Baroness took me by surprise. I want to make it clear that this is not a change to the National Policy Planning Framework; it is an underscoring of what that policy has always said about the involvement of local communities in the development of local plans. Wind farms fall into the capacity of local plans and local structures. We are therefore making sure, for any wind farm development, that developers must talk to the local community before they put those plans forward and that the local authority also takes that into account. At present, it is not mandatory, and this will make it mandatory. The rules for fracking are not relevant to this particular Statement.

11.44 am

Lord Howell of Guildford: My Lords, why does my noble friend think that neither the Answer she has repeated nor indeed the commendably brief intervention of the noble Baroness, Lady Worthington, made any mention at all of the impact on the consumer of electricity prices? Fuel poverty is reaching record levels and millions of families are finding present energy costs almost unbearable. The additions implicit in what she is saying must be quite considerable. Why is there no mention at all of cost—what about the consumer?

Baroness Hanham: My Lords, I hesitate. I once got told off because I referred to another department while I was replying for the Government. The cost of electricity and the impact on that is a matter for the

6 Jun 2013 : Column 1285

Department of Energy and Climate Change, and the Statement from the Secretary of State there will refer to that.

Lord Geddes: My Lords, have the Government taken into account at the very least the admirable provisions of the Private Member’s Bill from my late and much lamented noble friend Lord Reay, in which there was a correlation between the height of a wind turbine and the distance from human habitation?

Baroness Hanham: My Lords, the Statement referred to the thresholds that will be considered. I have no doubt that that is one of the aspects that will need to be taken into account. Of course, it is something that local communities will be expected to think about in the process of having discussions and deciding whether to oppose strongly any application or to see if it can be amended. With a great sadness that Lord Reay is not here himself to make that point, I think that he might be quite satisfied with the way things are moving.

Baroness Armstrong of Hill Top: My Lords, are the Government thinking of doing the same with open-cast coal, which they do not seem to be interested in at all? I would welcome the Minister to Durham, where I am surrounded by wind turbines, which are so much more attractive than the coal mines and the open-cast mines that we had, and still have, in our locality. There are a lot of myths around this. The Government need to show leadership, which will get us cheaper, more effective energy that is long-lasting and sustainable.

Baroness Hanham: My Lords, I do not think that this Government or the previous Government ever pretended or thought that wind power was ever going to provide for all our energy needs. Therefore, this is part and parcel of the package that we need to take us into the future. That also includes nuclear and coal, which are still there. I come from the north-east so I appreciate what impact mines have, but until we are clearer about the need for energy they probably will not be abandoned.

Lord Elystan-Morgan: The noble Baroness has assured us that the impact upon aesthetic values and considerations will indeed be very relevant. Can she say whether that will be a peripheral or a central and fundamental consideration? If so, how will these fundamental considerations be valued one against another; in other words, who will come to that almost impossible Solomonic decision?

Baroness Hanham: My Lords, I do not want to get tempted into discussing what the guidance will say. The point the noble Lord has raised is central. However, we have made it clear that the aesthetic as well as the heritage impact will be relevant to what the guidance says. I will make sure that what the noble Lord has asked is taken into account.

Lord Greaves: My Lords, the Answer referred to the cumulative effect of planning applications for wind turbines. In an area such as the Pennines, where there

6 Jun 2013 : Column 1286

is quite a dense but dispersed network of farms in many of the great open upland landscapes, if each of these settlements puts in for a couple of large wind turbines—which on their own might be acceptable—at what stage does it turn into a wind farm covering the whole area? Are the Government paying attention to this problem?

Baroness Hanham: My Lords, the Statement refers to major applications. However, as I suggested in the Statement, where wind farms become cumulative it seems to me that that will need to be taken into account.

Lord Campbell-Savours: My Lords, what estimate has been made of the potential decline in the number of wind farm approvals to be made in the United Kingdom? What form is the public benefit—this buying of local communities—going to take? Can we have some more detail on how that will work?

Baroness Hanham: My Lords, this does not change what the National Planning Policy Framework lays out at the moment. It advises that local people should be consulted about major planning applications. The Statement says that it will be amended so that they must be consulted. That then makes it a material consideration for the decision on planning applications and must be taken into account. Whether that increases or decreases the number of approvals given will become clearer, but, one way or the other, it seems to us essential that local people, who will feel the impact of wind farms—indeed, who already have experience of them—have a proper say on any future proposal.

Lord Cormack: My Lords, I express the hope that localism will be more than tokenism here. Much as I welcome what my noble friend said, does she accept that the vast majority of onshore wind farms are uneconomic, unreliable and very unsightly?

Baroness Hanham: My Lords, I am sure that my noble friend does not really expect me to say any of that. I can only repeat that we are trying to ensure that they are acceptable, aesthetic and take into account people’s views. I should also make it clear that this guidance and the Statement refer to England, not the whole of the United Kingdom.

Lord Forsyth of Drumlean: My Lords, how much is being allocated for the so-called incentivisation of local communities to accept wind farms? Where is the money coming from? Is it coming from the hidden subsidy on electricity bills—in which case, would we not be bribing people with their own money?

Baroness Hanham: My Lords, I am not certain where the noble Lord is coming from. He is rather suggesting that local people are to be bribed to have wind farms. My Statement, to which I stick firmly, is about ensuring that they are consulted.

6 Jun 2013 : Column 1287

Business of the House

Timing of Debates

11.52 am

Moved by Lord Hill of Oareford

That the debates on the Motions in the names of Lord Foulkes of Cumnock and Lord Dubs set down for today shall each be limited to two and a half hours.

Motion agreed.

Taxation: Evasion and Avoidance

Motion to Take Note

11.53 am

Moved by Lord Foulkes of Cumnock

To move that this House takes note of the economic and social consequences of tax evasion and avoidance.

Lord Foulkes of Cumnock: My Lords, I am particularly pleased to have obtained this debate on this subject, which is not just tax evasion and tax avoidance but the social and economic consequences of that tax evasion and avoidance. I must say I am disappointed that no Conservative Members have sought to participate in the debate; it might have added an interesting angle—some spice—to it, although I understand that some of the things that they might try to defend are not easy to defend. Tax is a question of a real moral imperative as well as having profound practical consequences. Those who dodge their legitimate tax obligation commit a severe moral breach, but they also deprive our schools and hospitals of much needed investment and create problems for responsible businesses that pay their full share of taxation.

Tax evasion and avoidance is not new. Plato—I see that the Convenor of the Cross-Benches is looking astonished that I am quoting Plato—said that when there is income tax, the just man will pay more and the unjust less on the same amount of income. How true that is. However, what is new about the current crisis in tax is the scale of the issue and how far out of control we have let it go. The amount that we lose in the United Kingdom in uncollected taxes is a third of the deficit. It dwarfs the personal tax allowance, and it is more than twice the size of the bill for housing benefit—and how often do we hear about all those? That is nearly £40 billion. It is a cash sum the size of the budgets of some government departments, which are being asked to make cuts that are causing tremendous problems. We have heard of them recently in debates on legal aid and defence, and of all the difficulties that are being created for our departments. It is money that could be used to cut the deficit, to build 2,500 new schools or to employ more than 1 million new nurses, teachers and policemen. On its own, tax evasion is costing the average household £530 every year.

These are the real and significant costs of tax evasion and tax avoidance. In responding to them, as well as in talking about the moral principles at stake, I will of course address some of the solutions to the

6 Jun 2013 : Column 1288

problems, but first we must say that not paying your full and legitimate share of tax is immoral. By making use of our roads or our highly trained workforce, or by breathing our clean air, or even by casting a vote, you are bound by the obligations of society—and one of those key obligations, agreed through our democratic process, is to pay your legitimate share of taxation.

Lord Campbell-Savours: If my noble friend will allow me to intervene, I wonder whether he might be able to tempt the noble Lord, Lord Forsyth, out of his corner on the question of a flat tax in his whole argument.

Lord Foulkes of Cumnock: I have never been able to tempt the noble Lord, Lord Forsyth, on anything up till now, but I am sure that if he feels constrained, he will come in.

Lord Forsyth of Drumlean: I agree with everything that the noble Lord said in respect of tax evasion, but he has linked that to avoidance as if they were the same thing. Does he think that political parties that receive money from donors should return such donations to those who say that they constructed them in such a way as to avoid paying as much tax?

Lord Foulkes of Cumnock: My remarks are addressed as much to them as they are to other people.

When you fail to pay your fair share of tax, you break that obligation. This results in unfairness. Can we be proud of a country where 500,000 people are forced to rely on food banks while the average rate of income tax paid by the top earners is only 10% of their vast income, or where the high street shops that we are so proud of are closing at 10 times the rate at which they did in 2011, yet Amazon gets away with paying a paltry £2.4 million on sales of £4 billion? Such contrasts make a mockery of our democracy and are shameful. I do not, therefore, apologise for speaking on this issue in moral terms. It is a moral issue. When Roger Carr of the CBI says to us politicians, “Don’t make tax a moral issue”, he sounds like a man who does not want to have an argument that he knows he has already lost.

However, we need to have that argument. The argument against having a moral debate is that morality has no role to play in the solution of the problem. Of course, the solution has to be practical, but I would argue that it will involve making companies and individuals pay more tax—their fair share of tax—rather than persuading them. Yet the will to get to grips with the complex, practical problems and the energy to make people pay tax will come because of moral outrage, so we must continue to highlight the moral issue. It might not provide the solution, but it is how the solution can be achieved. It will provide the momentum or force to get that solution.

I realise that speaking in these terms may get some disapproving looks from powerful chief executives. They dismiss the campaigns of politicians and think tanks such as Progress, which is now running an excellent campaign on this, and respected NGOs such as ActionAid, which has produced some reports—I have one of them here—about the effect on developing

6 Jun 2013 : Column 1289

countries of tax avoidance. I know that some of my colleagues will touch on that as well. They dismiss these as being anti-business. On the contrary, a fair tax system is about being pro-business but responsible business. In the UK, our bricks and mortar retailers are being driven out of business by online operators, based offshore, that can get away with not paying tax. Reputable companies such as John Lewis are struggling to compete with global firms that can spirit their profits out of the country. The status quo of allowing large-scale tax avoidance and evasion is favouring the large multinationals, which can pour resources into avoidance. That is hurting the growth of small and innovative British business, and it needs to be challenged.

I was glad to get a letter from the noble Lord, Lord Phillips, who unfortunately cannot be here today, in support of what I am arguing. He has given me permission to quote him. He says that,

“the already highly destructive effects of gross disparity in earnings”—

are “dire in the extreme”. He does not have very good writing, by the way. He also says:

“Restoration of some sense of civic duty is also essential”.

I have given the essence of what he says.

So what are the solutions? There is no single solution to the problem. Some of the options require international co-operation, and I welcome, as I did in the European Union Select Committee on Tuesday, the decision that was made at the recent Council of Ministers. However, we cannot allow the fact that some of the decisions have to be made internationally to serve as an excuse for us not taking action here in the United Kingdom, if for no other reason than to set an example. When we speak on this, it would give us greater authority on the international stage.

First, we need an HMRC with more bite. Tax avoidance is itself an industry. The big four accountancy firms make £2 billion a year, In order to challenge that kind of vested interest, HMRC needs to be given significantly more muscle. The £154 million so-called “blitz” that the Chancellor recently announced simply does not match up, especially—and I hope that the Minister will deal with this—against a backdrop of overall cuts to HMRC that will diminish it to its lowest staffing level ever by 2015. For every £1 invested in HMRC, £9 is returned to the Exchequer. That is a real investment. For every 10 cases of tax evasion brought by the Crown Prosecution Service, nine end in a conviction. So we have some of the tools, but we need more and we need to make them tougher.

We also need an HMRC that is more transparent. While HMRC is of necessity a big part of the solution, it is also currently part of the problem. With no proper ministerial oversight, it has become a closed community that cuts deals with big business. Noble Lords will have heard the stories of Vodafone having £8 billion in tax waived, which appear to go largely unchallenged. We need to be able to put a spotlight on HMRC. We need it to disclose the deals that are being done with big business. Every year HMRC writes off £5 billion that it knows that it will not collect. We need to be able to hold it accountable for that and for it to become substantially more transparent.

The chair of the Public Accounts Committee in the Commons, Margaret Hodge—who is doing a terrific

6 Jun 2013 : Column 1290

job, by the way—has called for the publication of the tax affairs of the FTSE 100, which may be a provocative idea but certainly has great merit.

We need the Government to negotiate a series of new multilateral automatic information exchanges. While the recent agreement signed between our overseas territories and the EU G5 is welcome, it is just a small first step. We need agreements that go further and draw in a greater number of participants. Developing countries in particular, as I have said, need to be brought within the fold. Rampant tax-dodging means that many of them are unable to capture the benefits of the foreign investment occurring within their boundaries. They would be less reliant on aid and therefore less dependent on us developed countries if they received the tax revenues that are due to them from the multinational companies operating within their boundaries.

We also need a public register of beneficial ownership. If we do not act on beneficial ownership and tax, we have not got to the nub of the problem. David Cameron, the Prime Minister, was right to call on our overseas territories to develop a register, but this is an issue on which the UK should lead from the front. At present, we have no formal obligation for companies to register their beneficial owner, so front companies are set up, and it is difficult to know who is the ultimate beneficial owner. We need to pull back the curtain and see who is really benefiting from tax scams. We must change that and set the kind of example that will enable us to speak with authority on this issue at the G8 and then at the G20. I am sure my colleagues around the House who are participating will make other useful suggestions.

Finally, I shall try to anticipate one of the Minister’s defensive responses. He might try the familiar attack on Labour’s 13 years of government, using one of the four or five clichéd images circulated in the memos we have see from government: “Asleep at the wheel”, and so on. I am happy to have a conversation with the noble Lord, Lord Newby, and any other Minister at any other time, but that is not the subject for today. Today we are challenging the present Government, who have been in power for three years, about what they are doing. Therefore I ask the Minister, first, whether he will agree with me, and more importantly with the Public Accounts Committee, that cuts of as much as £2 billion to HMRC have hindered our ability to collect tax, and will the Government think again about those cuts in the coming spending review. Secondly, will he commit the Government to a public register of beneficial ownership? Thirdly, will he encourage the Prime Minister to lead a multilateral automatic information exchange that is much broader and much more ambitious than any that has gone before and that includes, above all, the developing countries? I hope that his answer to each of those questions is positive. Unless he does so, he will not have answered the challenge that I put at the start, and he will have failed the people who are losing because of the tax dodging. I hope that today we can have a positive response from a Minister who I know deep in his heart is sympathetic to the cause that I have been putting. I beg to move.

6 Jun 2013 : Column 1291

12.07 pm

Lord Browne of Ladyton: My Lords, I congratulate my noble friend and my good friend Lord Foulkes of Cumnock on securing this timely and important debate, and on his characteristically robust speech of introduction in which he covered quite a lot of the waterfront. He constantly promised that others would add to it. I am not entirely sure that he has left much room for anybody to add anything, but I shall do my best while trying not to repeat what he has already said in great part.

It is disappointing that so few Members of your Lordships’ House consider this issue important enough to make a contribution to the debate because it is hugely important. The scale is mindboggling in the United Kingdom, as my noble friend has already said. According to Her Majesty’s Revenue and Customs, the tax gap—the difference between what Revenue and Customs believes should have been paid and what it received from the entire economy—amounted to £32 billion in 2011-12. One can disaggregate that, and it is interesting to see that it is not all corporation tax. Quite a substantial part of it is VAT, there is some customs and excise avoidance and a comparatively smaller amount is income tax. It is a significant amount of money. As my noble friend said, it is a third of the deficit for 2012-13. If this money were brought in, it would obviate the necessity for any further spending cuts; it would deal with that issue. While I accept the remonstrations of the noble Lord, Lord Forsyth, that we should be careful not to conflate tax avoidance and tax evasion, I do not think that there are any positive consequences from either of them for our community.

The tax avoidance industry is clearly damaging the interests of developed countries, including our own; there is no question. It is almost certain, however, that the harmful tax practices are an even greater problem for economies in transition and for developing countries. The leader of my party said recently:

“If everyone approaches their tax affairs as some of these companies have approached their tax affairs we wouldn't have a health service, we wouldn’t have an education system”.

Thankfully, everyone does not, but he makes a very important point. This is exactly the case in many of the world’s poorest countries. Because of the way in which businesses approach their tax affairs, many of these countries do not have these basic services that we can continue to sustain. It is estimated that countries in the developing world lose three times more money—three times more—to tax dodging than they receive in aid every year. The estimate is that they lose about £160 billion a year through tax dodging. If that money stayed in those countries, rather than being spirited away to the offshore accounts of multinational companies, it could be transformative. These tax havens—to which I will come back in a moment—are the life support system for that tax dodging, and the plug needs to be pulled on them. They play no useful role in the global economic system.

In 2004—I cannot find any more recent statistics but perhaps the Minister can—half of the world’s trade appeared to pass through tax havens. That is 50% that at some stage passed through a tax haven, even though these jurisdictions contributed then only

6 Jun 2013 : Column 1292

3% of the global GDP. Recent ActionAid research—which I believe is the research that my noble friend held in his hand while making his speech—reveals among other things that the taxes lost to Zambia from tax haven transactions from just one United Kingdom Company, Associated British Foods, was a sum 19 times greater than the United Kingdom’s aid to Zambia for hunger—19 times more from the activity of one British company. That would be enough, ActionAid estimated, to send 48,000 Zambian children to school each year. This is a scandal, which needs to be addressed. I will accept the remonstrations of the Minister, which no doubt we will receive, that nothing was done about this for a significant time when we were in power, and we have to live with that. However, we are learning much more about this now and there is much more understanding of the effect of these issues. What is now necessary is collective action, to which we on these Benches and across this House should contribute.

I turn for a minute to the issue of morality. Frankly, I am fed up with being lectured to by chief executives of industry, who tell me that they have some kind of moral duty to minimise taxation. I will address that point in this way. In September 2012, writing in the context of the revelation that the then presidential candidate Mitt Romney revealed—or was forced to reveal—that he had been subject to an income tax rate of “at least 13%” for the previous 10 years, Joseph Stiglitz, the US economist and celebrated professor at Columbia University, wrote on his blog:

“Democracies rely on a spirit of trust and co-operation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme”.

He goes on to say:

“Both alternatives are unacceptable … More broadly, a market economy could not work if every contract had to be enforced through legal action. But trust and co-operation can survive only if there is a belief that the system is fair. Recent research has shown that a belief that the economic system is unfair undermines both co-operation and effort. Yet, increasingly, Americans are coming to believe that their economic system is unfair; and the tax system is emblematic of that sense of injustice”.

In concluding, he wrote that,

“tax avoidance on Romney’s scale undermines belief in the system’s fundamental fairness, and thus weakens the bonds that hold a society together”.

That is my first point about morality—and I rely on Joseph Stiglitz, who put it better than I could.

I have already said that all the economic and social consequences of tax avoidance and tax evasion, which we are debating today, are corrosive, and none of them is positive. Paying tax is one of the fundamental ways in which private and corporate citizens engage with each other and with broader society. Tax revenues are the life blood of that social contract—and, dare I say it, the life-blood of the big society. They are vital to the development and maintenance of physical infrastructure and to sustaining the infrastructure of justice that almost all the people who operate in this system rely on to underpin liberty and their market economy. Why is it, therefore, that tax minimisation through elaborate and frequently aggressive tax avoidance strategies has come to be regarded as one of the prime duties that directors are required to perform

6 Jun 2013 : Column 1293

on behalf of their shareholders? Why has it been elevated to a moral imperative, when not paying fair taxes is not?

My noble friend made reference to the observations of Sir Roger Carr, the CBI chairman. This man’s views on the issue deeply worry me. He is the representative of British industry. Speaking at the University of Oxford’s Said Business School on 19 May, he said:

“It is only in recent times that tax has become an issue on the public agenda”.

I have to say that I do not know where he has been living, but certainly all my adult life tax has been an issue on the public agenda. He goes on to refer to,

“Starbucks, Google, Amazon—businesses that the general public know and believe they understand”.

I do not understand that part of the sentence. I think he is trying to give an impression that somehow these organisations are a good in themselves and that understanding them somehow means that we like them. We may use them, but I do not have that relationship with those organisations. He continues,

“businesses with a brand that become a perfect political football, the facts difficult to digest; public passions easy to inflame”.

He goes on, in what is clearly a criticism of rhetoric from our Prime Minister. He says that tax avoidance,

“cannot be about morality—there are no absolutes”.

I do not think I need to go much further than that; not many people in your Lordships’ House would not understand why I am disturbed that the man who represents our industry at its very pinnacle holds these views. I would like the opportunity to engage with him about them, but I cannot have that opportunity here. I do not really understand why he feels compelled to make that argument, particularly in the face of the fact that, in January, our Prime Minister said in a speech to the World Economic Forum in Davos:

“Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues”.

I agree with him. He urged multinational members to wake up and smell the coffee, obviously taking advantage of what was in the public domain.

Not entirely but relatively unusually for me, I am on the side of the Prime Minister on this issue. It is necessary for us to spend some time engaging with the view that has permeated our businesses, at least at one level of representation although not universally, about why they think their obligation is to avoid paying fair taxes and to challenge that directly. I ask the Minister, and I am sure that he will find it easy to answer this, whether he agrees with the Prime Minister or with the chairman of the CBI that this is a moral issue. If it is a moral issue, does the Minister agree that we in the United Kingdom, because of the position that we occupy in the world and our relationship with many of these tax havens, have a moral obligation to engage with them in a way that helps to solve this problem and undermines their activity?

While I am at it, can the Minister give some indication of how the Government intend, in the process of putting pressure on these tax havens—as they are— which I commend, to ensure that we do not replicate the situation that we allowed to happen in the first place? That situation put these communities in the position of finding some way to sustain themselves in the absence of natural resources and opportunities for

6 Jun 2013 : Column 1294

the economy, which forced them into the hands of clever people who showed them a way of making large amounts of money in a parasitic fashion so that they were not a burden on us. We have to accept that part of this deal must be that we accept our responsibility to ensure that people can live in these places at the standard of living that they have achieved—maybe beyond that, in some cases—which does not rely on them having to perform these functions in the world at such a disproportionate rate in order to keep body and soul together.

I commend to noble Lords the briefing I have in my hands from the co-ordinator of the All-Party Parliamentary Group on Anti-Corruption, and the one that was sent to all of us by Action Aid. These are excellent documents. I cannot, in my last minute, do any of them justice, but they have a list of arguments and questions that go to nub of this issue. If others who speak after me can engage with these issues in the way that these briefings deserve, I commend the briefings to them.

I make one final point to the Minister. There is a deeply corrosive effect of the structures that have been created by tax avoiders and tax evaders which we need to interdict: they have created a set of structures of which the crooks of this world are taking advantage. We discovered recently, because of the uncovering of money-laundering through a legitimate process of international banking in cyberspace, exactly what crooks are able to do. That is exactly what is happening in this environment. If the Minister wants evidence for that, he should look at the World Bank’s recent report, which showed that there were 800 corporations involved in the 150 examples of serious money-laundering and crooked use of money, all of them taking advantage of structures that were otherwise legitimately created. We are allowing crooks and deeply tainted money to get into our legitimate exercises and economy.

12.23 pm

Baroness Kramer: My Lords, I, too, congratulate the noble Lord, Lord Foulkes, on bringing forward an important issue, and on giving us an opportunity to discuss it, as it were, in the general. I suspect that there will be many discussions in this House about many specific measures in this area of enormous complexity.

I say to the noble Lord, Lord Foulkes, however, that when I started to make some notes for this debate I had little intention of making more than a passing reference to the history of Labour Governments in this. However, his comments have forced me to do so. This kind of amnesia, wherein what happened in the past is irrelevant, is a very uncomfortable position from which to pass. He talked about “new in scale” as if we are suddenly coming across problems which had not existed in the past, and had now forced themselves on to our attention. I remind him that even his own Labour Party was in 1997 sufficiently aware of tax evasion on the domestic scale to look at a GAAR—a general anti-avoidance rule or anti-abuse rule—which it rejected. This Government have now brought that back into the frame; I will talk about it in a minute. Also, however, the US Senate thought this was such a crucial issue that it started its major hearings in 2001.

6 Jun 2013 : Column 1295

That put into the public arena so much of the information now being used by all the parties that it is impossible that it was not going across Ministers’ desks and had not been drawn to government attention.

The noble Lord, Lord Browne, drew attention to the culture in which businesses, and those such as the CBI who speak as the trade bodies for businesses, work from the assumption that this issue should not be challenged. I think we all find that offensive. However, surely that grew out of what they saw as a very long period of complacency and a rejection by Government, who had the power to intervene, to make those interventions. Those years of neglect have played a very significant role in the culture that we now have to turn around. In the end, we have to get businesses, as well as government, to take responsibility.

I come from a party that, in conference after conference, debated these issues, put them on the agenda, introduced them into manifestos, and was treated as though it just did not understand the ways of the world and, as a consequence, business. I take some satisfaction in reading, in the coalition agreement in 2010:

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

It is right that people should be aware that there has been a loud and pressed voice, but that it has been ignored.

I will talk very briefly about the GAAR. I had the privilege of being on the Finance Bill’s sub-committee, which took a look at the general anti-abuse rule. It is a toe in the water—a first step at looking at a principles-based approach to sit alongside a rules-based approach. I suspect that in future years we will have to look at whether or not anti-abuse is sufficient, and whether we need to move into anti-avoidance. However, I will bring to your Lordships’ attention the first of the conclusions in the summary of the report from that sub-committee. It says:

“Given resource constraints and the need to provide certainty for business and to promote UK competitiveness, we regard the narrowly focused GAAR as a reasonable starting point. However, we think it important that the scope of the GAAR should be reviewed in the light of practical experience of its operation as part of the wider review that we recommend elsewhere in this report. Such a review should consider, in particular, how the double reasonableness test”—

the most constraining part of the GAAR—is impacting on the GAAR’s deterrent capacity.

It is also crucial that we understand that the measures we take that affect our domestic tax framework do not tackle the international, multinational tax issues. I sometimes think that when people talk about GAARs and anti-avoidance measures that can be taken domestically, they create an impression among the public that those measures can deal with the multinational and international problems. This report also reminds us of that, saying:

“We are fully persuaded that the GAAR will not apply to issues involving the taxation of multinational groups or the deferral of bonuses from one tax year to another”.

It is, therefore, reminding us that even approaching anti-abuse in this country does not deal with the wider set of problems.

6 Jun 2013 : Column 1296

My frustration, particularly with the capacity of multinational companies to use their offshore reach to avoid or minimise their tax—effectively, not to pay tax—is in part because of the impact on public spending. Other noble Lords have talked about that. It is also because of the way in which it destroys the level playing field for many of our businesses, and in particular our domestic and small businesses. I note that in my own community, Qbookshop, which is one of a chain of three, has a notice in its window reminding the public that the taxes it pays support at least one nurse in the local hospital. The reality is that Amazon, for all its reach, does not do a lot more than that with the corporate taxes that it pays.

As I look for ways to do my purchasing from companies that have a proper approach to tax—as others do—I find that it is extraordinary how few exist. There are times when you are simply forced back to Amazon to carry out a transaction. This basically shows that the advantage of being able to avoid tax payments has subsidised those players in growing and squeezing out the competition that otherwise would naturally occur. We as a country are suffering from the destruction of that kind of level, competitive playing field.

I also note that when small businesses in the UK begin to grow, they are frequently sold to a foreign owner, and sometimes the owner is essentially a Luxembourg-based shell. Once again, it is almost impossible for a company to continue to compete unless it tries to enjoy the tax advantages that others in its field can access. One can see the temptation of many an investor to buy a company and move its activities or quasi-activities simply from a tax motive. I wonder how much the issue that we have often addressed, which is why we cannot get our small companies to grow into medium-sized and large companies based in this country, has a tax motive somewhere at the bottom of it.

I, like many people, have a real frustration that the kinds of rules of which these large companies take advantage were written by Governments on the understanding that it was unfair for companies to pay tax on the same economic activity in one, two or three locations. It is an entirely fair request for a company to say that it should pay tax only once. However, to take advantage of that, to work around it and to use it in order to create an environment where tax payment is in effect zero strikes me as the most extraordinary abuse and contempt, and it is absolutely necessary that we should bring it back under control.

I am looking very much at the G8 to begin to make strides in that direction. We have to advocate the principle that tax is paid essentially where economic activity takes place. There are complexities around that, but it is the principal basis on which we should expect to proceed. We have to look very differently at online companies, which can move their profits, domicile and activities in such a significant way. I wonder whether we should look at whether online companies should pay tax on the basis of revenue rather than profits. We may have to be as radical as that.

Before I finish—I am not going to use my full time—I will say one thing quickly to the Government. I was struck by the fact that one of the important instruments that the United States uses is the Foreign

6 Jun 2013 : Column 1297

Account Tax Compliance Act, which requires individuals, or corporations as individuals, to report the financial accounts that they hold overseas. It also requires foreign financial institutions to report to the IRS on American clients. The UK is one of the countries that are co-operating with FATCA. It was designed primarily to combat offshore tax evasion and to recoup federal tax revenues. I would like to know whether we could have a UK version of this, because transparency—the kind of exposure that comes with FATCA—can be a very important basis for trying to challenge both tax avoidance and tax evasion.

Finally, I will say that many people, like me, would like to shift their economic activities—their business, their trade—to companies that play by the rules, but it is very difficult to find out which they are. I wonder whether there is any way that the Government could assist us: a way that would enable us to understand, when we walk into a shop, deal online, or, through our corporate lives, look at setting up relationships, whether we are working with a company that, as it were, has the kitemark of paying its taxes in an appropriate way. I admit that my ingenuity on this issue is limited, but it would be very helpful, and it would allow the public to do what they have done on many other occasions, which is to use their spending power. In that way, the Government would not have to deal with the issue simply through legislation and through enforcement by HMRC, but would have the public on their side. I note that Starbucks at least decided to make a voluntary tax payment—I think that we all agree that taxes should not be voluntary—in large part because when it was exposed as a company that paid virtually no corporate tax in the United Kingdom, its customers decided that they could go to a very nice coffee shop just down the road that did actually pay tax.

12.36 pm

Lord Haskel: My Lords, I, too, congratulate my noble friend on this very topical Motion. Tax avoidance has really captured the public’s attention. I am very sorry to see that there are no speakers on the Conservative Benches, because all of us have to shine a light on these practices. It is only in that way that we will be able to test their credibility and acceptability. I hope that this debate will be part of shining the light on these practices.

I will speak about corporate tax avoidance. We need to shine a light on this because, in this age of austerity, not only do we need the money—as other noble Lords said—but the products, services, jobs, innovations and all the good things in our lives and in the economy that these companies bring. If we get it wrong, all of us will be the losers.

What is the key test? It seems to me that it is credibility. Businesses, especially publicly owned ones, must be credible. They go to great lengths and great expense to appear so. Yes, it is credible to locate production where skills are available. Yes, it is credible to locate services where costs are lower. But is it credible to sell, package and ship a book—not an e-book—from a UK warehouse, and for it to arrive at my house with a UK stamp on the parcel, and then to say that really the transaction took place in Luxembourg—where, incidentally, many of our roaming

6 Jun 2013 : Column 1298

telephone charges are located? Is it credible that the intellectual property rights for a product should lie in the Cayman Islands, when the science, engineering, design and technology, and all the brain work were done in Europe, Asia and the USA? The Cayman Islands played no part in generating the value, and nor does it provide the patent protection that is so highly valued in these circumstances. Is the transfer pricing credible that goes on with coffee, metal ore and minerals? As the American Senate committee asked, is it credible for a company to have no domicile at all? In the


, Robert Shrimsley put it rather well when he said that these companies were domiciled somewhere on a cloud. Equally, it is not credible that HMRC should accept these activities as lawful. Is this really what Parliament intended? Is this really the law? I do not think that it is.

The executives of these companies tell us that they pay all the taxes that are legally required. Amazingly, Ministers and HMRC seem to accept this. But, surely, what is legally required is that these companies pay corporation tax on the profits earned in this country, less any allowances that the Government think fit and less any incentives, such as the rather successful patent box for R&D. Routing profits through a low-tax jurisdiction is not a legal requirement. As my noble friend Lord Browne reminded us, it is a matter of choice—a choice made by company executives. John Kay made this very point in his column yesterday.

Some executives say they act in this way because of their fiduciary responsibility to shareholders. Yes, they have a legal fiduciary responsibility but it does not include avoiding tax, particularly avoiding tax by non-credible means which brings the company into disrepute. Again, this is a matter of choice—a choice by the directors. When directors claim that they are paying all the taxes they are legally required to pay, I hope that the Minister will respond by saying that this is just not credible. It is not credible because they pay the tax they choose to pay. I hope that such a statement will encourage HMRC to be more credible as well.

In reality, we know that most large corporations make this choice. ActionAid reported that 98 of the FTSE 100 companies use tax havens. Indeed, the Finance Bill 2012 relaxed the controlled foreign companies rules to facilitate the use of tax havens, presumably because regulation was too strong for this Government. Do we really want to go down this path? We learnt that lesson from the banks. Weak regulation produced weak banks and contempt for bankers. We do not want contempt for our major businesses. We are all losers if that happens.

My noble friend asks what are the social and economic consequences of all this. Many noble Lords have spoken of the less developed countries and aid. On 11 December last year, your Lordships debated the impact of this activity on developing countries. In moving the Motion, the right reverend Prelate the Bishop of Derby explained how the use of tax havens enabled multinational corporations to shift profits from developing countries into tax havens. We have heard about the detrimental effect on the revenues of these countries. Indeed, my noble friend Lord Browne gave us some extraordinary figures regarding Zambia. These same countries are often in receipt of development

6 Jun 2013 : Column 1299

aid from us, aid which makes up for the shortfall in tax revenue. So that is a social and an economic consequence for us, the taxpayers of this country.

This gaming of the system is available only to well resourced, well advised, powerful companies, as my noble friend reminded us. The noble Baroness, Lady Kramer, told us that this activity helps big firms squeeze out their smaller rivals and she gave as an example the book trade. We hear plenty of fine words from the Government about open markets, fair competition and encouraging SMEs, so here is another economic consequence. What are the Government going to do about it? This is particularly important for our economy now that digital technology has opened up so many new possibilities, markets and opportunities for business and it is the ICT firms that are at the forefront of these new opportunities. How ironic that they should be at risk of losing credibility through their tax avoidance activities. That is another reason why we should not allow this to happen.

What is the solution? One answer is, of course, international co-operation and, yes, the G8 meeting next month provides an opportunity. The G8 may not have the power to impose its will, but it certainly has the authority to persuade. This is a chance not to be missed and I welcome the Government’s efforts in this regard. Meanwhile, we can do other things on our own. The noble Baroness, Lady Kramer, spoke of the general anti-avoidance rule—GAAR, as she put it. Will this enable HMRC to be more assertive and aggressive in challenging these arrangements, which are just not credible? I found what the noble Baroness said rather disappointing because I expected it to be much more powerful. I join other noble Lords in asking whether there is the expertise, staff and will within HMRC to fight the tax avoidance industry and bring more prosecutions. Naming and shaming is helpful, but it is not enough. For instance, will the Government deny public sector contracts to any company which is named and shamed? A solution which I find rather attractive is being investigated by the Oxford University Centre for Business Taxation. This focuses on the residence of the customer rather than on the residence of the supplier or where the click takes place for online business. This kind of sales tax would at least ensure that companies selling here would also make a contribution towards the infrastructure, services and facilities which enable that business to be carried out.

It is also partly the complexity of our tax system which enables companies to game it. There is an Office of Tax Simplification. It obviously needs a much greater sense of urgency injected into its work and probably needs to be given a lot more resources. Are the Government up for this? The current level of public anger over this matter should offer every encouragement for the Government to act. Ministers tell us that they are committed to transparency but they should act on this and require much more transparency showing beneficial ownership in the accounts filed in Companies House. The Government are absolutely right to make more transparent the activities of the UK dependencies which act as tax havens. Showing the beneficial ownership of companies and limited

6 Jun 2013 : Column 1300

liability partnerships there will expose not only tax avoidance but money laundering. I wish the Prime Minister every success in his forthcoming conference with representatives of the dependencies prior to the G8 meeting and I hope that the outcome will be an automatic information exchange system. The EU has transparency rules for banks and important resources companies. This is now being extended to all large companies, both public and private, and a law requiring companies to break down tax, profits, revenues and staff numbers by country should be passed by the European Parliament within months. I hope that the Government will support this.

“The times they are a-changin’” and I hope that this debate will be instrumental in catching the spirit of these changing times—a more challenging spirit, which means that nowadays business plans have to stand up to scrutiny socially, ethically, morally and environmentally as well as commercially and financially. I think this is what the current Lord Mayor of the City of London meant when he spoke about his year in office being directed towards a City,

“reaching towards a newer, healthier capitalism”.

The new Archbishop of Canterbury expressed similar views. My noble friend spoke of a moral imperative. They are expressing the values that many of us share. Let us therefore encourage our business leaders to join in and make the appropriate choices.

1 pm

Lord Watson of Invergowrie: My Lords, I, too, congratulate my noble friend Lord Foulkes, who is my friend, on achieving this important debate. It is a matter of some regret that only one Back-Bench Member from the coalition parties felt that they had anything useful to say on the subject. Perhaps that tells its own story.

Between 1999 and 2011, British companies’ profits increased by 58% but revenues from corporation tax increased by just 5%. Finally, political leaders are beginning to question that gap. That is to be welcomed. Last month, an EU summit pledged to clamp down through the sharing of information on the assets and gains of nationals banking in other countries. The Prime Minister expressed his belief that there was real momentum growing on the issue of tax and that is why he intended place it high on the agenda at the G8 summit, which he will chair in two weeks’ time.

The EU summit was the first time that European leaders had grappled with the increasingly important issue of tax evasion and avoidance. Some high-profile cases in various countries recently assisted in that process. Everyone, whether they are a football fan or not, will be aware that Bayern Munich has swept everything in front of it this season, both domestically and in Europe. However, a spoke in the club’s wheel was when its president, Uli Hoeness, was recently exposed, to much shock in Germany, over serious discrepancies in his tax affairs. Meanwhile, in France, the Cabinet Minister responsible for tax collection had to resign after admitting to having a secret account in Switzerland. You could not make that up.

It is encouraging to note that the intense debate in Britain over the tax behaviour of multinationals such

6 Jun 2013 : Column 1301

as Amazon, Apple, Google and Starbucks has put the issue at the top of the political agenda. It seems that the catalyst for action at an international level has been the Obama Administration, to which the noble Baroness, Lady Kramer, referred. It will be interesting to see how effective that will prove to be in terms of obtaining information on US nationals’ assets and earnings in other countries.

The savings directive makes it compulsory for EU member states automatically to share details about other EU citizens’ bank accounts. Proponents argue that this allows Governments to detect irregular payments and other signs of tax evasion. The directive does not, however, deal with corporations, and an example would be Google, which has been much publicised and criticised in the UK for outsourcing its advertising sales to Ireland.

It is to be welcomed that Ministers, too many of whom have fixated on austerity plans and deficit reduction as the only answer to the financial crisis, are now coming to accept that there are other ways to balance the books. The campaign group UK Uncut began campaigning on the issue in 2010, and its legal challenge revealed how HMRC had waived a £20 million bill to Goldman Sachs, as well as a £6 billion bill to Vodafone. Journalists, tax experts and campaigners have been exposing some of the tax chicanery perpetrated by big business for far longer. My noble friend Lord Foulkes highlighted the fact that Amazon’s company accounts reveal that its corporation tax bill amounts to less than it gets in grants. It appears that most of those grants are for the company’s new operation in Dunfermline. How can the Government clamp down on the likes of Amazon and Google when the accounting firms used by these companies actually second staff to advise the Treasury on new tax legislation? To be blunt, the more that you can afford to pay a financial adviser, the less you will pay in tax. Figures of course vary and are open to interpretation, but tax evasion is said to cost the Treasury about £14 billion a year.

Yet, while multinationals legally avoid paying millions of pounds, it seems that HMRC concentrates more of its efforts on aggressively targeting small businesses and publishing lists of builders, clothing manufacturers, tradesmen and hairdressers who owe relatively small sums, nearly all less than £50,000. Of course, anyone avoiding or evading the payment of tax should be pursued but there should be consistency in that, not a concentration on picking off the small fry, the easy targets. If all the small fry were rolled into one, they would not stand comparison with the internet giants.

Many of us will have been taken aback by the evidence given last month to the Public Accounts Committee by the head of Google in Europe, Matt Brittin, who denied that the company’s tax operations were unethical. He defended the arrangement whereby most of Google’s taxes on money earned in Britain are channelled through Ireland to Bermuda, with the company paying an effective rate of less than 1%. However, those comments have been destroyed by a former Google employee, who told the Sunday Times:

“Google has pulled the wool over the eyes of HMRC and the British population”.

6 Jun 2013 : Column 1302

The PAC chair, Margaret Hodge MP, whom I commend on doing a first-class job, confronted Mr Brittin with Mr Jones’s evidence, but Mr Brittin denied it. Mr Jones’s information, which he says he has taken to HMRC, includes thousands of e-mails in support of what he had to say and must be taken seriously by HMRC. I hope that in due course we will hear some positive response. The revenue from Google’s deals in the UK is sent to Google Ireland Ltd, which in turn pays dividends to its parent companies in Bermuda.

Interestingly, Bermuda is one of a number of overseas territories whose leaders have been invited to meet the Prime Minister in London on the eve of this month’s G8 summit. Mr Cameron apparently plans to urge them to root out the multi-billion pound evasion industry by signing up to agreements to share tax information. His letter calling for action on tax information exchange and beneficial ownership was also sent to leaders in many territories. It is to be hoped that when the Prime Minister meets them, he will have a stick as well as a carrot to hand because it is not just the developed world that stands to benefit if the situation were to be improved. As others have mentioned, the charity ActionAid has demonstrated that nearly one in every two dollars of large corporate investment in developing countries is routed through a tax haven and says that 98% of the FTSE 100 multinational groups have companies in tax havens.

However, it is not just multinationals that employ every trick in the book—and, it is not unreasonable to assume, a few companies that have not yet made the book—to deprive exchequers of tax revenues. More than 100 of Britain’s richest people have been caught hiding billions of pounds in secretive offshore havens, thereby sparking an unprecedented global tax evasion investigation. In April this year, HMRC warned those involved, who were named in offshore data first offered to the authorities by a whistleblower in 2009, that they will face criminal prosecution or significant penalties if they do not voluntarily disclose their tax irregularities. HMRC was quoted as saying that the data,

“reveals extensive use of complex offshore structures to conceal assets by wealthy individuals and companies”.

HMRC is also investigating more than 200 UK accountants, lawyers and other professional advisers named in the data as advising the wealthy on setting up the elaborate offshore tax arrangements. These revelations may be shocking but are surely not surprising. They demonstrate the extraordinary lengths to which some of the wealthiest Britons are prepared to go to avoid making their fair contribution to the resources required to run our country and provide public services for its people.

If only there were more rich Brits with a social conscience such as John Caudwell who built the Phones4u empire. Mr Caudwell has personally paid more than £250 million in tax since 2008; that is 66 times more than Google paid in the same period. Mr Caudwell has called for tax avoiders to be “named and shamed” and for consumers to boycott what he called “serial offenders”. He went further and asserted that unless the Government got to grips with the problem of rich individuals and powerful corporations dodging the taxman, Britain was facing a period of social unrest. It

6 Jun 2013 : Column 1303

is not sustainable, Caudwell argues, to have mega-millionaires and billionaires increasing their wealth, often by avoiding tax, while other people struggle to get by in the face of rising inflation and the severe reduction in public services over recent years.

One of the recurring issues is of course the role played by HMRC in pursuing those who refuse to make their contribution to tax revenues. We are told that there is to be new funding for HMRC, with the Government handing it almost £1 billion more to secure an additional £7 billion of revenue a year, thereby taking HMRC’s total compliance revenues to £20 billion in 2014-15. The Revenue in this spending review period wants further to expand anti-avoidance and evasion activity focused on offshore evasion, and this investment, it is claimed, will secure a further £2 billion in that period. Yet, as the noble Lord, Lord Foulkes, mentioned, there are hundreds fewer HMRC staff now than there were in 2011 due to total cuts of around £2 billion. How are these two positions to be reconciled? Surely HMRC must have more staff—and more highly paid staff to prevent them being poached by the big accountancy firms—to ensure that HMRC has the tools to make a better fist of reducing tax avoidance and evasion.

The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government, according to Margaret Hodge. They second staff to the Treasury to advise on formulating tax legislation. When those staff return to their firms, they have the very inside knowledge and insight to be able to identify loopholes in the new legislation and advise their clients on how to take advantage of them. As Ms Hodge said:

“The poacher, turned gamekeeper for a time, then returns to poaching. This is a ridiculous conflict of interest which should be banned in a code of conduct for tax advisers”.

I certainly second that. The idea could perhaps be turned on its head, with HMRC staff seconded to accountancy firms, sitting in on their meetings at which intricate plans to subvert legislation are discussed. Now I suggest that that would concentrate a few minds in a slightly different way.

The moral case on tax avoidance is overwhelming. That is why Margaret Hodge was right to be so forthright in her criticism of those individuals and corporations that route their cash through low-tax regimes at a massive cost to the UK Exchequer. Although it was encouraging that the recent Finance Bill contained the introduction of the general anti-abuse rule—again, referred to by the noble Baroness, Lady Kramer—it remains to be seen what deterrent the GAAR will have. I certainly agree with her comment that this is just a dipping of toes in water and that much more needs to be done. The rule is to be reviewed after two years, and I certainly hope that the information gained in that period will be used to ensure that it is extended.

As has been stated, changes to the international tax system will be high on the agenda at the G8 summit and there has probably never been a better time to crack down on tax havens, aggressive tax planning and transfer-pricing schemes. At least in part, this is because Governments are badly in need of tax revenue in a

6 Jun 2013 : Column 1304

time of weak growth. Tax could become to the 2010s what debt relief was to the 1990s—the focus of a global campaign for reform, and I very much hope that it is.

Part of the way in which this can be undertaken is surely by the Government introducing legislation containing clear and unambiguous anti-avoidance rules. One way would be to charge corporation tax on a definable estimate of the profits generated by all UK sales to other UK companies or individuals, whether in shops or online. Where the head office is based or where the profits are declared would then be of no importance, so the tax could not be evaded by channelling the business, or by claiming to have done so, to a country with a lower tax rate.

In the end, though, the success of any campaign will depend on how the public behave. If the Government cannot, or will not, act, ordinary people should vote with their wallets by boycotting the worst offenders. That might mean higher prices and less choice, but why should we support businesses that exploit loopholes in the tax system to siphon off tax money from Britain that is so desperately needed to provide the services that maintain the fabric of society? On a personal level, in the past year I have stopped using Google as my search engine, I drink my coffee anywhere but at Starbucks and I no longer order goods through Amazon. I am certainly not alone in that but it will take a huge wave before these and other companies notice and give their conscience a makeover.

In the mean time, we have the right to look to political leaders and urge them to fasten on the shin-pads to demonstrate to the corporate giants that, when it comes to paying tax, they are finally determined to take the issue as seriously as business has for many years. We are hearing some encouraging words but those words must be translated into action—action on an international scale—if it is to be of any sustainable value.

1.04 pm

Lord Brooke of Sutton Mandeville: My Lords, with the leave of the House, I appreciate the magnanimity of the noble Lord, Lord Davies of Oldham, in not grudging me four minutes out of the 40 minutes in today’s gap before he rises for the Official Opposition.

In his opening, the noble Lord, Lord Foulkes, regretted my party’s lack of participation, but I have been in the Chamber throughout, just as I was for all but 40 minutes of the 12 hours we devoted to the same-sex marriage Bill this week, which diminished temporarily my appetite for argument. I did think of speaking because of having participated in the debate on the Second Reading of the Finance Bill, following the Question for Short Debate last December on international tax implications, in which the noble Lord, Lord Browne, also took part. Unlike the noble Lord, I do not think that I received a briefing from ActionAid this time, so I make a plea, which no doubt will be read outside, to the charities and lobbyists on this subject that they keep a full list of the usual suspects in this area and send us a briefing on future occasions, even if we have not put our names down to speak, as we might thus be encouraged to do so.

6 Jun 2013 : Column 1305

The noble Lord, Lord Foulkes, said that the debate concerned the present Administration and not the 13 years before. I intervene to express a hope that the Minister will be prepared to say a word or two about the Charity Commission and its willingness to challenge the charitable credentials of a handful of black sheep where the charities have spent far less on charitable purposes than they have received in tax compensation, as has recently been reported in the press. This Government have taken some actions in this area already, whereas I think that the previous Government were less involved. It would also help if the Minister would indicate whether the Charity Commission needs any technical help with which the Treasury or Inland Revenue would be able to furnish it.

On a final, more light-hearted word, when my late noble kinsman was the Financial Secretary to the Treasury between 1954 and 1957 and was thus responsible to the other place for the Inland Revenue, he alleged that he once received a large anonymous banker’s draft from an equally anonymous taxpayer accompanied by a brief note, which said:

“I have not been sleeping well. I hope the enclosed tax contribution will cause me to sleep better. If it fails to do so, I shall send you some more”.

1.07 pm

Lord Davies of Oldham: My Lords, I am quite sure that the House does not begrudge the noble Lord, Lord Brooke, his late intervention in the debate, if only because he is the only Conservative speaker. However, we all very much appreciated the particular point that he made about charities and I hope that the Minister will respond to it.

It is normal at this stage to congratulate the noble Lord who has secured the debate on doing so and on his introductory speech. On this occasion, I do so with exceptional enthusiasm. We heard an outstanding speech from my noble friend Lord Foulkes. As my noble friend Lord Browne indicated as the second speaker, everything that needed to be said had at least been referred to by my noble friend Lord Foulkes in his all-encompassing speech, in which he made the points that were emphasised in subsequent speeches. We have of course all found other emphases to make and develop out of the original contribution.

I want to return to the opening point. My noble friend Lord Foulkes indicated that he sought this debate because society is suffering at present from grossly irresponsible conduct by people with enormous power. That was reflected, first, in the financial sector and the collapse of revenues for the Government—something that all significant nations suffered. That is why every nation has been looking at how to boost returns to their finance departments or treasuries. One thing that has stood out in every review has been that the capacity to raise taxation, certainly against declining production and the dip in production that all countries have suffered—and this country significantly so—has meant that government revenues have been under stress. Therefore, it is not surprising that the emphasis has shifted somewhat to who is making a contribution to those revenues and to whether everything is being done to see that fairness obtains. It is clear that a great deal has been revealed about the immoral

6 Jun 2013 : Column 1306

conduct of a large number of our major companies, particularly multinationals. It is immoral not to make a contribution to a society that provides all the necessary infrastructure for successful operations and yet seek to deny to that society the resources that sustain these essential services.

As my noble friend Lord Foulkes emphasised, it is ordinary people who have been paying the price of these collapses, not those who have awarded themselves huge bonuses in both the financial sector and at the top of industry. This has created such a disparity in income as to produce an unfair society in very dramatic forms over these past few years. It is essential, therefore, that we seek to recreate a fair society, and that means the Government need to act. If ordinary people are paying the price in lower wages, in lost jobs, in reduced public support for people on low income and in young people having great difficulty in obtaining a start in life with a job, it is essential that we ensure fairness in society, not only in the burdens but in the contributions. There has been a significant failure in that regard.

My noble friend Lord Browne identified one dimension of the unfairness. It is not only advanced countries that are suffering because of the gross levels of tax evasion by major companies; it has a crippling impact on underdeveloped countries such as Zambia when companies evade taxes which are vastly higher than any aid we offer to such countries.

The multinational companies have come to the fore. There has been not only a series of revelations at a parliamentary level in this country but, as the noble Baroness, Lady Kramer—the only speaker until the last intervention from the coalition Benches—emphasised, the Americans have taken a clear lead in this field. Not only is there the examination that has been going on in Congress for more than a decade, to which the noble Baroness referred, but, as is now appreciated, President Obama has been effective in taking an early lead in striking bilateral arrangements with countries to ensure the essential information flows which alone give the opportunity for people to respond effectively to the way in which big companies operate.

The Americans were greatly concerned about Apple when they discovered the extraordinary amount of taxation that was avoided by the location of its main body in Ireland. With all the advantages that it derived there, it could avoid significant taxation on its activities which raised revenue in the United States, Europe and the wider world.

The noble Baroness, Lady Kramer, also referred to Starbucks, as did a number of my noble friends. Companies want to sustain their reputation—they make their sales on the basis of how they are thought to provide services by the public—and we know the assiduous amount of effort and colossal resources that companies put in to burnishing their reputations. That is why Starbucks felt obliged to make a belated contribution. However, this is tokenism: it is not the response of a major company to the obligations it has. As my noble friend Lord Browne emphasised, given the obligations that it has, it will not do for it to make a token contribution when it has been exposed and therefore fears that there has been damage to its reputation.

6 Jun 2013 : Column 1307

We need a structure of identification and enforcement with regard to tax to ensure that these matters are dealt with fairly. My noble friend Lord Watson referred to the progress that is being made in Europe on this front and he mentioned the German example. So he should, because it was the German identification of what was going on in the Liechtenstein bank accounts of German citizens that alerted policymakers to the enormous potential loss to government revenues because of these strategies.

We have certainly got an obligation here; the Germans are concerned about Liechtenstein and the Americans are concerned about Ireland and the advantages it offers multinationals, and the United Kingdom, as we all know, has a string of Crown dependencies and tax havens. It is essential that we make progress there. Some progress is being made and we congratulate the Government on seeking more openness about their operation.

I hope this point will be accepted by the Minister. This debate is taking place a week and a half before the G8 summit. The Prime Minister will be president of the G8 when the meeting takes place. Can we be assured that an emphatic lead will be taken on these issues because it is quite clear that a great deal needs to be done? Will he seek to ensure that the G8 commits itself to securing country-by-country reporting in order to get essential information into the public arena and to make obligations on companies effective?

We need to see whether the Prime Minister will be able to extend the disclosure of tax avoidance schemes on an international scale. The Government are making some progress in the domestic scene but we want to see more breadth to this because disclosure of information is key to the issues. We certainly need to make sure that the Prime Minister is able to emphasise that Britain is taking key action with regard to the tax havens over which we have some jurisdiction. We expect, therefore, that considerable progress on these matters will be made at the G8. The Prime Minister will surely recognise that this is a unique opportunity, not least because key powers have clearly identified and expressed anxiety about these issues in recent months.

We also need action at home. We need to reform our corporate tax system, which clearly does not cope adequately with the issue at the present time. As several of my noble friends have emphasised, including my noble friend Lord Haskel, we need to ensure that Her Majesty’s Revenue has the resources to pursue people effectively. It is extraordinary that there have been cut backs even in the revenue collection department of HMRC in the years since the coalition came to power when it has been identified on all sides how cost-effective the allocation of resources are to that department in securing the taxation to which the country is entitled.

This has been an extremely illuminating debate and one to which I know the Minister will have some constructive response to make. I certainly hope he has, because I want to emphasise one point from the Opposition Benches—I am aware that this debate has been rather laden with speakers from the Opposition,

6 Jun 2013 : Column 1308

with scant contributions by the Conservative Party. The noble Lord will recognise that the nation has a common interest in effective action at this time, and the Prime Minister has been vouchsafed a particularly unique opportunity, which we hope he will seize.

1.20 pm

Lord Newby: My Lords, I begin by thanking the noble Lord, Lord Foulkes, for initiating this debate. It is a very important subject and this is a timely point at which to be discussing it. I reassure noble Lords that despite the tenor of the debate, the vast majority of UK taxpayers do not avoid or evade tax. They pay the tax that is due and they pay it on time. However, some do not, and that is what we have been discussing today. The economic and social consequences of tax avoidance and evasion are not insignificant. A number of noble Lords referred to the tax gap, which is estimated to be around £32 billion, in total of which the amount due to avoidance and evasion was estimated in 2010-11 at £19 billion. This tax gap exists everywhere, and it is rather lower in the UK than it is in most other countries. Furthermore, it has been falling over a period both before and since this Government came to office, but it is still significant and too big.

As a number of noble Lords have said, the money that we are not collecting in taxes is money that we could be spending on services, something that I am sure we all wish we were able to do. The social consequences of failure to collect the right amount of tax are in many ways as significant as the economic ones. Many individuals and companies up and down the country are honest and pay the tax they owe on time, and it is not right that they should shoulder the burden for those who dodge or completely evade their responsibilities. It generates a huge sense of unfairness and anger, and erodes confidence in the tax system. At a time when the Government are facing tough spending decisions, it is even more important that the right amount is collected.

I agree that this issue has a moral dimension. Failure to pay tax that is reasonably due weakens the bonds that hold society together. I also accept that while there is a moral element to this, there are some companies whose moral compass is, by common consent, lacking. This has been attacked in a number of ways. The Companies Act 2006 lays on directors a range of duties that go beyond fiduciary ones. It is a statutory obligation for directors to have regard to the impact of their company on society as a whole. In my view, sometimes they put less emphasis on that than they do on some of their other duties. However, they already have this requirement.

The question is how we translate our moral outrage into effective action. Before coming on to what the Government are doing, I will take up a comment made by my noble friend Lady Kramer about a potential kite mark, and the remarks made by a number of noble Lords about the effect of consumers. There are some things that consumers can do more effectively and quickly than government, and it seems that some of the actions that have been taken against some well-known companies have had more of an impact in a matter of days or weeks than anything that government, with the best will in the world, could do in the same

6 Jun 2013 : Column 1309

length of time. I do not have a suggested kite certification body, and I do not think that such a body should come from government, but it is a good idea that should be pursued.

We believe that this Government have a strong track record on tackling both tax avoidance and evasion. That is demonstrated, for example, in the 33 changes to tax law that have been made since 2010 to close down numerous tax avoidance loopholes, and illustrated by the 1,560 individuals who have been prosecuted for tax crimes by HMRC since then. We have shown a similar willingness to confront those who try to hide their money offshore. Some 50,000 taxpayers have already come forward in response to all the offshore disclosure facilities, of which Liechtenstein disclosure facility was the first. To date, these have generated over £1 billion of tax in penalties and interest, and in the years to come there are many billions more to come from that relatively narrow source. That activity reflects a wider transformation in the way HMRC now tackles avoidance and evasion.

Since 2010, some 1,000 additional staff have been deployed to tackle avoidance, evasion and criminal attack, and to cut back on tax debt. I shall deal head-on with the issue of how cuts to the overall HMRC budget have reduced the focus and effort being put into this area. Nothing could be further from the truth. One of the main reasons it has been possible to cut both the budget and the staff at HMRC while increasing effort and resource in this area is that the way people pay their taxes has changed. A huge number of companies and individuals used to pay their taxes using paper tax forms, but now virtually no one does. That has enabled HMRC greatly to reduce the number of people whose job was essentially to manage bits of paper. I do not know if there is a figure for it, but the amount of paper that goes through HMRC is a very small fraction of what it used to be. It means that we have already been able to allocate around an extra £1 billion to this area. So in answer to the first of the questions the noble Lord put to me, I can say that I am pretty confident, indeed very confident, that HMRC has the resources to tackle this issue more effectively than it did in the past, and we have said that we shall look at whether there is scope for putting more resource into it in the future. However, there is something to consider with regard to further resource: you cannot do it too quickly because we are talking about highly trained staff if they are going to be effective. We have put in a lot more and we are keeping the position under review.

In connection with HMRC, the noble Lord asked about it cutting deals with big business. He was concerned about that. The settlements he referred to were reviewed independently by a judge and found to be satisfactory. However, HMRC has put in place robust new assurance and governance rules for settling large cases, so I think that some lessons might have been learnt.

In the Budget, we vowed to do more to tackle avoidance and evasion. We announced the signing of major new automatic exchange agreements and disclosure facilities with the Isle of Man, Jersey and Guernsey, and I shall come back to that later. We also announced the introduction of the first general anti-abuse rule,

6 Jun 2013 : Column 1310

which will shortly be legislated for through the Finance Bill. This will target effectively the most abusive forms of avoidance and provide a strong deterrent against using such schemes in the first place. Is it strong enough? We shall see when we review it. Is it something against which the last Government set their face? Yes, it is. I would not want to get into too much retrospection, so let us leave it at this: having made the case in your Lordships’ House for an anti-abuse and an anti-avoidance rule for many years, I am very pleased that at long last it is now happening.

For those who choose to contrive complex mechanisms to disguise their employment status and thus avoid employment taxes, we have published a consultation to review two areas of the partnership tax rules, while just last week we published a consultation on the use of offshore employment intermediaries. Our focus on tackling avoidance and evasion will continue, but as a result of the investment that we have already made, HMRC is now set to raise total additional compliance revenues of £22 billion per year by 2014-15.

The noble Lord, Lord Foulkes, asked me three questions, the second of which had to do with beneficial ownership. The Financial Action Task Force on Money Laundering sets standards on anti-money laundering and these issues. The FATF standards are at a high level and are implemented at EU level. EU action is driven by the money laundering directives, a new one of which will be negotiated this year. The standards on beneficial ownership place the requirement on countries to ensure that there is adequate, accurate and timely information on the beneficial ownership of companies, which can be obtained or accessed by competent authorities. Member states are now implementing those standards. The Treasury is working with BIS, and BIS is currently drafting a discussion paper on corporate transparency, which includes beneficial ownership. This will be published over the summer. The measures agreed to through the G8 in this area will, as I say, be implemented in the UK through the EU money laundering directive, as well as by UK money laundering regulations and changes to the Companies Act.

Those concerned with these matters have been promoting the multilateral information exchange for a long time. There has been the most extraordinary acceleration of activity in this area in recent months. The key starting point—the stone, if you like, that started the avalanche—was, as noble Lords have pointed out, the US Foreign Account Tax Compliance Act, which requires non-US financial institutions to report extensive information on US customers with accounts overseas to the US authorities. The US is saying, “We want to know from you what our companies and citizens have in your back accounts”. This has been in operation for only a relatively short time.

As an example of how that standard has really become an international norm, I will go through the following year. In June last year, the UK, France, Germany, Italy and Spain agreed a model information exchange agreement with the US to implement FATCA. In September, the UK and the US signed an agreement on that model. In December, the UK announced that we saw it as a new standard and would look to build on it ourselves and internationally. In January, the

6 Jun 2013 : Column 1311

Prime Minister announced that tax transparency, including this, would be a priority for the G8. I confirm that it is. In February, the Isle of Man agreed to a FATCA-type regime with the UK. In March, Jersey and Guernsey agreed to the same thing. In April, France, Germany, Italy, Spain and the UK agreed to develop and pilot multinational tax information exchange based on the FATCA model and we made it clear that that was our priority for the May council. Last month, the overseas territories and Crown dependencies made a commitment to join the pilot: that is, to join the FATCA approach.

That is hugely significant. It means that, for the first time, places that have become a byword for tax avoidance will be required to make information available to other tax authorities. Also in May, another 12 European member states agreed to join the same process, while the European Council supported the creation of what it calls a new global standard for automatic exchange of information: that is, a FATCA-type approach. All this has happened in a year. It is an extraordinary acceleration of events but is all to the good. It is our intention that it should be pursued even more rigorously in the future.

The noble Lord, Lord Browne of Ladyton, asked about developing countries and the problems that they face in not being able to collect the tax revenues that they are due. There are two elements to how you deal with that. One is that we do our bit to make clear what is happening in those countries in relation to multinational companies. That is why we support the extractive industry transparency initiative and why the EU accounting directive will require country-by-country reporting for the extractive industries, so that at least you can see what is happening in those places.

We have also realised, in recent years, that we can play a major part by helping those countries themselves improve the efficiency of their tax collection. HMRC has been putting money into support for the tax administrations in those countries. In Ethiopia, where we have been doing it for a number of years, tax revenues have risen by as much as 40% in a year. In Zambia, to which the noble Lord referred, although we are committed to spending £235 million between 2011 and 2015 on reducing poverty, we are also committed to building their tax collection capacity, and HMRC has been supporting the Zambia Revenue Authority to build its own tax collection. Obviously, the quicker they can raise their own proportion of tax, the less reliant they will be on aid. In the Budget, we announced a programme of capacity building, which DfID and HMRC were going to promote in many of those countries. I think that is a very important move.

The noble Lord also referred to the future of tax havens and what they are going to do if they do not have a financial services sector. That is an extremely pressing issue but it must not be the principal issue. We cannot delay action in this area because some tax accountants in the Cayman Islands might find themselves slightly shorter of work.

My noble friend Lady Kramer and the noble Lord, Lord Haskel, in particular, talked about the problem of multinationals not paying tax and asked what we were going to do about it. There is a major push via

6 Jun 2013 : Column 1312

the OECD, in which we have taken a lead, to change the rules. A lot of the accounting rules have been in place for nearly a century, so it is not surprising that they do not deal very well with the current situation. I assure the noble Lord, Lord Davies, that the Prime Minister will take a lead and will push this very hard at the G8 later this month. Next month, the OECD will present proposals to the G20 on how exactly it proposes to revise the rules. There is a huge amount of work going on in this area—I gather there are 15 work streams—so we should not think that this is being taken at all lightly.

The noble Lord, Lord Haskel, asked whether the Government would deny contracts to tax avoiders. In the Budget, the Government announced that businesses must certify their tax compliance if they want to bid for government contracts. That is new, and we hope and think that it will be effective.

The noble Lord, Lord Watson, questioned whether employees of accountancy firms should be able to spend time on secondment with HMRC. We realise that there can be perceived conflicts of interest. At the moment, secondees have to sign an agreement with the host department and their permanent employer to ensure that there is no conflict of interest when they return. On balance, we value such secondments and think that HMRC gains an advantage by taking employees from the big accountancy companies to help with its work and to help bridge what used to be a complete silo between the accountancy firms and the department. It is a bit of a caricature to think that all accountants are necessarily evil-minded and are going to use the information they get to their clients’ advantage. My experience of accountants is that they are part of a very fine profession and are often unjustly criticised.

The noble Lord, Lord Brooke, asked a specific question on the charity tax. I assure him that HMRC is working closely with the Charity Commission to make sure that charities comply. It conducted 10 joint inquiries with the Charity Commission in 2012-13. There are about 20 exchanges of information every month about charities where it appears that there might be a problem. To go back to an earlier point, HMRC has doubled the staff working on charity compliance since 2012.

I hope I have gone some way to answering the points that have been made in the debate this afternoon and to reassuring noble Lords that tax compliance is an issue that the Government take extremely seriously and will continue to prioritise, both domestically and internationally.

1.40 pm

Lord Foulkes of Cumnock: My Lords, I have found this a really encouraging debate, with such well informed contributions. It was also notable for one of the most helpful and sympathetic responses by a Minister that I have heard for a very long time. I really am most grateful to him, and I will return to that in a moment.

I also thank all those who have contributed. My dear friend, the noble Lord, Lord Browne of Ladyton, echoed the description of the tax avoidance “industry”, which it has become, and underlined that very effectively. I say to the noble Baroness, Lady Kramer, that I

6 Jun 2013 : Column 1313

accept her scolding, gentle as it was. I was only saying, “Hands up” to our lack of action. But now it is the present and the future that we have to concentrate on. I will return to the noble Baroness, Lady Kramer, in a moment because she made a contribution, which was echoed, that was perhaps the most important new thing to come out of this debate.

Perhaps I might also say how pleased I am to see the noble Lord, Lord Haskel, back, not just in good health but, as we heard, in his robust, powerful and informed debating style. We really are very pleased to see him and we know that on this issue he is one of our noted experts. He talked about Luxembourg, and others talked about Liechtenstein and the Cayman Islands. It is interesting that over the past few years Ireland has been developing itself and organising its affairs to become a tax haven. That is something that has crept up on us. Perhaps we ought to be discussing this with the Irish, since they are so close to us.

When the noble Lord, Lord Watson, intervened, I realised that, along with my noble friend Lord Browne and myself, we have got three football fanatics from Scotland. He pointed out the fankle, if I may use the Scots word, that the chairman of Bayern Munich had got himself in. Sometimes the owners of football clubs, as I have found recently—not in my own personal case but in the case of my club—get themselves into these kinds of difficulties. He also picked up the suggestion made by the noble Baroness, Lady Kramer, which I will come back to.

Perhaps the most welcome of all interventions was from the noble Lord, Lord Brooke. His interventions are always welcome and sometimes the funniest things I ever hear in this Chamber, which is a relief sometimes through the long tedium of some of the debates that we have. I hope that his anonymous rich insomniac is now sleeping well, having paid the money that was due. If there are any more rich insomniacs who think they have not paid enough tax, I am sure that the Revenue would welcome their contributions.

I also thank the noble Lord, Lord Davies, for his very kind remarks, and his very perceptive points. He made the important point that if these taxes are paid properly, ordinary people become better off and the companies benefit because they have more consumers, purchasers and people involved. He summarised the points I was making about identification and enforcement very well, and echoed the call for the lead to be taken at the G8 meeting, which I am glad to say is going to be held in Northern Ireland.

The noble Lord, Lord Newby, answered my questions. It is good to come and have questions that are posed specifically being given an answer. I hope that other Ministers will learn from the excellent example of the noble Lord, Lord Newby. To echo the debate by saying that the moral compass of some companies is clearly lacking is a strong point for a Minister to make.

The one new point that I want to finish on, for which I give credit to the noble Baroness, Lady Kramer, was this idea of consumer power, of having some kind of boycott so that we can show our dissatisfaction with and distaste for the great tax avoiders. The noble Lord, Lord Watson, mentioned this as well and went through some of them: Google, which he is no longer

6 Jun 2013 : Column 1314

using; he will go anywhere but Starbucks for coffee; and Amazon. There are competitors. I am glad to see that the right reverend Prelate the Bishop of Derby is nodding. That gives me great comfort. I remember the great apartheid debates we had and how the boycotts really had an effect in South Africa. The noble Lord, Lord Brooke, made a plea to NGOs to keep us briefed. Perhaps a collective of NGOs could get together and produce a list of companies that they feel are the most outrageous and that we ought to avoid. That was very encouraging. We will call it the “Kramer coefficient” or the “Kramer list” and give credit to the noble Baroness.

It has been a very good debate. Once again, I thank everyone who contributed, particularly the Minister for his helpful responses.

Motion agreed.


Motion to Take Note

1.46 pm

Moved by Lord Dubs

That this House takes note of levels of unmet housing need.

Lord Dubs: My Lords, I am delighted to have this opportunity to open this debate on what is in effect the whole range of housing policy. Unmet need means people without homes, as I shall develop. Far too many of our people are badly housed, homeless or struggling to pay their high rents and avoid becoming homeless.

We have a real housing crisis in this country. There are currently more than 1.8 million households on waiting lists in England. There are currently more than half a million households living in overcrowded conditions. In 2012-13, 108,000 homes were completed in England. The evidence from Shelter, which has been very helpful in providing information for this debate, is that we have an annual need of 240,000 new homes to meet current and future demand. We are building at less than half that rate so the problem is going to get worse.

For far too many people in our country, their housing situation leads to misery and damage to health; it holds back the education of children, damages family cohesion and generally causes a great deal of human unhappiness. Anybody who has been a Member of Parliament or local councillor and has had a constituency surgery will know about the number of people who come along seeking help on one aspect or another of their housing difficulties.

I will turn briefly to private rented housing, which has had to increase. One-third of private renters are now families with children. What is alarming is that for so many of them, short-term tenancies are the norm and they keep having to move. Government research shows that renting families are nine times as likely to have moved in the past year as families who own their own homes. We know what sort of dislocation there can be for families with children if they have to move, and how it affects their schooling and their general well-being. Rents in the private sector are rising and eating savagely into household finances.

6 Jun 2013 : Column 1315

Perhaps even more damaging, one-third of privately rented homes fail to meet the Government’s own decent homes standard.

Surveys of public opinion show that the public would welcome more borrowing if it led to better housing and more housing being built. The surveys I have seen say that supporters of all parties believe that this would be a good idea. Of course, more building has other economic benefits, which I shall come on to. At the moment we have too few housing starts and virtually no social housing. There has to be a better way of managing our affairs.

I was given a number of examples. Let me just cite one. Oxford City Council is a Labour council and an example of good practice. It has a planning application for the development of about 900 homes at Barton West, which is in the Oxford City Council area. That will produce much-needed housing in an area where there are housing shortages. However, Oxford City Council has also identified land outside the local authority area in adjacent local authorities, which are mainly Conservative-controlled. It is finding it very hard to get the go-ahead to develop the land because the Conservative authorities do not want more housing there. Perhaps the Minister will have more information on that, but that is a rather sad state of affairs.

Although some people say that there are shortages of land, there are also allegations that developers in this country have large land banks which they are holding off until they can make more money than they can at the moment. Does the Minister know the extent of the land banks? I am not talking about developing the green belt, I am talking about land banks that the developers have, on which they could legitimately build if they decided to go ahead.

I want briefly to mention the difficulties of under-occupation. Yes, of course, there are people who are under-occupying their homes. For owner-occupiers, it is easy. They sell and move to a smaller property, make money in the process and someone else gets a larger property. That is easy for owner-occupiers, but we have an entirely different system for those who are in public housing. Now that they have the bedroom tax, families will have to move, but they have nowhere to move to because there are not enough smaller units available for them to move to—at least, not without a move, let us say, out of London into the suburbs or even further. That is hardly a humane way of dealing with under-occupation. There has to be a method to deal with that.

I remind the House of the dislocation to families and children if they have to move to different areas and different schools and have to make different friends. It can be very upsetting and can damage schooling and the happiness of the family. It is not surprising that there has been a rise in homelessness. Statutory homelessness is increasing, and local authorities are under pressure to find temporary accommodation to stop families having to sleep on the streets. Of course, that is a temporary measure, and councils have had to put homeless families in hotels and bed and breakfast accommodation. We know that a number of them are breaking the law because they are leaving

6 Jun 2013 : Column 1316

families there for longer than the six-week legal limit. A large proportion of local authorities are now in that position.

Of course, the benefits cap is aggravating that. Without getting into a long debate about social welfare at the moment, the benefits cap should surely take account of differences in housing costs from one region to another. We know the enormous differences between London and the south-east and other parts of the country. Shelter has demonstrated that local authorities which cannot source emergency housing in their areas are increasingly having to send homeless families further away.

I turn briefly to the situation of young people looking for housing. It is bleak for them. There is a massive housing shortage in properties that would be suitable for young people. They are increasingly priced out of buying or renting a home of their own. That is a struggle for people from all walks of life and particularly difficult in London and the south-east. From personal experience, I talk about mortgages and easy or difficult lending. Many years ago, when I got a mortgage before the first house that I bought, my wife and I had to demonstrate that I was asking to borrow only two and a half times my salary, I could borrow up to only 70% of the equity of the house and I had to produce an employers’ reference that I was good for my salary and was not likely to be fired quickly.

What has happened in more recent years? Mortgages went up to 120% of equity and 10 times the salary. It is no wonder that we had the terrible crash and the housing bubble. The danger is that we are moving back again. If borrowing money to buy houses is too easy and there is no increase in housing stock, it does not take an idiot to realise that prices will go up. That is what has happened in Britain over many years. Unless there is an increase in supply, making borrowing easier does not help. It may help the lenders of the money, but it does not help the people who want to be housed. That is why I am worried that the Chancellor of the Exchequer’s Help to Buy scheme—it has gone through a number of different names—will be no help at all if there is no significant increase in supply, but it will help some people who want to be second-home buyers. That is a sign of inequity.

In a more general sense, I say this about owner-occupation. Owner-occupiers in our country have managed to make enormous capital gains through holding a property. I have benefited in that way. It is quite unfair that the process of owner-occupation in our housing market has led to an enormous increase in inequality in this country. Okay, I cannot sell my house and move into a tent, but, at some point, somebody—a family or whoever—will benefit from that. It seems quite unfair that that has happened. It has happened partly because financial services have made it so easy to borrow, and the danger is that we are going back there. Of course I want people to be able to borrow money for their homes, so there has to be a balance, but the danger is that if the money is too easy to come by, there must be more houses, otherwise prices will rise.

Of course, we all know that on top of that there are significant north-south differences in this country. We have much greater housing stress in London and the

6 Jun 2013 : Column 1317

south-east than elsewhere. The trouble is that in the parts of the country where houses are incredibly inexpensive, there are no jobs. There is no economic base, so there is no demand to live there because people cannot earn money. I know that because I am lucky enough to have a home in Cumbria, but looking at the property prices on the Cumbria coast in places such as Workington and Maryport, I can get you a three-bedroom house for less than £100,000—in fact, for quite a lot less than that, but there are no jobs.

The north-south differences are important because they affect our perception of housing and what should be done to help. There is another problem, particularly in London and the south-east. If it will be increasingly difficult for relatively poor or not very well paid people to live—I am talking about the C2s and Ds; about people who keep many of our public services going; about local authority workers, cleaners, nurses, other NHS staff and teachers—or they cannot find anywhere to live, how are those services to be continued? It will be very damaging. It is all very well saying that you can get these people at the moment, but it is getting harder and harder for them to find somewhere to live. They do not earn enough to buy into the housing market, and they cannot get accommodation. I find that a very serious situation indeed.

The future for London and the south-east will be even bleaker if we do not do something to make more housing available so that we have a proper social mix, and so that various jobs can be filled. I know that we have people from other EU countries who come here, but some of their housing conditions are intolerable and they do it only temporarily while they try to keep their families going in their home country. That does not mean that the housing is there; it means that they are willing to accept standards in which one would hope that they did not have to live.

We have to build more homes. I do not believe that doing nothing is an option. We have to change our policies dramatically. The lack of housing construction is holding the whole economy back. We know that an active construction programme has knock-on benefits throughout the economy in jobs, further investment and so on. However, at the same time, we are seeing a generation who are finding a decent home of their own out of reach. As I said earlier, we are building about half of what we need.

Lending more and more is not the answer unless there is an increase in supply. Whereas I welcome, up to a point, making the planning system more efficient—there are arguments against it as well—that will not open the doors to a great deal of building. We need to look forward. Fundamentally, I believe that we need to get local authorities building again—and if not local authorities, then local authorities in tandem with housing associations. We need to ensure that we can develop a proper public housebuilding programme. That would give people an opportunity and boost the economy. I am afraid that I missed some of the discussion in Questions today about garden cities—I apologise, but I was working on this speech and I did not switch my screen on in time to hear what the Minister said about it—but that certainly has to be an option when looking at ways in which we can deal with the desperate housing situation.

6 Jun 2013 : Column 1318

To cite a well-known Conservative to support my argument, in the 1950s Harold Macmillan said that he would build 300,000 homes a year. He said he would ensure that there were that many built in the country, and he did it. If he could do it, that is a lesson to us all. Mind you, he is a different sort of Conservative from the ones that they have nowadays but he knew that housebuilding was important. It was important then and it is important now in terms of the economy, jobs and human happiness.

I believe that we need real political will on housing. Frankly, if the coalition will not provide that political will, the next Labour Government will. I very much hope that housebuilding and increasing housing will be a key feature of Labour’s manifesto, with which we shall win the next general election.

2.01 pm

Lord Griffiths of Burry Port: My Lords, I am delighted to be part of this debate. There was a very impassioned debate earlier this week in this House. When 538 people voted on Tuesday, I was not able to because I had to attend a rather important and long-standing event in the north of England. However, the passion that I heard on Monday and the sense of urgency expressed again and again from all the Benches around this House is something that I would wish to conjure up for the issue before us. I wish that we could sense the passion that is invested in this question of housing and feel the urgency for meeting the needs that are undoubtedly there.

I am aware that in speaking in such a debate, I am surrounded by people who are experts in their field, who have been or are in government and who have run big organisations and the rest of it. I come to most of the debates in which I speak in this House simply as a hands-on operator—a street-level worker. I work in communities with people; in their surgeries, Members of Parliament frequently refer some of the cases to which the noble Lord, Lord Dubs, has just mentioned to people like me. I must thank the noble Lord for bringing this matter to our attention today on two grounds. The first is that he gave me a respectable excuse for leaving the conference for which I was in the north of England, since I prioritised being here, and the second is the importance of the issue before us.

Over the years, I have been involved in meeting housing need in a variety of ways. I have served as director of two or three housing associations. For a while, I was responsible for a day centre in west London at the time when, as some Members of the House may remember, local authority housing was being exchanged and dealt with for political purposes in the City of Westminster. An awfully long shadow fell from that. I was also part of the London homelessness network of organisations meeting housing needs, largely but not entirely for the street homeless. One-to-one referrals have also been part of what I have done.

The economy, they say, is starting to build up again. What do I see in the part of London where I live? There is lots and lots of building going on. From the roof of my house, I think I have counted eight large cranes, busily building for the future. Someone is investing in the future, which they think is rather rosier

6 Jun 2013 : Column 1319

than the present. What kind of building am I talking about? First, obviously, there are premises to house the burgeoning businesses coming to what they call Silicon Roundabout. It is happening all around us with the start-up companies and their technology, and it is good to see that business in this sector will bring new life to the community I live in. Then there is student accommodation. There are large amounts of it with, we have to say, its limited usefulness. Nevertheless, I am glad for the students. Then there are hotels of various kinds. The final category is that of luxury flats.

I am the chair of an education foundation. We sold a piece of land at Old Street roundabout and could not believe the figure. We thought that if we got £20 million, we would really be doing well; we got £41 million. There have sprung up these great big sails—that is what they look like—on the roundabout, with these luxury flats in them boasting at street level that their prices started at £750,000. A building that once belonged to the Methodist church just the other side of the roundabout, and which we sold in 1989, is selling its luxury flats at roughly the same price. I see all that building and none of it would I really object to as long as there were certain other things happening in the world of construction. What I do not see is a real and systematic programme to build affordable and social housing, although there are some units. Do not get me wrong: there is a policy in the inner city to make it a requirement on developers to put a certain percentage of the units into what are called affordable categories. However, even that does not begin to scratch the surface of the need of which I am aware.

Within the church community that I look after, we have some truly outstanding young people. They are all British-born and mainly from ethnic minority backgrounds. Our work is intended to widen their horizons and raise their aspirations to help them see that one day they might become the Chancellor of the Exchequer, a leading journalist or barrister or, indeed, a Member of your Lordships’ House. Why not? We find scholarships and financial help for them at university. We try to open up some kind of new future for them. Sometimes, when I push them, asking them to consider things they had not even imagined before, they come back to me and say, “Why should I bother? Even if you help us with £1,000 or £2,000, we will still have to incur serious debts—and when we come out, how can we hope to live in these neighbourhoods where we have grown up, where our friends are and where our lives have been lived?”, and they are right.

It is impossible to imagine young people having a realistic hope of achieving that simple objective of continuing to live in a part of the world that suits them. Even if they get a job there, it will not lead easily to them getting a mortgage or an opportunity to live there and get their property. Yesterday’s Evening Standard indicated that the average price of a home in London is £421,395 and that if you took out an 85% mortgage on that, you would have to earn £96,000 per annum. Let me say that since I have never earned more than £25,000 in my life, if it were not for the fact that the church provides me with what I have to admit is a very nice house, I do not know how I would be able to cope at all. How can these children whose horizons we are

6 Jun 2013 : Column 1320

widening, whose hopes we are raising and whose gifts we want to value stand a hope of getting into that sort of league when they do not have any capital behind them, or any parental wealth or clout? It really is serious.